EOT Position Update – February 11, 2009

February 11, 2009

Market Snapshot

It looks like the market is holding tight to the idea of trading below the 8,000 level.  We continue to trade in a range-bound fashion.  I think this will be the norm for some time.  As the markets oscillate between the high 7,000 and low 9,000 we’ll look to play some of these trends.

The big news this week…

Treasury Secretary Tim Geithner released his plan on saving the economy.  Long on wishful thinking and short on details, the market dropped almost 400 points on the news.  The stimulus package continues to make its way through Congress.  I hope something in that package results in new jobs.

The layoffs continue…

GM ordered another round of layoffs this week with 10,000 jobs being axed around the world.

Telecom provider Qwest (Q) beat analyst estimates for 2008.  Not saying much, as the company’s earnings we’re down some 40%+ from the prior year.

McDonalds announced a strong January with sales up 7%.  The $1 menu seems to be drawing in value shoppers.

Mastercard also announced strong earnings… and the stock moved sharply higher on the news.

Acquisitions in the healthcare industry continue to stack up.  Just a few days ago it was Pfizer buying Wyeth.  Now Glaxo is looking to buy Piramal (an Indian Pharmaceutical company).

Now for the trade 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.

  TM April 2009 $55 PUTS (TMPK)
We put out a new trade yesterday in Toyota Motors.  The stock moved slightly lower. Everyone should have had the opportunity to get a good position established. Resistance levels are $72.50 and $75.  Support levels are $62.50 and $60.

  ORCL June 2009 $19 CALLS (ORQFT)
Last week when I penned the update, Oracle was trading around $17.20.  This week it closed above $18 (Monday).  After retreating slightly it made another run for $18 today.  At least we’re moving in the right direction.  I’m still expecting technology stocks to lead the market higher over the next few weeks.  Resistance levels are $18.50 and $20.50.  Support levels are $16.50 and $15.50.

  EMC April 2009 $11 CALLS (EMCDM)
EMC hit a new high of $12.50 earlier this week.  At that point our call options had increased by almost 90%.  Everyone should have a decent profit on the trade.We’re still in the money on this option.  Resistance levels will be at $13.00 and again at $14.25.  Support levels will be at $9.50 and $8.50.

  APEI March 2009 $45 CALLS (QAZCI)
This week we got a strong move above the $41 level, even briefly pushing into $43 intraday yesterday.  Give this trade some time… we’re heading in the right direction. Resistance is $44 and $46.50.  Support is $36 and again at $32.50.

  WPI February 2009 $25 CALLS (WPIBE)
News of the Glaxo interest in Piramal continued to push the healthcare industry higher. WPI followed the trend… We’re up 155% on this trade!  These options expire next week, so exit this trade soon.

Parting Shots…

Getting out at the TOP (or bottom)

I came across an interesting piece of information this week.  One of the most popular short sellers has decided to hang up his gloves.  Talk about getting out at the top!  (At least this bottom is a top for most short sellers.)

Bill Fleckenstein announced he was closing his short fund.

Could this be a sign the bottom is here?  If short sellers find it hard to make money in a down market, maybe that means the opportunities for upside are numerous.

Bill, as he discussed his departure, indicated he was buying into technology stocks… one of which was Microsoft.

Take it for what you will, but this may be yet another sign a bottoming process is starting in the market.

Category: EOT Update