12:40pm (EST) continued…
The boys who are crying wolf are begging for a correction so they can put some money to work because they have lagged in performance. We may be getting some bearish clues on the potential of more than a 2%-3% drop but we also got signs yesterday that the rally could still have some pop.
As we head into the second half of trading, the Dow is down 24 points to 15,270 while the S&P 500 is lower by 5 points to 1,645. The Nasdaq is declining 10 points to 2,449 while the Russell 2000 is off 4 points to 980. The S&P Volatility Index ($VIX, 14.48, up 0.41) is holding 15. Tuesday’s Dow 19-straight win streak could be in jeopardy. We could have an exciting close as the signals are still mixed.
The bulls are trying to clear Dow 15,355; S&P 1,668; and Nasdaq 3,500 to get the weekly win. The market will be closed on Monday for Memorial Day and to the troops that protect us and the country – Thank You for having our backs!
Today’s close should provide some additional clues as to where the market could be headed over the near-term but as we mentioned, the uptrend is still intact until the charts tell us otherwise.
We will be back Monday night with the Weekly Wrap and on Tuesday morning with the Daily. We closed numerous triple and double-digit winners this week and we added some “put protection” in case there is a continued pullback. Enjoy the weekend as we wind down an incredibly profitable month of May.
Special Notice: For our trading Course Members, we are going to try to do a video in the next week or 2 to talk about the market and earnings and here was a trade setup we should have been in:
Sears Holdings (SHLD) Drops 10%, Put Options Up 500%
Shares of Sears Holdings (SHLD, $49.74, down $8.43) are getting whacked today after the company reported a wider-than-expected loss for the recently ended quarter. The company confessed a loss of $280 million, or $1.78 a share, versus expectations for a loss of $0.60 a share. Revenues also missed forecasts as same-store-sales slid 3.5%.
We have traded this name in the past and the company’s earnings report didn’t show up on our earnings calendar as we likely would have played an option trade. We are usually bearish when we bet against Sears but the stock has 9-lives as their real estate remains more valuable than their flagship stores.
Shares usually move double-digits percentage wise to the upside or downside on earnings news and we would have penciled-in a 10% drop had we known they were coming out after the close last night.
Shares were just above $58 on Thursday’s close and a 10% would have puts shares near $52 or over $64. In after-hours trading last night, shares went out at $51 and have dropped to a low of $47.33 in today’s session.
The June 49 puts (SHLD13080622P00049000, $2.00, up $1.40) were at 60 cents going into Thursday’s close and would have been a nice earnings trade to play the possible drop below $50. There were 94 contracts that traded hands yesterday and today’s volume has reached 654 as the options have zoomed 240%.
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 trades or “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: 60-33, including the Weekly Wrap that is 17-1).
Facebook (FB, $24.38, down $0.62)
June 24 puts (FB130622P00024000, $0.65, up $0.20)
Entry Price: $0.55 (5/24/13)
Exit Target: $1.10
Return: 18%
Stop Target: None
Action: Shares are trading below their 200-day MA and we believe a quick test to $22 could be coming. The talking heads have jumped on our backs and volume in these options are zooming.
Caterpillar (CAT, $86.06, down $0.89)
June 82.50 puts (CAT130622P00082500, $0.65, up $0.10)
Entry Price: $0.60 (5/24/13)
Exit Target: $1.20
Return: 8%
Stop Target: None
Action: We are playing these puts for a possible drop below $85 next week.
Spiders Gold Shares (GLD, $134.19, down $0.42)
June 125 puts (GLD130622P00125000, $1.00, down $0.50)
Entry Price: $1.05 (5/23/13)
Exit Target: $1.55-$2.10
Return: -5%
Stop Target: 50 cents
Action: We are looking for a quick profit with these puts and would like to be out of them for a 50%-100% profit by next Friday. There is risk up to $140 if $135 fails to hold but we are betting on a trip down to $130 by next week.
Clean Energy Fuels (CLNE, $13.21, down $0.14)
July 16 calls (CLNE130720C00016000, $0.20, down $0.05)
Entry Price: $0.25 (5/22/13)
Exit Target: $0.50
Return: -20%
Stop Target: None
Action: Support is at $13. We would like to see a close above $13.75 today.
Solazyme (SZYM, $11.19, up $0.49)
June 12.50 calls (SZYM130622C00012500, $0.30, up $0.10)
Entry Price: $0.30 (5/20/13)
Exit Target: $0.75
Return: 0%
Stop Target: None
Action: We still believe shares can make a run to $15 on a close above $11 but we need $10 to hold on further weakness.
