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Daily Newsletter, Wednesday, 08/06/2008

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Table of Contents

  1. Market Wrap
  2. The Contrarian
  3. New Option Plays
  4. In Play Updates and Reviews

Market Wrap

Ground Control To Major Tom

Market Wrap

There is no way I can possibly cover all that I've observed since last week's market wrap (07/28/08) and meet deadline for tonight's wrap, so retreat to your den, close the door, and pay attention.

I'm not going to talk about Jim Cramer and his past Fed bashing from a year-ago, nor his recent bullish "bottom" call. I'll listen to Mr. Cramer, but I don't use him as a "contrarian" indicator as some may, nor do I think he is always right.

I'm not going to be able to cover Cisco System's (NASDAQ:CSCO) $23.96 +5.78% earnings report, which put a bid in technology stocks today.

I'm certainly not going to be able to cover the roughly 350 earnings reports released today, nor the many earnings press released I've read since Alcoa (NYSE:AA) $32.17 +1.61% kicked off earnings season.

I'm not going to be able to go over yesterday's ISM services report, which was an upside surprise to economists' forecast and a likely catalyst to yesterday's gains.

I'm not going to tell you that the recent decline in energy prices and commodity prices (see CRB index chart from 07/23/08 market wrap) in general hasn't had some number-crunching analysts making some adjustments to Q3 earnings forecasts. Especially those where company CEOs and CFOs cited "higher input costs" as weighing not only on bottom line results, but also having some customers delaying orders in hopes input costs of their own abated.

I will tell you that tomorrow's European Central Bank (ECB) decision on interest rates will probably be as closely monitored and analyzed that yesterday's FOMC decision on rates.

What I am going to tell you is to look at the above picture, and believe me when I tell you that tomorrow's job report, and current market internals and PRICE technicals are at what looks to be a point of "equilibrium."

I will once again emphasize that a trader/investor doesn't need to be FULLY invested, and entirely on ONE SIDE of a trade (all bull, or all bear).

I will review with you what you've observed and what to look for tomorrow, and the days ahead, so you can be ready to trade tomorrow, and MANAGE THE TRADE going forward.

I will preface tonight's market wrap with my bullish/bearish bias for BROADER U.S. equities, which is currently 60% bullish and 40% bearish.

Let's quickly cover today's internals and I'm going to quickly run you through some of today's action.

We'll start out with some profit taking at the open after a decent session of gains yesterday, we'll note Canada's Ivey Purchasing Managers Index from north of the border, and then throw in the EIA weekly U.S. crude oil, total gasoline and total distillate inventory data released at 10:35 AM EDT.

Wednesday's Market Internals -

A weak internal reading was found at the open and a slightly stronger-than forecasted Canada Ivey PMI reading of 65.5 at 10:00 AM EDT (forecast 62.0) and still expansionary (above 50 expansion, below 50 contraction) combined with a steady trade in oil prices helped keep PRICE losses in check in the first hours of trade.

I would also have to add that the continued STABILITY and slowly trending HIGHER U.S. dollar (US Dollar Index) hasn't been hurting equities either. That is, the Fed and Treasury have been sticking with their "the dollar will reflect U.S. economy" and there's still a few of us out here that listen to the Fed and the Treasury department, and monitor the dollar's strength/weakness.

Certainly it can give some insight as to Fed monetary policy, but also an observation of "confidence" in this major world currency which just about everything is priced/translated in, or to.

Might as well wait to see what the EIA had to say about U.S. oil, gasoline and distillate stockpiles at 10:35 AM EDT.

Today's Economic Data (Calendar)- All times are EDT

A weaker-than-forecast German factory orders would suggest the ECB on "hold" for rate policy, but you just never know for certain. They're VERY focused on past/current inflation trends (as they should be), but they've been so focused, they may be choking things there into recession.

In past wraps I've mentioned that they've been so focused on one tree, that they might not be able to see the forest.

In 2000, the Fed was so focused on "wage inflation" that it may have kept tightening (raising rates), which some argue sent U.S. into recession.

I'd say the Ivey PMI "not overly strong, but not as bad as some had thought." Yes, it is another country, but just north of the U.S.

At 10:35 AM EDT we got some intra-day chop and volatility in oil and unleaded prices when the EIA reported stockpiles of crude oil rose by 1.61 million barrels. While the build was larger than forecasted, total gasoline stockpiles fell by 4.34 million barrels. Mass confusion in the pits took hold.

