11:30pm (EST)
1. Market Summary
2. Research in Motion (RIMM) Showing Some Upward Momentum
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)
= = = = = = = = = = = = = = =
1. Market Summary
“The talking heads and Wall Street pros were telling viewers and clients on Friday (12/28/12) that the market isn’t “technically” driven right now and has been reacting to the headlines. While this is true to a degree, the market has been and will be technically driven and the headlines are pushing key support and resistance levels.
We mentioned on Friday that these knuckleheads don’t do homework and there were plenty of signs that showed a downtrend and a test to the bottom of the current trading range was coming. While they can be stretched attimes, trading ranges can have wild price swings but there are levels towatch for when looking for a breakout or breakdown.
We also said last week we were looking for the market to make a 4% move by today’s close and last week’s drop was 2%. The selling pressure on Friday picked up steam in the final 30 minutes of trading when it was reported the President had no new offer on the table. The zombies met again last night but they still don’t have a deal. Of course, they only worked an hour and half last night so we didn’t expect much. With less than 16 hours away to a deadline, they will meet again this morning at 11am (EST). Unbelievable but not really when it comes to lame-duck politics.
The market is on a 5-session slide and we have had a lower Friday/ Monday and a lower Friday over the past 2 weeks. We said last weekend it was the first time in months the market had a lower Friday/ Monday close.
The second layers of support and now in play and even if there is a deal, a test back to resistance might be the best the bulls can do. If a Fiscal Cliff deal with some significant proposals are agreed to today then it could be super bullish but the best we expect the zombies to do is put a patch on things or no deal at all. (from 12/31/2012 Monday Morning Daily Update)…
It was another volatile week on Wall Street as the bulls and bears fought over support and resistance levels while the zombies in DC battled over the Fiscal Cliff. There was no deal by the Monday night deadline but the Democrats came up with a proposal shortly after midnight on Tuesday. The deal cleared the Senate by a wide margin which left things up to the House which was expected to vote on the package later in the day. As usual, the zombies dragged their feet but got a deal done.
The test to support, or the bottom of the trading range, was a warning signal the market was going to get punished if there was no Cliff deal. Of course, nothing was done about spending cuts and taxes were raised on everyone anyway by $10-$20 a paycheck as the fat cats in DC continue to pad their wallets and throw money at the wind.
The tax-payers are on the hook for 2 round trips to Hawaii with Air Force One jetting the head zombie back-and-forth between talks but the good news is the market went up. The bad news is the 2 new words we will be typing over-and-over for the next 2 months are “Debt Ceiling”.
We would love to see D.C. avoid the DC but we warn you the next squabble between the zombies could be 10 times worse than the Fiscal Cliff rhetoric. The victory over the Fiscal Cliff was enjoyed for one day before the talking heads and suit-and-ties began fretting over the Debt Ceiling and calling for a market pullback. The funny thing is they forgot Santa Claus was still in town as the bulls broke resistance and finished Friday’s session with solid gains.
The Dow gained 43 points, or 0.3%, to close at 13,435 on Friday. The blue-chips traded to a low of 12,883 on Monday’s open and we mentioned to watch for support to hold at 12,800 and the bottom of the trading range. Once word spread the zombies had a deal in place, the index rebounded off its lows to clear its 50-day and 200-day MA’s (moving average) by the close. Wednesday’s surge to 13,412 cleared two layers of resistance at 13,200 (100-day MA) and 13,350 that are now short-term support. The top of the range is at 13,600 and could be tested on continued momentum with “fluff” up to 13,800. The Dow started Monday at 12,938 and advanced 497 points, or 3.8%, for the week. For 2012, the index ended with a gain of 887 points, or 7.3%, and is up 331 points, or 2.5%, for 2013.
