There have been some rumblings in the Just Covered Call Yahoo Group about the Bull Run that the market is in right now regarding a pullback. I am a follower of the S&P 500 index and it has just blown past a resistance point of 877 and closed at 907 yesterday. Breaking resistance soundly is a good indication that 877 will become the new support. There is another, weaker resistance at 943 and then the big one at 1,000 – which is a huge psychological barrier. Right now I am thinking the market will continue to rise overall, but that there will be a pullback or pullbacks and that we should not panic.
I still had some cash sitting around yesterday, so I jumped on 2 trades for May. I had several on a list that I compiled over the weekend, but they all gapped up big time on Monday and I don’t really like chasing stocks that do that.
I found Urban Outfitters (URBN) on CallWriter’s NASDAQ 100 list around noon with a MAY 20. It has just recently broken out of a consolidation pattern, has healthy financials and has a Technical Rating of 100% Buy – a number that I have never seen before. My only point of concern is their earnings announcement the day before expiration.
My second trade was found on the S&P 100 list. About the only good news (relatively speaking) coming out of Detroit is Ford Motor Company (F), so I stepped in with a MAY 6.00. When I told my wife, she said “WHAT!?” Come on, they even outsold Toyota last month! Although their chart has some huge gaps in it, I believe the sentiment in this country is to back a US automaker and the result will be an increase in Ford’s stock price – but I have been wrong before. There is other data to back this up, however, such as a rating of 96% Buy, heavy accumulation, no earnings to worry about for May, broke 200 EMA and the HV/IV ratio is healthy.
I also rolled my underwater UAL Corporation (UAUA) from a MAY 5 to a JUN 5. The stock made a healthy bullish move yesterday and with Swine Flu now occupying less that 7/24 coverage, the airlines should get a pop. With that in mind, I didn’t want to get assigned early and take the 7.8% loss and by rolling I reduced my loss to 3.68%. Eventually I will work this one out to a gain, but it may take a while.
If you look at my Trading Plan, you will see that my allocation rule is to not put more than 10% of my account into any one trade (or industry for that matter), and to keep 10% cash in reserve for emergencies. Take a look at my In Play page and you will see that I currently have 9 Covered Calls open. That means I am fully vested right now. Unless I close one of these early, that’s it (really, honest) for this month. However, I am keeping a close eye on CROX. Did you see what they did yesterday? Up 42% on just an analyst upgrade? With earnings on May 7th, I may close this one early if the gain is close enough to my original target so I don’t have to sweat out earnings.
– Jeff
“Believe in yourself! Have faith in your abilities! Without a humble but reasonable confidence in your own powers you cannot be successful or happy.” Norman Vincent Peale (1898 – 1993)
Date |
BTO Stock & Price |
STO Option & Price |
Option Exp/Strike |
Cost Basis |
ITM Return |
Downside Protection |
5/4 |
URBN 20.02 |
URQED 1.07 |
MAY/20 |
18.96 |
5.47% |
5.35% |
5/4 |
F 5.84 |
FEI 0.30 |
MAY/6 |
5.55 |
8.07% |
5.0% |
3/23/09 |
UAUA 8.04 |
UALFA 0.45 #5 |
JUN/5 |
5.19 |
-3.68% |
N/A |
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