EOT Position Update – February 23, 2011
February 23, 2011
Market Snapshot
In case you missed it… Civil unrest in Africa spread from Egypt and Tunisia into neighboring Libya this week.
Libya happens to be home to Africa’s largest oil reserves. As a result of the uprising, Libya’s government declared “force majeure” and shut down oil operations. The news roiled the oil markets and sent oil prices surging toward $100 per barrel.
Now investors are pondering the impact higher energy costs will have on global growth. It’s led to some weakness in stock markets around the globe.
Here’s the good news… So far this looks like healthy market action. The unrest in the Middle East and Africa is a perfect reason to take profits off the table. And that’s exactly what I think is happening… profit taking.
Don’t forget, the Fed is still inflating the market with QE2. As long as the Fed is pumping cash into the system, I think stocks and our call options are destined to move higher.
If all hell breaks loose, that’s ok too, we’ll be right there with put options to profit from the fall out!
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.
LVS June 2011 $55 Calls
LVS’ chart is forming a wedge consolidation pattern. But I’m expecting a bullish breakout to the upside soon. Clearly the unrest in Africa and the Middle East isn’t doing us any favors. But despite these short term concerns, I think LVS is heading much higher from here. Just give this one some time to work through the consolidation period. Resistance is at $52.50 and $58. Support is at $43 and $41.
RIO July 2011 $80 Calls
RIO stock is down a bit. But I’m not ready to give up on it yet. A stronger Chinese Yuan drove China’s iron ore imports to record highs in January. That’s great news for RIO who makes most of their money mining iron ore. Sit tight for now… Resistance is at $80 and $85. Support is at $65 and $60.
DO June 2011 $78.50 Calls
DO is moving up along with oil prices. We’re now up 92% on our options! With oil closing in on $100 and our option close to doubling, conservative traders may want to take some money off the table. More aggressive traders should continue holding. DO has the potential to be a huge winner… Resistance is at $80 and $85. Support is at $64 and $62.
AUY April 2011 $12 Calls
AUY is surging higher along with gold prices. Clearly the political unrest in the Middle East is driving demand for safe haven assets like precious metals. Management will report fourth quarter earnings today after the markets close. Analysts are expecting 20 cents per share. Continue holding these options… Resistance is at $14 and $17. Support is at $11 and $10.
DRQ March 2011 $85 Calls
DRQ doubled in the second half of 2010. Conservative traders locked in massive 164% gains on our options back in December. Since then, DRQ has been stuck in a period of consolidation. This Friday, management will report earnings. Analysts are expecting DRQ to earn 70 cents per share. Aggressive traders should continue holding for the earnings report.
Category: EOT Update
