9:00am (EST) continued…
The Dow jumped 110 points, or 0.7%, to finish at 15,848. The blue-chips traded to a high of 15,907 but failed to hold the 15,900 level. The close above 15,800 was bullish but the bulls need to clear 16,000 to get back the momentum. Another close below 15,800
The S&P 500 soared 20 points, or 1.1%, to end at 1,794. The index reached a peak of 1,798.77 but has failed all week in clearing or holding 1,800. A move above this level would be bullish but we would wait for 1,810, to clear before we would say the bulls are safe. A close below 1,775 remains the bears goal.
The Nasdaq zoomed 71 points, or 1.8%, to settle at 4,123. Tech opened at 4,098 and easily took out the 4,100 level after pushing 4,135. The index just missed holding 4,125 and the next 25 points either way could be a good clue on how next week shakes out.
The Russell 2000 roared 17 points, or 1.5%, to close at 1,139.36. The small-caps cracked 1,140 after kissing 1,144 but failed to hold this level for the 4-straight session. The bulls came close yesterday but we have said any rebound shouldn’t be trusted until 1,150 clears again. A dip below 1,125 by the close would be bearish for next week.
The S&P Volatility Index ($VIX, 17.29, down 0.6) was flat despite trading to a low of 15.96. This was a troublesome sign as a close above 17.50 would suggest further weakness ahead. The bulls are gunning for a 15 and below.
Futures are showing a mixed open after Amazon (AMZN, $403.81, up $18.81) and Google (GOOG, up $1,135.39, up $28.47) missed Wall Street’s earnings expectations:
AMZN gained 5% yesterday but gave it all back in after-hours trading last night after going out at $384.50 while GOOG was at $1,182 – up 4%.
As we head from desk to press, here is how we look: Dow (-154); S&P 500 (-16); Nasdaq 100 (-16).
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 2014: 15-1- the Weekly Wrap is 7-1 for 2014 (92-8 since 2011) and is designed for traders that want to use options with less risk.
Caterpillar (CAT, $93.20, up $2.58)
March 85 puts (CAT140322P00085000, $0.55, down $0.30)
Entry Price: $0.75 (1/28/2014)
Exit Target: $1.50
Return: -27%
Stop Target: None
Action: The March option have 49 days before they expire and we wanted some put protection heading into February. We believe shares will dip below $90 again and possibly push $85 over the next 6 weeks. Resistance is at $95 and where we would possibly exit the trade if cleared.
Ariad Pharmaceuticals (ARIA, $7.84, up $0.24)
March 10 calls (ARIA140322C00010000, $0.80, up $0.05)
Entry Price: $0.95 (1/28/2014)
Exit Target: $1.90
Return: -16%
Stop Target: None
May 11 calls (ARIA140517C00011000, $0.95, up $0.05)
Entry Price: $1.05 (1/28/2014)
Exit Target: $2.10
Return: -10%
Stop Target: Nobe
Action: The close back above $7.75 was bullish. We feel as though shares will trade to the mid-to high double-digits, soon, or there will be a takeover of the company for possibly $20+ a share.
Krispy Kreme Doughnuts (KKD, $17.47, down $0.49)
March 16 puts (KKD140322P00016000, $0.75, up $0.10)
Entry Price: $0.70 (1/27/2014)
Exit Target: $1.40
Return: 7%
Stop Target: None
Action: Shares traded to a low of $17.43 yesterday and we would like to see further weakness to $17 today. We are expecting a near-term test to $15 for KKD and the chart shows the potential for shares to drop to $14 based on the “gap” that needs to be filled. Resistance will try to hold at $18 and we have wiggle room to $20 before the drop to $15 comes.
BlackBerry (BBRY, $9.79, down $0.17)
February 11 calls (BBRY140222C00011000, $0.20, down $0.05)
Entry Price: $0.65 (1/22/2014)
Exit Target: $1.30
Return: -69%
Stop Target: None
Action: There could be a back test to $9-$8.50 if volatility picks up but we still like the position. A close back above $10.50 would be bullish.
