Good evening traders. I mentioned in my updates last night that when Intel reported similar earnings on January 14 the markets traded higher initially and then sold off hard which sparked a -9% decline in the ensuing weeks. That didn't exactly happen this time around as the rally was stoked by stellar results from CSX and JP Morgan. JP Morgan's earnings were so good this morning that it may be setting other banks up for an earnings disappointment. Any sort of earnings miss by the banks in the coming days/weeks could get a market correction going. This would be the "excuse" traders are looking for to take profits off the table and could spark some selling. Whether this happens or not will soon play out. So continue to be nimble when managing positions, tighten stops, and exit when you can, not when you have to.
CALL Play Updates
Coca-Cola - KO - close: 54.95 change: -0.07 stop: 52.95
KO is seeing resistance in the congestion/resistance area we have been mentioning in the $55 to $56 area. I would like to see if KO can muster up a rally in the coming days to break through this congestion. KO also tends to be a defensive play so it could rally if the overall market is weak. Our target to exit the position remains at $57.00 but I will consider closing the position prior to this level if KO starts to struggle. Conservative traders should consider exiting their positions if KO rallies into the aforementioned congestion zone, with $55.25 as a potential target.
Current Position: CALL May $55.00 (KO 10E55.00) at $1.62
Entry on March 24th at $ 55.22
Earnings Date 04/21/10
Average Daily Volume = 14.6 million
Listed on March 23rd, 2010
L-3 Communications - LLL - close: 95.61 change: +0.43 stop: N/A
Our highly speculative trade broke out to new 52-week highs today but our call is still probably too far out of the money. The April 100 calls purchased for $0.30 are now essentially worthless. At this point we will need some sort of a catalyst or news event on LLL to make any money. If LLL happens to spike and the options become worth something we will sell them immediately. I am not suggesting any new positions in LLL at this time.
We chose the out of the money $100 calls to keep our capital investment very small and our position size limited.
Current Position: CALL APRIL 100.00 (LLL 10D100.00) @ $0.30
Entry on March 18th at $ 93.88
Earnings Date 04/22/10
Average Daily Volume = 908 thousand
Listed on March 17th, 2010
Occidental Petrol. - OXY - close: 86.16 change: +.47 stop: 83.45
OXY continues to see buyers step in near $85.00. On the daily chart OXY has 5 consecutive bottoming tail candlesticks. Monday's price bar could be considered a doji but the point is that buyers continue to step in. I expect OXY to rally from here but we will need crude oil and overall market strength to be in our favor. Our first target is $88.75 which is just below last weeks highs. I am looking for OXY to rally to this level in the next week and if it does it will ensure a nice profit on our position. We'll use a longer-term target at $94.00 but this could take several weeks to achieve.
Current Position: BUY CALL MAY $85.00 (OXY 10E85.00) at $3.25
Entry on April 7th at $85.50
Earnings Date 04/29/10 (unconfirmed)
Average Daily Volume = 5.5 million
Listed on April 6th, 2010
PartnerRe Ltd. - PRE - close: 80.97 change: +1.32 stop: $78.75
PRE had a great day, closing at its highs +1.66%. The stock looks poised to break out above our key $81.05 resistance level and we expect it to test its October 2009 highs of $81.70. If PRE follows through and breaks out above $81.70 we have a good chance to reach our second target of $83.90 (just below the late 2007 highs). The stock in now firmly above its 20-day SMA and is its upward trend line which began on March 10. Our stop is $78.75. PRE has support at $79.30 and $79.00. We are about break-even on our calls right now and the stock is entering a resistance area. I suggest conservative traders consider lightening up positions or taking profits now, especially if PRE continues its rally tomorrow into the $81.70 level, which will also produce a nice winning trade.
Current Position: CALL MAY $80.00 (PRE 10E80.00) $ $2.40
Entry on April 6th at $ 80.55
Earnings Date 04/27/10
Average Daily Volume = 989 thousand
Listed on March 20th, 2010
PUT Play Updates
SPDR S&P 500 Index - SPY - close: 119.74 change: +0.19 stop: 123.05
Ouch! The trio of earnings reports from Intel, JPM, and CSX sent SPY +1.13% higher today. Our puts took a beating but I am not throwing in the towel quite yet. SPY has technical resistance overhead and I want to stick to our plan. I mentioned in my updates last night that after Intel reported similar earnings on January 14th, the market proceeded to decline -9% in the coming weeks. In addition, JPM's earnings were so good that any sort of earnings miss by the banks in the coming days/weeks could get the market correction going. This may not start until next week after options expiry this Friday though. I am keeping our target at $115.50 and we have a time frame of a couple of weeks. Our stop is $123.05 but expect to lower the stop if the trade gets moving in our direction.
Current Position: SPY PUT MAY $119.00, entry at $2.05
Entry on April 13th at $ 2.05
Earnings Date Not Applicable
Average Daily Volume = 164 million
Listed on April 12th, 2010
CLOSED BULLISH PLAYS
F5 Networks - FFIV - close: 65.21 change: +1.22 stop: 61.40
FFIV spiked higher today on the heels of a price target upgrade from $61 to $73 at Piper Jaffray. The stock rallied and closed +3.27% higher. Our lowered target of $65.95 was hit and we are now flat on the calls at $4.10 for a +36.67% gain. Our initial target of $69.75 could still be hit but I would encourage any readers with positions to tighten stops and exit positions soon on any continued strength. Trying to squeeze out the extra gain will become more stressful.
Closed Position: CALL MAY $65.00 (FFIV 10E65.00) @ $4.10, entry was at $3.00
Entry on April 6th at $ 65.26
Earnings Date 04/21/10
Average Daily Volume = 1.0 million
Listed on April 5th, 2010
Silicon Laboratories â€“ SLAB â€“ close: 52.11 change: +1.60 stop: 47.95
After Intel's blowout earnings yesterday semiconductors broke out to new highs last seen in May 2008. I don't think it is worth chasing SLAB right now as it has already traded through our target. As such we are going to drop the play for now and look for other opportunities when the semiconductors have a meaningful correction.
Suggested Position: Dropped
Annotated Monthly Chart:
Entry on April xxth at $ xx.xx
Earnings Date 4/28/10
Average Daily Volume = 762,000
Listed on April 10th, 2010