TEN Exclusive: Options Update – 8/4/10

Written by Dan Micovic

The market put in another solid, workman-like effort today buoyed by an upbeat ADP report.  The reported noted that private-sector employers added 42,000 new jobs in July, outpacing analysts’ expectations. Also today the Institute for Supply Management (ISM) stated that its non-manufacturing index improved to 54.3% in July, versus expectations of a monthly decline. The ISM’s employment index rose by 1.2 percentage points, which was its highest reading since late 2007, adding to the positive momentum sparked by the ADP report. We still face a few hurdles as tomorrow we will get monthly retail numbers and on Friday we get eh big jobs report from the Labor Department.  The ADP number has been pretty accurate in foreshadowing the jobs report and if that holds true we could see a rally right into the weekend.

The SPX put in some solid work today but lacked the volume to get above the next resistance range between 1027 and 1030 today.  With decent retail numbers tomorrow we should see the upper end challenged early tomorrow.  To the downside we have support at 1114 and then 1100.

We remain bullish.

Weekly Economic Calendar:

Thursday

• The weekly report on initial jobless claims will be released. Beazer Homes USA Inc. (BZH), Diana Shipping Inc. (DSX), DIRECTV (DTV), Fuel Systems Solutions Inc. (FSYS), Hyatt Hotels Corp. (H), Liz Claiborne Inc. (LIZ), Playboy Enterprises Inc. (PLA), Time Warner Cable Inc. (TWC), Activision Blizzard Inc. (ATVI) and Kraft Foods Inc. (KFT) will report earnings.

Friday

• On Friday, the Labor Department will release nonfarm payrolls and unemployment reports. Reporting earnings will be China Sunergy Co. Ltd. (CSUN) and Dynegy Inc. (DYN).

New Trade Idea:

Buy SanDisk (SNDK) August 46 Calls @ $1.70 or better:

Sandisk is getting ready to make another run here.  We should see higher prices over the next few sessions.  Use $3.20 as a target and $1.65 as a mental stop-loss.

Open Positions:

Green Mountain Coffee Roasters (GMCR) August 30 Calls @ $1.65:

We closed a nice winner in GMCR recently and since the stock has consolidated and is making another run towards new highs.  We should see a nice move higher this week.  Use $3.00 as a target and $1.00 as a mental stop-loss to eh downside.

Baidu (BIDU) August 80 Calls @ $4.00:

Great move this week and we should see higher prices tomorrow.  Use $8.00 as a target and $2.00 for a mental stop-loss.

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

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.

Manitowoc (MTW) August 10 Calls @ $0.95:

Target hit and we locked in the 63% profit.  Nice trade.

NetApp (NTAP) August 43 Calls @ $1.90:

Great move by the stock today.  We should see our target by the weekend.  Continue to hold and use $3.00 as a target and $0.90 as a mental stop-loss.

Related Reading:

• TEN Exclusive: Options Update – 10/31/10
• TEN Exclusive: Options Update – 11/21/10
• TEN Exclusive: Options Update – 11/14/10
• TEN Exclusive: Options Update – 10/27/10
• Sector Performance: I’ll Take a Little Sugar with My Coffee

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