Please remember, ALL “Exit Targets” and “Stop Targets” are targets. You should not have any “Hard Stops” entered to close any trades or “Exit Orders” in your brokerage account unless we list one. We will send out an “Alert” or “Trade Update” if we want you to close a position OR if a new trade comes out. Otherwise, follow instructions at all times in the 9am and 1pm updates. Also, we will usually give you a heads-up if we think we are going to send an email outside of these time frames but it is rare that we do.
1:05pm (EST)
PowerShares QQQ (QQQ, $52.08, down $1.75)
September 50 puts (QQQ110917P00050000, $1.65, up $0.60)
Entry Price: $1.55 (8/8/11)
Exit Target: $3.10
Return: 6%
Stop Target: None
Action: Tech looks the weakest of the three indexes and we think the Q’s could trade below $50.
Cigna (CI, $42.40, down $2.79)
September 44 puts (CI110917P00044000, $3.50, up $1.60)
Entry Price: $1.20 (8/4/11)
Exit Target: $2.40+
Return: 228%
Stop Target: None
Action: Close HALF the trade at current levels. This will lock in profits of at least 100% and we still have plenty of time to play a move below $40.
Rambus (RMBS, $10.50, down $1.08)
August 12.50 puts (RMBS110820P00012500, $2.20, up $0.90)
Entry Price: $0.15 (7/29/11)
Exit Target: $1.20+ (closed half at $1.70 on 8/5/2011)
Return: 1200%
Stop Target: None
Action: We told you to load up on the put options once we found out Rambus had a setback at its trial and the insurance was cheap. The stock traded to a low of $11.14 on Friday so we decided to take half the trade off the table.
The break below $14 wasn’t healthy and although it doesn’t help the call options, we used put options to play the move to $10. There is also further weakness to $8-$7 if $10 doesn’t hold.
That is the technical picture for Rambus. If the company can get a legal victory in their ongoing litigation, or a settlement, then shares should trade up to $20.
Other 2011 Portfolio OPEN positions (14): These are trades that are still open in the portfolio that have longer expiration dates or are on “hold” but are not worth mentioning until they turn around. This means we would not open any new positions. We are still keeping track of the trades and we will record the results, accordingly, when we close them or the options expire. Click on the 2011 Portfolio link in the Members Area to view ALL open/ closed trades.
RF MicroDevices August 10 calls (from February 2011)
Dendreon August 50 calls (from April 2011)
MGM Resorts International September 17 calls (from May)
Vivus September 10 calls (from May 2011)
Symantec October 20 calls (from June 2011)
Rediff.com India October 15 calls (from June 2011)
Seattle Genetics August 22.50 calls (from June 2011)
September 20 calls (from May 2011)
Global Payments August 55 calls (from July 2011)
TiVo August 11 calls (from July 2011)
iShares Russell 2000 August 86 calls (from July 2011)
Spider S&P 500 August 135 calls (from July 2011)
Spider Dow Jones Industrial Average August 126 calls (from July 2011)
Freeport-McMoRan August 57 calls (from July 2011)
Qualcomm October 65 calls (from July 2011)
Rambus September 17 calls (from July 2011)
August 17 calls
WATCH LIST SECTION
These trades are NOT recommendations. They are trades that we like but have not added to the portfolio as an official recommendation because of market conditions or because we are waiting for better entry prices. We try not to have more than 12-15 open trades at any one time which is why we created a Watch List. We will not list entry prices because these stocks are on the verge of breaking out or they could sell-off.
We will update this section in the morning.
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10:25am (EST)
PowerShares QQQ (QQQ, $52.27, down $1.56)
Buy to OPEN September 50 puts (QQQ110917P00050000, $1.55, up $0.50)
Action: Use limit prices up to $1.60-$1.65. Tech continues to get pounded and the Q’s look like they could fall below $50.
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9:00am (EST)
Whew. What a week.
Wall Street went down again in dramatic fashion following continued global concerns as the bears pounded the bulls into one of their worst beatings in a couple of years. Volatility exploded, fear and panic set in, and blood was in the streets…but we loved the action.
The bulls came into the week trying to hold key support levels and were clinging to hope the jobs reports would come in better-than-expected. However, the first bit of news wouldn’t hit until Wednesday on that front and they still faced the wrangling in Washington over the debt deal. After an initial pop on an agreement over the weekend, the bears took advantage of the waffling to get the bill signed and pushed the market lower by 1%. The session ended slightly lower as the both sides of the House approved the bill and Obama signed it before Wall Street’s closing bell. Monday session included a 300-point swing on the Dow and it was a warning sign.
Tuesday’s session was crucial as the bulls needed to hold the first wave of support or face further downside risk. These levels were tested quickly as the market “sold the news” and instead focused on the possible prospect of a U.S. debt rating downgrade. It was a day which saw the Nasdaq fall below its 200-day moving average so we knew the selling wasn’t over.
The bulls got some relief on Wednesday on better-than-expected ADP Employment numbers and the Challenger Jobs Cuts reports. However, the bears were able to crack the second layer of support although the market did finish positive for the day.
