EOT Position Update – January 27, 2010
January 27, 2010
Market Snapshot
Let’s not sugar coat things… This last week, economic data and government actions have punished the stock market.
First, China announced they were tightening bank lending and the money supply.
My take is, China’s back to growing at a sustainable pace of about 10% per year. But if they don’t dial back the simulative lending policies, their economy will overheat. So dialing back lending now is a good thing.
Nevertheless, basic materials and mining stocks were down big on the news.
Then the whole fiasco about President Obama bashing the big banks sent many of the financial stocks down. I think it’s been overblown. If I’ve learned anything about President Obama, it’s that his bark is usually worse than his bite.
So the question on everyone’s mind is… What’s the next move?
Looking at the economic data, there isn’t anything really blindsiding the market. So as long as the employment trend keeps improving, the economy should keep improving. And a strong economy will lead to higher stock prices.
I think the last week has been a correction of an overheated market (triggered by government actions). Unfortunately, it’s just part of investing.
As long as an unexpected government or economic announcement doesn’t sidetrack investors, the markets should move higher from here.
Now for 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.
SWKS May 2010 $15 CALLS
SWKS is our latest trade from last week. The stock has continued to pull back with the rest of the market. But it’s now near support of the previous breakout. As soon as the market starts heading higher again, SWKS should be one of the stocks leading the way. Resistance is at $16.50 and $18. Support is at $12.25 and $11.50.
LVS Mar 2010 $19 CALLS
LVS has pulled back with the rest of the market. It’s now holding at support of the previous downtrend. I’m expecting LVS to stage a big rally once the markets start moving higher. Hold tight for now. Resistance is at $21 and $25. Support is at $15 and $13.
CSCO Apr 2010 $24 CALLS
CSCO crashed through its short term support level. It’s fallen back nearly reaching our first support level around $22.50. As long as CSCO holds this level, hold tight. We still have plenty of time with this option. The markets next leg higher will boost these options up. Resistance is at $26 and $29. Support is at $22.50 and $20.
NVDA Mar 2010 $15 CALLS (UVACC)
NVDA has pulled back to support in the area of its previous breakout. Aggressive traders may want to hold out for the market to regain its momentum. These options still have a few months to go. The next resistance is at $20. Support is at $13 and $12.
SBUX Apr 2010 $22 CALLS (SSUDV)
SBUX has also fallen back with the rest of the market. It’s now at support in the area of its previous breakout. Aggressive traders should hold tight. The next resistance is at $26. Support is at $18.50 and $17.
VIT Feb 2010 $17.50 CALLS (VITBW)
VIT has gotten punished for no other reason than it’s a Chinese company. Investors are worried about growth in China with tighter lending policies. Even though it shouldn’t impact VIT’s business! Aggressive traders should give this one a few weeks to regain its momentum… then look to exit before the options expire. The next resistance is at $22.50. Support is at $14.50 and $12.65.
MCRS Mar 2010 $30 CALLS (MFKCF)
MCRS has fallen back to support near its previous breakout. Same story here. No bad news, MCRS is just caught up in a market correction. Aggressive traders should give this one some time. We still have a few months for it to get back on track. The next resistance is at $33. Support is $25 and $22.50.
***Editors Note***
Option Symbology is set to change by February 12, 2010. That means a new method for identifying options is currently being put in place. Some of you will see it before others but February 12 is the cut off for all firms to be in compliance.
What does this mean for you? The current five character option ticker will be a thing of the past. It’s being replaced by a new option ticker format.
Here’s what it breaks down to.
The new option ticker will be expressed as: Root + Expiration + Strike + Type.
Root = the ticker symbol of the underlying stock.
Expiration = the expiration date of the option.
Strike = the strike price of the option.
Type = Call or Put.
The good news is we already give you all of the information for the new ticker in the trade alert. The bad news is the new ticker is going to be longer. And to top it off, individual brokerage firms may generate their own tickers for use only on their platform. So make sure to check with your broker.
Category: EOT Update
