After a great win streak, we do have positions that are down. But we continue to hold everything with original catalysts still in place. Much of the chaos on the Street is thanks to the Fed, economic worries, and geopolitical issues that have wreaked havoc for quite some time.
Most of the major indices – Dow, in particular – are stuck at historic highs, challenging heavy resistance. One day all is well, and the markets are running. The next day, the markets come down. The day after, as we saw yesterday, it’s mixed market madness.
All we can do is wait it out…
Again, we hold all open positions. We see no reason to exit any. Over the last few weeks, we’ve closed half of the Home Depot November 87.50 for a 35% gain. We closed the Toll Brothers puts for 29% and 33%. And we closed out the Staples September 12 calls for up to 58% gains.
We hold losers, such as Peabody (BTU), which we will let expire. This trade worked out well initially and then decided to flop. We also hold the second half of the Quiksilver November 3 calls. We still have plenty of time on this position after closing out half for gains of 65% in June 2014.
As for new positions, we’re looking at the short side of home builders again.
For the millionth time we hear the housing market is recovering. It’s not. There is no recovery in housing. The only reason stocks like Lennar (LEN) are up today is because its earnings beat lowered expectations.
As LEN challenges double top at overbought RSI, it’s likely to come back down shortly. The herd is running it up $2.56 today because they’re not paying attention… again.
We’re recommending that you buy to open the LEN November 2014 40 put up to $1.65.
The last time we played LEN, we took gains of 48% and 52% with the LEN November 37 calls. We’re now playing the short side looking for similar gains.
We’ll talk again soon. Take good care.
Ian L. Cooper
Inside Value Trader