MomentumOptionsTrading.com Weekly Wrap for 11/17/13
11:30pm (EST)
1. Market Summary
2. Fuel Tech (FTEK) Still Has Fuel
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
“The bulls and bears had a slugfest last week as both sides stretched support and resistance inside the current 2-week trading range. The chaos caused some of the weaker hands to fold as the market pros continue to say a top is in but the Dow and S&P 500 closed out a fifth-straight week of gains. The blue-chips are up 689 points, or 5%, while the S&P 500 is higher by 80 points, or 5%, as well, over that time period.
The small-caps are also up and Tech sneezed.The Russell 2000 got back on track following a dip the prior week and is up 4-out-of-5 weeks. The small-caps have advanced a double-deuce (22 points), or 2%. Meanwhile, Tech fell for the second-straight week but is up triple 1’s (111 points), or 3%, over the same 5-week time period.
The mini-trading range over the past few weeks has pushed the Dow and S&P to the top of their trading ranges while the Nasdaq and Russell 2000 are near the lower end of theirs. This type of “divergence” can look bearish but we warned not to get too emotional as we prepared for a possible pause and some sector rotation.
Of course, we do want to point out how fast the indexes can tank when momentum does slow as the bears can throw a 2% punch in a matter of hours like the one we witnessed last week. The rebounds can also be just as strong though as we have seen the dips bought for much of the year.
The puzzle will be figuring out when the dips won’t be bought.
The headline risk will be here shortly once the zombies get back together in DC but with earnings starting to wind down and an improving economy, the outlook is good for another week or two and possibly into December. It has been nice not to talk about the zombies and we will try to keep it that way until they force our hand.
We mentioned on Friday the Financial sector was showing some strength as we noticed a number of our favorite banking stocks getting pops. It could be time for us to enter another Bank of America (BAC, $14.32, up $0.52) trade as shares could be on the verge of a breakout if the sector itself can regain some momentum. The 52-week peak for BAC is just north of $15 and we have been riding shares higher from $5 for 2 years with Weekly Wrap recommendations.
The Finance Spiders (XLF, $20.86, up $0.28) are the best way to get an overall snapshot of the sector and it’s no secret they have been underperforming the broader market since peaking over a month ago. We wanted to do some homework before playing a possible breakout and buying options on Friday and here is our analysis.
After clearing resistance at $20 in mid-October, the index failed to hold the breakout and was making lower lows before Friday’s rebound. The XLF tested a low of $19.48 in early October and zoomed over 10% before the false breakout at resistance and a test to $21. The 50-day MA has easily held and the chart shows the Spiders now dancing with the 20-day MA. The huge move on Friday reversed a week of losses and another run past $20 could lead to $22-$23.
This part will be in our revised 2014 option trading manual (with a video) and is how we “find” trades. You should NEVER trade a stock or options unless you have done some kind of chart work.
We like to use a number of indicators to help us determine a trade setup and all signs are bullish for a possible call option trade. If the XLF can clear $21 then it would b a great signal to go long on a projected move to new highs.
The nearest month options (November) expire this week so it is important to give the trade enough time to work in your favor. An option that expires in less than a week is considered a lottery play but they can easily make triple-digits if there is a 3%-5% move in a few days.
The XLF November 21 calls (XLF131116C00021000, $0.08, up $0.05) jumped 167% from the prior close and expire this week. As you can see from the Yahoo Finance quote below, the options are very liquid as over 6,600 contracts traded on Friday and Open Interest is north of 47,000.
These call options expire this Friday, or 5 days from Monday’s open. The calls could make money, or be “in-the-money” if shares are above $21 by Friday’s close. If the XLF closes at $21.08 the trade would break even, technically, if you paid 8 cents and got in prior to Friday’s close. If the XLF trades to $20.16 the trade would be a double (100%) and at $20.24 a triple (200%).
The XLF also trades WEEKLY options and the November 21 WEEKLY calls (XLF131129C00021000, $0.15, up $0.08) were up 114% from the prior close and would give you nearly 3 weeks of time if opened on Monday (11/11/13).
If you get in at 15 cents on Monday, the XLF would need to get to $21.15 for the trade to break even by the end of the month. At $21.30 the trade would be a double and at $21.45 the calls would triple.
