EOT Position Update – July 20, 2011

| July 20, 2011

July 20, 2011

Market Snapshot

Second quarter earnings season is off with a bang.

Tech companies are leading the way.  There’s no doubt about it, Apple’s (AAPL) earnings were impressive.  They made $7.79 per share.  That’s nearly $2.00 more than expected.

But AAPL isn’t the only one posting blowout earnings.

IBM (IBM), Google (GOOG) and VMware (VMW) also beat expectations.  If more tech companies follow suit when they report, the entire tech sector could snap out of its six month funk.

Here’s the bottom line… It would be extremely bullish if tech can retake a leadership role.  Needless to say, I’ll be keeping a close eye on tech earnings.

Unfortunately, the good earnings are set against a toxic backdrop in Washington DC.

Democrats and Republicans really need to come to an agreement about the budget and the debt ceiling.  The game of chicken they’re playing with the country is insanity.

Once the mess in DC is worked out, there’s a good chance we’ll see a new bull market emerge.  But until then, stocks will likely stay in their established trading range.

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.

  BK January 2012 $27 Calls
BK reported second quarter earnings of $0.59 yesterday.  They beat estimates of $0.56 but the stock didn’t respond.  The custody bank said the increased earnings came from revenue gains as demand for their products increased.  They’re also working on a plan to cut costs.  At this point, BK looks like a screaming buy to me.  It’s near support of the lows of the last few years.  The stock is clearly cheap… It has forward PE of under 9x and a price to book of under 1.0.  I can only see BK moving higher from here.  Continue holding these call options… Resistance is at $28.50 and $30.50. Support is at $24 and $23.

  MAR January 2012 $37 Calls
MAR reported earnings last week.  The hotel operator posted solid revenue and earnings growth.  But management’s outlook for the current quarter rained on our parade.  They said revpar (revenue per available room) would be less than expected. But I’m not ready to throw in the towel… We still have plenty of time until our options expire in January.  Continue holding these call options… Resistance is at $40 and $45. Support is at $32.50 and $30.

  APKT August 2011 $60 Puts
APKT reports earnings tomorrow after the markets close.  If today’s price action is any indication, then our put options should be sitting pretty.  APKT fell more than 10% today!  Analysts are expecting earnings growth of 50% tomorrow.  If they come up short, this overpriced tech stock is going to get crushed.  Continue holding for the earnings report… Resistance is at $80 and $85.  Support is at $56 and $50.

  SBUX January 2012 $38 Calls
SBUX had a big surge in June.  And it’s held onto those gains as it consolidated over the last few weeks.  Now the 20-day moving average has caught up with the price. This is a bullish technical setup.  We should see SBUX and our options move even higher in the days and weeks ahead.  Continue holding for bigger gains.  The next resistance is at $45.  Support is at $32.50 and $30.

  POT September 2011 $60 Calls
POT jumped higher this week.  And our call options hit a new peak gain of 80%! Mosaic (MOS), one of their biggest competitors, beat earnings as demand for fertilizer sent revenue surging 54% higher.  If POT follows suit next week when they report earnings, the stock and our call options should soar.  Continue holding for the earnings announcement… Resistance is at $62.50 and $70.  Support is at $50 and $48.

  WPRT October 2011 $30 Calls
WPRT is close to breaking out to new all time highs.  And it’s only a matter of time until they do.  Natural gas as an alternative transportation fuel is just beginning to hit its stride.  And WPRT is major player in developing engines that run on natural gas. Continue holding for the next leg higher.  Resistance is at $30 and $35.  Support is at $20 and $17.50.

Category: EOT Update

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