TEN Exclusive: Options Update – 2/14/10
Sunday, February 14th, 2010Written by Dan Micovic
We are coming off of an unusual week where for a change both national and international economic concerns caused great volatility in the U.S. Markets. The Dow closed below the psychologically important 10,000 level on Monday but managed to squeak out a gin for the week, it’s first in the last five weeks.
Anxiety was high after a report that Federal Reserve Chairman Ben Bernanke would begin “to lay out a blueprint for a credit tightening.”   On Wednesday the market slowed its pace as it digested the Federal Reserve’s plan to unwind various stimulus measures. However, the Fed declined to offer a timeline, stating only, “The sequencing of steps and the combination of tools that the Federal Reserve uses as it exits from its currently very accommodative policy stance will depend on economic and financial developments.” Stocks rebounded on Thursday as details of the Greek bailout began to emerge, but on Friday the Dow was upset by news that China had taken steps to curb lending for the second time in as many months.
The market seems to be more subdued in its reaction to negative news and more poised to rally on better-than-expected news. This is bullish.
The SPX is still trading above its rising 160-day moving average, which is around 1050. However, it remains below the 80-day trendline around 1100. Those are the levels we will use for support and resistance and they tell us that we may very well continue to be trapped inside this trading range. We are still mildly bearish although by our next report that could change.
[private_Options Update]
Weekly Economic Calendar:
Monday
- The market is closed for the President’s Day holiday.
Tuesday
- The January Treasury budget is the lone economic report on Tuesday. Abercrombie & Fitch Co. (ANF), CF Industries Holdings Inc. (CF), Merck & Co., Inc. (MRK), Teva Pharmaceuticals Industries Ltd. (TEVA), Cray Inc. (CRAY), ValueClick Inc. (VCLK), and Whole Foods Market Inc. (WFMI) are slated to release earnings.
Wednesday
- January’s building permits, import/export prices, housing starts, and the capacity utilization and industrial production reports will be released. Deere & Co. (DE), Hecla Mining Co. (HL), OfficeMax Inc. (OMX), Applied Materials Inc. (AMAT), Chesapeake Energy Corp. (CHK), Hewlett-Packard Co. (HPQ), Las Vegas Sands Corp. (LVS), NetApp Inc. (NTAP), NVIDIA Corp. (NVDA), and priceline.com Inc. (PCLN) will report earnings.
Thursday
- Traders will see the report on U.S. weekly petroleum supplies, weekly initial jobless claims, the January producer price index (PPI), January’s leading indicators, and the Philadelphia Fed’s manufacturing index for February on Thursday. The Goodyear Tire & Rubber Co. (GT), Hormel Foods Corp. (HRL), MGM MIRAGE (MGM), Wal-Mart Stores Inc. (WMT), Dell Inc. (DELL), First Solar Inc. (FSLR), and Intuit Inc. (INTU) are scheduled to report earnings.
Friday
- The consumer price index (CPI) will be released. J.C. Penney Co. Inc. (JCP) and PG&E Corp. (PCG) are releasing their earnings reports on Friday.
New Trade Idea:
With Monday being a holiday and the still uncertain situation in Europe, we don’t feel it would be prudent to release a new trade today.
Open Positions:
Vertex Pharmaceuticals (VRTX) March 35 Puts (VQROG) @ $1.00:
Continue to hold. The stock has broken a key line of support and looks intent on filling a gap back down to the $35 level. Be quick to take profits but we could see a double out of these calls.
JP Morgan (JPM) March 38 Call (JPMCC) at $2.35:
Continue to hold. JPM has retraced to its support level and the 200-day moving average is approaching the 30-day moving average. With JPM at its 7-month low, this looks like a good entry point on the 38 calls for a nice short-term gain.
Whirlpool (WHR) March 75 Put (WHROO) @ $4.60:
We were stopped out of this play.
Research in Motion (RIMM) March 70 Call (RFYCN) @ $2.60:
We closed our calls on Friday for a +60% profit. If you are still holding your calls, look to take profits early this week.
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.[/private_Options Update]
