TEN Exclusive: Options Update – 7/28/10

Written by Dan Micovic

The market paused again today and traded in a choppy fashion as it continued to digest the recent rally.  We continue to get better than expected corporate results with mixed to worse than expected economic results.  Today the Commerce Department reported that U.S. durable goods orders fell 1% in June versus expectations for a 1% increase during the month. The afternoon release of the Fed’s Beige Book this afternoon kept with the cautious tone of comments made by Chairman Ben Bernanke before the Senate last week, as most of the 12 Federal Reserve districts reported stagnant or slowing economic progress.

The S&P 500 Index managed to stay above the key level of 1,100 that we have been highlighting.  Resistance continues to be the 200-day moving average around the 1114 level. We feel that it’s healthy for the markets to pause and digest some of the big moves we’ve seen.  The market is selling off in area, on low-volume and with reason.  We wouldn’t be surprised if we catch a nice up session by the weekend.

We remain bullish.

Weekly Economic Calendar:

Thursday

• Weekly initial jobless claims will be joined by the Fed’s Beige Book on Thursday.Avon Products Inc. (AVP) , Barrick Gold Corp. (ABX), Celgene Corp. (CELG),Colgate-Palmolive Co. (CL) , Exxon Mobil Corp. (XOM), Motorola Inc. (MOT),Northrop Grumman Corp. (NOC) , Sony Corp. (SNE), Strayer Education Inc. (STRA), Wynn Resorts Limited (WYNN),Chiquita Brands International Inc. (CQB) , Coinstar Inc. (CSTR), Expedia Inc. (EXPE), First Solar Inc. (FSLR), McAfee Inc. (MFE), and MetLife Inc. (MET) will report earnings.

Friday

• On Friday, we’ll get the latest numbers on second-quarter gross domestic product, along with the Chicago Purchasing Managers’ Index for July, and a final look at July consumer confidence as measured by Reuters and the University of Michigan. Joining the earnings parade will beArch Coal Inc. (ACI) , Chevron Corp. (CVX), ITT Corp. (ITT), and Merck & Co. Inc. (MRK).

New Trade Idea:

Buy American International Group (AIG) August 40 Calls @ $1.90 or Better:

AIG has continued to perform well even while the market consolidates and digests the recent rally.  When this market is ready to move again, AIG should be ready to run.  $40 may prove to be a bit of resistance.  Use $4.00 as a target and $0.90 as a mental stop loss.

Open Positions:

Manitowoc (MTW) August 10 Calls @ $0.95:

We came close to our target early in the week.  The company reported good earnings and the stock has a consolidated a bit.  Continue to hold.  Use $1.55 as a target and $0.45 as a mental stop-loss.

NetApp (NTAP) August 43 Calls @ $1.90:

Stock is consolidating after a nice run-up.  Very healthy.  Continue to hold and use $3.00 as a target and $0.90 as a mental stop-loss.

Related Reading:

• TEN Exclusive: Options Update – 10/27/10

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