EOT Position Update – January 13, 2016
Market Snapshot
The selloff to begin 2016 is the worst since 1930. There’s no way to sugarcoat that… it’s just an awful start to the year.
The selloff has hit the best performing stocks of 2015. Facebook $FB, Amazon.com $AMZN, and Alphabet $GOOGL have all seen their stocks move lower with the selloff.
Right now, everyone is focused on oil and China.
China’s stock market has taken a 17% nosedive in 2016. And there are signs that their economic growth will continue to slow in 2016. China has been the engine of global economic growth for the last decade. Now it’s not.
And the selloff for oil has been even more stunning. The price of a barrel of oil is down 19% this year.
Put simply, the oversupply of oil is even worse than we thought. Now there are calls for oil to reach $20 or even $10 per barrel this year.
Despite these ominous selloffs and dire forecasts, the Fed continued to say they could raise interest rates four times in 2016. They believe oil will rebound (many are still projecting oil at $57 per barrel) and inflation could become a problem.
Needless to say, there’s a big disconnect between the Fed’s forecast and those in the private sector.
Fourth-quarter earnings are the one thing that could recharge the market. Earnings estimates have been slashed and forecasts are predicting a 6.7% decline in profits from companies in the S&P 500.
We’ve seen similar predictions in the 2nd and 3rd quarter that proved to be overly pessimistic. When the real numbers were reported, it helped lift US stocks.
The last day to trade January options is Friday. Close out any open positions that are in-the-money.
Now, 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.
INTC March 18th 2016 $33 Calls
INTC is one of a few stocks showing relative strength in an ugly market. The stock is holding above the 200-day moving average. Many technical indicators that monitor market momentum are at levels where we typically see stocks stage a rally. INTC and our call option is in a great position to profit from this rally. Support is at $31.00 and $30.00. Resistance is at $33.00 and $35.00.
Category: EOT Update
