EOT Position Update – July 1, 2015
Market Snapshot
It’s been another week dominated by talk of Greece and China.
If the Greek tragedy that’s unfolding were a movie, we would be on the 8th hour of the 6th sequel of the long running story. Most people didn’t care enough to bother showing up to pay attention. Most of those that did show up have left or have fallen asleep. And anyone that’s still paying attention has no clue what’s going on.
This is truly a messed up situation without any good solutions.
The silver lining for investors is the debt that Greece will default on is held by central banks. The ECB has spent the last five years shifting the risk from private institutions to government run agencies.
All of the fear mongering about the potential for Greece to trigger an event like Lehman Brothers in 2008 is simply nonsense. But until a resolution is reached, it will create enough uncertainty to keep a lid on investors’ risk appetites.
Speaking of risk appetites… Chinese investors are losing theirs.
The Shanghai Composite has lost 21% in a little more than two weeks. And the Shenzhen market has declined by 25% over the same time period.
Despite the recent declines, the Shanghai Composite is still up 25% this year. And the Shenzhen Composite is up an eye-popping 65%… that’s the best performance of any global index this year.
These Chinese stocks have been carried higher by leverage, government stimulus, and good old fashioned greed. The key to the remarkable run for Chinese A-Class Shares has been bullish investor sentiment. Now it appears that the enthusiasm for these stocks has peaked. There’s no telling how bad it could get if investor sentiment continues to sour.
Through it all, the S&P 500 has remained mired in the trading range that has dominated the index for months on end… and that‘s after one of the worst selloffs of the year on Monday.
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.
LUV August 21st 2015 $36 Calls
LUV has been holding up well despite the overall weakness in stocks. But a new report about a Justice Department investigation into airline collusion is coming to light. Needless to say, this is an expected development. The initial knee jerk reaction sent the stock below our $33.00 support level. Conservative traders should sell this option to close this trade now. Resistance is at $38.25 and $40.00. The next support is at $30.00.
TAN July 17th 2015 $45 Calls
TAN has unloaded its shares of Hanergy, the troubled Chinese solar stock. But solar stocks haven’t been able to buck the overall weakness in stocks due to the uncertainty in Greece. The ETF is holding between our support and resistance levels. Continue holding for an uptick fueled by the end of the Hanergy saga and an increase in risk appetite after a Greek resolution. Resistance is at $46.00 and $49.00. Support is at $38.00 and $34.00.
GDDY August 21st 2015 $24 Puts
Reality has set in for the GDDY speculators that sent the stock soaring as high as $33.00 per share last week. The stock has plummeted more than 14% in the last week or so. Like I’ve said all along, this company has some serious question marks that were being ignored. I don’t see the dramatic selloff coming to an end any time soon. Aggressive traders still have plenty of time for this stock to crash lower before the option expires.
Category: EOT Update
