12:20pm (EST)
The bears are working on their third-straight Monday win and are making more noise than the prior two. The bulls are holding near-term support but all signs are pointing towards a volatile July.
With 2Q earnings season kicking off tomorrow, there were a few clues I said to watch for today to get a feel for how the week might play out.
The first was how the blue-chips performed. The Dow is doing a back test to 17,000 but I mentioned a triple-digit loss could be a warning sign. Today’s low has checked-in at 16,993 and represented a 75-point clip. The good news is the bulls nearly made it back to even the prior two Monday’s ahead of the close.
The other important indicator I’m watching today is the S&P 500 Volatility Index ($VIX, 11.40, up 1.08). The VIX is up 10% but is holding 11.50. A close above this level would suggest 12.50 comes into play and a continued pullback to support for the major indexes. I have mentioned the bulls have wiggle room up to 12.50 but a close below 11.50 would suggest a continued rally despite today’s double-digit percentage pop.
Heading into the second half of trading, the Dow is down 53 points to 17,015 while the S&P 500 is lower by 8 points to 1,977. The Nasdaq is declining 31 points to 4,454 and the Russell 2000 is tanking 16 points to 1,191.
Let’s look at the current updates as there are two trades that I’m closing.
Closed Trades for 2014: 64-33 – the Weekly Wrap is 19-4 (83%) for 2014 (104-11, or 90% 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.
Fortinet (FTNT, $24.91, down $0.37)
August 27 calls (FTNT140816C00027000, $0.60, down $0.10)
Entry Price: $0.55 (6/30/2014)
Exit Target: $1.10
Return: 9%
Stop Target: None
September 28 calls (FTNT140920C00028000, $0.65, down $0.05)
Entry Price: $0.55 (6/30/2014)
Exit Target: $1.10
Return: 18%
Stop Target: None
Action: Close the August 27 calls at current levels.
Shares have dipped below $25 and have tested a low of $24.83. I would like to see $25 hold into the close but wanted to close the August 27 calls in case it doesn’t.
Rambus (RMBS, $14.42, down $0.26)
August 15 calls (RMBS140816C00015000, $0.60, down $0.10)
Entry Price: $0.60 (6/30/2014)
Exit Target: $1.20
Return: 0%
Stop Target: None
August 16 calls (RMBS140816C00016000, $0.33, down $0.02)
Entry Price: $0.33 (6/30/2014)
Exit Target: $0.65-$1
Return: 0%
Stop Target: None
Action: I would like to see shares hold $14.50. Earnings are tentatively scheduled for next week but there is no hard date listed.
Imax (IMAX, $27.94, down $0.30)
September 30 calls (IMAX140921C00030000, $0.60, down $0.10)
Entry Price: $0.60 (6/30/2014)
Exit Target: $1.20
Return: 0%
Stop Target: None
Action: Close the trade at current levels.
With shares falling back below $28, I wanted to take some risk off the table in case their is a continued decline. I will keep these options on my Watch List for a possible reentry point down the road.
General Motors (GM, $37.40, down $0.34)
September 32 puts (GM140920P00032000, $0.25, flat)
Entry Price: $0.40 (6/23/2014)
Exit Target: $0.80-$1.20
Return: -38%
Stop Target: None
Action: I like the trade as long as $38 holds and these are cheap options to use as “protection” over the summer months. A close below $36 would help get this trade going in the right direction.
Limelight Networks (LLNW, $2.98, down $0.12)
September 3 calls (LLNW140920C00003000, $0.40, flat)
Entry Price: $0.15 (6/4/2014)
Exit Target: $0.45
Return: 167%
Stop Target: None
December 3 calls (LLNW141220C00003000, $0.50, down $0.05)
Entry Price: $0.20 (6/4/2014)
Exit Target: $0.60
Return: 150%
Stop Target: None
Action: A close above $3.25 would be extremely bullish. Support is at $2.75 but $3 has been holding on pullbacks.
Previous comments:
Shares traded to a high of $3.25 on 6/20 after Tuition Build offered roughly $645 million, or $6.55 a share, for Limelight. The company dismissed the Silicon Valley’s private-equity firm’s offer after basically saying they weren’t experienced enough to run the business.
I have been suggesting a buyout offer would come for Limelight Networks with the company’s cheap market cap and said they would make a very luscious takeover target.
Its litigation issues have decreased dramatically following their recent win against AKAM and they are open to a much bigger marriage.
Roth Capital lifted its Price Target for Limelight Networks to $4.50 from $3 following its recent court win against AKAM. I have already covered the acquisition appeal of the stock and Captain Obvious echoed those comments last week. I was hoping shares would go unnoticed by the suit-and-ties and perhaps they have been reading my updates but I have a much higher target for Limelight. I have said shares could make a run to $5, possibly $8 if the takeover talk heats up over the summer.
Apple, Google, Facebook, Microsoft and Verizon, just to name a few, could take a look at this company as it looks to build out its CDN network. Limelight has a market cap of just $280 million and would be a great acquisition target for Apple. The market cap was just $214 million when I started recommending shares at the end of May at $2.16.
Other 2014 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 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.
McDonald’s July 95 puts (from May 2014) – continue to hold – shares are on the verge of falling below $100 but the options are running out of time.
Apollo Group August 23 puts (from April 2014) – continue to hold – resistance is at $32 and a close below $30 is needed to get this trade going in the right direction.