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Ah, but refiners do more than refine gasoline. Total distillate stockpile rose for a 13th-straight week. Total distillate stockpiles jumped another 2.84 million barrels (diesel, jet fuel, heating oil are a part of total distillates).

The Strategic Oil Preserve (SPR) added 515,000 barrels to 706.8 million barrels.

On the INPUT side of things, weekly crude oil inputs into refineries fell by 123,000 barrels per day. One "surprise" was that since last week, refinery OPERABLE capacity jumped by 12,000 barrels per day. This figure doesn't change very often, but this is now a record with U.S. refineries able to refine 17.6 million barrels of crude oil per day..

With the added capacity, U.S. refiners were running at 86.96% of total capacity last week, which was down fractionally from last week's 87.17%.

The number of days of U.S. crude oil supplies rose slightly to 19.5 days from last week's 19.3 days.

Nothing MAJOR to note on an intra-day basis, but note some volatility in the energy commodity area today.

The DJUSHB finished relatively unchanged. Today's Mortgage Bankers Assoc. weekly mortgage application survey not all that revealing in my opinion. I don't see anything overly bullish in the report. The purchases index rose 1.8% to 315.2, while the refinance index rose 4.4% after a 22.9% decline last week.

The average contract interest rate for a 30-year fixed edged down to 6.41% from the prior week's 6.46%, while a one-year ARM edged down to 7.17% from the prior week's 7.25%.

Tomorrow's Global Economic Calendar -

Again, I'm pressed by deadline, but the above economic calendar will be busy. Before U.S. equities open for trade at 07:00 AM EDT the Bank of England will release its lending interest rate (currently 5.00%). Then just after the U.S. opening tick the European Central Bank will release its decision on interest rates (currently 4.25%).

I would think BOE and ECB "hold" at a minimum. With some recent abatement in energy prices and commodities, BOE might be less hawkish, as might ECB. What they "say" might further influence currencies, so be watchful. It certainly looks as if currency traders have been making some adjustments of late, and so have equity traders.

Major Global Indexes, Currencies, Oil, Gold and $HUI Table

Here's how things stood on a more "global" basis at Wednesday's close. I should note that Hong Kong's Hang Seng Composite ($HSI) was closed due to a cyclone.

At the far right of the above table, we should note the dollar's strength so far this quarter (+2.4%) for the weighted basket DXY, and if the dollar's weakness was partially attributed to a rise in oil prices, then USO and even gold as depicted by the StreetTracks Gold (GLD) also reflecting the dollar's gains.

The EuroCurrency Shares (FXE) $154.28 -0.27% closed smack on its 150-day SMA and once again resting on/at that 154 level.

Again ... a lot of number crunching going on and the above table gives us a feel on just how "dynamic" things are.

EuroCurrench Shares (FXE) - Daily Intervals

Currency traders are all abuzz regarding the euro, and oil traders are too. In mid-June I had subscriber's "on the alert" that the euro was at a major level of support and if it cracked lower, oil prices might follow.

The euro rallies strong on hawkish comments out of the ECB's Trichet and oil rallied strong.

See tomorrow's economic table and consider the implications.

OK, now I've got to update a Point and Figure chart from my 07/14/08 market wrap and the Russell 2000 Index (RUT). Take a moment if you can and go back and look at that chart and commentary.

What unfolded AFTER that wrap was a BEARISH triangle pattern, but then buyers really came in and shoved price higher.

Here's where things stand at tonight's close. Main point here is to look at the chart.

PRETEND you shorted the BEARISH triangle, then got COMPLACENT.

You NEED to do THIS, if you BOUGHT the S&P 500 (SPX) today. I'll show you why in a minute.

Russell 2000 (RUT) - 4-point box

Today's trade at 724 is a BULLISH triangle in the RUT.X.

Back in mid-July the various bullish % indicators were all DEEPLY oversold, but VERY weak.

What I want traders and investors to focus on in part is the BREAK lower and BEARISH triangle when the RUT traded 656, fell to 648, then RAMPED back higher as BUYERS came in to the small caps with a vengeance.

The REASON "triangle" patterns can be so POWERFUL is the near-term lower highs and higher lows creates PRESSURE and buyers and sellers clash.

Now the RUT is trying to make its way HIGHER above trend. If LONG the RUT, or IWM, or other "like" security, a "sell signal" would be found at 700.

