TEN Exclusive: Options Update – 2/24/10
Wednesday, February 24th, 2010Written by Dan Micovic
Thanks Chairman Bernanke. Traders collectively released a breath of relief today as the central banker began a two-day venture on Capitol Hill. Offering his semi-annual assessment of the economy, the Fed chief didn’t disappoint the street, assuring Congress that last week’s move to boost the rate on emergency loans to banks doesn’t necessarily indicate more rate hikes in the near future. As a result stocks soared in late-morning trading. Though the government’s report that new-home sales unexpectedly fell to a record low in January helped to limit the bulls, the major market indexes settled in the black and halted a two-day downturn.
As you can see from the chart below, the 1110 level remains the key level the market has to overcome in order to resume its rally. The pattern has become to test, fail and to rollover from this level. We remain cautiously bullish, but will wait to add more bullish plays until we hurdle the 1110 level. If we fail, we will test 1092 again.
Weekly Economic Calendar:
Thursday
- Traders will see weekly initial jobless claims, January’s durable goods orders, and the FHFA housing price index for December on Thursday. Coeur d’Alene Mines Corp. (CDE), Frontier Oil Corp. (FTO), H.J. Heinz Co. (HNZ), Kohl’s Corp. (KSS), Newmont Mining Corp. (NEM), Sirius XM Radio Inc. (SIRI), Crocs Inc. (CROX), Deckers Outdoor Corp. (DECK), The Gap Inc. (GPS), OmniVision Technologies Inc. (OVTI), Weight Watchers International Inc. (WTW), and Wynn Resorts Limited (WYNN) are scheduled to report earnings.
Friday
- Friday brings a close to the week, with the revised fourth-quarter gross domestic product (GDP) reading, February’s Chicago purchasing managers’ index (PMI), January’s existing home sales, and the final reading on the University of Michigan’s consumer sentiment index for February on tap. BioScrip Inc. (BIOS), James River Coal Co. (JRCC), and Mirant Corp. (MIR) will release earnings reports.
New Trade Idea:
Buy Rackspace (RAX) March 20 Calls (RAX100320C20) @ $1.05 or better:
The stock is breaking out nicely from its base and we think we could hit $21 this week. Look to take profits around $2.00 on the calls.
Open Positions:
International Paper (IP) March 24 Calls (IUI100320C24) @ $1.35:
IP is testing support at it’s 20-day moving average here and we should see the stock bounce. Continue to hold.
Ambercrombie & Fitch (ANF) March 35 Calls (ANF100320C35) @ $1.65:
The stock is beginning to heat up here and we should see a move above $36 shortly. Continue to hold an dlook to take profits on the calls around $3.00.
JP Morgan (JPM) March 38 Calls (JPMCC) at $2.35:
We took profits at $3.35. A +43% profit. Another great trade!!