A safer play would be the December 21 calls (XLF131221C00021000, $0.31, up $0.14) as they provide 6 weeks before expiration. The break even point is $21.31 if purchased at Friday’s close. A triple-digit return would come at $21.62 and if our Price Target of $22 trips the trade would return 200% by Christmas.
As we wind out the last 2 months of the year, the bullish case is there are another 12-18 months of gains and the market is still underpriced. The bearish case is that the market is at bubblious levels as valuations are at their highest levels in 3 years. We have been bullish all year long and we can’t wait until there is a major correction but until that time comes we will continue to ride the wave.
For those of you that are new subscribers and may not know how to play a down market, don’t getnervous as the profits can be just as explosive. At some point in 2014 (or sooner) things will get ugly and there will be a 10%-20% correction. The suit-and-ties will say we told you so but this will be when we start using put options to make even more profits that promise to be just as explosive as the call options plays we have banked on all year long.
In 2008, when the Dow was following 300, 500 and 700 points on any given day we used put options to make our subscribers an incredible amount of money and you can view our 2008 track record to see the types of gains that were made.
These days are in the future and we remind you of support on a daily basis because the market can turn on a dime. Investors get scared and the pros will tell you to stay out of the market when it is violent and like they are now.
For those of you that have followed us for a long time, you know we are not bullish or bearish by heart because if you are it limits your trading ability and you have wiped out half your playbook for possible option trades if you don’t like playing the downside or pullbacks and corrections.
While we continue to enjoy the bullish ride, there will be plenty of possible put option trades in 2014 as Obamacare and another possible zombie battle over the budget starts to take shape in December and into January. The good news for now is that we are still bullish and since 1928, 82% of the time the market has closed higher over the last 2 months of the year.
We have all the clues we need and plenty of warning signs to prepare for the eventual pullback but we continue to see higher prices through November and possibly into December until the charts tell us otherwise.” (from11/10/2013 Weekly Wrap…)
The bulls got their second-straight Monday win by the slimmest of margins to keep the uptrend intact to start the week as the market drifted higher. The bears made a little noise on Tuesday and controlled the action for much of the session but they were also stymied as the losses were minimal.
Wall Street seemed cautious ahead of the Fed Heads speaking on if and when a taper cut will come but the small-caps showed some strength that spilled over into Wednesday’s session as the bulls cheered Janet Yellen and her plans to keep the money printing presses rolling to support QE (quantitative easing).
The Dow made a significant breakthrough on the news and the other indexes followed suit as the rally lasted into Thursday. We mentioned on Friday that November expiration day has been bullish in recent years and the bulls did not disappoint as the Dow came within spitting distance of clearing our yearend 16,000 target we set in February. (continued…)
The Dow gained 57 points, or 0.4%, to close at 15,961 on Friday. The blue-chips made a run to resistance at 15,800 to start the week, reaching 15,791, but failed to clear this level by the close. This lead to a back test of 15,708 on Tuesday and Wednesday’s low reached 15,672 ahead of the Janet Yellen nomination. Wall Street liked her bullish comments as the index rebounded to clear resistance with the close at 15,821. This cleared the way for a run at Dow 16,000 with Thursday’s high reaching 15,884 and Friday’s peak of 15,963. Support has moved up to 15,800 with 15,600 serving as backup. For the week, the Dow added 200 points, or 1.3%, after starting at 15,761. For the year, the blue-chips are up 2,857 points, or 21.8%
The S&P 500 advanced 4 points, or 0.2%, to settle at 1,798. The index made another run at 1,775 on Monday after trading up to 1,773 but also failed to clear resistance. The S&P 500 traded down to 1,762 on Tuesday before recovering half its losses while holding support at 1,750. Wednesday’s low reached 1,760 before the surge and close at 1,782. This was a great clue the bulls would push 1,800 as Thursday’s peak reached 1,791 and Friday’s high coming in at 1,798.22. Support is at 1,775 followed by 1,750. The S&P 500 came into Monday’s session at 1,770 and was up 28 points, or 1.6%, for the week. Year-to-date, the index has surged 372 points, or 26.1%.
