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Two Ways To Play: Mind The Gap

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Strengthen your portfolio in good times and bad.

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Gap Beats 1Q Expectations

Gap (GPS) surprised the Street with better-than-expected first-quarter profits. According to Bloomberg, the largest clothing retailer in the U.S. said net income increased 40% to $249 million, or 34 cents a share on revenues of $3.38 billion. Analysts expected 31 cents a share on $3.42 billion in revenues. The company improved its profitability by cutting costs, lowering payroll and advertising spending but was still able to sell more jeans and t-shirts in the process. However, same store sales fell 11% including an 18% drop at Old Navy, its largest division by revenue. Nonetheless, Gap issued inline guidance for FY2009 saying EPS would come in the range of $1.20-1.27 per share.

From the Bull Pen: Gap has been trading in a tight range for some time. Should Gap shares rise, bulls that already own the stock might decide to use a covered call strategy.

From the Bear Cave: Bears see a broken uptrend in Urban Outfitters (URBN); buy-stops can be set above $32.


Existing Home Sales

According to Bloomberg, sales of previously owned homes likely fell in April to a record low. At 10:00 AM EST, the National Association of Realtors is scheduled to report existing home sales data. Economists are looking for a drop of -1.6% to 4.85 million homes. It would be the lowest level since comparable records began in 1999. Meanwhile, yesterday the Office of Federal Housing Enterprise Oversight said home prices fell a record 1.7%, the biggest drop in the 17 years the housing regulator has tracked the data. For context, see Professor Kevin Depew's Five Things You Need To Know.

From the Bull Pen: Bulls can consider the $65 level in the iShares Real Estate ETF (IYR) for an upside trade.

From the Bear Cave: Housing bears can use Home Depot (HD) for a downside play; buy-stops can be set above $27.80.

For more ideas in real time throughout the trading day, check out Minyanville's Buzz & Banter.


Quick Check Around the World

Asian trading closed with the Hang Seng -1.31%, Nikkei +0.24%, Sensex -1.52%, Taiwan -1.92% and Shanghai -0.36%.

A quick look towards Europe finds the CAC -0.97%, DAX -0.47%, FTSE -0.57%

As of 8:45 AM EST, S&P futures are lower -5.10 points to 1388, and Nasdaq futures are down -6.00 to 1960.


A Look At Commodities

Commodities are mixed. Crude oil is higher +1.38 to 132.19. Gold is higher +7.80 to 926.10. Silver is lower -0.023 to 17.975 as well as copper, down -0.85 to 371.40.

The dollar index is higher +0.154 to 72.053.


On the Radar

Economics

10:00 Existing Home Sales: 4.85 million cons.
10:00 Existing Home Sales (m/m): -1.6% cons

Happy Friday, Minyans! Three-day weekend! Woo!
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