9:00am (EST) continued…
The Dow zoomed 292 points, or 1.9%, to settle at 16,167. The blue-chips traded to a low of 15,808 and held 15,800 before reaching a peak of 16,173 into the close. It was another record closing high for the Dow and just missed the Black Friday high of 16,174.50. This could signal a short-term double-top until Christmas (next Tuesday) before the “official” Santa rally begins afterwards (Thursday). Resistance and our fluff target is at 16,200.
The S&P 500 soared nearly 30 points or 1.7%, to close at 1,810. The index was hugging support just above 1,775 before a cliff fall to to 1,767 during the announcement. The recovery reached 1,811 and was 2 points off the November 29 intraday high of 1,813.55. Our yearend fluff target of 1,825 is now back in play.
The Nasdaq jumped 46 points or 1.2%, to finish at 4,070. Tech closed above our 4,050 target after testing a low of 3,979. We mentioned if the bulls could clear 4,050 again there could be a push to 4,200. The Naz also closed at fresh 52-week peaks but missed its intraday high hit last Monday by 11 points.
The Russell 2000 rocketed 15 points, or 1.3%, to end at 1,133. The small-caps held 1,110 after dropping to 1,112 late in the day before finishing right at session highs. We predicted the index could reach 1,150 by the end of this month but is still 14 points off its November 29 high of 1,147.
The S&P Volatility Index ($13.80, down 2.41) fell 15% and back below 15. The run to 16.75 held 17.50 and was a good clue a major rally would result. The bulls aren’t out of the woods yet as they need to get the VIX below 13.50 by the week to confirm the next uptrend.
Futures were slightly lower throughout the night and look like this as the bears try to put up a fight: Dow (-38); S&P 500 (-5); Nasdaq (-8).
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 2013: 133-75 – the Weekly Wrap is 41-4 for 2013 (85-6 since 2011) and is designed for traders that want to use options with less risk.
Herbalife (HLF, $78.00, up $2.24)
January 82.50 calls (weekly) (HLF140103C00082500, $1.40, flat)
Entry Price: $1.70 (12/17/13)
Exit Target: $3.80
Return: -18%
Stop Target: None
Action: We are expecting a run past $80 to $85 and we will stick with the trade as long as $70 holds as support.
Vera Bradley (VRA, $23.36, up $0.63)
January 22.50 puts (VRA140118P00022500, $0.70, down $0.20)
Entry Price: $1.20 (12/10/13)
Exit Target: $2.40
Return: -42%
Stop Target: None
Action: There is risk up to $24 and the 20-day MA. We are expecting a drop to $21-$20.50 by mid-January.
Ariad Pharmaceuticals (ARIA, $4.98, up $0.82)
January 7 calls (ARIA130118C00007000, $0.35, up $0.25)
Entry Price: $0.45 (12/3/13)
Exit Target: $0.90-$1.35
Return: -22%
Stop Target: None
Action: We said we would bring this trade back off HOLD once shares pushed $5 again. There is a big gap to fill from $6 to $17.
Pulte Group (PHM, $18.41, up $0.39)
January 20 calls (PHM140118C00020000, $0.20, up $0.05)
Entry Price: $0.50 (11/27/13)
Exit Target: $1.00
Return: -60%
Stop Target: None
Action: We said in our Weekly Wrap the Homebuilding stocks should do well this week as some companies are coming in with better-than-expected earnings. While there could be a near-term test to $17.50, we still feel as though shares will be north of $20 come mid-January.
Opko Health (OPK, $8.86, up $0.46)
January 11 calls (OPK140118C00011000, $0.30, up $0.10)
Entry Price: $0.65 (11/26/13)
Exit Target: $1.30
Return: -54%
Stop Target: None
Action: Support is at $8.50 but there is further risk to $7.50 on continued weakness. Short-term resistance is at $9 and a close above $10 would indicate the short selling is complete. Yesterday’s high was $8.92.
We have done our own research and we have written about Opko in our Weekly Wrap. We are expecting some good news on the company’s Phase 3 trial results for its cancer drug, Rolipitant, this month.
Galena Biopharma (GALE, $3.94, down $0.06)
January 2.50 calls (GALE140118C00002500, $1.50, flat)
Entry Price: $0.30 (11/11/13)
Exit Target: $0.90 (closed a quarter @ $1 on 11/21/13, closed a quarter @ $1.50 on 12/10/13)
Return: 358%
Stop Target: $1 on remaining half position (Stop Limit)
Action: We would like to see a close above $4.25 this week but yesterday’s action was disappointing. Support is at $3.75 on another close below $4. Resistance is at $4.25-$4.50. We have a stop limit of $1 on the other half of the trade that will likely get triggered if shares fall below $3.50.
Millennial Media (MM, $7.11, up $0.55)
December 7.50 calls (MM131221C00007500, $
Action: This is a trade from October from our last batch. These options are now showing a bid and have also come off hold as they could make us a profit. We will need $8 to trip but anything over $7.50 will require us to take action as they will be in-the-money”. We will talk more about this into Friday if we don’t close the position today.
Other 2013 Portfolio OPEN positions (2): 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.
Peabody Energy December 22 calls (from November 2013) – Expire Friday
Kodiak Oil & Gas December 13 calls (from November 2013) – Expire Friday
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.
SolarCity (SCTY, $52.78, up $0.38)
January 45 puts (SCTY140118P00045000, $1.05, down $0.10)
Thoughts: Shares could be headed for a back test to $40 but the options are expensive. We would like to see a test to resistance at double-nickels before possibly going short.
Morgan Stanley (MS, $31.62, up $1.10)
January 32 calls (MS140118C00032000, $0.80, up $0.35)
Thoughts: Resistance is at $31.50. Support is at $30.
Exact Sciences (EXAS, $12.01, up $0.22)
January 12 calls (EXAS140118C00012000, $0.50, down $0.10)
Thoughts: Resistance is at $12.25-$12.50 and a close above this level would be bullish for a run past $13 that could lead to $14-$15.Support is at $11.50 and the 50-day MA with risk down to $11 on a close back below these levels.
Twitter (TWTR, $55.51, down $0.94)
January 60 calls (TWTR140118C00060000, $2.10, down $0.75)
January 49 puts (TWTR140118P00049000, $1.35, up $0.20)
Thoughts: Watch for now.
Gold Shares (GLD, $117.61, down $1.04)
January 115 puts (GLD140118P00115000, $1.60, up $0.20)
Thoughts: We have said the yellow metal could touch $1,100 this year.We could go short on a break below $117.50 but we would love to see a back test to $122 this week.
Cliff’s Natural Resources (CLF, $24.00, up $0.10)
January 25 calls (CLF140118C00025000, $0.85, flat)
Thoughts: The close below $24 was bearish and could lead to the low $20’s.
iShares Russell 2000 (IWM, $112.88, up $1.53)
January 114 calls (IWM140118C00114000, $1.30, up $0.40)
January 107 puts (IWM140118P00107000, $0.60, down $0.45)
Thoughts: We could go short on a close below $109 or long on a pop past $112.50.
International Business Machines (IBM, $178.70, up $2.94)
January 170 puts (IBM140118P00170000, $0.85, down, $0.70)
Thoughts: We are looking for one last push to $180 before possibly going short. Support is at $175 and a close below $170 would be very bearish that could have us on board.