Petrobras (PBR, $18.05, down $0.06)
June 20 calls (PBR130622C00020000, $0.10, flat)
Entry Price: $0.25 (5/17/13)
Exit Target: $0.50+
Return: -60%
Stop Target: None
July 20 calls (PBR130720C00020000, $0.25, flat)
Entry Price: $0.45 (5/17/13)
Exit Target: $1.00+
Return: -44%
Stop Target: None
Action: Support is at $18 and there is further risk down to $17 if this level fails to hold. A close above $19 keeps $20 in the mix and a possible run to $22-$24.
Beam (BEAM, $67.36, down $0.03)
June 72.50 calls (BEAM130622C00072500, $0.30, flat)
Entry Price: $0.60 (5/16/13)
Exit Target: $1.20
Return: -33%
Stop Target: None
Action: A close above $68 today would be bullish heading into next week. We will likely close the trade on a dip below $66.
MGM Resorts International (MGM, $14.93, flat)
July 17 calls (MGM130720C00017000, $0.20, flat)
Entry Price: $0.40 (5/10/13)
Exit Target: $0.80
Return: -50%
Stop Target: None
Action: Short-term support is at $14.50.
Yahoo (YHOO, $26.18, up $0.16)
January (2014) 31 calls (YHOO140118C00031000, $1.00, flat)
Entry Price: $1.05 (5/8/13)
Exit Target: $2.10
Return: -5%
Stop Target: 80 cents (Hard Stop)
Action: The options have traded to a low of 86 cents today but shares are rebounding and we would like to see $26 hold into the close.
Other 2013 Portfolio OPEN positions (1): 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.
Keryx Biopharmaceuticals June 10 calls (from February 2013)
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.
We will update this section with some fresh ideas on Tuesday.
****************************
11:10am (EST)
NEW TRADES!!!
Facebook (FB, $24.59, down $0.47)
Buy to OPEN June 24 puts (FB130622P00024000, $0.55, up $0.10)
Action: Shares are trading below their 200-day MA and we believe a quick test to $22 could be coming.
Caterpillar (CAT, $86.11, down $0.84)
Buy to OPEN June 82.50 puts (CAT130622P00082500, $0.60, up $0.05)
Action: We are playing these puts for a possible drop below $85 next week.
**************************
9:00am (EST)
The S&P 500 fell 5 points, or 0.3%, to end at 1,650. The index traded down to 1,636 at the open and had breathing room down to 1,625 before rebounding to nearly breakeven. We said to watch for 1,650 to hold and it did by a half-point so this was a bullish sign. A close above 1,668 would be even more bullish for next week.
The Nasdaq dropped 4 points, to 0.1%, to finish at 3,459. Tech tested 3,422 shortly after the open but, like the Dow, was also able to push green after touching 3,467. The index held our 3,450 downside target but there is further risk to 3,400 on continued weakness. If the bulls can clear and hold 3,500 in today’s session they will win the week.
The Russell 2000 bucked the trend and closed higher by 2 points, or 0.2%, to 984. The small-caps kissed 970 on the opening pullback but were able to hold our 975 target. Resistance is at 1,000 and a close above this level would be super bullish heading into next week.
We talked about the S&P 500 Volatility Index ($VIX, 14.07, up 0.25) holding 15 in our midday update yesterday and after a brief pop to 15.11, the bulls did by a point. We would like to see the VIX finish below 13.50 today and a close above or below these targets could be a good clue on how next week shakes out.
Trading could be light today as Wall Street looks ahead to Monday’s holiday and a well deserved 3-day weekend for you and us. Futures look like this as we head towards the open: Dow (-51), (S&P 500 (-9); Nasdaq (-15).
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 trades or “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: 60-33, including the Weekly Wrap that is 17-1).
Spiders Gold Shares (GLD, $134.61, up $2.67)
June 125 puts (GLD130622P00125000, $1.00, down $0.50)
Entry Price: $1.05 (5/23/13)
Exit Target: $1.55-$2.10
Return: -5%
Stop Target: 50 cents
Action: We are looking for a quick profit with these puts and would like to be out of them for a 50%-100% profit by next Friday. There is risk up to $140 if $135 fails to hold but we are betting on a trip down to $130 by next week.
Clean Energy Fuels (CLNE, $13.35, up $0.03)
July 16 calls (CLNE130720C00016000, $0.25, up $0.05)
Entry Price: $0.25 (5/22/13)
Exit Target: $0.50
Return: 0%
Stop Target: None
Action: Shares traded to a low of $13.01 and dipped below their major moving averages but held support at $13 and ended the session in positive territory. Yesterday’s high was $13.57 and we would like to see a close above $13.75 today.
