TEN Exclusive: Options Update – 3/7/10

Written by Dan Micovic

We saw some great achievements by the market this week.  On the first day of the week (and month), the Dow Jones Industrial Average cracked the 10,400 mark for only the second time since Jan. 20. On Thursday, the Dow closed in positive territory for the year. On the final day of the week, the bulls pushed past the 10,500 level.  We are setting up for a retest of the January highs.

On Friday, the Dow rocketed out of the gate, broke through the 10,500 level early in the session, held steady through mid-day, and then made another jump in the afternoon. Better-than-expected jobless numbers played a part in the run, as did a report that consumer borrowing unexpectedly climbed in January.

On thing to keep an eye on is the plunging VIX index.  Fear has left the market this past week and that’s a pretty good sign that a pullback is just around the corner.  It may be a good time to add April puts to your portfolio.

We are looking for the SPX to make a run at eh 1150-1160 resistance level this week, but we doubt that we’ll be able to break above and sustain that level without letting some steam out of the market first. Beyond 1160, the next resistance level for the SPX is 1200.

We remain bullish but wary of a sharp but short-lived pullback.

Weekly Economic Calendar:

Monday

• There are no economic reports slated for release on Monday. Yingli Green Energy Holding Co. Ltd. (YGE), Force Protection Inc. (FRPT), H&R Block Inc. (HRB) and TiVo Inc. (TIVO) will release earnings.

Tuesday

• There are no economic reports slated for release on Tuesday. Dick’s Sporting Goods Inc. (DKS), The Kroger Co. (KR), Collective Brands Inc. (PSS), and J. Crew Group Inc. (JCG) are slated to release earnings.

Wednesday

• January’s wholesale inventories and the February Treasury budget will arrive alongside the weekly report on U.S. petroleum supplies on Wednesday. American Eagle Outfitters (AEO), Children’s Place Retail Stores Inc. (PLCE), ReneSola Ltd. (SOL), FuelCell Energy Inc. (FCEL), Hot Topic Inc. (HOTT), and The Men’s Wearhouse Inc. (MW) will report earnings.

Thursday

• Weekly initial jobless claims and the January trade balance will be released on Thursday. China Sunergy Co. Ltd. (CSUN), Aeropostale Inc. (ARO), Goldcorp Inc. (GG), Pacific Sunwear of California Inc. (PSUN), and Shuffle Master Inc. (SHFL) are scheduled to report earnings.

Friday

• February’s retail sales, the March University of Michigan consumer sentiment index, and the January business inventories report are scheduled for release. AnnTaylor Stores Corp. (ANN), and Kirkland’s Inc. (KIRK) are releasing their earnings reports on Friday.

New Trade Idea:

Buy Abercrombie & Fitch (ANF) March 41 Puts @ .70 or better

ANF is giving an overbought reading and we will play it for a quick pullback after making money on the calls.  Use $1.40 as your target and .35 as a mental stop.

Open Positions:

Abercrombie & Fitch (ANF) March 35 Calls (ANF100320C35) @ $1.65:

We sold our calls at $5.10 on March 4^th after ANF blew away monthly estimates.  This was a whopping 209% profit.  Nice trade.

PNC Financial (PNC) March 55 Calls @ .95 or better:

The stock was very strong on Friday and we should hit our target soon.  Use 1.75 as a target and use a mental stop of .50.  Continue to hold.

Morgan Stanley (MS) March 28 Calls @ 1.00 or better:

Take profits on Monday, March 8^th.  The stock has really moved and we are sitting on a 60% gain here.

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