1:25pm (EST)
I mentioned a few weeks ago Merger & Acquisitions could help the bulls power new highs into the summer and today’s action continues to give hints there will be more to come.
Apple’s (AAPL, $631.44, up $7.43) rumored deal to buy Beats is now official and could open the door to other deals for Internet services. The company announced after yesterday’s close it had inked a deal to acquire Beats Music, and Beats Electronics for $3 billion with co-founders, Jimmy Lovine and Dr. Dre, joining Apple as part of the deal.
Elsewhere, Tyson Foods (TSN, $43.58, up $2.83) has made a bid to acquire Hillshire Brands (HSH, $52.48, up $7.67) for $50 a share in an all cash deal. This tops the recent offer of $45 a share from Pilgrim’s Pride (PPC, $24.93, down $0.45) to acquire the company.
Adding fuel to the fire is Hillshire’s recently announced deal to acquire Pinnacle Foods (PF, $31.71, up $0.34) for $4.3 billion. This acquisition is expected to be completed by September with a $163 million breakup fee for Pinnacle Foods if Hillshire falls to follow through. Pinnacle Foods has said it will pay $141 million to Hillshire if it accepts a better offer.
Let the food wars begin.
Despite the flurry of M&A news, the market is still struggling with resistance.
The Dow is up 10 points to 16,643 while the S&P 500 is higher by 4 points to 1,914 (side note: the index has reached another all-time intraday high of 1,915.78). The Nasdaq is gaining 11 points to 4,236 and the Russell 2000 is advancing 3 points to 1,139.
I have updated the current trades so let’s go check the tape.
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.
CVS Caremark (CVS, $77.46, up $0.21)
July 80 calls (CVS140719C00080000, $0.55, flat)
Entry Price: $0.52 (5/28/2014)
Exit Target: $1.10
Return: 6%
Stop Target: None
Action: I’m expecting a run past $80 over the next 2 months. If shares reach $81 these options will be worth at least $1-$1.05, for a 100% return. Short-term support is at $76.50.
Apollo Group (APOL, $26.68, down $0.10)
June 25 puts (APOL140621P00025000, $0.45, flat)
Entry Price: $0.55 (4/28/2014)
Exit Target: $1.10 (limit order to close half)
Return: -18%
Stop Target: None
August 23 puts (APOL140816P00023000, $0.70, flat)
Entry Price: $0.70 (4/28/2014)
Exit Target: $1.40 (limit order to close half)
Return: 0%
Stop Target: None
Action: The close below $27 and the 200-day MA opened the door for another test to $26. A break below this level should lead to the low $20’s. Resistance is at $28.
Kirkland’s (KIRK, $17.55, up $0.04)
June 15 puts (KIRK140621P00015000, $0.15, flat)
Entry Price: $0.45 (5/20/2014)
Exit Target: $0.90
Return: -67%
Stop Target: None
Action: A close below $17.50 should lead to a test to $15. The longer-term chart shows a test to the low teens.
Bed, Bath & Beyond (BBBY, $60.85, up $0.34)
June 60 puts (BBBY140621P00060000, $0.80, down $0.05)
Entry Price: $0.60 (5/14/2014)
Exit Target: $1.20
Return: 33%
Stop Target: None
August 55 puts (BBBY140816P00055000, $0.70, flat)
Entry Price: $0.63 (5/14/2014)
Exit Target: $1.25
Return: 11%
Stop Target: None
Action: Support is at $60 and a break below this level will likely lead to $57.50-$55. Resistance is at $61.50-$62.50.
Twitter (TWTR, $34.39, up $0.62)
January 50 calls 2015 (TWTR150117C00050000, $1.50, up $0.15) LEAP option
Entry Price: $1.75 (5/8/2014)
Exit Target: $3.50-$5
Return: -14%
Stop Target: None
Action: Resistance is at $35. Support has moved up to $32.
McDonald’s (MCD, $101.11, up $0.62)
July 95 puts (MCD140719P00095000, $0.35, down $0.10)
Entry Price: $0.70 (5/6/2014)
Exit Target: $1.40
Return: -50%
Stop Target: None
Action: The break below $101.50 was beàrish and I’d like to see a close below $100 by the weekend. 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 (1): 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.
iShares Russell 2000 June 103 puts (from May 2014)