9:00am (EST)
Here is the chart work from our Weekly Wrap/ Monday morning outlook as we can officially say the 5-week trading range has been broken.
Here is the same chart as of Tuesday’s close.
The S&P 500 got blackjacked for 21 points, or 1.5%, to settle at 1,343. The index touched a low of 1,340 after crucial support at 1,350 gave way. The bears quickly forced 1,325-1,300 into the picture and from there all call option bets will be off if 13-hundred is penetrated. It was the S&P’s first 1% decline since December.
The Nasdaq was punished for 40 points, or 1.4%, and ended at 2,910. The one piece of good news is Tech held 2,900, barely, after kissing 2,900.28. After Tech opened at 2,921, it was all over but the crying. The bears will target a test to 2,850 while the bulls will aim for 2,925 today.
The Russell 2000 tanked 16 points, or 2%, to close at 787. Not good.
We knew coming into the week the bulls would need to get to Wednesday and hope Apple (AAPL, $530.26, down $2.90) would say something good today. We know the iPad3 is coming and the bells-and-whistles will be important but a surprise dividend announcement, a buyout of Adobe Systems (ADBE, $31.99, down $1.23), or a time machine would certainly wow Wall Street.
Apple’s event and Friday’s jobs numbers were the two catalysts we said could help or hurt the bulls chances of reaching our upper-end fluff targets but yesterday’s damage may be too much to overcome unless these headlines come in money. If there are any disappointments, the market could quickly succumb to their 50-day moving averages (MA’s) while bringing the 200-day MA’s into play.
Futures are up as we head to press. Dow (+59), S&P (+7), Nasdaq (+14)
MEMBERS AREA
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 “Trade Update” 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 but it is rare that we do.
Special Notice: We have a number of notes for our current trades that need your attention in the HOLD section today.
Pepsico (PEP, $62.28, down $0.51)
July 65 calls (PEP120721C00065000, $0.95, down $0.15)
Entry Price: $0.95 (3/6/12)
Exit Target: $1.50-$2.00
Return: 0%
Stop Target: 50 cents
Action: There is risk down to $60 if current levels do not hold and where we may add to the position. Of course, we are hoping support sticks as we wait for a run past $65 by July. We have traded Pepsi numerous times over the years and we often do well with the call options. We feel this is a low risk/ high reward trade which will have plenty of time to play out.
Clean Energy Fuels (CLNE, $19.26, down $0.19)
June 25 calls (CLNE120616C00025000, $0.55, flat)
Entry Price: $0.50 (3/6/12)
Exit Target: $1.00
Return: 10%
Stop Target: None
Action: Clean Energy Fuels could be a big winner in 2012 as we wait for a pop past $20 again. The 52-week high is $20.98 set last week and we there could be risk down to $17 on a pullback if $18.50 doesn’t hold. Longer-term, we have a $30 price target for the stock.
Silver Wheaton (SLW, $34.97, down $1.24)
April 42 calls (SLW120421C00042000, $0.30, down $0.15)
Entry Price: $1.00 (3/1/12)
Exit Target: $1.50-$2.00
Return: -64%
Stop Target: 50 cents
Action: We should have made this a straddle option play by playing some short-term March put options but we are convinced silver is bottoming and will be at $40 by mid-April. Of course, we could be wrong but the precious metal is due for a rebound and is a steal in the low $30’s.
Side Note: We are building a small silver portfolio on the side by buying American Eagles Silver Dollars which represent an ounce per coin and are very liquid. We play to purchase even amounts over the next 10 months and we will update you in a year to let you know how it does.
Adobe Systems (ADBE, $31.99, down $1.23)
April 35 calls (ADBE120421C00035000, $0.50, down $0.30)
Entry Price: $0.75 (2/28/12)
Exit Target: $1.50
Return: -33%
Stop Target: None
July 38 calls (ADBE120721C00038000, $0.55, down $0.25)
Entry Price: $0.70 (2/28/12)
Exit Target: $1.40
Return: -21%
Stop Target: None
Action: Let’s hope Apple mention’s Adobe’s name today.
Sony (SNE, $20.36, down $0.37)
April 22 calls (SNE120421C00022000, $0.35, down $0.10)
Entry Price: $0.90 (2/27/12)
Exit Target: $1.60
Return: -61%
Stop Target: None
Action: Yesterday’s low was $20.22 and we have cautioned here could be a test to $20. We are still expecting shares to push double-deuces by the end of the month which should get shares to $25 by mid-April.
