12:20pm (EST)
The dog days of summer have finally arrived and I talked about the possibility of a mini trading range developing following last week’s wild swings.
The bears have been unable to put the final nail in the bulls coffin while at the same time, resistance has held all month long with lower lows. With support holding and the rebound off Thursday’s lows, the possibility for an end of summer rally is also in play.
I mentioned with earnings winding down, economic news and geopolitical events will likely sway market direction. Overseas economic news from Germany will be in focus on Thursday and the convoy of Russian white trucks could be an omen of things to come – good or bad.
Heading into the second half of trading, the Dow is up 85 points to 16,645 while the S&P 500 is higher by 11 points to 1,945. The Nasdaq is gaining 34 points to 4,423 and the Russell 2000 is advancing 8 points to 1,141.
I have a lot to cover with the current trades as several of them are in play today that need attention. I also have a New Trade for the Weekly Wrap along with additional updates on some of the positions in that portfolio as well coming out within the next hour.
Although Wall Street is bored, I’ve been grinding it out. The hard work is paying off as I was able to close 2 more triple-digit winners yesterday and have managed to avoid the pitfalls of the summer doldrums.
Stay close to your email inbox for the remainder of the day as there could be additional alerts.
Closed Trades for 2014: 81-39 – the Weekly Wrap is 22-4 (85%) for 2014 (107-11, or 91% win rate, since 2011) and is designed for traders that want to use options with less risk. All trades are dated and time stamped so new subscribers can look at the past history to see how the trades have played out.
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 I list one. I will send out a “Profit Alert” or “New Trade” if I want you to close a position or if a new trade comes out. Otherwise, follow instructions at all times in the 9am and 12pm-1pm updates. Also, I will usually give you a heads-up if I think I’m going to send an email outside of these time frames.
Fossil (FOSL, $97.67, down $4.58)
September 90 puts (FOSL140920P00090000, $0.95, down $0.20)
Entry Price: $1.05 (8/12/2014)
Exit Target: $1.75-$2.10 (Limit Orders)
Return: -10%
Stop Target: None
Action: Although I pegged the drop below $100 and possible test to $95-$90, the options have pulled back as they were a little inflated going into earnings. The option pits were pricing an 8% move for the stock going into the announcement and so far there has only been a 4% pullback.
I still like the position as the chart work was more important to be than Fossil’s numbers. Shares are sharply below all of the major moving averages with today’s drop with the 50-MA now serving as major resistance. I went with the September options to give the trade plenty of time to play out.
Yahoo (YHOO, $36.40, up $0.88)
September 38 calls (YHOO140920C00038000, $1.50, up $0.45)
Entry Price: $1.25 (8/11/2014)
Exit Target: $1.90-$2.50
Return: 20%
Stop Target: None
October 43 calls (YHOO1018C00043000, $0.85, up $0.10)
Entry Price: $0.80 (8/11/2014)
Exit Target: $1.90-$2.50
Return: 6%
Stop Target: None
Action: I would like to see shares clear and hold the 200-day MA at $36.40 today.
Shares have been hovering in a tight range for 3 weeks between $35.50-$36.50. I’m expecting a breakout to $40+ once $37 clears.
S&P 500 Spiders (SPY, $195.04, up $1.51)
September 180 puts (SPY140920P00180000, $0.50, down $0.20)
Entry Price: $1.25 (8/7/2014)
Exit Target: $1.90-$2.50
Return: -60%
Stop Target: None
Action: Resistance is at $194-$195. A close below $192 would help get this trade back on track but it has plenty of time to mature. I like these puts as “insurance” as I believe volatility is still in play and will be for the next few months.
World Wrestling Federation (WWE, $13.78, up $0.07)
September 15 calls (WWE140920C00015000, $0.40, up $0.05)
Entry Price: $0.50 (8/6/2014)
Exit Target: $1.00+
Return: -20%
Stop Target: None
Action: Resistance is at $13.75-$14 and a close above the latter would be bullish. Support is at $13.50 and a drop below this level will likely lead to $13.
The 2 prior WWE trades made 203% (in early March) and 133% (last week). This is a piggy-back trade that I’d like to see perform just as well.
Pool (POOL, $55.51, down $0.22)
October 50 puts (POOL141018P00050000, $0.80, flat)
Entry Price: $1.10 (7/16/2014)
Exit Target: $2.20-$3.30
Return: -27%
Stop Target: None
Action: A break below the July low of $54.16 would be bearish and could lead to $50 and fresh 52-week lows. Longer-term resistance is at $57 along with the 200-day MA.
The break-even point for the trade is at $48.90, technically, by mid-October. These options have over 2 months before they expire.
Other 2014 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 I would not open any new positions. I’m still keeping track of the trades and will record the results accordingly, when the trade closes or if the options expire. Click on the 2014 Portfolio link in the Members Area to view ALL open/ closed trades.
Fortinet September 28 calls (from June 2013) – continue to hold
CVS Caremark September 82.50 calls (From July 2014) – continue to hold