11:30 a.m. (EST)
The bulls spent the first 3 days of the month pushing record highs and came into today’s session with the monthly lead. However, the bears have only needed a half-session to erase those gains following the tight trading range in between.
The action has been very reminiscent of May’s frustrating range but with a tad more volatility. The action has caused continued confusion on Wall Street as more and more pros say a “top” is in.
While they may be patting themselves on the back today after 7 months of being wrong, I’m not ready to join that crowd…yet. However, today’s action makes tomorrow’s Nonfarm Payrolls report that much more important as the bears have pushed the second layers of support.
I have given specific downside levels to possibility start fresh short positions by using index put options over the past 2 weeks. While it is tempting to throw fresh bait to the sharks, I have also talked about trading ranges getting “stretched” both to the upside and downside.
The possibility of a summer rally is still in play as the uptrends lines and and major moving averages continue to hold. Although volatility has been elevated in recent weeks, the S&P Volatility Index ($VIX, 14.96, up 1.63) has also stayed range bound and continues to be an excellent guide in navigating the current trading range.
The Dow came into the month at 16,826 while the S&P 500 started at 1,960. The Nasdaq was at 4,408 and the Russell 2000 ended June at 1,192.
Heading into the second half of trading, the Dow is dropping 184 points to 16,696 and the S&P 500 is tanking 25 points to 1,945. Tech is lower by 70 to 4,393 while the Russell 2000 is declining 17 points to 1,129.
As I mentioned earlier, tomorrow will be a big day as Nonfarm Payrolls will hit Wall Street ahead of the open. The suit-and-ties are expecting around 245,000-250,000 new jobs. Although this would be a decent number, it is a decline from last month’s surprise of 288,000 jobs created.
A better-than-expected report (over 290,000-300,000) would be very beneficial for the market as it would support this week’s Gross Domestic Product (GDP) numbers. A number south of 250,000 could start a new market trend heading into August.
If this is a short-term top in the market, there will be a ton of opportunities to make money by using put options. However, it is important to wait for all of the stars to align before doing so. Today’s action is spooky but the market has seen this horror show before.
I have a number of updates for the Daily portfolio, including 3 juicy Profit Alerts. I could also have additional updates later in the day and into the close so stay locked-and-loaded in what will be a busy and possibly hectic rest of the session.
Closed Trades for 2014: 74-38 – 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 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.
World Wrestling Federation (WWE, $13.09, up $1.00)
September 13 calls (WWE140920C00013000, $0.90, up $0.35)
Entry Price: $0.50 (7/30/2014)
Exit Target: $1.50-$2+ (closed a third at $0.90 on 7/31/2014)
Return: 80%
Stop Target: None
Action: Close a third of the trade at current levels. Shares have traded to a high of $13.40 and $13 seems like it wants to hold as support. If I take additional action, I will sent out another Profit Alert but I’m trying to wait for the $14-$18 zone to trigger before locking-in another third of the position.
RF Micro Devices (RFMD, $11.13, down $0.64)
September 12 calls (RFMD140920C00012000, $0.55, down $0.15)
Entry Price: $0.45 (7/29/2014)
Exit Target: $0.90 (closed half at $0.55 on 7/31/2014)
Return: 22%
Stop Target: None
November 12 calls (RFMD141122C00012000, $0.90, down $0.15)
Entry Price: $0.70 (7/29/2014)
Exit Target: $1.40 (closed half at $0.90 on 7/31/2014)
Return: 29%
Stop Target: None
Action: Close half of the September calls and half of the September calls at current levels.
I have a near-term target of $13 and a longer-term of $15 on the stock. Support will try to hold at $11 on any pullbacks.
CVS Caremark (CVS, $77.35, down $0.40)
September 82.50 calls (CVS140920C00082500, $0.30, down $0.05)
Entry Price: $0.45 (7/28/2014)
Exit Target: $0.90
Return: -33%
Stop Target: None
Action: There is risk to $77 and the 50-day MA on the close below $78. I’m looking for this area to hold as support before shares resume their uptrend for a possible push past $80. The 52-week high of $79.43 was reached in early June. Earnings are due out next week.
iShares Russell 2000 (IWM, $111.71, down $2.08)
August 118 calls (IWM140816C00118000, $0.10, down $0.10)
Entry Price: $0.60 (7/22/2014)
Exit Target: $1.20
Return: -83%
Stop Target: None
Action: Support is at $112. I would like to see a finish above $115 by Friday’s closing bell.
Pool (POOL, $54.95, down $0.33)
October 50 puts (POOL141018P00050000, $1.00, flat)
Entry Price: $1.10 (7/16/2014)
Exit Target: $2.20-$3.30
Return: -9%
Stop Target: None
Action: Shares are on the verge of testing the July low of $54.16. A break below this level should lead to $50 and fresh 52-week lows. Resistance is holding at $57 along with the 200-day MA.
The break-even point for the trade is at $48.90, technically, by mid-October. In other words, this trade has plenty of time to play out.
Fortinet (FTNT, $24.69, down $0.84)
September 28 calls (FTNT140920C00028000, $0.25, down $0.10)
Entry Price: $0.55 (6/30/2014)
Exit Target: $1.10 (Limit Order to close HALF)
Return: -55%
Stop Target: None
Action: A move above $26 would be bullish. Support is at $25-24 on a backtest.
General Motors (GM, $33.97, down $0.34)
September 32 puts (GM140920P00032000, $0.50, up $0.05)
Entry Price: $0.40 (6/23/2014)
Exit Target: $0.80-$1.20 (Limit Order to close HALF at 80 cents)
Return: 25%
Stop Target: None
Action: GM is below all of its major MA’s and is on track to test the low $30′s. Resistance is at $36.
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 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.