9:00am (EST)
The market soared to fresh all-time highs on Tuesday as tensions eased between Russia and Ukraine for now. The gains were strong across the board as the bulls regained all of Monday’s losses and then some.
The Dow jumped 228 points, or 1.4%, to end at 16,395. The blue-chips reached a peak of 16,419 and easily cleared 16,200 and 16,350 on the rally. The next level of resistance lies at 16,500-16,600 and a move above these levels will likely get our fluff target of Dow 16,800-17,000 in play. Support is at 16,350-16,200.
The S&P 500 soared 28 points, or 1.5%, to finish at 1,873.91 The index traded to a high of 1,876.23 after opening just below the 1,850 level and will now target a run at 1,900. Support is at 1,850 if the S&P 500 can’t clear and hold 1,875.
The Nasdaq zoomed 75 points, or 1.75%, to settle at 4,352. Tech touched another intraday 14-year high of 4,357 and remains on track to trigger our December fluff target of 4,400-4,500 over the near-term. Support will try to hold at 4,300 with 4,275-4,250 serving backup.
The Russell 2000 rallied 32 points, or 2.75%, to close at 1,208. The small-caps traded up to 1,212.82 after its biggest one-day gain of the year and the close above 1,200 was bullish. There is fluff up to 1,225 as long as 1,200 holds. Support is at 1,175-1,170 if it doesn’t. We have been mentioning the December 23 “unofficial” intraday high is 1,213.49.
The S&P 500 Volatility Index ($VIX, 14.10, down 1.90) tanked 12% and fell back below 15 after kissing a low of 14. We would have liked to have seen a close below 14 and the bulls will need to get below 13.50 to keep the current rally going. The bears will try to get the action back above 15 and then past 17.50.
As we head from desk to press, futures look like this: Dow (+20); S&P 500 (+3); Nasdaq 100 (+6).
We had some nice pin action yesterday as our current call option trades performed rather well. We could be locking-in additional profits if our exit targets are hit so stay locked-and-loaded up until our midday update as we could have Trade Alerts before then.
MEMBERS AREA
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 tradesor “Exit Orders” in your brokerage account unless we list one. We will send out a “Profit Alert” or “New Trade” 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. Closed Trades for 2014: 22-8 – the Weekly Wrap is 9-2 for 2014 (94-9, or 91% win rate, since 2011) and is designed for traders that want to use options with less risk.
Opko Health (OPK, $9.46, up $0.06)
April 10 calls (OPK140419C00010000, $0.65, up $0.05)
Entry Price: $0.65 (3/4/2014)
Exit Target: $1.30
Return: 0%
Stop Target: None
Action: We are expecting a surge past $10 over the next few weeks and a close above $9.50
Ingersoll-Rand (IR, $61.23, up $1.10)
April 62.50 calls (IR140419C00062500, $1.15, up $0.25)
Entry Price: $0.90 (2/27/2014)
Exit Target: $1.80
Return: 28%
Stop Target: 90 cents
Action: We have a near-term target of $64-$65. If reached, these options will easily double from our entry price. Support will try to hold at $60 on any pullback with $59 serving as backup. The April options have 45 days before expiration.
Discovery Laboratories (DSCO, $2.70, up $0.03)
April 2 calls (DSCO140419C00002000, $0.85, up $0.05)
Entry Price: $0.65 (2/24/2014)
Exit Target: $1.00-$1.30
Return: 31%
Stop Target: 60 cents
Action: Shares continue to climb higher after the break out of the symmetrical triangle but Friday’s close felt bearish. Support is at $2.50 but we are still looking for shares to test $3.
World Wrestling Federation (WWE, $26.24, up $3.04)
March 30 calls (WWE140322C00030000, $0.55, up $0.30)
Entry Price: $0.40 (2/18/2014)
Exit Target: $0.80
Return: 38%
Stop Target: None
Action: Set limit orders to close HALF the trade at 80 cents or better today.
Shares came to life after our midday update and likely benefitted from the Disney/ Dish deal. The close above $25 was super bullish and could lead to more short-covering but we have to be careful not to give back profits as these options expire in a little over 2 weeks and they are still out-of-the-money.
Kodiak Oil & Gas (KOG, $12.44, up $0.32)
March 12 calls (KOG140322C00012000, $0.70, up $0.15)
Entry Price: $0.60 (2/13/2014)
Exit Target: $1.20
Return: 17%
Stop Target: None
June 13 calls (KOG140621C00013000, $0.90, up $0.15)
Entry Price: $0.70 (2/13/2014)
Exit Target: $1.40
Return: 29%
Stop Target: None
Action: Shares tested resistance at $12.50 and close just below this level. If cleared, a run to $13-$14 could be coming. We also believe the company is a takeover candidate and why we are also long the June calls.
