EOT Position Update – December 1, 2010

| December 1, 2010

December 1, 2010

Market Snapshot

As far as I’m concerned, November was a forgettable month.  The S&P 500 started the month at 1,185 and finished it at 1,180.  Clearly, it wasn’t anything to write home about.

Stocks spent the majority of the month consolidating near their recent highs.  But that’s to be expected after posting sizeable gains in September and October.  In fact, the market’s ability to hold onto those gains is looking outright bullish.

Now it’s looking like we could have a huge year-end rally to close out 2010.

The first day of December brought some welcome news on the employment front.  ADP reported employers added 93,000 jobs in November.  And that’s on top of last week’s initial jobless claims report, the best since 2008.

Clearly this is great news for the economy and our call options.

Remember, unemployment, housing, and financials have been the major disappointments of the economic recovery so far.  So any sign of improvement in these areas could be a huge milestone on the road to recovery.

For now, the market’s off to a great start in December.  And after a lackluster November, that’s really all we can ask for.

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.

  CNH June 2011 $55 Calls
CNH pulled back a bit since the trade alert went out.  But today’s rally sent the stock up nearly 4%.  Remember, commodity prices are soaring.  And farmers are going to rake in some serious profits this year.  But that also means a big tax bill for many of them.  One way they can offset their tax bill is buying new equipment.  The 50% bonus depreciation on new equipment put into use in 2010 will mean farmers can keep more of their profits and upgrade old equipment at the same time.  I think it will lead to record sales of new equipment in the fourth quarter.  Hold tight for the sales data to start coming in.  I think CNH will see a huge jump in short order.  Resistance is at $54 and $60.  Support is at $35 and $31.50.

  DRQ March 2011 $85 Calls
DRQ shot out of the gate today.  It cleared our first resistance level at $80. Congratulations to traders locking in a spectacular 126% gain!  With oil prices heading up again, oil and gas producers are cranking up production.  That’s great news for DRQ who provides the equipment they need.  Aggressive traders should continue holding for bigger gains ahead.  The next resistance is at $90.  Support is at $62 and $57.

  MCP March 2011 $45 Calls
MCP’s holding at support of the 50-day moving average.  But speculation in the rare earth mining companies like MCP could explode at any moment.  I think we’ll see MCP ride another speculative wave higher soon.  Aggressive traders should hold tight for now.  The next resistance is at $45.  Support is at $25 and $20.

  FRX January 2011 $34 Calls
FRX is still in a solid uptrend off the June lows.  So despite stocks pullback over the last month, I’m still optimistic about FRX.  And we’ve even seen it start moving higher again over the last few days.  If the markets rally to close out 2010, FRX should continue its uptrend and break out to new highs.  Hold tight for now.  Resistance is at $35 and $40.  Support is at $30 and $27.50.

  PEGA March 2011 $25 Calls
PEGA has finally broken through the 200-day moving average.  It had failed to clear this hurdle on five separate occasions since first falling below it in April.  Now the stock and our option is surging to new heights.  We hit a peak gain of 359% today!Aggressive traders should continue holding for bigger gains ahead.  But keep an eye on it as it approaches the next resistance at $35.  Support is at $16 and $15.

Category: EOT Update

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