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It's never been easy

HAVING TROUBLE PRINTING?
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Have you ever had a trade on that simply begins working to perfection; only to have some type of "news" put a potential kink in the best laid plans? By golly, I'm going to pull what is left of my hair out after this afternoon's news that OSI Systems (NASDAQ:OSIS) $17.25 -2.6% is going to be added to the Russell 2000 Index (RUT.X) 414.09 -1.35%.

That news has shares of OSIS recovering from their lows of $16.35 on thoughts that near-term demand will increase ahead of index funds that are designed to reflect the Russell 2000.

This news makes current trading difficult. In past months, we've noted other institutional holders of a stock becoming willing sellers into various index additions as the addition of a stock and demand brought on by the addition gives an institutional seller some needed liquidity for a position they were looking to sell.

As it relates to timing, I have not seen when the OSIS addition to the Russell 2000 Index would take place. However, traders holding July put contracts may need to weigh the risk of a bullish reaction to today's news against July expiration that takes place next Friday, July 19th.

As of the time of this writing, this news had not hit some of the major news wires.

Based on my 01:00 Update, shares of OSIS trade exactly in the middle of their downward regression, thus very much a 50/50 type of trade right here. The best advice is to trade the stock as it relates to your account/risk management.

Whenever I'm faced with such a situation, where news could be potentially favorable for a stock, I weigh the risk/reward to expiration. If I've got some good gains locked in on other positions and don't mind letting a trade play out as dictated by the technicals, then I'll hold a trade. However, if I've been on a bit of a "hard luck" streak and have a gain and just can't afford to let a winning trade potentially turn into a loser, I'll lock in the gain, and wait for a market reaction after everyone gets the news.

Treasuries see some selling

There hasn't been a great deal of change in the broader markets in the past couple of hours.

About the only thing that has caught my eye is that Treasuries have seen a bit of a reversal in fortunes this afternoon and we've seen some selling in the 10-year as YIELD has reversed back up to the 4.619% level. This is still below the 4.635% YIELD level of retracement, but hints that there may be some profit takers coming into Treasuries after a nice price run.

As such, we've seen some recovery in the Dow Industrials (INDU) 8,744 -0.78% as they trade down just 67 points now. The S&P 500 Index (SPX.X) has edged into positive territory at 920.81 +0.03% with a $0.34 gain, and the more tech-laden NASDAQ Composite (COMPX) 1,360.98 +1.11% shows a gain of 14 points.

Jeff Bailey
Senior Market Technician
Option Investor

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