NEWSLETTERS & RECOMMENDATIONS - June 26, 2011

Dear Friends & Fellow Traders,

I believe we are in a Fed no fire zone. Here's hoping all is well but there will be a lot of watchful waiting going on to see if the economy can stand on its own. I personally believe there is a QE2 lag that will manifest itself with higher growth but not much over the next 6-12 months. I don't know too many Fed policies that operate without a lag.

There are two serious problems out there preventing investors from obtaining Alpha (performance measure on a risk-adjusted basis). Achieving adequate investment returns, I've mentioned countless times over the past years, will be extremely difficult over the next 10 years and probably longer.

The first serious problem is the Eurozone sovereign debt crisis. Markets rally on news Greece will get funds and then decline when rating agencies threaten to downgrade all 16 Italian banks or something like that. This crisis has been analyzed 65 ways to Sunday by everyone. All I'll say is that it is in the interest of all parties for at least the next 3-5 years for this Union to persevere. Euro land has proven that it has the tools and the flexibility to do so. After that time we have to see just what the Germans and possibly the French want to do.

I'm guessing Greece will be once again become a great tourist attraction with its own cheap currency - even I might want to spend considerable time there. The best real solution, in time, is for Greece to exist gracefully from the Eurozone.

The second problem I believe is the Great Unwind of the largest hedged trade we have seen in our lifetime. Get short the dollar and go long commodities. After listening to Gentle Ben last week traders found a new religion for now. Sell now or be forced to later on by the margin clerks. There is no new Fed policy. Even world governments piled on the speculators announcing their intention to sell 60 million barrels of oil from their strategic reserves. If this happened during a football game the refs would have thrown a flag for unnecessary roughness, AKA piling on, and marked off 15 yards.

Governments of the world cannot stand idly by and see speculators, OPEC or others push oil over $100 and expect to see their economies grow. So governments in their infinite wisdom decided to release some oil. They want to break the back of this energy inflation. Lower oil prices should be good for everyone. If these new lower prices are sustained, it'll be like a tax cut. Everyone likes a tax cut and this would be good for stocks and bonds.

Crude oil fell for the fourth straight week and is off 20% in 2 months. Even $80 oil isn't bad for the oil companies. Unfortunately, oil is getting harder and harder to find and supplies are very tight. Therefore I'm sure we will see oil prices as well as other commodities sharply higher over time.

Risk and fear hang over the markets now. At least the dollar should get a lift. Gold down over $50 last week tells us short term that the dollar will no longer be debased. Trust me gold will trade somewhere between $1600 and $2000 over the next 3-5 years or maybe even higher. No one trusts paper money any longer. India alone imported over $8 billion of gold in May alone. India imported only $22 billion all last year. China has become one of the largest importers as internal demand has greatly out stripped their own huge production.

Hedged funds the largest seeker of Alpha and are barely holding their own so far this year. These are the firms that promise "absolute returns" while most others get rewarded if they beat their peers. The market’s down 10% I'm only down 6%. I win. However you, the investor, lose.

Everyone faces the same return problem. That’s why some of the largest stock companies sell for single-digit multiples even with tons of cash on the balance sheet. There are few alternatives to buying back stock which in the long run has not worked well. One doesn't have to look very far to see that CSCO is down 80% from its high after buying back over $70 billion of their stock. Investors are screaming for more dividends. Managements, given the uncertainty of Obama government policies, are sitting on their hands. I see only takeovers as one of the greatest benefits of these fortress-like balance sheets. Acquisitions should put a floor under this market now that the BB put is in limbo.

Stock Updates
CIGX was recommended by its 1st brokerage firm ICM Capital Markets. CIGX managed to get over $5.00 but closed at $4.95 up 5-6 days in a row in a very weak market. The report mentions 4 near-term catalysts anyone of which could pop the stock nicely. We can then sell higher strike calls.

BTX held their annual meeting in NYC Thursday. I can only say Dr. West is one of the most brilliant scientists and CEOs out there in medicine today. In time I believe he may be to BTX what Steve Jobs is to Apple. There should be a replay of his hour long talk posted soon to BTX's web site. There is no doubt that BTX is by far and away the best positioned stem cell company on the planet.

Dr. West mentioned he thought that a 2nd big pharma deal could be done by year's end. If this deal is with the right company I can see BTX back closer to the highs. BTX has enough money in the bank to last the next 2-3 years. I'm guessing the company has grown so fast these last 18 months that somewhere in the next 18 months BTX will obtain brokerage coverage. I would then expect a small $25-$50 million fundraising offering to expand their shares to get more institutional ownership. There are only 48 million fully-diluted shares outstanding.

BTX also expects to have its 1st significant product on the markets within 2 years. I continue to sell BTX Sep/Dec puts with various strikes on weakness so I can own more BTX well under $4.00. I continue to like the cheap Dec 5 strike calls under $0.70. BTX was up nicely Friday on rather large volume. BTX should have closed lower given BTX's price decline since being included in the Russell 3000 last June. Instead there were buyers into the rebalance of the Index on the close Friday. I was looking to buy size on any weakness - it never happened. Sometimes we don't get what we wish for.

