Do not risk more than 5% of your trading account on any one trade but do try to take ALL of the trades. 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 a “Profit 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.
12:40pm (EST)
Concur Technologies (CNQR, $67.63, down $1.43)
September 60 puts (CNQR120922P00060000, $1.70, up $0.45)
Entry Price: $1.50 (7/30/12)
Exit Target: $3.00
Return: 13%
Stop Target: None
Action: The options opened at $1.35 and we were able to get in at $1.50. We said to do half positions because this is an earnings trade. The company will confess to Wall Street on Wednesday.
Constant Contact (CTCT, $17.40, down $0.60)
September 17.50 puts (CTCT120922P00017500, $1.40, up $0.30)
Entry Price: $1.30 (7/30/12)
Exit Target: $2.20
Return: 8%
Stop Target: None
Action: We had to pay $1.30 to open the position which was a nickel more than we wanted to pay but we should be okay. We are looking for shares to fall below $15 by mid-September which will get these options to $2.50-$2.60 for a double.
Dow Jones Industrial Average Spider (DIA, $130.23, down $0.21)
September 119 puts (DIA120922P00119000, $0.70, up $0.05)
Entry Price: $1.55 (7/24/12)
Exit Target: $3.10
Return: -55%
Stop Target: 75 cents
Action: We would love to see a close below $130 today.
S&P 500 Spiders (SPY, $138.44, down $0.24)
September 123 puts (SPY120922P00123000, $0.60, up $0.05)
Entry Price: $1.30 (7/24/12)
Exit Target: $2.60
Return: -54%
Stop Target: 65 cents
Action: There is risk up to $140 which could come at the first part of the week. We recommended these puts on Tuesday just as the Spiders were testing their 50-day MA. The move back above the 100-day was disappointing but not surprising given the market momentum but we would like to see a close below $135 this week if resistance does hold.
Apollo Group (APOL, $27.68, down $0.71)
August 27 puts (APOL120818P00027000, $1.15, up $0.10)
Entry Price: $0.90 (5/10/12)
Exit Target: $1.80 (close HALF of the trade at $1.80)
Return: 28%
Stop Target: 45 cents, raise to 90 cents
Action: We would like to be out of this trade by Friday as the August options expire in 18 days. However, if we get another push towards $25 we will continue to play the downtrend because our biggest gains will come with the August puts. The September 24 puts are at 95 cents and we may add them this week to play a continued move below $20.
Other 2012 Portfolio OPEN positions (6): These are trades that are still open in the portfolio but are down over 50%. They have longer expiration dates and 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 if the options expire. Click on the 2012 Portfolio link in the Members Area to view ALL open/ closed trades.
Bank of America January 12.50 calls 2013 (from March 2012
iShares Dow Jones US Real Estate August 57 puts (from June 2012)
AOL August 24 puts (from June 2012)
Consumer Discret Select Spiders August 41 puts (from June 2012)
Freeport McMoRan Copper & Gold August 29 puts (from June 2012)
PowerShares QQQ August 59 puts (from June 2012)
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 but these are the trades we are watching as new candidates.
We will update this section in the morning.
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11:00am (EST)
NEW TRADES!!!
Concur Technologies (CNQR, $68.51, down $0.55)
Buy to OPEN September 60 puts (CNQR120922P00060000, $1.40, up $0.15)
Action: HALF POSITIONS! Use limit orders up to $1.50 which should get filled but you may have to pay $1.60-$1.65 to get filled. Do not pay more than $1.70-$1.75 to establish positions.
Constant Contact (CTCT, $17.71 down $0.29)
Buy to OPEN September 17.50 puts (CTCT120922P00017500, $1.10, flat)
Action: Use limit orders up to $1.20 but do not pay more than $1.25 to establish positions.