Thursday was the jailbreak as the bears punished the indexes for 4%-5% losses and took out not only the June lows, but the March lows as well.
The volatility continued into Friday’s session, but stocks finished mixed which only left more head scratching. Futures were improving from a predicted 1% drop and turned positive after hearing the unemployment rate fell to 9.1%, down from the 9.2% rate that had been penciled-in.
As far as the specifics, Non-farm payrolls for July increased by 117,000, which was higher than the expected increase of 84,000. The bulls got a bonus after the prior month payrolls were also adjusted upward. Private Payrolls came in at 154,000, which was well above the forecast for a 100,000 increase.
The Dow started off with a 170-point pop that quickly faded as the indexes failed to clear short-term resistance which had been prior support. In fact, the selling pressure was so intense, all 3 major indexes hit fresh lows and the VIX chart we drew up on a napkin Friday morning played out like we expected. More on this in a minute.
The Dow added 60 points on Friday to finish at 11,444. The index traded to a low of 11,139 while the high was 11,555 – nearly a 400-point swing. The chart below shows the next wave of support at 11,000 (top black line, blue circles) while resistance is at 11,600 (orange line). However, serious technical damage is being done which is threatening the bull market that has been strong (red line) for so long. If the 11,000 level fails then there is a chance 10,750-10,500 comes into play but we would be prepared for a test down to 10,000 (bottom black line, blue circles). If the bulls can rebound above 11,600 watch 11,800 and then 12,000 for a continued rally. For the week the blue-chips lost nearly 700 points, or 5.8%, and the Dow is now down 1.1% for 2011.
The S&P 500 slipped less than a point but finished below the 1,200 mark at 1,199. The index traded to a low of 1,168 which was halfway near our 1,150 target (top black line, blue circles). The bulls made a run back to a high of 1,218 but we knew when 1,225 didn’t print at the open the rally could fizzle. There is further risk down to 1,100 if the selling pressure continues but we have penciled in 1,050 (bottom black line, blue circles) just in case. While a break above resistance at 1,225, first, then 1,250 (orange line) seems like a long shot, it would restore some faith for the bulls. The S&P fell 93 points, or 7.2%, for the week and is off 4.6% YTD.
The Nasdaq also finished lower by dropping 24 points to settle at 2,554. Tech continues to look like a train wreck and dipped to a low of 2,464 on Friday once the 2,500 level was pinched. We mentioned the possibly of 2,400 coming into play (top black line, blue circles) and further support lies at 2,350 but the bears could target 2,200 (bottom black line, blue circles) if things gets ugly this week. The Nasdaq faces strong headwinds on its fight to get back to 2,600 (orange line) but if it can, and then 2,700 – the bulls would be back in business. Tech gave back 224 points, or 8.1%, last week and is down 4.5% for the year.
The S&P Volatility Index (^VIX, 32, up 0.34) spiked up to 39 on Friday and here is Friday’s chart we gave you before the open.
Here is what it looks like after Friday:
The VIX could go parabolic like it did a few years ago as shown by the 5-year chart below if there is a correction. If it does, there will be a lot of money to be made to the downside.
Oil has also been moving lower after closing at $86.25 a barrel on Friday, down $0.38. This should help drop the national average for gas to $3.25 a gallon which should help consumers.
Some of the strength from Friday can be attributed to news that the European Central Bank was ready to provide support to Spain and Italy by buying their bonds. The two troubled countries would have to commit to specific reforms but this helped the market bounce after being down 2% on Friday. On Sunday night, we will need to see China come in and buy the bonds.
Speaking of troubles, there was news after the closing bell that we are sure many of you have heard by now. America lost its triple AAA credit rating Friday night. Yep, that’s right. Standard & Poor cut the long-term U.S. credit rating by a notch to AA+ over concerns on the nation’s bloated budget deficit and rising debt burdens. To dummy it down, what this means is that all of us, including the government and corporate America, will be paying higher interest rates.
Here is how futures look heading into the opening bell this morning: Dow (-259), S&P (-31); Nasdaq (-59).
MEMBERS AREA
Please remember, ALL “Exit Targets” and “Stop Targets” are targets. You should not have any “Hard Stops” entered to close any trades or “Exit Orders” in your brokerage account unless we list one. We will send out an “Alert” or “Trade Update” if we want you to close a position OR if a new trade comes out. Otherwise, follow instructions at all times in the 9am and 1pm updates. Also, we will usually give you a heads-up if we think we are going to send an email outside of these time frames but it is rare that we do.
Cigna (CI, $45.19, down $0.31)
September 44 puts (CI110917P00044000, $1.90, up $0.15)
Entry Price: $1.20 (8/4/11)
Exit Target: $2.40+
Return: 58%
Stop Target: None
Action: The options have traded up to $2.35 on Friday and our alert didn’t trigger because we had it set for $2.40. We are hoping to get there today if shares continue to tumble.
As far as the chart, we are looking for a test to $42 (green line, black circles) once the $44 levels trips (red line, black circles) which is where we would look to close half the trade.
