EOT Position Update – April 23, 2008

| April 23, 2008

April 23, 2008

Market Snapshot

Today the Dow Jones Industrial Average closed at 12763.  We witnessed yet another 200+ point move in the index, this time on Friday.  Despite the rally, we’re still trading well below the 200 day moving average.

Oil was the hot news over the last week.  Prices crossed above 119 a barrel. Everyone’s pointing to weakness in the US Dollar and concerns about production in Nigeria and the U.K..

Next week the Federal Reserve meets to set interest rates.  The debate still rages as to what rate cuts will occur.  I’m still expecting a quarter point cut.

Earnings this week have been exciting.  Yum Brands beat estimates and the stock traded up.  UAL took a bath falling more than 7 points after posing a huge loss . . . I think there’s more pain to come.  Google outperformed, helping the tech sector, but banks are still hurting.  Bank of America and Citigroup both posted bad numbers.

Now for the trade updates.

Position Updates

  VNO June 2008 $95 Calls (VNOFS)
This is a new trade for the week.  I like REITs and think this one should move higher. Resistance is 100 and 105.  Support is 85 and 80.

  APA May 2008 $135 Calls (APAEX)
Apache continued to climb this week crossing over 143.  Over the last few days it pulled back to close under 140.  The stock broke both our original resistance levels.

  CBI May 2008 $45 Calls (CBIEI)
CBI managed to put together 5 days of gains, pushing the stock above 48.50.  The stock is taking a breather at just under the 47 level today.  Resistance is $50 and $52.50.  Support is $42.50 and $40.

   RRC May 2008 $65 Calls (RRCEM)
RRC managed to trade well above 73 this week, before pulling back to just under 71. The stock broke our original resistance levels.  Today they announced earnings and record results.

   COP May 2008 $75 Calls (COPEO)
COP has pulled together an impressive string of 7 straight up days before closing lower today at 84.05.  The next resistance level is 85.  Support is $70 and 67.50.

   NSC June 2008 $55 Calls (NSCFK)
On Friday and again on Tuesday NSC was close to or above 61.50.  The stock is at new highs and has broken our original resistance levels.  Unfortunately the company announced earnings this morning that missed analyst estimates.  The stock closed today at 58.74.

Parting Shots…


Our NSC Call options traded for more than $8 this week.  This represents more than a 180% gain on your investment.  Congratulations to everyone who caught that trade and exited at the resistance levels.

I like to look at some of the successful trades that I’ve made and see what really made them work (same thing with unsuccessful trades).  In the case of NSC it was news from a competitor.

Last week NSC rallied to all-time highs trading over $61 per share. The driving force was earnings news from a competing railroad.  CSX published their earnings last Wednesday which was higher than expected.  Investors rushed into the railroad stocks with reckless abandon.

Great news for those of us with call options.

I think following the big movers in the industry can really pay off.  I’ve seen it time and time again when a company announces great earnings and their competitors benefit from the news.  Buying options on some of these companies can be a great way to profit.

It doesn’t always work, but when it does . . . watch out, huge profits ahead.

Category: EOT Update

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