12:20 p.m. (EST)
Futures were volatile throughout the night and were higher ahead of the overseas market opening, but got progressively worse ahead of Wall Street’s open. Dow futures were down over triple-digits at one point, but made a dramatic turnaround following a weaker-than-expected Non-farm Payrolls number.
The drop to 209,000 jobs added came in worse-than-expected, but held the 200,000 level. The goldilocks number has the Fed debate on interest rates back in full gear, but I’ll save that rhetoric for another day.
The more important picture is in the charts, as the bears did do some serious technical damage on Thursday. The Dow and the S&P 500 are wrangling with their 100-day moving averages, while the Russell 2000 fell below its 200-day moving average. The Nasdaq has fallen below its 50-day moving average with today’s pullback.
I was up late doing chart work and research to figure out possible actions for next week. Needless to say, if there is no rebound today, there could be a new short-term trend developing.
August has historically been the worst month for the Dow and S&P 500 since the late 1990′s. Additionally, a second consecutive negative Friday close would add to the bearish outlook.
Heading into the second half of trading, the Dow is down 101 points to 16,461, while the S&P 500 is declining 12 points to 1,918. The Nasdaq is lower by 39 points to 4,330, and the Russell 2000 is dropping 12 points to 1,108. The VIX is up 0.47 to 17.42. I will be watching to see if the bulls can hold the 17.50 level into the close.
The stop limits on the current profitable trades are still holding and, while it is tempting to open a new position today, I usually shy away from doing so on Friday’s due to the weekend time decay. However, I do see a few trades I like and, if the selling pressure continues, I may send out a New Trade alert.
If the stop limits trigger on the current trades, I will also have additional room to open more new trades next week.
Stay locked-and-loaded into the close, but if you don’t hear from me, I will be back Sunday night with the Weekly Wrap and on Monday morning with the Daily. Until then, have a great weekend, everybody!
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 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 9 a.m. and 12 p.m. – 1 p.m. 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, $12.38, down $0.10)
September 13 calls (WWE140920C00013000, $0.60, flat)
Entry Price: $0.50 (7/30/2014)
Exit Target: $1.50-$2+ (closed a 1/3-sized position at $0.90 on 7/31/2014)
Return: 40%
Stop Target: $0.45 (Stop Limit on two remaining 1/3-sized positions)
Action: Support is at $12, and a test to this level will likely trigger the Stop Limit. I would like to see shares clear and hold $12.50-$12.75 by the close.
RF Micro Devices (RFMD, $11.15, down $0.01)
September 12 calls (RFMD140920C00012000, $0.55, flat)
Entry Price: $0.45 (7/29/2014)
Exit Target: $0.90 (closed half at $0.55 on 7/31/2014)
Return: 22%
Stop Target: $0.40 (Stop Limit)
November 12 calls (RFMD141122C00012000, $0.85, flat)
Entry Price: $0.70 (7/29/2014)
Exit Target: $1.40 (closed half at $0.90 on 7/31/2014)
Return: 25%
Stop Target: $0.70 (Stop Limit)
Action: Support is at $11, and a close below this level will likely trigger the Stop Limits on the remaining halves of each trade. Short-term resistance is at $11.50.
CVS Caremark (CVS, $76.80, up $0.44)
September 82.50 calls (CVS140920C00082500, $0.25, flat)
Entry Price: $0.45 (7/28/2014)
Exit Target: $0.90
Return: -44%
Stop Target: None
Action: There is additional risk to $75. Earnings are due out next week. I would like to see shares recover $77 today.
iShares Russell 2000 (IWM, $110.82, down $0.87)
August 118 calls (IWM140816C00118000, $0.05, flat)
Entry Price: $0.60 (7/22/2014)
Exit Target: $1.20
Return: -92%
Stop Target: None
Action: I got this one wrong, as I suggested going long when the Russell 2000 cleared 1,160 last week. I was looking for a run to 1,175-1,200, but with numerous layers of resistance to overcome, I doubt the small-caps will get there over the next two weeks. Close the trade at current levels to save a nickel.
Pool (POOL, $54.68, down $0.08)
October 50 puts (POOL141018P00050000, $1.15, flat)
Entry Price: $1.10 (7/16/2014)
Exit Target: $2.20-$3.30
Return: 5%
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 moving average.
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, $24.11, down $0.43)
September 28 calls (FTNT140920C00028000, $0.20, down $0.10)
Entry Price: $0.55 (6/30/2014)
Exit Target: $1.10
Return: -64%
Stop Target: None
Action: Support is at $25-$24 on a backtest. A move above $26 would be bullish. I would like to see where shares close ahead of the weekend before possibly exiting the position. I also believe the company is a takeover target.
General Motors (GM, $33.44, down $0.38)
September 32 puts (GM140920P00032000, $0.60, up $0.05)
Entry Price: $0.40 (6/23/2014)
Exit Target: $0.80-$1.20 (Limit Order to close half at $0.80)
Return: 50%
Stop Target: None
Action: GM is below all of its major moving averages and is on track to test the low $30 level. I would love to see a close below $33.50 ahead of the weekend. Resistance will try to hold at $34.
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.