EOT Position Update – December 7, 2011

| December 7, 2011

December 7, 2011

Market Snapshot

Volatility reigns supreme…

It’s simply mindboggling to watch.  Stocks are swinging from euphoric highs to depressing lows and back again.

Consider this…

During the last four months, the S&P 500 has had 8 advances and 8 declines of 5% or more.  To put that in perspective, there have been entire years where the S&P hasn’t moved 5% higher or lower.  Yet, we’ve had 16 of these gut-wrenches in the last four months!

What’s behind the increase in volatility?  You guessed it… Europe.

The European sovereign debt crisis is the only story that matters.  As a result, stocks rally when investors’ hopes for a solution are high.  And they fall when those hopes are dashed.  It’s a disturbing cycle to say the least…

Simply put, stocks aren’t going anywhere until Europe is fixed.

What’s more, the chart of the S&P 500 shows a bearish technical setup.


Right now, the S&P is bumping up against a dual layer of resistance.  The first level is the 200-day moving average (gray line).  And the other one is the March and June lows (blue line).

Both of these levels are strong technical resistance on their own.  And when they overlap like they are now, it’s like a ceiling of bullet proof glass just overhead.

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.

  DNKN March 2012 $22.50 Puts
DNKN is our newest trade.  Our put options are down a few cents since our trade alert went out last Friday.  This looks like a great buying opportunity to me.  DNKN is facing stiff competition and insiders are selling out in a secondary offering.  Those are stiff headwinds for any company to overcome.  Go ahead and buy these puts up to $2.00. Resistance is at $27.50 and $29.  Support is at $20 and $19.

  PLCE January 2012 $50 Puts
PLCE is bumping up against stiff resistance at $55.  And until PLCE can break above this key level, I believe PLCE is destined to fall.  Don’t forget, strong consumer spending has been driving retail stocks higher lately… but PLCE hasn’t participated in this move.  This is a clear sign of weakness.  Continue holding… Resistance is at $58 and $60.  Support is at $45 and $40.

   NFX January 2012 $50 Calls
NFX announced more positive news last week.  They signed a crude oil supply agreement to provide Tesoro (TSO) with 18,000 barrels per day.  What’s more, the stock is in a strong uptrend off of the October lows.  Our option hit a peak gain of 39% last week.  But I believe the best is yet to come.  Continue holding for bigger gains… Resistance is at $51 and $56.  The next support is at $35.

Category: EOT Update

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