EOT Position Update – August 24, 2011

| August 24, 2011

August 24, 2011

Market Snapshot

It’s been an ugly summer for the stock market.

The S&P 500 has fallen from a high of 1,370 on May 2nd to a low of 1,101 on August 9th.  That’s a whopping 20% correction for the large cap index this summer!

Thankfully, summer is finally coming to an end in a few weeks!  I know I’m ready for the Arizona desert heat to break… 110 degree temperatures are brutal!

Remember, many of the big money managers and traders take the summer off.  You’re much more likely to find Wall Street big wigs on the beach in the Hamptons than you are sweating out in the city.

That leaves the market action to the computer programs and retail investors.  So, the dumb money typically has a much bigger impact on the markets in the summer.

As a result, I’m expecting to see more of the same over the last few weeks of summer. But then the tide will turn…


After Labor Day, the big boys will be back in town.  They’ll be returning from their vacations in the Hamptons in droves.  And they’ll be ready to make some money.

Right now, every indication is institutional investors are much more bullish than retail investors.  That means we could see the smart money return and overwhelm the bears and fearful retail investors alike.

Either way, there’s sure to be some fireworks over the next month.  And we’ll be there to capture some huge gains as the bulls and bears battle it out for control of the markets.

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.

  N October 2011 $25 Puts
N is our latest trade. We rolled it out yesterday.  The stock got a little bounce yesterday and today.  That should give everyone an opportunity to buy these puts at a great price.  Look for N to run into resistance at the 200-day moving average and then begin the next leg down.  Resistance is at $31 and $35.  Support is at $25 and $20.

  BAS October 2011 $25 Calls
BAS initially got a nice bounce off the 200-day moving average.  But it wasn’t able to build on its bullish momentum.  In fact, the entire oil service industry has been under selling pressure.  The culprit?  Oil prices… A barrel of West Texas crude oil has fallen from $87 to $81.  As oil prices fall, companies cut back on exploration and production. And that means oil services companies like BAS will see less business.  I think the weakness in oil is temporary.  Once investors see demand for oil hasn’t fallen off as predicted, oil prices and oil related stocks will bounce back quickly.  Continue holding BAS… Resistance is at $30 and $40.  Support is at $20 and $15.

  SBUX January 2012 $38 Calls
SBUX’s chart looks great considering how volatile the markets have been lately.  SBUX has a strong technical support zone around $34 to $35.  The only way I see SBUX breaking below this level is if some completely unforeseen negative event blindsides the entire market.  But outside of that, I think SBUX will make another push higher. Don’t forget, we still have plenty of time on our January options.  Aggressive traders should continue holding for SBUX to make another push higher in the 4th quarter.  The next resistance is at $45.  Support is at $32.50 and $30.

  POT September 2011 $60 Calls
POT has held up well throughout the market selloff.  In fact, the chart looks outright bullish to me.  I think POT has carved out a solid base between $50 and $62 this year. And judging by the high prices for corn, wheat, and soybeans, this should be a banner year for fertilizer stocks like POT.  I think we could see POT make a big push higher after Labor Day.  Aggressive traders should continue holding… The next resistance is at $70.  Support is at $50 and $48.

Category: EOT Update

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