Rambus (RMBS, $11.58, down $0.65)
September 17 calls (RMBS110917C00017000, $0.15, flat)
Entry Price: $0.65 (7/22/11)
Exit Target: $1.30+
Return: -77%
Stop Target: None
August 17 calls (RMBS110820C00017000, $0.10, flat)
Entry Price: $0.60 (6/20/11)
Exit Target: $1.20+
Return: -83%
Stop Target: None
August 12.50 puts (RMBS110820P00012500, $1.30, up $0.55)
Entry Price: $0.15 (7/29/11)
Exit Target: $1.20+ (closed half at $1.70 on 8/5/2011)
Return: 900%
Stop Target: None
Action: We told you to load up on the put options once we found out Rambus had a setback at its trial and the insurance was cheap. The stock traded to a low of $11.14 on Friday so we decided to take half the trade off the table.
The break below $14 (red line, blue circles) wasn’t healthy and although it doesn’t help the call options, we used put options to play the move to $10 (black line, green circles). There is also further weakness to $8-$7 if $10 doesn’t hold.
That is the technical picture for Rambus. If the company can get a legal victory in their ongoing litigation, or a settlement, then shares should trade up to $20.
Other 2011 Portfolio OPEN positions (14): These are trades that are still open in the portfolio that have longer expiration dates or are on “hold” but are not worth mentioning until they turn around. This means we would not open any new positions. We are still keeping track of the trades and we will record the results, accordingly, when we close them or the options expire. Click on the 2011 Portfolio link in the Members Area to view ALL open/ closed trades.
RF MicroDevices August 10 calls (from February 2011)
Dendreon August 50 calls (from April 2011)
MGM Resorts International September 17 calls (from May)
Vivus September 10 calls (from May 2011)
Symantec October 20 calls (from June 2011)
Rediff.com India October 15 calls (from June 2011)
Seattle Genetics August 22.50 calls (from June 2011)
September 20 calls (from May 2011)
Global Payments August 55 calls (from July 2011)
TiVo August 11 calls (from July 2011)
iShares Russell 2000 August 86 calls (from July 2011)
Spider S&P 500 August 135 calls (from July 2011)
Spider Dow Jones Industrial Average August 126 calls (from July 2011)
Freeport-McMoRan August 57 calls (from July 2011)
Qualcomm October 65 calls (from July 2011)
WATCH LIST SECTION
These trades are NOT recommendations. They are trades that we like but have not added to the portfolio as an official recommendation because of market conditions or because we are waiting for better entry prices. We try not to have more than 12-15 open trades at any one time which is why we created a Watch List. We will not list entry prices because these stocks are on the verge of breaking out or they could sell-off.
Spider S&P 500 (SPY, $120.08, down $0.18)
August 115 puts (WEEKLY) (SPY11081200115000, $1.00, down $0.15)
Thoughts: These puts will gap up so we will have to see where they open and how the market looks afterwards. We have already went over the S&P chart and it shows the same technical outlook as the Spiders.
PowerShares QQQ (QQQ, $53.83, down $0.34)
September 50 puts (QQQ110917P00050000, $1.05, up $0.20)
Thoughts: Tech could stay weak for another few weeks and for August. This is one of the better ways to play a down move on the Nasdaq and we went over that chart earlier as well.
Freeport-McMoRan (FCX, $45.99, down $0.81)
August 45 puts (WEEKLY) (FCX110812P00045000, $1.05, up $0.15)
Thoughts: Shares could test $40 if copper continues to show weakness.
Potash (POT, $53.09, down $0.29)
September 60 calls (POT110917C00060000, $1.00, down $0.10)
August 50 puts (POT110820P00050000, $1.05, up $0.15)
August 50 puts (WEEKLY) (POT110812P00050000, $0.75, up $0.17)
Thoughts: We listed the puts on Friday because we knew there could be volatility although we think shares can reach $60 if the market rebounds. The August 50 puts opened at 62 cents and traded to a high of $2.01 when shares kissed a low of $50.78 on Friday. The September 60 calls traded up to $1.27 while the low was 80 cents.
The chart shows shares are right at support (green line, red circles) but there is risk down to $51 (black line, red circles) and again, shares traded to a low of $50.78 on Friday. A break below there could lead to $48. If the Weekly options open under $1, we may use them for a quick trade this morning.
Pepsi (PEP, $64.67, up $1.32)
October 67.50 calls (PEP111022C00067500, $1.05, up $0.35)
September 65 calls (PEP110917C00065000, $1.55, up $0.65)
Thoughts: Shares rallied back to short-term resistance (black line, red circles) and support just above $60 (red line, green circles) has held over the last few weeks. Watch for now as there could be continued strength or a test back to support and another breakdown.
Bank of America (BAC, $8.17, down $0.66)
September 7 puts (BAC110917P00007000, $0.45, up $0.30)
May (2012) 15 calls (BAC120519C00015000, $0.10, down $0.05)
Thoughts: We would love to shares drop to $3 again because we made some beautiful “calls” on the rebound off the March 2009 lows. As you can see, at $8 shares are on the edge of another leg lower (red line, green circles) and have a few layers of support (black lines, green circle).
