MomentumOptionsTrading.com Weekly Wrap for 12/26/11
11:00pm (EST)
1. Market Summary
2. Imperial Sugar (IPSU) – Imperial’s Peril
3. Why Mitt Can Bet $10,000
4. Earnings
5. Weekly Wrap Portfolio Update
6. Week Ahead
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1. Market Summary
The bulls came into last week facing an uphill battle following comments from European Central Bank chief Mario Draghi and the death of North Korean leader Kim Jong-il. The bears were already pushing the bottom of the current trading range and Monday’s 1% pullback pushed the indexes to their tipping point.
We had been warning of a test to lower levels of support for weeks and on Tuesday morning we said the bulls needed to make a stand or risk a full blown bear attack. We also mentioned that “Mario” had said the markets weren’t pricing in the “good things” the ECB was doing and that the VIX was still headed to 22.5.
Futures were higher Tuesday morning by 0.5% when the European markets opened for trading so there we knew when we hit the rack there was a chance for a rebound. When we woke up for our morning cup of java, we were pleasantly surprised to see futures up 1%.
Yes, Wall Street was caught napping as the market soared 3% after Spain was able to get sweeter deals on their debt offerings following cut-rate deals by the European Central Bank (ECB). Economic news here at home was also stellar with the Housing sector showing promising signs of getting better.
We were a little worried Tuesday’s rally would fizzle because the “pros” have been trying to fade them but the shorts ran for cover as the Dow closed back above 12,000 and the S&P made a run a 1,250. The Nasdaq ended the session above 2,600 and the VIX settled at 23.22, down 7%.
We were anxious to see if the momentum would continue into Wednesday and we weren’t too surprised to see a test back down to support. The talking heads spend much of the session wondering why 500-some banks would borrow $500 billion euros. Duh, it is cheaper to borrow money at 1% for 3 years than it is at 4%. In any event, the bulls were able to power the market higher for the most past as the Dow and S&P finished with slight gains. Oracle (ORCL, $26.06, up $0.27) weighed on Tech after missing Wall Street’s earninhgs estimates by a mile. Shares fell 14% that day. The VIX closed at 21.43, down 1.79.
Thursday’s action was tepid at first despite another snazzy jobs report. The pace picked up steam after other economic news came in good throughout the session as the market ended higher by 0.7%, on average.
Heading into Friday, the bulls had a comfortable lead for the week but got more good news after the knuckleheads in DC came up with a short-term “agreement” to the tax cuts. The bulls were able to crack another layer of resistance by lunchtime and spent much of the session holding their gains. However, the last 30 minutes of trading saw another surge higher as some traders wanted to get in ahead of the possible Santa Claus rally.
The Dow jumped 124 points, or 1%, to finish at 12,294 on Friday. The blue-chips went out near the high after easily breaking through the 12,200 level. We said last week if the bulls could clear this area there would be a chance for a Christmas pop or yearend rally up to 12,400-12,600. That is still the case if the bulls can get past 12,350. If the bears can get back under 12,200 then look for further support at 12,000 and the 200-day moving average (11,938). The Dow gained 427 points, or 3.6%, after starting the week at 11,866. For the year, the index is up 717 points, or 6.2%.
The longer-term chart shows an incredible bullish 2012 could unfold. However, we said last week if the Dow couldn’t hold 11,800 then our line in the sand would be at 11,600. A break below this level would be bearish as you can see from the blue uptrend line. If the bulls can clear 12,600 there is a shot at 12,800-13,000 by mid-January.
The S&P 500 advanced 11 points, or 0.9%, to close at 1,265. All we were looking for on Friday was a hold of 1,250 but we liked the push up towards 1,275. If the bulls can get past short-term resistance then there is a chance we could see 1,300 over the next week or two. Of course, a break back below 1,250 would have us testing 1,225 and possibly 1,200 again which would not be good. The S&P started Monday at 1,219 and added 46 points, or 3.7%, for the week. For the year, the index is now in positive territory by 8 points, or 0.6%.
The bigger picture and why 1,300+ could print. A break back below 1,200 would have us worried and why we have been saying 1,150 is where we would turn bearish.
The Nasdaq popped higher by 19 points, or 0.7%, to settle at 2,618. The index closed just below the 2,600 level on Thursday so we were hoping this area would hold into the weekend because Tech lagged the other two indexes. The next area of resistance lies at 2,650 and the 200-day moving average (2,661). The low on Monday of 2,518 was just above support at 2,500 and there is further help down at 2,450. These two levels will likely come back into play if the bulls cannot hold 2,600 and then 2,550. The Nasdaq started at 2,555 and gained 63 points, or 2.5%, for the week. For the year, the index is still showing a loss of 34 points, or 1.3%.