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9:00am (EST)
The Dow surged 188 points, or 1.5%, to finish at 13,075 on Friday. The blue-chips fell below 12,600 on Tuesday’s selloff after trading to a low of 12,514 but were able to hold support which was a sign the trading bottom would hold. By Thursday’s close the index was back above 12,800 and its 100-day MA. The Dow cleared 13,000 shortly after Wall Street’s lunch break on Friday and popped to a high of 13,117. The next wave of resistance is at 13,200 and a bullish blue-sky breakout could occur on a close above 13,350. The Dow started the week at 12,822 and was up 253 points, or 2%, for the week. Year-to-date, the blue-chips are showing a gain of 858 points, or 7%.
Here is last week’s chart of the Dow:
The S&P 500 jumped 26 points, or 1.9%, to settle at 1,385. The index traded to a low of 1,329 on Tuesday and we felt certain once 1,334 tripped 1,325 would be tested. Close but no cigar. The S&P ended at 1,331 on Wednesday but traded up to 1,343 and by Thursday had easily cleared the 1,350 level again. This set the stage for a pop to 1,375-1,400 and the top of the trading range. Friday’s high was 1,389. The S&P could make a run up to 1,425 if resistance at 1,400 is cleared and a break to new highs could get some major money off the sidelines. The S&P 500 started Monday’s open at 1,362 and was up 23 points, or 1.7%, for the week. For 2012, the index is higher by 128 points, or 10.2%.
Last week’s chart for the S&P 500:
The Nasdaq zoomed 65 points, or 2.2%, to settle at 2,958. Tech kissed a low of 2,847 on Tuesday and when Apple (AAPL, $585.16, up $10.28) missed expectations after the bell, we thought the Nasdaq would easily test 2,800 on Wednesday’s open. The low for the session was 2,839 that day and the close above 2,850 was a sign that support was going to hold. We knew the push to 2,900 on Thursday would clear the way for a possible run to 2,950-3,000 but we will have a hard time trusting this rally until 3,150 is cleared and even then we would be reluctant. The Nasdaq came into the week at 2,925 but was only able to advance 33 points, or 1.1%, following all of the late-week fireworks. For the year, the Nasdaq is up 353 points, or 13.6%.
Here is last week’s chart for Tech:
The Russell popped 19 points, or 2.2%, to close at 796 even. The small-caps traded down to a low of 765 on Tuesday’s tumble after failing to hold 780 on Monday. We said if this area were breeched, a test to 760-750 would occur but support held and the Russell was back testing 780 by Thursday’s close. Friday’s high was 797 and the finish below 800 gave the bears a little hope. The bulls will try to push 810 this week for a possible run to 825 but there is still a long way to go before the small-caps hit new highs (847.92). The Russell 2000 started Monday’s opening bell at 791 and gained just under 5 points, or 0.6%, for the week. For 2012, the index is up 56 points, or 7.4%.
Here is last week’s chart for the Russell 2000:
The S&P Volatility Index ($VIX, 16.70 down 0.83) was basically flat for the week after squeaking out a half-point gain but there was plenty of volatility. The prior week low was 15.45 and the VIX is higher than where it was despite a higher market. This usually works the other way around but a test to the low teens is still possible on a market breakout. The high on Tuesday’s market drop was 21 and we have been saying a break above 22.50 will lead to panic selling. The bears will need to clear 17.50, first, and then 20 before the talking heads get nervous again.
Last week’s chart of the VIX:
The bears were so close to a breaking out of the trading range at the beginning of the week but the volatility carried the bulls back to the top with a possible breakout on the horizon. The 3-month long trading range has been frustrating since June following the test to new lows by the end of May.
All of the rallies by the bulls in recent weeks have come on promises and hope and that is exactly what the ECB’s (European Central Bank) president, Mario Draghi, delivered on Wednesday.
Although the latest GDP numbers from Friday showed the economy is still weak and that growth is slowing, it didn’t matter. The Gross Domestic Product was expected to come in at 1.4% and there were whispers of a print below 1%. Instead, it came in at 1.5% which saved the Fed from doing anything this week.
With Germany and France (supposedly) backing Mario Draghi’s commitment to preserve the euro, Europe could announce a new stimulus plan as soon as this week. The market rally was all hype last week as it is important to remember that nothing actually got done. However, something could get done because the world’s top brass know the markets around the world will tank if they don’t.
