11:00pm (EST)
1. Market Summary
2. LifeLock (LOCK) Announces Sweet Earnings
3. Earnings
4. Weekly Wrap Portfolio Update
5. Week Ahead
(To view the charts, please log into the Members Area and go to the Weekly Wrap Premium section.)
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1. Market Summary
“There are plenty of signals to sift through on trying to figure out where the market could be headed over the short-term but the Presidential Election will be the heaviest weight that could sink or swim either side. Like the election, there will be a loser and the trend could affect how the market trades for the rest of the year.
Economic news, earnings, and European headlines will be a risk and the headlines would seem to favor the bears going forward but it has been hard to count the bulls out all year long. We are on the fence on which way the market is headed but we wouldn’t be surprised either way which direction the market takes from here. The beauty is we could care less because our Portfolios are light and we like to play BOTH sides of the market and that gives us an edge over most investors and mutual fund managers.
When the market is going up, we favor call option trades. When the market is going down, we use put options to play the downside. We have outlined clear levels of support and resistance so we can relax a little until after the dust settles. There will be plenty of time and plenty of trades to get into so let’s look at how this week could play out.
We have said there is a chance for a “Romney Rally” and we aren’t sure if we coined this term back in August but it is picking up steam. There are different perceptions on which President is “better” for the stock market but the majority of investors and Wall Street believe an Obama win would be bullish. We don’t.
To start, an Obama second-term could cause further division between the Republicans and Democrats and we doubt the Fiscal Cliff would get resolved by year-end, especially with the holidays coming up. Romney has said he will solve these issues like he did when he was governor but stock market pundits believe if he gets rid of Ben Bernanke, the market will tank in 2013 because the Fed won’t be providing liquidity.
Our argument would be 12 million jobs like he promised and growing the economy at a much faster rate is better than doubling the national debt again which is what happened during Obama’s 4 years in the White House. In case anyone has forgotten, the U.S. owes $16 trillion. This is 16 plus 12 zeros, or $16,000,000,000,000, or a million millions.
The deficit is the single-most factor in deciding America’s future and Obama could push it to $20 trillion at his current rate. Oh, and Obama wants to INCREASE capital gains tax. Romney wants to eliminate them. Right on.
We could go on and on about who could win, who should win, what could happen or what will happen but in our minds, we would rather have a President that has run businesses and balanced budgets instead of going down the current road towards socialism.
As far as the technical picture, the indexes have held their 200-day MA’s except for Tech and all of them are having trouble clearing their 50-day MA’s. It would be hard to imagine the Dow, S&P 500, and the Russell 2000 not falling below their 200-day MA’s simply because Tech has. However, if this is the bottom, overall, it will be easy to say they held if there is a rally. But that would be hindsight and that is why we feel a test below the 200-day MA’s will come over the near-term for all of the major indexes.
If there isn’t, and the market rallies maybe we can thank Mitt because we do feel he will be better for the market, but more importantly, America. If there is somehow a “tie” and lawyers get involved because the race is so tight, the market will suffer.
There has been one indicator, believe it or not, that has been incredibly accurate in picking the next President and has a 95% win rate.
We will leave you with what we call the Redskins Rule. Since we live and work near the nation’s Capital, it is hard not to follow the NFL Washington Redskins (and politics) and the Redskins Rule is something we always watch every 4 years. We weren’t around when the “indicator” started in 1940 mind you but it has an incredible accurate history of picking the next President.
Over the past 18 Washington Redskin’s HOME games before the Presidential election, the incumbent party (or the party that last won the popular vote) has won 17 of the times if the Redskins won. If the Redskins lost their home game before the election, the challenging party has won (Romney).
The Redskins played on Sunday and were at home pagainst the Carolina Panthers. The Redskins lost 13-21. This will be a historic week to say the least as we could get a Redskin Ruling, a Romney Rally, or a Barrack Breakdown”. (from 11/4/2012 Weekly Wrap/ Monday Morning Outlook)…
“Hail to Obama, hail victory, Democrats on the war path, fight for all D.C. – Theme song at the White House following Tuesday’s Presidential race…
The Redskin Rule was a fumble, there was a Romney Rally, but the devil was in the details as the market got the Barrack Breakdown. The bears pushed support on Monday as the Dow held 13,000 and the S&P 500 1,400. The bulls were able to rebound to start the week with a slight win which carried over into Tuesday.