Solazyme (SZYM, $10.70, down $0.11)
June 12.50 calls (SZYM130622C00012500, $0.20, flat)
Entry Price: $0.30 (5/20/13)
Exit Target: $0.75
Return: -33%
Stop Target: None
Action: We still believe shares can make a run to $15 on a close above $11 but we need $10 to hold on further weakness. Yesterday’s low was $10.36.
Petrobras (PBR, $18.11, down $0.25)
June 20 calls (PBR130622C00020000, $0.10, down $0.05)
Entry Price: $0.25 (5/17/13)
Exit Target: $0.50+
Return: -60%
Stop Target: None
July 20 calls (PBR130720C00020000, $0.25, down $0.05)
Entry Price: $0.45 (5/17/13)
Exit Target: $1.00+
Return: -44%
Stop Target: None
Action: Support is at $18 and there is further risk down to $17 if this level fails to hold. A close above $19 keeps $20 in the mix and a possible run to $22-$24.
Beam (BEAM, $67.39, down $0.25)
June 72.50 calls (BEAM130622C00072500, $0.30, flat)
Entry Price: $0.60 (5/16/13)
Exit Target: $1.20
Return: -33%
Stop Target: None
Action: A close above $68 today would be bullish heading into next week. We will likely close the trade on a dip below $66.
MGM Resorts International (MGM, $14.93, down $0.15)
July 17 calls (MGM130720C00017000, $0.20, flat)
Entry Price: $0.40 (5/10/13)
Exit Target: $0.80
Return: -50%
Stop Target: None
Action: Short-term support is at $14.50. We would like to see a run past $15.25 today.
Yahoo (YHOO, $26.02, down $0.52)
January (2014) 31 calls (YHOO140118C00031000, $1.00, down $0.05)
Entry Price: $1.05 (5/8/13)
Exit Target: $2.10
Return: -5%
Stop Target: 80 cents (Hard Stop)
Action: The options traded to a low of 86 cents yesterday when shares fell to $25.70 but they held $26.
Other 2013 Portfolio OPEN positions (1): 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.
Keryx Biopharmaceuticals June 10 calls (from February 2013)
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.
Spider S&P 500 (SPY, $165.45, down $0.48)
June 160 puts (SPY130622C00160000, $0.95, up $0.10)
Thoughts: These puts traded to a high of $1.39 yesterday and we will keep watching them in case support fails on the S&P.
Walter Energy (WLT, $18.53, down $0.84)
June 20 calls (WLT130622C00020000, $1.00 down $0.30)
July 22.50 calls (WLT130720C00022500, $1.00, down $0.30)
Thoughts: These options are expensive but there looks to be a good chance shares will test $25, possibly $28 on a takeover bid.
Financial Select Sector Spiders (XLF, $19.71, down $0.12)
July 20 calls (XLF130720C00020000, $0.35, down $0.05)
Thoughts: If support at $19 holds we may get back in Financial Spiders with these July call options.
Sony (SNE, $21.63, down $0.52)
July 25 calls (SNE130722C00025000, $0.50, down $0.10)
Thoughts: If $22 holds and shares cross back over $23 we can use these options to play a continued push higher.
Goodyear Tire & Rubber (GT, $14.58, up $0.08)
July 15 calls (GT130720C00015000, $0.55, flat)
Thoughts: If we get back into GT these are the calls we are planning to use.
SAIC (SAI, $15.16, down $0.10)
June 15 calls (SAI130622C00015000, $0.50, down $0.10)
Thoughts: We still like this stock for a run to $17.
Michael Kors Holdings (KORS, $59.81, down $0.65)
June 65 calls (KORS130622C00065000, $1.80, down $0.10)
Thoughts: Earnings are due out next week.
Regeneron Pharmaceuticals (REGN, $254.87, down $7.55)
June 310 calls (REGN130622C00310000, $2.00, down $0.40)
Action: Shares could test $250. A close back above $280 should get our $300 target in play.
Boeing (BA, $99.75, up $1.82)
June 100 calls (BA130622C00100000, $2.40, up $1.00)
Thoughts: We like these calls for a possible push past $100 as long as $95 holds.
JPMorgan Chase (JPM, $53.35, down $0.28)
June 55 calls (JPM130622C00055000, $0.55, down $0.15)
Thoughts: Shares could make another run at $55 as long as $50 holds.
Nasdaq OMX Group (NDAQ, $30.92, down $0.06)
June 31 calls (NDAQ130622C00031000, $0.75, down $0.05)
June 32 calls (NDAQ130622C00032000, $0.35, down $0.05)
Thoughts: We are expecting a push to $32 as long as short-term support at $30 holds.