9:00 a.m. (EST)
The bulls made a statement on Wednesday following the recovery of prior support levels. The rebound off of Thursday’s lows has continued as volatility relaxed, and the chances for an end-of-summer rally are improving.
The Dow gained 91 points, or 0.6%, to settle at 16,651. The blue-chips traded in the green throughout the session and easily cleared 16,600 after reaching a peak of 16,670. The next layers of resistance are at 16,800-17,000. Support has moved up to 16,500.
The S&P 500 advanced 13 points, or 0.7%, to close at 1,946. The index cleared 1,940 shortly after the open and made a run at 1,950 after pushing 1,948. A close above this level will get 1,960-1,975 back in play, while a drop back below 1,940 keeps 1,925 on tap.
The Nasdaq surged 45 points, or 1%, to end at 4,434. Tech opened above the 4,400 level at 4,407 and went out near its session high. The close above 4,425 was bullish, but I have talked about the bigger battle at 4,450. If cleared, the bulls will be within striking distance of the 52-week high north of 4,485 and could trip 4,500.
The Russell 2000 gained 9 points, or 0.8%, to finish at 1,141. The small-caps cleared 1,140 during the first half of trading and held this level into the close after kissing a high of 1,143. The bulls need to climb the hill past 1,150 and plant the flag at 1,160 before a “breakout” can be considered.
The S&P 500 Volatility Index ($VIX, 12.90, down 1.23) tanked 9% and closed below 13.50. I have been mentioning that if the bulls got back below this level the rally could be on. I would like to see a drop below 12.50 by the weekend as an early signal that next week might be bullish. The bears would obviously love to get the action back above 15 by Friday’s close.
While the Wall Street pros are away, I’ve been putting my money in play, as it has been a busy week. Despite the “worry” over low trading volume, the market has had a bullish tone this week, and I have been trying to take advantage of it.
Heading into the open, futures are shaping up like so: Dow (+21); S&P 500 (+2.5); Nasdaq 100 (+6).
Special Notice: I could have a New Trade ahead of the Mid-Market update or could combine the two for an early briefing today.
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 9 a.m. and 12 p.m. –” 1 p.m. 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, $96.55, down $5.70)
September 90 puts (FOSL140920P00090000, $0.90, down $0.25)
Entry Price: $1.05 (8/12/2014)
Exit Target: $1.75-$2.10 (Limit Orders)
Return: -14%
Stop Target: None
Action: Shares traded down to $95.25 intraday and made a fresh 52-week low on Wednesday. The options recovered off a low of $0.60, and the trade is still manageable.
Of course, I was looking for a test closer to $90 yesterday, but if shares can get below $95 by Friday’s close, the position should be positive. This was more of a technical trade instead of a straight-up earnings play, and I still like the position.
Yahoo (YHOO, $36.19, up $0.67)
September 38 calls (YHOO140920C00038000, $1.35, up $0.30)
Entry Price: $1.25 (8/11/2014)
Exit Target: $1.90-$2.50
Return: 8%
Stop Target: None
October 43 calls (YHOO1018C00043000, $0.80, up $0.05)
Entry Price: $0.80 (8/11/2014)
Exit Target: $1.90-$2.50
Return: 0%
Stop Target: None
Action: Yahoo cleared but couldn’t hold the 200-day moving average at $36.29 after reaching a peak of $36.45. Shares have been hovering in a tight range for three weeks between $35.50-$36.50. I’m expecting a breakout to $40+ once $37 clears.
S&P 500 Spiders (SPY, $194.84, up $1.31)
September 180 puts (SPY140920P00180000, $0.45, down $0.25)
Entry Price: $1.25 (8/7/2014)
Exit Target: $1.90-$2.50
Return: -64%
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, $13.83, up $0.12)
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 two 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, $55.60, down $0.13)
October 50 puts (POOL141018P00050000, $0.70, flat)
Entry Price: $1.10 (7/16/2014)
Exit Target: $2.20-$3.30
Return: -36%
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 moving average.
The break-even point for the trade is at $48.90, technically, by mid-October. These options have over two 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