EOT Position Update – October 19, 2011

| October 19, 2011

October 19, 2011

Market Snapshot

Here we go again!

Just when you thought Europe had a plan in place to deal with their debt crisis… oops! We find out they’re not even close.

Simply put, this game of predicting European policy decisions is getting really old. And I’m not the only one who thinks so… Europe’s mess is frustrating many of the world’s best traders.

You can hear the frustration and anger in any number of recent interviews with professional traders. There’s simply no rhyme or reason behind many of the market’s recent moves.

How else do you explain the market rally the morning after Apple (AAPL) missed their earnings estimates? It was the first time the consumer electronics giant had missed their earnings in nearly a decade… And the markets just dismiss it out of hand? Come on…

I’m sticking to my guns…

I think the market is overbought and due for a correction.

Right now, the S&P 500 is bumping up against resistance around 1,230. The market hasn’t been able to break above this level since falling below it in August. And I don’t see any catalyst propelling the market beyond this level anytime soon.

What’s more, it looks like the European debt crisis is going to get worse before it gets better. There are just too many competing interests. I’m afraid it’s going to take being pushed to the brink of disaster before they take action.

One thing’s for sure, when the proverbial “crap” hits the fan in Europe, investors pour their money back into the safe haven of the US Dollar. And when the US Dollar rallies, stocks fall!

So there you have it… I think things are going to get worse before they get better.

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.

  APD November 2011 $70 Puts
APD rallied over 10% since our trade alert. And it did so on no real news. Unfortunately for us, APD was caught up in the stock market’s rising tide. It moved beyond both of our resistance levels at $83 and $85. That’s a cue to sell. All but the most aggressive traders should close this position out to conserve capital.

   GOLD December 2011 $80 Puts
GOLD is trading in lock step with gold and silver prices. Over the last week, precious metals have been rolling over and heading south. And I think this downward trend has legs. Don’t forget, the turmoil in Europe should drive the US Dollar higher. And a strong dollar should pressure gold and silver prices lower and lower. Continue holding… Resistance is at $105 and $111. Support is at $85 and $70.

  CNH December 2011 $40 Calls
CNH is trading for around $30 per share. That’s the same price as when our trade recommendation went out last month. The problem is our option is shedding value as it loses time value and volatility premium. However, I think CNH could make a big push higher to close out the year. And we still have plenty of time until our calls expire. Continue holding… Resistance is at $40 and $45. The next support is at $21.50.

Category: EOT Update

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