The late-day pop on Friday were on headlines on what type of tools the ECB would consider using to help the euro zone and there are reports Draghi is meeting with U.S. Treasury Secretary, Timothy Geithner, this week. The first part of Timmy’s trip will be in Germany as he is scheduled to meet with their Finance Minister, Wolfgang Schaeuble. He will then boogie to Frankfurt to meet with Draghi.
With all the jet-setting events taking place, it does feel like some kind of stimulus package is coming but we doubt the Fed will act alone, if at all. They will meet on Tuesday and any statements they make will be released along with the FOMC Rate Decision at 2:15pm on Wednesday.
We do have to keep an open mind that the Fed could team-up with the ECB which would be music to the bulls’ ears. If some kind of joint-package were to come from this week’s meetings, then the market could set new highs in August.
The ECB will meet on Thursday and there was a report over the weekend that the head of the Eurogroup, Jean-Claude Junker, said the ECB will act soon to save the euro. He was quoted as saying “we will decide in the coming days which measures to take”.
We lean more to the technical picture when analyzing the market and the major indexes but we do follow headlines because trend changes and new chart patterns can develop very quickly. However, we try not to get too excited (or nervous) until we have a clear breakout or breakdown.
Earnings have been lousy but the talking heads are spinning the profit beat per share and not the revenue miss and lowered guidance. There have been a ton of sectors and individual stocks that have seen their market cap crippled on the misses and we still believe it will only be a matter of time before the major averages catch-up. However, that doesn’t mean the indexes can’t go higher.
So how do we see the week unfolding?
The bulls will likely push the upper-end of resistance: Dow 13,250; S&P 1,400 and Nasdaq 3,000; Russell 820 – into the early part of the week. The market will likely be flat heading into Wednesday’s Fed news. If the Fed comes out blazing guns and says something regarding quantitative easing these targets could be met. It would then leave the possible market breakout in the ECB’s hands.
If they fail to do nothing or the market doesn’t buy the latest kick of the can down the road, look for a huge sell-off and for the bears to break through the bottom of the current trading range. Yes, it will that ferocious if all of the knuckleheads who run the printing presses cried wolf again.
As we head to press, futures are showing a mixed to lower open this morning. Dow futures are down 38 points to 12,995 while the S&P 500 futures are lower by 6 points to 1,377. The Nasdaq 100 futures are up a point to 2,643.
Do not risk more than 5% of your trading account on any one trade but do try to take ALL of the trades. 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 a “Profit 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.
Dow Jones Industrial Average Spider (DIA, $130.54, up $1.96)
September 119 puts (DIA120922P00119000, $0.65, down $0.25)
Entry Price: $1.55 (7/24/12)
Exit Target: $3.10
Return: -58%
Stop Target: 75 cents
Action: There is risk up to $132-$133, $135 on a Dow breakout. We were looking for a drop below $125 when we recommending the trade last Tuesday but the ECB comments put us behind the 8-ball early.
S&P 500 Spiders (SPY, $138.68, up $2.51)
September 123 puts (SPY120922P00123000, $0.55, down $0.30)
Entry Price: $1.30 (7/24/12)
Exit Target: $2.60
Return: -58%
Stop Target: 65 cents
Action: There is risk up to $140 which could come at the first part of the week. We recommending these puts on Tuesday just as the Spiders were testing their 50-day MA. The move back above the 100-day was disappointing but not surprising given the market momentum but we would like to see a close below $135 this week if resistance does hold.
Apollo Group (APOL, $28.39, up $0.88)
August 27 puts (APOL120818P00027000, $1.00, down $0.20)
Entry Price: $0.90 (5/10/12)
Exit Target: $1.80 (close HALF of the trade at $1.80)
Return: 11%
Stop Target: 45 cents, raise to 90 cents
Action: A rising tide will lift all boats and this week has been frustrating trying to nail the action in Apollo. We just missed our exit target, twice, and we were hoping to close half of the trade by today. We are going to push this trade into next week but we may have to move out to the September put options.
