Up=Sell, Down=Buy?
Although nothing to write home about, all of the major indices this past week held above the previous week’s lows, leaving open the question, “do we go higher or lower from here?” If I had to guess I’d say “higher,” as the market continues to work off its oversold condition.
However, the current market trend analysis continues to reflect a negative intermediate- and longer-term picture, so for now I’ll view any rally in the short term (or even intermediate term) in that context. On the other hand, an immediate resumption of the decline from here – while oversold conditions still exist – will tend to have me looking again more aggressively at put-selling opportunities.
New positions
General Maritime (GMR) – Last week I sold some July 35-strike calls against my long position in GMR as the stock rallied toward the 35 level. I could have waited a bit as the stock ended the week at over 36!
My net cost basis in this position – after accounting for this and a previous covered-call sale, as well as a dividend payment – is about 31 1/2.
J.P. Morgan (JPM) – Last week I also sold some July 40 calls against my long position in JPM as the stock rallied above 41 1/2:
The stock’s probably more of a buy than a sell here short term, but I wanted to hedge my long-term gain in the position (a net cost basis of about 37) against a further decline. If the stock is called, I’ll have made a decent profit – if not, I’ll have lowered my net cost basis close to 35.
Watchlist
Stocks of interest showing upside strength this week include CarMax (KMX), El Paso Corp. (EP), J.M. Smucker (SJM), Johnson & Johnson (JNJ), SPX Corp. (SPW), and Teekay Shipping (TK).
“Beaten down” stocks of interest this week include ACE Ltd. (ACE), Amgen (AMGN), Cardinal Health (CAH), Dollar General (DG), Duetsche Telekom (DT), eBay (EBAY), Fortune Brands (FO), Gannett (GCI), Health Management Associates (HMA), Popular (BPOP), Sara Lee (SLE), Sonic Automotive (SAH), and Vodafone Group (VOD).
