EOT Position Update – September 2, 2015

| September 2, 2015

Market Snapshot

The calm and boring summer of range bound trading was broken in an instant.

As you can see, the S&P 500 broke through the key technical support level of the 200-day moving average on August 20th. And all hell broke loose…

S&P 500

The primary cause of the selloff was China.  As we’ve talked about many times before, economic growth in China has been slowing for years.

Their latest attempts to prop up economic growth built up a stock market bubble. The air began to come out of the stock market bubble in June.  Chinese stocks are now 40% below their peak of just a few months ago.

The Chinese government openly admitted they were buying stocks to try to stem the tide of selling.  Then China devalued their currency in a surprise move in the week before the US market selloff.

Needless to say, these aren’t normal things for the government to be doing.  All of the crazy stuff China was doing caused a lot of investors to believe that another shoe was about to drop.

As a result, there wasn’t anyone that wanted to buy stocks on the morning of August 24th, 2015 as the market opened. And the market rout was on…

It’s hard to say where we go from here.  China, oil prices, earnings, and the uncertainty of the first Fed rate hike are weighing on investors.  Fear and pessimism are dominating investor decisions these days.

At the same time, US economic data is solid with pockets of strength that point to faster economic growth and better days ahead for consumers.

One thing’s for sure, the relative calm of the range bound S&P 500 has ended.

If these fears and negative sentiment are proven to be unfounded, it could be just the thing to spark the next big move higher for US stocks.

Let’s move onto the updates…


Position Updates

Just a quick note:  Remember, we won’t update every open position every week.  We try to focus on the positions that have some significant news or price movement.

GPRO October 16th 2015 $52.50 Calls

GPRO is down today after one of their suppliers issued weak guidance on future revenue and earnings.  Needless to say, that’s not good news for our call option.  In short, their comments gave investors reason to question GPRO’s revenue and earnings growth estimates as well.  The initial knee jerk reaction is overblown… but it sent the stock below our $42.50 support level.  That’s the cue for conservative traders to close this trade by selling the option.  We should see GPRO bounce back in the weeks ahead, aggressive traders can continue holding.

NTAP September 18th2015 $30 Puts

NTAP has rallied up to resistance of the long-term downtrend.  But it’s already starting to roll over and move lower again.  Aggressive traders can continue holding in anticipation of lower stock prices ahead for this troubled tech stock.

Category: EOT Update

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