12:00pm (EST)
What looked like a good day for the bulls has turned sour following news Ukraine has engaged with Russia.
I mentioned there were 3 main clues I was watching this week to confirm if last week was a temporary bottom or not. The bulls have cleared 2 of the 3 hurdles with today’s test being the last.
The bears still have a chance to keep the mini-trading range intact with the possibility of lower lows but they are now facing the same fork in the road the bulls encountered last week. With geopolitical tensions picking back up, they may have caught a break today.
I will talk more about the three wishes the bulls asked for from the market genie over the weekend but the chances of an end of summer rally continue to improve – providing things simmer down between Russia and Ukraine.
Heading into the second half of trading, the Dow is down 61 points to 16,652 while the S&P 500 is declining 4 points to 1,951. The Nasdaq is lower by 7 points to 4,446 and the Russell 2000 is off 4 points to 1,139. The VIX is up 1.33 to 13.75.
Despite the noise for a continued correction, and the wackiness over the past few weeks, the Daily Portfolio has closed 8-straight winning trades since late July with 2 triple-digit winners of 113% and 107% this week. I also recommended a 133% winner along the way with the rest of the trades being solid double-digit winners.
I’m knocking on wood, of course, because I know the market can always humble you. However, when the getting is good, go get it.
I will be hanging out the rest of the session in case something whacky happens but all signs are pointing to the bulls wrapping up a solid week with higher highs coming.
I will be back Sunday night with the Weekly Wrap and on Monday morning with the Daily. Until then, have a great weekend everyone!
MEMBERS AREA
Closed Trades for 2014: 81-39 – the Weekly Wrap is 22-4 (85%) for 2014 (107-11, 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 the 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 I list one. I will send out a “Profit Alert” or “New Trade” if I 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, I will usually give you a heads-up if I think I’m going to send an email outside of these time frames.
Sony (SNE, $18.31, up $0.24)
September 18 calls (SNE140920C00018000, $0.70, up $0.15)
Entry Price: $0.50 (8/14/2014)
Exit Target: $1.00
Return: 40%
Stop Target: None
Action: Near-term resistance is at $18.50 with support at $17.75. Shares could make a run at $20 as long as the 200-day MA holds at $17.38.
Fossil (FOSL, $96.33, down $1.07)
September 90 puts (FOSL140920P00090000, $0.75, up $0.10)
Entry Price: $1.05 (8/12/2014)
Exit Target: $1.75-$2.10 (Limit Orders)
Return: -29%
Stop Target: None
Action: Resistance is at $97-$98. I will stick with the trade as long as $100 holds. A break below $95 would be extremely bearish in an already broken stock.
Yahoo (YHOO, $36.30, down $0.06)
September 38 calls (YHOO140920C00038000, $1.30, flat)
Entry Price: $1.25 (8/11/2014)
Exit Target: $1.90-$2.50
Return: 4%
Stop Target: None
October 43 calls (YHOO1018C00043000, $0.75, flat)
Entry Price: $0.80 (8/11/2014)
Exit Target: $1.90-$2.50
Return: -6%
Stop Target: None
Action: Shares have been hovering in a tight range for 3 weeks between $35.50-$36.50. I’m expecting a breakout to $40+ once $37 clears. The 200-day MA is at $36.29.
World Wrestling Federation (WWE, $13.95, up $0.05)
September 15 calls (WWE140920C00015000, $0.35, flat)
Entry Price: $0.50 (8/6/2014)
Exit Target: $1.00+
Return: -30%
Stop Target: None
Action: Resistance is at $13.75-$14 and a close above the latter would be bullish. Support is at $13.50 and a drop below this level will likely lead to $13.
The 2 prior WWE trades made 203% (in early March) and 133% (last week). This is a piggy-back trade that I’d like to see perform just as well.
Pool (POOL, $55.39, down $0.50)
October 50 puts (POOL141018P00050000, $0.70, flat)
Entry Price: $1.10 (7/16/2014)
Exit Target: $2.20-$3.30
Return: -36%
Stop Target: None
Action: A break below the July low of $54.16 would be bearish and could lead to $50 and fresh 52-week lows. Longer-term resistance is at $57 along with the 200-day MA.
The break-even point for the trade is at $48.90, technically, by mid-October. These options have over 2 months before they expire.
Other 2014 Portfolio OPEN positions (3): 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 I would not open any new positions. I’m still keeping track of the trades and will record the results accordingly, when the trade closes or if the options expire. Click on the 2014 Portfolio link in the Members Area to view ALL open/ closed trades.
Fortinet September 28 calls (from June 2013) – continue to hold
CVS Caremark September 82.50 calls (from July 2014) – continue to hold
S&P 500 Spiders September 180 puts (from August 2014) – continue to hold
Rick Rouse
Chief Options Strategist
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