EOT Position Update – April 20, 2011

| April 20, 2011

April 20, 2011

Market Snapshot

The markets started out the week on a down note…

The stock market plunged Monday morning when S&P downgraded their outlook on US government debt from stable to negative.  It was a shot across the bow indicating the US could lose their AAA rating in the future.

Thank goodness nobody cares what S&P has to say!  The markets snapped back quickly and have continued moving higher over the past two days.

Clearly the ratings agencies like S&P have lost all credibility after playing a prominent role in the credit crisis.  What’s more, it’s no secret the US government is running record deficits and there isn’t a plan to fix it.  So, I guess we can thank S&P for pointing out the obvious…

Investors have already forgotten about the downgrade.  And now they’re moving onto more important matters… like quarterly earnings.

And so far earnings season has mostly been a resounding success!

The positive earnings are headlined by tech bellwethers Intel (INTC), IBM (IBM), and EMC (EMC).  They all managed to best analyst expectations.

The corporate technology refresh cycle is the driving force behind their strong earnings.  In other words, businesses are upgrading their computer systems after shelving plans during the recession.

On the flip side, the financial sector is weak.

Banks like JPMorgan Chase (JPM) and Bank of America (BAC) disappointed investors with their latest earnings.  The banks haven’t shown the ability to grow revenue and earnings in the new regulatory environment.

All things considered, earnings season is shaping up to be a very bullish event.  The markets need tech to lead if they’re going to continue moving higher.  And with the upbeat earnings and outlook, I think tech’s in prime position to resume their leadership role.  That’s great news for our call options!

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.

  WPRT October 2011 $30 Calls
WPRT is chopping around $25.  Remember, this is a speculative trade.  We’re waiting on the passage of the Nat Gas Act.  Until the bill passes, WPRT will ride the ups and downs of the legislative process.  Bottom line… our options have huge upside potential. Continue holding for bigger gains ahead.  Resistance is at $30 and $35.  Support is at $20 and $17.50.

  HP June 2011 $70 Calls
HP’s in a strong uptrend.  The resurgence of drilling activity in North America is a huge positive for HP.  They continue landing new contracts to build and operate their FlexRigs.  HP still has plenty of upside even after the big rally over the last year. Aggressive traders should continue holding for the earnings announcement next week. The next resistance is at $74.  Support is at $59 and $52.

  AKAM August 2011 $40 Calls
AKAM shot up 6.5% on Monday.  An analyst with Stifel Nicolaus upgraded the stock from a hold to a buy.  Our option responded by setting a new peak gain of 51%!  The content delivery company will report earnings next week.  I’m expecting growing demand for their services to outweigh pricing concerns plaguing the stock for the last few months.  Continue holding for the earnings report.  Resistance is at $43.50 and $47.  Support is at $32 and $30.

  GM June 2011 $35 Calls
GM fell apart over the last week.  Clearly investors have lost faith in the reformed car giant more quickly than I anticipated.  The stock is stuck in a brutal downtrend.  And it’s not showing any sign of pulling up.  It’s time to eject before this sinking stock crashes.  Go ahead and sell this option to conserve capital.

  MCD June 2011 $80 Calls
MCD finally cleared the resistance zone around $77 today.  The stock and our option are racing higher in anticipation of another strong quarter.  Keep an eye on MCD as they report earnings tomorrow before the market opens.  I think MCD could surprise analysts with a strong quarter and make a big push higher before our options expire in June.  Resistance is at $80 and $85.  Support is at $70 and $67.50.

Category: EOT Update

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