EOT Position Update – February 18, 2009

| February 18, 2009

February 18, 2009

Market Snapshot

Wow, what a difference another week makes.  Two weeks ago we were near 8,400, last week it was 8,000… today were around 7,500 on the Dow.  Clearly we’re retesting the November lows… everyone is waiting to see if they hold.

The big news this week…

The automakers went again hat in hand to the Federal Government.  Looks like their little tide-me-over loan has grown into a huge handout.  They want almost $40 billion in loans.

It just so happens about $40 billion is what the California state government needs as well.  They continue their budget gridlock in “The Golden State”.

JP Morgan and Citigroup both announced a delay in the foreclosure process till March. Looks like they’re bending to the will of Congress.

Wells Fargo wasn’t in on the foreclosure moratorium… instead they announced a one-time charge of $320 million and a cut to expected EPS for this year.

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.

  TM April 2009 $55 PUTS (TMPK)
Toyota was heading lower, having lost 10 points in a few days.  Then the stock rallied today.  This industry is still in tough times… give this trade time to develop.  Resistance levels are $72.50 and $75.  Support levels are $62.50 and $60.

  ORCL June 2009 $19 CALLS (ORQFT)
ORCL was all over the place this week.  I’m still expecting technology stocks to lead the market higher over the next few weeks.  Resistance levels are $18.50 and $20.50. Support levels are $16.50 and $15.50.

  EMC April 2009 $11 CALLS (EMCDM)
EMC trended lower this week in all the economic and market turmoil.  Everyone should have a decent profit on the trade.  We’re still in the money on this option. Resistance levels will be at $13.00 and again at $14.25.  Support levels will be at $9.50 and $8.50.

  APEI March 2009 $45 CALLS (QAZCI)
We continue to move in the right direction… the stock closed trading today at just under $44.  Resistance is $44 and $46.50.  Support is $36 and again at $32.50.

  WPI February 2009 $25 CALLS (WPIBE)
WPI continues to move higher.  We’re up 205% on this trade!  These options expire in two days… exit this trade before the options expire.

Parting Shots…

Dividend Cuts Galore

One of the big challenges in this market is knowing when it’s safe to re-enter the investment pool.  Unfortunately many investors are finding a great white shark cruising the shallow-end.  Every time they wade in, the shark takes off a toe, a hand, and sometimes a leg.

It’s an experience many investors (myself included) are finding tiresome.  Every time stocks look cheap, another shark comes along and takes a bite out of our investment portfolio.

Some investment advisors suggest looking to dividends as a safe way to determine value and make investments.  Sometimes it works… sometimes it doesn’t.

Just look at Pfizer or CBS.  These are major players in their industry, both with long histories of paying investors dividends.  Unfortunately investor dividend history has been thrown in the wastebasket.  Both companies have cut their dividends, and in the process decimated their stocks.

Even when a company doesn’t cut a dividend it gets hammered.

Just look at General Electric (GE).  They came out publicly announcing they’d continue paying the dividend… now the stock is battered every day by investors calling for them to cut the dividend.

It’s ugly out there.  If you’re going to buy into dividend paying stocks, be careful! There are sharks in the pool.

Category: EOT Update

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