A rebound from Tuesday’s lows had stocks recover and rally yesterday with across the board gains, frustrating short sellers once again.

Tech turned higher, regaining losses in the NDX Nasdaq 100 index with a gain of 33 points (.8%) to close at 4095.  Higher lows set the stage for a bounce as the 4050 level has repeatedly held as support.

Netflix is up 60% from the April 28^th lows, posting new all-time highs on Tuesday.  The close at $484 yesterday, with option activity in the weekly September 480 and 485 calls looking for more upside on the new long position.

The broad market SPX jumped back above the 1990 support level to close at 1996, a .3% percent gain.  The measured move target stands at just below 2040, assuming a full “V” retracement back to the 2011 peak.

POT was in play, closing at $34.02 seeing a total of 19,000 September OTM $34.50 calls mostly bought at $.25.  The open interest was only 210 contracts, showing a strong upside opinion with Potash up 3% YTD.

The rally in stock price saw an inverse fall in volatility, as per the norm, with the VIX down nearly 5%, giving back half of the big early week gains.  After peaking above $14 for the first time since August 15^th, the VIX closed at $12.88 down $.62.

The increased volatility during the session yesterday saw more than normal option volume with 566,000 contracts trade on 72% calls.  The most active option was the September $18, trading 59,000 contracts.

Blue Chips added 55 points to 17,069, up .3%.  The YTD performance is plus 3% in the DOW, dwarfing the NDX 14% and SPX 8% gains.

McDonalds posted new 52-week lows intraday at $90.53 to close at $93, up 2.1%, leading the index on the upside.  The price movement resulted in 3.7x normal option activity trading 105,000 contracts on 65% calls.

Stocks to watch this morning include:

LULU Lemon is up 14% in pre-market trading, with better than expected earnings results and positive outlook.  LULU is at $44 with the year low at $36

JDSU is up 13%, announcing it will split into two companies.  JDSU shares had been down 15% over the last 52 weeks before the news.

RSH is bouncing pre-market as it tries to get a lifeline. Barron’s asks if the stock is “waving goodbye,” with bankruptcy reorganization likely in its online comments this morning.

Overseas markets have The Nikei in Japan up .75% to lead the day once again.  Europe is in red with the FTSE down .4%, and the DAX in Germany is barely negative.

Stock index futures prices are steady with the Emini S&P minus 5 points.  The Dow futures are 50 points lower here this morning, with an hour to go before the open of the cash stock market.

Facebook, Inc. (FB), is engaged in building products to create utility for users, developers, and advertisers. People use Facebook to stay connected with their friends and family, to discover what is going on in the world around them, and to share and express what matters to them to the people they care about.  FB is currently trading around $77.85 in a 52 week range of $42.43 – 78.17. The company’s stock has been outperforming the market this year with shares increasing 42.43% year to date.

Today we got a great signal of FB breaking the Ichimoku Cloud to the Upside, on the first 5-minute bar of the trading day. This is our ideal set-up, as the stock breaks the cloud to the upside and closes on the highs.  We would have a stop under the low of the day: $76.40. A less aggressive trader might set a stop in the Ichimoku Cloud, at around the $76.80 level. Our head trader took profits at the the targets listed below. These types of trades are short-term day trades, and appropriate stop loss and target prices are critical to successfully managing the position. Facebook soared higher today, and the stock is trading near its 52-week high towards the end of today’s session.

The Trade: Buying FB at $77.13

STOP Loss: $76.40

Target #1: 50% of Stop Loss

Target #2: 100% of Stop Loss

Target #3: 150 of Stop Loss

Target #4: 200% of Stop Loss

Unusual Option Activity:
We define unusual option activity as large block trades that represent a large percentage of daily option volume. The block trade is considered “unusual” if the option volume is above the average daily volume over the past 22 days. At KeeneOnTheMarket.com we scan and analyze order flow from all of the major options exchanges in order to identify any unusual option activity.

Analyzing unusual order flow gives traders a window into what the positions that large institutional players have. The majority of unusual option activity can be traced back to hedge funds, mutual funds, and other large institutions. Knowing where these institutions are placing their bets can be hugely advantageous for any trader. These institutions have informational and technological advantages that the average trader doesn’t have, and the amount of time and analysis that goes into every one of their trades is substantial. We offer this service through our 7 hour daily LIVE trading room http://bit.ly/135QWt8 or through Premium Twitter feed with all entries, exits, and unusual options activity tweeted all day long:http://bit.ly/11f0L9u.