The major indexes posted strong gains and cleared near-term resistance ahead of the Presidential Election but Tech looked weak and the closes were right at resistance. We watched the race and the futures throughout the night and we warned of a major selloff on Sunday night. Despite us being unhappy with the Head Zombie that got elected to serve America, we were extremely pleased with how the futures market was unfolding.
Wednesday was a nasty day as the market fell 2.5%, on average, with the Dow closing below 13,000 and its 200-day Moving Average (MA) while the S&P finished below 1,400. The index was able to hold it 200-day MA at 1,380 but this level fell on Thursday as the Dow and S&P 500 joined the Nasdaq in accomplishing this mission.
Friday was up for grabs and we figured there would be a bounce, and there was until Obama spoke, but the market barely held onto its gains and the next levels of support.
The Dow added 4 points, or 0.03%, to end at 12,815 on Friday. The downside channels we drew up last week were spot on as the blue-chips held 12,800 but the drop to 12,743 opened the door for a test down to 12,600 and possibly 12,350 on an overshoot as you can see in the chart. Resistance will be at 13,000 followed by 13,200. The Dow started the week at 13,093 and was down 278 points, or 2.1%, by Friday’s close. For 2012, the index is showing a gain of 598 points, or 4.9%.
Last week’s chart for the Dow:
The S&P 500 gained 2 points, or 0.2%, to settle at 1,379. The index closed just below its 200-day MA and right at the bottom of last week’s downside channel. We have been calling for a pullback to 1,350 and a break below this level could lead to 1,325-1,300. Resistance is at 1,400 followed by 1,425. The S&P500 started Monday at 1,414 and lost 35 points, or 2.4%, for the week. For the year, the index is up 122 points, or 9.7%.
This is the S&P’s chart from last week:
The Nasdaq advanced 9 points, or 0.3%, to finish at 2,904. Our downside target of 2,900 was hit on Thursday when Tech traded down to 2,895 which nailed our 5% pullback target from mid-October. The next wave of support is at 2,850 but 2,800 could be in play if some of the bigger market-cap names continue to fold like a cheap lawn chair. Resistance is at 2,950 and then 3,000. The Nasdaq came into the week at 2,982 and was down 78 points, or 2.6%, by the weekend. YTD, the index is higher by 299 points, or 11.5%.
Here is how Tech looked last week:
The Russell 2000 popped 2 points, or 0.3%, to finish at 795. We said the small-caps needed to hold 810 on Monday and they did before clearing 820 on Tuesday. However, the index fell below 810 and tested 800 on Wednesday’s sell-off. The break below the 200-day MA gets our 780 target in play from mid-October. There could be an overshoot to the downside of 760 if there is panic selling and from there it gets ugly. The bulls will need to clear 800 to start the week and then 810 to stop the bleeding. A move back above 820 would be bullish and would signal a bottom is in. The Russell 2000 was at 814 before Monday’s open and gave back 19 points, or 2.4%, by Friday’s closing bell. For 2012, the index is showing a gain of 54 points, or 7.3%.
Here is the Russell 2000 from last week:
The S&P Volatility Index ($VIX, 18.61, up 0.12) came into the week at 17.59 and traded to a high of 18.70 on Monday’s which gave us a clue 20 could trigger if 17.50 held. On Tuesday’s push higher, the VIX briefly fell below 17.50 to 17.19 but finished the session at 17.58 which favored the bears. We have been calling for the VIX to test 20 and said this is when the panic selling would start. Wednesday’s high on the selloff was 19.40.
We said last week there was a good chance the mini trading range the market had been in was about to crack and all signs were favoring the bears. The move lower from the previous 5-week trading range served as serious resistance and the breakdown from the current trading range could lead to a possible correction if the zombies aren’t careful.
Of course, the big worry as soon as the Presidential Election ended was the Fiscal Cliff and the rhetoric that would come on Friday. The Republicans have made it clear they are against raising taxes on individuals and businesses making more than $250,000 because of the impact it will have on future economic growth. They argue 7 million jobs will be lost.
The Democrats want to raise taxes, implement ObamaCare which is already forcing companies to cut back on employee hours so they won’ t have to offer healthcare benefits, and increase taxes on capital gains and dividends.
