Pair-Trade StrategiesBy Timothy Collins
05/15/09 10:34 a.m.
Though this strategy keeps you on your toes, it does offer some compelling risk/rewards, especially on option expiration day. With both the SPDR (SPY) and ProShares Ultra S&P 500 (SSO) up for the day, we are going to buy 100 shares of the SPY at the market, and short 200 shares of the SSO at the market, covering our long SSO May 24 calls with short shares, and covering our short SPY May 89 calls with long shares. If the SPY closes at or above 89, this trade, which originally cost 65 cents just a few days back, will bring in a little over 90 cents. We are not doing this on the entire position but on a good-sized chunk.
Positions: Long SPY shares, short calls, Short SSO shares, long calls
Home DepotBy Scott Rothbort
05/15/09 1:04 p.m.
I have started a position in Home Depot (HD - Get Report). All of my channel checks, observations and discussions around the country indicate that we are in the beginning of a new wave of home improvements.Also the company has steadily reduced debt the past several quarters during the economic slide. The company reports Tuesday and I am willing to buy stock ahead of what could be a positive surprise for the quarter. Positions: Long HD
Home Depot TechnicalsBy Gary Morrow
05/15/09 3:13 p.m. Home Depot is nearing an important support area. Scott Rothbort posted his bullish take on HD earlier, so I thought I would add my technical take as well. I am also long the stock and have been patiently waiting for a healthy pullback to buy more. The stock has had a great run since completing a triple bottom just below $18 in early March. Volume in the early stages of the recovery was very robust, easily pushing the stock back above resistance at both its 50- and 200-day moving averages. The stock began to run out of steam in late April as volume declined while prices continued to rise. This month began with a series of loses -- seven out of the first eight days -- as a healthy pullback began. Volume continued to stay well below average during the downside action, indicating no rush for longs to dump stock. With today's 1% decline, again on very light volume, HD is very close to a key support area. The stock's upward-sloping 50-day moving average, which crossed through the 200-day last week, is just above $24. Just below $24 is a breakaway gap left behind in early April. This gap-higher action on April 2 was on the heaviest volume by far for the month. Slightly below this support is the 200-day moving average at $23.50 as well as the one-third retracement level of $23.40. A test of this support band, from $23.30 to $24, would offer a very-low-risk buying opportunity for Home Depot bulls. A close below $22 on accelerating volume would put the rally in trouble.