EOT Position Update – February 3, 2010

| February 3, 2010

February 3, 2010

Market Snapshot

The roller coaster ride continues…

Last Friday the U.S. fourth quarter GDP numbers were released.  It came in at a smokin’ hot 5.7%.  A full percentage point higher than the 4.7% economists were forecasting.

We’ve also seen a number of bellwether firms like Intel (INTC) and Microsoft (MSFT) blow out earnings estimates.  Despite the seemingly good economic data flowing in, the markets have made a hasty retreat.

As I pour through the data and look at chart after chart, I’ve come to the conclusion the recent selloff is nothing more than a technical pullback.

You see, the one chart I keep coming back to is the recent trend change for the Dow and the S&P 500.  Back in December, both indexes crossed over long term downtrend lines to the upside.  This made the uptrend since March the new dominant trend. (Sounds good so far.)

The problem is we’ll often see an index or stock come back and test the support line of the breakout before eventually moving higher.

Take a look at this chart of the S&P 500.  (The Dow looks almost identical.)


You’ll see the markets have bounced over the last few days after reaching support of the downtrend.

Now it’s not out of the question for the markets to trend flat or down for a period of time before resuming their march higher.  But I think the downside is limited at this point.

Hold tight, it’s only a matter of time before we’re back to retesting the recent highs.

Now for 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.

  SWKS May 2010 $15 CALLS
SWKS continued to fall for a few days after the trade alert went out.  But over the last few days, we’ve seen SWKS bounce back from support.  Hold tight, we still have plenty of time for SWKS to work out.  Resistance is at $16.50 and $18.  Support is at $12.25 and $11.50.

  LVS Mar 2010 $19 CALLS
LVS continues to hug the support line of the downtrend it broke through in early January.  Recently the gaming industry began to see some favorable year over year and month to month revenue increases.  If this trend shows up in the earnings report in a few weeks, our options will be a winning ticket.  Hold tight for now.  Resistance is at $21 and $25.  Support is at $15 and $13.

  CSCO Apr 2010 $24 CALLS 
CSCO closed just below our first support level before reversing course and moving higher.  Aggressive traders should keep an eye on CSCO’s quarterly earnings report today after close.  The consensus earnings estimate is $0.30 per share, but whisper numbers are as high as $0.37.  If they’re able to beat these estimates on strong revenue, we should see a good pop.  But nothing is certain judging by investors reactions to other positive earnings reports lately.  Resistance is at $26 and $29.  The next support level is $20.

  SBUX Apr 2010 $22 CALLS (SSUDV)
SBUX is holding at support in the area of its previous breakout.  Aggressive traders should hold tight.  We still have plenty of time for the market and SBUX to regain their momentum.  The next resistance is at $26.  Support is at $18.50 and $17.

  MCRS Mar 2010 $30 CALLS (MFKCF)
MCRS has started to recover over the last few days.  Management will report their quarterly earnings tomorrow after the markets close.  Aggressive traders should hold tight for the report.  And we still have a few months before our options expire.  The next resistance is $33.  Support is at $25 and $22.50.

***Editors Note***

Option Symbology is set to change by February 12, 2010.  That means a new method for identifying options is currently being put in place.  Some of you will see it before others but February 12 is the cut off for all firms to be in compliance.

What does this mean for you?  The current five character option ticker will be a thing of the past.  It’s being replaced by a new option ticker format.

Here’s what it breaks down to.

The new option ticker will be expressed as:  Root + Expiration + Strike + Type.

Root = the ticker symbol of the underlying stock.
Expiration = the expiration date of the option.
Strike = the strike price of the option.
Type = Call or Put.

The good news is we already give you all of the information for the new ticker in the trade alert.  The bad news is the new ticker is going to be longer.  And to top it off, individual brokerage firms may generate their own tickers for use only on their platform.  So make sure to check with your broker.

Category: EOT Update

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