EOT Position Update – March 30, 2011

| March 30, 2011

March 30, 2011

Market Snapshot

Stocks are climbing a wall of worry.

In other words, stocks are going up despite negative headlines and some weak economic data.  That’s great news for our call options…

Japan’s nuclear crisis and fighting in Libya are grabbing all of the headlines.  And for good reason… Higher oil prices and supply chain disruptions from these events will put a dent in corporate profits.

Here’s the key…

These events are temporary setbacks.  They’re not changes to fundamental long term trends.  Stocks should be ignoring these types of negative headlines.

The bottom line is bulls are firmly in control of the market.

What’s more, the technical picture has improved considerably from last week.

The S&P 500 has broken through resistance at the 20- and 50-day moving average as well as the short term downtrend line off the February 18th high.  That’s another sign the bulls are in control of this market…

The next resistance level the S&P will contend with is the February high.  I expect to see some selling as the S&P reaches the 1,340 to 1,344 range.  But just like all of the other resistance levels, the bulls will likely make quick work of this one as well.

Once the S&P clears resistance at 1,344, we could see it surge another 6% to around 1,425 before it runs into another technical resistance level.

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.

  HP June 2011 $70 Calls
HP keeps on rollin’.  Onshore drilling for oil and gas in the US is ramping up.  HP is landing new orders for their FlexRigs at an impressive rate.  They’re clearly the dominant force in onshore horizontal oil and gas drilling today.  The good news sent our option soaring to a peak gain of 85%!  Remember to keep an eye on HP as it approach resistance at $70 and $74.  Support is at $59 and $52.

  AKAM August 2011 $40 Calls
AKAM is looking good.  The content delivery industry is growing by leaps and bounds. This growth will continue powering AKAM’s revenue and earnings to new heights.  Hold tight for the next leg higher.  Resistance is at $43.50 and $47.  Support is at $32 and $30.

  GM June 2011 $35 Calls
GM is holding steady at around $31.  Supply chain disruptions from the Japan quake are keeping the US automaker’s shares in neutral.  The good news is demand for new cars is strong.  Remember, GM sold 46% more cars in February this year than it did a year ago.  And high oil prices should drive sales of more fuel efficient models.  Hold for now.  Resistance is at $37 and $40.  Support is at $31 and $29.

  MCD June 2011 $80 Calls
MCD continues to consolidate around $75 per share.  Investors are weighing the impact of the Japan quake and rising food costs on company profitability.  I think MCD’s marketing and growth plans should drive the stock and our option higher in the days and weeks ahead.  Hold tight for now.  Resistance is at $80 and 85.  Support is at $70 and $67.50.

  DO June 2011 $78.50 Calls
DO is bumping up against resistance.  The stock just can’t build enough momentum to clear resistance near $80.  The good news is the stock still looks cheap at this price. And we still have a few months until our option expires.  Aggressive traders should continue holding for the next leg higher.  The next resistance is at $85.  Support is at $64 and $62.

Category: EOT Update

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