9:00am (EST)
“The bulls will be trying to clear Dow 16,600; S&P 1,900; Nasdaq 4,175; and Russell 1,125 into the close. If successful, there should be a continued run higher into next week. If the bears hold these levels, they still have a chance to do some damage.” (Friday’s Midday Update)
With an hour left in trading on Friday, the Dow stood at 16,599.83; the S&P was at 1,899.82; the Nasdaq was at 4,182 and the Russell 2000 was at 1,124.20.
Watching the last hour of Wall Street’s close on a Friday is never any fun, especially ahead of a 3-day weekend, but as a trader and technician it’s part of the job.
Much of the action after the midday update was like watching paint dry but the close was exciting as the indexes danced and closed above the aforementioned resistance levels I highlighted.
The Dow gained 63 points, or 0.4%, to end at 16,606 on Friday. The blue-chips traded in positive territory throughout the day and reached a high of 16,613. The close above 16,600 gets the 52-week high of 16,735 and 16,800-17,000 back in play. Support is at 16,400-16,350.
The S&P 500 added 8 points, or 0.4%, to settle at 1,900. The index opened at 1,893 and made a steady run at 1,900 before cracking and holding this level for an all-time closing high. The high checked-in at 1,901 but fell short of the all-time intraday high of 1,902.17. My upside target since March has been 1,909 with additional fluff to 1,925. Support is at 1,885-1,875.
The Nasdaq jumped 31 points, or 0.8%, to close, to close at 4,185. Tech tested 4,148 shortly after the open but held near-term support at 4,150 before testing resistance the remainder of the day. I talked about the resistance zone between 4,175-4,200 and the bulls did a great job at splitting the difference after pushing 4,186. Specifically, I have mentioned 4,200 as the key level the Nasdaq needs to clear for a run to continued highs and today will be an important clue if this is doable or not.
The Russell 2000 popped a 12-pack, or 1.1%, to finish at 1,126. The small-caps opened higher at 1,115 and made a negative dip to 1,113.75 before going on a mission to take out 1,125. The 200-day MA was easily cleared in the process and sets up a bullish run to 1,150. Support is at 1,115 followed by 1,100.
The S&P 500 Volatility Index ($VIX, 11.36, down 0.67) went out and traded to another fresh 52-week low. There were a number of slick talking pros mentioning the VIX for all the wrong reasons on Friday but I have talked about the possibility of single-digits triggering all year long with an upside target of 2,000-2,100 for the S&P. The bears will need to recover 12.50 this week to keep Wall Street nervous.
The close above resistance looked extremely bullish on Friday but the week after Memorial Day has been bearish in recent years with losses averaging 2%. Perhaps this trend changes this week but its worth noting.
Futures are showing a higher open at the start of trading: Dow (+39); S&P 500 (+6); Nasdaq 100 (+13).
MEMBERS AREA
Closed Trades for 2014: 48-28 – the Weekly Wrap is 14-3 for 2014 (99-10, or 91% win rate, since 2011) and is designed for traders that want to use options with less risk. All trades are dated and time stamped so new subscribers can look at our past history to see how the trades have played out.
Do not risk more than 5% of your trading account on any one trade but do try to take ALL of the trades. Please remember, ALL “Exit Targets” and “Stop Targets” are targets. You should not have any “Hard Stops” entered to close any trades or “Exit Orders” in your brokerage account unless we list one. We will send out a “Profit Alert” or “New Trade” if we want you to close a position OR if a new trade comes out. Otherwise, follow instructions at all times in the 9am and 12pm-1pm updates. Also, we will usually give you a heads-up if we think we are going to send an email outside of these time frames.
Apollo Group (APOL, $27.28, down $0.03)
June 25 puts (APOL140621P00025000, $0.50, down $0.10)
Entry Price: $0.55 (4/28/2014)
Exit Target: $1.10 (limit order to close half)
Return: -9%
Stop Target: None
August 23 puts (APOL140816P00023000, $0.70, down $0.10)
Entry Price: $0.70 (4/28/2014)
Exit Target: $1.40 (limit order to close half)
Return: 0%
Stop Target: None
Action: Shares traded to a low of $26.78 on Friday and closed below $27.50. The 200-day MA is at $27 and where I’d like to see a close below this level this week. There is risk to $28 and then $30 on a back test as a few analysts defended the stock following the plunge from $30 to $26 last week.
Kirkland’s (KIRK, $17.92, down $1.20)
June 15 puts (KIRK140621P00015000, $0.15, up $0.05)
Entry Price: $0.45 (5/20/2014)
Exit Target: $0.90
Return: -67%
Stop Target: None
Action: Shares closed below $18 on Friday and just above the 50-day MA. A close below $17.50 should lead to a test to $15. The longer-term chart shows a test to the low teens is possible.
iShares Russell 2000 (IWM, $111.97, up $1.21)
June 103 puts (IWM140621P00103000, $0.30, down $0.12)
Entry Price: $0.68 (5/20/2014)
Exit Target: $1.40
Return: -56%
Stop Target: None
Action: Resistance at $112 held on Friday and although the trade is down, I like the “protection” this trade offers over the next month. There is further risk to $114 with support at $110.
Bed, Bath & Beyond (BBBY, $61.36, down $0.10)
June 60 puts (BBBY140621P00060000, $0.60, down $0.05)
Entry Price: $0.60 (5/14/2014)
Exit Target: $1.20
Return: 0%
Stop Target: None
August 55 puts (BBBY140816P00055000, $0.65, flat)
Entry Price: $0.63 (5/14/2014)
Exit Target: $1.25
Return: 3%
Stop Target: None
Action: Support is at $60 and a break below this level will likely lead to $57.50-$55. Resistance is now at $62.50.
Twitter (TWTR, $30.50, down $1.02)
January 50 calls 2015 (TWTR150117C00050000, $0.90, down $0.05) LEAP option
Entry Price: $1.75 (5/8/2014)
Exit Target: $3.50-$5
Return: -49%
Stop Target: None
Action: Near-term resistance is at $32 and a move above this level would be bullish. Support is at $30. This is a longer-term option that gives the trade until next January for this story to play out. Twitter is the source for global news the instsant it happens and this is worth a premium.
McDonald’s (MCD, $102.00, down $0.45)
July 95 puts (MCD140719P00095000, $0.35, up $0.05)
Entry Price: $0.70 (5/6/2014)
Exit Target: $1.40
Return: -50%
Stop Target: None
Action: Shares are dancing with the uptrend line and a break below $101.50 would be beàrish. There is risk to $105. These options have 2 months before they expire so there is plenty of time for the trade to play out.
Other 2014 Portfolio OPEN positions (0): These are trades that are still open in the portfolio but are down over 50%. They have longer expiration dates and are on “hold” but are not worth mentioning until they turn around. This means we would not open any new positions. We are still keeping track of the trades and we will record the results accordingly, when we close them or if the options expire. Click on the 2014 Portfolio link in the Members Area to view ALL open/ closed trades.
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