EOT Position Update – June 6, 2012

| June 6, 2012

June 6, 2012

Market Snapshot

Wow!  A positive day yesterday.  And another today!

The markets finally closed positive yesterday on a slightly better than expected ISM services number.

But let’s not go jumping the gun just yet.

My point is… There’s two things I didn’t like about today’s rally.

First, the main driver behind today’s rally was rumors of a secret deal being hatched in Europe. 

In other words, politicians spent the day talking amongst themselves on what they may be willing to do to save the Euro Zone.  Obviously, starting with Greece.  But that’s all it was… rumors.

At the end of the day, all the talk didn’t clarify if there’s any truth to any of it.

The second point that makes me feel uncomfortable about a rally like today is the charts.

More specifically, a technically driven market without a lot of volume.

A market where too many were leaning short because of last week’s dip below the 200-day moving average.

And a market where the machines say sell because these charts show so much uncertainty.

That’s what we had today.  And as a result, that’s the kind of mush that ignites a 284 point rally.

Now, I’ll bet you can guess what I’m going to say next… And you’re probably right.

We get wind that there might be a secret deal in Europe and we also get word of a big short bias because of the charts.

You see, these political backroom deals and charts are not my cup of tea.

Bottom line…

I deal with companies and their options.

And I must say, the companies we’re in now are doing pretty well.  But as option investors, we still must remain cautious in the face of European rumors and technical charts.

I’m sorry but I think it was nothing more than that today.  Nothing at all.

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.

  GLD June 2012 $154 Puts
Gold is beginning to act erratic.  At the end of last week, GLD hit a low of $148.  Then, like a tightly wound spring, GLD jumped to a high of $159.20 in only two days.  So, even though it hasn’t crossed our final resistance, I’m recommending getting out now to preserve a little capital.  You see, GLD expires next week and time decay is going to begin to accelerate if GLD doesn’t go our way.  So, with the clock running, it’s time to exit.

  SCHW July 2012 $12 Calls

Schwab is up 20% since our recommendation last week.  Not bad for a market that can be compared to a bloodbath.  What I still like about this stock is that it falls under the banking sector.  But it’s not really a bank.  While Schwab does have a banking division, it’s mainly a trading platform where revenues come from commissions. However, if the banking sector jumps, SCHW will reap the rewards.  And since our options are already in the money and we have a long time before expiration, we’re going to hold these options for large gains.  Remember, we want this stock to rise in value.  Resistance is at $13.20 and $13.60, while support is at $11.70 and again at $11.20.

Category: EOT Update

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