Other 2012 Portfolio OPEN positions (6): These are trades that are still open in the portfolio but are down over 50%. They have longer expiration dates and 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 if the options expire. Click on the 2012 Portfolio link in the Members Area to view ALL open/ closed trades.
Bank of America January 12.50 calls 2013 (from March 2012
iShares Dow Jones US Real Estate August 57 puts (from June 2012)
AOL August 24 puts (from June 2012)
Consumer Discret Select Spiders August 41 puts (from June 2012)
Freeport McMoRan Copper & Gold August 29 puts (from June 2012)
PowerShares QQQ August 59 puts (from June 2012)
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 but these are the trades we are watching as new candidates.
Stanley Black & Decker (SWK, $68.65, up $2.62)
September 65 puts (SWK120922P00065000, $1.60, down $1.00)
August 70 calls (SWK120818C00070000, $1.00, up $0.70
Thoughts: Shares made a break above both the 50-day and 100-day MA last week which was at $66. This could lead to a run to $75 on a break above $70 but we feel shares could trade below $50 on a market pullback. The August calls could be played on a continued run higher with the September 65 puts providing insurance.
KLA-Tencor (KLAC, $50.91, up $1.25)
September 47 puts (KLAC120922P00047000, $0.95, down $0.75)
Thoughts: We had a feeling shares would break $50 on earnings last week and a run to $54 appears to be in the cards. A break above this level would be “blue-sky” territory and could lead to a run up to $60. We have been waiting to buy puts on a break below $44 but we may move our entry price up to $46 if $50 quickly fades.
UnitedHealth Group (UNH, $53.34, up $1.33)
September 57.50 calls (UNH120922C00057500, $0.60, up $0.15)
January (2013) 65 calls (UNH120119C00065000, $0.75, up $0.15)
Thoughts: Shares fell to a low of $50.89 last week and we have mentioned support at $50 should hold. UnitedHealth has already reported earnings and the January 65 could be setting up nicely for us to play a run back to $60 once $55 is cleared.
FedEx (FDX, $90.89, up $2.34)
September 80 puts (FDX120922P00080000, $0.70, down $0.30)
Action: We have been waiting for shares to fall below $85 before going short but support is holding. Friday’s pop could lead to a run to $95 which is where we will look to go short or possibly play a strangle option trade.
Lufkin Industries (LUFK, $59.33, up $1.50)
September 55 puts (LUFK120922P00055000, $1.00, down $0.30)
Thoughts: We have been waiting for Lufkin to close below $50 before possibly going short. A move above $60 could lead to a quick pop to $65.
Concur Technologies (CNQR, $69.06, up $2.24)
September 60 puts (CNQR120922P00060000, $1.30, down $0.60)
August 75 calls (CNQR120818C00075000, $0.95, up $0.60)
Thoughts: The company announces earnings on Wednesday and the 21 analysts who follow the company are expecting 21 cents a share, on average. The high is 22 cents and the low is 19 cents. With a volatile week coming up this could be a great strangle option trade. If they score a huge beat, then shares could run to $80. If Concur misses, look out below.
Visa (V, $129.14, up $2.37)
September 115 puts (V120922P00115000, $0.95, down $0.30)
Thoughts: If the market continues higher, Visa could push $140-$150 as shares are nearing a “blue-sky” breakout. We have been looking for a drop below $120 to possibly go short but the stock is holding its upper trend line.
Constant Contact (CTCT, $18.00, down $0.46)
September 17.50 puts (CTCT120922P00017500, $1.10, down $0.45)
September 15 puts (CTCT120922P00015000, $0.45, down $0.20)
Thoughts: The company missed earnings by 2 cents after the close last Thursday. Shares traded down to $16.62 before recovering some of their gains but we have a test to the low teens is coming. There is risk up to $20.
Veeco Instruments (VECO, $34.50, up $0.76)
September 30 puts (VECO120818P00030000, $1.20, down $0.25)
Thoughts: We have been cheering for a test to $35-$36 which is where we are looking to possibly go short. A move back to $31 appears to be in the cards if resistance holds.