Here was our chart work for the Dow back in late December:
The S&P 500 added 7 points, or 0.5%,to close at 1,466. The index touched a low of 1,398 on Monday which was just below our support target of 1,400. There was further risk down to 1,375-1,350 on no FC deal but the 200-day MA held. The close above 1,425 and the 50-day and 100-day MA’s set the stage for Wednesday’s push past resistance at 1,450 and a level where the bulls had struggled with back in mid-December. The bears will try to get the action back below 1,450 that is now support. The close at 1,462 set the stage for a possible short-term run to 1,475-1,500. Thursday’s high was 1,465 and Friday’s peak was 1,467.94. The S&P 500 started Monday at 1,402 and was up 64 points, or 4.6%, for the week. For 2012, the index surged 169 points, or 13%. For 2013, the S&P 500 is higher by 40 points, or 2.8%.
This was the S&P 500 just before Christmas:
The Nasdaq managed a 1 point pop on Friday, or 0.04%, to end at 3,101. Tech tested a low of 2,953 on Monday and we have warned for a few weeks that 2,950 needed to hold. The prior week’s low was 2,951 and the “double-bottom” held as the index surged to close at 3,019. The 50-day MA (2,981) and the 200-day MA (2,991) were stretched at the start of the week but the close at 3,019 was impressive. We were looking for a finish back above 3,025 and the 100-day MA (3,039) and that was taken care of on Wednesday’s surge to 3,112. We said if 3,100 were challenged and cleared, Tech could push 3,200 over the short-term. The 52-week high is 3196.93. A close back below 3,050 could be a warning sign the rally is fading. The Nasdaq came into the week at 2,960 and zoomed 141 points, or 4.8%, by Friday’s close. For 2012, the index was higher by 414 points, or 15.9% and for 2013, Tech is up 82 points, or 2.7%.
You can clearly see why 2,950 was so important to hold from our late December chart:
The Russell 2000 popped a six-pack, or 0.8%, to finish at 879.15. The index is at at all-time high and kissed 880.47 on Friday and we said to watch for the small-caps to outperform the major indexes back in mid-December. Monday’s low was 831 and we said the bulls needed to hold 830 before we left for Christmas. If not, all of the major MA’s would have come into play but now we just need to see if 850 holds on any pullback. Monday’s close was 849 and a print below this level would get 825 and the 200-day MA back into the mix. We have penciled in a test to 900-910 over the near-term and at some point 1,000 could trip this year but the road is not going to be that well-paved before a pullback hits. The Russell 2000 was at 832 on Monday’s open and ripped higher by 47 points, or 5.7%, for the week. For 2012, the small-caps returned 14.6%, or 209 points and for 2013 the index has advanced nearly 30 points, or 3.5%.
Here was our chart for the Russell 2000 on 12/21/12:
We warned of the S&P Volatility Index ($VIX, 13.83, down 0.73) making a move past 20 which was triggered 2 days after Christmas. The VIX reached 20.90 that day before closing at 19.47. The prior Friday’s close of 21.79 was a sign more short-term pain would come and it did on Monday’s peak of 22.72. However, when word spread the zombies were about 100% close to getting a deal done, the VIX closed below 20 before the New Year at 18.02. It was another good clue the rally would have legs and Wednesday’s close below 15 confirmed our belief. There is a chance the VIX trades below its 52-week low of 13.30 which could mean new highs for the S&P 500. A move back above 15 and then 17.50 would signal momentum is changing again.
You can see where we called for a test to 20.50 back before Christmas:
It was almost a 100% guarantee the market would pop on any Fiscal Deal announcement but we didn’t think the bounce would be enough to clear resistance although the small-caps have. The zombies still have a number of upcoming issues they will be fighting over but the market made a strong move higher despite the volatility and uncertainty.
We wanted to check the “Santa Claus Rally” that didn’t officially start until AFTER Christmas and runs the last 5 trading days of the year and the first 2 trading sessions of the New Year that concluded Wednesday and Thursday. Believe it or not, the rallies have averaged 1.5% over this time frame for the last 60 years when the market moves higher. If the market moves lower, then it can be a warning sign for an upcoming bear market. The Dow started at 13,190 on December 21 while the S&P 500 was at 1,430. The Nasdaq was at 3,021 while the Russell 2000 stood at 847. On Thursday’s close, the indexes looked like this: Dow 13,391 (+1.5%); S&P 1,459 (2%); Nasdaq 3,100 (2.6%); Russell 872 (3%).
