9:00 a.m. (EST)
The market finished mixed again on Tuesday and ahead of today’s Fed news. The bears won the overall session but there were pockets of strength as the bulls held support. The mini-trading range from July continues to cause Wall Street confusion but don’t get too complacent as the breakout or breakdown forthcoming will be worth playing.
The Dow dropped 70 points, or 0.4%, to close at 16,912. The blue-chips made a run past 17,000 to 17,056 before fading to a low of 16,912. Support continues to hold at 16,900-16,800 with resistance at 17,100.
The S&P 500 fell 9 points, or 0.5%, to settle at 1,969.95. The bulls reached a peak of 1,984.85 shortly after the open and missed clearing 1,985 by a stone’s throw. On the flip side, the bears got below 1,970 just ahead of the closing bell. Although support was “stretched”, it opened the door for another back test to 1,960-1,950 if there is no rebound today.
The Nasdaq slipped 2 points, or 0.1%, to finish at 4,442. Tech made a run past 4,450 to 4,470 at the start of trading before sharply falling to 4,441 by noon. There was another push past 4,450 afterwards but the bulls failed to hold this level for the third-straight session.
The Russell 2000 added 2 points, or 0.2, to end at 1,141. The small-caps opened above the 1,140 level and held positive territory throughout the session after racing to a high of 1,149. The close back above 1,140 was bullish but there is no need to roll out the red carpet until 1,150-1,160 clears.
The S&P Volatility Index ($VIX, 13.28, up 0.72) jumped 6% but held 13.50 after testing 13.35. No bear worries until 15 clears but the bulls need to get under 12.50-11.50 by today’s close.
Futures are showing a higher open ahead of the Fed’s comments today: Dow (+19); S&P 500 (+2): Nasdaq 100 (+6).
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.
RF Micro Devices (RFMD, $11.38, up $0.46)
September 12 calls (RFMD140920C00012000, $0.50, up $0.20)
Entry Price: $0.45 (7/29/2014)
Exit Target: $0.90
Return: 11%
Stop Target: None
November 12 calls (RFMD141122C00012000, $0.80, up $0.25)
Entry Price: $0.70 (7/29/2014)
Exit Target: $1.40
Return: 14%
Stop Target: None
Action: Shares traded to a fresh 52-week high of $11.50 on Tuesday. I have a near-term target of $13 and a longer-term of $15 on the stock. Both of these calls will return triple-digits if shares reach these targets over the next 2-4 months. The September calls traded over 6,800 contracts yesterday. Support will try to hold at $11 on any pullbacks.
CVS Caremark (CVS, $77.81, down $0.51)
September 82.50 calls (CVS140920C00082500, $0.35, down $0.10)
Entry Price: $0.45 (7/28/2014)
Exit Target: $0.90
Return: -22%
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, $113.34, up $0.31)
August 118 calls (IWM140816C00118000, $0.20, flat)
Entry Price: $0.60 (7/22/2014)
Exit Target: $1.20
Return: -67%
Stop Target: None
Action: Support is at $112. I would like to see a close above $115 ahead of the weekend.
Pool (POOL, $54.55, down $0.75)
October 50 puts (POOL141018P00050000, $1.10, up $0.20)
Entry Price: $1.10 (7/16/2014)
Exit Target: $2.20-$3.30
Return: 0%
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, $25.12, down $0.16)
September 28 calls (FTNT140920C00028000, $0.30, down $0.05)
Entry Price: $0.55 (6/30/2014)
Exit Target: $1.10 (Limit Order to close HALF)
Return: -45%
Stop Target: None
Action: There is risk to $25-24 on continued weakness. These options have 2 months before expiration and I will likely keep the trade open as long as $24 holds. A close above $26 would be bullish.
General Motors (GM, $34.45, down $0.45)
September 32 puts (GM140920P00032000, $0.45, up $0.10)
Entry Price: $0.40 (6/23/2014)
Exit Target: $0.80-$1.20 (Limit Order to close HALF at 80 cents)
Return: 13%
Stop Target: None
Action: shares ended 2 pennies of the session low. 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.