The longer-term chart is still bullish but 4Q earnings could ruin any market momentum come mid-January. There have been a few warnings but this will be the week to confess with much of Wall Street on vacation.
We wanted to show the longer-term WEEKLY chart of the S&P Volatility Index (^VIX, 20.73, down 0.43) after we called the drop to 22.5 back in October. We said a couple of weeks ago the VIX appeared to be “decoupling” from Europe’s mess and the talking heads echoed the same thing last week which was old news. We also mentioned the VIX could fall into the teens with a rally thru January and we talked about how February is normally a bearish month. The bulls are safe for now but a decline in the market and a rising VIX above 25 would be early clues a pullback is coming.
We wanted to clarify the “Santa Claus” rally because the talking heads were driving us crazy when they kept referring to last week’s rally as such. The “official” start date of the Santa rally always arrives the week AFTER Christmas on Wall Street and runs the last five trading days of the year and the first two of January. The average gain has been 1.6% since the Eagles opened up the Hotel California (1969), or 1.5% since 1950 if you want to go further out.
There are 4 trading sessions left before the end of 2011 and we told you last week we wanted to get in early with some call option trades because support held, not because of history, although we like the factoid. The flip side of the Santa rally is that if there isn’t one, there is usually a bear market that follows (4Q earnings?).
We also said last week “the market hasn’t had a losing pre-election year since 1939 so the bulls will be motivated to keep this streak alive. The other indexes have a little work to do but we saw some encouraging signs last week that still have us bullish.” Ditto those same thoughts this week.
The Nasdaq still needs help along with the Russell 2000 – 748, up 2 points on Friday. We covered the small-caps last week and said if the Russell could climb back over 750 then it would be bullish. After holding 700, the index made a strong surge last week (+3.6%) but is still down 4.6% YTD and will need to trip 784 to make it into positive territory for the year.
The one event that has us worried this week is the Italian bond auction on Wednesday. The rates on the 10-year notes were back at 7% on Friday which worries Wall Street. Italy will be trying to sell over $8 billion euros of debt and their government is asking their people to step up to the plate by saying they to need to trust each other.
The market will get the news before the open on Wednesday which poses a gap down risk but if everything goes good and there are no high-profile earnings warnings, the bulls should have another good week to end the year in the green.
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2. Imperial Sugar (IPSU) – Imperial’s Peril
Imperial Sugar (IPSU, $3.47, up $0.13) looks very cheap. After all, a commodity company cannot be worthless. However, we all know when something looks too good to be true it usually is which is why we do homework.
At first glance, the stock looks a steal. Forward PE is 4.03, PEG is 0.05, and price/book is 0.20. There is not a lot of analyst coverage but at $3.47, the stock is far below its low target of $13.00 made by the 2 on record by Thomson/First Call. Mean and medium target is $16.50, and high target is $20.00. Using a scale of 1.0 as a strong buy and 5.0 as a sell, the average rating of the stock is 3.0.
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Current Month |
Last Month |
Two Months Ago |
Three Months Ago |
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Strong Buy |
0 |
0 |
0 |
0 |
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Buy |
0 |
1 |
1 |
1 |
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Hold |
1 |
1 |
1 |
1 |
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Underperform |
0 |
0 |
0 |
0 |
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Sell |
0 |
0 |
0 |
0 |
The one one analyst dropped their buy recommendation, while the other analyst kept their hold recommendation.
The decline in Imperial Sugar’s stock began in August after the company reported an earnings loss of $1.35 a share for the quarter. Wall Street had expected a profit of $0.52 a share. Revenue fell to $197 million, below the $222 million that was expected. To make matters worse, management gave a pessimistic outlook for the current quarter, saying costs would remain high. As a result, the stock plunged 45% before the bell that day.
Imperial Sugar is one of the largest processors and marketers of refined sugar in the NAFTA, or North American Free Trade Agreement, region, which is comprised of the United States, Canada, and Mexico. Under the NAFTA, the countries don’t pay tariffs between each other. Enacted during the Clinton Administration, this could later cause problems down the road for the company.
