Weekly Update: December 5, 2013

| December 5, 2013

Weekly Update:  December 5, 2013

 

What To Watch

December is off to a somewhat rocky start for US equities.  The S&P 500 is down around a half percent from last week, and it looks like we’re going to have four straight down days to open the month.  At least one reason for the slow start, holiday spending so far has been a little worse than expected.

On the bright side, almost all the recent economic data has been positive.  The ADP jobs report showed 215,000 jobs were added in the private sector last month.  While the ADP report can differ quite a bit form the government non-farm payroll report (due out tomorrow), it’s typically a good sign for the job market when the number is stronger.

Meanwhile, new home sales soared 25% from month to month.  That’s the largest monthly gain since 1980!  Plus, GDP was revised significantly higher from 2.8% to 3.6% on the strength of higher than expected inventories.  That could be a sign businesses are expecting higher demand.  Finally, jobless claims dropped to 298,000 from 321,000 the week prior – although the Thanksgiving holiday had something to do with the big decline.

The only negative reading over the past week or so has been the ISM Services Index which came in at 53.9 from 55 in the prior period.  Overall though, the data is clearly encouraging on the economic front.  Does that mean the Fed will taper sooner than expected?  I guess we’ll need to see what the rest of December brings.

 

Portfolio Recap

Position #1: Citrix Systems (CTXS) December $65 Calls

Price Paid: $1.39

Current Price: $0.15

Time Until Expiration: 15 days

CTXS is testing the 50-day moving average.  If it breaks through, we have a chance for our calls to be in play.  With two weeks to go, we need a substantial breakthrough by the end of next week.  There’s still time for this trade to work, but we’re cutting it close.

 

Position #2: Dominion (D) December $65 Puts

Price Paid: $1.45

Current Price: $1.90

Time Until Expiration: 15 days

I originally intended to exit D around the $64 level.  But, the stock has broken clean through support and could be headed all the way to $62.  I may still decide to sell in the next day or so depending on market action, and as of right now, we have a 31% winner on our hands.  Let’s see how D looks tomorrow and we’ll go from there.

 

Position #3: Millennial Media (MM) February $7.50 Calls

Price Paid: $0.65

Current Price: $0.55

Time Until Expiration: 78 days

MM keeps testing that 20-day moving average and has yet to breakthrough.  As long as it keeps trying to move higher, it’s a good sign that investors will eventually push the price through resistance.  And, we can sit on this one for quite awhile given the expiration isn’t until February.

 

Position #4: Cree (CREE) January $60 Calls

Price Paid: $1.52

Current Price: $1.95

Time Until Expiration: 43 days

CREE is taking a nice path higher, passing the 20-day moving average with the 200-day moving average next in line.  Our calls are already winners and will continue to gain steam as the stock moves higher.  If the stock hits $60 soon, it could be a good spot to take profits.

 

Category: OTW Weekly Updates