EOT Position Update – October 17, 2012

October 17, 2012

***Editor’s Note***  Keep an eye out for a new trade later this week.

Market Snapshot

Third quarter earnings season is in full swing.

A few notable companies like IBM (IBM) and Apollo Group (APOL) have reported disappointing results.  But they’re the exception, not the norm.

So far, 33 of the 44 S&P 500 companies reporting earnings have beaten EPS estimates.  That’s 75% of companies reporting better than expected earnings.

Obviously, that’s good news for stocks.  At this point, it looks like analysts got a little too aggressive with their negative earnings growth revisions last quarter.

Unfortunately, it hasn’t been all good news…

The uncertain outlook for the global economy is causing management at many businesses to dial back on future earnings guidance.  In fact, twice as many companies have lowered guidance than raised it.

The good news is investors are taking the negative news in stride.  And the S&P 500 has logged three solid up days this week.  The rally has sent the large cap index up to resistance at 1,460.

If the S&P can clear this important technical level, it should spark another surge up to around 1,500.  However, if the market fails to break through 1,460, we’ll likely end up right back where we began the week around 1,425.

I’m watching these technical levels closely.  The price action tomorrow will likely determine if our next trade is a call or a put.  Either way, I’ll have a new trade out later this week.

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.

  BGS February 2013 $30 Calls
BGS fell through our $29 support zone last Thursday.  If you’re a conservative trader, that was your cue to sell to conserve capital.  Since then, BGS announced they were increasing their dividend by 7.4% from 27 cents to 29 cents.  The announcement stemmed the tide of selling and its logged two solid gains over the last two days.  This should turn the tide for BGS.  Aggressive traders should continue holding for a rebound.  Resistance is at $33.50 and $35.00.  The next support is at $28.00.

Category: EOT Update