The Nasdaq jumped 13 points, or 0.3%, to finish at 3,985. Tech tested support at 3,900 on Monday after kissing 3,904 but bounced back and reached 3,925.34 before ending just a half point higher. The index fell to a low 3,902 on Tuesday but finished in the green by a smidge after challenging 3,925 all session long. We have said a close above this level should lead to another battle at 3,950 with a shot at 3,975-4,000 coming if cleared. Tech slipped below support on Wednesday by a fraction to 3,899.31 that shook out the remaining weaker hands before zooming over 65 points to end at 3,965. Thursday’s top reached 3,975.89 with a close at 3,972 before Friday’s close at session highs. The Nasdaq began the week at 3,919 and was higher by 66 points, or 1.7%, by Friday’s close. For 2013, Tech has is up a cool 967 points, or 32%.
The Russell 2000 added nearly 5 points, or 0.4%, to end at 1,116 on Friday. The small-caps touched a low of 1,096 but held 1,100 in Monday’s action and repeated the process on Tuesday with a low of 1,095 and finish at 1,101. Wednesday’s back test to 1,095 flushed out the Nervous Nellie’s as the Russell recovered to clear 1,110 with the close at 1,112. We said this level would be the next hurdle the bulls needed to overcome if they were going to make another run at 1,125 and Thursday’s 1-point drop was no help. Friday’s high reached 1,116.31 after a low of 1,109.72. The Russell 2000 was at 1,099.97 before Monday’s open and advanced 16 points, or 1.5%, for the week. YTD, the small-caps are higher by 267 points, or 31.4%.
The S&P 500 Volatility Index ($VIX, 12.19, down 0.18) came into the week at 12.90 and traded in the red all day on Monday after bottoming at 12.40 and closing at 12.53. Tuesday’s test to 13.06 never really threatened 13.50 but Wednesday’s pop to 13.35 did. The fact the bears couldn’t clear this level was bullish as the VIX finished at 12.52 by the close. We have said a close below 12.50 could lead to new lows on the VIX that could come on an extended rally or a blow off top and Friday’s low was 11.99 following Thursday’s trip down to 12.28.
The Dow and S&P 500 wrapped up their sixth-straight week of gains with the blue-chips coming within 37 points or tripping our yearend target of Dow 16,000. The blue-chips remain the last of the 4 major indexes that hasn’t triggered our 2013 Price Targets (from February we remind you) but probably would have if not for Cisco Systems’ (CSCO, $21.54, up $0.17) terrible earnings report.
The other major indexes are showing signs of a surge past round number resistance with the S&P 500 approaching 1,800 and the Nasdaq 4,000. The Dow Theory trends we have been discussing have played out well over the past few weeks and the index cleared a triple-top.
From our 11/4/2013 Weekly Wrap:
“The Dow is also at a triple-top and these types of chart patterns can be bullish or bearish but this one looks bullish. The blue-chips peaked in August and September and are on the verge of a triple-top breakout as the index is in an uptrend. These types of setups are usually reliable and a breakout on higher volume would confirm another rally that should carry the Dow towards our yearend target of 16,000.” (End)
We have talked about the first 3 Dow Theory patterns that have taken place with the Transports breaking out to new highs, volume picking up and the trend staying intact through the mini-trading range.
The other 3 main Dow Theories are “movement”, “phase” and the fact the market is discounting all news for the most part.
The “main movement” the Dow could he entering is considered the primary movement of a major trend that can last from less than a year to several years. The index appears to have finished its “medium swing” after a consolidation phase from the summer highs that generally retraces from 33% to 66% of the primary price change but the “short swing” isn’t as reliable as it can vary from hours to a month or more. However, the 3-week mini-trading range qualifies in our mind as the completion of the short swing.
The overall Dow Theory also shows major market trends and are composed of three phases: 1) an accumulation phase (that has occurred all year). 2) a public participation, or absorption phase, that yet to happen but could ignite at Dow 16,000. 3) a distribution phase.
The accumulation phase is what we have seen for all of 2013 and is a period when smart people are buying while others are selling and the general opinion of the market is negative. During this phase, the market can trade flat or appear to be correcting as the astute traders are in the minority camp buying stock that the market is supplying.