If I were short (and I'm not), a trade at 728 is going to have a BEAR assessing risk up to 760.

OK, NO COMPALCENCY! And while I suggested in last week's market wrap that traders be BULLISH the S&P 500, or SPY, or ProShares UltraS&P 500 (SSO) with PARTIAL positions, now look at the SPX.

S&P 500 Index (SPX) - 10-point box

Today's action has a BULLISH triangle pattern triggered as the SPX traded 1,290. See the "triangle" and BULLISH as the SPX manages to trade 1,290.

Go ahead and say "dirty trick," perhaps like the "dirty trick" that got played on BEARS in the RUT back in mid-July.

I say PLAY BULLISH the SPX with a stop at 1,240 for more CONSERVATIVE bulls, or 1,230 for those willing to give things a little more room near-term.

USE PARTIALS still as you KNOW there's a pretty FULL economic calendar to digest.

Now, one last chart of the SPX and I think this one just about does it.

Let's add a little more NOISE to the SPX chart, and instead of looking at the conventional 10-point box, lets change our scale to a 5-point box.

Let's use StockCharts.com's PnF chart. You can for FREE at www.stockcharts.com!

S&P 500 ($SPX) - 5-point box

Make the "tie" with the SPX back on June 6th and the euro (euro currency shares) and possible impact with all it may encompass.

See the "triangle" today?

See how market participants just haven't been able to get the trade at 1,295 since late June, or early July (red 7).

I'd be ready for "launch sequence" and tomorrow's economic data may trigger some SERIOUS action.
 


The Contrarian

The CBOE Equity Put/Call Ratio

On Friday the CBOE Equity Put/Call ratios 10 day moving average curled up a little to 0.74 from Thursdays low of 0.726. Even though the 10 day moving average ticked up we are still on a positive bias mainly because the 20 day moving average of the CBOE Equity Volume Put/Call ratio has begun to trend downward. Bullish signals occur when a peak in put volume is achieved and confirmed by the 10 day moving average curling over. One might think that waiting ten days is too long to wait for a signal. But the down trend in Put volume provides confirmation that hedgers and speculators have decided to take off bearish positions.

As of Tuesdays close the 10 day moving average (DMA) of the CBOE Equity Put/Call Ratio declined to 0.720 which broke below last Thursdays low. The 20 day moving average declined to 0.764 from 0.771. We remain on a Positive bias signal until the 10 day moving average curls upward above 0.74 or Fridays high. SIGNAL: POSITVE BIAS

The CBOE Volatility Index ($VIX)

As the chart above shows the CBOE Volatility Indexs (VIX) 10 DMA peaked at 26.00 on 7/16. After the peak the 10 DMA began to fall quickly to its current level of 22.53. Fridays close of 22.49 was actually the recent low which was spurred on by the VIX dipping to 21.21 last Wednesday and remaining fairly low since then. Last week I mentioned that the 10 day moving average is currently in a range between 21 and 26. The slightly flat movement of the 10 DMA appears to be just a pause. However, a sharp move up in the 10 DMA toward the declining 20 DMA will make the signal Neutral. There is some chance that the market is short term overbought and that the VIX is near its lows. Investors didnt really get overly anxious about the recent market decline. For instance, the SPX fell from 1284 to 1249 in three days and the VIX only advanced up to 23.49. When the SPX fell to 1200 the VIX popped up to a high of 30.81. There is a lot more complacency in the market while the markets fall. If the VIX breaks and closes below the recent low of 20.73 the current range will be extended to 17 as a low and 25 as the high (when the VIX is High its time to buy; when the VIX is low its time to go!). In addition, a break lower will further support the positive (bullish) bias. The 10 day MA closed at 22.53 for the last two days. The 20 day MA continues to decline and closed at 23.95 to 24.05. SIGNAL: POSITVE BIAS

The Investors Intelligence Polls

The Investors Intelligence polls show that the percent of bullish newsletter writers increased to 34 from 30. The bullish percent established a low at 27.4 on 7/9/08. However, the Bearish percent poll didnt reach its low until last weeks 50 high. Normally the Bearish percent peaks at about 45. So when it broke above 45 on 7/9 while the Bullish percent hit a low of 27.4 the signal was moved to a neutral bias. That was obviously one week too early. We have been positively biased since July 16th and the markets havent really begun to move anymore than sideways.

