EOT Position Update – December 29, 2010

| December 29, 2010

December 29, 2010

Market Snapshot

The markets are drifting lazily higher on weak volume.

A combination of holiday vacations and heavy snowfall on the east coast have sent trading volumes down even more than usual for this time of year.  There isn’t even much in the way of corporate or economic news to stir the pot either.

And as we approach the end of the year, many funds are laying low and doing a little window dressing for their end-of-year snapshot.

In other words, don’t expect the markets to make any big moves until the calendar year turns…

The good news is… stocks continue to extend their strong end-of-year run.

In fact, the S&P 500 has reached its highest point since August 2008.  These are pre-Lehman Brothers collapse levels and a key milestone for stocks.

As I look ahead to next year, I’m optimistic the bull market will continue for quite some time.  The combination of low interest rates, low inflation, and strong corporate balance sheets are great for profitability.

It should give us plenty of opportunities to pick up call options on stocks with bullish momentum… And if anything changes, we can always switch gears in an instant to profit from bearish momentum with puts.  That’s the beauty of trading with options!

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.

  AUY April 2011 $12 Calls
AUY is picking up momentum.  It’s up about 3% since our trade alert went out last week.  The main reason of course is gold.  Gold prices are once again on the rise after a mild pullback.  We’re off to great start, continue holding for further gains ahead. Resistance is at $14 and $17.  Support is at $11 and $10.

  BAC May 2011 $13 Calls
BAC’s bullish momentum continues to push the stock higher.  Our option hit a peak gain of 42% yesterday.  I think BAC and financial stocks in general should continue to rebound after a tough 2010.  Continue holding for further gains.  Conservative traders should keep a close eye on this one as it approaches our first resistance level. Resistance is at $14 and $17.  Support is at $11 and $10.

  CNH June 2011 $55 Calls
CNH is holding onto its recent gains.  As the stock stabilizes, our option has lost some value as we lose some of the volatility premium.  But in the big picture, I don’t think it will matter.  I believe CNH is going to blow away their revenue and earnings estimates for the 4th quarter.  But we won’t see those until they report earnings at end of January.  We’ve still got plenty of time on our options.  Sit tight for the next leg higher.  Resistance is at $54 and $60.  Support is at $35 and $31.50.

  MCP March 2011 $45 Calls
MCP is turning into a juggernaut!  China announced they’re cutting their rare earth element export quotas by another 10% in 2011.  This has lit a fire under MCP and other non-Chinese rare earth producers.  MCP was briefly over $55 yesterday and our option hit a peak gain of 426%!  Congratulations to everyone locking in massive gains on this move.  Clearly the speculative bull market in rare earth element companies has paid off very nicely for us.

  ADBE January 2011 $27 Calls
ADBE’s post-earnings bullish momentum continues to push the stock higher.  Our option is within pennies of reaching a new high.  We’re sitting on gains of more than 140% as I write.  Aggressive traders should continue holding for the next leg higher. The next resistance is at $33.50.

Category: EOT Update

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