EOT Position Update – May 6, 2015

| May 6, 2015

Market Snapshot

Investors are greeting the arrival of the month of May as they so often do… They’re selling stocks.

The old Wall Street adage goes, sell in May and go away.

But here’s the thing…

I don’t think investors will go away.

In order for the ‘sell in May and go away’ strategy to work, it assumes investors can make money in bonds or risk free accounts.  But that’s not the case right now.

Bond yields are low… so low that they’re even negative in parts of Europe.

Right now we’re seeing some seasonal selling.  But investors will be back quickly as they realize that they’re not making any money being out of stocks.

Simply put, there’s no better place for investors to be than stocks.  So investors will have a hard time staying away.

What’s more, one important thing hasn’t changed.  It’s the reason I’m still bullish on stocks… companies are still growing earnings. 

Amazingly, 69% of the companies in the S&P 500 beat Q1 earnings estimates.  And 46% beat sales estimates.

The bottom line is companies are still able to generate earnings growth even in a flat economy.  Until we see a breakdown in earnings growth, stocks should continue moving higher throughout the year.

But there’s likely to be more choppy trade over the next few weeks before stocks resume their uptrend.

Let’s move onto the updates…


Position Updates

Just a quick note:  Remember, we won’t update every open position every week.  We try to focus on the positions that have some significant news or price movement.

 CBT June 19th 2015 $45 Calls

CBT has been reeling since reporting quarterly earnings.  Needless to say, it’s more than a bit disappointing.  And the company wasn’t able to spin it positively in their earnings call.  Simply put, the unexpected slump in US economic growth hit CBT harder than I expected.  Sell this option now to conserve capital.

 CDW June 19th 2015 $40 Calls

CDW has been holding near its high as their May 7th earnings report approaches.  Keep an eye on how this stock reacts to their earnings report over the next few days.  Resistance is at $40.00 and $42.50.  Support is at $36.00 and $34.00.

 WEN May 15th 2015 $11 Calls

WEN is surging higher today after reporting earnings.  The company has a great plan to enhance shareholder value.  They’re selling off company owned stores to franchisees and divesting their bakery business.  In short, WEN has decided to streamline their operations to focus on things that will improve the business.  This is a great story that should push WEN higher… but we’re running short on time.  Let’s give these options another week to see if they can push into the money.  Resistance is at $12.00 and $13.00.  Support is at $10.20 and $9.50.

Category: EOT Update

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