Phase two is when the market catches on to what these astute traders are doing and a rapid price change occurs. This is what the Dow could now be experiencing as trend followers and other technically oriented traders are now jumping on the bulls’ bandwagon. This phase should continue for awhile until rampant speculation occurs but something we haven’t seen yet. We will know when that occurs once the local waiter and cab driver start to give us a stock tip.
This is when the last and third phase kicks in as the astute investors begin to close their positions into a blow off top rally that could be coming in December.
The last part of the Dow Theory we will cover is the news. The market is starting to react to new information as soon as it becomes available and is absorbing it as quickly as its released. This is usually bullish until it isn’t and with the zombies meeting again in December, any negative headlines could have a major impact on the trend.
The Monday/ Friday closes continue to be bullish as the Dow has closed higher 2-straight Monday’s with the previous 2 slightly lower. Friday’s have been a game saver for the bulls as the Dow is now up 7-straight. The last down Friday for the Dow came in late September. This has been another great clue for us through the trading range and breakout to new highs. Lower Monday/ Friday in the future will need to be watched but for now they have been super bullish.
We have no plans to change our February yearend targets of Dow 16,000; S&P 1,700; Nasdaq 3,800; and Russell 1,025 – the charts are telling us there is fluff up to Dow 16,250-16,300; S&P 1,825-1,850; Nasdaq 4,000-4,200; and Russell 1,175-1,200.
We have mental notes on all the warning signs we need to watch for on a trend change or pullback but we don’t believe the bulls have come this far without ringing Dow 16,000 with an overshoot to higher highs.
As we head to press, futures look like this: Dow futures are off 6 points to 15,907 while the S&P 500 futures are lower by a point to 1,792. The Nasdaq 100 futures are down a point as well to 3,415.
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2. Fuel Tech (FTEK) Still Has Fuel
By Michael Bryant
Fuel Tech (FTEK, $5.87, down $0.10) seems to be making a comeback after the stock bottomed in June and recently reported good earnings.
The company was founded in 1981 by Harvard freshman undergraduate William M. Haney III in Cambridge, Massachusetts. Haney graduated with a B.A. in history of technology in 1984. While studying the history of science, he became interested in the techniques for breaking down air pollutants, such as nitrogen oxides (NOx), into their elements, nitrogen and oxygen. He borrowed $10,000 from a friend to start the company with the intent to improve methods of burning fossil fuels by using technology that reduced emissions of NOx, which is produced by vehicles, power stations, and factories and considered a principal component of acid rain, smog, and ground-level ozone.
In August 1983, the company obtained a licensing agreement from Braintree, Massachusetts Columbia Chase Corp. for use of Columbia’s processes and technologies for making fuel more economical and less polluting. In May 1984, it acquired International Power Chemicals, a subsidiary of Rolfite. In 1985, it developed NOxOUT, a nitrogen oxide reduction technology for factories and power stations. The process was initially designed in 1976 by the California-based Electric Power Research Institute, and Fuel Tech further developed the process, which involved injecting a urea-based liquid into the combustion exhaust gas of a boiler, furnace, or incinerator to turn nitrogen oxides into water and air. In 1987, Electric Power sold a worldwide marketing license for NOxOUT to Fuel Tech.
In 1987, Haney sold the company for $15 million, and the company became the U.S. subsidiary of newly-created Fuel Tech N.V. In April 1988, the company, through its West German subsidiary, launched a joint venture with a German chemical company and bank to promote NOxOUT in West Germany, Switzerland, Austria, and Sweden. The company claimed its technology reduced NOx emissions by 70% and cost $15 to $30 per kilowatt of installed capacity, about one-fourth the cost of a rival Japanese process. In October 1988, 12 European countries signed a treaty to reduce emissions of NOx by 30% in the next ten years. By the end of 1988, the company made its first orders for installations of NOxOUT systems.
In January 1990, Fuel-Tech N.V. established Nalco-Fuel Tech, a 50-50 joint venture with Naperville, Illinois-based Nalco Chemical Company, then the world’s largest chemical water treatment company. The new company, based in Naperville, was created to market, install, and supply NOxOUT technology in the United States. By September 1990, 20 American companies bought NOxOUT systems to comply with state and local ozone regulations. The Clean Air Act Amendments (CAAA) of 1990 established timetables for NOx emissions reductions for varying sources, leading to more orders.
