Option Investor
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Bearish traders should lock in some gains.

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Bearish traders (put/short) should either be snugging down some stops at current levels or be looking to lock in some gains at current levels. We're starting to see some selling in bonds short-term and some stocks are starting to find some bidders. The Market Volatility Index (VIX.X) is also back near a level where we've seen some short-term reversals take place in the past near the 33 level. If you are like me and enjoy taking profits too soon, now might be a good time to be doing that in stocks where are relatively far from a resistance level.

Market Volatility Index (VIX.X) Chart 60-minute interval

The current state of the VIX at 33.22 might just be a good time for bearish traders to be locking in some gains, especially in those positions that they hold some puts. Often times we can see some quick reversals from these levels and I like to take some profits before things start reversing.

Semiconductor Index (SOX.X) turns green!

That's right! The SOX is in the plus column and should have technology shorts looking to lower stops in many stocks they're short/put, even if it is in the software sector (GSO.X) or Networking sector (NWX.X). The SOX is an index we characterized as "strong" relative to other technology indexes and one we felt would be the first to show signs of strength and alert us to a potential reversal. Now I'm looking at the GSO.X and have also noticed that it has made a fairly significant reversal in the past hour from its lows of 188.04 and now trades at 194! This is a sign of short covering and creates a short-term demand environment. Just remember that sometimes the short-term can turn into a longer-term trend. Don't let profits slip away.

Goldman Sachs (NYSE:GS) short

Earlier today I highlighted a potential short in shares of GS above the $86 level. Using our "python approach" for squeezing profits from the trade I suggested that traders lower their stops to the $85 level and that trade should be stopped out at current levels for short-term traders. Swing traders should be lowering their stops to the break-even level at $86.05 if positions were initiated at the opening of trading.

30-year (TYX.X) turns green!

YIELD on the 30-year Treasury (TYX.X) has just turned green and this tells us we're starting to see a pick up in the selling of bonds. Be alert if you're short. Traders looking to do some buying on the bullish side should be looking for stocks in a longer-term upward trend that is holding a level of support and offers favorable risk/reward to the upside.

Jeff Bailey
Staff Analyst

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