SIGA is still mired in political turmoil but this too will end. I continue to sell puts into Sep and trade the stock under $11.

PIP somehow got a brokerage recommendation and comment from Seeking Alpha. These popped the stock from $2.41 to $3.29. Can't help but love that move. I continue to sell 2.50 strike puts on weakness and the 5 strike calls into strength. I can see PIP nearing $5.00 with a little luck by year end.

What's a guy supposed to do to make returns today in addition to buying your small "Event-driven” ideas? That's a great question. First there's the obvious trading expiring Index options with a hedging strategy every Thursday/Friday. Join the NET Chat Room to accelerate your learning and income.

Secondly, if you want to do an enormous amount of work and have a large portfolio you can chase fast growth stocks. Growth momentum never goes out of style. You can own AAPL, CRM, CMG, GMCR, NFLX and others of this ilk. You can sell calls and puts to increase your returns. Just don't get caught in the next major decline. The current leaders are normally not the new leaders coming out of a major bear market. Trust me I've seen my share of major bear markets.

My best choice for all of you now if none of the above appeal to you, would be to start looking at aggressive option trading strategies. I already told you that I'm looking at a trading range market for the next 2-4 months, higher into year end. This means buying longer dated long options and selling in closer ones equal to your strike or higher. This should work well for you. I make quite a bit doing this recently with CIGX. I'm long Jan 2012 call with 4 and 5 strikes. So far I've sold the May 4s over $0.65. I bought them back at expiration for an average of $0.075. Next I sold the June 5s, 5.50s and 6s over $0.35 average. These expired worthless. I'm expecting news shortly so I'm selling the Jul 5s over $0.45. On further strength I will sell higher strikes into Aug/Sep like 7s and 8s. I expect to sell calls against CIGX well into the future.

I've mentioned a very successful strategy one of my students has been doing with a metal ETF in the Chat Room. He's long the 2013 calls and is selling 1-2 strike calls OTM against his longs on a weekly basis. He's making about a $1.50 per contract on 30-40 calls every week since he told me about it awhile back. That's $4,000+ a week! I'm looking at it. Shorter term, next 2-4 months, it's perfect. I’m leaving out a few details as he asked me not to tell the world and kill it for him.

There's another option strategy I love and it's perfect for today's market. I'm continuing my AAPL research. I've known about AAPL since $90; I kept hesitating. This and another 10 ideas I had as well. AAPL has $50 a share in cash. AAPL will earn $30 this year and $40 next. I believe AAPL will sell near $280-$300 on the down side and probably $450 on the high side. I'm thinking sell either the $300 or even the $320 puts out to Jan 2012 on weakness say $23-25 for the 300 strike. Use the proceeds to buy an April 2012 call 350 strike say near $25. Then let the fun begin.

There are AAPL weekly calls to sell OTM against your longs. In the current market environment I can see AAPL going nowhere for next 2 -3 months. You may even make enough money to buy more calls. I fully expect AAPL puts by Jan 2012 to go out worthless and if they don't roll to the Jan 2013 down and over. Just don't take delivery.

Trade of the Week in Review
I started the week buying the OTM 570 weekly puts under $2.00 on Tuesday something I haven't done this early in quite awhile. These same puts hit $8.00 by Wednesday morning. The 565 puts mentioned in the Chat Room as well later were trading near $2.00 and were mentioned as the better buy than the $1.10 570Ws at that moment. Obviously I should have emailed an Alert Email but I never expected the very heavy liquidation selling across the board as outlined above. The 565s hit a high of $13.00. I'm trying to do a multi-time frame trade setup video. It's as perfect as any trade setup I've ever taught in my 22 years. The only problem was it was a Tue/Wed option trade versus our perfect Thu/Fri ones with much less risk.

Again on Thursday, as usual one day has nothing to do with the next, it would be time to buy calls. I thought we'd spend the entire day trading sideways and therefore I did not send an Alert Email because of all the hedging that would be needed to pay for the OTM $2.00 calls. The Chat Room got the idea to buy calls after 10:00. However, my Intraday Chart/Alert Email subscribers saw the trade recommendation at 12:00 and again at 2:00. After the 2:00 posting the S&Ps pulled back and allowed another re-purchase of the 570 calls near $1.90. These calls hit $6.35 in less than 1 hour. Again nice work if you can get it. See attached Thursday "C" chart, NET Weekly Money Chart 2011-06-24.

There are a few market moving news events coming next week late. We have the Chicago PMI and the ISM Manufacturing numbers coming out. Both are expected to be lower. However, we are looking for a favorable EOQ mark upcoming by Thursday. Every money manager can use some help here. There is a massive Oscillator leading buy divergence on NET Daily charts. Then on Friday, the 1st day of a new quarter, we expect positive money flows to give us a positive bias for early Friday trades.

As always keep those cards and letters coming. I read every one of them.

Good trading,

Stan Moore
702.558.1814

P.S. There will be no Stan’s Blog for the next two weeks but please email me if you have questions. If I see the need for an Alert Email on our research idea(s) I will send one out.