9:00 a.m. (EST)
The market was volatile Wednesday but bounced off its lows after the zombies cut another $10 billion from their monthly bond buying spree while keeping interest rates unchanged.
Of course, the tight trading range over the past 3 weeks could continue today as Wall Street awaits Friday’s Nonfarm Payroll numbers.
The Dow declined 31 points, or 0.2%, to end at 16,880. The blue-chips reached 16,984 on the open but gave back 167 points after falling to a low of 16,817 ahead of Wall Street’s lunch break. The spike back into positive territory came right after the Fed’s minutes were released but faded afterwards. Support at 16,800 held once again with near-term resistance at 17,000.
The S&P 500 added a tenth-point, or 0.01%, to settle at 1,970. The bulls made a run to resistance at 1,980 and reached 1,978.90 before testing support at 1,960. The bears pushed 1,962 before the bulls reclaimed the 1,975-1,970 level. I mentioned earlier in the week that I would be watching the S&P a little more closely for additional clues for a breakout or breakdown. I may use an index trade to play a bullish move above 1,980 or a bearish drop below 1,960.
The Nasdaq jumped 20 points, or 0.5%, to finish at 4,463. Tech held green all session long after reaching a peak of 4,476 on the open and challenging this level again into the final bell. The close back above 4,450 was bullish and the 52-week high is at 4,485.93 which was tripped on July 3rd. Support remains steady at 4,425-4,400.
The Russell 2000 advanced 5 points, or 0.4%, and went out at 1,146. The small-caps cleared 1,150 at the start of trading and also held positive territory throughout the session. The bulls fell short at holding resistance but the continued pop offMonday’s low of 1,132 looks promising.
The S&P 500 Volatility Index ($VIX, 13.33, down 0.05) traded to 14.07 by high noon and finished slightly higher after testing 12.53 on Wednesday’s open. The “no flinching” rule is still in effect as I have said not to get nervous (or excited for that matter) until 15 is cleared on a close. The next bearish trend might occur if this were to happen but I’m looking for the bulls to get back below 12.50-11.50 ahead of the weekend.
One of the current trades will see some action this morning as the company is reporting their numbers ahead of the opening bell. There is the possibility that I could send a Profit Alert ahead of the midday update if the option play does well. I have given specific trade instructions on what to expect and how to manage the position and will follow-up if the register rings early.
Heading from desk to press, futures look like this: Dow (-94); S&P 500 (-12); Nasdaq 100 (-25).
Closed Trades for 2014: 74-38 – 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 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.
World Wrestling Federation (WWE, $12.09, down $0.38)
September 13 calls (WWE140920C00013000, $0.55, down $0.10)
Entry Price: $0.50 (7/30/2014)
Exit Target: $1.50-$2+ (limit order on half at $1.50)
Return: 10%
Stop Target: None
Action: Set limit orders to close half the trade at $1.50 to automatically lock-in a 200% return on the open.
I have listed 2 exit targets as I would like to close half the trade at $1.50 and the other half at $2 or better. I also wanted to include the current chart that shows a huge “gap up” could occur if shares clear $14 as $18 could come into play on short covering.
A 10% move puts shares at $13.30 or $10.90. A 20% swing from current levels will have shares at $14.50 or $9.70. A 20% move should trigger the exit target while a 10% move should provide a 100% return along with a Profit Alert.
If shares tank on an earnings miss or lowered guidance, I will deliver the nasty news at noon.
RF Micro Devices (RFMD, $11.77, up $0.39)
September 12 calls (RFMD140920C00012000, $0.70, up $0.20)
Entry Price: $0.45 (7/29/2014)
Exit Target: $0.90
Return: 56%
Stop Target: None
November 12 calls (RFMD141122C00012000, $1.05, up $0.25)
Entry Price: $0.70 (7/29/2014)
Exit Target: $1.40
Return: 50%
Stop Target: None
Action: Shares traded to another 52-week high of $11.79 yesterday and were kissing $12 in after-hours trading last night. If $12 clears today, I may also send out a Profit Alert to take quarter or half profits. Anytime you get 2-day gains of this magnitude, its best to take at least a little off the table.
I have a near-term target of $13 and a longer-term of $15 on the stock. Support will try to hold at $11 on any pullbacks.
CVS Caremark (CVS, $77.74, down $0.04)
September 82.50 calls (CVS140920C00082500, $0.35, flat)
Entry Price: $0.45 (7/28/2014)
Exit Target: $0.90
Return: -22%
Stop Target: None
Action: There is risk to $77 and the 50-day MA on the close below $78. I’m looking for this area to hold as support before shares resume their uptrend for a possible push past $80. The 52-week high of $79.43 was reached in early June. Earnings are due out next week.
iShares Russell 2000 (IWM, $113.79, up $0.45)
August 118 calls (IWM140816C00118000, $0.20, flat)
Entry Price: $0.60 (7/22/2014)
Exit Target: $1.20
Return: -67%
Stop Target: None
Action: Support is at $112. I would like to see a close above $115 by Friday’s close.
Pool (POOL, $55.28, up $0.73)
October 50 puts (POOL141018P00050000, $1.00, down $0.10)
Entry Price: $1.10 (7/16/2014)
Exit Target: $2.20-$3.30
Return: -9%
Stop Target: None
Action: Shares are on the verge of testing the July low of $54.16. A break below this level should lead to $50 and fresh 52-week lows. Resistance is holding at $57 along with the 200-day MA but I didn’t like the close back above $55.
The break-even point for the trade is at $48.90, technically, by mid-October. In other words, this trade has plenty of time to play out.
Fortinet (FTNT, $25.53, up $0.41)
September 28 calls (FTNT140920C00028000, $0.35, up $0.05)
Entry Price: $0.55 (6/30/2014)
Exit Target: $1.10 (Limit Order to close HALF)
Return: -36%
Stop Target: None
Action: A close above $26 would be bullish. Support is at $25-24 on a backtest.
General Motors (GM, $34.31, down $0.13)
September 32 puts (GM140920P00032000, $0.45, up $0.05)
Entry Price: $0.40 (6/23/2014)
Exit Target: $0.80-$1.20 (Limit Order to close HALF at 80 cents)
Return: 13%
Stop Target: None
Action: GM is below all of its major MA’s and is on track to test the low $30′s. Resistance is at $36.
Other 2014 Portfolio OPEN positions (0): 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.