9:00 a.m. (EST)
The market finished in the green on Thursday ahead of today’s big speech from Fed Head Janet Yellen. The mini-trading range on Wednesday/Thursday and ahead of today’s fireworks has carried a bullish tone with higher highs.
This can mean one of two things. A continued summer rally is in store into next week and through August — or a “sell the news” event is in the works.
The Dow jumped 60 points, or 0.4%, to end at 17,039. The blue-chips traded to a high of 17,074 and held the 17,000 level into the close. The next level of resistance is at 17,100 and the all-time high of 17,151. If cleared, I talked about a run to 17,200-17,350 back in July, and these targets are back in play. Support is at 16,800 and then 16,600 if the action gets nasty today.
The S&P 500 popped a 6-pack, or 0.3%, to finish at 1,992.37 and a new all-time closing high. The index reached an intraday peak of 1,994.76 and should clear my near-term 2,000 target with a solid session.
The Nasdaq added 5 points, or 0.1%, to settle at 4,532. Tech tangoed with another 52-week high of 4,534 after trading down to 4,513. The bulls could push 4,550-4,600 today or next week on continued strength, while a drop below 4,500 likely leads to 4,450-4,400.
The Russell 2000 advanced 2 points, or 0.2%, to close at 1,160.03. The small-caps struggled at the open and fell below the 1,150 level to 1,147 before reclaiming resistance at 1,160 by a nose. This appears to be a bullish sign, but any negativity in today’s action could spell trouble. It is entirely possible a near-term 20-point move is in store today or into next week. A close above 1,175 would be the all aboard sign that might get Wall Streeter’s back from vacation early. A close below 1,140 could have them kicking it back until September saying “I told you so.”
The S&P Volatility Index ($VIX, 11.76, down 0.02) traded exactly in the range of a bullish breakout or bearish breakdown on Thursday, and I expected nothing less. The bears made a move past the 13.50 level to 13.52 on the open, as you can see from the one-day chart below. If you sneezed, you might have missed it.
I have talked about the bulls needing to get below 11.50 for the S&P index to trigger fresh highs. Well, the bulls pushed the VIX to a low of 11.52 and the S&P reached 1,994. I’ll have more on the VIX this weekend, but single-digits could be back in play, or all bear could break loose.
The current trades will likely get some action today, so make sure you read all trade instructions so that you know the game plan.
Ahead of the open, futures look like this: Dow (-15); S&P 500 (-3); Nasdaq 100 (-5).
MOMENTUM OPTIONS PLAY LIST
Closed Trades for 2014: 83-40 — 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.
Sony (SNE, $18.83, down $0.12)
September 19 calls (SNE140920C00019000, $0.40, down $0.10)
Entry Price: $0.45 (8/20/2014)
Exit Target: $0.90
Return: -11%
Stop Target: None
October 20 calls (SNE141018C00020000, $0.30, flat)
Entry Price: $0.25 (8/20/2014)
Exit Target: $0.50-$0.75
Return: 20%
Stop Target: None
October 19 calls (SNE141018C00019000, $0.55, down $0.10)
Entry Price: $0.45 (8/18/2014)
Exit Target: $0.90
Return: 22%
Stop Target: $0.45 (Stop Limit)
Action: Sony struggled yesterday but after six straight sessions to the upside, the mini-pullback looks healthy as long as $18.75 holds into the weekend. Of course, I would like to see a close above $19, which should get $20 in play.
Keryx Biopharmaceuticals (KERX, $15.63, down $0.55)
September 18 calls (KERX140920C00018000, $0.60, down $0.15)
Entry Price: $0.75 (8/20/2014)
Exit Target: $1.50
Return: -20%
Stop Target: None
Action: Keryx has a Phase 3 drug, Zerenex, which could gain FDA approval at some point this year or next. News could be coming in the next few weeks, and I will give you the full scoop on Monday morning of what I am expecting over the next week or two.
Yahoo (YHOO, $37.64, up $0.14)
September 38 calls (YHOO140920C00038000, $1.65, up $0.10)
Entry Price: $1.25 (8/11/2014)
Exit Target: $1.90-$2.50 (Limit Order to close half at $1.90)
Return: 32%
Stop Target: $1.40 (Stop Limit)
October 43 calls (YHOO1018C00043000, $0.90, flat)
Entry Price: $0.80 (8/11/2014)
Exit Target: $1.20-$1.60
Return: 13%
Stop Target: $0.80 (Stop Limit)
Action: I would like to see $37-$36.75 hold on any pullback, but this would likely trigger the Stop Limits. A close back above $37.75-$38 keeps $40 in play. Drumroll, please…Thursday’s high reached…drumroll…$37.75.
World Wrestling Federation (WWE, $14.44, down $0.07)
September 15 calls (WWE140920C00015000, $0.35, down $0.10)
Entry Price: $0.50 (8/6/2014)
Exit Target: $1.00+
Return: -30%
Stop Target: None
Action: The close back below $14.50 was slightly bearish, and $14.25 needs to hold on any pullback. If shares fall below $14, I might pull the plug. A close above $14.75 would be bullish.
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 and which only cost $0.50.
Pool (POOL, $56.15, up $0.04)
October 50 puts (POOL141018P00050000, $0.45, flat)
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 more than two months before they expire.
Trades on Hold — other 2014 Portfolio Open positions (3): 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.