EOT Position Update – March 11, 2009
March 11, 2009
Market Snapshot
The ‘one day wonder’ rallies continue. Every week we seem to get a big rally, only to give up the gains the next day or two. Clearly, follow through is not the strong point for the market these days.
The big news this week…
It looks like Madoff is going to plead guilty at some point in the next few days. I hope they string this guy up.
United Technologies announced another round of layoffs… more than 11,000 workers will be losing their jobs.
Mergers & Acquisitions continue in the healthcare industry. Merck announced they’d be acquiring Schering-Plough for more than $41 billion. Roche also increased their bid for the remainder of Genentech… I don’t think it’ll help as Genentech management doesn’t want to part with their jobs. (Can you blame them?)
Following in a long line of dividend cuts, Wells Fargo cut theirs to $0.05. Is anyone able to keep their dividends in tact? This is getting brutal.
General Motors auditors gave the company a going concern warning. Basically, it questions if GM can continue to survive in its present state. Humm… high employment costs, huge debt, seeking government bailout, and losing money… I could have told them that!
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.
BDK May 2009 $17.50 PUTS (BDKQW)
This was a new trade for the service. After falling for 9 of the last 12 sessions, BDK actually moved higher (just our luck). Everyone should have established a position, and I imagine many of you got the option at a great price. I’m expecting the next few months to be a bit tough for the company. Resistance is $25 and again at $28. Support levels are $17 and $15.
WPI May 2009 $30 CALLS (WPIEF)
We lost a lot of ground on this trade right out of the gate. In the last seven trading days the stock has managed to put in a nice uptrend. We’re back up close to the 28 level. With the amount of M&A activity occurring in the industry, I’m expecting this stock to move still higher. Continue holding the position. Resistance levels will be at $31.50 and again at $33. Support levels are $27 and $25.
TM April 2009 $55 PUTS (TMPK)
TM finally started acting just like we expected. Industry news is still horrible, and the stock plunged to new lows (trading below $57 at one point). Earlier this week our options were showing a gain of as much at 97%. We’ve crossed both support levels and some of you have taken profits. If you’re aggressive give this trade another week or two, you might grab even bigger profits.
EMC April 2009 $11 CALLS (EMCDM)
EMC traded below $9.75 this week, before moving higher. Resistance levels will be at $13.00 and again at $14.25. Support levels will be at $9.50 and $8.50.
Parting Shots…
Profits At Citigroup?
This week the entire market was pumped up on news out of Citigroup. The major financial firm’s CEO sent an internal memo to employees. In it he noted the company was showing an operating profit in the first few months of the year.
The collective sigh of relief could be heard round the world.
I hate to throw cold water on the party, but unfortunately, Mr. Pandit highlighted operating profit… not bottom line profit.
What’s the difference?
Well, if the bank has huge write-offs from their mortgage holdings (which is the big fear) those expenses come AFTER the operating line. So Citigroup could show an operating profit for the quarter and still lose billions and billions of dollars.
Kind of scary don’t you think?
Category: EOT Update