U.S. Oil Fund (USO, $40.13, down $0.84)
April 45 calls (USO120421C00045000, $0.40, down $0.15)
Entry Price: $0.80 (2/24/12)
Exit Target: $1.60
Return: -50%
Stop Target: None
Action: We said there would be risk down to $40 and yesterday’s low was $39.97. We expect shares to make a run past $45 by mid-April and the high last week was $42.30 but we need these level to hold or we face risk down to $38.
magicJack VocalTec (CALL, $23.13, down $0.34)
June 22.50 calls (CALL120616C00022500, $3.00, down $0.25)
Entry Price: $1.10 (2/15/12)
Exit Target: $2.20 (closed quarter position at $2.10 on 3/1/12, closed quarter position at $3.40 on 3/2/12)
Return: 161%
Stop Target: $2.00 (HARD STOP on other half)
Action: The options touched a low of $2.80 but shares of magicJack held up well in a rough market. We still need to make a decision by Friday on our other half because the company reports earnings on Monday. Until then, we will stay in the trade unless our $2 HS is hit before then.
Our average closing price on the two quarters we closed is $2.75 ($3.40 + $2.10/ 2). The current price on our other half is $3.00 which gives us our total return.
ValueClick (VCLK, $20.42, down $0.46)
June 23 calls (VCLK120616C00023000, $0.50, down $0.15)
Entry Price: $0.40 (2/15/12)
Exit Target: $0.80 (closed half position at $0.70 on 2/29/12)
Return: 50%
Stop Target: 40 cents
Action: Support is at $20 and we will close the other half of the trade if this level fails to hold.
Other 2012 Portfolio OPEN positions (10): These are trades that are still open in the portfolio that have longer expiration dates or 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 the options expire. Click on the 2012 Portfolio link in the Members Area to view ALL open/ closed trades.
PowerShares QQQ Trust March 60 puts (from February 2012) HOLD – Ask 15 cents, entry 58 cents. More downside pressure could get us back near even.
Abercrombie & Fitch March 39 puts (from February 2012) HOLD – Ask 5 cents. AEO is reporting earnings today so let’s hope for some bad news by the teen retailer.
Polypore International March 60 calls (from January 2012) HOLD – Ask 10 cents. Close this trade today for 10 cents or better.
iRobot March 40 calls (from February 2012) HOLD – Ask 5 cents. Close this trade today for 5 cents or better.
Newpark Resources March 10 calls (from January 2012) HOLD – Ask 5 cents. Half closed at $1.20, entry 95 cents.
Dendreon May 22 calls (from January 2012) HOLD – Ask 10 cents. Dendreon is a takeover target at these levels.
OCZ Technology Group March 10 calls (from February 2012) HOLD – Ask 10 cents, entry 65 cents. A short-squeeze is still possible.
Acme Packet March 37.50 calls, April 40 calls (from February 2012) HOLD
Freeport McMoRan March 45 calls (from February 2012) HOLD
Solazyme April 15 calls, March 15 calls (from January and February 2012) 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.
Potash (POT, $43.28, down $1.78)
April 47.50 calls (POT120421C00047500, $0.55, down $0.40)
Thoughts: We said a test to $40 could come so let’s be patient.
First Solar (FSLR, $27.63, down $0.45)
April 25 puts (FSLR120421P00025000, $1.80, up $0.15)
September 18 puts (FSLR120922P00018000, $1.95, up $0.10)
Thoughts: The April 25 put options opened at $1.15 on Monday while the September 18 puts opened at $1.59.
Rosetta Resources (ROSE, $48.69, down $0.76)
April 55 calls (ROSE120421C00055000, $0.85, down $0.20)
Thoughts: Very volatile stock and worth watching on a break back above $50.
Market Vectors Gold Miners ETF (GDX, $52.47, down $1.15)
April 58 calls (GDX120421C00058000, $0.55, down $0.15)
Thoughts: A drop below $52 would be bearish but gold did finish higher yesterday.
American Express (AXP, $51.74, down $1.23)
April 52.50 calls (AXP120421C00052500, $1.25, down $0.55)
July 57.50 calls (AXP120721C00057500, $0.80, down $0.15)
Thoughts: We may start nibbling if shares fall to $50.
MGM Resorts (MGM, $13.08, down $0.36)
April 13 calls (MGM120421C00013000, $0.80, down $0.25)
January 20 calls 2013 (MGM130119C00020000, $0.40, down $0.15)
January 17.50 calls (MGM130119C00017500, $0.80, down $0.10)
Thoughts: The Casino stocks have suddenly become bearish to Wall Street and maybe it’s because they have missed the rally all year in these names. There is further risk down to $12 but our 2012 target is $17. A break above this level would be super bullish and could likely lead to $25. The 52-week high is $16.05.
Zynga (ZNGA, $14.06, up $0.09)
September 19 call (ZNGA120922C00019000, $0.90, down $0.65)
Thoughts: Shares traded own to $13.19 and short-term support is at $12.50 followed by $10.
Scientific Games (SGMS, $10.16, up $0.01)
July 12.50 calls (SGMS120721C00012500, $0.35, flat)
April 10 calls (SGMS120421C00012500, $0.70, flat)
Thoughts: Shares traded own to $9.92 and short-term support is at $10 followed by $9. This could be our next Weekly Wrap covered call trade.