9:00 a.m. (EST)
The bulls continued their climb towards both previous and fresh all-time highs, as the four major indexes finished Tuesday in the green for the second straight session, with the Nasdaq powering higher for five straight sessions.
I mentioned that the start of the week could fuel a short-covering rally if certain resistance levels were cleared, and the bulls have followed the game plan to a “T” thus far.
The Dow advanced 81 points, or 0.5%, to close at 16,919. The blue-chips traded to a high of 16,929 in positive territory throughout the session. A close above 17,000 would get new all-time highs back in play. That peak is at 17,151. Support at 16,800 is trying to move up to 16,900.
The S&P 500 gained 10 points, or 0.5%, to settle at 1,981. The index cleared resistance at 1,975 shortly after the open, and the close above this level was bullish. I mentioned that if 1,985 clears, a run to and past 2,000 is nearly a given. Support will try to hold at 1,975-1,970, with further help at 1,960 on a pullback.
The Nasdaq added 19 points, or 0.4%, to finish at 4,527. Tech tapped another 52-week high of 4,528.91, while holding 4,500 throughout the session. A run to 4,550-4,600 is possible over the near-term. Support is at 4,475-4,450 on a break below 4,500.
The Russell 2000 popped 4 points higher, or 0.4%, to end at 1,162. The small-caps kissed 1,164, but, more importantly, cleared 1,160. This puts 1,175 on the bulls’ radar. Fresh support will try to hold at 1,160, with backup at 1,150.
The S&P 500 Volatility Index ($VIX, 12.21, down $0.11) dropped 1% after trading to a low of 11.91. I talked about the bulls needing to get below 11.50 to confirm that new highs on the S&P 500 are coming.
The trade instructions for the current option plays are very busy this morning — to say the least — as I have raised the Exit Targets and lifted the Stop Limits on several trades.
I want to ensure that the trades are profitable, while, at the same time, I want to continue to ride the bullish breakout.
Everyone should have a big smile on their face given the recent trade results, and I will review them on Friday (along with a Special Announcement), but there are a number of headlines due out during the remainder of the week.
I’m staying focused, as I still need to watch the review mirror for bears, but the rally could last all month long while Wall Street vacations — providing fresh support levels hold.
Heading from desk to press, futures look like this: Dow (+1); S&P 500 (-0.25); Nasdaq 100 (+2.25).
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.
GT Advanced Technologies (GTAT, $18.40, up $0.17)
September 20 calls (GTAT140920C00020000, $0.95, up $0.05)
Entry Price: $0.70 (8/18/2014)
Exit Target: $1.40 (Limit Order to close half)
Return: 36%
Stop Target: $0.80 (Stop Limit)
Action: Shares traded up to $18.57 on the open before dipping into negative territory to $18.12 shortly afterwards. I was pulling for a close above $18.50, but I raised the Stop Limit to $0.80 yesterday in case momentum slows. The low on these options yesterday was $0.89.
The Limit Order of $1.40 is still in place on half of the position.
Sony (SNE, $18.86, up $0.34)
October 19 calls (SNE141018C00019000, $0.60, up $0.15)
Entry Price: $0.45 (8/18/2014)
Exit Target: $0.90
Return: 33%
Stop Target: $0.45 (Stop Limit)
September 18 calls (SNE140920C00018000, $1.05, up $0.25)
Entry Price: $0.50 (8/14/2014)
Exit Target: Raise from $1.00 to $1.25-$1.50 (Limit Order on another 1/3 at $1.25; closed 1/3 at $1.00 on 8/19/14)
Return: 107%
Stop Target: Raise from $0.60 to $0.90 (Stop Limit on remaining 2/3)
Action: I suggested closing a third of the September 18 calls after the Limit Order of $1.00 triggered. I have raised the Exit Target to $1.25 on another third of the trade and $1.50+ on the remaining third. Set Limit Orders to close another third of the trade at $1.25, and we will go from there if reached. I have also raised the Stop Target from $0.60 to $0.90 and have made it a Stop Limit for the remaining two-thirds of the trade.
As far as the October 19 calls, I like them for a continued run past $20. Yesterday’s high was $18.90, and shares came within spitting distance of clearing $19. Near-term support is at $18. I have made the Stop Target of $0.45 a Stop Limit.
Yahoo (YHOO, $37.83, up $0.45)
September 38 calls (YHOO140920C00038000, $1.70, up $0.15)
Entry Price: $1.25 (8/11/2014)
Exit Target: $1.90-$2.50 (Limit Order to close half at $1.90)
Return: 36%
Stop Target: Raise from $1.25 to $1.50 (Stop Limit)
October 43 calls (YHOO1018C00043000, $0.95, up $0.05)
Entry Price: $0.80 (8/11/2014)
Exit Target: $1.20-$1.60
Return: 19%
Stop Target: $0.80 (Stop Limit)
Action: I have set a Limit Order to close half of the trade at $1.90 on the September 38 calls. I have raised the Stop Target from $1.25 to $1.50 and have made it a Stop Limit.
I have also placed a Stop Limit of $0.80 on the October 43 calls.
I have been expecting a breakout to $40 since $37 cleared, and a close above $38 could ignite another round of buying. I would like to see $37-$36.75 hold on any pullback.
World Wrestling Federation (WWE, $14.39, up $0.33)
September 15 calls (WWE140920C00015000, $0.40, up $0.05)
Entry Price: $0.50 (8/6/2014)
Exit Target: $1.00+
Return: -20%
Stop Target: None
Action: Shares traded to a high of $14.47 on Tuesday, and I mentioned that a close above $14.25 would be bullish. The next wave of resistance is at $14.50-$14.75 and, if cleared, will likely get these call options “in-the-money” and the trade back to even.
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, $56.67, up $0.24)
October 50 puts (POOL141018P00050000, $0.45, down $0.10)
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 makes 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) — I could close this trade today depending on the action. 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.