EOT Position Update – November 16, 2011

| November 16, 2011

November 16, 2011

Market Snapshot

It’s another choppy week for stocks…

One minute stocks look like they’re ready to break out and run higher.  The next minute stocks are giving back those gains and then some.  The whippy action is driving traders (including me) crazy!

The way I see it, markets lack momentum.  But that could change very soon…

Take a look at this chart of the S&P 500.


As you can see, the S&P had a massive 20% rally in October.  After a big move, we’ll typically see a pullback or consolidation before it makes another big move.

And that’s exactly what’s happening now… The large cap index is in a consolidation phase.

This particular consolidation is forming a symmetrical triangle pattern.  I’ve drawn the pattern on the chart of the S&P above.

Here’s the key…

We’ll typically see symmetrical triangle patterns form in aimless markets (no surprise there).  The pattern itself is neither bullish nor bearish.  However, once the S&P breaks above or below the trend line… watch out.  A decisive move can shift momentum to either the bears or bulls and dictate the direction stocks will trend over the next few weeks.

The problem is the pattern doesn’t indicate which way the market is going to break. And the pattern is prone to giving head fakes (or false breakouts).

For now, I’m content to wait for the S&P to break out of the triangle before rolling out a new trade.  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.

   NFX January 2012 $50 Calls
NFX is a growing player in US onshore oil exploration and production.  As an oil producer, they obviously benefit from rising oil prices.  And oil prices are screaming higher right now.  The price for a barrel of west Texas crude is now over $100 for the first time since July.  It’s up more than 30% since October 4th.  It looks like NFX is setting up for a nice rally to end the year.  Continue holding… Resistance is at $51 and $56.  Support is at $40 and $35.

  CNH December 2011 $40 Calls
CNH is in a consolidation phase.  It’s been holding near our option’s strike price for more than a week now.  Simply put, the chart looks bullish.  I’m expecting CNH to make another push higher soon.  Aggressive traders should continue holding for bigger gains ahead.  The next resistance is at $42.20.

Category: EOT Update

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