EOT Position Update – May 25, 2011
May 25, 2011
Market Snapshot
Choppy trading continues to dominate the markets.
Stocks are up one day and down the next. And for that matter, so are currencies, commodities, and bonds… This type of action is typical of an uncertain market.
Right now, neither the bears nor the bulls have much conviction.
As a result, major indices like the Dow, S&P 500, and NASDAQ are stuck in range bound trading. They first reached these levels in January or February. To see them hovering in the same range they were in at the beginning of the year is cause for concern.
However, nothing is set in stone… It remains to be seen whether this is a healthy consolidation or the early stages of a larger correction.
Here’s how I see it playing out…
The markets will continue their choppy consolidation phase for awhile longer.
Then, economic data will come in weaker than expected. This will lead to lower growth estimates across the board. At the same time, we’ll likely see inflationary pressures subside.
This combination of slowing growth and tame inflation will be enough for the Fed to put the possibility of a QE3 back on the table. Once that happens, we’ll likely see risky assets like stocks and commodities soar while the US Dollar gets trashed.
One thing’s for sure, sooner or later something has to give. And we’ll be there to profit from stocks whether they’re sinking or soaring.
In fact, I’m working on a new trade right now… So, keep an eye on your email for the trade alert later this week.
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.
POT September 2011 $60 Calls
POT is currently trading for just under $55 per share. The good news is it’s just above technical support provided by the upward sloping 200-day moving average. I’m expecting POT to follow the 200-day moving average’s upward trend. As you might expect, our option is looking good too. It hit a peak gain of 25% on Thursday. I’m expecting strong agricultural demand for Potash to push POT higher over the summer. Continue holding for bigger gains ahead. Resistance is at $62.50 and $70. Support is at $50 and $48.
WMT June 2011 $55 Puts
WMT is rolling over. Selling pressure around $56 proved to be too much for WMT to overcome. It hit a low of $54.20 today. Our option is looking good as WMT continues to fall. Conservative traders may want to exit their position when WMT approaches the 200-day moving average at $53.74. Resistance is at $57 and $58. Support is at $52 and $50.
WPRT October 2011 $30 Calls
WPRT tested the 50-day moving average support line last week. Since then, it’s been moving up quickly. We need WPRT’s bullish momentum to continue. If Congress ever throws their support behind subsidies for natural gas engine conversions… this stock will skyrocket. Continue holding for bigger gains ahead. Resistance is at $30 and $35. Support is at $20 and $17.50.
MCD June 2011 $80 Calls
MCD had a great week. Yesterday, the stock hit an all-time high of $83.08. It’s up 10% since our trade alert went out. But that’s nothing compared to our option. Our option hit a peak gain of 149%! Now that’s more like it… It’s time to start thinking about taking some profits off the table. The uptrend looks overextended to the upside. I think we’ll see MCD pull back before it moves higher. Let’s book this winning trade. Go ahead and sell this option now. Congratulations on a successful trade.
Category: EOT Update
