| October 22, 2014

October 22, 2014

Market Snapshot

For one reason or another, we almost always see a market correction this time of year.  And this year’s September/October pullback was no exception.

After reaching a high of 2,019 on September 19th, the S&P 500 plummeted nearly 200 points by October 15th.  The 9.8% drop ended one of the longest uptrends for the S&P 500 that never fell below the 200-day moving average.

As we’ve seen time and time again over the past five years, it’s hard to hold large cap US stocks down for very long…

Over the last week, we’ve seen the S&P 500 come charging back.  The large cap index recouped more than 60% of the correction in about a week.  And it’s back above the 200-day moving average.

Now the large cap index is battling resistance at a Fibonacci retracement level.  The bears are putting up a fight at this level in an attempt to establish a significant lower high.  This would set the stage to establish a new downtrend.

In other words, the long uptrend for the S&P 500 is over.  Now we need to see how the price action plays out over the next few weeks.  It will determine if stocks will fade into the end of the year or if they can rebound and finish on a strong note.

Now I’d like to address a few subscriber questions.  We’ve received a few emails about when to sell an option to close a trade.

There’s no right or wrong answer.  It’s truly up to each individual.  I give you the tools you need to build your trading plan in this free report… The Millionaire Makers Payday..

If you’re having a hard time deciding when to sell an option to close out a trade, then you’ve probably skipped this crucial step. Take some time to read this report and know when you will close the trade before you ever buy the option.

I give you two support and two resistance levels on the underlying stock with each trade.  Many traders will simply track the underlying stock and sell the option to close the trade when the stock triggers one of these levels.

Of course, I’ll give you my thoughts in the weekly updates.  But in the end, the decision to sell rests with each individual.

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.

GLOG February 20th 2015 $20 Calls
GLOG went gangbusters in the days after the trade alert went out.  The stock soared from $16.00 to as high as $22.44 today.  The quick move higher sent the value of our option up 163% in about a week!  It hasn’t triggered either of our resistance levels. But conservative traders should consider locking in gains now given the high levels of market volatility.  Resistance is at $24.00 and $28.00.  Support is at $14.00 and $13.00.

CVX December 19th 2014 $120 Calls
CVX has rebounded over the last week and so has the value of the stock option. That’s good news for the aggressive traders that are continuing to hold onto this option.  The initial snap back rally has materialized as I expected.  The next move for CVX is a bit murkier… it has reached a point where the bears are trying to establish a lower high that would indicate a downtrend.  But we could just as easily see CVX slice right through this short term resistance and move quickly higher.  At this point, the 200-day moving average should be used as a target to exit this trade… that’s currently $122.14.

Category: EOT Update

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