EOT Position Update – June 11, 2008
June 11, 2008
Market Snapshot
The Dow Jones Industrial Average just closed at 12,083. We’re down more than 300 points from the same point last week. The US Dollar is showing strength and yet oil prices continue to skyrocket.
With oil trading at over 138 a barrel, the impact of high energy prices are finally hitting hard. The national average for gas is over $4.00 a gallon, which appears to be the level at which consumers start driving conservatively.
In the commodity world, corn prices are starting to get ridiculous. Prices on the corn exchange locked limit up today moving higher by some $0.30. Now pushing above the $7.50 a bushel level corn’s trading at all time highs. The fears of reduced supply caused by flooding in the Midwest continue to push prices higher.
Anyone who uses large amounts of corn or corn derivates (like corn syrup) is cringing right now. I’m sure cattle producers who consume huge quantities to feed the herds are second guessing price levels. Eat your steak now . . . my prediction is beef costs are going to be significantly higher in just a few months.
More Yahoo news
The Yahoo/Icahn tug-o-war continues. A hastily thrown together severance plan could cost shareholders anywhere between $500 million (if you believe Yahoo) to $2.5 billion (if you believe Icahn). Clearly Yahoo management is looking to line their pockets with cash in the event of a change of control. No wonder Icahn is mad . . . if I were a shareholder I’d be a little upset too.
The Federal Reserve
Aren’t these guys supposed to be the smartest around? Today the Fed announced the economy was “generally weak” because of high food and energy costs. Yet when measuring inflation they look at “Core CPI” numbers which, strangely enough, exclude food and energy.
Explain that one to me.
Keep an eye out for the next trade alert, some stocks are setting up nicely.
One important note . . . June options expire next week.
Position Updates
AHGP October 2008 $30 Calls (AQPJF)
AHGP traded up to $30 on the day of our recommendation. Yet the stock gave up a few points over the last 5 trading days to close at 28.39. Coal prices are still going the right direction . . . give this trade some time. Resistance is 32.25 and 35. Support levels are 26 and 25.
NGS July 2008 $30 Calls (.NGSGF)
NGS traded up this week, reaching a high of over 31.50 before closing at 31.13. We are now in the money on this trade and everyone should be showing a profit. We are through the first resistance level, the next is at 35. Support is 25 and 23.
DSX June 2008 $35 Calls (.DSXFG)
DSX gave up almost 5 points in trading this week . . . on no news. Resistance is 42. Support is 27.50 and 24.
Parting Shots…
New subscriber questions, the topic is Support and Resistance.
As a subscriber to Elite Option Trader you’ve no doubt seen me mention Support and Resistance levels on our trade alerts. These are technical trading terms that some texts devote entire chapters. Here’s a brief overview.
One subscriber asks: What are support and resistance levels?
Support and resistance levels are used by technical analysts to identify certain price points. These price points or levels are where a stock might stop moving higher (Resistance) or stop moving lower (Support).
For example, with a support level the theory is buying pressure (demand) overcomes the selling pressure (supply) at a particular price. This prevents the stock from falling below that price level.
The opposite is true for resistance. With resistance levels technical analysts identify where there might be more sellers than buyers. This prevents the price from moving higher.
Another subscriber question: How do I use support and resistance levels? What am I supposed to do?
We provide support and resistance levels for every trade alert. You are free to use them in any way you want. You can even ignore them – don’t worry my feelings won’t be hurt.
I’m trying to give you some idea of where the stock might trade to (either up or down). Hopefully you can use this additional information to better manage your sell discipline.
Remember, a sell discipline is unique to every trader. No two traders are going to look at a trade the same way. Some will take on more risk – and hope to hit home runs. Others are more conservative looking for smaller risks and rewards.
I strongly recommend you review the Elite Option Trader Operating Manual. If you don’t have it, you can download your free copy at the website. Go back to pages 10, 11, and 12 where we discuss selling disciplines. Hopefully you’ll get a better idea on how to incorporate support and resistance levels into your unique sell discipline.
Category: EOT Update