Order flow can however at times be deceiving. One might logically thing that a large block buyer of calls is bullish on the underlying. This is not always the case. Remember that a large number of participants in the equity options market are hedgers. Long calls are a hedge against short stock, and long puts are a hedge against long stock. With this in mind we have developed a 7 step trading plan that helps filter out unusual option activity that will not provide actionable trade setups. It is by using this plan that we are able to identify the most significant unusual options activity trades every day.

Apple (AAPL) announced two new products at their “Special Event” on Tuesday.  As anticipated, the company unveiled an upgraded and redesigned iphone (iPhone 6 & iPhone 6 Plus), as well as a new product deemed the Apple Watch.  Apple also announced a new NFC based payment system integrated into the iPhone 6.  Naturally, the payment system is named “Apple Pay”.

Going into the 1PM Est event AAPL shares were trading at $100.41 with investors expecting a 4% move in the stock by Friday.  The first hour of the event consisted of presentations introducing the iPhone 6, iPhone 6 Plus, and Apple Pay.

Investors seemed to be happy with the iPhone 6’s and the Apple Pay service as they pushed the price of AAPL up to a high of 103.08 at 1:58PM Est.

Around 2PM, Apple began demonstrating the Apple Watch.   The feature packed watch looks classy and intuitive for consumers, but investors aren’t buying it.  As Apple began demonstrating the watch, the price of AAPL proceeded to fall.  By the end of the event, shares of AAPL were trading below $99 and ultimately closed the day at $98.

We love seeing Apple continue to push the smart phone market forward with yet another cutting edge iPhone release. The design is beautiful and with two separate models being offered Apple can continue to satisfy the general consumer market while also appeasing the advanced pro user market.  Some worry that the 5.5″ iPhone Plus will cut into iPad sales, but it is important to note that Apple’s gross margin is about 15-20% higher on iPhones than iPads.

We also love seeing Apple cut into the e-commerce payment industry which reportedly includes $12 billion in US transactions a day.  Apple Pay represents massive revenue potential and adds yet another diversified income stream to their day to day operations.

Investors are overlooking the good news from this event and putting too much weight on the Apple Watch product release.  Yes, we are also upset that we cannot get the trendy watch until “early 2015” but we won’t let that cloud our judgment on the stock.

Apple Pay and the iPhone 6 are the shining gems of this event.  Revenue growth does not appear to be slowing down anytime soon for Apple.  The phone looks like another stunning addition to the iPhone line and these phones will be selling fast.  Watch for Apple Pay to lead to huge revenues for AAPL while also taking swings at e-payment companies like eBay/Paypal (ebay) and Square.

The day has come–after 14 straight sessions without a .5% market move for the first time since 1995, stocks sold off.  Across the board losses seemed to coincide with “Sell The Fact,” a prime example being Apple as the stock unwound.  AAPL got within $.75 of the record before closing at $97.99.

After new NDX Nasdaq 100 index record highs above 4111, the tech slide finished at 4062, down 33 points.  The .8% loss led index losers with yet another technical key reversal to watch on a weekly basis, keeping an eye out for trend stall signals.

Super video cam maker GOPRO posted new highs Tuesday at $68, with the close at $64.19, up 1%.  The June IPO price was $24 to total a 125% jump for lucky investors.  In a possible stock substitution play, a trader was buying blocks of the January ITM $45 calls to total nearly 10,000 contracts.  The $20 premium position ties up less capital and has less risk than owning shares outright.

Second place in the negative index race had the broad market S&P 500 SPX minus 13 points to 1988, and a .65% drop. The downturn added more than 6.5% in the VIX to close at $13.50.

The double digit two day performance has volatility more than 30% above the year lows. Options still failed to manage a full days average volume, trading 468,000 contracts at 90% normal activity.

BOYD Gaming stock lost 3%, ending at $11.40 yesterday, though far out of the money call activity was bullish.  The December $15 calls traded 5000 contracts against open interest of 1000, looking like new buys at the ASK for about a quarter.  The 52-week high at $14.75 was made last October.

The Dow 30 held losses to less than triple digits with the close at 17,013 (-97) for a best in show .5%+ drop.

In a story devoid of politics and ALL ABOUT PRICE, United Health posted record highs closing at $88.56 up .75% on a down day.  The 17% YTD performer in UNH was one of only 6 green blue chips.   Options traded 14x average volume on 63,000 contracts with 96% calls in dividend capture plays.

Stocks to watch this morning include:

Microsoft is reported to be interested in Swedish game maker Minecraft in a $2 billion dollar acquisition. MSFT is trading at $46.90 in the pre market this morning.

