9:00am (EST) continued…
The Dow gained 11 points, or 0.1%, to end at 16,179. The blue-chips traded in a tight 73-point range and reached a high of 16,194 late in the day following an opening dip to 16,121. The bulls will be trying to clear 16,200 ahead of the weekend while the bears are shooting for anything under 16,100.
The S&P 500 dropped a point, or 0.1%, to settle at 1,809. The index spent much of the session in the red defending the 1,800 level following a test to 1,801 but rebounded to see a little green ahead of the close. The S&P peaked at 1,810.88 and is still on track to trigger 1,825 as long as near-term support holds.
The Nasdaq declined a dozen points, or 0.3%, to close at 4,058. Tech traded in negative territory all day and reached a low of 4,045 before recovering and holding 4,050. There is risk back down to 4,025-4,000 on a continued pullback but the bulls have expectations for a run to 4,200.
The Russell 2000 fell 8 points, or 0.7%, to finish at 1,125. The small-caps were also shutout from seeing positive territory and traded down to 1,124.93. Prior resistance at 1,120 will now try to hold as support. A close above 1,135 will get new all-time highs back in play.
The S&P Volatility Index ($VIX, 14.15, up 0.35) traded below 13.50 to 12.89 but the bulls could hold this level. The high of 14.21 was never a threat to 15 but this level still needs to be watched for bearish clues.
As we head to press, futures look like so: Dow (+17); S&P 500 (+3); Nasdaq 100 (+6).
MEMBERS AREA
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 tradesor “Exit Orders” in your brokerage account unless we list one. We will send out a “Profit Alert” or “New Trade” if we want you to close a position OR if a new trade comes out. Otherwise, follow instructions at all times in the 9am and 1pm updates. Also, we will usually give you a heads-up if we think we are going to send an email outside of these time frames. Closed Trades for 2013: 133-75 – the Weekly Wrap is 41-4 for 2013 (85-6 since 2011) and is designed for traders that want to use options with less risk.
Herbalife (HLF, $79.58, up $1.58)
January 82.50 calls (weekly)(HLF140103C00082500, $1.75, up $0.35)
Entry Price: $1.70 (12/17/13)
Exit Target: $3.80
Return: 3%
Stop Target: None
Action: Thursday’s high reached $79.95 and we are expecting a run past $80 to $85. We will stick with the trade as long as $75 sticks on the stock as we have moved our possible stop up from $70.
Vera Bradley (VRA, $23.10, down $0.26)
January 22.50 puts (VRA140118P00022500, $0.75, up $0.05)
Entry Price: $1.20 (12/10/13)
Exit Target: $2.40
Return: -38%
Stop Target: None
Action: We would like to see a close below $23 toay. There is risk up to $24 and the 20-day MA. We are expecting a drop to $21-$20.50 by mid-January.
Ariad Pharmaceuticals (ARIA, $5.52, up $0.54)
January 7 calls (ARIA130118C00007000, $0.55, up $0.20)
Entry Price: $0.45 (12/3/13)
Exit Target: $0.90-$1.35
Return: 22%
Stop Target: None
Action: There is a big gap to fill from $6 to $17.
Pulte Group (PHM, $18.25, down $0.16)
January 20 calls (PHM140118C00020000, $0.20, flat)
Entry Price: $0.50 (11/27/13)
Exit Target: $1.00
Return: -60%
Stop Target: None
Action: While there could be a near-term test to $17.50, we still feel as though shares will be north of $20 come mid-January.
Opko Health (OPK, $8.81, down $0.05)
January 11 calls (OPK140118C00011000, $0.25, down $0.05)
Entry Price: $0.65 (11/26/13)
Exit Target: $1.30
Return: -62%
Stop Target: None
Action: Support is at $8.50 but there is further risk to $7.50 on continued weakness. Short-term resistance is at $9 and a close above $10 would indicate the short selling is complete. Yesterday’s high was $8.97.
We have done our own research and we have written about Opko in our Weekly Wrap. We are expecting some good news on the company’s Phase 3 trial results for its cancer drug, Rolipitant, this month.
