EOT position update June 11, 2014

| June 11, 2014

June 11, 2014

Market Snapshot

If you were expecting a quiet summer for stocks… you’ve been disappointed by the market’s recent performance.  The ‘Sell in May and go away’ crowd is missing out on a whopper of a rally over the last month.

Over the last month, the S&P 500 is up 4.3% and recently made a new all-time high of 1,955.  At this rate, the S&P could reach 2,000 before the summer is out!

What’s behind the recent surge?

First off, the three biggest threats to stocks have dissipated over the last few weeks. The situation in Ukraine/Russia has calmed down, small-cap stocks have rebounded, and financials have found solid footing.

This is reassuring to investors.  Right now there’s no major threat that could send stocks spiraling downward.  In other words, investors feel that it’s safe to be in stocks.

What’s more, we have a Goldilocks scenario for economic growth in the US.  It’s not too hot and it’s not too cold.

We continue to see solid economic data from things like factory orders, motor vehicle sales, and growth in consumer credit.  These are signs of a cyclical upturn and a strong consumer.

But at the same time, the employment and inflation data show that the economy isn’t running too hot.  That means the Fed will be able to keep their very accommodative monetary policy in place to support the economic recovery.

The bottom line is the market is poised to move higher from here.

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.

GLOG August 2014 $25 Calls
GLOG has moved up about 2.5% to around $24 per share.  I believe this stock is moving much higher.  The only question is… will it happen before our options expire in August?  I’ve found that buying call options on stocks like GLOG after a dip is one of the most profitable option strategies around.  This could be a huge winner.  Continue holding… Resistance is at $28.00 and $30.00.  Support is at $25.50 and $20.00.

HIMX September 2014 $7 Calls
HIMX has been in a tug-o-war between bulls and bears.  And there’s a lot of mis-information out there… for instance, the rumor they could be losing Google (GOOG) as a customer.  I still haven’t seen anything concrete to make me believe this will happen.  And right now, HIMX is dirt cheap based on current earnings estimates.  We still have plenty of time for HIMX to prove themselves before these options expire in September.  Give this one some time to play out.  Support is at $5.75 and $5.00. Resistance is at $9.00 and $11.00.

JOY June 2014 $60 Puts
JOY saw earnings per share plummet 56% last quarter and revenue wasn’t much better with a 32% drop.  But it was better than expected and the less bad quarter in combination with a rosy outlook for the future sent the stock soaring.  Conservative traders had already locked in their gains on this option.  But aggressive traders that were looking to hit a home run on this trade have seen the value of this option plunge. Aggressive traders still holding this option should sell to conserve capital.

Category: EOT Update

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