EOT Position Update – December 28, 2011

| December 28, 2011

December 28, 2011

Market Snapshot

And that’s just about a wrap!  It’s time to close the books on another year!

As we look back and size up the events of 2011, all I have to say is, “What a wild ride.”

But before I sign off for 2011… there’re still a few days left this year.  And as we know, trading doesn’t stop!

This is another holiday shortened week and trading will most likely remain light.  My attention will be focused on two key points.

First, consumer confidence… this month’s number will be holding an important message which I’ll tell you about in a moment.

But first, why am I tuning into this number so closely…

Here’s how it works.  There are three numbers directly correlated to each other.  These are employment, consumer confidence, and consumer spending.  Until we have increasing data numbers in all three areas, it’ll be hard for the economy to grow.

So, to begin, we’ve been watching the employment number trending up over the past few months.  However, what we want to know, is it really getting better?

If so, this week’s consumer confidence number should reflect an increase in employment.  And then it should immediately result in consumer spending.

That’s why there’s so much riding on this month’s consumer confidence because it’s directly correlated to consumer spending.

And this week we’ll get a glimpse if consumers put their money where their mouths are.

If people are truly feeling better about themselves, their families, and the economy, they’re going shopping!

And that everyone, is what it’s all about.

There’s no question, the more time we spend out shopping, the faster the economy will grow.  And economic growth is what I’m looking for heading into 2012.

Second on my mind this week is the chart of the S&P 500.

SPX Chart

We can’t overlook the technicals.

Even though the past few months have shown extreme volatility, the market has remained in a tight trading range.

As you can see, the S&P has been struggling to move and stay above 1,250 for any extended period of time.  That’s not good news because it gives traders a clear line to sell.

However, the S&P has struggled to fall below 1,200.  That is good news because it gives traders a clear signal to buy.

So, what am I looking for?

I would love to see us hold above 1,250 (especially 1,257 which would be breakeven on the S&P for the year).

No question about it, holding this level will result in strong investor confidence and lead a big momentum boost moving into 2012.

Don’t forget, over the last year, more options contracts changed hands than stocks on the New York Stock Exchange.  Option trading is the new trend and I’ll continue to guide you through what I know will be a great 2012.

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.

  CAT February 2012 $95 Calls
CAT is our newest trade we recommended Friday.  With the global demand rising for construction and agricultural equipment, CAT is certainly poised to head higher.  CAT has 50% of the global market share and they’re not in jeopardy of losing that status.  If you haven’t entered this trade yet, look to buy these call options up to $3.25. Resistance is at $97 and $112.  Support is at $88 and $80.

  TRV April 2012 $60 Calls
TRV shot through our $57.50 resistance this week.  Congratulations to everyone locking in 77% gains.  More aggressive traders should continue holding.  There’s plenty of time for more gains to come our way.  The next resistance is at $61.  Support is still at $54 and $49.

  DNKN March 2012 $22.50 Puts
DNKN stock is up a little over the last week.  No doubt pushed that way with the overall market.  However, the chart is showing the downtrend is still intact.  We still have plenty of time, continue holding these puts.  Resistance is at $27.50 and $29. Support is at $20 and again at $19.

  SBUX January 2012 $38 Calls
If you’re still holding calls on SBUX, these options are now deep in the money.  We’re closing in on a 200% winner.  That’s a monster size gain!  But just as a reminder, these calls expire January 21st, 2012.  If you’re still holding any of these options, you may want to close your options on this successful trade any time before expiration.

Happy New Year and safe trading.

Category: EOT Update

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