EOT Position Update – January 14, 2015
Market Snapshot
The stock market has started out the year with an increase in volatility. There have been several cases of the market swinging more than 1% higher or lower during the day.
As a result, bullishness among investors has fallen over the last few weeks.
We have also seen several indicators of fear creep into the market. Whenever fear is the dominant emotion driving investors’ actions, there’s a higher probability of a pullback.
And today’s report on retail sales isn’t doing anything to soothe investor fears…
US retail sales came up well short of expectations. Overall, sales dropped 0.9% last month. That’s the biggest decline in a year.
The bulk of the drop was due to lower gasoline sales because prices at the pump are cheaper. But consumers didn’t spend the money they saved at the pump at other retailers.
What’s more, the retail sales for October and November were also revised lower. Needless to say, US consumers aren’t spending money like many assumed they would with an uptick in employment and a drop in gas prices.
And no market update is complete without mentioning oil prices…
Oil prices have simply collapsed over the last six months from over $100 to around $45 per barrel today. And they appear to be headed even lower… The price of WTIC oil is widely expected to fall below $40 per barrel as the supply glut peaks during the first half of the year.
Needless to say, the impact of cheap oil will ripple through the entire global economy. And it’s too soon to say whether it will end up being a net positive or a net negative.
One thing’s for sure, US shale oil producers are being squeezed. Expect to see US oil production decline quickly in the next few months. That could spell trouble for all sorts of companies that have profited from the rapid expansion of US oil production.
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.
FAST February 20th 2015 $48 Calls
FAST has taken a step back after the disappointing US retail sales report today. The stock fell through our $44 support… that’s the cue for conservative traders to exit the trade to conserve capital. The company will report 4th quarter and full year earnings tomorrow before the market opens. Aggressive traders should keep a close eye on the price action tomorrow. If FAST delivers a solid quarter, it should make a run at our $48.00 and $50.00 resistance levels.
WBA January 16th 2015 $32 Calls
Walgreens made another run at our $78 resistance level last week. It gave us another chance to capture big profits on this trade. Congratulations to everyone that doubled their money or better on this trade.
WWWW January 16th 2015 $17.50 Puts
Our put option on WWWW is now in the money. So make sure to sell this option to close this trade out before the markets close on Friday.
GLOG February 20st 2015 $20 Calls
GLOG continues to be range bound. The drop in oil prices has turned investor sentiment bearish toward any company that’s tied to the energy sector… and GLOG is no exception. As I’ve said before, I think GLOG is being unfairly lumped in with other energy stocks. There’s still a chance GLOG could make a run back the 200-day moving average before these options expire next month. Continue holding. Resistance is at the 200-day moving average – currently $23.59. Support is at $15.00.
Category: EOT Update
