EOT Position Update – May 19, 2010

| May 19, 2010

May 19, 2010

Market Snapshot

How are the markets?  To sum it up in one word… VOLATILE.

Cyclical stocks led the markets higher for more than a year.  But after three weeks of volatility and selling, their uptrends are in jeopardy.

Take a look at this chart of the S&P 500.  You can see it has retreated back to the 200-day moving average (the dashed line).


It’s the first time the S&P 500 has pulled all the way back to the 200-day moving average since crossing it to the upside back in July.

This is a major support line.  If the uptrend is going to hold, now is the time.

But if the S&P 500 falls below the 200-day moving average, all bets are off.  The odds would favor a further fall in stock prices.

So far, the 200-day moving average is holding.  The uptrend is still in place.  But it’s time to proceed with caution.

The good news is options give us the ability to profit whether stocks are sinking or soaring.  But right now it’s tough call the next move.

Another indicator I’m watching closely is volume.  Over the last few weeks, volume on down days is outpacing the volume on up days.  A bearish sign.

It indicates the institutional players are still selling (or at least they haven’t started buying).  I’d like to see the markets up on heavy volume.  That would tell me the big players are starting to buy again.

Until then, we’ll play it cautiously.

Now for 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.

  ASIA October 2010 $30 CALLS
ASIA is our most recent pick we sent out last Friday.  I recommended ASIA because I think they’re an exciting growth company.  And the pullback has made the stock cheap.  It was also bucking the downtrend.  However, it’s since fallen back near its recent lows.  I love the fundamental story for ASIA.  If the market uptrend holds, ASIA should rocket higher.  Hold tight for now.  Resistance is at $29.50 and $32.  Support is at $18 and 16.

  WYN November 2010 $30 CALLS
WYN is chopping around like the rest of the stock market.  The fundamentals are strong.  Management recently increased earnings guidance and declared a cash dividend.  So there is some positive news that could get the stock moving if investors start buying again.  Aggressive traders should hold tight.  Resistance is at $30 and $35.  The next support is at $21.

  ASEI July 2010 $85 CALLS 
ASEI fell back to and bounced off of the support line of the uptrend today.  With the uptrend still in place, ASEI should move higher from here.  Unfortunately, ASEI wasn’t able to build on its momentum after reporting outstanding earnings last week.  But since the uptrend’s still in place, aggressive traders should continue holding. Resistance is at $82.25 and $87.  The next support is at $70.

Category: EOT Update

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