12:55 p.m. (EST)
He said, “Son, I’ve made my life
Out of readin’ people’s faces
Knowin’ what the cards were
By the way they held their eyes
So if you don’t mind my sayin’
I can see you’re out of aces
For a taste of your whiskey
I’ll give you some advice”
So I handed him my bottle
And he drank down my last swallow
Then he bummed a cigarette
And asked me for a light
And the night got deathly quiet
And his faced lost all expression
He said, “If you’re gonna play the game, boy
You gotta learn to play it right
I normally wait until Friday’s to spin an office classic ahead of Wall Street’s open but today I felt the need to reach back in the archives to keep my emotions in check…
You’ve got to know when to hold ‘em
Know when to fold ‘em
Know when to walk away
Know when to run
You never count your money
When you’re sittin’ at the table
There’ll be time enough for countin’
When the dealin’s done
Futures were showing a slightly lower open when I hit the rack last night but got progressively worse ahead of this morning’s open. There are a number of events that are worrying the suit-and-ties and in a short sentence they are blaming Portugal for today’s pullback.
The country missed an interest payment and the talk of default was the water-cooler chatter that helped the bears push fresh lows for the week on the open. Of course, the bulls have rebuffed those claims and have rebounded off the lows but they still have work to do.
One thing for certain, volatility has picked up but the clues Kenny and I are giving you should help you in navigating today’s pullback.
The indexes pushed my December fluff targets ahead of the July 4th holiday and while I have penciled-in higher highs, it all depends on if near-term support holds – and the VIX.
Tomorrow and next week will play a major role in possibly determining the new trend, or a continued trend higher. The Financial stocks will be in focus, starting with Well Fargo’s (WFC, $51.81, down $0.38) earnings ahead of tomorrow’s open. Next week will feature a number of heavy-hitters in the industry.
I have talked about the Financials needing to lead the market to new highs and they performed well in the second quarter. The question is can they keep the momentum going as Wall Street isn’t expecting much from the sector.
The suit-and-ties have been wrong on a number of calls this year so perhaps the banks surprise to the upside.
The good news is the Daily portfolio is very light and there is room to add a bevy of new trades over the next few weeks. It is still too early to load up and go all-in until the market shows me a few more cards but I do have a New Trade for today.
Heading into the second half of trading of trading, the Dow is down 75 points to 16,909 while the S&P 500 is declining 7 points to 1,965. The Nasdaq is lower by 16 points to 4,402 and the Russell 2000 is getting pounded for 12 points and is at 1,161. The VIX is up 0.62 to 12.27.
Subscribers, check the Members Area for the New Trade and updates.
Closed Trades for 2014: 67-33 – the Weekly Wrap is 20-4 (83%) for 2014 (105-11, 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 we 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.
NEW TRADE!!!
Fastenal (FAST, $48.50, down $0.51)
Buy to OPEN August 50 calls (FAST140816C00050000, $0.80, down $0.30)
Action: The company has matched estimates twice and missed by a penny on the other two over the past 4 quarters. There could be a nice upside surprise with this quarter’s earnings.
This is an earnings trade so the risk is heightened as the trade could take a major hit if Fastenal misses earnings and trades to $45. If the economy is really improving, this company should benefit.
Current Trades
Fortinet (FTNT, $24.00, down $0.24)
September 28 calls (FTNT140920C00028000, $0.40, down $0.10)
Entry Price: $0.55 (6/30/2014)
Exit Target: $1.10
Return: -18%
Stop Target: None
Action: Shares are holding $24.
Earnings are due on July 23rd and I believe they will announce a blowout quarter. A close above $25 would be bullish for a run to fresh highs.
Rambus (RMBS, $14.07, down $0.08)
August 15 calls (RMBS140816C00015000, $0.45, flat)
Entry Price: $0.60 (6/30/2014)
Exit Target: $1.20
Return: -25%
Stop Target: None
August 16 calls (RMBS140816C00016000, $0.25, flat)
Entry Price: $0.33 (6/30/2014)
Exit Target: $0.65-$1
Return: -24%
Stop Target: None
Action: There is further risk to $13.75-$13.50 on a drop below $14 while a close above $14.25-$14.50 keeps $15 in play.
Earnings are tentatively scheduled for next week but there is no hard date listed. I believe the company will beat estimates so I don’t mind staying long.
General Motors (GM, $37.72, down $0.25)
September 32 puts (GM140920P00032000, $0.20, flat)
Entry Price: $0.40 (6/23/2014)
Exit Target: $0.80-$1.20
Return: -50%
Stop Target: None
Action: I would like to see a close below $36 this week. Resistance is at $38.
Limelight Networks (LLNW, $2.84, down $0.01)
September 3 calls (LLNW140920C00003000, $0.35, flat)
Entry Price: $0.15 (6/4/2014)
Exit Target: $0.45 (closed 1/4 at $0.35 on 7/8/14)
Return: 133%
Stop Target: None
December 3 calls (LLNW141220C00003000, $0.45, flat)
Entry Price: $0.20 (6/4/2014)
Exit Target: $0.60 (closed 1/4 at $0.45 on 7/8/14)
Return: 125%
Stop Target: None
Action: I would like to see shares clear $3 again this week. Support is at $2.75.
Other 2014 Portfolio OPEN positions (2): 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.
McDonald’s July 95 puts (from May 2014) – continue to hold – shares are on the verge of falling below $100 but the options are running out of time. If the stock is still above par by Friday, I may close the trade.
Apollo Group August 23 puts (from April 2014) – continue to hold – shares are below $30 and a drop under $28 would help get this trade rolling again.