Needless to say, this is going to get nasty and it won’t be solved anytime soon. If the zombies can’t come to agreement on nearly $600 billion in spending cuts and tax increases by yearend, the talk is the U.S. economy will go into another recession. Unemployment could surge above 9% by the end of next year, or 20% if you count the people who have given up working that the government doesn’t count.
We aren’t Vegas, but the odds of the zombies pushing the U.S. off the cliff are running at 5-to-1, or 20%, but could increase if Congress drags its feet. There are talks scheduled for this Friday at the White House (Monday or Tuesday was just way too soon we suppose) and Thanksgiving is next week. Given the lines in the sand that were drawn this past Friday, this leaves the earliest we see something getting done is December.
This leaves the bulls in a volatile situation which is only likely to pick up from here on out until these issues are resolved.
As the rest of the world watches our soap opera play out, headlines from across the pond could also come back into play. There were more riots in Greece last week after the country approved additional austerity measures to ensure an upcoming aid payment. The country continues to blow through cash and will try to raise 3 billion euros on Tuesday in an attempt to sell debt through bonds. Why any investor would buy these bonds or why Greece continues to get more money baffles us because they can’t ever pay it back.
Same deal with Spain. The country so far has refrained from asking for an “official” bailout that would trigger bond purchases from the European Central Bank but it could be coming. We aren’t sure how the markets will react to this news that could also hit this week but the ECB wants Spain to ask for a handout so that it will reduce the yields on their bonds.
The fight over money, taxes, and power between the zombies will weigh on the market over the near-term as earnings wind down and the holiday’s comes around. However, we did mention the week before Thanksgiving is usually bullish and the indexes are due for a bounce. It is also November options expiration week and it will only add to the volatility.
Over the past 18 years, the Dow has traded higher for the week in 15 of them. However, Monday’s have been bearish 7 out of the last 12 during November option expiration week with a nasty loss of nearly 3% in 2008. The index fell from 8,497 to 8,273 which would be roughly 350 Dow points at current levels.
Friday November expiration has seen the Dow rally 7 out of the last 9 years with 2008 showing jaw dropping gains. The blue-chips surged nearly 500 points, or 6.5%, after moving from 7,552 to 8,046. We mentioned on Friday some of the wild price swings the Dow endured in 2008 and while we don’t believe the index will see a 3% or 6% single-day drop, it could happen over the next few weeks if there is continued weakness and the finger-pointing becomes middle fingers between the Republicans and Democrats.
While we have penciled in a possible rebound, we still believe our 5% targets for all of the indexes will trigger and we often remind you that once there is a breakout or breakdown out of a trading range there are fluff targets.
From our 10/28/12 Weekly Wrap:
“There are a ton of fund managers that are underperforming the market and some of them have been caught on the wrong side of the recent volatility trying to make up for lost ground. At some point, there could be a bottom and strong rally but we have to be prepared for both cases. It was good to break out of the trading range to the downside but they too can sometimes get “stretched” at the top and at the bottom so we have to realize this as well.
So how low could the indexes go if the 200-day MA’s break and there is panic selling?
The Dow touched a low of 12,035 in early June and the mid-July low was 12,492. The June 4 low for the S&P 500 was 1,266 while the July low was 1,325. The Nasdaq lows were 2,726 and 2,837 in June/ July while the Russell 2000 kissed 729 and 765, respectively.” (END)
As we head to press, futures are showing a slightly higher open for Monday. Dow futures are up 8 points to 12,772 while the S&P 500 futures are higher by a half-point to 1,376. The Nasdaq 100 futures are advancing 3 points to 2,585.
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Key of Technicals Used In Following Articles
2. LifeLock (LOCK) Announces Sweet Earnings
By Michael Bryant
The stock of popular but controversial identity theft protection company LifeLock (LOCK, $8.08, up $0.24) got off to a rough start and bad publicity but is it time to put the bad history behind?
But investigators later found out that he was lying. Charges were dropped after he repaid the $16,000 casino credit he owed. In 2005, he filed for bankruptcy for the third time while starting the company and received startup funding from Biltmore Ventures.
