EOT Position Update – April 13, 2011
April 13, 2011
Market Snapshot
It’s all about oil and consumer spending…
Oil prices continue to move higher. And investors fear the worst. Will high prices at the gas pump derail consumer spending and the economic recovery?
According to today’s US retail sales figures, the core retail sales (ex autos and gas) were better than expected… A clear sign higher oil prices haven’t slowed consumer spending.
In short… higher food and energy prices aren’t dampening US economic growth.
Despite the good economic news, stocks have faltered in April. And what’s even more concerning is the markets change of leadership.
Until now, cyclical sectors like consumer discretionary and technology have been the market leaders. Bullish investors have poured tons of money into these hot growth sectors.
But that’s all changed…
Ever since the markets began bouncing back from mid-March, consumer discretionary and tech have been lagging behind. And in their place, defensive sectors like consumer staples and health care have taken over as market leaders.
It’s true that energy stocks are cyclical and moving higher. But here’s the problem…
Energy stocks are moving higher for the wrong reasons. They’re moving higher along with oil prices. And oil prices are trading higher on the fear of a major supply disruption in the Middle East. That’s a big difference than moving higher on strong demand due to economic expansion.
The bottom line is the markets have lost their bullish momentum. And until cyclical stocks regain their leadership, the markets will continue to struggle.
Here’s the good news… I think earnings season will deliver the bullish sentiment needed to push cyclical stocks back to the forefront. And once that happens, stocks will take their next big leg up.
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 one volatile stock. But that’s to be expected. Remember, this is a speculative trade. This trade is riding on the passage of the Nat Gas Act. But until the bill passes or gets shot down, WPRT will ride the ups and downs of the legislative process. Bottom line… our options on WPRT have huge upside potential. Continue holding for bigger gains ahead. Resistance is at $30 and $35. Support is at $20 and $17.50.
HP June 2011 $70 Calls
HP hit a new 52-week high of $70.47 on Friday. As a result, our option hit a peak gain of 110%. Congratulations to everyone on more than doubling your money… and in just a few weeks. 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 looking good. It’s been trending steadily higher since our trade alert. I think investors are overly pessimistic about AKAM’s profit potential. But we may not get any major news until their quarterly earnings in two weeks. Continue holding. Resistance is at $43.50 and $47. Support is at $32 and $30.
GM June 2011 $35 Calls
GM is holding above support at $31. What’s more, it’s putting in a double bottom at this support zone. And to top it off… the car maker looks solid fundamentally. Remember, retail sales in the US are strong and growing demand from China should drive this stock and our options higher. Continue holding. Resistance is at $37 and $40. Support is at $31 and $29.
MCD June 2011 $80 Calls
MCD is being met by sellers when it reaches $77. Over the last few months, MCD has been turned back at this level on four different occasions. Obviously, that’s not the kind of momentum we’re looking for. Conservative traders may want to sell now to conserve capital. More aggressive traders should continue holding. I think MCD could surprise analysts with a strong quarter and make a big push higher before our options expire in June. Resistance is at $80 and $85. Support is at $70 and $67.50.
Category: EOT Update