On September 17, 1993, Fuel-Tech N.V. began trading on the Nasdaq under the symbol FTEKF. In January 1994, the company formed Clean Diesel Technologies (CDTI) as a wholly owned subsidiary to develop technologies to reduce the level of emissions produced by diesel engines. The 4th quarter of 1994 was the company’s first profitable period due primarily to increased sales in the United States as companies took steps to comply with the CAAA regulations deadline. In July 1995, the company received $10 million in orders for NOx reduction systems, including large first-time orders from Poland and the People’s Republic of China. In December, the company spun off its Clean Diesel Technologies (CDTI) subsidiary, but retained a 27% stake.
In November 1997, the company bought Nalco Chemical Company’s 50% share of Nalco-Fuel Tech via investment firm American Bailey Corporation, which took a 25% stake in Fuel Tech N.V. Its air pollution control business surged in early 1998 with the company landing $6.6 million worth of new contracts in January. In March 1999, it reported a net profit for 1998 of $539,000 on sales of $25.8 million. The company also changed its NASDAQ trading symbol to FTEK.
With earnings being affected by politics, it is possible that one of the catalysts that caused the stock to bottom in late June and early July of 2013 is that President Obama gave a speech at Georgetown University regarding climate change. He called for new limits on emission from existing coal-fired power plants. Another catalyst could be the receiving of four air pollution control contracts from China and with two air pollution control orders in the United States on July 22nd. In addition, the company was selected to perform engineering studies for Selective Non-Catalytic Reduction (SNCR) and Selective Catalytic Reduction (SCR) technologies. These awards and projects have an aggregate value of approximately $6.4 million.
Last week, the company reported 3Q results that beat expectations on both earnings and revenue. Revenue came in $33.6 million versus a forecast for $30.75 million. Earnings increased to $0.15 per share in the quarter versus estimates for a nickel.
The results included these figures that we had penciled in:
- August 29th orders from new customers in China and an order for the United States totaling approximately $5.7 million
- October 3rd orders from existing customers in China totaling $2.5 million
Profitability is still tight with a small gap between the red line (total expenses) in the first graph and the blue line (revenue). It seems that the 2nd quarter (6/10, 6/11, and 6/12) is the least profitable quarter each year. Revenue seems to peak in the 4th quarter (12/10, 12/11, and 12/12). Thus, analysts’ 4th quarter revenue estimate (12/13) seems low. As for the 3rd quarter (9/13), it looks like revenue will at least meet estimates. Notice that earnings always seem to spike between the 2nd and 3rd quarters. Thus, analysts’ expectation of a flat earning change from 2nd quarter to 3rd quarter 2013 seems too low.
The company competes with CECE Environmental (CECE) in pollution control.
Source: Numbers calculated from Yahoo Finance and Finviz.com
At $5.87, the stock is above its low target of $4.50 made by the 3 analysts recorded by Thomson/First Call. Mean target is $5.17, median target of $5.00, and high target is $6.00. Using a scale of 1.0 as a strong buy and 5.0 as a sell, the average rating of the stock was 2.5, unchanged from a week ago but upgrades could be coming.
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Hold |
3 |
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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 11/15/13 close)
Monday
ACPW, ALOT, BRCD, BWS, DY, EDG, FCZA, HAYN, HOLI, IEC, JKS, MNGA, OCIP, OFIX (possible puts), PEGA, PERY, ROCM, SMTC, SFL, TSN, URBN,
Salesforce.com (CRM) long calls in Daily
Jacobs Engineering Group (JEC, $63.76, up $0.31)
December 65 calls (JEC131221C00065000, $1.20, up $0.15)
Thoughts: Shares are quietly pushing 52-week highs and has been a hot stock in the past.
Krispy Kreme Doughnuts (KKD, $25.83, up $0.37)
December 23 puts (KKD131221P00023000, $0.80, down $0.05)
Thoughts: See chart below.
Tuesday
CRMT, BBY, DAKT, DKS, GLAD, Home Depot (HD), KID, LZB, LITB, MDT, MODN new 52-week lows, TJX, VAL
Campbell Soup (CPB, $42.42, down $0.12)
December 43 calls (CPB131221C00043000, $0.70, down $0.10)
Thoughts: We have listed call options because the company has some new innovations rolling out, including a partnership with Green Mountain. Nearly 500 contracts traded on Friday.
