EOT Position Update – July 6, 2011

| July 6, 2011

July 6, 2011

Market Snapshot

A big rally for stocks across the board…

The last few weeks of bullish trading sent stocks soaring.  They’ve jumped from near the lows of this year’s trading range to the high end of the range.  But it’s nothing to get overly excited about…

Just take a look at this chart of the S&P 500…



As you can see, the recent rally didn’t change the market’s technical picture one bit. Stocks are still in a trading range.  Clearly, stocks are in consolidation mode at this point.

And it doesn’t help that the economic data is mixed.  Some is good and some is bad…

For instance, on Friday the ISM Manufacturing Index came in better than expected.  It showed manufacturing activity accelerated more than expected in June.  It contradicted other data from the Fed showing manufacturing contracted in June.

If nothing else, the economic outlook is hazy…

It’s a lot like looking out my office window after the massive dust storm rolled through Scottsdale last night.  I can see the buildings next door but the mountains in the distance have completely faded from view.

In similar fashion, I think market forecasts for anything beyond the very short term are just a shot in the dark.

The good news is option trading can generate profits whether stocks are sinking or soaring.

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.

  MAR January 2012 $37 Calls
MAR is off to a good start.  An analyst at Lazard Capital Markets initiated coverage on MAR with a buy rating today.  That’s great news… Obviously, we think MAR has big upside as well.  Continue holding for bigger gains ahead.  Resistance is at $40 and $45. Support is at $32.50 and $30.

  STEC November 2011 $17 Puts
STEC is trading in a tight range between $16 and $18.  However, management continues to be overly optimistic about sales projections.  Now, inventory levels are rising in anticipation of those future sales.  This situation could get ugly if they don’t deliver on those expected sales.  I think there’s a good chance STEC will disappoint investors with weaker than expected revenue and earnings.  Continue holding while we wait for the next shoe to drop.  Resistance is at $19.50 and $22.  Support is at $14.50 and $12.

  APKT August 2011 $60 Puts
APKT moved higher this week.  But the stock is still firmly entrenched in a downtrend off the April high.  Now APKT is at resistance of the 50-day moving average.  This high flying tech stock looks overvalued to me.  Management will report earnings in a few weeks.  If revenue and earnings growth don’t meet investors lofty expectation, it could get ugly in a hurry.  Continue holding APKT… Resistance is at $80 and $85. Support is at $56 and $50.

  SBUX January 2012 $38 Calls
SBUX is showing no signs of slowing down.  The coffee makers stock is up more than 11% since our trade alert went out.  The big move sent SBUX through our $40 resistance level.  Our option hit a peak gain of 88% yesterday!  Congratulations to everyone locking in those impressive gains.  The next resistance is at $45.  Support is at $32.50 and $30.

  POT September 2011 $60 Calls
POT is building momentum.  After a long consolidation period, POT is looking good.  The fertilizer company finally broke through the downtrend off the February high.  It’s on the verge of setting a higher high for the first time in months.  We’re beginning to see technical indicators confirm the bullish fundamentals we’ve been talking about for months.  Continue holding… Resistance is at $62.50 and $70.  Support is at $50 and $48.

Category: EOT Update

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