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Portfolio Review

HAVING TROUBLE PRINTING?
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The Roller-Coaster Ride Continues...

Stocks soared Thursday as investors returned to the market in the wake of favorable profit reports from Motorola (NYSE:MOT) and Google (NASDAQ:GOOG), and optimism among some analysts who suggested that equities were favorably priced in the wake of the recent sell-off.

The bullish activity was a welcome change for the MCM Portfolio and we congratulate those of you who weathered the recent downdraft in Black & Decker (NYSE:BDK), Pixar (NASDAQ:PIXR), and Sealed Air (NYSE:SEE). A number of more-experienced readers took an assertive approach to position management with these issues and so far, that tactic is paying off. While we hesitate to sound the "all clear" bell, it appears there may be some hope for these positions, provided the market can transition to a relatively lateral trend in the coming weeks.

Of course, a continued rebound would threaten some of the bearish plays in the portfolio and among those issues, we are maintaining a close watch on Expeditor's International (NASDAQ:EXPD) until its quarterly earnings report on May 4. Xilinx (NASDAQ:XLNX) was also a slight concern until the company announced less than stellar profits on Thursday afternoon. With the stock down in "after hours" trading, there seems to be little potential for a rally in the near-term.

One issue that "came along for the ride" was LM Ericsson (NASDAQ:ERICY), which jumped nearly 5% after both Nokia (NYSE:NOK) and Motorola (NYSE:MOT) surprised the market with solid numbers and positive forecasts. Now the company is set to release its own quarterly report and analysts have diverse opinions as to the outcome. Since nobody is actually trading the position (it was originally for illustration purposes), we did not post a specific "alert." However, an appropriate adjustment for someone with short call options would be to purchase the stock at a price near the sold strike of $30. Considering the effects of slippage, a buy-stop at no more than $30.10 appears reasonable in order to limit losses from future upside activity. Having made that statement, you can be sure the issue will retreat sharply after Friday's earnings announcement. :-)

So, where do we go from here? It's anybody's guess. We came "oh so close" to offering a bullish position on Google (NASDAQ:GOOG) Tuesday night, but couldn't stand the potential risk of an earnings miss with such a volatile issue. Of course, we couldn't (with reason) offer any bullish plays last night, and now we are wondering if another group of bearish positions, although technically appropriate, is completely out of the question, given the market's sharp rebound today. After a review of the market internals, it seems best to simply monitor the trading activity for another session and hope that a near-term trend emerges as we move deeper into the earnings season. Rest assured, the quarterly cycle of profit reports is the most difficult period for option traders and if we make it through this month with a profit, it will be an accomplishment.


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