TEN Exclusive: Options Update – Bulls try to fight back

Written by Dan Micovic

The market was due for a breather and decided to take it today.  After two straight sessions of triple-digit gains, the Dow gave back 26 points today. Only 9 Dow components finished in the positive today.

The SPX also finished lower, losing 6 points and closed below the critical 1,100 level. The Dow and the SPX both stayed above the 10-day trendline. The Nasdaq managed to close virtually unchanged by the closing bell.

Tomorrow should be a relatively calm and choppy day with traders hesitant to put on big positions ahead of Fridays jobs report.  As you can see from the chart below, we are at a critical juncture here.  Notice that the volume has been light this week, raising concerns about the rally earlier this week.  It’s critical that we get back above the 1100 level.[private_Options Update]

Weekly Economic Calendar:

Thursday

• Traders will see weekly initial jobless claims, the fourth-quarter productivity report, and December’s factory orders today. Avon Products Inc. (AVP), Burger King Holdings Inc. (BKC), The Clorox Co. (CLX), Kellogg Co. (K), MasterCard Inc. (MA), Reynolds American Inc. (RAI), Royal Gold Inc. (RGLD), Sony Corp. (SNE), Bebe stores inc. (BEBE), Con-way Inc. (CNW), and Sunoco Inc. (SUN) are scheduled to report earnings.

Friday

• Friday brings us January’s unemployment rate, nonfarm payrolls, and December’s consumer credit report. Aetna Inc. (AET), Beazer Homes USA Inc. (BZH), Tyson Foods Inc. (TSN), and YRC Worldwide Inc. (YRCW) are scheduled to release their earnings reports on Friday.

New Trade Idea:

Buy Research in Motion (RIMM) March 70 Call (RFYCN) @ $2.60 or better:

Research in Motion is finally beginning to fill the gap from back in December.  The next targets for the stock are $68.50 and then $69.70 on its way above $70.

Open Positions:

Apollo Group (APOL) March 60 Put (OAQOL) @ $3.30:

Continue to hold.  The for-profit education stocks are beginning to rollover after student lending legislation stalled.  Apollo is nearing its last major line of support and we could see a quick drop to its old support around the $58 level.  Use a mental closing stop of $1.90 for the option and a rough target of $5.30.

Johnson Controls (JCI) March 27.5 Put (JCIOY) @ $1.40:

This position was closed today based on the closing price.

Zion Bancorp (ZION) Feb 18 put (ZNQNF) @$0.85:

This position was closed today.

Exxon (XOM) March 65 call (XOMCM) @ $2.20:

Continue to hold.  Use a target of $4.50 for the calls and a stop of $1.40.[/private_Options Update]

Related Reading:

• TEN Exclusive: Options Update – 2/7/10
• TEN Exclusive: Options Update – 10/31/10
• TEN Exclusive: Options Update – 10/27/10
• TEN Exclusive: Options Update – 10/10/10
• TEN Exclusive: Options Update – 9/29/10

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