EOT Position Update – April 27, 2011

| April 27, 2011

April 27, 2011

Market Snapshot

Federal Reserve Chairman Ben Bernanke took the stage today.

The Fed chief hosted a press conference following the FOMC meeting.  It was a historic moment of sorts… It was the first time any Fed Chairman has held a press conference.

And judging by the market’s reaction, investors like what he had to say.  The major stock market averages all rallied after his speech and closed near their best levels of the day.

Today’s move higher takes the S&P 500, Dow, and NASDAQ to new bull market highs. And they’re showing no signs of slowing.

However, Bernanke’s speech didn’t do the US Dollar any favors.

The dollar is sinking like a rock.  It’s clear the dollar will continue to weaken as long as the Fed continues quantitative easing (QE).  And so far the Fed isn’t willing to take the option for a QE3 off the table.

It looks like the ‘risk on’ trade, where stocks and commodities go up while the US Dollar falls, will continue for a little while longer.  At least until QE2 comes to an end in June. And 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.

  MIPS October 2011 $11 Calls
MIPS reported earnings rose 9.9% in the first quarter.  But they came up short of the 11% gain investors were expecting.  It’s never good when a company misses estimates.  And as a result, the stock is down.  The silver lining is… MIPS reported their first ever royalties from smartphone and tablet sales.  This is the area that will drive the company’s future growth.  I still believe MIPS has a bright future.  And we could see buyers come in and pick up shares at these discounted prices.  Conservative traders should sell now to conserve capital.  More aggressive traders may want to hold out for a comeback.

  WPRT October 2011 $30 Calls
WPRT is consolidating around $25.  This is a good sign after the big move up a few weeks ago.  We want WPRT to hold onto its gains and continue moving higher. 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 bumping up against stiff resistance at $70.  The North American onshore oil and gas boom is in full swing.  Last week the number of onshore rigs climbed by 27 to 1,754.  HP will report earnings tomorrow before the market opens.  Aggressive traders should continue holding for bigger gains ahead.  The next resistance is at $74.  Support is at $59 and $52.

  AKAM August 2011 $40 Calls
AKAM’s first quarter revenue and earnings beat analyst estimates.  The stock initially traded higher after the earnings release.  But during the conference call, management revealed second quarter earnings and revenue guidance were below estimates.  That’s never a good sign… Keep an eye on AKAM tomorrow.  If it hits our support, consider selling to conserve capital.  Resistance is at $43.50 and $47.  Support is at $32 and $30.

  MCD June 2011 $80 Calls
MCD is still hovering around $77.  The fast food giant grew earnings by 11% last quarter and beat estimates.  But the bullish report is being offset by rising commodity prices.  Investors are afraid of skyrocketing food costs pressuring earnings going forward.  I think their fears are unfounded.  MCD has been able to pass those costs onto the consumer before and they’ll be able to again.  I think the shares are due for a rally.  Continue holding your MCD call options for the next leg higher.  Resistance is at $80 and $85.  Support is at $70 and $67.50.

Category: EOT Update

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