9:00am (EST) continued…
The Dow added 90 points, or 0.6%, to finish at 15,928. The blue-chips dipped to a low of 15,840 midday but held green after pushing a high of 15,945. The close above 15,900 was a baby step towards a possible push past 16,000 as long as 15,800 holds as support.
The S&P 500 advanced 11 points, or 0.6%, to end at 1,792. The index traded to a high of 1,793.87 but fell shy of triggering 1,800 after testing a low of 1,779. Support at 1,775 is holding.
The Nasdaq gained 14 points, or 0.4%, to close at 4,097.96. Tech came within spitting distance of clearing 4,100 after kissing 4,099.81 but fell just short after testing a low of 4,067. Support at 4,050 held and the rebound was good to see but resistance that served as prior support at 4,150 needs to be cleared before the bulls can get too giddy.
The Russell 2000 was up over 10 points, or 0.9%, to settle at 1,138. The small-caps ended at session highs and held positive territory from start to finish to end a point below its 50-day MA. A 1% pop today would get 1,150 back in play while another dip below 1,825 would be bearish.
The S&P Volatility Index ($VIX, 15.80, down 1.62) fell another 2% after our midday update and was down 9% overall. We mentioned Monday’s close back below 17.50 was slightly bullish and this level held once again on Tuesday as the VIX stayed in the red all session long. A close below 15 would be bullish while a pop back above 17.50 could be a good signal a short-term top in the market is in.
The Turkish central bank raised its overnight interest rates from 7.75% to 12% last night that should help stem the recent chaos in the emerging currency market and the country’s Lira. Futures got a nice pop on the news but did not hold up throughout the night.
As we head to press, here is how futures look: Dow (-68); S&P 500 (-6); Nasdaq 100 (-14).
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: 15-1- the Weekly Wrap is 7-1 for 2014 (92-8 since 2011) and is designed for traders that want to use options with less risk.
Ariad Pharmaceuticals (ARIA, $8.04, up $0.13)
March 10 calls (ARIA140322C00010000, $0.95, up $0.10)
Entry Price: $0.95 (1/28/2014)
Exit Target: $1.90
Return: 0%
Stop Target: 40 cents
May 11 calls (ARIA140517C00011000, $1.05, up $0.10)
Entry Price: $1.05 (1/28/2014)
Exit Target: $2.10
Return: 0%
Stop Target: 50 cents
Action: We feel as though shares will trade to the mid-to high double-digits, soon, or there will be a takeover of the company for possibly $20+ a share. We will use stops to protect our overall profits in case shares do a back test to $7 but we think $10 trips and shares never look back. However, these are not Hard Stops.
Krispy Kreme Doughnuts (KKD, $18.45, up $0.97)
March 16 puts (KKD140322P00016000, $0.55, down $0.20)
Entry Price: $0.70 (1/27/2014)
Exit Target: $1.40
Return: -21%
Stop Target: None
Action: We are expecting a near-term test to $15 for KKD and the chart shows the potential for shares to drop to $14 based on the “gap” that needs to be filled. We weren’t thrilled with the close back above $18 but we have wiggle room to $20 before the drop to $15 comes.
BlackBerry (BBRY, $10.04, up $0.29)
February 11 calls (BBRY140222C00011000, $0.35, up $0.05)
Entry Price: $0.65 (1/22/2014)
Exit Target: $1.30
Return: -31%
Stop Target: None
Action: There could be a back test to $9-$8.50 if volatility picks up but we still like the position. A close back above $10.50 would be bullish.
Exact Sciences (EXAS, $13.29, down $0.13)
April 19 calls (EXAS140419C00019000, $0.55, flat)
Entry Price: $0.88 (1/22/2014)
Exit Target: $1.75
Return: -38%
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 and why we do not have a Stop Limit listed. There could be further weakness and we may have to put the trade on hold but this will be a major event.
Other 2014 Portfolio OPEN positions (5): 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.
SLM February 27 calls (from January 2014)
General Electric March 28 calls (from January 2014)
PulteGroup February 22 calls (from January 2014)
Sony February 19 calls (from January 2014)
April 20 calls
PowerShares QQQ February 90 calls (from January 2014)
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.
Dupont (DD, $59.57, down $0.67)
February 57.50 puts (DD140222P00057500, $0.55, up $0.10)
March 62.50 calls (DD140322C00062500, $0.45, down $0.30)
Thoughts: The bulls and bears will battle over the $60 level and there are a number of ways we can play this. Both options together would make a nice strangle option trade with a chance for a nice 50%-100% return. We could also go long on a move above $60.75 and the 100-day MA but if shares stay fall below $59 there could be a test to double-nickels ($55).
Caterpillar (CAT, $92.47, up $1.18)
February 87.50 puts (CAT140222P00087500, $0.40, down $0.20)
March 85 puts (CAT140322P00085000, $0.50, down $0.20)
Thoughts: If shares reverse course and dip below $90 again, there could be a back test o $187.50-$185 over the near-term.
iShares Russell 2000 (IWM, $112.97, up $1.18)
February 107 puts (IWM140222P00107000, $0.55, down $0.30)
Thoughts: We could go short on a drop below $111.
Aruba Networks (ARUN, $20.54, down $0.31)
February 22 calls (ARUN140222C00022000, $0.65, down $0.10)
April 25 calls (ARUN140419C00025000, $0.50, down $0.10)
Thoughts: We were stopped out of the February 21’s last week for a 108% gain and we could add one or both of these options on a pop past $22.
H&R Block (HRB, $29.31, up $0.04)
February 30 calls (HRB140222C00030000, $0.55, flat)
April 31 calls (HRB140419C00031000, $0.85, flat)
Thoughts: A run past $29 would be bullish but we wouldn’t initiate new positions until shares clear $29.50-$30.
Galena Biopharma (GALE, $5.53, up $0.47)
February 6 calls (GALE140222C00006000, $0.40, up $0.10
April 9 calls (GALE140419C00009000, $0.55, up $0.10)
Thoughts: We like the company and the stock and feel a run to double-digit will come but we need to make sure $5 holds as support. We have listed the April 10 calls to buy the trade more time and to get through the volatility and we can use these options on another break above $7.
Twitter (TWTR, $60.44, up $2.53
February 90 calls (TWTR140222C00095000, $0.60, up $0.10)
February 40 puts (TWTR140222P00040000, $0.40, down $0.10)
Thoughts: Earnings are due out on February 5 and we believe shares will either be above $80 or testing $40 after the announcement is made. We will update this trade throughout the week to see if there is a possible playfor next week.
Linn Energy (LINE, $32.99, up $0.54)
March 34 calls (LINE140322C000354000, $0.55, up $0.15)
March 30 puts (LINE140322P00030000, $0.40, down $0.10)
Thoughts: Shares could be setting up for a nice strangle trade.
Fossil (FOSL, $114.46, down $0.25)
February 95 puts (FOSL140222P00095000, $0.90, flat)
Thoughts: Earnings are due out on February 11 and we are expecting a drop below $100 over the next month.