9:00 a.m. (EST)
The blue-chips extended their Monday win streak to five straight following an open and close into positive territory to start the week. The other major indexes followed suit, as they also finished in the green and once again left Wall Street feeling jealous.
The Dow jumped 75 points or 0.4%, to finish at 17,076. The blue-chips traded to a high of 17,124 after opening at 17,011 and came within 27 points of setting another all-time high. If the bulls can clear 17,151, then a run to 17,300-17,350 could come this week. Support at 17,000 held for the third straight session.
The S&P 500 added 9 points, or 0.5%, to close at 1,998. The index cleared 2,000 and traded to an all-time intraday high of 2,001.95 before ending just south of that level. There is additional fluff to 2,025-2,050 as long as 1,985-1,975 holds on a pullback.
The Nasdaq gained 18 points, or 0.4%, to settle at 4,557. I have been mentioning that a close above 4,550 could quickly lead to 4,575-4,600. Tech would then have major resistance to clear at 4,700-4,800, but all signs continue to be bullish. Monday’s high reached 4,571.14, which was another 52-week peak. Near-term support is at 4,500, with backup at 4,450-4,400.
The Russell 2000 advanced nearly 5 points, or 0.4%, to end at 1,165. The small-caps traded into the 1,170-1,175 zone but missed holding it by a nickel. The 1,160 level held during the second half of trading, with 1,150 still serving backup.
The S&P 500 Volatility Index ($VIX, 11.70, up 0.23) traded to a high of 11.77 on the open and was tested into the close despite Monday’s bullish action. There wasn’t much wiggle room for the bulls to hold 11.50, as the VIX came into the week at 11.47, and it was good to see 12.50 hold. Single-digits on the VIX are still in play if the bulls can reclaim 11.50, while a close above 12.50 would slow the momentum.
Instructions for this morning’s current trades have been tinkered with, so play close attention to all of my comments.
Ahead of Wall Street’s open, futures look like this: Dow (+29); S&P 500 (+3); Nasdaq 100 (+8).
Momentum Options Play List
Closed Trades for 2014: 83-40 — 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.
Flextronics (FLEX, $10.83, flat)
October 11 calls (FLEX141018C00011000, $0.31, flat)
Entry Price: $0.33 (8/25/2014)
Exit Target: $1.00
Return: -6%
Stop Target: None
Action: Support is at $10.80, and a break below this level could lead to $10.40. A close above $11 could spark a run to $11.40. If shares trigger $12 by mid-October, these options will be worth $1.00 for a 200% return.
Rubicon (RBCN, $6.50, up $0.22)
December 8 calls (RBCN141220C00008000, $0.40, up $0.10)
Entry Price: $0.35 (8/25/2014)
Exit Target: $0.70
Return: 14%
Stop Target: None
Action: There is a gap to fill to $7, which is where the first level of resistance lies. Support is at $6.
Sony (SNE, $18.97, up $0.11)
September 19 calls (SNE140920C00019000, $0.50, up $0.05)
Entry Price: $0.45 (8/20/2014)
Exit Target: $0.90
Return: 11%
Stop Target: None
October 20 calls (SNE141018C00020000, $0.35, flat)
Entry Price: $0.25 (8/20/2014)
Exit Target: $0.50-$0.75
Return: 40%
Stop Target: None
October 19 calls (SNE141018C00019000, $0.70, up $0.05)
Entry Price: $0.45 (8/18/2014)
Exit Target: $0.90
Return: 56%
Stop Target: $0.45 (Stop Limit)
Action: Sony traded to a high of $19.03 yesterday but missed holding $19 into the close. Once accomplished, a run to $20 could come. Support is at $18.75.
Keryx Biopharmaceuticals (KERX, $17.23, up $1.34)
September 18 calls (KERX140920C00018000, $1.30, up $0.50)
Entry Price: $0.75 (8/20/2014)
Exit Target: $1.75-$2.00 (closed a quarter at $1.30 on 8/25/14)
Return: 73%
Stop Target: $0.90 (Stop Limit on remaining three-quarter position)
Action: I recommended closing one quarter of the trade at $1.30 yesterday to lock-in gains. Shares reached a 52-week peak of $17.52 intraday, and the options held firm.
I have made the Stop Target into a Stop Limit on the remaining three quarters of the trade to ensure that profits are protected.
Yahoo (YHOO, $37.71, down $0.30)
September 38 calls (YHOO140920C00038000, $1.60, down $0.15)
Entry Price: $1.25 (8/11/2014)
Exit Target: $1.90-$2.50 (closed half at $1.90 on 8/22/14, Limit Order to close other half at $2.50)
Return: 40%
Stop Target: $1.50 (Stop Limit on other half)
October 43 calls (YHOO1018C00043000, $0.95, down $0.05)
Entry Price: $0.80 (8/11/2014)
Exit Target: $1.20-$1.60
Return: 19%
Stop Target: $0.85 (Stop Limit)
Action: Shares closed below $38, but the Stop Limits held. They will likely trigger on further weakness or on a dip below $37.50. The September 38’s traded to a low of $1.57, while the October 43’s kissed $0.89. A close back above $38 today would be slightly bullish.
World Wrestling Federation (WWE, $14.89, up $0.25)
September 15 calls (WWE140920C00015000, $0.55, up $0.10)
Entry Price: $0.50 (8/6/2014)
Exit Target: $1.00+
Return: 10%
Stop Target: None
Action: Shares traded to a high of $14.99 yesterday but failed to hold $15.
There is a gap to fill up to $17, and the 200-day moving average is at $17.44. A run to these levels will make this trade a big winner if $15 clears this week.
The two prior WWE trades made 203% (in early March) and 133% (in early August). This is a piggy-back trade that I’d like to see perform just as well and only cost $0.50.
Trades on Hold — 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) — The 52-week high is at $26.23. Shares are acting like they want to clear $26 and make a run at fresh highs — continue to hold.
CVS Caremark September 82.50 calls (from July 2014) — Shares are still trying to crack $80. I will bring back coverage once cleared — continue to hold.
S&P 500 Spiders September 180 puts (from August 2014) — Like blackjack, I’m considering this trade as “insurance,” as the puts still have a month before they expire. Perhaps they pay off, maybe not, but the tremendous gains in the other trades makes me feel comfortable holding the trade open. Remember, the bulls like taking the stairs higher. The bears love taking the elevator — continue to hold.
Pool October 50 puts (From July 2014) — The break-even point for the trade is at $48.90, technically, by mid-October. These options have nearly two months before they expire.