EOT Position Update – January 21, 2009

| January 21, 2009

January 21, 2009

Market Snapshot

The last three weeks the market has done nothing but fall… At the start of 2009 the Dow Jones Industrial Average peaked at around 9000.  Today we’re trading around that 8,000 level and threatening to go lower.

The big news this week…

The highlight of the week, the Arizona Cardinals win on Sunday.  The thrilling game gave quarterback Kurt Warner a big win and punched his ticket to the Super Bowl.  The entire state is abuzz with excitement.  Watch out Steelers, here come the Cards!

In the category of “Miracles Do Happen,” a US Airways flight safely landed in the Hudson River.  Amazingly everyone survived.  The sight of a huge Airbus A320 floating down the Hudson was… incredible.

Now for some business news…

The US Dollar is showing quite a bit of strength.  This is pushing other currencies and commodities lower.  The cause of the strength is a resumption of fear in the markets. The banking crisis continues to worsen not only in the US but also in Europe and the UK.  The British Pound is at a 25 year low.

IBM (IBM) crushed analyst expectations beating earnings estimates for the quarter by $0.25 and increasing earnings expectations for the year.  Clearly they have figured a way to sidestep the recession and the falling demand for servers.

Banking stocks are down substantially over the last week.  Bank of America, Citibank, even Wells Fargo and JP Morgan are getting hammered.  RBS – the stalwart UK bank posted a huge loss (almost $40 billion US Dollars).  They all can’t go out of business, can they?

President Obama took the oath of office.  The parties were huge, the spending lavish. Lots of confidence in this new President.  Let’s hope it gives the economy a boost.

State Street had a huge loss this week as well… The stock’s down more than 50%.

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.

  EMC April 2009 $11 CALLS (EMCDM)
This was a new trade from yesterday.  Everyone should have had the opportunity to get a good position in the option.  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)
The stock moved higher, breaking above $41 late last week.  We’re still early on the trade, give it a little more time.  Resistance is $44 and $46.50.  Support is $36 and again at $32.50.

  WPI February 2009 $25 CALLS (WPIBE)
This stock has done nothing but move the wrong direction.  Watch this closely as we’re nearing the first support levels.  Everyone should consider conserving capital if we hit these levels.  Resistance is at $25.50 and $27.  Support levels are $22 and $21.

Parting Shots…

Subscriber Question:  Brian, why do you talk about moving averages and support and resistance levels in your trade alerts?

Importance of Technical Analysis:

If you follow the markets at all, you’ll notice a great many commentators starting to talk about technical analysis.  It’s just now that they are able to grasp the power of the information that can be gleaned.  Using technical analysis is nothing new for us.

Some investors focus entirely on fundamental analysis.  There’s nothing wrong with that.  However, these investors tend to miss out on some important information.

Technical analysis looks at the price action of a security.  Technical analysts look at how a stock has moved over time.  The idea is to profit by following patterns that repeat themselves.  Technical analysis takes into account many things like high and low prices, moving averages, trading ranges, channels, and other patterns.

Technical analysts are only looking for patterns.

I like to combine both fundamental and technical analysis.  Fundamental analysis can identify major movements in the market.  Technical patterns can confirm my analysis and help determine entry and exit points.  That’s why I try to highlight important technical indicators that might impact a trade.

Category: EOT Update

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