EOT Position Update – December 24, 2008
December 24, 2008
Market Snapshot
Merry Christmas Eve. I hope everyone is having a wonderful holiday season. As we enter the end of the year and the holiday season, the market has settled considerably. Volumes and volatility are down, and the Santa Clause rally many were hoping for never materialized.
The big news this week . . .
Not a lot of news because of the holiday. However, worthy of noting is Toyota’s first ever loss. When that happens you know the auto industry is hurting.
Also, GE’s rating was threatened by the rating agencies. S&P lowered the outlook on GE to “Negative” and threatened their coveted top credit rating. The stock fell on the news. I’m not sure how much creditability the rating agencies have anymore… they miss the subprime mess, and now downgrade one of the largest companies in America?
By the way, I am a holder of GE stock. You’ve got to love that dividend yield – almost 7.5%
Now for the trade 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.
WPI February 2009 $25 CALLS (WPIBE)
The stock ran up on Thursday last week, approaching the $25 level. Since then we’ve drifted lower. I’m not expecting a move, or any news until the new year. Give this trade some time to develop. Resistance levels will be at $25.50 and again at $27. Support levels are $22 and $21.
GVA January 2009 $55 CALLS (GVAAK)
This stock has been remarkably volatile. After touching $46 it slid to just under $38. Give this trade another week or two to develop. We should see this option trend up in value as we approach the Obama Inauguration. Resistance is $50 and $55. Support will be at $41 and again at $37.50
IBM January 2009 $60 PUTS (IBMML)
Last week IBM’s stock kept moving higher. This week it’s trended lower. We’re now below $82 and falling. I’m expecting the downtrend to continue… if it doesn’t consider exiting to conserve capital. Resistance is $90 and $95. Support will be at $72.50 and again at $70.
SU January 2009 $17.50 PUTS (SXHMW)
After rallying a few weeks ago, the stock has moved steadily lower in the last week. Once trading in the low $20s, we’re now close to being in the money on this option. If oil continues to fall, I’m expecting this stock to fall along with it. Resistance is $23 and $25.50. Support will be at $17 and again at $15.
GT January 2009 $15 PUTS (GTMC)
If you still hold this option take your profits soon. The option reached a peak value of 424%.
Parting Shots…
The Santa Claus Rally?
Last week I wrote about the Dow Jones Industrial Average crossing above its 50-day moving average. It was a positive sign that the markets might be heading higher.
Unfortunately, we traded lower over the next few days.
Now, we’re back below the 50-day moving average. A bearish signal. Normally, I’d say the potential for moving higher in the markets is limited. However, this downtrend comes in the week before Christmas. This is a time of year when most professional money managers and institutional investors are taking time off.
That means little volume, and little conviction in the markets. If we can trade steadily higher in the New Year, we might then consider the November bottom a true bottom. If we cross below the 8,000 level again, I’d consider the bear alive and well!
Category: EOT Update
