1:35 p.m. (EST)
Futures were higher throughout the night and ahead of Wall Street’s open which was a bullish sign following my weekend homework. While it is too early to say if the early August weakness has come and gone, the bulls are taking a step in the right direction with today’s follow-through rally.
This week will be pivotal in determining if a short-term double bottom was set last week or if today’s pop is a back test ahead of further weakness. Although the zombies are away on their month-long August vacation, geopolitical risk remains at the forefront along with economic news as 2Q earnings begin to simmer down.
There will still be a number of companies reporting their numbers for the rest of August and into September worth watching but the bigger picture is what is happening during the current quarter and the yearend outlooks.
I talked about trends, trading ranges, and market clues in this morning’s update and the first one I said to watch for is today’s close. So far, so good for the bulls but current levels need to hold into the close.
Heading into the second half of trading, the Dow is up 41 points to 16,595 while the S&P 500 is higher by 10 points to 1,941. The Nasdaq is advancing 36 points to 4,407 while the Russell 2000 is jumping 15 points to 1,146. The VIX is getting hit for 12% to 13.85, down 1.92, and is back below 15.
I have a New Trade for today as well as another Profit Alert. Subscribers, head to the Members Area for the updates and stay locked-and-loaded into the close in case I see additional low hanging fruit for new trades or if I ring the register on additional profits.
Closed Trades for 2014: 77-39 — 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.
New Trade!!!
Yahoo (YHOO, $35.90, down $0.01)
Buy to Open September 38 calls (YHOO140920C00038000, $1.25, down $0.05)
Buy to Open October 43 calls (YHOO1018C00043000, $0.80, down $0.05)
Action: Shares have been hovering in a tight range for 3 weeks between $35.50-$36.50. I’m expecting a breakout to $40+ once $37 clears.
Current Trades
Exact Sciences (EXAS, $17.39, up $0.72)
September 18 calls (EXAS140920C00018000, $1.05, up $0.25)
Entry Price: $0.75 (8/8/2014)
Exit Target: $1.50
Return: 40%
Stop Target: None
October 19 calls (EXAS141018C00019000, $1.05, up $0.20)
Entry Price: $0.75 (8/8/2014)
Exit Target: $1.50
Return: 40%
Stop Target: None
Action: Shares have traded to a high of $17.57 today. Near-term support is at $16 and the 50-day MA. Shares have been in a longer-term trading range of $15.50 with resistance at $17.50. A close above $17.50 will likely lead to a run at $20+. The 52-week high is at $17.74.
S&P 500 Spiders (SPY, $194.33, up $1.09)
September 180 puts (SPY140920P00180000, $0.65, down $0.35)
Entry Price: $1.25 (8/7/2014)
Exit Target: $1.90-$2.50
Return: -48%
Stop Target: None
Action: Resistance is at $194-$195. The S&P Spiders held the 100-day MA at $190.85 last week but a close below $190 would be bearish. I like these puts as “insurance” for the week as I believe volatility is still in play.
MGM Resorts (MGM, $24.90, up $0.17)
September 25 puts (MGM140920P00025000, $1.00, down $0.15)
Entry Price: $0.80 (8/6/2014)
Exit Target: $1.60 (closed half at $1.20 on 8/7/14)
Return: 47%
Stop Target: $1 (Stop Limit on other half)
Action: The Stop Limit of $1 has triggered on the other half of the trade after shares cleared $25 this morning and the puts kissed 95 cents.
The average closing price was $1.10 after I suggested closing half last Thursday at $1.20. The overall return was 47% for less than a week’s work.
World Wrestling Federation (WWE, $13.83, up $0.08)
September 15 calls (WWE140920C00015000, $0.40, flat)
Entry Price: $0.50 (8/6/2014)
Exit Target: $1.00+
Return: -20%
Stop Target: None
Action: Support is at $13.50 and a drop below this level will likely lead to $13. Resistance is at $13.75-$14 and a close above the latter would be bullish.
Pool (POOL, $56.55, up $0.23)
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 MA.
The break-even point for the trade is at $48.90, technically, by mid-October. These options have over 2 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 – a close back above $25 would be bullish.
CVS Caremark September 82.50 calls (From July 2014) – continue to hold – a close above $78.50-$79 would be bullish.