Historic times indeed. Tuesday’s 485 point climb for the Dow was the third largest ever after dropping 777 points on Monday. The Dow’s close of 10,850 puts the index down 18% YTD. The Nasdaq jumped nearly 100 points to close at 2,082 but its 5% jump still leaves it off by 20% YTD. The S&P 500 rallied 60 points to finish at 1,166 and is also down 20% for the year.
NewsFlash. Despite the market’s gyrations, there are a few stock out there making new 52-week highs. Tough times call for tough choices and when you have to sell something for money where do people go? Yeap, pawn shops are hot (no pun intended)…EZCorp (EZPW, $18.80, up $1.32) hit a 52-week high of $19.25. There was a little action in the October 17.50 calls (ULPJT, $1.95, up $0.90) which jumped 85% but open interest is relatively low.
Other stocks to add to our “Pawn Shop” watch list: Cash America International (CSH, $36.04, down $0.06) and First Cash Financial Services (FCFS, $15.00, up $0.27) are a couple of other players but their stock was hit by Hurricane Ike recently.
JPMorgan Chase (JPM, $46.70, up $5.70) did not set a 52-week high yesterday but the 14% surge has me believing it could be the one to “buy” if a bailout is approved. There was heavy action in the October 47.50 calls (JPMJW, $2.73, up $0.54). If you have some “house money” to play with you’re getting 50/50 odds. Either the financial stocks get a short-term lift with the bailout or they plunge even further.
Keep an eye on the HealthCare sector. One of my favorite plays could be UnitedHealth Group (UNH, $25.39, up $4.39) which has been slammed recently. There was huge volume in the October 25 calls (UHBJE, $1.50, up $0.20) but I’d go way out to the January 35 2010 calls (WUHAG) which closed at $2.05 if the stock can hold $20 for a few months. This would give us an entire year to play a rebound.
Other potential names include Aetna (AET, $36.11, up $0.85), Cigna (CI, $33.98, up $0.65), Humana (HUM, $41.20, up $0.50) and WellPoint (WLP, $46.77, up $2.31).
It’s a tough market right now but an exciting one. Novice traders will get “smothered and covered” in these types of markets and it’s best to leverage trades and take profits until we get back to “normal”. That might take a while though.
Rick Rouse
Rick@OptionsMentoring.com