We also talked about the “January Effect” which is a time period when the small-caps outperform the large-caps. The time-frame is from mid-December through January and so far, the Russell 2000 is outperforming the Dow. The first 5 days of January are another “market tell” on possible direction not only for the month but for the year as well. Monday and Tuesday conclude the time period and it would be nice to see a push to new highs.
We also looked at our prediction on where the market would finish from our Weekly Wrap from last January. We usually wait until the end of the first month of a New Year to make “predictions” for a yearend target for the indexes and last year’s targets were: Dow 14,000; S&P 1,550-1,600; Nasdaq 3,750; Russell (2000) 1000. These targets probably would have been achieved but the selloff from the October highs to the December lows caused some serious technical damage from the Fiscal Cliff worries. We didn’t factor the zombie pullback and meddling in the market last year but we will this year.
In early December, we talked about a 4% rally to new highs if the zombies could come together with some real solutions. Our targets were Dow 13,777; S&P (500) 1,492; Nasdaq 3,150; Russell (2000) 885. We still believe the bulls can hit these levels but we wanted to check the time frame from July/ August of 2011 to be sure. This was the last Debt Ceiling debate that got super ugly.
The market was near its 52-week highs back in June and July 2011 with wild price swings leading up to the August showdown before the Dow plunged 2,000 points. If the pattern plays out the same way, we would expect the market to test new highs over the next few weeks before worries of the Debt Ceiling become more of a concern to the market. There could be a 5% pullback afterwards into February where things will then be back on the zombies to do something. If the battle becomes intense and nothing gets done with the government shuts down then the Dow could easily lose another 2,000 points.
If the knuckleheads can do something constructive then maybe, just maybe, we could have a full-blown rally into April. Of course, from the “Hard to Believe” department we offer you this. One of the “old” zombies was on TV over the weekend and he talked about how much they use to “work” compared to what they work now. Back in the day, a regular workweek for government was 48 out of 52 weeks, 4-5 days a week. Today’s zombies are built to work 32 out of 52 weeks of the year but only 2 or 3 days with most Friday’s off. We doubt this debate will go smoothly with the President already saying he won’t be in a compromising position.
America slipped over the Fiscal Cliff and was “saved” by the zombies after the fact but there will be more “Cliff” talk this year, unfortunately. You will start hearing about the Valentine Cliff and the St. Patty’s Cliff and possibly a Dairy Cliff. Our road map for the next few months could be a push higher to resistance and possibly past before a steep selloff into mid-March. The political rhetoric has only just begun and will likely persist until something dramatic between the zombies happens. We hate to say it but 4 more years of a divided Congress is very possible with Obama in charge.
As we head to press, futures are showing a slightly lower open for Monday. Dow futures are down 12 points to 13,34 while the S&P 500 futures are lower by a point to 1,456. The Nasdaq 100 futures are declining a half-point to 2,712.50.
= = = = = = = = = = = = = = =
Key of Technicals Used In Following Articles
2. Research in Motion (RIMM) Showing Some Upward Momentum
By Michael Bryant
We covered Research In Motion (RIMM, $11.95, up $0.48) in the Weekly Wrap on December 12, 2010 as it was preparing for its 3rd quarter earnings report for its 2011 fiscal year. Earnings came in at $1.74 on $5.49 billion in revenue, beating estimates of $1.64 on revenue of $5.39 billion, as we expected. Shares rose and peaked around $70 in February of 2011 before starting a downward spiral. The Playbook, its first tablet computer, did not live up to the hype. The main problem with the Playbook was that it needed to attach to a Blackberry phone to do email. But more importantly, the company has been losing out to competitors like Apple (AAPL, $527.00, down $15.10) and Google (GOOG, $737.97, up $14.30) in the smartphone wars. Can the introduction of not one but three new smartphones reverse the trend? Investors have already bid up shares 45% in the last three months and they could go higher.
Currently, its smartphone portfolio includes BlackBerry Bold series, BlackBerry Curve series, and BlackBerry Torch series. It also added a rectangular Porsche Design P’9981. All phones have a QWERTY keypad. The Blackberry Bold series consists of four models: 9900, 9930, 9790, and 9780. BlackBerry Curve series consists of nine models: 8520, 8530, 9300, 9310, 9330, 9350, 9360, 9370, and 8350i. BlackBerry Torch series consists of four models: 9800, 9810, 9850, and 9860. Within each series, the models generally look the same. Only the 9900, 9930, 9790, 9800, 9810, 9850, 9860, and P’9981 have touch capability. The 9800 and 9810 have a camera, a full touch screen with apps, and a QWERTY keypad that can slide out from behind the touch screen. The 9850 and 9860 have a camera and a full touch screen with apps, but no QWERTY keypad. Instead, it has a touch keyboard. Below are example images of one phone from each series.
Google’s Android dominates both the U.S. and worldwide smartphone market. As of this November, it had 53% share in the U.S., up 6.8% in the last 12 months, and 68% share worldwide. Apple’s iPhone comes in at #2 with a 35% share in the U.S., up 6.3% in the last 12 months, and 17% worldwide. Research In Motion comes in a distant third, with 7.3% share in the U.S., down 9.3% in the last 12 months, and less than 5% worldwide. Nokia’s (NOK, $4.18, up $0.02). Symbian operating system has fallen to 0.5% U.S. market share, while Microsoft’s (MSFT, $26.74, down $0.51) operating system claims 3.0% U.S. market share. The table below shows the change in U.S. market share over the past year.
|
|
GOOG |
AAPL |
RIMM |
MSFT |
Symbian |
Other |
|
11/2011 |
46.9% |
28.7% |
16.6% |
5.2% |
1.5% |
1.1% |
|
2/2012 |
50.1% |
30.2% |
13.4% |
3.9% |
1.5% |
0.9% |
|
5/2012 |
50.9% |
31.9% |
11.4% |
4.0% |
1.1% |
0.7% |
|
8/2012 |
52.6% |
34.3% |
8.3% |
3.6% |
0.7% |
0.5% |
|
11/2012 |
53.7% |
35.0% |
7.3% |
3.0% |
0.5% |
0.5% |
Despite the rapid decline in RIMM’s U.S. smartphone market share, the decline has seemed to be slowing down. The number of Blackberries shipped worldwide has fallen 41% year over year but things may be turning a corner for the company. Smartphones won’t sell well if there are not enough apps for it. This is one reason why Apple’s iPhone has been so successful. So far, RIMM has 60,000 apps while Apple has some 700,000 apps, up from 25,000 in 2009. To boost the number of apps, RIMM India and Devworx is holding the BlackBerry 10 Apps Challenge from December 15th to January 21st where developers get a chance to display their best app ideas for BlackBerry 10 and win prizes. Will the strategy work? The CEO projects that it will have 100,000 apps by the BlackBerry 10 launch.
The percentage in the United States fell from 49% to 19%, as shown in the table below. All numbers are in billions of dollars. Thus, most of any future growth will likely come from outside these three regions. In Europe, the company also has offices in France, Germany, Italy, Spain, Austria, Russia, and Turkey. In Asia, it has offices in Singapore, Hong Kong, Australia, and Indonesia. In Africa, it has offices in South Africa, Egypt, Kenya, and Nigeria. And in Latin America, it has offices in Mexico, Argentina, Brazil, and Uruguay. We have a feeling much growth will come from Turkey, Russia, Hong Kong, Singapore, and Indonesia and business is also booming for the company in Africa, where it has become the leading smartphone vendor. Africa has actually now overtaken Latin America to be the second largest mobile market in the world after Asia.
|
|
Canada |
United States |
United Kingdom |
Other |
|
1st quarter 2011 |
$0.234 (5.5%) |
$2.074 (49.0%) |
$0.469 (11.1%) |
$1.458 (34.4%) |
|
2nd quarter 2011 |
$0.286 (6.2%) |
$2.220 (48.0%) |
$0.429 (9.3%) |
$1.686 (36.5%) |
|
3rd quarter 2011 |
$0.506 (9.2%) |
$1.883 (34.3%) |
$0.685 (12.4%) |
$2.421 (44.1%) |
|
4th quarter 2011 |
$0.382 (6.9%) |
$1.646 (29.6%) |
$0.635 (11.4%) |
$2.893 (52.1%) |
|
1st quarter 2012 |
$0.371 (7.6%) |
$1.320 (26.9%) |
$0.478 (9.7%) |
$2.739 (55.8%) |
|
2nd quarter 2012 |
$0.308 (7.4%) |
$1.111 (26.6%) |
$0.419 (10.1%) |
$2.330 (55.9%) |
|
3rd quarter 2012 |
$0.385 (7.5%) |
$1.026 (19.9%) |
$0.588 (11.4%) |
$3.167 (61.2%) |
|
4th quarter 2012 |
$0.196 (4.7%) |
$0.725 (17.3%) |
$0.434 (10.4%) |
$2.838 (67.7%) |
|
1st quarter 2013 |
$0.100 (3.6%) |
$0.694 (24.7%) |
$0.257 (9.1%) |
$1.763 (62.6%) |
|
2nd quarter 2013 |
$0.227 (7.9%) |
$0.641 (22.3%) |
$0.339 (11.8%) |
$1.666 (58.0%) |
|
3rd quarter 2013 |
$0.127 (4.7%) |
$0.520 (19.1%) |
$0.302 (11.1%) |
$1.778 (65.1%) |
On December 20th, the company reported 3rd quarter earnings, which disappointed investors. Thus, the stock plunged from $14 to $11. It also delayed the launch of the BlackBerry 10 to January 30th, which caused further disappointment. On top of that, it expects sales of current BlackBerry 7 products may be impacted by some customers waiting for the BlackBerry 10. To help curb this, the company intends to continue using pricing initiatives on BlackBerry 7 devices and service fees in some markets as a way to maintain its subscriber base and to drive more BlackBerry users. It also expects to report an operating loss for the 4th quarter, which it reports after the bell on March 28th. Analysts expect it to report earnings of -$0.31 on $2.87 billion in revenue.
Based on the revenue and expenses graph, the company seems on track to have revenue greater than expenses in the near future. Earnings look on track to beat estimates again in the 4th quarter.
All margins, except the gross margin, are negative. The same is true with return of assets and return on equity. Short sellers are betting that the price will fall, and more shorts are coming in. This would put pressure for the stock to fall, but if good news comes out about the company, shorts may be rushed to cover, causing a short squeeze and a pop in the share price. Thus, RIMM seems a value play and not a growth play.
At $11.95, the stock is between its mean target of $10.14 and high target of $17.00 made by the 33 analysts recorded by Thomson/First Call. Median target is $10.00, and low target is $5.00. Using a scale of 1.0 as a strong buy and 5.0 as a sell, the average rating of the stock was 3.5, down from 3.4 a week ago.
|
|
Current Month |
Last Month |
Two Months Ago |
Three Months Ago |
|
Strong Buy |
1 |
1 |
0 |
0 |
|
Buy |
5 |
4 |
4 |
2 |
|
Hold |
23 |
26 |
26 |
28 |
|
Underperform |
9 |
11 |
11 |
11 |
|
Sell |
6 |
6 |
6 |
6 |
= = = = = = = = = = = = = = =
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 1/4/13 close)
By Catherine Tierney
Monday
Commercial Metals (CMC, $15.54, up $0.26), FelCor Lodging Trust (FCH, $5.01, up $0.03), Material Sciences (MASC, $9.27, up $0.11), National Healthcare (NHC, $48.67, down $0.02), Penford (PENX, $7.70, down $0.12), Phillips 66 (PSX, $53.14, down $0.05), Rocky Mountain Chocolate Factory (RMCF, $11.19, up $0.30), Saba Software, (SABA, $9.29, up $0.18), SandRidge Permian Trust (PER, $17.51, up $0.46), Taylor Devices (TAYD, $8.51, up $0.01), Team (TISI, $37.12, up $0.01), Village Super Market (VLGEA, $33.36, down $0.32), Zep (ZEP, $14.93, up $0.24)
Tuesday