The Spread between the Bullish and Bearish percent polled increased a lot this week. With both polls moving in opposite directions the Spread increased 10.4% to minus 9.6% from last weeks 20%. Last week I mentioned that there was still a lot of bearishness still out there and when at such extremes that havent been seen it is hard to determine the normal reaction of the indicator. Now that the Bearish percent is below 45 again the drop in Bearish sentiment confirms that the peak has occurred. Confirmation of peaks in sentiment confirms the signal. Our signal remains Positive until the Spread turns lower or the Bullish percent breaks above 50. SIGNAL: POSITVE BIAS

Summary: The signals remain on a positive bias. However, both VIX and the Put/Call ratio indicators are on a close watch for any tick up in their respective 10 day moving averages. If either or both move up a Neutral signal will occur.


Robert J. Ogilvie
 

New Plays

Most Recent Plays

Click here to email James
New Option Plays
Call Options Plays
Put Options Plays
Strangle Options Plays
None None None

New Calls

None today.
 

New Puts

None today.
 

New Strangles

None today.
 

Play Updates

Updates On Latest Picks

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Call Updates

Adobe Systems - ADBE - close: 43.53 chg: +0.19 stop: 39.99

Tech stocks continued to rally on Wednesday thanks to a strong earnings report from Cisco Systems. Shares of ADBE dipped to $42.61 before bouncing back into the green. We don't see any changes from our Tuesday comments. We would still consider new positions here but there still a good chance ADBE will see a larger dip before moving higher. Our preferred entry point would be to wait for a dip back toward $42.50 or $42.00. ADBE does have what could be significant resistance near $45.00. If the NASDAQ can keep the rally alive then we would expect ADBE to surge past the $45 mark. Our target is the $47.50-50.00 zone. More conservative traders may want to use a stop loss closer to $40.50 or $40.75.

Picked on August 05 at $ 43.34
Change since picked: + 0.19
Earnings Date 09/16/08 (unconfirmed)
Average Daily Volume = 6.5 million

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ArcelorMittal - MT - close: 84.82 change: +1.55 stop: 79.95

Steel makers continued to bounce and shares of MT added 1.8%. Volume was a little light but it is summer time. If MT were to pull back from here use a dip in the $83.00-82.00 zone as a new entry point. This is an aggressive, higher-risk play. There is no way to predict if the huge whipsaws are over. Our short-term target is the $88.50-90.00 zone. MT appears to have resistance near $90 and its 100-dma.

Picked on August 05 at $ 83.27
Change since picked: + 1.55
Earnings Date 11/13/08 (unconfirmed)
Average Daily Volume = 4.5 million

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Research In Motion - RIMM - cls: 127.30 chg: +5.32 stop: 118.45*new*

Some positive analyst comments helped lift RIMM to another 4% gain. The stock broke through technical resistance at its 100-dma and 50-dma. Volume actually came in above average. The intraday high was $128.93. Our first target is $129.00. More conservative traders might want to take some money off the table right here. We are raising our stop loss to $118.45. We have two targets. Our second target is $137.00.

Picked on July 31 at $120.50 *triggered
Change since picked: + 6.80
Earnings Date 09/25/08 (unconfirmed)
Average Daily Volume = 18.6 million

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CBOE Volatility Index - VIX - close: 20.23 chg: -0.91 stop: n/a

The VIX closed at a new six-week low. The downward trend in the VIX is potentially bullish for the stock market. Overall the current market rally looks like another bear-market bounce. We would consider buying calls on the VIX on a bounce in the 20.00-17.50 zone. Remember, this is a very speculative bet that the market will see a sharp sell-off before September's option expiration and that the VIX will surge toward 30 on the move. Our target is $29.75.

Picked on August 03 at $ 22.57
Change since picked: - 2.34
Earnings Date 00/00/00
Average Daily Volume = x million
 

Put Updates

Freddie Mac - FRE - close: 6.49 change: -1.55 stop: n/a

It was a really rough day for FRE. The stock is no stranger to big moves these days abut shares lost almost 20% following its earnings report. FRE's losses were three times more than expected. Wall Street was looking for minus 53 cents a share. FRE reported -$1.63 a share. The company also raised its reserves from $1.2 billion to $2.5 billion due to rising foreclosure rates. Management slashed their cash dividend from 25 cents to 5 cents a share.

