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Stock futures diving lower

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Stock futures have deteriorated markedly since last night and this morning, S&P futures (sp02m) are down 16.10 points to 1,013.40, NASDAQ futures are down 52.00 points at 1,111.50 and Dow futures are lower by 135 points at 9,495.

Stocks look to take a beating at the open after last night's mid- quarter update from Intel (NASDAQ:INTC) $27.00, which is now seeing action at the $22.55 level. When I left work late last night, the stock had "settled out" at $24.24, so sentiment toward the stock has soured further as the opening bell approaches.

Furthering this morning's weakness in stock futures was Biogen's (NASDAQ:BGEN) $47.70 warning on earnings. Shares of the number two biotech stock are getting hit to the downside at $41.00 in pre-market trading.

Wireless products maker RF Micro Devices (NASDAQ:RFMD) $15.24 have lost 34% of their value at $9.95 in pre-market action after the company lowered its fiscal first quarter financial expectations.

Jobless rate drops to 5.8%

This morning's economic data has the jobless rate here in the U.S. falling to 5.8%, which was better than the forecasted 6.1% rate. However, non-farm payrolls grew by just 41,000, which was lower than the forecasted 60,000. While the jobless rate number was favorable, the slower addition of people hired at the non- farm level still weighs on investor's minds as the labor market, while improving, doesn't look to be improving fast enough.

Check your stop orders

There are two types of "stop orders" that traders will place on their stocks. "Stop limit" orders under a bullish position will only be triggered at the defined price of the stop. For instance, if you were long 100 shares of Intel (INTC) and placed a "stop limit" order at $25, that stop will not be triggered at the $22.55 level should the stock open there.

A "stop market" or "stop loss" order at $25, will turn into a "market order" at the opening of trading in Intel (INTC) if the stock opens at $22.55.

In recent weeks, I profiled a bullish trade for 1/2 position in Intel (INTC) with a stop at $25.00 (on the stock, not the options). What I would suggest a trader do that is long this stock is this...... If you can monitor the stock at the opening of trading, I would remove the $25.00 stop order and now place the stop at $22.25, which is about $0.30 below current pre-market trading. Then, should the stock ever rally back near the $25.00 level, then the trader could sell the stock, or raise their stop from the $22.25 level.

Note to bears

Bearish traders that have entered bearish positions profiled across the web site should stick with their trading plan. Too many times I see a bear's target achieved, but the trader never pulls the trigger and locks in a gain because the MARKETS or stock looks like it is going to get hit further to the downside. If a bearish target is achieved, I suggest either moving your stop-profit down to your target level, or taking at least a portion of the trade off the table at profitability. Pay yourself for the risk you took and don't let the opportunity pass you buy.

Jeff Bailey
Senior Market Technician
Option Investor

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