Not time to make the donuts, as Krispy Kreme is down 5% at $16.50 after missing earning expectations.

EBAY is down 1% after a 3% loss as analysts opine stating that Paypal will face more competition with the Apple foray in the online payment business.

Overseas markets have The Nikei in Japan is plus .25% to lead the day once again.  Europe is mixed and steady as the FTSE in London is barely plus and the DAX in Germany is barely negative.

Stock index futures prices are steady with the Emini S&P plus 1 point.  The Dow futures are 5 points higher here this morning with an hour to go before the open of the cash stock market.

Dunkin’ Brands Group, Inc. (DNKN) is a franchisor of quick service restaurants (QSRs) serving hot and cold coffee and baked goods, as well as hard serve ice cream. The Company franchises restaurants under its Dunkin’ Donuts and Baskin-Robbins brands.  DNKN is currently trading around $46.56 in a 52 week range of $40.50 – 53.05. The company’s stock has been underperforming the market this year with shares declining 3.41% year to date. Options traders seem to think that this trend will reverse as order flow in DNKN has been decidedly bullish during today’s trading session. Today a trader bought over 5600 DNKN Dec 50 105 calls at $.95. This is an extremely bullish order and involves this trader laying out over $550,000 in total premium. The stock is trading flat towards the end of today’s session.

The Trade:
Buying the DNKN Dec 50 Calls for $1.05
Risk: $95 per 1 lot
Targets: $1.20 and up every $.15, 5 Targets

Greeks of this Trade:
Delta: Long
Gamma: Long
Theta: Short
Vega: Long

Unusual Option Activity:
We define unusual option activity as large block trades that represent a large percentage of daily option volume. The block trade is considered “unusual” if the option volume is above the average daily volume over the past 22 days. At KeeneOnTheMarket.com we scan and analyze order flow from all of the major options exchanges in order to identify any unusual option activity.

Analyzing unusual order flow gives traders a window into what the positions that large institutional players have. The majority of unusual option activity can be traced back to hedge funds, mutual funds, and other large institutions. Knowing where these institutions are placing their bets can be hugely advantageous for any trader. These institutions have informational and technological advantages that the average trader doesn’t have, and the amount of time and analysis that goes into every one of their trades is substantial. We offer this service through our 7 hour daily LIVE trading room http://bit.ly/135QWt8 or through Premium Twitter feed with all entries, exits, and unusual options activity tweeted all day long:http://bit.ly/11f0L9u.

Order flow can however at times be deceiving. One might logically thing that a large block buyer of calls is bullish on the underlying. This is not always the case. Remember that a large number of participants in the equity options market are hedgers. Long calls are a hedge against short stock, and long puts are a hedge against long stock. With this in mind we have developed a 7 step trading plan that helps filter out unusual option activity that will not provide actionable trade setups. It is by using this plan that we are able to identify the most significant unusual options activity trades every day.

Good morning from Chicago, I’m Alan Knuckman here at the CBOE with your Pre Market Pulse for Tuesday, September 9th.

Volatility reared its pretty head as the prime mover in the market as a new week began Monday. Price movement can mean opportunity in what has been a slow couple of weeks of stock melt up.

The VIX traded above $13, finishing at $12.66 up 4.75% on the day.  As a weekly reminder, the VIX has remained significantly above record lows even with the S&P price continually made new highs.

On a light day, with only 60% normal VIX volume, a SIZE paper order (meaning real money institution or hedge fund) saw a buy of 15,000 of the October $18 calls at $.74 ask.  The total on the day was 20,000 contracts with the expiration break even 48% above the closing VIX price.

Positive performance had the NDX Nasdaq 100 fight the downward pressure to close up .14% at 4095, ½ less than 10 points from the recent record last Wednesday. All eyes are on Apple today with shares closing at $98.36 for the fourth session below $100.  AAPL options traded a less than robust 778,000 contracts, still number one in equity options, with 66% call volume.

YHOO for Ali Baba, as shares jumped over 5% to new 52-week highs closing at $41.81.  At 4x normal option volume, YHOO traded a close second with 771,000 lots.  More than 22,000 of the October $45 calls traded with a Bid and Ask mix.  Yahoo is up over 16% in the last month, as the stake in the pending ALIBABA IPO comes into focus.

Pharma Mylan had nearly 8x normal option activity, closing at $47.96, up 2%.  MYL had bull spread action in the January $49/$57.50 calls around $2.50.  The March 4^th price peak sits at $57.52, a level necessary to achieve max profit at expiry.