Ariad Pharmaceuticals (ARIA, $8.75, up $0.17)
March 10 calls (ARIA140322C00010000, $0.30, flat)
Entry Price: $0.95 (1/28/2014)
Exit Target: $1.90
Return: -68%
Stop Target: None
May 11 calls (ARIA140517C00011000, $0.75, flat)
Entry Price: $1.05 (1/28/2014)
Exit Target: $2.10
Return: -29%
Stop Target: None
Action: We are expecting a pop to $10 over the next few weeks. Support is at $8 with $7 serving backup.
Revenues should grow during the current quarter with the re-launch of Iclusig in the U.S. The company could also have a new drug debut in the second half of 2014 and why we also suggested longer-term options on this trade as well.
The water cooler talk is that Eli Lilly has made a “friendly approach” to buy the company and is willing to pay up to $20 a share. GlaxoSmithKline is also in the hunt along with Shire.
We have said there is a HUGE gap to fill on the stock’s drop from $23 to a 52-week low of $2. Eli is trying to get the company for cheap as it currently has a $1.25 billion market-cap.
Exact Sciences (EXAS, $14.17, up $0.62)
April 19 calls (EXAS140419C00019000, $0.50, flat)
Entry Price: $0.88 (1/22/2014)
Exit Target: $1.75
Return: -43%
Stop Target: None
Action: Resistance is at $15 and a move above this level should get us back near even. Support is at $12.50.
The company should get some FDA news in March on its Cologuard drug. These are April options with 2 months until expiration and we plan to hold through the volatility because we want to be in when the March news is released. We do not have a Stop Limit listed.
Other 2014 Portfolio OPEN positions (5): 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 2013Portfolio link in the Members Area to view ALL open/ closed trades.
Sony April 20 calls (from January 2014) – continue to HOLD
General Electric March 28 calls (from January 2014) – continue to HOLD
Caterpillar March 85 puts (from January 2014) – continue to HOLD
McDonald’s March 90 puts (from February 2014) – continue to HOLD
Apollo Education Group March 29 puts (from February 2014) – continue to HOLD
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 and why we have 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.
Aruba Networks (ARUN, $21.18, up $0.75)
April 23 calls (ARUN140419C00023000, $0.65, up $0.10)
Thoughts: We believe shares could make a run past $25 and challenge its 52-week high of $26.26.
Valero Energy (VLO, $49.22, up $0.87)
April 52.50 calls (VLO140419C00052500, $1.00, up $0.15)
Thoughts: The 50-day MA is at $49.62 but there is risk to $46. We could go long if shares clear $49.75.
S&P 500 Spiders (SPY, $187.58, up $2.60)
March 188 calls (SPY140322C00188000, $1.60, up $0.90)
Thoughts: These options rebounded big time yesterday and with the huge spike at the open we didn’t want to chase.
H&R Block (HRB, $31.57, down $0.37)
April 33 calls (HRB140419C00033000, $0.85, down $0.05)
Thoughts: Shares traded up to $32.42 midweek but couldn’t hold $32 by Friday’s close. Earnings are due out this week.
Philip Morris (PM, $81.58, up $1.13)
March 82.50 calls (PM140322C00082500, $0.65, up $0.25)
April 77.50 puts (PM140419C00077500, $0.75, down $0.35)
Thoughts: We said a close above $80 could lead to $82.50. A back test to $75 could be coming afterwards and this could be setting up for a decent strangle trade.
Krispy Kreme Doughnuts (KKD, $19.12, up $0.56)
April 17 puts (KKD140419P00017000, $0.55, down $0.10)
May 17 puts (KKD140517P00017000, $0.75, down $0.10)
Thoughts: Resistance is at $20 and we have added the May 16 puts as an additional way to play KKD’s possible drop to $10 by the summer.
Verizon (VZ, $47.90, up $0.59)
March 49 calls (VZ140322C00049000, $0.35, up $0.05)
April 45 puts (VZ140419P00045000, $0.50, down $0.10)
Thoughts: Shares are on the verge of clearing the 200-day MA at $48.14. If shares clear $48.50 we could go long as they could reach $50-$52. If resistance holds, we could go short at some point so we have also listed put options. Shares have been volatile of late.
iShares Russell 2000 (IWM, $119.83, up $2.94)
March 115 puts (IWM140322P00115000, $0.55, down $0.75)
Thoughts: We could go short on a drop below $117.50.
Alexza Pharmaceuticals (ALXA, $5.55, flat)
June 6 calls (ALXA140621C00006000, $0.40, flat)
Thoughts: These options look like a bargain if shares make a run past $6.