EOT Position Update – May 21, 2008

| May 21, 2008

May 21, 2008

Market Snapshot

Once again, we rallied above the 13,000 level only to get slapped back down.  Today the Dow Jones Industrial Average closed at 12,601.  In the last two days we’ve given up more than 400 points.

This week, all of the market chatter has been on crude oil prices crossing into new high territory.  Today we reached over $130 for the first time ever . . . and Congress decided to grill oil executives over how much they are paid.

Now for the trade updates.

Position Updates

  NGS July 2008 $30 Calls (NGSGF)
NGS moved higher this week at one point today the stock spiked above 31 . . . right through our resistance level.  We’re at new highs on this stock.  I’d hold a bit longer as we still have some time on the option.  Support is 25 and 23.

  DSX June 2008 $35 Calls (DSXFG)
Since announcing earnings last week the stock has continued to move higher.  At one point it traded as high at 40.  We’re now between our two resistance levels and most of you should consider selling.  Two days ago we were up over 700%.  The next resistance level is 42 – an all time high.  Support is 27.50 and 24. 

  EXM June 2008 $50 Calls (EXMFJ)
Chalk this up to the market not making sense.  EXM announced earnings on the 19th. In the two days before the announcement, the stock broke higher, eventually crossing our second resistance level.  Earnings were spectacular.  Net income tripled and the stock closed down.  Congratulations to everyone who exited this trade at the second resistance level.  Some of these options traded over $12 on that day (a gain of over 300%). 

Bearish Put  UAUA June 2008 $15 Puts (UALRC)
Today American Airlines announced they were being hammered by higher jet fuel costs.  They were going to implement more fees and cut capacity.  The entire airline industry fell on the news.  UAUA closed at 8.15 today.  Our options are worth $7 each . . . a gain of almost more than 260%.  If you haven’t already, take your money off the table on this one . . . the stock can only go so low before the government bails them out.   

  VNO June 2008 $95 Calls (VNOFS)
VNO traded lower with the market over the last two days.  The stock closed under $95.  Resistance is 100 and 105. Support is 85 and 80.

   NSC June 2008 $55 Calls (NSCFK)
The stock broke our original resistance levels a few weeks ago.  Peak gain on this trade was 321%.

Parting Shots…

Earnings Estimates and Expectations

A few months back economists were shouting about the falling sky.  Recession they screamed.  Some even whispered “Depression.”  The consumer was in trouble and they were going to stop shopping.

So they pointed to the weak Christmas sales from last year.

Apparently some of the research analysts on Wall Street actually listened.  This week we’ve had a number of retailers report earnings.

Gap (GPS) and Aeropostale (ARO) both announced earnings estimates above estimates. . . . my guess is that those estimates were really cut back quite a while ago.

Retailer stocks moved ahead briefly.  The biggest move came when news of the government stimulus package hit the markets.  I guess only time will tell what people spent their checks on.

Category: EOT Update

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