EOT position update April 16, 2014

April 16, 2014

Market Snapshot

Over the last few weeks, we’ve seen a dramatic change in market leadership.

Growth stocks have gone from the penthouse to the outhouse while value stocks have picked up momentum.  It’s unusual to see this type of market action when there aren’t ominous signs of economic slowing or stagnation.

One reason I’ve seen thrown out there for the dramatic change is hedge funds.

At the beginning of 2014, hedge funds that manage billions of dollars placed big bets on more upside on these hot investments.  As these stocks began to underperform in March, many hedge funds were forced to unwind these positions.

As one hedge fund after another has pulled out of growth stocks, the prices of these stocks have dropped and forced even more selling.

At this point, growth stocks no longer have momentum and value stocks have become the new market leaders.

I believe we’ve reached the end of the selloff in growth stocks.  Now that doesn’t mean they’re going to come racing back.

Going forward I see the markets shifting toward more cyclical stocks.  That means economic data will be a key focus for investors.

If economic growth accelerates as expected, we could see stocks in the industrial, basic materials, energy, and financial sectors deliver some huge gains.

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.

APA May 2014 $85 Calls
APA is gaining bullish momentum again.  This independent oil and gas company has done all of the right things to reposition itself as a leader in the onshore US oil and gas segment.  This stock should continue to track higher going into their May quarterly earnings announcement.  Continue holding… Support is at $80.00 and $77.50. Resistance is at $90.00 and $94.00.

GMCR May 2014 $90 Puts
GMCR has continued to fall since breaking support of the 50-day moving average.  It reached a low of $94.25 yesterday.  And our option hit a peak gain of 79%.  I don’t see this as the end of the selloff for GMCR.  Continue holding… Support is at $90.00 and $80.00.  Resistance is at $110.00 and $115.00.

Category: EOT Update