EOT position update August 6, 2014
August 6, 2014
Market Snapshot
Welcome to the dog days of summer.
It’s the time of year when the action on Wall Street dwindles down to a trickle. We see it every year… droves of big players leave the concrete jungle for their beach house or mountain chateau. And anything can happen in these thinly traded markets.
In other words, the dramatic selloff that sent the S&P 500 down 3.5% over the last few weeks isn’t surprising. It’s the kind of thing that often happens in thinly traded markets.
The selloff caused the S&P to close below its 50-day moving average for the first time since April 15th. But it remains above the 200-day moving average and the upward trending support level connecting the previous lows over the last two years.
What’s more, I think the economic data continues to be in the Goldilocks range – it’s not too hot, it’s not too cold.
For instance, the latest jobs data shows the US economy added a solid 209 thousand jobs while the unemployment rate ticked slightly higher. GDP rebounded with 4% annual growth rate in the second quarter, but 1% of the growth was contributed to inventory build-up.
That’s the type of economic growth that will continue to put people back to work but won’t trigger inflation… that means the Fed won’t be forced to start raising interest rates sooner than expected.
Here’s the bottom line…
The bull market is still intact and economic data is just right for the market to continue moving higher.
Let’s move onto 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.
ADI September 19th 2014 $50 Calls
ADI was oversold going into the market correction and it has held up well despite the weakness in the overall market. That’s a good sign for ADI… this stock should come roaring back when the market regains its footing. We’re looking for the stock to move higher between now and when they report earnings on August 26th. Resistance is at $53.00 and $55.00. Support is at $48.00 and $47.00.
TPLM October 2014 $12.50 Calls
TPLM has seen some wild swings over the last week. The selloff is due in part to the drop in crude oil prices that have fallen below $100 per barrel for the first time in months and partly due to the general weakness in stocks over the last week. One of the downdrafts sent TPLM below our $10.75 support. That’s the cue for conservative traders to sell to conserve capital. The day after the stock dropped below our first support, a report surfaced that TPLM was looking to spinoff their oilfield-services business, RockPile Energy Services LLC. The news sent TPLM surging higher. It has given back some of those gains… but I think the stage is set for TPLM to deliver on the upside between now and when these options expire in October. Aggressive traders should continue holding… Resistance is at $14.00 and $17.50. Support is at $10.00.
HIMX September 2014 $7 Calls
HIMX has bounced back to around $6.50 per share heading into their quarterly earnings tomorrow. We’ve seen some of the analysts with bearish calls on the stock back away from some of their outlandish claims they made back in June. And others even upgraded their opinion of the stock. All of the speculation will be over tomorrow when they report earnings before the opening bell. The way I see it, their LCD panel display drivers business should be strong and that’s what makes the company tick. The wild card is Google Glass… I’d prefer they didn’t mention it at all because this company has so many other strengths that the speculation can overshadow the things they are doing well. Be ready to take action on this trade tomorrow after the earnings announcement. Support is at $5.75 and $5.00. Resistance is at $9.00 and $11.00.
Category: EOT Update
