EOT Position Update – February 4, 2015
Market Snapshot
It’s been an interesting start to the year for US stocks.
The S&P 500 finished the month without making a new high. And each of the rallies this year made a lower high going back to the December 29th high.
This has clearly been a period of consolidation for large cap US stocks. However, it’s important to note that the correction is taking place within the price channel of the long term uptrend.
Don’t forget that the S&P 500 is above the 200-day moving average… a key support line many investors pay close attention to. And the large cap index is up 16% from a year ago.
In other words, the period of weakness hasn’t done any major damage to the bullish long term uptrend.
Nevertheless, the weakness for US stocks has been widespread. Out of the nine sectors, only utilities and healthcare are up year-to-date.
One of the main reasons for the weakness in stocks has been an uptick in uncertainty. That uncertainty has been created in large part to the drop in oil prices and volatility in the global currency markets.
Another reason for the weakness in US stocks has been 2015 earnings estimates.
The energy sector is leading the way in downward earnings projections as oil prices fell below $50 per barrel. But weaker than expected earnings forecasts have been seen in companies in every sector.
We’ve seen this time and time again from corporate America. They come out with weaker than expected earnings forecasts in order to have better-than-expected earnings when companies actually report earnings.
It’s a silly game… but it’s one that publicly traded companies, as well as the analysts that cover them, love to play.
One thing that has benefited from the drop in oil prices has been consumer sentiment. The University of Michigan’s Survey of Consumers reached an 11 year high last month.
The way I see it, this period of weakness for US stocks won’t last long.
Let’s move onto the updates…
Position Updates
Just a quick note: Remember, we won’t update every open position every week. We try to focus on the positions that have some significant news or price movement.
STI April 17th 2015 $41 Calls
STI has moved up 2.2% to $39.87 in the last week. That small move has sent our stock option soaring higher. The option reached a new high of $0.85 today. Upon further inspection of STI’s chart, it could run into resistance around $40.00. The stock has reversed lower at this price several times over the last year. If you’re a conservative trader, you might want to sell this option to close out the trade and pocket these quick profits. That being said, I’m still bullish on the stock… and if STI breaks out above $40.00, I think it will quickly run toward our $42.50 and $45.00 price target before the option expires in April. Support is at $37.50 and $35.00.
FAST February 20th 2015 $48 Calls
In today’s quarterly earnings report, FAST announced that they missed revenue estimates in the 4th quarter. Obviously, that’s devastating news for our call option. Barring an incredible recovery in the next few weeks, aggressive traders still holding this option will likely see it expire worthless in a few weeks.
GLOG February 20th 2015 $20 Calls
GLOG is up nearly 10% in the last week. The tide is finally beginning to turn in our favor after the stock has been unfairly punished for being associated with energy stocks over the last few months. Aggressive traders should continue holding… Resistance is at the 200-day moving average – currently $23.02. Support is at $15.00.
Category: EOT Update