Also not helping the company was the fact they had to settle nearly 70 lawsuits relating to the explosion at the company’s Port Wentworth plant in February, 2008. A December 2011 settlement was reached with one of their former workers who suffered 70 surgeries totaling over $17 million in medical bills. Though the total sum was undisclosed, we are sure it was a large dent in the Imperial’s cash.
On top of that, the company is being charged by numerous law firms in class action suits for the August earnings miss and subsequent haircut in the stock price. The complaints allege that defendants misrepresented and/or failed to disclose that:
- the company was experiencing a known but undisclosed reduction in customer demand for its products resulting from Mexican and other sugar refiners selling sugar products into its markets at steeply discounted prices
- the decline in sales during the various class periods was primarily due to a lack of customer demand by competitors selling lower-priced products into its markets and not due to refinery production supply constraints
- it was experiencing a significant decline in its gross margins
- the Port Wentworth, Georgia refinery was experiencing ongoing operating defects that resulted in higher production costs and thus lowered the company’s gross margins
- representations about the disclosure controls were materially false and misleading
- positive statements about the business which lacked a reasonable basis
A few weeks ago, shares tanked again after the company said it would be late in filing its 10-K annual report for the year. The stock fell from $4.35 to $3.31, or 24%, on the news. The company claimed it had not received audited financial statements from Louisiana Sugar Refining, LLC, a significant equity investee. Additionally, Imperial Sugar claimed it needed time to finalize the accounting adjustments but expects to file this week.
In addition, the company suspended the $0.02/quarterly dividend sighting pressure on its gross margins as sustained high raw sugar prices and competitive refined sugar pricing continues. Liquidity concern is apparent in the stock’s current ratio, which is 0.99. This means that current assets are less than current liabilities, and thus the company will need to raise capital, either by issuing stock or selling off assets which they are already doing.
In mid-December, they sold their one-third joint venture interest in Louisiana Sugar Refining LLC for $18 million including $14.2 million in cash with the remaining $3.8 million payable over a 21-month period.
The company is a mess and we will get another peak at their earnings this Thursday. Analysts predict a loss of 89 cents a share, worse than the 19 cent loss from a year ago. Revenue is expected to come in at $219 million, down from $264 million a year ago. The good news is that for the 1st quarter (3/12), analysts are looking for earnings and revenue of $0.06 a share on $145.40 million. Estimates are included in graphs below.
Imperial Sugar’s revenue is slowly rising for the most part, but earnings are all over the place and mostly negative so we will be looking for some clarity on their conference call. The graphs show that rising revenue cannot seem to rise fast enough to cover rising raw material costs.
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3. Why Mitt Can Bet $10,000
By Bill Gunderson
America used to be a country where doing something, meant something.
Now we elect Presidents based on what candidates say. Not what they have done.
We confuse talking with doing. No wonder so many things are undone or done so poorly. Need more energy? Make a speech, but do not let anyone build new pipelines. Talk about natural gas, just don’t allow people to drill for it. Cry crocodile tears about dependence on foreign oil, but make sure we do not look for it here.
Now it is getting even worse: Instead of ignoring the doers, we are actively scorning them. People like a Donald Trump, who to his credit, refused to sit by while Do-Nothing Talkers with TV shows say he does not have the credibility to host a presidential debate.
But, somehow, Anderson Cooper does. So do personalities from the media wing of the socialist party of America, MSNBC. But Trump has nothing to say.
As if Trump should apologize for being accomplished.
Surely we have no greater example of this today than the reception Mitt Romney is getting in some quarters in his bid for the Republican nomination.
If there is anything that joins that Republican candidates for President, it is that they agree Obama is the worst president in our lifetimes and he most go. But they are separated by something even more important: Some are talkers. One is a doer.
Talking and passing laws and running governments can be important, especially if you are passing and not passing the right ones. But we should never confuse people who talk about creating jobs, creating wealth, and creating prosperity, with those who actually do it.
Like Mitt Romney.
Fresh out of business school, Romney actually went into business. Showing real companies with real payrolls and products how to do better. How to stay in business. Including the company that hired him, Bain Capital.
His boss was so impressed, he convinced Romney that instead of just advising companies in trouble, Romney should buy them, fix them, and sell them. Over the next ten years, that is what he did.
Romney bought and sold or invested in Experian credit reporting agency, Domino’s Pizza, Staples Superstore, AMC Entertainment, Brookstone, Burger King, Burlington Coat Factory, DoubleClick, Guitar Center, Hospital Corporation of America (HCA), Sealy, The Sports Authority, Toys R Us, Unisource, Warner Music Group, The Weather Channel and more than more than a hundred others.
