1:20 p.m. (EST)
Bank stocks will be in focus all next week and shares of Wells Fargo (WFC, $51.81, down $0.38) started off the parade early after reporting earnings ahead of this morning’s opening bell.
The company reported a profit of $1.01 a share on revenue of $21.1 billion. Wall Street was looking for $1.01 a share on revenue north of $20.8 billion.
The high estimate from the nearly 30 analysts that follow the company came in at $1.06 a share. The low estimate called for a profit of 93 cents a share.
The beat on revenue was slightly bullish but the results have weighed on the market with the Financial Select Sector Spiders (XLF, $22.62, down $0.03) trending lower.
The bears have left clues throughout the week they are waking up again with lower lows and an edgy VIX. The bulls have lost 3-straight Monday sessions and are in danger of having their 7-straight Friday win streak snapped if the Blue-chips close at current levels.
The Dow is down 20 points to 16,894 while the S&P 500 is slipping 2 points to 1,962. The Nasdaq is up 7 points to 4,403 and the Russell 2K is lower by 4 points to 1,157. The S&P Volatility Index ($VIX, 12.51, down 0.08) is wavering at support/resistance.
I will talk more about the Financial sector in upcoming issues and how they will play a role in the market moving foward. Citigroup (C, $46.90, down $46.92, up $0.02) will announce their numbers ahead of Monday’s open and I will cover the other companies and their due dates in more detail in this weekend’s Weekly Wrap and in the Daily.
I have updated the current trades and despite taking one on the chin today, the portfolio is in great shape to play the upcoming volatility. Instead of focusing on earnings, there may be a great opportunity coming to trade the indexes as volatility heats up.
I will be back on Sunday night with the Weekly Wrap and on Monday with the Daily. Until then, have a great weekend everyone!
Closed Trades for 2014: 67-35 – the Weekly Wrap is 20-4 (83%) for 2014 (105-11, 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 we 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 9am and 12pm-1pm 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.
Fastenal (FAST, $45.87, down $2.29)
August 50 calls (FAST140816C00050000, $0.15, down $0.60)
Entry Price: $0.80 (7/10/2014)
Exit Target: $1.60
Return: -81%
Stop Target: None
Action: Close the trade at current levels.
I hate ending the week on a sour note but I got this one wrong. The company matched on earnings but missed on revenues. They also announced some stores will be closing. This was an expensive bet on a strong economic recovery but from their results, things are still shaky out there.
Fortinet (FTNT, $24.20, up $0.11)
September 28 calls (FTNT140920C00028000, $0.45, flat)
Entry Price: $0.55 (6/30/2014)
Exit Target: $1.10
Return: -18%
Stop Target: None
Action: I would like to see a close above $24.25 today.
Earnings are due on July 23rd and I believe they will announce a blowout quarter. A close above $25 would be bullish for a run to fresh highs.
Rambus (RMBS, $14.00, down $0.12)
August 15 calls (RMBS140816C00015000, $0.45, flat)
Entry Price: $0.60 (6/30/2014)
Exit Target: $1.20
Return: -25%
Stop Target: None
August 16 calls (RMBS140816C00016000, $0.25, flat)
Entry Price: $0.33 (6/30/2014)
Exit Target: $0.65-$1
Return: -24%
Stop Target: None
Action: Shares of Qualcomm were downgraded by a brokerage firm which could be weighing on shares of Rambus today.
I mentioned there would be further risk if to $13.50 if $14-$13.75 is triggered so today’s close will be crucial. A move above $14.25-$14.50 keeps $15 in play.
Earnings are tentatively scheduled for next week but there is no hard date listed. They will likely be moved out as I have already scanned for the companies reporting next week.
I believe Rambus will beat estimates so I don’t mind staying long.
General Motors (GM, $37.85, up $0.10)
September 32 puts (GM140920P00032000, $0.25, flat)
Entry Price: $0.40 (6/23/2014)
Exit Target: $0.80-$1.20
Return: -38%
Stop Target: None
Action: I would like to see a close below $36 today. Resistance is at $38.
Limelight Networks (LLNW, $2.85, up $0.03)
September 3 calls (LLNW140920C00003000, $0.30, flat)
Entry Price: $0.15 (6/4/2014)
Exit Target: $0.45 (closed 1/4 at $0.35 on 7/8/14)
Return: 117%
Stop Target: None
December 3 calls (LLNW141220C00003000, $0.40, flat)
Entry Price: $0.20 (6/4/2014)
Exit Target: $0.60 (closed 1/4 at $0.45 on 7/8/14)
Return: 113%
Stop Target: None
Action: I’m cheerleading for a pop back above $3 today. These are longer-term options so there is plenty of time to wait for another takeover offer north of $6.
Other 2014 Portfolio OPEN positions (1): 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.
Apollo Group August 23 puts (from April 2014) – continue to hold – shares are below $30 and a drop under $28 would help get this trade rolling again.