On Wednesday U.S. stocks ended lower, weighed down by a rebound in oil prices and ongoing worries about the financial sector sparked by Merrill Lynch’s downgrades of several banks.

The Dow Jones Industrial Average fell 109.5 points to 11,532, with only five of its components finishing in positive territory. The S&P 500 index ended down 3.76 points at 1,285 points and the Nasdaq was down only 2 points to 2,428.

J.P. Morgan Chase’s $1.5 billion write-off, Wachovia’s wider-than-originally-reported second-quarter loss and reduced earnings estimates for Goldman Sachs Group all dragged on U.S. stocks in Tuesday’s session.

J.P. Morgan is one financial stock that I have been tracking for opportunity and have been taking good profit for the past few rounds. Spotted a tail on Tuesday before the open, there was certainly a bearish reversal opportunity after hitting resistance.

Bought 4 contracts Sept 40 Put @ $2.35 and by the time it was closed, the puts had increased to $3.95.

Wednesday was another negative day for the financials as Merrill Lynch’s downgrades of several banks send JPM to open in the red.

Spotting the opening opportunity, I further pyramid up my position by another 2 contracts @ $4.15 making it an average entry of $2.95 and was closed @ $4.26 with an unrealized profit of $782.00 or 44.4% in just 2 trading days.

I also bought BAC Nov 30 Put @ $4.30 with an unrealized profit of $91.00 on the same day.

Economic data on inflation is expected to cause some stair in the market when the consumer price index is reported at 8:30 am on Thursday. July CPI is expected to rise 0.4 percent.

Volatile trading in crude oil and commodities will continue to spill into the stock market again. Oil and other commodities rose, reversing a selling trend on Wednesday worrying investors, who are hoping for a reprieve from inflation.

“If you knew what was going to happen in the economy, you still wouldn’t necessarily know what was going to happen in the stock market” - Warren Buffett

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