Wednesday
ADT (always seems to disappoint), BV, DL, Deere (DE, $82.83, down $0.02), JACK call options, KONG, LTD, LOW, PLNR, POST, SPLS, VVTV, VELT, WSM
JC Penney (JCP, $9.03, up $0.34) – we are long calls in the Daily.
Green Mountain (GMCR)
Thursday
ADSK, BONT, BRC, BKE, CATO, DEST, DLTR, DCI, TFM, GME, GPS, GEOS, INTU, ISS, KIRK, LQDT, LRAD, MVRL, MENT, NGVC, PACT, P, PERY, RAVN, ROST, SHLD, SOFO, SPB, SSI, SMRT, TGT, WAIR
Aruba Networks (ARUN, $18.58, up $0.22)
December 20 calls (ARUN131221C00020000, $0.75, up $0.05)
January 21 calls (ARUN140118C00021000, $0.65, up $0.05)
Thoughts: We believe the company is stealing market share from Cisco Systems and one of the reasons Cisco reported a terrible quarter.
Friday
ANN, CHRM, HIBB, PETM, GASS
Sirona Dental Systems (SIRO, $72.18, up $0.64)
December 75 calls (SIRO131221C00075000, $1.10, up $0.20)
Thoughts: No chart but worth a look later in the week.
Foot Locker (FL, $37.14, up $0.01)
December 39 calls (FL131221C00039000, $0.50, flat)
Thoughts: Shares normally spike higher on earnings.
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4. Weekly Wrap Covered Call Portfolio Update (Closing prices as of 11/15/13)
Our Weekly Wrap Closed Trade Track Record for 2013 is 40-4 (84-6, overall since the start of 2011).
WhiteWave Foods Company (WWAV, $21.61, up $0.12)
January 22.50 calls (WWAV140118C00022500, $0.70, down $0.05)
Original Entry Price: $0.55 (11/11/13)
Exit Target: $1.10
Return: 27%
Stop Target: None
Action: Shares reached a peak of $22.08 by midweek but were unable to hold $22. Near-term support will try to hold at $21 on a back test and there is further help at $20. We like these calls for a run to $25 by mid-January that would get these options to at least $2.50 for a monster return.
H&R Block (HRB, $28.50, up $0.33)
January 30 calls (HRB140118C00030000, $0.60, up $0.10)
Original Entry Price: $1.10 (11/5/13)
Exit Target: $2.20
Return: -45%
Stop Target: None
April 32 calls (HRB140419C00032000, $0.75, down $0.05) LEAP Option
Original Entry Price: $0.95 (11/5/13)
Exit Target: $1.90+
Return: -21%
Stop Target: None
Action: Shares are just above their 50-day and 200-day MA’s and a close above them could lead to another test down to $27. The 100-day MA is at $28.71 and a move above this level would be bullish for a possible run at $30.
Millennial Media (MM, $6.17, down $0.15) Stock Trade
Original Entry Price: $6.95 (10/25/13)
Lowered Price from Selling Options: $6.95
Exit Target: $14
Return: -11%
Stop Target: $5
February 10 calls (MM140222C00010000, $0.25, down $0.05) LEAP Option
Original Entry Price: $0.50 (10/25/13)
Exit Target: $1.00
Return: -50%
Stop Target: None
Action: The company reported mixed earnings and tested $6 on Wednesday’s selloff. There could be further risk down to $5 as we wanted to $6.50 clear ahead of the weekend. A close back above this level would be bullish for another possible push to $7.
Boston Scientific (BSX, $11.89. down $0.07) Stock Trade
Original Entry Price: $12.29 (10/21/13)
Lowered Price from Selling Options: $12.29
Exit Target: $15
Return: -3%
Stop Target: $3
January 13 calls (BSX140118C00013000, $0.20, flat)
Original Entry Price: $0.45 (10/21/13)
Exit Target: $1.35
Return: -56%
Stop Target: None
Action: We figured the market makers would keep shares below $12 as the November options expired on Friday. Now that that is over, and shares are holding their 50-day MA, we are expecting another run at $12.50. Support at $11.75-$11.50 and there is risk down to $11.25 and the 100-day MA on another close below this level.
