The S&P 500 has gained more than 7% so far this year, and just made new highs on Wednesday. A move to 2,000 and beyond seems all but assured. #-ad_banner-#The massive bull market run makes long candidates more difficult to pick, as many stocks seem overextended and ripe for a pullback. But it’s hard to say when the correction will arrive, as the market has climbed relentlessly in the face of bad news. At this juncture, if you’re looking for outsized gains, it may be a smart move to go after lagging stocks, which arguably have less to… Read More

The S&P 500 has gained more than 7% so far this year, and just made new highs on Wednesday. A move to 2,000 and beyond seems all but assured. #-ad_banner-#The massive bull market run makes long candidates more difficult to pick, as many stocks seem overextended and ripe for a pullback. But it’s hard to say when the correction will arrive, as the market has climbed relentlessly in the face of bad news. At this juncture, if you’re looking for outsized gains, it may be a smart move to go after lagging stocks, which arguably have less to lose and more upside as the market plods higher. Sears Holdings (Nasdaq: SHLD) looks like a good candidate for this strategy. The stock has had a challenging 2014 and is down 22% this year. A channel from $32 to $44 has captured the majority of the price activity over the past 52 weeks. In recent months, the $38 midpoint of the range has held as support on a weekly basis, with a series of lower highs and higher lows signaling an impending breakout. The upside target is calculated by adding the $12 height of the trading range to the breakout… Read More

It seems like nothing is ever on sale at high-end natural grocer Whole Foods Market (Nasdaq: WFM) — but what is on sale is the company’s stock.#-ad_banner-#​ Trading near $40 at the start of 2006, WFM plunged to the single digits in 2008, as investors questioned customers’ ability to pay premium prices for groceries. Emerging from the depths of the financial crisis, WFM’s trajectory was nearly straight up until peaking at its all-time high above $65 in October. The $40 level is an important pivot point, as it represents the midpoint of… Read More

It seems like nothing is ever on sale at high-end natural grocer Whole Foods Market (Nasdaq: WFM) — but what is on sale is the company’s stock.#-ad_banner-#​ Trading near $40 at the start of 2006, WFM plunged to the single digits in 2008, as investors questioned customers’ ability to pay premium prices for groceries. Emerging from the depths of the financial crisis, WFM’s trajectory was nearly straight up until peaking at its all-time high above $65 in October. The $40 level is an important pivot point, as it represents the midpoint of the price action from the past five years. When WFM pushed above this level in 2012, it became support. An earnings miss in early May sent shares cratering almost 20% in one day. Since then, WFM has traded sideways between $37 and $43. The first target for a price recovery is a retracement to the top of the trading range and the middle of the May gap down, near $44. The $44 target is about 17% higher than recent prices, but traders who use a capital-preserving stock substitution strategy could make 70% on a move to… Read More

While the blue-chip Dow Jones Industrial Average is up 11% over the past 52 weeks, it has some serious catching up to do with the broader S&P 500 Index, which has gained 19% during that time.  Of the Dow 30 components, nearly a third are in negative territory for the year. Verizon Communications (NYSE: VZ) is off nearly 4% in the past 12 months. As a defensive telecom stock, VZ could benefit from a catch-up rally if the market continues higher… or a flight to safety if investors grow nervous. VZ has traded in… Read More

While the blue-chip Dow Jones Industrial Average is up 11% over the past 52 weeks, it has some serious catching up to do with the broader S&P 500 Index, which has gained 19% during that time.  Of the Dow 30 components, nearly a third are in negative territory for the year. Verizon Communications (NYSE: VZ) is off nearly 4% in the past 12 months. As a defensive telecom stock, VZ could benefit from a catch-up rally if the market continues higher… or a flight to safety if investors grow nervous. VZ has traded in a range between $52 and $45 for the past year, which puts midpoint support at roughly $48. The recent sideways consolidation between $48 and $50 targets $52 on an upside breakout. #-ad_banner-#The $52 target is about 6% higher than recent prices, but traders who use a capital-preserving stock substitution strategy could make almost 50% on a move to that level. One major advantage of using a long call option rather than buying a stock outright is putting up much less capital to control 100 shares — that’s the power of leverage. But with all… Read More

J.C. Penney (NYSE: JCP) bounced from an all-time low of $4.90 in early February. Shares went on to double in less than three months but have since pulled back slightly.  The extreme lows did not see new highs in volatility, representing a bullish divergence. This is a sign that a bottom has been put in place. The $8 level is a technical price pivot in the wide basing pattern since October. Midpoint support of the $10 to $5 trading channel sits at $7.50. #-ad_banner-#If you are comfortable holding on to this inexpensive stock… Read More

