EOT Position Update – February 2, 2011

| February 2, 2011

February 2, 2011

Market Snapshot

It’s a slow day on Wall Street today…

A combination of cold and snowy weather across much of the country seems to have put a lid on investor activity today.  Trading volume on Dow, S&P 500, and NASDAQ stocks are all well below average.

And don’t forget China starts their lunar New Year celebration today.  This could lead to weak trading volume across the board for the next week.  Chinese markets will resume trading on February 9th…

Last Friday, we saw some panicked selling as political unrest swept into Egypt. Investors dumped stocks out of fear the entire Middle East region would be thrown into disarray over the weekend.

It turns out their fears were unfounded.  The protests have been mostly peaceful and successful for that matter.  As a result, we’ve seen stocks bounce back from Friday’s selloff rather quickly.

The rebound has been led by the usual subjects…. Oil & Gas, Technology, Industrials, and Basic Materials.

We also had a very strong ISM Manufacturing Report yesterday.  US manufacturers said orders rose to a seven-year high!  And the component representing factory employment gained to its highest level since 1973!

The upbeat manufacturing data is a good sign the economic recovery may finally be able to survive without government life support.  And that’s great news for the economy and our call 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.

  RIO July 2011 $80 Calls
RIO is the trade we rolled out earlier today.  You can find more details in the trade alert… Resistance is at $80 and $85.  Support is at $65 and $60.

  MCD June 2011 $80 Calls
MCD hasn’t responded as well as I would have liked post-earnings.  The good news is MCD is holding above a strong technical support zone.  And the international growth they’re ramping up across Asia gives them a nice growth stock quality they’ve been lacking… The bottom line is the fundamental outlook for MCD is still good.  And to top it off, our options don’t expire until June.  So give this one a little time… Resistance is at $80 and $85.  Support is at $70 and $67.50.

  DO June 2011 $79.25 Calls
DO’s stock price has bounced around the last week.  Investors are weighing what the impact of a shutdown of offshore drilling in Egypt will have on the company.  Look, DO is trading at a P/E of 10.  It’s undervalued even if their two rigs near Egypt are shutdown permanently.  The good news is an analyst over at Standpoint Research agrees.  They initiated coverage on DO with an $88 price target… Hold tight for the next leg higher.  Resistance is at $80 and $85.  Support is at $64 and $62.

  AUY April 2011 $12 Calls
AUY continues to claw its way back.  At this point, it’s really all about gold prices.  And I think gold is due for a rally.  Sit tight for now.  Resistance is at $14 and $17. Support is at $11 and $10.

  CNH June 2011 $55 Calls
CNH disappointed with their latest earnings.  They actually beat earnings estimates but it was primarily due to a one-time tax benefit.  Their US sales didn’t disappoint but weakness out of Europe was much more than I expected.  The good news is we’re still up on our option.  And I’m still bullish on CNH and the Agribusiness sector in general. CNH has bounced back nicely over the last few days.  Aggressive traders should continue holding.  The next resistance is at $60.  Support is at $35 and $31.50.

Category: EOT Update

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