Pizza Inn Holdings (PZZI, $8.79, up $0.30) Stock Trade
Original Entry Price: $8.10 (10/11/13)
Lowered Price from Selling Options/ Dividends: No options available
Exit Target: $12+
Return: 9%
Stop Target: $9
Action: Pizza Inn traded down to $8 midweek and there is risk down to $7.75 on a close below this level. We feel any dips should be bought as a close above $8.75-$9 will spark a quick run to double-digits. The company has over 100 Pie Five stores that are slated to open into 2014 and we love this stock as a long-term core holding. We have been bringing you this story since shares were under $4 and it is not too late to get in.
Aruba Networks (ARUN, $18.58, up $0.22) LEAP Option Trade
January 20 calls (ARUN140118C00020000, $1.00, up $0.10)
Original Entry Price: $1.45 (10/11/13)
Exit Target: $2.90
Return: -31%
Stop Target: $0.70
Action: Shares came close to clearing $19 and making a run at the 200-day MA. A close above these levels should be bullish for a push past $20. Support is at $18.25 and the 50-day MA. We are expecting an earnings beat this week.
Sonus Networks (SONS, $2.72, down $0.27)
Original Entry Price: $3.73 (9/9/13)
Lowered Price from Selling Options: $3.73
Exit Target: $5
Return: -27%
Stop Target: $2.50
Action: There is risk down to $2.50 following the close below $2.75. A rebound above $3-$3.10 will get us looking at selling longer-term call options to lower our cost basis.
Krispy Kreme Doughnuts (KKD, $25.83, up $0.37) Short Position
Original Entry Price: $18.92 (9/4/13)
Lowered Price from Selling Options: None
Exit Target: $16
Return: -27%
Stop Target: $26
Action: Earnings are due out on Monday! There is risk up to $28-$30 on a breakout above resistance at $26. We still like this trade and at some point, valuation will matter. We would like to see a close back below $24 this week.
Galena Biopharma (GALE, $2.92, up $0.04)
Original Entry Price: $2.12 (7/8/13)
Lowered Price from Selling Options: $2.12
Exit Target: $5
Return: 38%
Stop Target: $2.50
Action: We said shares were on the verge of a breakout.
After being teased at clearing prior resistance at $2.50 with Monday’s kiss at $2.49, shares surged to a high of $2.70 on Tuesday and closed at $2.68. The 52-week had been $3 and Wednesday’s trip to $3.10 took care of that. There was some fluff to $3.19 on Thursday but the back test to $2.88 was disappointing. Galena tripped $2.71 on Friday before pushing $3. We would like to see a close above $3 on Monday and a run past $3.30 should lead to $3.50-$4.
We have a Stop Target of $2.50 in play on any pullback but it is not a Hard Stop. We will send out a Trade Alert if shares fall below $2.50 as we will likely close half there and then set a Hard Stop of $2 on the other half. This is still a small-cap biotech (and one we like for the long-term) but we will want to protect profits if shares fade. We could also sell an option to lower our cost but we are expecting shares to make a run at $5 early next year.
Exact Sciences (EXAS, $11.60, up $0.20)
Original Entry Price: $13.55 (6/11/13)
Lowered Price from Selling Options: $12.40
Exit Target: $16+
Return: -6%
Stop Target: $10.45
Action:
Shares could be on the verge of a major move. A close above $12.25 would be bullish while a dip below $11.25 favors the bears.
We recommended buying Exact Sciences at $13.55 on 6/11/13. On 7/11/13 we sold the August 15 calls for 55 cents that lowered our cost basis to $13.
On 9/10/13 we sold the October 14 calls for 60 cents which lowered our cost basis to $12.40.
Trades on HOLD (7): DryShips (DRYS, $3.13, up $0.03), AKS Steel Holding (AKS, $5.26, up $0.03), Rare Element Resources (REE, $1.60, down $0.01), Rambus (RMBS, $8.55, down $0.14), Bebe Stores (BEBE, $5.61, down $0.04), Vivus (VVUS, $9.84, up $0.69), Dendreon (DNDN, $2.54, up $0.05)
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5. Week Ahead
Here is a chart of the events for the week ahead:
