Booking Double- and Triple-Digit Percentage Option Gains

It was another positive week in the stock market, with the S&P 500 ending the week 1.30% higher and the MCSI Emerging Markets Index jumping another 2.24%.

That made it four straight weeks that international stock markets had outperformed their U.S. counterparts.

Big gainers in your Bull Market Alert portfolio included Gentherm (THRM), which jumped up 3.76%, and Priceline.com Incorporated (PCLN), which rose 3.74%.

One position — WellPoint, Inc. (WLP) — bucked the trend and tumbled 7.59% and moved to a HOLD. As I note below, this is a short-term dip, and even may prove to be an excellent buying opportunity.

Both U.S. and global stock markets have had a big run since late August, and investors have certainly become very optimistic, very quickly.

According to Lipper, more than $30 billion has flowed into equity funds over the past two weeks, when you include both mutual funds and exchange-traded funds (ETFs). That is the largest two-week sum in at least 10 years. The previous high was $28 billion in early July. Flows into funds, not including ETFs, have been positive every week this year, 37 straight weeks and counting.

Rather ominously, in the past, this extreme flow into funds happened right as stocks were about to enter multi-month corrections.

That said, I remain bullish for the rest of the year, perhaps even more so, thanks to the Fed failing to cut back on its tapering program.

At the same time, my favorite medium-term technical indicators tell me that both the U.S. and global stock markets have entered overbought territory.

That means that this is a good week to take some big option profits off of the table.

1. Sell your remaining Bank of Ireland Oct 2013 $10.00 call options (IRE131019C00010000) to lock in a triple-digit percentage gain of 113.33%.
2. Sell your remaining Gentherm Dec 2013 $17.50 call options (THRM131221C00017500) and book 70.37% gains in just two weeks.

I’ll be back next week with a new Bull Market Alert stock and option recommendation.

Portfolio Update

Bank of Ireland (IRE) rose 1.58% last week. Moody’s affirmed its rating on Irish sovereign debt last week and raised its outlook from “Negative” to “Stable.” Moody’s also made quite a few positive comments on Ireland’s financial recovery, noting that Ireland had already pre-funded its full 2014 debt rollover requirements. IRE remains a BUY.

WellPoint, Inc. (WLP) lost 7.59%. Despite Bank of America’s recent upgrade, WLP fell last week on news that House Republicans passed their “Obamacare defunding” bill. Whatever success Republicans garnered last week will be extremely short-lived, however, as this bill has no chance of making it through the Democrat-controlled Senate, and would be vetoed by President Obama in the White House. This Republican-fueled dip in the stock price likely creates a remarkable buy-point for WLP investors. Trading below its 50-day moving average, WLP is technically a HOLD.

Celgene Corporation (CELG) added 0.25% last week. Celgene had a quiet week last week, despite hitting a new 52-week high and seeing volume shoot up to a lofty 7 million trades last Friday — a level Celgene has only seen a handful of times this year. Celgene also received good news last Thursday, after obtaining “orphan drug” status on its new Revlimid product. Expect Celgene to take a short pause as it grapples with the particularly robust $150 resistance level. CELG is a BUY.

Gentherm (THRM) continued its vigorous rebound last week, adding another 3.76%. Gentherm was flirting with $21 per share prior to its somewhat challenging earnings report several weeks ago that sent shares falling. However, with current momentum continuing on strength, THRM may visit the $21 level once again in the coming weeks. THRM is a BUY.

Google Inc. (GOOG) rose 1.60% last week. While most companies are in the traditional business of selling things and making money, Google is in the enviable business of giving things away for free — and still making money. Google announced last week that it was giving away Google QuickOffice, an app that is essentially ”Microsoft Office in your pocket” (and one of Microsoft’s bread-and-butter products, no less), to both Android and iOS users for the excellent price of free. Why, you may ask? Simply, for the additional millions of new users drawn to gaze upon Google’s ads, as well as add to its unfathomable coffers of priceless consumer analytics data. The “GE of tomorrow,” as the famous General Electric ad goes, really is “bringing good things to life.” GOOG is a BUY.

Priceline.com Incorporated (PCLN) added 3.74%. PCLN had a tremendous week last week, hitting a new 52-week high. Perhaps the most interesting news centers around Priceline breaking the almighty $1,000-a-share mark — a price level very few stocks ever attain. If Priceline’s second go at $1,000 is successful, it may run considerably higher from here. PCLN is a BUY.

AutoNation (AN) gained 0.51% for the week. AN turned out an unusually lackluster week last week, despite hitting a new 52-week high and receiving positive news of a Moody’s upgrade. AN is a BUY.

Krispy Kreme Doughnuts (KKD) added 1.58% for its first week in your portfolio. Krispy Kreme’s “high-margin treat” competitors, such as Starbuck’s Coffee and Dunkin Donuts, currently have the lead on Krispy Kreme when counting retail outlet stores. However, it’s precisely the company’s room for growth that makes KKD an attractive investment candidate going forward. KKD is a BUY.

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