Retest of the lows: Did it do the job?

While last week’s retest of the recent lows might have marked the end of a correction, it and the bounce that followed weren’t all that convincing. In addition, the trend picture remains negative to neutral overall, suggesting that there’s plenty of possibility for both further upside and downside action ahead.

Key near-term support levels on the major indices remain at the recent lows: about 1365 (S&P 500), 2330 (Nasdaq), 790-800 (Russell 3000), and 11,950 (DJIA). Key near-term upside resistance levels are now about 1410-1415 and 1430 (S&P 500); 2405 and 2430 (Nasdaq); 820-825 and 835 (Russell 3000); and 12,300-12,350 and 12,500 (DJIA).

Options Expiration Results

• Alcoa (AA) – The March 35-strike puts I sold on 2/22/07 expired in the money (ITM) and I was put the stock for a net cost basis of about $34.00 per share.

• Amgen (AMGN) – The March 65-strike puts I sold on 2/16/07 expired ITM and I was put the stock for a net cost basis of about $64.40 per share.

• Automatic Data processing (ADP) – The March 50-strike puts I sold on 2/27/07 expired ITM and I was put the stock for a net cost basis of about $49.35 per share.

• Caterpillar (CAT) – The March 65-strike puts I sold on 2/27/07 expired ITM and I was put the stock for a net cost basis of about $64 per share.

• CSX (CSX) – The March 40-strike puts I sold on 2/26/07 expired out of the money (OTM) for a 3-week net return of about 3.9%.*

• DaimlerChrysler (DCX) – The March 65-strike puts I sold on 2/27/07 expired OTM for a 2-1/2-week net return of about 1.1%.*

• Dow Chemical (DOW) – The March 45-strike puts I sold on 2/27/07 expired OTM for a 2-1/2-week net return of about 3.2%.*

• Gerdau S. A. (GGB) – The March 17-1/2-strike puts I sold on 2/27/07 expired ITM and I was put the stock for a net cost basis of about $16.88 per share.

• GlaxoSmithKline (GSK) – The March 57-1/2-strike calls I sold on 2/13/07 against my long position in GSK (purchased 4/21/06) expired OTM, for a 1-month net return of about 1.9%.

• International Paper (IP) – The March 37-1/2-strike puts I sold on 2/21/07 expired ITM and I was put the stock for a net cost basis of about $36.70 per share.

• Kroger (KR) – The March 25-strike puts I sold on 2/27/07 expired OTM for a 2-1/2-week net return of about 1.9%.*

• Nordic American Tanker Shipping (NAT) – The March 35-strike puts I sold on 2/21/07 expired ITM and I was put the stock for a net cost basis of about $33.90 per share.

• Oshkosh Truck (OSK) – The March 55-strike puts I sold on 2/20/07 expired ITM and I was put the stock for a net cost basis of about $54 per share.

• Progress Energy (PGN) – The March 45-strike calls I sold on 2/7/07 against my long position in PGN (purchased 4/21/06) expired ITM, and my shares were called, for an 11-month total net return in the position of about 15% (including dividends).

• Whole Foods Market (WFMI) – The March 45-strike calls I sold on 2/9/07 against my long position in WFMI (purchased 1/22/07) expired OTM, for a 5-week net return of about 6%.

New positions
No new positions this week.

Watchlists
New additions (or re-listings) to the “upside strength” list include Estee Lauder (EL), Fred’s (FRED), Health Management Associates (HMA), Kellogg (K), LandAmerica Financial (LFG), Sanderson Farms (SAFM), and Unum Group (UNM).

New additions to the “oversold” list this week include Allstate (ALL), Gannett (GCI), Motorola (MOT), and Tribune (TRB).

* As always, the return on these “cash secured” put sales was based on the premium received from the sale of the options (minus commissions) against the unmargined capital set aside to pay for the possible assignment of the stock.

Related Posts: