EOT position update July 30, 2014

| July 30, 2014

July 30, 2014

Market Snapshot

There has been lots of good news for stocks and the US economy this week.

So far the 2nd quarter earnings season has delivered good results.  At the end of last week, 78% of the companies in the S&P 500 that had reported beat analysts’ estimates.

Today’s advanced 2nd quarter GDP report was a winner too.  Real GDP increased at an annualized rate of 4%… a nice rebound after slumping in the 1st quarter.

And the Fed minutes that were released today showed the central bank still doesn’t have a time frame for the first rate hike.  They stuck with the ‘considerable time’ after the bond purchases are tapered off later this year.

Despite these seemingly bullish data points, the S&P 500 has fallen back about 1% off of the recent high.  However, it’s important to note that the large cap index is still firmly entrenched in a long term uptrend.

One of the most troubling things in the market is the breakdown in the industrial sector.  The cyclical sector has been the worst performing US sector over the last week.

Industrial stocks should be one of the strongest sectors if economic growth is accelerating.  So the recent weakness is either a great buying opportunity or a sign that we could see economic growth disappoint in the future.

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.

ADI September 19th 2014 $50 Calls
ADI held at the technical support level around $50.00 and it’s now attempting to recapture the 200-day moving average.  The quick selloff last week provided us with a great entry point on this trade.  It should continue to bounce back from oversold conditions going forward.  Resistance is at $53.00 and $55.00.  Support is at $48.00 and $47.00.

P August 2014 $30 Calls
P’s quarterly earnings beat expectations and the company raised its 2014 outlook.  But growth of active listeners came up short of expectations.  The number of regular listeners grew 7.5% to 76.4 million users.  Some analysts were expecting the number of active listeners to reach 76.6 or 77 million last quarter.  The shortfall caused many investors to speculate that growth is stagnating… That’s a big deal for a growth stock like P.  So despite the company delivering a better than expected quarter and raising guidance, the stock sold off after the earnings announcement.  The stock will likely rebound from here.  But there’s little chance of the stock achieving our upside targets before this option expires next month.  It’s time to exit this position to conserve capital.

TPLM October 2014 $12.50 Calls
TPLM is holding in a trading range between $11.00 and $12.00.  That’s not surprising given the weakness in the overall stock market and energy stocks.  There hasn’t been any real news for a few weeks and they don’t report earnings until September.  In other words, TPLM has done exactly what it should have given the current information. But that could change quickly.  The ongoing mergers and acquisitions in the energy sector and an earnings announcement between now and when this option expires in October are two catalysts that could send this stock soaring.  Continue holding… Resistance is at $14.00 and $17.50.  Support is at $10.75 and $10.00.

HIMX September 2014 $7 Calls
HIMX successfully held just above our $5.75 support level and surged 9.2% higher today.  The chart pattern for HIMX shows that a bullish reversal is taking shape. Today’s surge seems to have been triggered by better than expected earnings and a big increase in shipments from fellow LCD panel maker AU Optronics (AUO).  These small and medium panel LCD drivers accounted for 53.9% of HIMX’s first quarter revenue.  That bodes well for HIMX when they report earnings next Thursday. 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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