There continues to be a lot of fear that if the government has to step in to save FRE (and FNM) the equity (stock holders) will be wiped out. FRE has issued several comments recently that they have more than their required reserves on hand to wade through this crisis. Yet there was a quote from FRE's CEO today that said, "There is a significant possibility that continued adverse developments...could cause us to fail to meet this standard" [of capital on hand]. Meanwhile fueling the fears that stock holders could get wiped out were comments from Armando Falcon, the former OFHEO director. Mr. Falcon said that he does not expect FNM and FRE to survive this housing crisis.

We are not suggesting new put positions at this time. We consider this a lottery-ticket style of play. The put option is our ticket. If we win, we should win big. If we lose, we lose it all. Our short-term target would be a move back to $5.00. More aggressive traders may want to aim lower. We are thinking about moving the target closer to $4.00.

Picked on July 20 at $ 9.18
Change since picked: - 1.14
Earnings Date 08/06/08 (confirmed)
Average Daily Volume = 45.5 million

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VISA Inc. - V - close: 71.48 change: -2.12 stop: 72.55

Shares of Visa continue to under perform. The financial sector was only down about 1% today but V lost 2.8%. More aggressive and nimble traders may want to consider new bearish positions now with a stop loss above Tuesday's high. We are going to stick to our plan and wait for a breakdown under the bullish trend of higher lows. We're suggesting that readers buy puts on Visa if the stock trades at $69.45 or lower. If triggered we have two targets. Our first target is $65.25. Our second target is $61.00.

Picked on August xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 07/30/08 (confirmed)
Average Daily Volume = 14 million
 

Strangle Updates

(What is a strangle? It's when a trader buys an out-of-the-money (OTM) call and an OTM put on the same stock. The strategy is neutral. You do not care what direction the stock moves as long as the move is big enough to make your investment profitable.)

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Apple Inc. - AAPL - close: 164.19 chg: +3.55 stop: n/a

AAPL continued to rebound but the bulls struggled to get AAPL above resistance near $165 and its 200-dma. The intraday high of $167.40 is a bad tick. If the stock starts to stumble here it might be a new entry point for directional put plays. The sad news is that this big two-day rally has killed our strangle play. We have less than two weeks before August options expire and need to see AAPL well above $180 or under $150. We are not suggesting new strangle positions. The options we suggested were the August $180 calls (APV-HP) and the August $150 puts (APV-TJ). Our estimated cost is $8.90. We want to sell if either option hits $14.50 or more.

Picked on July 20 at $165.15
Change since picked: - 0.96
Earnings Date 07/21/08 (confirmed)
Average Daily Volume = 31.7 million

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Popular Inc. - BPOP - close: 7.25 change: +0.16 stop: n/a

BPOP was creeping higher and out performed its peers in the financial sector. We don't see any changes from our weekend comments. More conservative traders may want to consider an early exit now. We are not suggesting new strangle plays on BPOP. The options we listed were the August $7.50 calls (BQW-HU) and the August $5.00 puts (BQW-TA). Our estimated cost was $0.65. We want to sell if either option hits $1.45 or more.

Picked on July 16 at $ 5.82
Change since picked: + 1.43
Earnings Date 07/18/08 (confirmed)
Average Daily Volume = 3.4 million

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DIAMONDS - DIA - close: 116.49 chg: +0.48 stop: n/a

Today's lack of profit taking following yesterday's 300-point gain is a bullish sign for the DJIA. Yet the index couldn't get past its late July highs. We remain very cautious here. A move toward the 12,000 level in the DJIA might be enough to score a win with this strangle. More conservative traders need to strongly consider adjusting their exit target lower or closing the play early. With less than two weeks left before expiration we're moving our target to $5.35. We're not suggesting new strangle positions at this time. The options we suggested were the August $115 calls (DIA-HK) and the August $109 puts (DIA-TE). Our estimated cost is $4.35. We want to sell if either option hits $5.35 or more.

Picked on July 07 at $112.21
Change since picked: + 4.28
Earnings Date 00/00/00
Average Daily Volume = 15.5 million

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iShares Brazil - EWZ - cls: 77.50 chg: +1.63 stop: n/a

The Brazilian Bovespa index produced a strong 1.9% oversold bounce after its recent declines. The EWZ out paced the move with a 2% gain. The trend is lower and there is still a decent chance that the EWZ will be under $75 before option expiration. We're not suggesting new positions at this time. The options we suggested back in early July were the August $90 calls (EWZ-HR) and the August $75 puts (EWZ-TO). Our estimated cost is $3.95. We want to sell if either option hits $5.90.

