Next stop: 1410-1420 on the S&P 500?
The current market trend picture remains positive as the major market indices continue to work their way higher, and last week closed above some key resistance levels. A test of the next significant near-term upside resistance levels (i.e., at about 1410-1420 and ~1430-1440 for the S&P 500; 2480-2500 and ~2550 for the Nasdaq; and 13,000 and 13,200-13,300 for the DJIA) seems increasingly likely.
New positions
Astoria Financial (AF) – Last Monday I sold some May 22.5-strike puts on AF as the stock continued to fall in a short-term downtrend:
The intermediate-term picture for AF is unclear, but the stock is becoming short-term oversold and has bounced off support at the ~23 level. A break below ~22 1/2 might suggest a retest of the lows at around 20.
Gannett (GCI) – Last Wednesday I sold some May 25-strike puts on GCI as the stock fell to new multi-year lows (and a significant support level) as it and other publishers reported continued declines in revenues and profits:
After declining relentlessly for the last year, GCI has fallen to significant support at the ~25 level and might be expected to hold/bounce from these levels. Fundamentally, the newspaper publishing industry’s problems are well known and may well now be over-reflected in the stock price, which appears to be a reasonable value here.
Hartford Financial Services Group (HIG) – Last Wednesday I sold some May 65-strike puts on HIG as the stock fell along with the rest of the insurance sector:
HIG is in a short-term downtrend but its intermediate-term trend appears to be neutral to positive. A break of the support at the 69-70 level would suggest a retest of the March lows at around 65 – a level at which I’d be comfortable owning the stock.
Kraft Foods KFT – Last Tuesday I sold some May 30-strike puts on KFT as the stock dropped below the 31 level:
KFT is in a short-term downtrend but its intermediate-term trend is currently positive. A break below the 30 level would change this picture. The news earlier this year that Warren Buffett bought KFT at around these levels may tend to lend support to the share price. A 3.5% dividend yield doesn’t hurt either.
Microsoft (MSFT) – Last Thursday I sold some May 32-strike covered calls against my long position in MSFT (purchased 02/17/08) as the stock rallied in anticipation of a strong earnings report:
The earnings report failed to meet the high expectations and the stock fell sharply. Still, it had rallied sharply in the days leading up to the news and remains in an intermediate-term uptrend, and seems likely to revisit the recent highs in the days/weeks ahead. A break below the 28-1/2 to 29 level would change this view.
Precision Drilling Trust (PDS) – Last Wednesday I sold some May 25-strike puts on PDS as the stock hit a downdraft in its strong intermediate-term uptrend:
PDS has been performing strongly since the beginning of the year and appears likely to move higher over the intermediate term. A drop back below the 21-22 level might change this view. Near-term upside resistance is at ~27.
Watchlists
Stocks of interest showing up on this week’s “upside strength” scans include Bed Bath & Beyond (BBBY), Dow Chemical (DOW), Microchip Technology (MCHP), Watsco (WSO), and Weingarten Realty Investors (WRI).
New and returning “oversold” candidates of interest this week include Clorox (CLX), Cooper Tire & Rubber (CTB), Mine Safety Appliances (MSA), and Whirlpool Corp. (WHR).
