9:00am (EST)
The S&P 500 sank 7 points, or 0.5%, to settle at 1,409.46. The index came close to triggering a possible bullish breakout at 1,425 after trading to a high of 1,423.73 and we have said to wait for a close above this level before going long and strong. The close below 1,410 was a little troublesome and we have talked about this level as a bullish clue for a run to 1,425 but it was only by a half-point. The talking heads were glad 1,400 held after the low of 1,408 but the S&P is very technically driven right now which is keeping us one-step ahead of the suit-and-ties because they hate doing chart work.
Eight points was enough for the Nasdaq, or 0.3%, as it finished at 3,002. The index did slip below 3K to 2,999.57 after reaching a peak of 3,030 but held on to this level by its fingernails into the close. If there is further weakness, the bulls will need to hold 2,975-2,950.
The Red zombies’ came up with a new 10-year, $2.2 trillion, counter Cliff offer late in the day in response to the Blue zombies’ plans for a 10-year, $1.6 trillion offer from last week to avoid the Fiscal Cliff.
House Speaker John Boehner said the latest proposal was a “credible plan” that proposes to raise $800 billion in higher tax revenue but wants to keep the Bush tax cuts in place for now. The plan also calls for increasing the age requirement for Medicare and lowering the cost-of-living increases for Social Security benefits.
It’s unknown if the President went over the details of the plan after Mr. Boehner put him on the clock but the new proposal was mocked and quickly rejected. At least there is progress between the zombies as the frame work for a deal continues to get hammered out.
The bulls need to get off to a good start this morning following yesterday’s pullback and futures are pointing towards a higher start: Dow (+16); S&P 500 (+2); Nasdaq 100 (+2). Subscribers, check the Members Area for the updates.
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 trades or “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 2012 (148-54, or 73% win rate, including the Weekly Wrap which is 26-0).
Taser International (TASR, $8.12, down $0.14)
January 10 calls (TASR130119C00010000, $0.20, flat)
Entry Price: $0.15 (11/29/12)
Exit Target: $0.45
Return: 33%
Stop Target: None
March 10 calls (TASR130316C00010000, $0.40, flat)
Entry Price: $0.30 (11/29/12)
Exit Target: $0.50
Return: 33%
Stop Target: None
Action: Shares traded to a low of $7.71 but held the second wave of support at $7.50 after $8 triggered. Shares did finish above the first wave of support and a close over $8.50 would be bullish. The January option chains have 45 days before expiration so we have plenty of time for this trade to play out. We have a near-term target of $10-$11 once shares clear resistance.
Vivus (VVUS, $11.37, up $0.07)
January 15 calls (VVUS130119C00015000, $0.50, up $0.05)
Entry Price: $0.65 (11/21/12)
Exit Target: $1.30
Return: -23%
Stop Target: None
Action: Vivus traded to a high of $11.61 before finishing slightly up. The 50-day MA is at $16.41 and where we believe shares are headed over the next 6 weeks. Support is $11 with $10 serving backup.
Rosetta Stone (RST, $12.63, down $0.15)
January 15 calls (RST130119C00015000, $0.20, down $0.05)
Entry Price: $0.20 (11/19/12)
Exit Target: $1.00
Return: 0%
Stop Target: None
Action: Shares touched a low of $12.35 and we mentioned support is at $12.30, or the 50-day and 100-day MA’s. Short-term resistance is at $13.25 and then $13.50. A break back above these levels should lead to a run past the 52-week high of $14.69.
HealthCare REIT (HCN, $59.28, up $0.39)
December 60 calls (HCN121222C00060000, $0.55, up $0.05)
Entry Price: $1.00 (11/19/12)
Exit Target: $2.00
Return: -45%
Stop Target: None
Action: Shares hit a high of $59.54 and we would like to see a close back above $60 this week. A close below $58.50 will force us out of the trade.
Knight Capital Group (KCG, $3.33, down $0.04)
January 2.50 calls (KCG130119C00002500, $0.85, down $0.05)
Entry Price: $0.55 (8/21/12)
Exit Target: $1.10
Return: 55%
Stop Target: None
Action: The current buyout offer is $3.50 but we expect a final price north of $4 by mid-January.
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) – continue to hold
Solazyme December 12.50 calls (from September 2012)– continue to hold
Lufkin Industries December 45 puts (from November 2012) – half position open
LifeLock December 10 calls (from November 2012)– continue to hold
Monster Beverage January 35 puts (from November 2012)– continue to hold
Apollo Group December 18 puts (from October 2012)– 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 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.
Dunkin’ Brands Group (DNKN, $31.65, down $0.17)
January 32.5 calls (DNKN130119C00032500, $0.65, down $0.10)
March 35 calls (DNKN130316C00035000, $0.60, down $0.10)
Thoughts: We will likely buy either or both of these options once $32 triggers.
Nuance Communications (NUAN, $21.77, down $0.47)
December 22 calls (NUAN121222C00022000, $0.50, down $0.30)
January 23 calls (NUAN130119C00023000, $0.50, down $0.20)
Thoughts: There is a good chance shares trade to $25 once $22.80 and the 50-day and 100-day MA’s are cleared. Short-term support is at $21.50 followed by $20.
Intel (INTC, $19.554, down $0.03)
January 20 calls (INTC130119C00020000, $0.55, flat)
March 20 calls (INTC130316C00020000, $0.75, flat)
Thoughts: There is talk Intel is trying to persuade Apple into letting them make chips for their products. It would be a big deal for Intel which is losing market share in a dying PC business. Support has been holding at $19 but ther is risk down to $17 over the near-term if shares break below this level.
Cree (CREE, $31.87, down $0.47)
December 33 calls (CREE121222C00033000, $0.60, down $0.20)
January 34 calls (CREE130119C00034000, $0.90, down $0.15)
Thoughts: Shares are near 52-week highs and there could be a push to $40 if momentum sticks. A close back below $30 would be bearish.
TiVo (TIVO, $11.78, up $0.08)
December 10 calls (TIVO121222C00010000, $1.75, flat)
January 10 calls (TIVO130119C00010000, $1.80, flat)
Thoughts: Shares are new 52-week highs and could push $16.
MGM Resorts International (MGM, $10.17, up $0.02)
January 10 calls (MGM130119C00010000, $0.55, flat)
March 11 calls (MGM130316C00011000, $0.45, flat)
Thoughts: We are warming up to this trade as MGM is showing some strength.
PowerSharesQQQ (QQQ, $65.67, down $0.13)
December 65 calls (QQQ121222C00065000, $1.30, down $0.10)
December 63 puts (QQQ121222P00063000, $0.30, flat)
Thoughts: A move above the 50-day MA would be bullish for a possible run to $68+ while a drop below $65 and the 200-day MA would be bearish.
S&P 500 Spiders (SPY, $141.45, down $0.71)
December 142 calls (SPY121222C00142000, $1.40, down $0.20)
December 135 puts (SPY121222P00135000, $0.60, up $0.10)
Thoughts: Shares look poised to clear the 50-day MA at $142.31 which could lead to a run to $146. There is slight support at $138 but a break below this level would have us looking at put options.