Picked on July 03 at $ 83.06
Change since picked: - 5.56
Earnings Date 00/00/00
Average Daily Volume = 13.6 million

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FosterWheeler - FWLT - close: 56.61 chg: +6.03 stop: n/a

FWLT reported earnings this morning and beat estimates by 14 cents. Investor reaction was to cover their shorts and the stock soared almost 12% taking a huge chunk out of the recent sell-off. This is the worst possible move for us. We have less than two weeks before August options expiration and FWLT is rebounding back toward $60. We are not suggesting new strangle positions in FWLT at this time. The options we suggested were the August $70 calls (UFB-HN) and the August $50 puts (UFB-TJ). Our estimated cost was $2.60. We want to sell if either option hits $4.00.

Picked on July 15 at $ 61.24
Change since picked: - 4.63
Earnings Date 08/06/08 (confirmed)
Average Daily Volume = 2.5 million

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Corning Inc. - GLW - close: 20.38 chg: -0.06 stop: n/a

GLW is stuck in a trading range and at this point we don't know what it's going to take to knock it out of this range. Lack of any real bounce might suggest the prevailing trend, which is down, will reassert itself but bulls are buying the dips. We are not suggesting new strangle positions. The options we suggested were the August $22.50 calls (GLW-HX) and the August $17.50 puts (GLW-TW). Our estimated cost is $0.75. We want to sell if either option hits $1.50.

Picked on July 10 at $ 20.16
Change since picked: + 0.22
Earnings Date 07/30/08 (confirmed)
Average Daily Volume = 15.9 million

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Google Inc. - GOOG - close: 486.34 chg: + 6.49 stop: n/a

GOOG is trying to bounce again. Shares are up two days in a row. More conservative traders might want to consider an early exit since we have less than two weeks before August options expire. We're not suggesting new strangle positions in GOOG at this time. The options we listed were the August $590 calls (GOO-HR) and the August $480 puts (GOP-TI). Our estimated cost was $19.10. We want to sell if either option hits $30.00 or more.

Picked on July 16 at $535.60
Change since picked: -49.26
Earnings Date 07/17/08 (confirmed)
Average Daily Volume = 4.5 million

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Internet Holders - HHH - cls: 50.18 change: -0.35 stop: n/a

There is no change from our prior comments on HHH. This play is essentially a "dead man walking" and we're just waiting for August option expiration. We are not suggesting new positions at this time. The options we suggested were the August $55 calls (HHH-HK) and the August $45 puts (HHH-TI). Our estimated cost is $1.65. We want to sell if either option hits $1.50 or higher!

Picked on July 03 at $ 50.50
Change since picked: - 0.38
Earnings Date 00/00/00
Average Daily Volume = 132 thousand

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Lehman Brothers - LEH - close: 20.46 chg: +0.22 stop: n/a

LEH managed to end with another gain on Wednesday but shares have not yet broken the trend of lower highs. We don't have much time left so readers will want to consider an early exit if either option even gets close to our breakeven price. We're not suggesting new positions at this time. The options we suggested were the September $24.00 calls (LYH-IR) and the September $10.00 puts (LYH-UB). Our estimated cost is $2.15. We want to sell if either option hits $3.50 or higher.

Picked on July 27 at $ 17.05
Change since picked: + 3.41
Earnings Date 09/18/08 (unconfirmed)
Average Daily Volume = 63 million

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Legg Mason - LM - close: 42.33 chg: -0.52 stop: n/a

LM did a relatively good job of holding on to its recent gains. Shares only gave up 1.2%. We don't see any changes from our weekend comments. We are not suggesting new strangles at this time. The options we listed were the August $45 calls (LM-HW) and the August $35 puts (LM-TG). Our estimated cost was $3.15. We want to sell if either option hits $4.85 or more.

Picked on July 23 at $ 40.20
Change since picked: + 2.13
Earnings Date 07/25/08 (confirmed)
Average Daily Volume = 3.1 million

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MarketVectors Agribusiness- MOO - close: 52.20 chg: +1.10 stop: n/a

The agribusiness stocks were sold hard this week and the group managed a bounce on Wednesday. We're not suggesting new positions at this time. The options we suggested were the August $62 calls (MYV-HJ) and the August $50 puts (MOO-TX). Our estimated cost is $2.10. We want to sell if either option hits $3.15.

Picked on July 03 at $ 57.25
Change since picked: - 5.05
Earnings Date 00/00/00
Average Daily Volume = 745 thousand

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Netflix - NFLX - close: 30.00 change: +0.11 stop: n/a

NFLX is still moving sideways. We don't see any changes from our weekend comments. More conservative traders may want to exit early or adjust their exit target. We're not suggesting new strangles at this time. The options we suggested were the August $32.50 calls (QNQ-HT) and the August $22.50 puts (QNQ-TX). Our estimated cost is $1.20. We want to sell if either option hits $2.20 or more.

Picked on July 23 at $ 27.98
Change since picked: + 2.02
Earnings Date 07/25/08 (confirmed)
Average Daily Volume = 1.3 million

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PowerShares QQQ - QQQQ - cls: 46.63 chg: +0.70 stop: n/a

Will wonders never cease? After more than a month of being stuck in the $44-46 range the Qs finally broke out today. This is short-term bullish even though the QQQQ has a cloud of moving averages overhead and any of them could act as resistance. We are not suggesting new strangles and more conservative traders will want to consider closing this play. The options we suggested were the August $47 calls (QQQ-HU) and the August $43 puts (QQQ-TQ). Our estimated cost is $1.80. We want to sell if either option hits $2.75 or more.

Picked on July 07 at $ 44.90
Change since picked: + 1.73
Earnings Date 00/00/00
Average Daily Volume = 148 million

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Starbucks - SBUX - close: 14.94 change: +0.42 stop: n/a

Today's 2.9% gain in SBUX actually broke its two-week downturn of lower highs. Unfortunately for shareholders SBUX still has a much larger, long-term trend of lower highs to deal with. We are not suggesting new strangles. The options we suggested for the strangle were the August $14.00 calls (SQX-HK) and the August $13.00 puts (SQX-TJ). Our estimated cost was $1.38. We want to sell if either option hits $2.10 or more. (FYI: The $14 calls hit $2.10 on the July spike to $16.00.)

Picked on July 15 at $ 13.58
Change since picked: + 1.36
Earnings Date 07/30/08 (confirmed)
Average Daily Volume = 14 million

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UBS Ag - UBS - close: 20.61 change: +0.02 stop: n/a

Traders could have slept through UBS' performance on Wednesday. It was a flat session. We don't see any changes from our previous comments. We have less than two weeks before August options expire. More conservative traders may want to consider an early exit now or adjust their exit target to 75% or 100% of breakeven. We're not suggesting new positions at this time. We listed two different strangles.

UBS Strangle #1) This uses the August $22.50 calls (UBS-HX) and $17.50 puts (UBS-TW). Our estimated cost was $1.90. We want to sell if either option hits $3.00.

UBS Strangle #2) This uses the August $25.00 calls (UBS-HE) and $15.00 puts (UBS-TC). Our estimated cost was $0.90. We want to sell if either option hits $1.90.

Picked on July 13 at $19.49
Change since picked: + 1.11
Earnings Date 08/12/08 (unconfirmed)
Average Daily Volume: 7.3 million

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Valero Energy - VLO - close: 34.47 chg: +2.33 stop: n/a

VLO displayed some impressive relative strength with a 7% gain on above average volume. Has the stock finally found a bottom? We are not suggesting new strangle positions. The options we suggested were the August $37.50 calls (VLO-HU) and the August $27.50 puts (VLO-TS). Our estimated cost is $1.38. We want to sell if either option hits $2.25 or higher.

Picked on July 27 at $ 31.88
Change since picked: + 0.26
Earnings Date 07/29/08 (confirmed)
Average Daily Volume = 12.7 million

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Washington Mutual - WM - close: 5.30 chg: +0.08 stop: n/a

WM managed a meager bounce from the $5.00 level today. We are not suggesting new positions at this time. The options we suggested were the August $8.00 calls (WM-HV) and the August $4.00 puts (WM-TH). Our estimated cost is $0.72. We want to sell if either option hits $1.45 or more.

Picked on July 20 at $ 5.92
Change since picked: - 0.62
Earnings Date 07/22/08 (confirmed)
Average Daily Volume = 57 million
 

Dropped Calls

None
 

Dropped Puts

None
 

Dropped Strangles

None
 

Today's Newsletter Notes: Market Wrap by Jeff Bailey, The Contrarian by Robert Ogilvie, and all other plays and content by the Option Investor staff.

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