EOT Position Update – May 9, 2012
May 9, 2012
Market Snapshot
There is certainly fear in the air.
It is so intense it’s producing a mini washout.
And, although the market has managed to mount a decent rally in each of the last few trading sessions, all of the major sectors continue to close negative.
The big question we must consider is this possible washout enough to set the market up for a new sustained rally?
I’m not sure. Fundamentally, nothing has changed.
Here are some details…
Europe is likely to remain an issue as it struggles to find a solution to cutting debt without cutting spending. And we’re likely to lack clarity on this for awhile.
More specifically, Greece is back in the spotlight.
Greece’s GDP is only about $300 billion annually. So the second bailout alone was more than half the country’s total annual economic imports and exports.
Furthermore, Greece may run out of money to service its sovereign debt before June. This will require either another bailout or the country’s default of debt.
The problem this time is that the current government may not consider another bailout.
Quite simply, this time around contagion may not just be within the EU.
Meanwhile, the US banking system has been caught in a myriad of real estate-related issues, while Europe has been dealing with sovereign debt issues.
To top it off, in both cases the choice of the respective governments has been to extend money and pretend nothing’s wrong.
It’s imperative that we continue to remain cautious during these turbulent times.
And we’ll be alert and keep our eyes peeled for opportunities to capitalize on.
Let’s move onto the updates…
Position Updates
Just a quick note: Remember, we won’t update every open position every week. I try to focus on the positions that have some significant news or price movement.
CLNE June 2012 $19 Puts
Clean Energy Fuels has not been able to rally at all! Not only has it broken our first support level, it’s broken the second support level as well. And it’s now trading down at $16.25. Since we owned puts options, this is exactly what we were looking for. Congratulations! Both conservative and aggressive traders can go ahead and take profits, locking in a 200% gain.
WMT September 2012 $57.50 Calls
Wal-Mart is our newest trade. And despite the stock market in a massive correction right now, mega cap Wal-Mart has outperformed very nicely. This is a company that has weathered good times and bad times. In this uncertain market, WMT is what we want to own. Since our recommendation ten days ago, our options are up an impressive 20%. And with an eternity to expiration, we’ll continue to hold this company for larger gains. Remember that we want this stock to move higher. Resistance is at $62.50 and $65.00, while support is at $55.00 and again at $52.50.
Category: EOT Update
