EOT Position Update – May 26, 2010

| May 26, 2010

May 26, 2010

Market Snapshot

This week brought more of the same with a few surprises.

The same bad news in Europe continues to weigh on investors.  It has everyone concerned a slowdown in European economic growth will hurt the worldwide recovery.

It has Chinese officials concerned enough to change their focus from containing speculative bubbles back to promoting growth.  The good news is… this could be just the thing to jar the Chinese stock market out of it recent decline.

And news out of North Korea shocked investors around the globe.  Could their crazy leader trigger the first full-fledged nuclear war?  I certainly hope not, but certainly added to the fear factor.

It seems like investors are expecting more bad news daily.  And the last month has served up a boatload of it.

The stream of bad news has sent the S&P 500 and the Dow below their 200-day moving averages.  And now they’re testing the lows they set back in February.

So far we’re seeing bulls step in to buy when the major averages near their February lows.  Could this be the support level that finally holds?  It seems unlikely to me.

Right now the odds favor another leg down.  We’ll look to profit from the emerging downtrend by buying puts on stocks sensitive to the economic developments.

I hope you have a great holiday weekend.  I know I can use a few days of relaxation…

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.

  WFC July 2010 $28 PUTS
We just sent this trade out yesterday.  We’ll profit if the bearish momentum carries WFC’s stock price lower.  So far the 200-day moving average has put a lid on WFC’s attempt to rally.  Hold tight for the next leg down.  Resistance is at $29.75 and $30.50.  Support is at $26.25 and $25.

  ASIA October 2010 $30 CALLS
ASIA has settled in just above $20.  We got some good news out of China today. Apparently government officials are refocusing on growth.  They see the risks of a slowing economy as a bigger problem than speculative bubbles in real estate and commodities.  This could light a fire under ASIA and other Chinese stocks.  Hold tight for now.  Resistance is at $29.50 and $32.  Support is at $18 and $16.

  WYN November 2010 $30 CALLS
WYN continued to be pulled down along with most US stocks.  It found support and bounced higher just above our $21 support area.  We still have plenty of time for our November options.  Aggressive traders should sit tight.  Resistance is at $30 and $35. The next support is at $21.

  ASEI July 2010 $85 CALLS 
ASEI couldn’t hold onto its gains after a great quarterly earnings report.  Outside of the stock market resuming its bullish momentum, I don’t see another catalyst to get ASEI moving before our July expiration.  Aggressive traders should start looking for an exit point.  Resistance is at $82.25 and $87.  The next support is at $70.

Category: EOT Update

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