9:00 a.m. (EST)
The market traded in a tight range for much of Tuesday’s action, with both the bulls and bears trying to gain traction inside the current trading range. The bears eventually won the struggle, but the clues remain mixed on how the rest of the week might play out.
The Dow dipped 9 points, or 0.1%, to end at 16,560. The blue-chips traded to a high of 16,589 before falling to a low of 16,518 while holding near-term support. A close above 16,600 would be bullish, but there is risk to 16,350-16,200 on a close below 16,500 and further weakness.
The S&P 500 slipped 3 points, or 0.2%, to settle at 1,933. The index made a run to resistance after trading to 1,939.65 but struggled once again at 1,940. The bears pushed a low of 1,928 and are still looking to get below 1,925 by week’s end.
The Nasdaq fell 12 points, or 0.3%, to finish at 4,389. Tech tested 4,407 on the open but never really challenged resistance at 4,425-4,450. The index made a back test to 4,371 afterwards with short-term support holding at 4,375. Any dips below 4,350 need to be watched.
The Russell 2000 gave back 9 points, or 0.8%, to close at 1,133. The small-caps struggled from start to finish and traded underwater throughout the session. Paper-thin support at 1,140 failed within the first hour of trading, with the low checking in at 1,129 ahead of the close. The bears are licking their chops to get the action back below 1,125.
The S&P 500 Volatility Index ($VIX, 14.10, down 0.10) stayed relaxed, with the bulls making a run at 13.50 on the open. They reached 13.76 before the bears took over and pushed 14.74. Resistance at 15 held. These two areas hold the next major clue on market direction if the bulls get below 13.50 or the bears clear 15.
Once again, there are specific trade instructions for this morning’s open, as I have another trade that could return triple-digits.
Heading from desk to press, futures look like this: Dow (+63); S&P 500 (+9); Nasdaq 100 (+18).
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.
Fossil (FOSL, $102.25, down $0.96)
September 90 puts (FOSL140920P00090000, $1.15, up $0.25)
Entry Price: $1.05 (8/12/2014)
Exit Target: $1.75-$2.10 (Limit Order)
Return: 10%
Stop Target: None
Action: Set a limit orders to close half of the trade at $1.75 on this morning’s open. Once filled, try to get $2.10 for the other half of the trade by setting a limit orders as well.
If the trade is filled, I will update the position in the Mid-Market update. If the limit orders fail to trigger, or if the first does and the second doesn’t, I will likely send out a Profit Alert or Trade Update shortly after the opening bell.
Shares were under $100 and pushing $98 in after-hours last night on earnings.
Yahoo (YHOO, $35.52, down $0.27)
September 38 calls (YHOO140920C00038000, $1.05, down $0.25)
Entry Price: $1.25 (8/11/2014)
Exit Target: $1.90-$2.50
Return: -16%
Stop Target: None
October 43 calls (YHOO1018C00043000, $0.75, down $0.10)
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.
S&P 500 Spiders (SPY, $193.53, down $0.26)
September 180 puts (SPY140920P00180000, $0.70, up $0.05)
Entry Price: $1.25 (8/7/2014)
Exit Target: $1.90-$2.50
Return: -40%
Stop Target: None
Action: Resistance is at $194-$195. A close below $192 would help get this trade back on track, but it has plenty of time to mature. I like these puts as “insurance,” as I believe volatility is still in play and will be for the next few months.
World Wrestling Federation (WWE, $13.71, up $0.01)
September 15 calls (WWE140920C00015000, $0.35, down $0.05)
Entry Price: $0.50 (8/6/2014)
Exit Target: $1.00+
Return: -30%
Stop Target: None
Action: Shares traded to a high of $14.14 before fading in the second half of trading on Monday. 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, $55.73, down $0.53)
October 50 puts (POOL141018P00050000, $0.80, flat)
Entry Price: $1.10 (7/16/2014)
Exit Target: $2.20-$3.30
Return: -27%
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 (2): 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