EOT Position Update – July 7, 2010

| July 7, 2010

July 7, 2010

Market Snapshot

The markets bounced back from oversold conditions today.  It’s not surprising to see a relief rally.  Stocks were down almost every day for two straight weeks.

But there’s one thing today’s rally lacked.  It’s the same thing all of the single day rallies since April have lacked… Volume!

Below average volume is a sure fire signal the big money still isn’t buying.  And as long as the institutional money is selling or on the sidelines, a sustained rally will be tough to come by.

The bottom line is… Today’s rally doesn’t change the technical picture one bit.

The bull market off the March 2009 low is over.  There’s an emerging downtrend in the S&P 500.  But it’s too early to say we’re in a bear market.

The good news is… Right now, conditions are ripe to play both sides of the market.  We should see stocks making big moves this earnings season.

Strong companies who’ve been beaten down in the market correction have huge upside potential.  And weaker companies will get punished if their earnings don’t live up to expectations.

Any way you slice it, we’re sure to get some fireworks next week when earnings season swings into high gear.

I’ve got a new trade in the works right now.  I’m expecting it to get a nice pop off their earnings announcement.  So keep an eye out for the trade alert in the next 48 hours.

Now for 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.

  JNJ October 2010 $62.50 Calls
JNJ’s broke out of its month long consolidation pattern today.  A breakout from a consolidation pattern is a very bullish sign.  We’re showing a nice 28% gain on our option right now.  But we still have plenty of time for JNJ to continue its run higher. Hold tight for now.  Resistance is at $62.50 and $65.  Support is at $57.50 and $55.

  RIG August 2010 $40 Puts
RIG’s downtrend remains firmly in place.  And today the European Union energy chief urged a ban on new offshore oil drilling.  I said in the trade alert it was only a matter of time before this happened.  If more bans on offshore oil drilling are enacted around the world, RIG’s going to head much lower.  Hold tight for RIG’s next leg down. Resistance is at $56.75 and $64.  Support is at $40 and $35.

  ENS September 2010 $22.50 Puts
ENS broke through its recent low to the downside this week.  Our option is now in the money by more than $1.  Remember, ENS’s business is very sensitive to economic growth.  They’re betting growth in European markets will drive earnings growth this year.  I think it’s a pipedream.  ENS should continue moving lower as fears of a slowing economy weigh on investors.  Hold tight for now.  Resistance is at $25.50 and $27. Support is at $20 and $19.

  WFC July 2010 $28 Puts
WFC fell through our second support level last Thursday.  Aggressive traders should have locked in a 75% gain when WFC dropped below $25!  Congratulations on a successful trade.

  ASIA October 2010 $30 Calls
ASIA is developing a new uptrend off the May low.  It has set two higher highs and two higher lows since May 25th.  The Chinese IT company has been growing earnings at an impressive pace over the last two years.  They’ve delivered better than expected earnings seven straight quarters.  They’ll report their most recent quarter’s results in a few weeks.  Hold tight for the earnings announcement.  Resistance is at $29.50 and $32.  Support is at $18 and $16.

Category: EOT Update

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