Galena Biopharma(GALE, $4.06, up $0.12)
January 2.50 calls (GALE140118C00002500, $1.60, up $0.10)
Entry Price: $0.30 (11/11/13)
Exit Target: $0.90 (closed a quarter @ $1 on 11/21/13, closed a quarter @ $1.50 on 12/10/13)
Return: 375%
Stop Target: $1 on remaining half position (Stop Limit)
Action: We would like to see a close above $4.25 today. Support is at $3.75 on another close below $4. Resistance is at $4.25-$4.50. We have a stop limit of $1 on the other half of the trade that will likely get triggered if shares fall below $3.50.
Millennial Media(MM, $7.13, up $0.02)
December 7.50 calls (MM131221C00007500, $0.05)
Action: Anything over $7.50 will require us to take action as these options will be in-the-money”. It will be important to watch the close and we will update the trade one last time this afternoon.
We still like this stock and while we may take a hit with these options we are up on our Weekly Wrap trade and we are looking forward to the LEAPs possibly bailing us out for an overall return.
Other 2013 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 we would not open any new positions. We are still keeping track of the trades and we will record the results, accordingly, when we close them or if the options expire. Click on the 2013Portfolio link in the Members Area to view ALL open/ closed trades.
Peabody Energy December 22 calls (from November 2013)– Expire Friday
Kodiak Oil & Gas December 13 calls (from November 2013) – Expire Friday
WATCH LIST SECTION
These trades are NOT recommendations. They are trades that we like but have not added to the portfolio as an official recommendation because of market conditions or because we are waiting for better entry prices. We try not to have more than 12-15 open trades at any one time which is why we created a Watch List. We will not list entry prices because these stocks are on the verge of breaking out or they could sell off but these are the trades we are watching as new candidates.
SolarCity (SCTY, $56.90, up $4.11)
January 50 puts (SCTY140118P00050000, $1.60, down $0.95)
Thoughts: Shares could be headed for a back test to $50 but the options are expensive. We would like to see a test to resistance at double-nickels before possibly going short.
Morgan Stanley (MS, $30.86, down $0.76)
January 32 calls (MS140118C00032000, $0.50, down $0.30)
Thoughts: Resistance is at $31.50. Support is at $30.
Exact Sciences (EXAS, $11.94, down $0.07)
January 12 calls (EXAS140118C00012000, $0.65, flat)
Thoughts: Resistance is at $12.25-$12.50 and a close above this level would be bullish for a run past $13 that could lead to $14-$15.Support is at $11.50 and the 50-day MA with risk down to $11 on a close back below these levels.
Twitter (TWTR, $57.49, up $1.98)
January 60 calls (TWTR140118C00060000, $2.70, up $0.60)
January 49 puts (TWTR140118P00049000, $0.95, down $0.40)
Thoughts: Watch for now.
Gold Shares (GLD, $114.82, down $2.79)
January 115 puts (GLD140118P00115000, $2.60, up $0.95)
Thoughts: We knew the breakdown was coming and we should have positioned ourselves for the move. We were hoping to get into these puts next week after a few trades came off the board today but we will have to revaluate the chart to see if there is still an opportunity to make a profit.
Cliff’s Natural Resources (CLF, $24.87, up $0.87)
January 25 calls (CLF140118C00025000, $0.85, flat)
Thoughts: Nice rebound yesterday but we wouldn’t trust the bounce until $25.25 clears.
iShares Russell 2000 (IWM, $112.04, down $0.85)
January 114 calls (IWM140118C00114000, $0.85, down $0.40)
January 107 puts (IWM140118P00107000, $0.70, up $0.10)
Thoughts: We could go short on a close below $109 or long on a pop past $112.50. At current levels the options together might make a good strangle trade.
International Business Machines (IBM, $180.22, up $2.94)
January 175 puts (IBM140118P00175000, $0.90, down, $0.60)
Thoughts: Whoa Nelly! We are looking for one last push to $180 before possibly going short. Support is at $175 and a close below $170 would be very bearish that could have us on board. We are now following the Jan 175’s instead of the 170’s.