EOT Position Update – April 6, 2011
April 6, 2011
Market Snapshot
Get ready… Earnings season is about to take our options for a ride!
Companies are starting to report first quarter earnings this week. But it’s not until next week earnings season kicks into higher gear after Alcoa (AA) reports on Monday.
Expectations are for another stellar quarter. Investors are anticipating that strong margins will drive revenue and earnings growth again this quarter.
The good news is… there’s still a good bit of skepticism. In other words, there are still plenty of investors who are bearish. They think this market is about to fall flat on its face.
The bears have been quick to point out input costs are going up. Food, energy, and for that matter just about every commodity across the board has surged higher over the last quarter.
The bears contend the rising costs will squeeze margins and shrink profitability.
I don’t buy it…
I think productivity increases and low wages will more than offset higher input costs. In fact, I think margins will expand despite rising input costs.
In the end, strong first quarter revenue and earnings growth will power the markets to a new bull market high. But until we actually get numbers the bears and bulls will continue their push and pull battle.
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.
WPRT October 2011 $30 CALLS
WPRT is our latest trade. It sure didn’t waste any time getting things going… The stock and our option are surging today. Here’s why… At the time we sent the trade alert out yesterday, Westport announced a new deal with natural gas service provider Heckmann Corporation. WPRT will be converting Heckmann’s fleet of trucks from diesel to natural gas. This is the first major oil and gas services company to commit to changing their vehicle fleet from oil to natural gas. I’m expecting this to be the first of many similar deals we’ll see struck in the days and weeks ahead. Continue holding WPRT for bigger gains. Resistance is at $30 and $35. Support is at $20 and $17.50.
HP June 2011 $70 CALLS
HP is looking strong. I love what this oil and gas contract driller is doing right now. They are the go to driller in horizontal drilling. And that’s the fastest growing area of onshore drilling in North America. What’s more, drilling activity in North America just hit its highest level since December 2008! Clearly things are looking up for HP. Congratulations to everyone locking in 95% profits! Aggressive traders should continue holding HP for the next leg higher. The next resistance is at $74. Support is at $59 and $52.
AKAM August 2011 $40 CALLS
AKAM is being held back by fear. There’s no debate about the growth of content delivery networks. The fear is competition will drive prices down and limit the profit potential in this niche market. I think these fears are overblown. And if AKAM delivers solid first quarter earnings and an upbeat forecast… the stock and our options should soar. Continue holding for the next leg higher. Resistance is at $43.50 and $47. Support is at $32 and $30.
GM June 2011 $35 CALLS
GM is gaining momentum. Car sales in China surged 10% in the first quarter. And GM is holding down their market leadership with an impressive 34% market share. So fundamentally GM is doing well. And it looks even better on the charts. I think the stock and our option are gearing up for a big push higher. Hold tight for now. Resistance is at $37 and $40. Support is at $31 and $29.
AUY April 2011 $12 CALLS
AUY is riding high on record high gold prices. If gold continues moving up, AUY has a good chance to clear resistance at $13 and scream higher next week. But we’re running out of time on our April options. Conservative traders may want to sell now to conserve capital. More aggressive traders may want to hold on for a potential rally into options expiration next Friday.
Category: EOT Update
