9:00 a.m. (EST)
The market finished Wednesday’s session mixed following the release of the FOMC minutes. The usual rhetoric was used on when interest rates might rise, but Wall Street is waiting to hear it from the horse’s mouth on Friday before committing new money to the bulls.
The Dow added 59 points, or 0.4%, to end at 16,979. The blue-chips traded down to 16,896 on the open, and I talked about 16,900 trying to hold as fresh support. It did, and there is back-up at 16,800, but all signs are pointing towards a pop past 17,000. Wednesday’s high reached 16,994.
The S&P 500 gained 5 points, or 0.3%, to finish at 1,986. The index tested a low of 1,977 at the start of trading and easily held support at 1,975 before making a run past 1,985. I have mentioned that a close above this level would nearly guarantee a run at or past 2,000. The index just missed setting another closing all-time high (currently at 1,987.98) after reaching a peak of 1,988.57. The all-time intraday high is 1,991.39.
The Nasdaq declined a point, or 0.02%, to settle at 4,526. Tech traded to another 52-week peak of 4,533 late in the session after a back test to 4,515. I mentioned that 4,500 would be trying to hold as support on a pullback, and yesterday’s action was bullish despite the slight dip. There is backup support at 4,475-4,450. Near-term resistance is at 4,550-4,600.
The Russell 2000 slipped 5 points, or 0.4%, to close at 1,157. The small-caps were weak throughout the session after kissing 1,152 late in the day. The good news is that support at 1,150 held. I have talked about the bulls needing to hold 1,160 this week and, hopefully, it wasn’t a one-night love affair. Resistance above this level is at 1,175.
The S&P 500 Volatility Index ($VIX, 11.78, down 0.43) fell another 4% despite the flatness in the overall market. I have said that a close below 11.50 would confirm fresh all-time highs on the S&P index, and yesterday’s low on the VIX touched 11.60. The bulls need to hold 12.50 to keep the bullish momentum going this week and into next.
There has been a lot of pin action this week, and over the past six weeks, which has allowed me to post some incredible gains over the summer. However, we all know you never count your money while you’re sittin’ at the table.
The market is still dealing, and I’m still playing, so let’s go check the current trades. There will be enough time enough for counting when the dealing’s done…
From desk to press, futures look like this: Dow (+38); S&P 500 (+4); Nasdaq 100 (+5.5).
MEMBERS AREA
Closed Trades for 2014: 83-39 — 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, $18.95, up $0.09)
September 19 calls (SNE140920C00019000, $0.50, up $0.10)
Entry Price: $0.45 (8/20/2014)
Exit Target: $0.90
Return: 11%
Stop Target: None
October 20 calls (SNE141018C00020000, $0.30, up $0.10)
Entry Price: $0.25 (8/20/2014)
Exit Target: $0.50-$0.75
Return: 20%
Stop Target: None
October 19 calls (SNE141018C00019000, $0.65, up $0.05)
Entry Price: $0.45 (8/18/2014)
Exit Target: $0.90
Return: 44%
Stop Target: $0.45 (Stop Limit)
Action: The battle at $19 was intense, as it triggered just ahead of the bell before shares finished a nickel off of their high. A close above $19 should get $20 in play. Support is moving up, and I would like to see $18.75 hold on any pullback. No announcement, yet, on when earnings might be out, but I will do some research over the weekend.
Bonus Coverage!
It’s a little after 2 a.m., and I couldn’t sleep. It’s been an exciting week. I had these thoughts on my mind and felt that if I wrote them down, I wouldn’t forget them.
I have a feeling that Sony is going to report an outstanding quarter. Apparently, Wall Street has no clue the company exists, as there is no analyst coverage of the stock. Yes, Sony is based in Japan, but shares trade on the U.S. exchanges. Anyway, if they report a blowout quarter, the suit-and-ties could notice and “initiate” coverage of the stock.
This doesn’t mean they did their homework, however, and they will essentially be doing what I like to call “jumping on the bandwagon.”
To take this a step further, I have said that Apple (AAPL) should buy Sony. Just pull the trigger, Tim. The company has a market cap just south of $20 billion. Apple could offer $30 billion, or $27-$28 a share, and Wall Street would wet its pants.
Apple would have made a major acquisition to brag about, they would have a finger in the TV pie, and, to totally make this a hat trick, their money would be overseas if they moved their headquarters to Japan.
I don’t know what Japan’s corporate tax rate is, but it has to be cheaper than the U.S. If not, the deal still makes sense. While a merger might produce good business synergies, I’m sure our government officials would be a little ticked off if one of the largest companies in the world packed up their offices and moved offshore.
Keryx Biopharmaceuticals (KERX, $16.18, down $0.04)
September 18 calls (KERX140920C00018000, $0.75, down $0.05)
Entry Price: $0.75 (8/20/2014)
Exit Target: $1.50
Return: 0%
Stop Target: None
Action: Keryx has a Phase 3 drug, Zerenex, which could gain FDA approval at some point this year or next. News could be coming in the next few weeks.
Yahoo (YHOO, $37.50, down $0.33)
September 38 calls (YHOO140920C00038000, $1.55, down $0.15)
Entry Price: $1.25 (8/11/2014)
Exit Target: $1.90-$2.50 (Limit Order to close half at $1.90)
Return: 24%
Stop Target: Lower from $1.50 to $1.40 (Stop Limit)
October 43 calls (YHOO1018C00043000, $0.90, down $0.05)
Entry Price: $0.80 (8/11/2014)
Exit Target: $1.20-$1.60
Return: 13%
Stop Target: $0.80 (Stop Limit)
Action: The September 38 calls traded to a low of $1.51 yesterday and missed the Stop Limit of $1.50 by a penny. Volume was heavy and, although I usually refrain from lowering a Stop Limit, I want to give this trade a little more wiggle room. The trade will still be profitable if the lowered Stop Limit of $1.40 triggers, but I do not want to get whipsawed out of this trade.
The low on the October 43 calls was $0.88, and there are no changes to this part of the trade.
I would like to see $37-$36.75 hold on any pullback, but this would likely trigger the Stop Limits. A close back above $37.75-$38 keeps $40 in play.
World Wrestling Federation (WWE, $14.51, up $0.12)
September 15 calls (WWE140920C00015000, $0.45, up $0.10)
Entry Price: $0.50 (8/6/2014)
Exit Target: $1.00+
Return: -10%
Stop Target: None
Action: Following a dip to $14.21 on the open, shares made a run at $15 after reaching a peak of $14.90. The close above $14.50 was slightly bullish, but $14.25 needs to hold on any pullback. If shares fall below $14, I might pull the plug.
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.
Pool (POOL, $56.11, down $0.21)
October 50 puts (POOL141018P00050000, $0.45, flat)
Entry Price: $1.10 (7/16/2014)
Exit Target: $2.20-$3.30
Return: -59%
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 (4): 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, and 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, and the trade is down 56%. 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 make me feel comfortable holding the trade open. Remember, the bulls like taking the stairs higher. The bears love taking the elevator — continue to hold.
Fossil September 90 puts (from August 2014) — The rebound above $98 was bullish, and I have said that if shares clear $100 I will likely close the trade — continue to hold, for now.