EOT Position Update – May 16, 2012

| May 16, 2012

May 16, 2012

Market Snapshot

The market has been caught in an ugly downtrend for a couple weeks.

However, the market action today really had a bear market feel to it.

We’re certainly oversold and ripe for a bounce, but after two brief attempts, we rolled over hard and broke to a new low.

So, allow me to give you one explanation for this… other than the obvious Greece situation.

You see, one of the consequences of a straight-up move from the first quarter is that it never gave technicians any support lines to measure trading ranges.

Meaning, we never built a strong trading base.

In fact, technicians are still uncertain of what levels to look at in order to call a market bottom from a technical perspective.

As you know, my theme for the last few weeks… has been to respect the fact that we’re in a downtrend.  And market action today is exactly why.

If you’ve been loading up in anticipation of a market turn, you have suffered some pain.  And there’s no doubt that it’s going to take some decent action to return to even.

However, hopefully you have reason to celebrate!

If you have respected the trend and have stayed out of the way, you should be feeling pretty good.  Because the market beating will eventually help to create a new slew of winners.

The question we need to ask now is, “What should we do?”

The answer is simple…

Stick with any shorts or puts and keep trying to play very short-term bounces if that is your style.

Most important, don’t try to call the lows until we actually have some upside action first.

Bottom line…

The goal is to buy stocks when they’re going up and can make you some good money.

Trying to call a bottom is for people who are hungry for attention.

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 has been in a downtrend that I haven’t seen in a very long time.  The scary thing is gold continues to roll over.  Now, we may actually be close to a bottom.  However, we may not.  So, until the trend in GLD changes, we remain long GLD puts.  Remember, we want GLD to move lower.  For conservative investors, GLD just broke through our first support level of $150.  So you should look to take your nice profits of 125%.  Congratulations!  As for aggressive investors, the next support level remains at $140.

  WMT September 2012 $57.50 Calls
Wal-Mart has been holding up extremely well during this recent market downtrend.  As a consumer staple stock, investors have continued to buy this company as a dividend yielding safe haven company.  Just a note, WMT reports earnings tomorrow morning before the open.  But I don’t think it’ll make any difference as this is a long term hold for us.  In these uncertain times, WMT is still a stock we want to own.  Since our recommendation two weeks ago, our options are up an impressive 31%.  And with an eternity to expiration, we’ll continue to hold this company for larger gains.  Remember that we want this stock to move higher.  Resistance is at $62.50 and $65.00, while support is at $55.00 and again at $52.50.

Category: EOT Update

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