EOT Position Update January 22, 2014
January 22, 2014
Market Snapshot
The sluggish start to 2014 continued this week. The S&P 500 is down slightly year-to-date.
The poor performance hasn’t put a damper on investor sentiment. Everyone from fund managers that oversee billions of dollars in assets to everyday do it yourself investors are bullish on stocks right now.
When the current market psychology gets overly bullish, it’s often times a contrarian indicator. In other words, crowded trades that everyone expects to work often turn out to underperform… or even worse, they can blow up in your face.
The first week of earnings was a mixed bag. There were a number of stocks that reacted positively to their earnings and an equal number that took a hit when they didn’t live up to expectations.
If the earnings season continues down this path, we could see the first major correction in more than a year. But it’s too early to make that call.
The bulls are still in control of the market. The bears have been run over time and time again during the last year. And until the bullish momentum is broken, I’ll continue to focus on the upside with call options.
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.
EIGI May 2014 $15 Calls
EIGI is our latest trade. This relatively unknown company has a tremendous amount of upside after its recent IPO. Give this one some time to get on track… This could be a huge winner as it picks up momentum. Resistance is at $20.00 and $22.00. Support is at $12.00 and 11.00.
CMLS March 2014 $7.50 Calls
CMLS has been a hedge fund favorite over the last year. But the recent selloff is clear indication something has changed. This is now a broken momentum stock. And there’s nothing worse than a broken momentum stock. It’s time for everyone but the most aggressive traders to cut this one loose. CMLS could bounce back but there will be better opportunities than this down the road.
SPR April 2014 $35 Calls
SPR had another big day today and closed at $35.89. Our options are now firmly in the money. Our option is up 31%. And there’s still more upside from here. Continue holding… Resistance is at $38.00 and $40.00. Support is at $31.00 and $30.00.
CRM February 2014 $52.50 Calls
CRM continues to go up and up and up! I was clearly too conservative with my estimates for this one. The stock is now up 19% and our option hit a new high of $8.85 today. That’s an eye-popping gain of 259%!
C March 2014 $57.50 Calls
C… what can I say about Citigroup? They got their tail kicked by the other big banks last quarter. They executed poorly. Then they blamed others. Any momentum C had is out the window. Now’s the time to sell these options to conserve capital.
GE February 2014 $28 Calls
The fallout from GE’s quarterly earnings is shocking to me. I liked the report. I like the direction the company is going. It’s on the way to becoming a much less complex and easier to value company. And that type of transformation typically drives the multiple higher. Yet, investors have reacted to the latest earnings very negatively. The momentum has clearly turned against GE. And in the few short weeks we have until these options expire – that’s really all that matters. It’s time to sell these options to conserve capital.
Category: EOT Update
