EOT Position Update – September 7, 2011

| September 7, 2011

September 7, 2011

Market Snapshot

Consumers and investors have finally cracked… They’ve lost confidence in the economy, politicians, and the stock market.

Just look at the latest Conference Board’s Consumer Confidence Index.  It plummeted from 59.2 in July to 44.5 in August.  The index is now at its worst level since the depths of the credit crisis in April 2009.

What’s more, 42% of hedge fund managers are bearish.  That’s up from 27% in July and the highest reading in a year.

It’s shocking to say the least…

I know the economy’s been a little rocky, but it’s nowhere near as bad as it was in 2009.

The truth is consumers will continue buying stuff even if they’re in a bad mood. However, their gloomy outlook will play havoc with financial markets.

Remember, the market isn’t moved by fundamentals alone.  It’s moved by how investors interpret the data.  And as long as confidence stays low, you can expect volatility to remain high.

The good news is options give us the opportunity to profit from both the ups and the downs.

In fact, I’m working on a new trade for later this week.  So stay tuned…

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.

  N October 2011 $25 Puts
N is in a clearly defined downtrend off the July high.  It’s tested the upper downtrend line three times since the decline began.  And each time N has been repelled lower. Until this trend changes, our put options are in a good position.  Continue holding… Resistance is at $31 and $35. Support is at $25 and $20.

  BAS October 2011 $25 Calls
BAS fell below our $20 support zone. Conservative investors should sell it now to conserve capital.  Look, we all know BAS is dependent on high oil prices.  And oil is pushing $90 per barrel after falling to nearly $75 in early August.  Clearly, oil prices are on the rise.  I think BAS and other oil services stocks are due for a big rebound.  So, more aggressive traders should hold onto this option.  Resistance is at $30 and $40. The next support is at $15.

  SBUX January 2012 $38 Calls
SBUX appears to be on the brink of breaking out of a bullish consolidation pattern.  It should make a push toward $40 before running into resistance at the previous high. Overall the price action for SBUX has been very bullish compared to the overall market. Continue holding for the next leg higher.  The next resistance is at $45.  Support is at $32.50 and $30.

  WPRT September 2011 $60 Calls
WPRT shot up 20% today! They announced an agreement with Shell to launch a co-marketing program in North America.  Their aim is to provide customers a better economic case when purchasing and operating liquefied natural gas-powered vehicles. This is a huge statement to say the least.  We’ve been waiting for just this type of event to propel natural gas stocks higher.  So, continue holding WPRT for bigger gains ahead.  The next resistance is at $70.  Support is at $50 and $48.

Category: EOT Update

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