He started with $37 million. Romney left Bain in 1998. Today Bain Capital controls $65 billion in assets.
If you had invested $1000 in Bain Capital at the beginning of Romney’s fourteen-year run, that would have been worth more than $39 million by the time he was through.
And in his spare time, he saved the 2002 Winter Olympics at Salt Lake City.
This guy has been doing nothing but turning around dismal enterprises that everyone had forsaken. And making money at it.
Real world translation: He did a great job. Wiggle your fingers at that, Occupy Wall Street.
Now there is one more job to do. The biggest turnaround of all: The greatest country in the world.
And Romney is really the only one who has shown us he knows how to do it. Because he has done it before.
We used to honor people of achievement. Now we do not. So we get less achievement. More talking. Maybe that is the biggest turnaround challenge this turnaround expert really faces.
Bill Gunderson is a financial advisor with Gunderson Capital Management in Oceanside, California and writes for us from time to time.
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4. 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 as of Friday’s close, 12/9/11).
MONDAY
The market is closed on Monday but some companies decided to report anyway.
Ark Restaurants (ARKR, $13.27, up $0.04), Flanigan’s Enterprises (BDL, $7.62, down $0.08), Hauppauge Digital (HAUP, $0.81, down $0.03), Seanergy Maritime Holdings (SHIP, $2.36, down $0.07).
Side note: Ark Restaurants is an interesting company that pays a 7% dividend which had been consistent up until 2009 when they only paid out one quarterly payment. The 4 quarterly dividends were reinstated in 2010 and they haven’t missed a beat since.
TUESDAY
Cal-Maine Foods (CALM, $49.63, down $0.19), Macatawa Bank (MCBC, $2.15, down $0.01), Nobility Homes (NOBH, $5.50, up $0.30)
WEDNESDAY
Bridgeline Digital (BLIN, $0.58, down $0.10), eOn Communications (EONC, $1.45, up $0.05), Piedmont Natural Gas (PNY, $34.02, up $0.27), Reading International (RDI, $4.15, down $0.05)
THURSDAY
General Steel Holdings (GSI, $1.03, down $0.02), Imperial Sugar (IPSU, $3.47, up $0.13)
FRIDAY
Kingtone Wirelessinfo Solution Holding (KONE, $0.42, down $0.05)
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5. Weekly Wrap Covered Call Portfolio Update (Closing prices as of 12/16/11)
WEEKLY WRAP CLOSED TRADES for 2011 (16-0): SPRD +23%, CSCO +10%, VVUS, +17%, F + 7%, RMBS +16%, SYMC +4%, VVUS +18%, DNDN +9%, PCX +13%, SGEN +26%, TIVO +34%, REDF +11%, PCX +7%, GE +5%, CLNE +13%, VVUS +14%.
Zynga (ZNGA, $9.39, down $0.08)
Original Entry Price: $9.37 (12/22/11)
Lowered Price from Selling Options: Waiting for options to list
Exit Target: $15
Return: 0%
Stop Target: None
Action: Shares do not trade options but they should shortly. The IPO was priced at $10 and the low since has been $8.75. This is a high risk/ high reward trade because of the uncertainty of its business model. Our near-term target is $12 which is over a 20% gain but we think shares can hit $15 in 2012 if the company can capitalize on its growing ad revenues. If online poker is approved, Zinga Poker could be a goldmine.
We recommended buying the stock at $9.37 on 12/22/11.
Bank of America (BAC, $5.35, up $0.12)
Original Entry Price: $5.35 (12/22/11)
Lowered Price from Selling Options: Waiting to sell an option at $6
Exit Target: $7.50
Return: 5%
Stop Target: None
Action: We will wait to sell options on the stock at $6, which is just above the 50-day MA, or, we might close the trade for a gain of 12%. Longer-term we feel shares can hit $7.50-$8 which would be a 50+% return.
We recommended buying the stock at $5.35 on 12/22/11.
Vivus (VVUS, $9.17, up $0.49)
January 11 calls (VVUS120121C00011000, $0.10, up $0.03)
Original Entry Price: $10.29 (12/16/11)
Lowered Price from Selling Options: $9.39
Exit Target: $15
Return: -2%
Stop Target: None
Action: After the bell on Wednesday, news that one of the ingredients (topiramate) in the company’s diet drug, Qnexa, posed greater risks for birth defects caused shares to sink 6% in after-hours. This news was already known but the rate was greater. The study was done after the FDA rejected Qnexa in 2010 and asked for more data. Vivus did not conduct the original tests and they were based on 15,000 medical claims by patients who took topiramate for epilepsy. This wasn’t the best of news and shares fell below $9 for the day.
