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When I'm desperate for a gain

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Every trader that trades long enough may go through a spell when they just aren't getting results and they've seen a couple too many losing trades. Some know it as a "trader's slump" when market conditions have shifted a bit and an old trading scenario or technique just isn't getting the results.

It's times like this when a trader needs to be "less greedy" with their trades and get some gains under their belt. They are better off starting to look for reasons to close trades "too soon" and book a gain, rather than play the hand of uncertainty and try and recoup some recent losses all in one trade.

Last night I got an e-mail from a subscriber that I just don't know how to handle. Has the subscriber been seeing some gains in their account, or are they desperate for a gain? The e-mail was regarding a recently profile put play I had profiled in shares of slot machine maker International Game Technologies (NYSE:IGT) $55.09 -1.36% dating back to the April 3rd gap lower after the stock was downgraded by Merrill Lynch. I had previously placed the stock on my own bearish watch list on a break below the $60 level, but Merrill's downgrade had the stock gapping lower and I decided to still profile the stock as short/put in the market monitor on OptionInvestor.com. Here's what I'm looking at near- term in IGT.

International Game Technology Chart - Daily Interval

Shares of IGT look weak longer-term, but I'm thinking a subscriber that "needs a gain" from a trade to get the mental attitude back on track and get a gain under his/her belt should be looking to lock in a gain in here. Too often I get some e- mails where the subscriber's "mentality" seems a bit "depressed." Heck, I get that way from time to time and nothing like a gain (no matter how small) can brighten a day. With the stock sitting right on our 50% retracement level and lower regression channel, a trader that is in need of a gain should take it here, then look for another rally back near the $58.70 level for another bearish trade. With a longer-term bearish vertical count of $43, I think there will be a couple of opportunities to trade IGT short/put in the future.

Cyclicals still stuck

The major market averages continue to trade "mixed" as the Dow Industrials (INDU) trade down 34 points (-0.33%) at 10,266, while the S&P 500 (SPX.X) trades unchanged and the NASDAQ Composite (COMPX) holds on to a 1 point gain at 1,817.

In last night's market wrap, I was looking for the cyclicals as characterized by the Morgan Stanley Cyclical Index (CYC.X) lead the market higher, but after the opening bell and a trade at 588.63, the cyclicals just haven't been able to achieve the 590 level which I thought might help spur on a continuation of yesterday's broader market gains.

While it may not make a lot of sense to some technology bulls that I'm keying on the cyclical index, I have often made the comment that for strong rallies, the market looks for leadership. For me, my "leadership group" as it relates to the economy is and has been the deeper cyclicals.

While the HMO Index (HMO.X) surges to another 52-week high today and rivals the Gold/Silver Index (XAU.X) $71.54 +3.87% for sector gainers, the HMO stocks are not what I would characterize as "economically sensitive." Heck! That's one of the reasons we've been so bullish in our intraday commentary on this group of stocks. Earnings have been strong and the group most likely wouldn't be as "questioned" my the MARKET regarding the economy.

In the 11:00 EST Update on OptionInvestor.com, I profiled shares of fellow HMO Index (HMO.X) component Trigon Healthcare (NYSE:TGH) $77.18 +2.93% as bullish if the stock could break above the $76.90 level. That has taken place in the past 2 hours and I like this stock long at current levels.

Trigon Healthcare Chart - $1 box

Shares of TGH broke out of a little consolidation handle on the bar chart today, but its the point and figure chart that has my attention and the longer-term bullish vertical count of $118. After setting a 52-week high back in February of $79.00 the stock took a rest and pulled right back to its spread-triple-top near $70. Now it looks like institutions are coming back for seconds. The all-time high for TGH is $81.50 dating back to 11/16/00 and that would be my near-term target for bulls. First sign of trouble on the above chart would be a trade at $70.

Jeff Bailey
Senior Market Technician
Option Investor

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