J.C. Penney (NYSE: JCP) bounced from an all-time low of $4.90 in early February. Shares went on to double in less than three months but have since pulled back slightly.  The extreme lows did not see new highs in volatility, representing a bullish divergence. This is a sign that a bottom has been put in place. The $8 level is a technical price pivot in the wide basing pattern since October. Midpoint support of the $10 to $5 trading channel sits at $7.50. #-ad_banner-#If you are comfortable holding on to this inexpensive stock for a potential recovery, then selling puts could allow you to collect income while you wait to get into JCP at a 13% discount. While the typical investor might use a limit order to buy a stock or ETF at a designated price or lower, the options trader can do one better by selling a cash-secured put option. This strategy has the same mathematical risk profile as a covered call. When selling puts, there is an obligation to buy the stock at the option’s strike price if it is assigned, allowing you to get into the… Read More

Starbucks (Nasdaq: SBUX) has stalled out following an 85%-plus run from its October 2012 low to the November 2013 high. For more than eight months, the stock has traded in a roughly $10 range between $80 resistance and $70 support. The first upside goal is a recovery to the channel top at $80. If shares can break above that resistance, we could see a $10 jump to $90. The $80 target is about 13% higher than recent prices, while the $90 target represents a 27% move. But traders who use a capital-preserving… Read More

Starbucks (Nasdaq: SBUX) has stalled out following an 85%-plus run from its October 2012 low to the November 2013 high. For more than eight months, the stock has traded in a roughly $10 range between $80 resistance and $70 support. The first upside goal is a recovery to the channel top at $80. If shares can break above that resistance, we could see a $10 jump to $90. The $80 target is about 13% higher than recent prices, while the $90 target represents a 27% move. But traders who use a capital-preserving stock substitution strategy could make up to 190% returns on a move to that level. One major advantage of using a long call option rather than buying a stock outright is putting up much less capital to control 100 shares — that’s the power of leverage. But with all of the potential strike and expiration combinations, choosing an option can be a daunting task. You want to buy a high-probability option that has enough time to be right, so there are two rules traders should follow: Rule 1: Choose a call option with a delta of… Read More

Commodities have dramatically outperformed the broader market so far in 2014. The iPath DJ-UBS Commodity Index Total Return ETN (NYSE: DJP) has risen roughly 10% this year, while the S&P 500 is up just over 1%. But not all commodities have kept pace. Coal prices have suffered from the fracking boom, as natural gas inventories rose and prices fell. Market Vectors Coal ETF (NYSE: KOL) is down 9% in the past year. And coal producer Walter Energy (NYSE: WLT) has fared much worse, declining roughly 60% in the past 52… Read More

Commodities have dramatically outperformed the broader market so far in 2014. The iPath DJ-UBS Commodity Index Total Return ETN (NYSE: DJP) has risen roughly 10% this year, while the S&P 500 is up just over 1%. But not all commodities have kept pace. Coal prices have suffered from the fracking boom, as natural gas inventories rose and prices fell. Market Vectors Coal ETF (NYSE: KOL) is down 9% in the past year. And coal producer Walter Energy (NYSE: WLT) has fared much worse, declining roughly 60% in the past 52 weeks. Yet, the death of coal has been greatly exaggerated, as it still accounts for the majority of electrical power generated in the United States. (My colleague Dave Goodboy recently took a look at the fuel’s near-term prospects.) And while coal as a commodity isn’t getting much love from investors at the moment, we can use an options strategy to generate an attractive level of income or buy shares of this beaten-down stock at a major discount. As you can see on the one-year chart, WLT has dropped from $20 a share to new lows near $7. Read More

After lagging behind the broader market for more than a year, SPDR S&P Metals & Mining (NYSE: XME) finally hit bottom in June and has bounced more than 30% from those lows. Cliffs Natural Resources (NYSE: CLF), a major supplier of iron ore, fell from $100 a share in 2011 to below $20. Shares hit a 52-week low of $15.41 in July, around the same time XME’s uptrend began. CLF then rallied 88% to a high just below $29 in November before selling off. Currently trading near $18.70, CLF has support… Read More

After lagging behind the broader market for more than a year, SPDR S&P Metals & Mining (NYSE: XME) finally hit bottom in June and has bounced more than 30% from those lows. Cliffs Natural Resources (NYSE: CLF), a major supplier of iron ore, fell from $100 a share in 2011 to below $20. Shares hit a 52-week low of $15.41 in July, around the same time XME’s uptrend began. CLF then rallied 88% to a high just below $29 in November before selling off. Currently trading near $18.70, CLF has support at $16. The $20 level is a long-term price pivot point and represents resistance CLF must overcome on a monthly closing basis to reverse the downtrend. #-ad_banner-#If you are comfortable holding on to this inexpensive stock for a potential recovery, then selling puts could allow you to collect income while you wait to get into CLF at a 17% discount. Cash-Secured Put Selling Strategy While the typical investor might use a limit order to buy a stock or ETF at a designated price or lower, the options trader can do one better by selling a cash-secured… Read More

RadioShack’s (NYSE: RSH) brand may be recognizable, but the same cannot be said for its stock. Shares of the once-popular electronics retailer fell from $24 in 2010 to 20-year lows below $2 currently.#-ad_banner-#​ On the one-year chart, the August low was eclipsed by the January low, but volatility did not make new highs. A bullish divergence like this is often a sign of price stability, and RSH rebounded 38% into its March high. The bounce in February and March gave way to selling pressure and new lows below $2. But again, we did not see… Read More

RadioShack’s (NYSE: RSH) brand may be recognizable, but the same cannot be said for its stock. Shares of the once-popular electronics retailer fell from $24 in 2010 to 20-year lows below $2 currently.#-ad_banner-#​ On the one-year chart, the August low was eclipsed by the January low, but volatility did not make new highs. A bullish divergence like this is often a sign of price stability, and RSH rebounded 38% into its March high. The bounce in February and March gave way to selling pressure and new lows below $2. But again, we did not see new highs in volatility. Technically, RSH has traded in a channel from $4 to $2 since mid-2012. An upside breakout targets a move to $6 once a price base has finally been made. Traders should watch the $2 level on a weekly basis for support. If you are comfortable holding on to this inexpensive stock for a potential recovery, then selling puts could allow you to collect income while you wait to get into RSH at a 12% discount. Cash-Secured Put Selling Strategy While the typical investor might use a limit order to… Read More

The price of gold has declined below the weekly pivot at $1,300 an ounce, presenting a potentially lucrative buying opportunity. The nearly $100 drop in the metal over the past two weeks is about half of the recent run-up from the double-bottom lows. Despite the recent decline, SPDR Gold Shares (NYSE: GLD) is up nearly 7% as the first quarter comes to a close. However, over the past 52 weeks, GLD is down 28%. And as you can see in the chart below, miner Barrick Gold (NYSE: ABX) has been hit even harder, off 38%.  On… Read More

The price of gold has declined below the weekly pivot at $1,300 an ounce, presenting a potentially lucrative buying opportunity. The nearly $100 drop in the metal over the past two weeks is about half of the recent run-up from the double-bottom lows. Despite the recent decline, SPDR Gold Shares (NYSE: GLD) is up nearly 7% as the first quarter comes to a close. However, over the past 52 weeks, GLD is down 28%. And as you can see in the chart below, miner Barrick Gold (NYSE: ABX) has been hit even harder, off 38%.  On July 5, ABX made an extreme low at $13.43, but this low was not accompanied by new highs in volatility. This bullish divergence suggests a long-term bottom was put in place. Sideways trading action between $22 and $14 since April has midpoint support at $18 to lean on. The $8 channel targets $30 on an upside breakout above $22 resistance.  #-ad_banner-#The $30 target is about 68% higher than recent prices, but traders who use a capital-preserving, stock substitution strategy could make nearly 200% returns on a move to that level. One major advantage of using a long call… Read More

Mosaic Co. (NYSE: MOS) fell from grace in 2013 thanks to the breakup of the Uralkali/Belaruskali potash cartel and plummeting grain prices. In fact, in a banner year for stocks, we see MOS is almost the mirror image of the broader S&P 500. #-ad_banner-#With corn prices below $5 per bushel, their lowest level since 2010, and soybean prices below $14 per bushel, it will be important for farmers to get the maximum yield from every acre, which means increased demand for the crop nutrients produced by Mosaic. Additionally, there is speculation of a potash cartel reunion, which would… Read More

Mosaic Co. (NYSE: MOS) fell from grace in 2013 thanks to the breakup of the Uralkali/Belaruskali potash cartel and plummeting grain prices. In fact, in a banner year for stocks, we see MOS is almost the mirror image of the broader S&P 500. #-ad_banner-#With corn prices below $5 per bushel, their lowest level since 2010, and soybean prices below $14 per bushel, it will be important for farmers to get the maximum yield from every acre, which means increased demand for the crop nutrients produced by Mosaic. Additionally, there is speculation of a potash cartel reunion, which would help boost potash prices. I think the risk/reward in MOS favors the bulls at these discounted levels. The stock held above its 2010 lows just below $40 on last year’s pullback. The eight-month trading range from $40 to $50 targets $60 on an upside breakout. Only a close below the $40 channel support level on a weekly basis would negate the bullish trend. The $60 target is about 24% higher than recent prices, but traders who use a capital-preserving, stock substitution strategy could more than double their money on a move to that level. One major advantage… Read More