EOT Position Update – August 22, 2012
August 22, 2012
Market Snapshot
The current rally in the S&P 500 doesn’t get any respect.
Naysayers complain about low volume and the lack of an economic catalyst. It must be infuriating to miss out on a rally because you can’t explain it, while others who don’t seek such explanations reap the benefits.
So, what are the naysayers to do?
The stock market is moving up. You’re underperforming. The clock is ticking. You have four months until the year ends.
You have money sitting in Treasuries. Treasury prices are starting to fall. You know that if you maintain your current position, you’re going to end the year pretty much where you are right now or maybe worse.
If you’re in the market to make money, that’s just not going to cut it.
But don’t feel too bad. According to Hedge Fund Research, even the best professional traders have underperformed the market in the first half of the year.
At this point, the individual and professional traders alike are realizing the only chance they have to turn things around is to let go of their fear and climb aboard the rally. That means there’s going to be lots of money coming into the market in the second half of the year.
Clearly, that’s a bullish catalyst for the market going forward.
But don’t get too excited… the S&P’s impressive rally may be running into resistance.
The large cap index hit a new bull market high of 1,426 yesterday. It barely eclipsed the high of 1,422 it set back in April.
Now, traders are taking some of their hard earned profits off the table. This selling pressure will likely keep a lid on the market for a while. But longer term I think we’ll see more money come into the market and push the S&P to new highs.
Stay patient. We’ll be there to profit no matter which way the market goes.
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.
DRYS September 2012 $2 Calls
DRYS is one of our older trades, but we’re not discounting that. It is still working out very nicely. Remember that DRYS owns dry bulk carries and tankers that operate worldwide. As the global situation improves, DRYS will continue to rise. As far as our call options, they are slightly above what we paid for them, but DRYS has been outperforming its peers lately and we are going to hold this name for larger gains. Remember, we want this stock to rise in value. Support is at $2.10 and $1.90. Resistance is at $2.90 and again at $3.20.
BKI October 2012 $30 Calls
BKI is our newest trade. We’ve only had it for a little over a week and it’s already performing. A 40% return in nine days. Not bad, wouldn’t you say? Better yet, the industry itself has been showing clear signs of improvement and I think BKI has a lot more room to run. We are going to hold these call options for large gains! Remember, we want this stock to rise in value. Support is at $27.50 and $26.00. Resistance is at $34.50 and again at $36.00.
Category: EOT Update
