EOT Position Update – May 6, 2009
May 6, 2009
Market Snapshot
The Dow hit fresh YTD highs this week. It’s been quite a rally off the March lows.
One of the main catalysts for the rally has been a steady flow of less bad economic news.
You see, the estimates for everything from housing to spending got way too negative. Now, numbers are a little better than expected. It has given investors a reason to start buying (that’s all it takes to start a rally).
But I noticed something today that made pause.
For the first time in months, less bad news didn’t make the market jump. The ADP employment numbers came in considerably better than expected. We still lost jobs but at about one-third the rate they were expecting.
When news like this hit the wires last month, investors were tripping all over themselves to buy. This tells me we’ve reached a point where less bad news is priced into stocks.
In order for this rally to continue, we’re going to need real improvement. Just being better than awful isn’t going to cut it.
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.
LZ June 2009 $45 CALLS (LZFI)
As expected, LZ jumped higher on the earnings call and hit our first resistance level. Congrats to everyone locking in gains of 76% in just a few days. If you still own this option, hold tight. Analysts are starting to upgrade specialty chemical makers. This bodes well for Lubrizol’s stock price. Resistance at $45 and $50. Support is at $37.50 and $32.75.
JPM June 2009 $37.50 CALLS (JPMFU)
It looks like JPM is regaining some momentum this week. The option set a new high today. Hold tight for more good news tomorrow. The bank stress test results are due out. Their capital position is second to none. I expect these results to give them a boost. Resistance will be at $37.50 and $42. Support is at $28 and $25.
SPLS June 2009 $20 PUTS (PLQRD)
It looks like SPLS is now in a short-term downtrend. We’re pennies away from being in the money with these puts. These June options will take us past the next earnings call later this month. A miss is exactly what we need. Resistance is $24 and $26. Support is $16 and $14.
GE June 2009 $11 CALLS (GEWFI)
GE continues to crawl its way back after being left for dead in March. These calls continue to set new highs and are now well into the money. We hit our second resistance level today. Congratulations to everyone locking in 200% gains! Aggressive investors should hold on as we still have over six weeks to let these run. Resistance is $11 and $13.75. Support is $8.25 and $7.
WPI May 2009 $30 CALLS (WPIEF)
The earnings call gave us another opportunity to take some profits on these calls. If you’re still holding this position, start looking to exit, as the expiration date is fast approaching. Resistance levels will be at $31.50 and again at $33. Support levels will be at $27 and $25.
Parting Shots…
Stress Tests And Balance
The results from the government administered bank stress tests are due out tomorrow.
And it’s got me thinking about stress.
It’s not always a bad thing. Managing stress can lead to increased performance. In order to get the most out of life and your investments, you need stress. Without it, we’re apt to sleep walk right through life. But add too much and you’re likely to end up in a straight jacket.
I’m not a life coach so I’ll stick to a few investment pointers.
The lowest stress way for most people to invest is through a company sponsored 401k. But often these retirement accounts offer little in the way of true diversification.
If you haven’t already, set up an IRA that you can use to add some balance.
While being conservative in your 401k, you can get aggressive in your IRA. Some IRAs even let you trade options. These shorter term investments require more work and involve more stress. But striking a balance of short and long term investing strategies could increase your overall performance.
Category: EOT Update