There were a few analysts who came to our defense and said the weakness creates a buying opportunity. Investors didn’t listen to this heads-up on Thursday but Friday shares jumped 6% and were back over $9. There is further risk down to $8 but we are looking for a pop back to $10 going into January.
We recommended buying the stock at $10.29 on 12/16/11 and for every 100 shares to sell the January 11 calls for 90 cents. This lowered the cost basis to $9.39.
If shares are called-away by mid-January at $11 the trade makes 17%.
Ford Motor (F, $10.95, up $0.01)
January 11 calls (F120121C00011000, $0.32, down $0.03)
Original Entry Price: $10.38 (12/16/11)
Lowered Price from Selling Options: $10.15
Exit Target: $14+
Return: 8%
Stop Target: None
Action: Ford held $10 all week after dipping to a low of $9.99 on Monday and made a run to $11 by week’s end. Shares are right at their 50-day MA and the 200-day is at $12.50. The stock should easily be over $11 by mid-January unless there is a pullback.
We recommended buying the stock at $10.38 on 12/16/11 and for every 100 shares to sell the January 11 calls for 23 cents. This lowered the cost basis to $10.15.
If shares are called-away by mid-January at $11 the trade makes 8%.
Alcoa (AA, $8.86, down $0.05)
January 9 calls (AA120121C00009000, $0.34, down $0.03)
Original Entry Price: $8.90 (12/16/11)
Lowered Price from Selling Options: $8.45
Exit Target: $11
Return: 5%
Stop Target: None
Action: Alcoa will announce earnings on January 9 which “unofficially” kicks-off 4Q earnings season. Shares traded down to $8.50 to start the week but finished near $9. There is risk back down to $8 on an earnings miss, possibly $7, but we are looking for a run back to $10 at some point in 2012.
We recommended buying the stock at $8.90 on 12/16/11 and for every 100 shares to sell the January 9 calls for 45 cents. This lowered the cost basis to $8.45.
If shares are called-away by mid-January at $9 the trade makes 7%.
Clean Energy Fuels (CLNE, $12.65, down $0.13)
January 14 calls 2012 (CLNE120121C00014000, $0.15, flat)
Original Entry Price: $11.47 (11/23/11)
Lowered Price from Selling Options: $11.02
Exit Target: $15
Return: 15%
Stop Target: None
Action: Shares tested $11.38 on Monday and we have outlined strong support at $11. Clean Energy was up 9% on Tuesday’s rally and made a push right up to resistance at $12.50. The 200-day MA is at $13.45 and represents strong resistance.
We recommended buying the stock at $11.47 on 11/23/11 and for every 100 shares to sell the January 14 calls for 45 cents. This lowered the cost basis to $11.02.
If shares are called-away by mid-January at $14 the trade makes 27%.
Darling International (DAR, $13.31, up $0.06)
January 15 calls 2012 (DAR120117C00015000, $0.10, flat)
Original Entry Price: $13.23 (11/23/11)
Lowered Price from Selling Options: $12.73
Exit Target: $15
Return: 5%
Stop Target: None
Action: Darling tested a low of $12.27 to start the week which is just above strong support at $12. Shares gained 3% on Wednesday to make it above $13 and resistance is at $14. Short-term support is now at $12.
We recommended buying the stock at $13.23 on 11/23/11 and for every 100 shares to sell the January 15 calls for 50 cents. This lowered the cost basis to $12.73.
If shares are called-away by mid-January at $15 the trade makes 18%.
Symantec (SYMC, $15.78, up $0.22)
January 17.50 calls 2012 (SYMC120121C00017500, $0.07, up $0.02)
Original Entry Price: $15.60 (11/23/11)
Lowered Price from Selling Options: $15.30
Exit Target: $18
Return: 3%
Stop Target: None
Action: Symantec traded down to $14.94 on Wednesday which easily erased the 52-week low of $15.23 which was hit the prior week. We have been mentioning multi-year support at $15 which held so we weren’t too worried as shares made a run back to $16 by the end of the week.
We recommended buying the stock at $15.60 on 11/23/11 and for every 100 shares to sell the January 17.50 calls for 30 cents. This lowered the cost basis to $15.30.
If shares are called away by mid-January at $17.50 the trade makes 14%.
