EOT Position Update – January 28, 2015
Market Snapshot
The slow start for US stocks continued over the last week. Amazingly, the S&P 500 hasn’t made a new high in 2015. The high from December 29th of last year is still the high water mark for the large cap index.
For those that believe the old Wall Street adage, ‘as January goes, so goes the year’, the weak start to the year is certainly troubling.
The macro issues that have investors on edge haven’t changed. Slowing economic growth everywhere that’s not the US, plunging oil prices, and wild swings in currency valuations are creating uncertainty in the minds of investors.
It seems that the only ones that are concerned about the impact of these events is the Fed. In today’s statement, the Fed downplayed the risk these events pose to the US economy.
Not surprisingly, the stock market took a turn for the worse following the release of the Fed statement.
I’ve said it before and I’ll say again, there’s nobody worse than the Fed at forecasting the impact that changes will have on economic growth. Never forget that at one point former Fed Chairman Ben Bernanke contented the sub-prime mortgage crisis posed no threat to the stability of the financial system… then they caused the 2008 financial crisis.
The Fed was wrong then and they’re likely wrong about this too.
We’ll likely see the Fed admit they were wrong and promise to keep their zero interest rate policy through the end of 2015 before long. Until then, we’ll likely see more range bound action for the S&P 500.
The few trades that have been working well this year have been to be bearish on energy stocks and bullish on the airline stocks that benefit greatly from lower fuel prices.
But here’s the thing…
Option premiums on the stocks in these sectors are sky high. Simply put, buying puts on energy related stocks or buying calls on airline stocks hasn’t been nearly as profitable because the option premiums are so expensive.
In other words, we would have to take on too much risk for too little reward to use options to profit from the few trends that are working this year.
Let’s move onto the updates…
Position Updates
Just a quick note: Remember, we won’t update every open position every week. We try to focus on the positions that have some significant news or price movement.
STI April 17th 2015 $41 Calls
This is a new trade I sent out earlier today. I think this undervalued stock has huge potential over the next few months. Take a look at the trade alert for more details.
FAST February 20th 2015 $48 Calls
FAST has been moving in lock step with the overall market recently. However, a bullish inverse head and shoulder pattern on the daily chart is a good sign for our call options. If this pattern plays out as it often does, it could send shares of FAST sharply higher in the weeks ahead. Aggressive traders should continue holding. Resistance levels are at $48.00 and $50.00.
GLOG February 20th 2015 $20 Calls
GLOG continues to be unfairly punished for being associated with energy stocks. Simply put, this stock is dirt cheap based on the earnings growth the company will experience from the expansion of the fleet and long term shipping contracts they continue to sign. Unfortunately, time is beginning to run out on these options that expire next month. It’s hard to say whether investor sentiment toward this stock will turn in time. But one thing’s for sure, the fundamentals certainly point toward a higher stock price. Continue holding. Resistance is at the 200-day moving average – currently $23.25. Support is at $15.00.
Category: EOT Update