Exact Sciences (EXAS, $13.37, up $0.47)
April 19 calls (EXAS140419C00019000, $0.55, up $0.10)
Entry Price: $0.88 (1/22/2014)
Exit Target: $1.75
Return: -38%
Stop Target: None
Action: The company should get some FDA news in March on its Cologuard drug. These are April options with 3 months until expiration and we plan to hold through the volatility because we want to be in when the March news is released and why we do not have a Stop Limit listed. There could be further weakness and we may have to put the trade on hold but this will be a major event and we will hold the trade open win, lose, or draw.
Other 2014 Portfolio OPEN positions (5): 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.
SLM February 27 calls (from January 2014)
General Electric March 28 calls (from January 2014)
PulteGroup February 22 calls (from January 2014)
Sony February 19 calls (from January 2014)
April 20 calls
PowerShares QQQ February 90 calls (from January 2014)
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.
Philip Morris (PM, $79.09, down $0.35)
February 77.50 puts (PM140222P00077500, $0.80, up $0.10)
March 75 puts (PM140322P00075000, $0.70, up $0.05)
Thoughts: The drop below $80 was bearish and we have a near-term target of $75 on the stock.
H&R Block (HRB, $30.12, up $0.99)
February 30 calls (HRB140222C00030000, $0.80, up $0.30)
April 31 calls (HRB140419C00031000, $1.15, up $0.25)
Thoughts: A run past $29 would be bullish but we wouldn’t initiate new positions until shares clear $29.50-$30.
Dupont (DD, $61.54, up $0.83)
February 57.50 puts (DD140222P00057500, $0.20, down $0.15)
March 62.50 calls (DD140322C00062500, $1.05, up $0.25)
Thoughts: The bulls and bears will battle over the $60 level and there are a number of ways we can play this. Both options together would make a nice strangle option trade with a chance for a nice 50%-100% return. We could also go long on a move above $60.75 and the 100-day MA but if shares stay fall below $59 there could be a test to double-nickels ($55).
iShares Russell 2000 (IWM, $113.00, up $1.65)
February 107 puts (IWM140222P00107000, $0.65, down $0.20)
Thoughts: We could go short on a drop below $111.
Aruba Networks (ARUN, $20.55, up $0.22)
February 22 calls (ARUN140222C00022000, $0.65, up $0.05)
April 25 calls (ARUN140419C00025000, $0.55, up $0.10)
Thoughts: We were stopped out of the February 21’s for a 108% gain and we could add one or both of these options on a pop past $22.
Galena Biopharma (GALE, $5.41, up $0.13)
February 6 calls (GALE140222C00006000, $0.35, flat)
April 9 calls (GALE140419C00009000, $0.50, flat)
Thoughts: We like the company and the stock and feel a run to double-digit will come but we need to make sure $5 holds as support. We have listed the April 10 calls to buy another trade more time and to get through the volatility. We can use these options on another break above $7.
Twitter (TWTR, $63.47, up $4.02)
February 90 calls (TWTR140222C00095000, $0.70, up $0.15)
February 40 puts (TWTR140222P00040000, $0.25, down $0.20)
Thoughts: Earnings are due out on February 5 and we believe shares will either be above $80 or testing $40 after the announcement is made. We will update this trade throughout the week to see if there is a possible playfor next week.
Linn Energy (LINE, $33.09, up $0.29)
March 34 calls (LINE140322C000354000, $0.60, up $0.10)
March 30 puts (LINE140322P00030000, $0.40, down $0.05)
Thoughts: Shares could be setting up for a nice strangle trade.
Fossil (FOSL, $115.25, up $2.50)
February 95 puts (FOSL140222P00095000, $0.80, down $0.25)
Thoughts: Earnings are due out on February 11 and we are expecting a drop below $100 over the next few weeks. We may take a small position next week if shares continue their downtrend.