EOT Position Update – April 29, 2009

| April 29, 2009

April 29, 2009

Market Snapshot

After chopping around the 8,000 mark for a week, the Dow staged a rally today. Reaching levels last seen in early February.  This is a very positive sign.

You see, the last few weeks the market has been ripe for a correction.  And we got one; the best kind if you’re bullish.  Let me explain.

There are two types of corrections… corrections by price and corrections by time.

When the market corrects by price, stock prices fall.  They generally reverse quickly to a support level of one of the moving averages, like the 20- or 50-day moving average.  But we didn’t get a correction by price; we got the more bullish correction by time.

Instead of stock prices falling, they traded sideways, letting the moving averages catch up to them.  This type of correction indicates the rally has strong momentum. There just aren’t any sellers at these prices.  And it gives the bulls even more incentive to buy.

And it happened today.  We saw the bulls come back into the market and sent the Dow up 168 points.

Stated simply, we’re prepared for this rally to continue.

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.

  LZ June 2009 $45 CALLS (LZFI)
This trade went out yesterday.  We’re looking for a positive reaction to the earnings report tomorrow before the bell.  Hold on tight.  Resistance will be at $45 and $50. Support is at $37.50 and $32.75.

  JPM June 2009 $37.50 CALLS (JPMFU)
Unfortunately, other bank earnings reports fizzled.  As a result, we didn’t get the initial pop we were looking for in JPM.  If financials stage another run, JPM should lead the way.  Resistance will be at $37.50 and $42.  Support is at $28 and $25.

  SPLS June 2009 $20 PUTS (PLQRD)
A dose of reality was breathed into the stock price today.  Today’s sell off was preceded by Office Depot announcing a quarterly loss yesterday… a little foreshadowing of what’s to come for Staples.  Resistance is $24 and $26.  Support is $16 and $14.

  WPI May 2009 $30 CALLS (WPIEF)
Earnings are due out tomorrow morning.  Look for a positive earnings announcement to give these calls a nice boost.  We’re solidly in the money on this trade!  Resistance levels will be at $31.50 and again at $33.  Support levels will be at $27 and $25.

Parting Shots…

Swine Flu Fact or Fiction?

It’s been all over the news this week.  Swine flu is spreading.  Can a flu pandemic derail the market’s recovery?

Yes, but it’s highly unlikely.

Look, sensationalist media love a good story.  And that’s all this is.  Don’t get me wrong, this has the potential to develop into something more.  But now is NOT the time to change your investments.

It comes back to a topic we stress often.  You can’t make investment decisions with your emotions.  Don’t let your emotions win out, use your brain.

As investors, we must face fear and greed with the same stone-faced resolve.  Making the tough decisions to buy and sell based on the information at hand.

So it’s gut check time.

Don’t let yourself be derailed by fear…. or by the swine flu.

Category: EOT Update

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