EOT position update July 2, 2014

| July 2, 2014

July 2, 2014

Market Snapshot

Happy Fourth of July.

I hope you all get to enjoy a fantastic Independence Day celebration.

We have plenty of economic data to digest this week as we move through the holiday shortened week.  Not surprisingly, the data we’ve received this week shows that US economic growth is sluggish.  That’s just par for the course during this recovery.

That’s good news for the stock market that’s enjoying the moderate growth, low interest rates, and quantitative easing.

After reading up on the revision to first quarter GDP (a stunning 2.9% annualized drop), there’s little doubt that the first quarter was saved by massive stock repurchases.

And I can’t blame companies for turning to stock buybacks to keep earning per share growth in line with analysts’ estimates.  After all, reducing the number of shares outstanding is the simplest way for a company to boost earnings per share.

It’s an even more attractive option when interest rates are so low.  So, we’ll likely see companies add even more debt to repurchase shares while interest rates remain low.

In other words, the stock market is likely to stay on the same trajectory it has been on over the last few years.  At least until the Fed ends QE in October.

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.

P August 2014 $30 Calls
P is off to a nice start.  This momentum growth stock has regained its bullish momentum.  Look for this upswing to carry P up to our first resistant level.  Resistance is at $32.00 and $36.00.  Support is at $24.00 and $22.50.

TPLM October 2014 $12.50 Calls
TPLM is part of the US onshore oil and gas boom.  This trade was a little overbought, but after a quick selloff, it has rebounded and consolidated its recent gains.  There’s a reason I chose the October option… I wanted to give this one enough time to play out.  So don’t worry about time value decay, the dip in the VIX, and lower volatility in TPLM driving the value of this option down… it should be temporary.  I don’t worry about time value decay until we get into the last 3 or 4 weeks until expiration.  After all, TPLM has the potential for big moves over a short period of time.  Continue holding… Resistance is at $14.00 and $17.50.  Support is at $10.75 and $10.00.

HIMX September 2014 $7 Calls
HIMX hired an outside firm to handle investor relations.  That’s good news… HIMX is embroiled in a high stakes battle between the bears and bulls.  And there’s a lot of misinformation out there right now.  If the new company can clear up and communicate to investors better than they have up to this point, it could swing the tide in our favor.  Continue holding… Support is at $5.75 and $5.00.  Resistance is at $9.00 and $11.00.

Category: EOT Update

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