Acuity Brands (AYI, $69.22, down $0.11), Alcoa (AA, $9.26, up $0.19), Apollo Group (APOL, $22.03, up $0.25), Global Payments (GPN, $47.20, up $0.83), IHS (HIS, $98.82, up $0.81), Lindsay (LNN, $81.26, down $0.68), Mistras (MG, $24.41, up $0.01), Monsanto (MON, $96.11, up $0.77), RPM (RPM, $30.50, up $0.15), Schnitzer Steel (SCHN, $31.68, up $0.43), WD-40 (WDFC, $48.28, down $0.17)
Wednesday
AZZ (AZZ, $39.49, up $0.52), Constellation Brands (STZ, $36.75, up $0.06), Greenbrier (GBX, $16.68, up $0.62), Helen of Troy (HELE, $32.72, down $0.27), Richardson Electronics (RELL, $12.07, up $0.06), Ruby Tuesday (RT, $8.29, down $0.01), Synergy Resources (SYRG, $5.76, up $0.12), Texas Industries (TXI, $55.60, up $0.96), VOXX (VOXX, $7.22, up $0.17)
Thursday
Emmis Cominications (EMMS, $1.90, down $0.10), MSC Industrial Direct (MSM, $78.29, up $0.23), SYNNEX (SNX, $35.26, up $0.21), Washington Federal (WAFD, $17.05, up $0.03), Xyratex (XRTX, $7.99, down $0.22)
Friday
Wells Fargo (WFC, $34.94, up $0.18)
Possible earnings trade (for the Daily)!!!
January 35 calls (WFC130119C00035000, $0.60, up $0.05)
February 35 calls (WFC130216C00035000, $0.80, up $0.02)
Thoughts: Shares are near all-time highs and we have said the Financial stocks need to breakout if the market is going to kiss new highs. The January options will provide more bang for the buck but the February calls would provide a little safety if they disappoint. The company is expected to earn 89 cents a share on revenues of $21.3 billion. The “whisper” number is for 95 cents. A beat-and-raise could get shares past their 52-week high of $36.60.
= = = = = = = = = = = = =
4. Weekly Wrap Covered Call Portfolio Update (Closing prices as of 1/4/13)
Our Closed Trade Track Record for 2013 is 0-0 (44-2, overall since 2011). We have not closed any trades in 2013.
Special Notice: There are a few trades we like and we may start nibbling but we want to be careful in case there is a pullback over the next month or two. TiVo (TIVO, $12.40, down $0.03) is our favorite play and we nearly added the stock to our portfolio on last week’s dip to $12.14. We feel shares will run to $16-$18 at some point this year despite what could be a volatile next few months. The February 13 calls (TIVO130216C00013000, $0.42) could be sold to lower the cost basis and we may get into this trade at some point this week.
CURRENT TRADES
Bank of America (BAC, $12.11, up $0.15)
Original Entry Price: $9.89 (11/27/12)
Lowered Price from Selling Options: $9.88
Exit Target: $12+
Return: 23%
Stop Target: $11.00 (Hard Stop)
Action: We raised the Hard Stop to $11.00 lst week to lock-in in at least an 11% profit if there us selling pressure down the road. This is a 3-year weekly chart for BAC which hit a fresh 52-week high again last week of $12.15. We have a price target of $15 for BAC at some point in 2013. Longer-term support is moving up and is now at $10. The company will announce earnings on the January 17.
We recommended buying the BAC at $9.89 on 11/27/12.
The company paid a dividend of a penny on 12/05/12 that lowered our cost basis to $9.88.
CubeSmart (CUBE, $14.63, down $0.09)
Original Entry Price: $13.59 (11/27/12)
Lowered Price from Selling Options: $13.48
Exit Target: $16+
Return: 9%
Stop Target: $14 (Hard Stop)
Action: This 3-year chart show the strong uptrend channel shares are in. The company paid a dividend of 11 cents at the end of December that lowered our cost basis to $13.48. Shares traded to $14.87 and the low for the week was $14.30.
We recommended buying CUBE at $13.59 on 11/27/12.
The company paid a dividend of 11 cents on 12/27/12 that lowered our cost basis to $13.48.
