9:00 a.m. (EST)
The market stayed in a slow-but-steady uptrend throughout Thursday’s session to reclaim another layer of support. This week’s action has returned all of the major averages into positive territory for the month, but today is August option expiration so volatility could return.
The Dow advanced 61 points, or 0.4%, to close at 16,713. The blue-chips held positive territory for much of the session, excluding the 1/10-point hiccup shortly after the open. Support at 16,600 was never challenged, as the bulls reached a peak of 16,714. Resistance is at 16,800-17,000 and a close into this zone ahead of the weekend would be bullish.
The S&P 500 gained 8 points, or 0.4%, to end at 1,955. The index opened higher and quickly made a run past resistance at 1,950, while ending near its session peak. The close above 1,950 looked pretty, but the 1,960 level is more important. Near-term support is at 1,940.
The Nasdaq added 19 points, or 0.4%, to settle at 4,453. Tech made a slight 1/5-point dip into the red shortly after the opening bell but easily recovered to challenge and clear 4,450. I have been mentioning all week (and last) that if this level triggers, 52-week peaks and a run past 4,500 could be back in play.
The Russell 2000 chipped in with a 1-point pop, or 0.1%, to finish at 1,143. The small-caps made Costanza mad by “double-dipping” into negative territory and testing support at 1,140 before ending higher. The bulls pushed 1,144 but didn’t have the sauce to push 1,150.
The S&P Volatility Index ($VIX, 12.42, down 0.48) fell 4%, and more importantly, closed below 12.50. This suggests further upside action in the market. There was a spike to 13.13 on the open, but 13.50 easily held. A close above this level would leave next week in question.
The bulls will be trying to put the finishing touches on a strong week, and August option expiration has been bullish in recent years.
Ahead of Wall Street’s open, futures look like this: Dow (+49); S&P 500 (+5); Nasdaq 100 (+15).
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 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.
Sony (SNE, $18.07, up $0.13)
September 18 calls (SNE140920C00018000, $0.55, up $0.05)
Entry Price: $0.50 (8/14/2014)
Exit Target: $1.00
Return: 10%
Stop Target: None
Action: Shares traded to a high of $18.08 and held $18 into the close. 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 moving average holds at $17.38.
Fossil (FOSL, $97.40, up $0.85)
September 90 puts (FOSL140920P00090000, $0.65, down $0.25)
Entry Price: $1.05 (8/12/2014)
Exit Target: $1.75-$2.10 (Limit Orders)
Return: -38%
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, $36.36, up $0.17)
September 38 calls (YHOO140920C00038000, $1.30, down $0.05)
Entry Price: $1.25 (8/11/2014)
Exit Target: $1.90-$2.50
Return: 4%
Stop Target: None
October 43 calls (YHOO1018C00043000, $0.75, down $0.05)
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 three weeks between $35.50-$36.50. I’m expecting a breakout to $40+ once $37 clears. The 200-day moving average is at $36.29.
World Wrestling Federation (WWE, $13.90, up $0.07)
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 two 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, $55.89, up $0.29)
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 moving average.
The break-even point for the trade is at $48.90, technically, by mid-October. These options have over two 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