EOT Position Update – April 21, 2010

| April 21, 2010

April 21, 2010

Editor’s Note:  Keep an eye out for a trade in the next 48 hours.

Market Snapshot

The relative calm of the markets the last few weeks was shattered in an instant Friday.

News of a SEC civil lawsuit against Goldman Sachs (GS) sent the major averages down sharply.  If the allegations of fraud are true, I hope they get hung out to dry.

The bigger question is… Will the lawsuit open Pandora’s Box in the financial sector?

Only time will tell.

The markets have stabilized after the initial shock.  And they’ve gotten a boost from several strong earnings reports.  But they haven’t been able to recapture all of the ground they lost on Friday.

Today I want to take a look at a question from Jamie S.

Jamie writes, “I’m a new subscriber to Elite Option Trader.  How do I use the support and resistance to sell my options?

Great question.

As you’ve probably already noticed, the support and resistance are price levels of the underlying stock, not the option itself.

We’ll give you two support and two resistance levels in each trade alert.

Traders who are more conservative should sell when the underlying stock reaches or passes the first support or resistance level.

More aggressive traders should look to exit when the second level is reached.

By giving two different levels, we’re allowing you to customize the risk to match your trading style.

We’ve found support and resistance are a perfect way to manage trades.  It allows us to exit trades that don’t work early and still capture big gains from our winners!

Keep in mind, picking support and resistance levels are as much an art as they are a science.  They’re not always going to be exact down to the penny.

Thanks for the question.  I hope that helps.

Remember, this question and many more are answered in the Elite Option Trader Operating Manual.  It’s located on the “Special Reports” page of the website.

How’s the exit strategy working for you?

You can reach me at customerservice@hyperionfinancial.com.

Now for 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.

  CTSH October 2010 $60 CALLS
CTSH pulled back along with the rest of the market.  Support at the 20-day moving average kept the damage to a minimum.  Now it’s starting to trend higher again.  We got more good news for the tech sector when “Big Blue” reported better than expected first quarter earnings on Monday.  Hold tight for CTSH’s earnings the first week of May.  Resistance is at $55 and $60.  Support is at $49 and $47.50.

  ASEI July 2010 $85 CALLS
ASEI slipped past our first support level this week.  It found support at the 200-day moving average.  And it’s quickly rebounded back into its trading range.  There hasn’t been much news on ASEI so the price movements are being driven by technical factors more so than fundamentals.  Aggressive traders should hold for the results of quarterly earnings in May.  Resistance is at $82.25 and $87.  The next support is at $70.

  WFR July 2010 $13 CALLS 
WFR came within a penny of hitting our second resistance level at $17 before pulling back.  It’s currently resting at support at the 20-day moving average.  Even after the pullback, our calls are still a few dollars in the money.  Since we still have three months to go until they expire, aggressive traders still holding these options should wait to see if WFR can make another push.  Support is at $11.50 and $11.

  INTC July 2010 $20 CALLS
INTC held its ground as most of the market pulled back last week.  That’s a good sign INTC will regain momentum once the markets settle down.  Aggressive traders should hold out for bigger gains ahead.  The next resistance is at $25.  Support is at $18.50 and $18.

  SWKS May 2010 $15 CALLS
SWKS continues to trade in a range between $15.50 and $16.50.  There really hasn’t been any significant news for awhile.  But that will change when they report quarterly earnings in a few weeks.  The next resistance is at $18.  Support is at $12.25 and $11.50.

Category: EOT Update

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