Solazyme (SZYM, $8.41, up $0.04)
Original Entry Price: $12.35 (8/9/12)
Lowered Price from Selling Options: $11.55
Exit Target: $15+
Return: -27%
Stop Target: $5
Action: This is a 2-year chart for SZYM which shows short-term support at $7.50. You can see the spike to $10 back in December and a close above $9.50 would be bullish. We covered the company’s long-term prospects last year and we like their partnerships which are growing. Earnings are due out in mid-February.
We recommended buying SZYM 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, $13.75, up $0.74)
Original Entry Price: $22.70 (7/27/12)
Lowered Price from Selling Options: $20.90
Exit Target: $30+
Return: -34%
Stop Target: $10
Action: Vivus ran to $14.71 before Christmas on takeover rumors but we have been talking about the company being a takeover candidate for over a year. Support has moved up to $12 and last week’s low was $12.65. A close above $14 would be super bullish for a run back to $18. We could sell the June 20 calls (VVUS130622C00020000, $0.90, up $0.05) but we believe a buyout offer comes in at $30 at some point for Vivus. The company has a strong pipeline that we have talked about from time-to-time, including a good-wood drug (Avanafil). Qnexa is an obesity drug that has won FDA approval and is also in Phase 2 clinical trials for Type 2 diabetes treatments, and as a sleep apnea cure.
We recommended buying VVUS 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, $3.90, up $0.05)
Original Entry Price: $4.94 (7/13/12)
Lowered Price from Selling Options: $3.94
Exit Target: $8+
Return: -1%
Stop Target: None
Action: The company submitted a New Drug Application for Otrexup that will use its Medi-Jet technology which is needle-free and why we like the stock. We have been waiting for a close above $4 and last week’s high was $3.96. We could sell the May 5 calls (ATRS130518C00005000, $0.30, flat) to lower our cost basis but shares could run once $4 is cleared. Support is moving up from to $3.50 to $3.75 but a break below $3.50 would be short-term bearish.
We recommended buying ATRS 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%.
Scientific Games (SGMS, $9.59, up $0.10)
Original Entry Price: $11.10 (3/20/12)
Lowered Price from Selling Options: $11.10
Exit Target: $13
Return: -14%
Stop Target: None
Action: We said the close above $8.75 would be bullish and the pop from $8.67 to $9.24 to start the year was just what the doctor ordered. Shares look poised for a run at $10 and the 3-year chart shows a run to $11 is possible over the near-term. Support has been strong at $8.
Pizza Inn (PZZI, $3.75, up $0.14)
Original Entry Price: $4.50 (2/22/12)
Lowered Price from Selling Options: No options available
Exit Target: $9
Return: -17%
Stop Target: None
Action: Shares finally broke out of their trading range and we used the 3-year chart to show the possible run to $4 coming. We said the very tight trading range would lead to a nice breakout (or breakdown) that would get shares to $3 or $4 based on the velocity of the move the longer shares stay range bound. A close above $4 could get the big boys involved but we doubt any of them have done their homework. The company is expanding its Pie Five Pizza concept to 75 stores and won the 2012 Hot Concepts award. We have a 6-12 month price target of $7 for the stock and we encourage you to add a few shares to your portfolio as a possible double from current levels.
This chart shows the trading range shares were in before the breakout:
We recommended buying PZZI at $4.50 on 2/22/12.
MGM Resorts (MGM, $12.64, up $0.18)
Original Entry Price: $13.77 (2/2/12)
Lowered Price from Selling Options: $12.67
Exit Target: $15
Return: 0%
Stop Target:None
Action: Shares were up 7% for the week and traded to a high of $12.69 on Friday. The next wave of resistance is at $13 and a break above $13.50 would be super bullish. We would like to see $12 hold on any pullback and we are waiting for higher prices before we sell another option.
We recommended buying MGM 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.
Trades on HOLD: DryShips (DRYS, $2.17, up $0.44), AKS Steel Holding (AKS, $4.81, up $0.19), Rare Element Resources (REE, $3.71, up $0.16), Rambus (RMBS, $4.91, up $0.01), Bebe Stores (BEBE, $3.69, down $0.09), Antares Pharma February (2013) 7.50 calls
= = = = = = = = = = = = = = =
5. Week Ahead
