EOT Position Update – January 11, 2012

January 11, 2012

Market Snapshot

The markets are back in full swing.

US stocks finished the first week of 2012 with solid gains.  That’s great news for investor sentiment in the short run.

However, the longer term question still remains… will stocks bounce back from a rocky 2011?

Well, we’re off to a good start…

The most notable development last week was investors ability to ignore the continued troubles in Europe.  For the first time in a while, stocks continued to rise even after less than stellar European bond auctions.

Instead, investors are clearly focusing on domestic news.

In fact, better than expected news about jobs is simply too good to ignore.  The US added 200,000 jobs in December.  And companies created a whopping 212,000 jobs. Both of these numbers easily beat Wall Street forecasts.

And the good news should keep coming in the weeks ahead…

Because earnings season is here again!  That means the next few weeks will be about expectations.

What’s so important about this earnings season is we’ve already seen a high level of warnings.  In fact, one recent report indicates that warnings are at the highest level in more than a decade.

I believe stocks are already pricing in these weaker earnings.  But analysts don’t seem to be in a rush to lower earnings expectations either.  In other words, they still think companies are going to report strong growth ahead.

What’s more, the options market is definitely bullish.

It’s shaping up to be an environment full of mispriced momentum options.  And of course… I’ll be passing them directly to you!

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.

  TGT April 2012 $50 Calls
TGT was just recommended on Monday.  I feel TGT has been unjustly punished on its December same store sales numbers.  What’s more, TGT’s chart shows it’s trading at the low end of its trading range.  It was trading at $48.60 when I recommended the April $50 call options.  Our resistance levels will be at $57.50 and then again at $60.  Support will be at $54, then again at $49.  Go ahead and buy the TGT calls up to our $1.75 buy price.

  GLD March 2012 $166 Calls
GLD is another recent recommendation.  It was trading for $157.20 when we told you to hop into the March $166 calls for $3.05 or better.  I believe gold is still in a long term uptrend and will be a solid trade over the next few months.  Resistance will be at $170 and again at $176.  Support will be at $148 and $140.  Buy these calls up to $3.05 if you haven’t already.

  CAT February 2012 $95 Calls
CAT just passed our $97 resistance level.  Congratulations to everyone cashing in gains of up to 123%!  There’s no question that 2012 is starting the year off well for the industrial industry.  And there’s no better stock to own call options on than CAT. For aggressive traders, there’s no reason to jump out now.  Continue holding for bigger gains.  The next resistance is at $112.  Support is at $88 and $80.

Category: EOT Update