EOT Position Update – June 24, 2015
Market Snapshot
Another week has gone by and the S&P 500 is still stuck in a trading range.
As you can see, the large cap index has done little more than tread water this year. And it has spent the vast majority in a trading range between 2,060 and 2,120.
There have been 3 attempts at breakouts over the last 3 months… 1 in April, 1 in May, and another in June. But each time the breakout has failed and the index has drifted back into the trading range.
One positive takeaway is the lows on the pullbacks after the failed breakouts have been moving higher. The red line connecting these lows is now support.
There have been several headwinds throughout the year that have helped keep the S&P 500 trapped in this trading range. For instance, weak US GDP in Q1, volatility in the fixed income and currency markets, and uncertainty surrounding the timing and pace of interest rate hikes.
Lately, Greece has been a thorn in the side of market. Thankfully, a deal between Greece and its creditors seems closer now than it has been before.
However, it remains to be seen if a Greek deal will be enough to trigger a breakout for the S&P 500. The vast majority of investors are sitting on the fence… they’re neither bearish nor bullish on stocks over the next six months and neither fear nor greed is driving investment decisions.
Something needs to change in order to spark the risk appetite and confidence needed to propel the S&P 500 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. We try to focus on the positions that have some significant news or price movement.
LUV August 21st 2015 $36 Calls
LUV is a new trade. I’m expecting it and other airline stocks to rebound after a selloff over the last few months. You can buy these options to open a position up to $1.35. Resistance is at $38.25 and $40.00. Support is at $33.00 and $30.00.
TAN July 17th 2015 $45 Calls
TAN has been holding steady since we bought calls on it a few weeks back. But these quiet periods don’t last long for solar stocks. I’m expecting the next leg higher in short order. We’ve seen some very unusual trading activity in this option. On June 18th, the price spiked as high as $4.30 even though the underlying asset didn’t move. This is a perfect example of why you need to use limit orders when executing options trades. Don’t expose yourself to a market maker that has the ability to set the price by using a market order. Resistance is at $46.00 and $49.00. Support is at $38.00 and $34.00.
GDDY August 21st 2015 $24 Puts
GDDY is a perfect example of how short term stock price movement can be driven by momentum, herding, and investor sentiment. I believe there are some serious question marks about the ability of this company to grow revenue or profits over the short and long term. Despite these serious question marks, the stock has trended higher since the IPO. However, the stock has hit some resistance near $32.00. It’s not unusual for a momentum stock to have a massive correction after the bullish momentum breaks. Aggressive traders still have a few months until this option expires.
Category: EOT Update
