Resistance Could Get Tested Today After Great Earnings. I Am Selling Put Spreads!

October 23, 2009
Author: Peter Stolcers, Founder of OneOption

I am trying to get today's comments posted before the open. Overnight earnings have been spectacular and we are likely to see a rally today. The good news spans from tech stocks to retail to credit card companies. Amazon blew estimates away and the stock is up $16 from yesterday's close. Microsoft trounced expectations and the stock is up two dollars pre-open. That is a huge move for Microsoft. CapitalOne is up four dollars on better earnings and lower than expected delinquencies. American Express also looks solid. Ingersoll-Rand and Honeywell also beat expectations and the stock's are indicated higher. Over 30% of the S&P 500 companies have reported and 78% of them have beaten earnings expectations. In the first two weeks of earnings season, stocks were sluggish after posting great results. Now we are starting to see some movement higher. As the good news piles on, profit takers are less aggressive and Asset Managers are starting to reach for offers. This means stock will get bid up on light volume. So far this morning, the earnings excitement has been contained and the S&P 500 is only up two points prior to the open. After yesterday's run-up, we could see a pullback on the open and as the day wears on, buyers will step up - wait for support. Monday's have been good for stocks and selling should be light today. With all of the good earnings news, traders are not in a hurry to unload stocks. Interest rates are low and the threat of a rate hike is still months away. I will be selling out of the money put spreads today. Tech, energy and retail are my targets. Look for companies that have strong earnings and good momentum. Sell the put spreads below support. There aren't any obstacles that will stand in the way of this rally next week. Earnings will overshadow "less bad" economic releases. Look for a quiet open and a grind higher into the close.image

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