9:00am (EST)
The bears got their third-straight Monday win as the market tested near-term support. Although the bulls held the losses in check, some of the closes were bearish as Wall Street prepares for the start of 2Q earnings season.
The Dow dropped 44 points, or 0.3%, to close at 17,024. The blue-chips hovered around the 17,000 level throughout the session following a dip to 16,992 on the open. There is additional support at 16,800-16,600 but higher highs are in store if the bulls can hold 17K today.
The S&P 500 fell 8 points, or 0.4%, to close at 1,977. The index traded down to 1,974.88 after the midday update on Monday and I mentioned the bulls needed to hold 1,975 to start the week. They did but a continued attack by the bears could lead to 1,960-1,950. The Nasdaq declined 34 points, or 0.8%, to settle at 4,451. The bulls held the 4,450 level into the closing bell following a test to 4,447.
I mentioned support at 4,400-4,350 could come into play if the bears got below 4,450. If the bulls can clear 4,475 again, they will likely push 4,500. The Russell 2000 tanked 21 points, or 1.8%, to end at 1,186. The small-caps opened at 1,204 and slipped below the 1,200 level an hour into trading. The worrisome part is the bears also cracked 1,190 with the index going out near its session low.
A close back above 1,190-1,200 needs to come quickly as there is risk to 1,175-1,170 on a continued pullback. The S&P Volatility Index ($VIX, 11.33, up 1.01) traded to a high of 11.54 but the bulls held 11.50 into the close. There is risk to 12.50 and a finish above this level bears watching as 13.50-15 could come quickly. A close back below 11-10.50 would be bullish.
I closed two trades yesterday for a slight profit and a scratch. I have updated the current trades and there could be New Trade(s) this afternoon depending on how the morning plays out.
Closed Trades for 2014: 66-33 – the Weekly Wrap is 19-4 (83%) for 2014 (104-11, or 90% 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.
Fortinet (FTNT, $24.91, down $0.37)
September 28 calls (FTNT140920C00028000, $0.65, down $0.05)
Entry Price: $0.55 (6/30/2014)
Exit Target: $1.10
Return: 18%
Stop Target: 55 cents
Action: Shares traded to a low of $24.85 on Monday and closed below near-term support at $25. There is backup support at $24 but I will likely close this trade if shares fall below $24.75-$24.50. I’m still looking for shares to make a run to $28-$30 at some point but I want to protect profits and reduce risk if there is a continued pullback.
Rambus (RMBS, $14.29, down $0.39)
August 15 calls (RMBS140816C00015000, $0.55, down $0.15)
Entry Price: $0.60 (6/30/2014)
Exit Target: $1.20
Return: -8%
Stop Target: None
August 16 calls (RMBS140816C00016000, $0.30, down $0.05)
Entry Price: $0.33 (6/30/2014)
Exit Target: $0.65-$1
Return: -9%
Stop Target: None
Action: Shares failed to hold $14.50 after ending near session lows. There is help at $14 but a drop below this level could lead to $13.75. Earnings are tentatively scheduled for next week but there is no hard date listed. I believe the company will beat estimates so I don’t mind staying long.
General Motors (GM, $37.44, down $0.30)
September 32 puts (GM140920P00032000, $0.25, flat)
Entry Price: $0.40 (6/23/2014)
Exit Target: $0.80-$1.20
Return: -38%
Stop Target: None
Action: I like the trade as long as $38 holds and these are cheap options to use as “protection” over the summer months. A close below $36 would help get this trade going in the right direction.
Limelight Networks (LLNW, $2.95, down $0.15)
September 3 calls (LLNW140920C00003000, $0.40, down $0.10)
Entry Price: $0.15 (6/4/2014)
Exit Target: $0.45
Return: 167%
Stop Target: None
December 3 calls (LLNW141220C00003000, $0.50, down $0.05)
Entry Price: $0.20 (6/4/2014)
Exit Target: $0.60
Return: 150%
Stop Target: None
Action: Additional support is at $2.75 following the close back below $3.
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.
McDonald’s July 95 puts (from May 2014) – continue to hold – shares are on the verge of falling below $100 but the options are running out of time.
Apollo Group August 23 puts (from April 2014) – continue to hold – resistance is at $32 and a close below $30 is needed to get this trade going in the right direction.