EOT Position Update – February 16, 2011
February 16, 2011
***Editor’s Note*** Watch for a new trade in the next 48 hours…
Market Snapshot
The market’s amazing bull market rally continues surging ahead!
Get this… The NASDAQ is up 123% from the March 2009 lows… And the Russell 2000 is up 142%! These are phenomenal moves!
What’s driving this market?
It’s a combination of powerful forces. The most important being the Fed’s asset purchases via QE2. But it doesn’t end there… There’s also better than expected market data and strong earnings.
Now the NASDAQ and the Russell 2000 indices are fast approaching their 2007 highs! It’s really a good news/bad news situation…
The good news is… Stocks have quickly recovered their losses from the worst recession since the Great Depression.
The bad news is… The 2007 highs are a major technical resistance level. This is one of those “brick wall” resistance levels. I expect to see heavy selling as the markets approach the 2007 highs.
As a result, market leaders like tech and small cap stocks may struggle for a bit. But in the end, I think strong economic data and improving earnings will propel the NASDAQ and Russell 2000 beyond their 2007 highs.
Of course, there is a wild card… Inflation.
Wholesale and consumer prices are beginning to accelerate higher. We’re already seeing inflation take the wind out of the sails of emerging market stocks.
If higher inflation shows up in the US faster than the Fed expects, they’ll be forced to take action. They might have to pull out of QE2 faster than expected. And they might even have to begin raising interest rates sometime this year.
Well have to wait and see just how this all plays out. But we’re prepared to profit no matter which way the market moves.
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.
RIO July 2011 $80 Calls
RIO’s stock looks ridiculously cheap. It’s trading at a forward PE under 8x and a PEG of 0.75. In other words, these shares are trading at a 25% discount to their projected growth rate. And the technicals look good too. RIO is holding above a key support zone. It should move higher in short order. Continue holding for bigger gains ahead. Resistance is at $80 and $85. Support is at $65 and $60.
MCD June 2011 $80 Calls
MCD is going through a period of consolidation. But the fundamentals are solid. And once it clears resistance at $76.50, it should move higher quickly. Sit tight for the next leg higher. Resistance is at $80 and $85. Support is at $70 and $67.50.
DO June 2011 $79.25 Calls
DO is benefiting from the resolution of the Egyptian uprising. Their three rigs in the region have been able to continue operations. As a result, DO’s stock and our call options are moving up quickly. Continue holding for bigger gains ahead. Resistance is at $80 and $85. Support is at $64 and $62.
CNH June 2011 $55 Calls
CNH is getting a boost from rival Deere’s (DE) earnings today. DE blew away earnings estimates on strong North American sales. How CNH didn’t do the same thing is a mystery to me… Nevertheless, DE’s bullish 2011 forecast is driving all of the Agricultural Machinery stocks higher. And that’s good news for our call options. Resistance is at $54 and $60. Support is at $35 and $31.50.
Category: EOT Update
