The pause that refreshes?
After two weeks of mixed signals, the weekly trend analyses of all the major indices are once again almost unanimously green, indicating the current trend is up. Even the Dow Jones Industrials – the weakest of the indices – has shifted to a mostly green status.
Last week’s market action in turn suggests a more positive/neutral bias for this coming expiration week. One potentially positive note, at least for the near term, is the increasing number of large-cap “blue chips” that have recently become significantly “oversold.”
These include the likes of 3M (MMM), Alcan (AL), Alcoa (AA), Anheuser Busch (BUD), Conagra (CAG), Clorox (CLX), Disney (DIS), Dow Chemical (DOW), DuPont (DD), IBM (IBM), International Paper (IP), Johnson & Johnson (JNJ), Merck (MRK), Sara Lee (SLE), and Tribune Co. (TRB). While many of these stocks may certainly ultimately trade lower, there is plenty of room here for them to bounce in the near term.
Early last week I bought back my short Agrium (AGU) puts for about 20% of what I had sold them for two weeks earlier. AGU was performing well (and continues to do so), but I saw no point in remaining exposed in the position for another two weeks for the little premium that remained. This translated into a nice 2.5%+ net gain in two weeks.
Otherwise I’m not in any particular hurry to close out my other short put positions. However, I’ll be continuing to watch for potentially favorable exit opportunities – especially in the case of those options that are currently trading at or in the money – as this expiration week progresses.