The Broad market S&P 500 SPX closed down .33% at 2001 ½, with a healthy range from 2007, only 4 points from the record peak, and the low at 1995.  In the SPY S&P 500 SPDR, a 49,000 lot of the Nov $195 puts were sold at $2.69.  With open interest of 87,000 contracts, the motivation is to be determined. This article offers free shipping on qualified products, or buy online and pick up in store today at Medical Department.

Blue Chips dropped 26 points to 17,111, making a .15% loss.  The YTD score is up 3.14% for the dogged DOW, with a third of the components still red in 2014.

Former Dow component Bank of America jumped 2% to $16.35, trading 1.3 times normal option activity on an impressive 79% calls as the number 3 equity option of the day. BAC out of the money January $17 calls were in play early and often starting with a 20,000 lot buy at the Ask for $.57.

Stocks to watch this morning include:

Annie’s Organics is being bought by General Mills for $46 a share, with BNNY the good macaroni and cheese up 37% in the pre market.

Twitter added a buy button to all tweets, and it has worked, with the stock up .5% to $52.30 before the bell.

Burlington Stores, that old coat place, (not just old coats but that what they used to be known for was coats) is up 5% in the pre market on good earnings results and raising outlook.

Overseas markets have The Nikei in Japan up .25% to lead the day.  Europe in going nowhere after action yesterday as the FTSE in London and the DAX in Germany are steady to unchanged.

Stock index futures prices are steady with the Emini S&P plus 1 point.  The Dow futures are 10 points higher here this morning, with an hour to go before the open of the cash stock market.

Crude oil opened down 1.7% on Monday as investors were rattled by more negative news from the Ukrainian front.  Although an apparent ceasefire was reached, fighting near two flashpoint cities in East Ukraine broke out less than 48 hours after the agreement.   The fighting has forced Western nations to threaten additional sanctions against Moscow.   Investors will continue to keep a close eye on the conflict as Russia is the second largest oil producer in the world.

Oil has dropped over 13% from its yearly high reached in late June of this year.  Disappointing Chinese and European data  stopped the recovery attempt Oil investors made last week and lower prices appear to be coming.  Poor Chinese factory output numbers showed that China, the number two consumer of oil in the world, may be entering a cyclical decline thus lightening demand.

Oil tends to follow a pattern of peaking in the middle of summer followed by a weak 2 – 4 months before continuing up.  While this drop may be cyclical in nature, economic and political concerns continue to keep investors on their toes.

We will continue to watch for a bottom in $OIL as it tries to hold near its 52 week low at 21.30.

DISCLAIMER:

Good morning from Chicago, I’m Alan Knuckman here at the CBOE with your Pre Market Pulse for Monday, September 8th.

In another addition of THE MARKET DOESN’T CARE, the monthly employment report was well short of expectations, BUT it didn’t hurt the longs as stocks surged to end the week.  Board gains erased early losses, resulting in another plus day for the markets.

Technology led gainers with the NDX Nasdaq 100 up .6%,  closing on session highs up 24 points at 4089.  The weekly score for the shortened 4 days was -.4% to total 14% YTD, with a new highs Wednesday at 4104.

A 13,500 lot option block in Oracle collected $500,000 premium in what looks to be a covered call on long stock, with the stock closing at $41.42.   ORCL traded 2x normal option activity with the sale of the Oct $43 calls at $.42.  ORCL’s 52-week high is $43.19.

Coupon Groupon has stabilized, trading between $6 and $7 for the past four months, closing at $6.82 on Friday.  The stock is down 40% this year, with option action in the Jan 2016 puts sold-to-open as a way to get into the stock lower.  3000 of the GRPN $ 3 puts sold at $.15 cents either has at $2.85 buy basis 58% below or get paid $45,000.

The Broad market S&P 500 SPX rebounded from 1990 support lows to close up .5% at just under 2008, plus a nice 10 points.  That put the index in the green for a fifth consecutive week, up about .25%, keeping the streak intact.

The XLU Utilities sector ETF closed at $43.62, continuing its rally run.  The Sep $42.50 put was in play with 30,000 contracts traded, versus open interest of 10,000. An August 6^th swing low at $40 has seen a 7% jump in a month.  The June 52-week high at $44.32 is less than $.75 away.

Walgreen is up 15% from its June 52 week high at $63.95, adding 2.4% Friday.  Options saw  3.4x normal volume as the 9th most active stock, trading 146,000 contracts at 68% calls.  The October $70 calls trade over 7000 contracts,  many of them trading at the ASK.

Volatility fell Friday as the VIX lost more than 4%, down to $12.09.  The drop last week was a non eventful $.11, with the high Tuesday at $13.41 serving as near term resistance. The volume was low at 370,000 VIX contracts, about 70% of the normal action.  A 20,000 lot Nov $17/$27 call spread for about $1 led paper activity.

22 of the Dow 30 were green on a 68 point bump Friday for a .4% pop to 17,137.  Blue Chips led gainers last week up .23% with higher highs Thursday to push upward momentum.

Stocks to watch this morning include:

A weekend article in Barron’s has Boeing bouncing .5% this morning on a call shares could rise 20%.  BA is the Dow loss leader, down more than 8% in 2014

No soup for you has Cambell’s down nearly 2% in the pre-market after disappointing outlook

One day before the colossal epic giant big Apple event, shares are up .03%, below $100 at $99.35, with the record peak 4.5% above heading into the unveiling of the iPhone 6.

Overseas markets have Europe in focus with the FTSE in London down 1% and the DAX in Germany down .15% .  The Nikei in Japan is up .25% to start the new week.

Stock index futures prices are lower with the Emini S&P down 2 points.  The Dow futures stand -25 here this morning with an hour to go before the open of the cash stock market.

 

Stay tuned for more market updates from Alan Knuckman. See you here Tuesday for your Pre-Market Pulse…

 

DISCLAIMER:

“KeeneontheMarket.com” (“KOTM”) is not an investment advisor and is not registered with the U.S. Securities and Exchange Commission or the Financial Industry Regulatory Authority. Further, owners, employees, agents or representatives of KOTM are not acting as investment advisors and might not be registered with the U.S. Securities and Exchange Commission or the Financial Industry Regulatory. IMPORTANT NOTICE! No representation is being made that the use of this strategy or any system or trading methodology will generate profits. Past performance is not necessarily indicative of future results. There is substantial risk of loss associated with trading securities and options on equities. Only risk capital should be used to trade. Trading securities is not suitable for everyone. Disclaimer: Futures, Options, and Currency trading all have large potential rewards, but they also have large potential risk. You must be aware of the risks and be willing to accept them in order to invest in these markets. Don’t trade with money you can’t afford to lose. This website is neither a solicitation nor an offer to Buy/Sell futures, options, or currencies. No representation is being made that any individual, group, or entity will or is likely to achieve profits or losses similar to those discussed on this web site. The past performance of any trading system or methodology is not necessarily indicative of future results.

eBay Inc., is a global technology company. The Company enables commerce through three reportable segments: Marketplaces, Payments, and GSI. The Company by providing online platforms, tools and services to help individuals and small, medium and merchants around the globe engage in online and mobile commerce and payments, the Company can facilitate transactions.  EBAY is currently trading around $53.99 in a 52-week range of $48.06 – 59.70. The company’s stock has been underperforming the market this year with shares increasing -1.54% year-to-date. Today, a trader bought over 4353 EBAY Fri 9/5 53 Calls (Wkly) at $0.58. With the short duration of these contracts, the trade was most likely set up as a day trade. EBAY is trading lower in today’s session, but these calls are up over 60% as the stock trades off the lows of the day.

Unusual Option Activity:
We define unusual option activity as large block trades that represent a large percentage of daily option volume. The block trade is considered “unusual” if the option volume is above the average daily volume over the past 22 days. At KeeneOnTheMarket.com we scan and analyze order flow from all of the major options exchanges in order to identify any unusual option activity.

Analyzing unusual order flow gives traders a window into what the positions that large institutional players have. The majority of unusual option activity can be traced back to hedge funds, mutual funds, and other large institutions. Knowing where these institutions are placing their bets can be hugely advantageous for any trader. These institutions have informational and technological advantages that the average trader doesn’t have, and the amount of time and analysis that goes into every one of their trades is substantial. We offer this service through our 7 hour daily LIVE trading room http://bit.ly/1usQnKR or through the only Unique Unusual Options Activity Scanner: http://bit.ly/1sCSaws

Order flow can however at times be deceiving. One might logically thing that a large block buyer of calls is bullish on the underlying. This is not always the case. Remember that a large number of participants in the equity options market are hedgers. Long calls are a hedge against short stock, and long puts are a hedge against long stock. With this in mind we have developed a 7 step trading plan that helps filter out unusual option activity that will not provide actionable trade setups. It is by using this plan that we are able to identify the most significant unusual options activity trades every day.

The Trade:
Buying the EBAY Fri 9/5 53 Calls (Wkly) at $0.58

Risk: $58 per 1 lot

Greeks of this Trade:

Delta: Long
Gamma: Long
Theta: Short
Vega: Long