EOT Position Update – December 15, 2010

| December 15, 2010

December 15, 2010

Market Snapshot

Stocks are pulling back a bit the last few days.

So far the pullback is nothing more than a minor correction.  And after the run the markets have had since the beginning of December, it’s not at all surprising.

In fact, we’ll likely see the S&P 500 pull back to around 1,225 to 1,220 before we see buyers step back in.  This area is now a key technical support zone.  On the chart below, you can see it’s defined by the highs set in April and November.


It’s uncanny how often we’ll see this happen.

A stock or index will breakout to a new high… pull back to test the new support zone… and eventually move higher again.  I think we’ll see a similar result this time around.

On the economic data front, tame consumer price inflation and strong retail sales is bullish.  The solid data combined with the Fed’s commitment to quantitative easing should continue propelling the markets higher.

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.

  BAC May 2011 $13 Calls
BAC is our latest trade.  It’s pulled back a bit since the trade alert went out.  Every-one should have been able to get in at a great price.  I’m expecting to see a big rally in bank stocks in early 2011.  So sit tight as we wait for the market to resume its bullish uptrend.  Resistance is at $14 and $17.  Support is at $11 and $10.

  CNH June 2011 $55 Calls
CNH briefly hit another new 52-week high of nearly $48 today.  Word on the street today was China could become a net importer of corn for the first time in 2011.  And if they do, the floor price for corn would be $6.50 per bushel!  That’s 2x to 3x the average price for corn over the last 20 years.  Clearly, farmers are enjoying their most prosperous period since the 1970s.  And their windfall profits are going to turn into huge sales volume of new equipment for CNH.  Hold tight for the next leg higher. Resistance is at $54 and $60.  Support is at $35 and $31.50.

  DRQ March 2011 $85 Calls
DRQ hit a wall today.  I don’t see any news that caused the selloff.  I think we’re just seeing some profit taking.  The stock has more than doubled off the June low.  But I think it has a lot higher to go.  The fundamentals are strong and we still have plenty of time on this option.  Aggressive traders should sit tight for now.  The next resistance is at $90.  Support is at $62 and $57.

  CBU February 2011 $22.50 Calls
CBU hit a new 52-week high and our $27 resistance level today.  Congratulations to everyone locking in their 136% gains!

  MCP March 2011 $45 Calls
MCP has posted some big gains over the last few weeks.  And it’s showing no signs of slowing down.  Earlier this week, the company announced good news.  They received environmental permits to begin construction on a new rare earth manufacturing facility at their Mountain Pass site.  Clearly this is a big step for the company.  It should set the stage for MCP to continue its big run.  Aggressive traders should continue holding for bigger gains ahead.  The next resistance is at $45.  Support is at $25 and $20.

Category: EOT Update

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