9:00am (EST) continued…
The Dow dashed 193 points higher, or 1.2%, to end at 15,994. The blue-chips broke through the 16,000 level shortly after our midday update and traded to a high of 16,027. The next levels of resistance are at 16,200-16,350. Support will try to hold at 15,800 on any back test.
The S&P 500 soared 20 points, or 1.1%, to settle at 1,819.75. The index cleared 1,800 by a half-point on the open and reached a peak of 1,823.54. The bulls came close to clearing 1,825 and if they can, another test to 1,850 could be in the works. A fade from current levels could lead to 1,810-1,800.
The Nasdaq zoomed 43 points, or 1.05%, to finish at 4,191. Tech kissed 4,192 and the close above 4,150 and then 4,175 was bullish. The next hurdle comes at 4,200 that is now within spitting distance and then 4,250.
The Russell 2000 added 10 points, or 0.9%, to close at 1,129. The small-caps have lagged the other major indexes over the past week but traded up to 1,131 and the close above 1,125 was super bullish. The next areas of resistance lie at 1,140 and then 1,150. Side note: The small-caps did trade into negative territory by less than a point shortly after the open and was the only aforementioned index to do so.
The S&P 500 Volatility Index ($VIX, 14.51, down 0.75) sank 5% and ended back below 15 – another bullish sign. A close below 13.50 would confirm a continued rally while a pop past 15 again would be pause for concern. Tuesday’s low was 14.08.
As we head from desk to press, futures are up on news the zombies rallied last night to pass another bill to raise the debt-ceiling again: Dow (xx); S&P 500 (xx); Nasdaq 100 (xx).
With a snowstorm due in DC today, and a 3-day weekend coming up, not surprising as most of the zombies will pack it in until next week.
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 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: 18-5 – the Weekly Wrap is 8-1 for 2014 (93-8 since 2011) and is designed for traders that want to use options with less risk.
H&R Block (HRB, $30.80, up $1.08)
March 32 calls (HRB140322C00032000, $0.70, up $0.25)
Entry Price: $0.60 (2/11/2014)
Exit Target: $1.20
Return: 17%
Stop Target: None
Action: We have a near-term target of $32 with fluff up to $34-$36. Support is at $30-$29.50.
Galena Biopharma (GALE, $5.31, down $0.08)
April 6 calls (GALE140419C00006000, $0.80, down $0.05)
Entry Price: $0.75 (2/10/2014)
Exit Target: $1.50
Return: 7%
Stop Target: None
Action: We believe a near-term test to $8 could come. Support is at $5 followed by $4.
McDonald’s (MCD, $95.58, up $0.72)
March 90 puts (MCD140322P00090000, $0.32, down $0.11)
Entry Price: $0.80 (2/5/2014)
Exit Target: $1.60
Return: -60%
Stop Target: None
Action: The 200-day MA is at $96.22 and a close above this level could lead to $100. We are looking for $96.50 to serve as resistance and a drop back below $94 would be bearish. These are March options and they have over a month before they expire so we have plenty of time for the trade to play out.
Apollo Education Group (APOL, $32.07, up $0.19)
March 29 puts (APOL140322P00029000, $0.45, down $0.05)
Entry Price: $0.50 (2/4/2014)
Exit Target: $1.00
Return: -10%
Stop Target: None
Action: We are looking for resistance at $34 to hold and there is risk up to $36. We believe a drop back below $30 is coming. There is a gap to fill from $30-$27 that should get tested on further weakness.
Caterpillar (CAT, $94.96, up $0.46)
March 85 puts (CAT140322P00085000, $0.25, down $0.05)
Entry Price: $0.75 (1/28/2014)
Exit Target: $1.50
Return: -67%
Stop Target: None
Action: Resistance is at $95 and CAT could also run to $100 on continued strength. We would like to see a close back below $92 over the near-term.
Ariad Pharmaceuticals (ARIA, $8.16, up $0.03)
March 10 calls (ARIA140322C00010000, $0.60, down $0.05)
Entry Price: $0.95 (1/28/2014)
Exit Target: $1.90
Return: -37%
Stop Target: None
May 11 calls (ARIA140517C00011000, $0.95, flat)
Entry Price: $1.05 (1/28/2014)
Exit Target: $2.10
Return: -10%
Stop Target: Nobe
Action: A close above $8 should get $10 in play. Support is at $7 with $6 serving backup.
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, $12.69, up $0.32)
April 19 calls (EXAS140419C00019000, $0.45, flat)
Entry Price: $0.88 (1/22/2014)
Exit Target: $1.75
Return: -49%
Stop Target: None
Action: The company should get some FDA news in March on its Cologuard drug. These are April options with 3 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. Support is at $11.75 and we may have to put the trade on hold on a break below this level. However, this will be a major event and we will hold the trade open win, lose, or draw.
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 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.
General Electric March 28 calls (from January 2014) – continue to HOLD
Sony February 19 calls (from January 2014) – continue to HOLD
April 20 calls – 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.
Cliffs Natural Resources (CLF, $21.31 $0.71)
February 22 calls (CLF140222C00022000, $0.72, up $0.22)
February 19 puts (CLF140222P00019000, $0.31, down $0.16)
Thoughts: Earnings are due out after the close on Thursday.
Philip Morris (PM, $79.46, up $0.65)
March 75 puts (PM140322P00075000, $0.43, down $0.17)
Thoughts: We would like to see a continued run to $82-$83 and where we could get the opportunity to short this one again. However, if shares fall below $77.25-$77, we may not get that opportunity and where we could pull the trigger a little quicker.
Krispy Kreme Doughnuts (KKD, $17.93, up $0.03)
March 15 puts (KKD140322P00015000, $0.30, flat)
March 16 puts (KKD140322P00016000, $0.45, down $0.05)
Thoughts: Resistance is at $17.50-$18 and where we would like to see a back test to continue.
Alkermes (ALKS, $51.69, up $0.88)
February 55 calls (ALKS140222C00055000, $0.85, up $0.30)
Thoughts: The chart looks bullish for a continued run higher.
Trimble Navigation (TRMB, $32.62, up $0.60)
February 32.50 calls (TRMB140222C00032500, $1.40, up $0.50)
February 30 puts (TRMB140222P00030000, $0.40, down $0.10)
Thoughts: Shares made a move from $29 to $34 following the last earnings announcement in November and could zoom past $34 or fall below $29 on Tuesday afternoon’s numbers.
Sketchers U.S.A. (SKX, $30.04, up $0.69)
February 30 calls (SKX140222C00032000, $1.40, up $0.40)
February 28 puts (SKX140222P00028000, $0.55, down $0.25)
Thoughts: Shares have been volatile of late and usually make dramatic moves around earnings. A strangle (or straddle) option trade might be the best way to play Wednesday’s afternoon’s news.
Avon (AVP, $14.94, up $0.19)
February 15 calls (AVP140222P00014000, $0.95, up $0.20)
February 14 puts (AVP140222P00014000, $0.70, up $0.05)
Thoughts: The company reports earnings Thursday morning. This could be a good strangle trade at current levels.
S&P 500 Spiders (SPY, $181.98, up $1.97)
February 181 calls (SPY140222C0018100, $1.90, up $0.85)
February 175 puts (SPY140222P00175000, $0.20, down $0.20)
March 170 puts (SPY140322C00165000, $0.65, down $0.30)
Thoughts: Continue to watch.
iShares Russell 2000 (IWM, $112.03, up $0.99)
March 105 puts (IWM140322P00100000, $0.80, down $0.25)
Thoughts: We could go short on a drop below $110.