EOT position update May 7, 2014

| May 7, 2014

May 7, 2014

Market Snapshot

The S&P 500 hasn’t done much lately.

The large cap index is sitting about 1% below the all-time high.  And over the last week, it has traded in a tight 32 point range.

Underneath the surface, we continue to see individual sectors outperform or underperform the large cap index.  The weakest sectors over the last week are financials, utilities, and health care.  At the same time, the materials and energy sectors were the strongest performers.

This is a continuation of the changes that began a few months ago… High flying momentum growth stocks are out of favor while cyclical and undervalued stocks are on the upswing.

What’s more, the Russell 2000 small cap index closed below its 200-day moving average for the first time since 2012.  It was the third time in the last 15 trading days it had dipped below the support level.  But it failed to rally back this time.

This doesn’t bode well for the performance of small cap stocks.

But here’s the thing…

What’s the one that will kill a bull market without fail?

A recession.

And right now there’s no indication that we’re heading for one.  In fact, the economic data points to an upturn in economic activity later this year.

The way I see it, the bull market continues… albeit at a slower pace than 2013 and with different sectors leading the way.

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.

JOY June 2014 $60 Puts
JOY is trending lower.  The stock is down 4.25% since we recommended buying puts on it.  And our option is up 40%.  The stock is now just above the 50-day moving average.  Conservative traders can captures the quick gain on this option now.  More aggressive traders can continue holding for the next leg down.  The next support is at $55.00.  Resistance is at $63.00 and $65.00.

APA May 2014 $85 Calls
APA reports earnings tomorrow morning before the markets open.  Needless to say, this is an important day for this trade.  Keep an eye on this stock tomorrow and be ready to sell if the support or resistance level is triggered.  Support is at $80.00 and $77.50. Resistance is at $90.00 and $94.00.

GMCR May 2014 $90 Puts
GMCR is reporting earnings after the markets close today.  In all likelihood, this is a make or break moment for this trade.  Based on the recent price action, investors are uncertain about what will happen.  The stock had rallied over the last two days before dropping back near $90 today.  A disappointing earnings report should send the stock lower.  Keep an eye on this stock tomorrow and be ready to capture profits or cut this loose if they manage to reverse the bearish trend.  Support is at $90.00 and $80.00. Resistance is at $110.00 and $115.00.

Category: EOT Update

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