EOT Position Update – February 4, 2009

February 4, 2009

Market Snapshot

Well, today we’re closing below the 8,000 mark on the Dow.  Just last week we were above 8,400 on the Dow.  The volatility in the market continues!

The big news this week…

The Super Bowl.  Congratulations to the Pittsburgh Steelers.  Despite losing, I must tip my hat to the Arizona Cardinals.  Good job guys.  Let’s hope we can get a repeat visit to the Super Bowl next year.  Go Cards!

Now for some business news…

Disney missed analyst estimates.  They also announced a work force reduction of some 5% across the board.  Slower sales in their TV Advertising and DVD sales divisions hurt performance.  The stock fell hard on the news.

Despite the fall in oil prices both Exxon and Chevron beat analyst estimates.  Speaking of oil, the commodity continues to trade around that $40 mark… it looks like it may have put in a bottom.

Friday, Amazon shocked the world with an EPS of $0.52 per share.  Analysts were expecting $0.14.  The stock jumped higher by 10 points on the news.

Now for the trade 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.

  ORCL June 2009 $19 CALLS (ORQFT )
Oracle announced an acquisition this week.  The company’s buying mValent, a application configuration management software company.  The stock traded down right after we made our recommendation… some of you should have great entry points. 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 bounced around quite a bit today.  The stock moved from a low of around $10.60 to a high of $11.70.  We’re still in the money on this option.  When tech starts to lead the market higher, expect EMC to move.  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 finally moved above the $41 level yesterday, only to fall back today.  The company announced two things this week, first was the addition of a new director. The other item was their attendance at the Deutsche Bank Small and Mid-Cap Growth Conference.  Management will be presenting to a whole host of potential new investors on February 11.  Let’s see if they can convince some people to buy the stock. Resistance is $44 and $46.50.  Support is $36 and again at $32.50.

  WPI February 2009 $25 CALLS (WPIBE)
WPI continues to shuffle higher, despite the market moving lower.  We’re now well in the money on this trade.  We’re up 128% so far!  These options expire in a few weeks so think about exiting the trade soon.

Parting Shots…

The future of oil prices.

One of the things I’m watching closely is oil prices.  As you may remember, a few months back, oil was heading lower.  We bought puts on Chevron and managed to rack up a pretty good gain… some 766%.

If you noticed in my update above, both Chevron and Exxon reported solid earnings for the last quarter.  Analysts really cut their profit estimates.  I think we should start to see oil prices move higher.  This will help their results even more.

Why higher prices?

Because OPEC and other oil producing nations are starting to cut back on oil production.  This will inevitably lead to higher oil prices down the line.  It may take a few months, but the laws of supply and demand will drive the price of oil.

The trick will be finding the right kind of trade to profit from the move.  That’s something I’m working on these days.  If I find the right opportunity I’ll let you know.

Category: EOT Update