EOT Position Update – October 27, 2010
October 27, 2010
Market Snapshot
The pace of the major stock market averages advance has slowed as they approach the highs set back in April. The Dow, S&P 500, and NASDAQ are now within striking distance of breaking out to new 52-week highs.
The weak dollar has been the primary catalyst behind their recent run. Investors are placing bets on the Fed rolling out a massive quantitative easing (QE) program… $1 trillion of QE is the target!
Now there are signs the QE may be smaller and less aggressive than previously thought.
It’s created a bit of a “calm before the storm” effect.
And the storm will be unleashed next week when the Fed meets. It’s widely expected Fed Chairman Bernanke will outline plans for how much and how fast the QE will be pumped into the markets.
If it’s less than or equal to the $1 trillion the markets have already priced in… Expect a dollar rally and a stock market pullback.
However, if it’s more than $1 trillion (or they clarify the economic conditions warranting additional QE), stocks should rally and the dollar will continue its recent slide.
So buckle your seat belts, because we’re heading into an exciting and volatile 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.
MCP March 2011 $45 Calls
MCP is our latest recommendation we sent out yesterday. And it’s off to a great start. The stock is up more than 10% since the trade alert went out. And our options have already shot up 77%! It’s simple supply and demand. Demand for Rare Earth Elements is skyrocketing and China is restricting supply. It has the makings of sustainable high prices for Rare Earth Elements for years to come. And it makes the deposits MCP has in the ground more valuable every day. Keep an eye on MCP as it approaches $40. More conservative traders should look to take profits at this psychological resistance level. Aggressive traders may want to hold out for bigger gains. Resistance is at $40 and $45. Support is at $25 and $20.
FRX January 2011 $34 Calls
FRX reported earnings yesterday. And the results were nothing short of spectacular. They made $1 per share, easily besting the $0.91 estimate. And on top of that, they boosted full year earnings guidance to a range of $3.80 to $3.90. Clearly these bullish estimates should lead to good things for our call options. Hold tight for now. Resistance is at $35 and $40. Support is at $30 and $27.50.
CBU February 2011 $22.50 Calls
CBU continues to hug the support line of the 200-day moving average. The community bank just can’t shake the negative investor sentiment right now. However, CBU is in great shape and growing nicely. We still have plenty of time on our call options. Hold tight for a year-end rally. Resistance is at $25.25 and $27. Support is at $21 and $20.
PEGA March 2011 $25 Calls
PEGA got a one day pop this week. They announced a new software program designed to help banks eliminate errors when they’re processing foreclosures. Talk about a timely development… They’ll report earnings next week. I’m expecting earnings growth to rebound this quarter after falling the last two. Aggressive traders should hold tight for the earnings announcement. The next resistance is at $35. Support is at $16 and $15.
BRCM November 2010 $30 Calls
BRCM shot up 12% today. The semiconductor maker handily beat analysts’ revenue and earnings estimates for the quarter. BRCM’s chips are widely used in wireless communications. And consumer demand for devices to stay connected should continue to drive strong earnings and revenue growth next quarter. Our options hit a peak gain of 24% today. With options expiring next month, aggressive traders still holding these options may want to grab their gains now.
Category: EOT Update
