Weekly Update: June 27, 2013

Weekly Update:  June 27, 2013

 

What To Watch

So that was interesting.  Last week at this time, we had just begun a nice little selloff in stocks due to a backlash from Bernanke’s comments.  The S&P 500 dropped from a high last week of roughly $1,650 all the way down to a low of around $1,560.

And now, we’re all the way back to $1,615 at the time of this writing.  It’s not quite the peak, but we’ve definitely gained back much of what was lost.

As I said last week, there was no way the market was going to continue to plunge unless something new came out.  The reality of the dynamics between the Fed and the economy was eventually going to sink in with investors.  Let me repeat, either the economy is getting better or the Fed is providing stimulus.

At this point in time, there’s simply no reason for a major selloff (barring new developments of course).

For those of you who only follow price action (and I know you’re out there) – let this be a lesson to you.  You can’t simply ignore the fundamentals.  There’s nothing wrong with focusing on technical trading.  I happen to be a big fan of moving averages and use them regularly in my trading decisions.  However, ignoring a hugely significant variable in the markets is a big mistake.

Look at it this way, why wouldn’t you use all the info you have at your disposal?  It’s like flying an airplane and only watching your speed.  Wouldn’t you want to know your altitude as well?

There are many different trading styles out there.  And, they all can be effective.  Let me just urge you to use as much information as you can when making trading decisions.

Now on to the portfolio.

 

Portfolio Recap

Position #1:  Cliffs Natural Resources (CLF) July $20 Calls

Price Paid: $1.11

Current Price: $0.10

Time Until Expiration: 22 days

CLF took it on the chin with the market selloff, and has just started to gain back some of what it lost over the past week.  I believe the stock has bottomed and is headed back towards the 50-day moving average.  Keep in mind, CLF shares can move in a hurry.  The stock is more than volatile enough for our calls to get back to respectability before expiration three weeks away.  Hang on to your options for now.

 

Position #2:  Pandora (P) July $16 Calls

Price Paid: $0.90

Price Sold: $1.85

We got the move we were looking for in Pandora.  As I predicted, the company has many different avenues in which to sell their product.  For the time being, they’re going to find ways to grow their revenue.  And, it was too early to give up on Pandora’s growth plan.  Nice work locking in roughly 100% gains on this one.

 

Position #3: Qualcomm (QCOM) August $65 Calls

Price Paid: $1.05

Current Price: $0.65

Time Until Expiration: 50 days

QCOM has been somewhat volatile, but in a fairly narrow range.  The stock should easily test the 200-day moving average and 50-day moving average (both right around $63) in the near future.  If it breaks through those levels, the price could easily see $66 soon after.

Fortunately, we have plenty of time on these calls.  And, with the overall market recovering, we have momentum on our side.

 

Category: OTW Weekly Updates