Solazyme (SZYM, $11.24, down $0.15)
Original Entry Price: $11.16 (11/14/11)
Lowered Price from Selling Options: $10.56
Exit Target: $15
Return: 6%
Stop Target: None
Action: Shares tested a low of $10.14 last week and backup support at $10 held after $11 was busted on Monday’s pullback. Solazyme was back over $11 on Thursday’s 6% pop and gained 4% for the week. We may sell another call option this week if shares break above $12.
We recommended buying the stock at $11.16 on 11/14/11 and for every 100 shares to sell the calls for 60 cents. This lowered the cost basis to $10.56.
Dendreon (DNDN, $7.57, down $0.10)
January 10 call 2012 (DNDN120121C00010000, $0.10, flat)
Original Entry Price: $9.95 (10/26/11)
Lowered Price from Selling Options: $8.45
Exit Target: $12+
Return: -10%
Stop Target: None
Action: Dendeon tested the low $7’s before closing above support at $7.50 mid-week. There is further risk down to $6.50, and possibly $5, but we think shares will trend towards $10 in 2012 as the company awaits a buyout offer in the teens.
We recommended buying the stock at $9.95 on 10/26/11 and for every 100 shares to sell the November calls for $1. This lowered the cost basis to $8.85.
On 11/23/11 we recommended selling the January 10 call option for $0.50 which lowered the cost basis to $8.45.
If shares are called-away by mid-January at $10 the trade makes 18%.
MGM Resorts (MGM, $9.96, up $0.48)
January 11 call 2012 (MGM120121C00011000, $0.15, up $0.07)
Original Entry Price: $11.73 (8/12/11)
Lowered Price from Selling Options: $9.28
Exit Target: $12+
Return: 7%
Stop Target: None
Action: Shares bottomed at $8.95 before adding 7% for the week (5% on Friday) as support at $9 held. A close above $10 gets $11 back into play.
We recommended buying the stock at $11.73 on 8/12/11 and for every 100 shares to sell the September 12 calls for 90 cents. This lowered the cost basis to $10.83.
On 9/20/11 we recommended selling the October 12 call option for $0.60 which lowered the cost basis to $10.23.
On 10/26/11 we recommended selling the November 11 call option for $0.50 which lowered the cost basis to $9.73.
On 11/23/11 we recommended selling the January 11 call option for $0.45 which lowered the cost basis to $9.28.
If shares are called-away by mid-January at $11 the trade makes 19%.
Newpark Resources (NR, $9.34, up $0.26)
Original Entry Price: $9.45 (7/27/11)
Lowered Price from Selling Options: $8.10
Exit Target: $10+
Return: 15%
Stop Target: None
Action: Newpark had a strong week, rising 13%. We want to wait for shares to reach $10 before selling another call because the January 10 calls are only going for 25 cents. We think a breakout to $15 could come in 2012 if $10 is cleared so we don’t want to be locked in a contract if a breakout does occur.
Newpark tested support at $8 on Monday before bouncing 6% to finish at $8.60 on Tuesday’s rally. This cleared the way for a run at $9 which tripped on Wednesday following a 4% pop. As you can see from the longer-term chart, shares on the verge of a multi-year breakout.
We recommended buying the stock at $9.45 on 7/27/11 and for every 100 shares to sell the August 10 calls for 50 cents. This lowered the cost basis to $8.95.
On 9/15/11 we recommended selling the December 10 call option for $0.85 which lowered the cost basis to $8.10.
Trades on HOLD: Rambus (RMBS, $8.21, up $0.89), Rare Element Resources (REE, $3.86, up $0.11), AKS Steel Holding (AKS, $8.39, up $0.23), American Capital (ACAS, $7.16, flat), DryShips (DRYS, $2.15, down $0.04)
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6. Week Ahead
Economic news will be light for the 4-day trading week starting with Tuesday’s Case-Shiller 20-city Index report before the bell. Thirty minutes after the open, the Consumer Confidence numbers will be out.
For Wednesday, the MBA Mortgage Index is due out at 7am (EST).
Thursday we get the weekly Initial Claims and Continuing Claims figures before the open followed by Pending Home Sales and Crude Inventories.
The last report scheduled for 2011 will be the Chicago PMI number on Friday which could carry some weight.
Special Note: We will have a “shorter” version of the Weekly Wrap for January 2, 2012 (the market is closed but we will be working) that will include our usual commentary on the indexes and our trade updates but we will be giving our writers the holidays off so that they can rest up for another banner year.