Amid hype in the anti-identity theft industry, LifeLock became one of the nation’s fastest growing companies in its field. Its primary service was placing alerts of potential unauthorized access on customers’ credit reports. It advertised aggressively where founder and CEO Todd Davis published his social security number and dared ID thieves to try to steal it. The company promised that its $10 monthly service would protect consumers from identity theft. If a fraud alert is on ones report, lenders are required to call the person before issuing credit in their name. Other services it offered were placing a request to remove a customer’s name from junk mail and pre-approved credit card lists, sending an annual credit report, and canceling one’s stolen credit card. LifeLock also provided a $1 million guarantee to compensate customers for losses incurred if they became a victim of identity theft after signing up for the service.
However in 2007, the Phoenix New Times found that many of the services could be obtained for free. Credit agencies charge customers as much as $14.95 a month to monitor ones credit score, but one can ask the credit bureau to put up a fraud alert for free. You can also renew the fraud alert for free after it expires every 90 days. Everybody can order a free annual credit report. Canceling credit cards should only take a few phone calls. Removing a name could be tricky but can be done after several phone calls. And the $1 million guarantee terms extensively limits what is eligible. Finally, the service can only try to prevent one kind of identity theft: new account fraud. According to data available from the Federal Trade Commission in 2005, only 0.8% of all people had fallen victim to new account fraud.
Further, the New Times disclosed Maynard’s past, prompting him to resign in June. However, the company continued to employ Maynard as a consultant from his home. Also, a identity thief used Davis’ social security number, causing an embarrassment for the company although the thief was caught. In response to the New Times findings and the CEO’s incident, the company added extra services to its existing ones. In December 2008, the company agreed with credit bureau TransUnion to automate the process of alerting customers through their credit reports. But it could not escape more bad news. In February 2008, credit information company Experian sued it for placing false fraud alerts and thus keeping clients’ files in a constant state of alert. It also charged that the company used false and misleading advertising. As part of a 2009 settlement, it created a new service that does not rely on setting fraud alerts. Then in 2010, the Federal Trade Commission fined it $12 million for making false claims and failing to secure sensitive customer data. Of that amount, $11 million will go to refund subscribers of the service.
In March 2012, LifeLock acquired San Diego based ID Analytics, which issues a real-time alert when someone applies for credit. This is different from credit monitoring where the alert might be sent a week or two later. For example, ID’s system can send a phone call in 10 seconds if someone is trying to apply for a credit card. If it is not the credit holder, they can stop the transaction. The drawback is that the credit card companies must be part of its network before ID Analytics can issue an alert to consumers. They also provide a similar service to banks and institutions. Very popular, ID Analytics had become fully profitable by 2009, and it is the company’s fastest growing subsidiary.
On August 28, 2012, the company filed for an IPO worth up to $175 million. It planned to offer 15.7 million common shares between $9.50 and $11.50 a share. On October 3rd, the stock started trading on the NYSE, opening at $9 a share and ending down 7.1% to close at $8.36 a share. That means its market debut was not much higher than where it sold equity more than two years ago. In May 2010, Industry Ventures paid $7.88 for preferred shares after 19% of the company’s shares outstanding were offered.
As of June 2012, the company served nearly 2.282 million people and 250 enterprise customers, including financial institutions, telecommunication and cable service providers, government agencies, technology companies, large retailers, e-commerce providers, and automobile and mortgage lenders. By September, it had 2.376 million subscribers. The growth in subscribers has been about the same since March of 2011. It also had an industry-high retention rate of 85.9% in the 3rd quarter. That means about 86 out a 100 subscribers stay with the company. Its retention rate has increased compared to a year ago.
The company reported 3rd quarter earnings last week with revenue coming in greater than total expenses while gross margins also increased. They posted a positive net income of $7.9 million for the 3rd quarter (9/12) of 2012, up from a net loss of $0.5 million for the 3rd quarter (9/11) of 2011. Non-GAAP adjusted net income per diluted share was $0.12, compared with $0.01 per diluted share a year ago. Net loss per diluted share was $0.16 compared with a net loss of $0.33 per diluted share a year ago. Cash flow from operations was $17.6 million and free cash flow was $16.2 million, comparing with cash flow from operations of $6.4 million and free cash flow of $6.2 million a year ago.
Analysts expect revenue growth to be flat in the 4th quarter (12/12). The company expects revenue to be in the range of $73 million to $74 million. Non-GAAP adjusted net income per share is expected to be in the range of $0.06 to $0.07. Thus, the company also thinks revenue growth would be flat. This could leave room for upgrades in revenue estimates as such upgrades should cause the stock to rise.
At $8.08, the stock is still far below its low target of $11.00 made by the 5 analysts recorded by Thomson/First Call. Mean target is $11.40, median target of $11.00, and high target is $12.00. Using a scale of 1.0 as a strong buy and 5.0 as a sell, the average rating of the stock was 1.6, unchanged from a week ago.
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Last Month |
Two Months Ago |
Three Months Ago |
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Strong Buy |
3 |
0 |
0 |
0 |
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Buy |
2 |
0 |
0 |
0 |
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Hold |
0 |
0 |
0 |
0 |
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Underperform |
0 |
0 |
0 |
0 |
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Sell |
0 |
0 |
0 |
0 |
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3. Earnings
The companies in BOLD, we are looking at as possible trades and we may list call or put options on them in our Daily Newsletter. If they become official recommendations, we sent out Trade Alerts or include them in our 9am and 1pm updates that come out during the week (Quotes are from 11/9/12 close)
By Catherine Tierney
Monday
Before the opening bell:
Beazer Homes (BZH, $16.64, down $0.36), Community Financial (CFFC, $5.53, down $0.22), CTI Industries (CTIB, $5.20, up $0.19), D.R. Horton (DHI, $20.60, down $0.37), Derma Sciences (DSCI, $10.98, down $0.02), Food Technology (VIFL, $5.56, down $0.40), Natural Alternatives (NAII, $6.29, up $0.13), Northern Tier (NTI, $23.40, down $0.11), Providence and Worcester Railroad (PWX, $13.51, down $0.61), RRSat Global Communications (RRST, $6.05, Flat), SouFun (SFUN, $19.24, up $0.05)
After the close:
America First Tax Exempt Investors (ATAX, $6.11, down $0.04), Canterbury Park (CPHC, $9.55, down $0.20), Colonial Financial (COBK, $12.76, down $0.23), Cornerstone OnDemand (CSOD, $27.61, down $0.07), Country Style Cooking Restaurant (CCSC, $7.90, up $0.02), CIFC (DFR, $6.56, down $0.01), Einstein Noah (BAGL, $14.80, up $0.16), ESCO (ESE, $35.94, up $0.02), Fortegra (FRF, $8.30, Flat), Gladstone Capital (GLAD, $8.47, down $0.13), Hologic (HOLX, $20.32, up $0.25), Jacobs Engineering (JEC, $39.00, up $0.03), LGL Group (LGL, $5.31, down $0.11), NQ Mobile (NQ, $6.64, up $0.02), Reeds (REED, $7.77, up $0.01), Unico American (UNAM, $12.81, up $0.31), Weatherford (WFT, $10.75, up $0.04), Wuxi Pharmatech (WX, $14.80, up $0.48)
Tuesday
Before the opening bell:
Aecom (ACM, $21.80, up $0.01), AuRico (AUQ, $8.22, down $0.24), Baytex (BTE, $43.21, down $0.04), Dicks Sporting Goods (DKS, $49.35, up $0.05), Elbit Systems (ESLT, $34.79, down $0.14), Fiesta Restaurant (FRGI, $13.46, Flat), Asure Software (ASUR, $6.90, up $0.03), Home Depot (HD, $60.96, up $0.10), Inergy (NRGY, $19.06, do9wn $0.41), Michael Kors (KORS, $50.43, down $0.27), Cellcom (CEL, $8.47, down $0.07), Pernix Therapeutics (PTX, $7.59, up $0.27), Saks (SKS, $10.05, up $0.05), TJX (TJX, $40.73, up $0.37), Vodafone (VOD, $26.56, down $0.13)
After the close:
BioFuel Energy (BIOF, $6.06, down $0.07), Cisco (CSCO, $16.82, down $0.01), Continental Materials (CUO, $11.85, down $0.13), Crown Crafts (CRWS, $Flat), CVD Equipment (CVV, $9.63, down $0.13), Friedman Industries (FRD, $10.57, down $0.07), Giant Interactive (GA, $5.11, down $0.02), Griffon (GFF, $9.18, down $0.05), Home Inns & Hotels (HMIN, $28.10, up $0.59), IAMGOLD (IAG, $15.38, down $0.38), IMPAC Mortgage (IMH, $17.33, up $0.98), M/A-COM Technology (MTSI, $10.87, down $0.14), Post Holdings (POST, $33.58, up $0.38), Qihoo 360 Technology (QIHU, $22.94, up $0.62), Rochester Medical (ROMC, $9.67, down $0.05), Silvercorp Metals (SVM, $6.08, down $0.03), Spark (LOV, $6.13, up $0.12), Wesco Aircraft (WAIR, $13.58, up $0.05), Woodward (WWD, $31.85, up $0.21)
Wednesday
Before the opening bell:
Abercrombie & Fitch (ANF, $31.52, up $0.02), Hollysys Automation (HOLI, $10.70, up $0.30), Manchester United (MANU, $12.79, down $0.02), Mobile Telesystems (MBT, $16.67, down $0.16), NetSol Technologies (NTWK, $6.66, up $0.12), Northern Technologies (NTIC, $10.77, down $0.27), Repros Therapeutics (RPRX, $12.88, down $0.05), S&W Seed (SANW, $8.36, up $0.09), Staples (SPLS, $11.15, down $0.14), Tyco International (TYC, $27.56, down $0.04), Verastem (VSTM, $6.87, down $0.31), VimpelCom (VIP, $10.70, down $0.15)
After the close:
Charter Financial (CHFN, $9.28, up $0.03), Cyclacel Pharmaceuticals (CYCC, $5.52, down $0.26), Gas Natural (EGAS, $9.97, up $0.03), Hot Topic (HOTT, $8.31, down $0.29), InterOil (IOC, $65.11, up $0.54), KongZhong (KONG, $6.02, up $0.02), Lifeway Foods (LWAY, $8.29, up $0.12), Limited Brands (LTD, $46.48, up $0.03), NetApp (NTAP, $27.34, up $0.03), NetEase (NTES, $53.85, down $0.88), NGL Energy Partners (NGL, $24.10, down $0.14), PennantPark Investment (PNNT, $10.52, down $0.09), PetSmart (PETM, $65.99, down $0.39), SINA (SINA, $53.42, down $0.45), Solazyme (SZYM, $7.55, up $0.11), Spectrum Brands (SPB, $43.04, down $0.52), Williams-Sonoma (WSM, $45.23, down $0.14)
Thursday
Before the opening bell:
AutoNavi (AMAP, $11.01, up $0.01), Bon-Ton Stores (BONT, $11.13, down $0.16), Brady (BRC, $30.90, down $0.01), Cato (CATO, $27.97, up $0.02), Children’s Place (PLCE, $57.75, up $1.57), Destination Maternity (DEST, $18.88, up $0.06), Dollar Tree (DLTR, $37.74, down $0.39), GameStop (GME, $22.11, down $0.41), Gentium (GENT, $10.89, down $0.17), Global Sources (GSOL, $5.50, down $0.02), Helmerich & Payne (HP, $45.92, up $0.17), HiSoft Technology (HSFT, $10.20, down $0.09), Maximus (MMS, $57.66, down $0.39), Multimedia Games (MGAM, $15.35, up $0.06), Nash-Finch (NAFC, $18.80, Flat), National Grid (NGG, $54.81, down $1.24), Nordic American (NAT, $8.56, down $0.13), Pacific Mercantile (PMBC, $6.47, up $0.12), Perry Ellis (PERY, $18.84, up $0.11), Ross Stores (ROST, $55.22, down $0.45), Sally Beauty (SBH, $25.05, down $0.17), Sears (SHLD, $62.51, up $0.67), Simcere Pharmaceutical (SCR, $8.02, up $0.01), Stage Stores (SSI, $24.40, up $0.11), StealthGas (GASS, $7.08, down $0.02), Stein Mart (SMRT, $6.90, down $0.17), Target (TGT, $62.02, up $0.20), Buckle (BKE, $47.68, up $1.04), Tower Semiconductor (TSEM, $7.58, down $0.10), TransDigm (TDG, $137.32, up $0.17), Vanceinfo (VIT, $7.58, down $0.12), Viacom (VIAB, $49.16, down $0.27), Wal-Mart (WMT, $72.31, down $0.17)
After the close:
21Vianet (VNET, $10.43, up $0.04), Applied Materials (AMAT, $10.67, up $0.17), Aruba Networks (ARUN, $18.80, down $0.09), Atwood Oceanics (ATW, $47.30, up $0.05), Autodesk (ADSK, $30.94, up $0.21), Dell (DELL, $9.41, down $0.04), Dole Food (DOLE, $11.78, up $0.15), eLong (LONG, $16.43, up $0.08), Focus Media (FMCN, $24.77, down $0.12), Gap (GPS, $33.62, down $0.45), Handy & Harman (HNH, $15.05, up $0.23), Intuit (INTU, $59.96, up $0.14), Marvell (MRVL, $7.77, down $0.06), Matthews (MATW, $28.83, down $0.05), MTS Systems (MTSC, $49.75, up $0.34), Natural Grocers (NGVC, $18.12, down $0.56), Sonic Foundry (SOFO, $7.15, up $0.01), WGL Holdings (WGL, $38.19, up $0.27)
Friday
Before the opening bell:
ANN (ANN, $33.57, up $0.37), Cyberonics (CYBX, $44.50, down $0.32), Foot Locker (FL, $32.59, up $0.46), Hibbett Sports (HIBB, $53.31, down $0.01), J.M. Smucker (SJM, $84.33, up $0.51), Optibase (OBAS, $5.39, down $0.06), Sirona Dental (SIRO, $57.82, up $0.03)
After the close:
Fidelity (FSBI, $21.60, up $0.05)
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4. Weekly Wrap Covered Call Portfolio Update (Closing prices as of 11/9/12)
Our Closed Trade Track Record for 2012 is 26-0(42-0, overall since 2011): TASR +25%, ARNA +117%, SZYM +11%,BAC +26%, EFTC +8%, SZYM +55%, VVUS +38%, CALL +19%, BAC +20%, SYMC +16%, DAR +20%,TIVO +5%, MGM +22%, ZNGA+13%, SGMS +6%, VVUS +17%, F +8%, AA +7%, CLNE +27%, DNDN +18%, MGM +19%, ACAS +3%, P +9%, BAC +6%, AA +3%, TIVO +6%.
Special Notice: We have recommended a few trades over the past few months but not as many as we would like. The reason is simple. We have been bearish and we have been waiting for better prices in most cases. There are a number of stocks we like and there have been a few gems we have uncovered but we plan to be aggressive once we can see a bottom might be in. Now that the indexes are near our downside targets, we can start nibbling starting with these two recommendations:
NEW TRADES!!!
Bank of America (BAC, $9.43, up $0.04)
Action: Set limit prices at $8.75 for half positions.
Shares of BAC look poised to clear double-digits and could push $12 if the Financial stocks can gather some momentum and the Fiscal Cliff is resolved. However, there could be a pullback to $9. If we are not filled this week, we will continue to wait. A move above $10 would be bullish and where we might have to enter if there is not a pullback.
CubeSmart (CUBE, $13.11, up $0.03)
Action: Set limit orders to buy the stock at $12.50 (half position) this week.
Shares are near their 52-week high of $13.46 but we would like to get them cheaper.
We will send out a Trade Alert if these prices are triggered but in the meantime, let’s see if we can get better prices by using limit orders.
CURRENT TRADES
Solazyme (SZYM, $7.55, up $0.11)
Original Entry Price: $12.35 (8/9/12)
Lowered Price from Selling Options: $11.55
Exit Target: $15+
Return: -35%
Stop Target: $9
Action: The chart from last week was showing a test to $7.50 and Friday’s low of $7.29 was very disappointing. However, we plan on holding the stock for 12-24 months and we have done well over the past 2 years trading Solazyme. We love the company’s future so weren’t aren’t worried about the recent pullback. Earnings are due out Wednesday and analysts expect a loss of 38 cents a share on revenue of $8.83 million. If the company can somehow surprise Wall Street with a lower loss and higher sales then shares could rebound on short-covering back towards $9. If not, shares could fall below $6.
We recommended buying the stock at $12.35 on 8/9/2012 and for every 100 shares to sell the September 12.50 calls for 80 cents. This lowered the cost basis to $11.55.
Vivus(VVUS, $10.84, up $0.60)
Original Entry Price: $22.70 (7/27/12)
Lowered Price from Selling Options: $20.90
Exit Target: $30+
Return: -48%
Stop Target: $15
Action: This is a 3-year chart for Vivus which we need to show following the break below $14 and then $12 last week. Shares traded to a low of $10 on Friday but there is risk to $8 as you can see. We aren’t sure if we would buy more shares at these levels but the stock has been good to us over the past two years as we have had numerous double-digit returns playing the run higher on its diet drug, Qnexa. We said the company has a strong pipeline but investors have thrown the baby out with the bathwater. If shares to slip to $8 we will reevaluate but we would like to see a move back above $12 over the near-term which is now resistance.
We recommended buying the stock at $22.70 on 7/27/2012 and for every 100 shares to sell the August 24 calls for 95 cents. This lowered the cost basis to $21.75.
On 9/6/12 we sold the September 24 calls for 40 cents which lowered our cost basis to $21.35.
On 10/16/12 we sold the October 23 calls for 45 cents which lowered our cost basis to $20.90.
Antares Pharma (ATRS, $3.77, up $0.04)
November 5 calls (ATRS121117C00005000, $0.05, flat)
Original Entry Price: $4.94 (7/13/12)
Lowered Price from Selling Options: $3.94
Exit Target: $8+
Return: -4%
Stop Target: None
Action: November options expire this week and we will not likely be called away unless shares trip $5.
The stock fell below its 200-day MA on Wednesday after kissing $3.51 despite beating Wall Street’s estimates. The company matched on the loss per share but beat on revenue. There is risk down to $3.20 but we see continued revenue growth and a trip past $5 coming in 2013.
We recommended buying the stock at $4.94 on 7/13/2012 and for every 100 shares to sell the August 5 calls for 70 cents. This lowered the cost basis to $4.24.
On 9/6/12 we sold the November 5 calls for 30 cents which lowered our cost basis to $3.94. If we are called away at $5 in mid-November the trade will make 27%.
Pizza Inn (PZZI, $2.63, up $0.07)
Original Entry Price: $4.50 (2/22/12)
Lowered Price from Selling Options: No options available
Exit Target: $9
Return: -42%
Stop Target: None
Action: Pizza Inn reported a penny loss for the quarter but restaurant sales increased 41% over the prior year’s quarter as the company continues to roll out its Pie Five Pizza chains. Support has been strong at $2.50 but we would like to see a close above $2.80 which would be bullish for a run back to $3+.
We recommended buying the stock at $4.50 on 2/22/12.
MGM Resorts (MGM, $10.01, up $0.23)
Original Entry Price: $13.77 (2/2/12)
Lowered Price from Selling Options: $12.67
Exit Target: $15
Return: -21%
Stop Target: None
Action: MGM shares fell below $10 last week and there is risk down to $9.40 on continued weakness. We still like MGM at current levels and would like to see a close above $10.40 this week.
We recommended buying the stock at $13.77 on 2/2/2012 and for every 100 shares to sell the March 15 calls for 45 cents. This lowered the cost basis to $13.32.
On 3/20/12 we recommended selling the April 14 calls for $0.65 which lowered the cost basis to $12.67.
NewparkResources (NR, $6.58, down $0.03)
Original Entry Price: $9.45 (7/27/11)
Lowered Price from Selling Options: $7.85
Exit Target: $11
Return: -16%
Stop Target: None
Action: Newpark fell to a low of $6.44 on Friday and we said last week there was risk down to $6 if Romney lost. If the $6.40 level can hold, we would expect shares to challenge $7 over the near-term as the company recently reported great numbers.
We recommended buying the stock at $9.45 on 7/27/2011 and for every 100 shares to sell the August 10 calls for 50 cents. This lowered the cost basis to $8.95.
On 9/15/2011 we recommended selling the December 10 calls for $0.85 which lowered the cost basis to $8.10.
On 1/25/2012 we recommended selling the March 12.50 calls for $0.25 which lowered the cost basis to $7.85.
Trades on HOLD: DryShips (DRYS, $2.20, flat), AKS Steel Holding (AKS, $5.41, down $0.07), Rare Element Resources (REE, $3.95, up $0.04), Rambus (RMBS, $4.51, down $0.06), Patriot Coal (PCXCQ, $0.12, down $0.02), OCZ Technology Group (OCZ, $1.31, flat), Bebe Stores (BEBE, $3.86, down $0.01), Scientific Games (SGMS, $7.25, up $0.23), Antares Pharma February (2013) 7.50 calls
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5. Week Ahead
Here is how the week looks as far as economic news:
