The market lacked direction on Monday as it weighed all the headlines from last week against the potential headlines later this week.
The markets lacked direction today simply because there were no headlines driving market sentiment. Everyone is waiting for the Fed and ECB to give the market a road map later this week. I am not holding my breath it will be positive.
The market is so keyed up in hopes of a blockbuster announcement from the ECB and/or Fed that anything less than spectacular is likely to be met with a sell off.
The economic road map for later this week is full of potential potholes so investors are best advised to drive slowly or find an alternate route.
James is on vacation this week.
NEW DIRECTIONAL CALL PLAYS
No New Calls Today
NEW DIRECTIONAL PUT PLAYS
Akamai Technologies - AKAM - close: 35.83 change: -.04
Stop Loss: 36.75
Time Frame: 2-4 weeks
New Positions: Yes, see below
Why We Like It:
Akamai reported earnings of 43 cents last week that beat the street and raised guidance. The stock soared +25% on the news. That was on Thursday. Friday's market short squeeze failed to add any material gains to that spike BUT Monday's lackluster market also failed to produce a material decline in AKAM.
After a 25% spike well above the consolidation range of the last three months you would expect the spike to fade and profit taking appear. The raised guidance is probably what is holding shares up. However, if the Nasdaq begins to roll over on less than expected help from the ECB/Fed then profit taking could begin with a vengeance.
This is a high risk play. If we do get a dip to trigger our put entry and the market turns around the dip in AKAM could be seen as a buying opportunity.
I am looking for AKAM to retrace about half of its gains from last week if profit taking appears.
I am recommending we buy the Sept $34 put in anticipation of a possible decline to the June support at $32.
Trigger: Enter only with an AKAM trade at $34.85
- Suggested Positions -
Position: Long Sept $34 PUT (AKAM1222U34), currently $1.19
Chart of AKAM
Entry on July xx at $ xx.xx
Average Daily Volume = 3.3 million
Listed on July 30, 2012