9:00am (EST)
The bears got their first win in more than a week after winning Monday’s session from start to finish. Although the bulls never came up for air, they did make a late day push to cut the losses in half, but more importantly, they were able to finish above key support levels.
The Dow fell 108 points, or 0.9%, to finish at 11,401. We mentioned in yesterday’s afternoon update the bulls needed to hold 11,350 and after trading to a low of 11,255, they did. The next layer of support lies at 11,200 then 11,000 while resistance remains 11,500-11,600 then 11,800.
The S&P 500 dropped a dozen points, or 1%, and settled at 1,204. The index dipped below the 1,200 mark and kissed a low of 1,188 before finishing just above support. There is still risk down to 1,175 and then 1,150 but the bulls are still trying to push 1,225 on their way to 1,250.
The Nasdaq gave back nearly 10 points, or 0.4%, and closed at 2,612. We were looking for Tech to hold 2,600 and after testing a low of 2,564 the index actually made a trip into positive territory. Support is at 2,550 followed by 2,525-2500 if current levels don’t hold with resistance coming in at 2,650-2,700.
There were a couple of stocks that caught our eye yesterday. One was Freeport-McMoRan (FCX, $40.22, down $1.37) which we mentioned as shares held $40 after falling to fresh a 52-week low of $39.31. With a forward PE of just under 7, shares are getting cheap, but could get cheaper. We would love to see Freeport fall to the mid-$30’s which is where we might start nibbling.
The other stock was Goodrich (GR, $107.60, up $14.71) which showed up on our option screen last Friday. There was a flurry of call buying ahead of the weekend as shares zoomed over $6 to close just below $93. We had planned on adding the stock and options to our Watch List after hearing rumors of a pending buyout offer from United Technologies (UTX, $75.55, up $0.05) but it was too late this morning. There were a few other names floating around in who else might be takeover targets (TYC and ROC were on the grapevine) but it appears Goodrich is the frontrunner.
The Goodrich October 100 calls (GR111022C00100000, $11.20, up $8.35) were already expensive at $3 going into Friday’s close but still surged nearly 300% yesterday. The options opened at $8.80 and traded up to $12.90 but the call options will take a big hit if no deal is announced this week.
Despite yesterday pullback, some of our current trades did rather well. We are still looking to build more positions for our next batch of trades but like we said yesterday, we don’t need to rush. However, we do have a NEW TRADE for our Weekly Wrap publication as well as a couple of updates on some other ones. Look for a Trade Alert shortly after the market opens this morning.
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