EOT Position Update – November 3, 2010

| November 3, 2010

November 3, 2010

Market Snapshot

Let’s face it.  The markets are waiting on the Fed.  Fed Chairman Bernanke is expected to announce plans for the second round of quantitative easing (QE2) later today.

Just this week the ISM manufacturing survey came in much better than expected.  But investors shrugged off the great economic data.

It looks like the markets have fully priced in a “no double-dip recession” scenario.

Now the mid-term election results are pouring in from across the country.  The Republicans will retake the House and they’ve made inroads into the Democrats majority in the Senate.

Sounds like gridlock to me… At least investors can look forward to the end of Pelosi, Reid, and Frank influencing the political and economic agenda.

Surprisingly, the markets didn’t react to the Republican victory.  So the changing political landscape appears to be fully priced into the markets too.

Where does that leave us?  We’re still waiting on the Fed.

Right now it looks like the markets are pricing in $500 billion worth of asset buying.

If QE2 is less than $500 billion, we could see a market correction.  However, if QE2 is greater than $500 billion, we should see the markets extend their recent run.

We’ll see the answer soon, so hold on tight.

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.

  MCP March 2011 $45 Calls
MCP is one volatile stock!  But that’s to be expected… It’s highly speculative after all. MCP hit our $40 resistance level just two days after recommendation.  Congratulations to conservative traders locking in a quick 106% gain when MCP hit the $40 resistance level.  MCP’s uptrend is still in place.  Aggressive traders should continue holding for the next leg higher.  The next resistance is at $45.  Support is at $25 and $20.

  FRX January 2011 $34 Calls
FRX’s ceftaroline drug was approved by the FDA this week.  It treats bacterial pneumonia and drug-resistant skin infections.  This is another positive development for FRX and should propel the stock higher.  Our option is close to moving into the money. Hold tight for further gains ahead.  Resistance is at $35 and $40.  Support is at $30 and $27.50.

  ADBE Jan 2011 $27 Calls
ADBE’s upward momentum continues… The stock is up more than 10% to around $29. Our option has nearly doubled!  Our option is solidly “in the money” with plenty of time until expiration.  I’m expecting ADBE to continue its upward momentum, so hold tight for further gains ahead.  Conservative traders should keep an eye on ADBE as it approaches our first resistance level.  Resistance is at $30.50 and $33.50.  Support is at $25 and $22.50.

  PEGA March 2011 $25 Calls
PEGA is expected to report earnings today after markets close.  I’m expecting to see earnings growth return after two down quarters.  Aggressive traders should continue holding for the earnings announcement.  The next resistance is at $35.  Support is at $16 and $15.

Category: EOT Update

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