Trend negative, but bearish sentiment positive
Not much change from last week – the trend picture for most indices and sectors remains mostly negative, but with some positive short-term trends still evident. Bearish sentiment and expectations of an imminent retest of the January lows remain high, suggesting perhaps that the odds may favor a move to the upside, or simply more sideways action.
New positions
Bank of America (BAC) – On Tuesday I sold some March 40-strike puts on BAC:
As with the market in general, it’s unclear whether BAC will go higher or lower in the short term. One likely scenario may be a period of consolidation for a while, between 45 or so on the higher end and 37-38 on the lower end.
Barclays (BCS) – On Thursday I sold some March 35-strike puts on BCS on weakness:
BCS recently made new oversold lows while exhibiting positive divergences on the price oscillator, after which it bounced strongly after reporting in-line earnings. For now a short-term bottom – and potentially an intermediate-term one as well – appears to have been made. A break below 35 would change this view and suggest a possible move to the 27-28 level. Upside resistance is at the 40 and 42-43 levels.
General Growth Properties (GGP) – On Thursday I sold some March 30-strike puts on GGP as the stock continued to pull back from its recent highs of ~40:
GGP appears to be in an intermediate-term consolidation phase within a longer-term down trend. An immediate retest of its recent lows will likely result in positive divergences and may set the stage for another bounce (or even an intermediate-term bottom). A move up from here would likely run into significant resistance in the low 40s, and potentially set the stage for another leg down.
Verizon (VZ) – On Tuesday I sold some March 35-strike puts on VZ as the stock sold off after Credit Suisse downgraded the telecom sector:
VZ is in an intermediate-term down trend, but may have made a short-term bottom for now. Significant upside resistance is at the 37-38 and 40 levels. Downside support appears to be at the 33-34 and ~31 levels.
Watchlists
“Upside strength” candidates of interest this week include AK Steel Holding (AKS), Companhia Siderurgica Nacional (SID), CSX Corp. (CSX), Precision Drilling (PDS), and Western Digital Corp. (WDC).
Candidates of interest on the “oversold” scans this week include AT&T (T), Apollo Group (APOL), Black & Decker (BDK), Boyd Gaming (BYD), Brinker International (EAT), Consolidated Edison (ED), Dollar Tree Stores (DLTR), General Electric (GE), and General Growth Properties (GGP).
