Option Investor
Newsletter

Daily Newsletter, Wednesday, 7/11/2012

Table of Contents

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

Market Wrap

Fed Disappoints

by Keene Little

Click here to email Keene Little
The market has been hoping the Fed is close to another monetary easing program (QE3) but worried there won't be any more for now. Today the market found out no QE3 for now.

Market Stats

With a few Federal Reserve governors out recently talking about the need for further monetary easing there were many market participants hoping the FOMC minutes, released today at 2:00 PM, would show the Fed seriously considering it and perhaps getting ready to implement it. But the Fed disappointed those who were holding out hope and the market sold off following the release of the minutes. But now that that's behind us we can worry about more mundane things like earnings.

The FOMC minutes showed there were a few members that wanted to see some further monetary easing now rather than later but there were no definitive signs in the minutes that would lead one to believe that another QE program is right around the corner. There were the usual hints that the Fed, yawn, stands ready to provide further stimulation when it's needed. Yea, right, whatever. What the market feared came true and it sold on the news. I liked the way Todd Harrison at Minyanville summed it up:

"Investors are conditioned to expect central banks to toss good money after bad at the overcapacity in debt, leverage, housing, and labor. It will work until it doesn't with all roads leading to debt deflation. This may sound familiar: it's very much a continuation of themes long discussed in Minyanville. Alas, those conditions are cumulative; there isn't an instance in history when a problem was solved by accelerating the actions that caused the problem in the first place."

I've often cited the fact that history shows us a perfect record in this regard -- never once has a country inflated its way out of debt. Not one time. But I guess Bernanke & Co. believe it's different this time and that they know better. Arrogance with a capital 'A'.

So the market sold off after the disappointing FOMC minutes but the selling wasn't intense and we even got a bounce back up into the close. The market finished down but it had been down all day (NYA finished in the green and SPX finished flat). The techs bore the brunt of most of the selling today as various tech indexes were weak.

As you can see by the numbers in the table above, market breadth was very neutral. It's possible the market is washed out on a short-term basis.

Even though I can't think of a reason why the stock market should rally, as I'll show in tonight's charts, there remains a good chance we'll see one into the end of this month. While that doesn't make sense for a lot of reasons (no monetary easing, poor earnings, slowing global economy, European debt issues...shall I continue?), the price pattern supports the possibility. But the bounce that started off this afternoon's low must see some follow through to the upside on Thursday otherwise the bulls could be in a precarious predicament.

In addition to the economy, poor earnings, European debt problems, etc., there's another thing that's a negative for the stock market and that's the weakness in commodity prices. It's common for commodity moves to forecast the coming move in the stock market since they react to more fundamental issues than the stock market (which is much more emotionally driven, especially hope and fear). When we compare the charts of the stock market (SPX) and the commodity index (I'm using the DJ UBS Commodity Total Return index, the closest thing I could find to the CRB index on stockcharts.com where I can do the kind of comparison shown below), you can see the tight correlation between the two, most of the time. When they diverge it's a warning of an impending change, usually in the stock market.

S&P 500 vs. DJ UBS Commodity Total Return index, Daily chart

There was a small divergence between the two indexes back at the April 2010 high, which was followed by a swift decline into July (remember May's flash crash?) and then they got back in synch with another climb into 2011. Since late 2011 the two indexes have been diverging and remain wide apart. Either commodity prices are going to rally or stock prices are going to decline. Care to guess which is the likely scenario? Note that commodities have been in a consistent downtrend since the May 2011 high while SPX pushed to a new high in 2012. That's what you call a rally on hopium and drug (Fed) money. The drug withdrawal is likely to be painful. The rally spike this past month has a lot to do with agricultural products that are being hurt by the hot dry conditions in the middle section of the country. Corn alone is up about +40% in the past month.

Looking at the CRB index, which looks slightly different from the DJAIGT index above, there is price-level resistance near 293, which is where it's currently banging its head. If both stocks and commodities rally a little higher this month I'll be watching resistance for the CRB near 307 (downtrend line from April and its 50-week MA).

CRB index, Daily chart

The bounce off the June 4th low for the stock market might have finished last week but at the moment I see the potential for another rally leg up to the SPX 1400 area, shown on its weekly chart below. There's even a chance there will be a new high in our future, potentially up to the 1450 area in August but at the moment I'm thinking there's potential only for a higher bounce from here but only to a lower high than April's and then tumble lower into the end of the year. From a weekly perspective, below 1290 would be trouble for the market and below 1266 would confirm last week's high was the completion of the bounce off the October 2011 low.

S&P 500, SPX, Weekly chart

Zooming in on the move down and back up since the April high, we've got a 5-wave move down from April followed by a 3-wave (or something more corrective and complex) bounce off the June 4th low. The bounce is clearly an overlapping pattern and that makes it a corrective pattern. The 5-wave move down means we'll get at least another leg down to equal (and probably exceed) the size of the April-June decline. The one thing that's not clear yet is whether or not the bounce pattern off the June low will get one more leg up to complete the correction. As long as SPX holds above 1335 I'm leaning toward one more rally into the end of the month, with an upside target near 1400. The 1335 level is where it has its uptrend line from June 4th, its 50-dma and price-level support from previous highs and lows. Above 1362 would confirm the likelihood of a higher bounce but below 1335 would turn 1335 support into resistance.

S&P 500, SPX, Daily chart

Key Levels for SPX:
- bullish above 1362
- bearish below 1335

The rally off the June 4th low is shown on the chart below and the multitude of 3-wave moves and overlapping highs and lows is what makes the bounce a correction to the April-June decline rather than something more bullish. If it were to press to a new high above April's it would be considered an ending pattern inside a rising wedge, which will show all kinds of bearish divergence. But so far the bulls passed the first test by defending 1335 and above 1352 would be the first sign the bulls are going to push us higher (which would leave this afternoon's post-FOMC-minutes selloff a bear trap, in which case look for a gap up on Thursday). We'll find out quickly from here which way the market will likely head for the rest of this month.

S&P 500, SPX, 60-min chart

The DOW looks a little more bearish at the moment because it has now broken both its 50-dma, near 12655, and its uptrend line from June 4th, near 12630. In fact it broke its uptrend line this afternoon and then bounced back up to it into the close but then pulled back from it. If it leaves a bearish kiss goodbye tomorrow morning with a further decline it's going to look bad for the bulls. A break below its June 29th low near 12450 and its 200-dma near 12443 would be a notch on the bear's gun.

Dow Industrials, INDU, Daily chart

Key Levels for DOW:
- bullish above 12,830
- bearish below 12,450

NDX has a shallower uptrend line from June 4th and hasn't tested it, which will be near 2539 Thursday morning. It has marginally broken both its 20- and 50-dma's, near 2585 and 2576, resp. The bulls need a quick recovery Thursday and they can't let its uptrend line break. If the bears drive the market lower and NDX drops below 2539 look for support near 2510. Slightly lower will be its 200-dma, near 2490. Below all that support would obviously mean trouble for the bulls.

Nasdaq-100, NDX, Daily chart

Key Levels for NDX:
- bullish above 2630
- bearish below 2536 and more bearish below 2510

AAPL will continue to be a good stock to watch for clues as to what the market sentiment is. This is a risk-on, risk-off stock and where it goes NDX is sure to follow (and the broader market). While I feel there's a good chance for the broader market to rally into the end of the month, I do not get the same impression from AAPL and that's worrying me. It has a nice a-b-c bounce off its May 18th low and achieved two equal legs up at 618.45 yesterday. (There's a higher target at 625.45 if I use the June 11th high as the end of wave-a instead of the May 31st high, which is what I'm currently using). At the same time it hit the top of a parallel up-channel for the bounce off the May 18th low so there's a good possibility AAPL is finished bouncing. Watch this one closely.

Apple Inc, AAPL, Daily chart

The RUT's strong rally last week has given it a little more room to drop before its pattern turns bearish. The 20-dma near 785 and the bottom of a parallel up-channel near 784 should provide support if it drops a little lower on Thursday. And then there's the 50-dma and uptrend line from June 4th, both near 777, that would be the next potential support level. Below 788 would be trouble and below 775 would be much more bearish. If it rallies from here I'll be looking for an upside target at least to 830.

Russell-2000, RUT, Daily chart

Key Levels for RUT:
- bullish above 811
- bearish below 788

Looking at one more major index, the Total Market index shows a clean corrective count for the bounce off the June 4th low and two price projections practically on top of each other. For the double zigzag wave count, which as a reminder consists of two a-b-c's separated by an x-wave, the two a-b-c's would equal each other at 14644 and the 2nd a-b-c (the move up from June 25th) would have two equal legs up at 14653. The bounce off the June 4th low is a 2nd wave correction to the 1st wave down (April-June) and an 88.6% retracement of the decline is at 14707 so we've got an upside target zone of roughly 14650-14700. Note that the smaller 2nd wave correction in the move down from April also retraced 88.6% of the initial decline so the larger-degree 2nd wave could end up being a fractal of the first bounce. But the bullish case would be in danger if it drops below today's low and it would be busted with a decline below 13687.

DJ Total Market index, DWC, Daily chart

Relating to Treasury yields, I received a question earlier in the week: "Keene, one of the analyst talking head types on CNBC vacationing in Europe last week said the people there firmly believe the Eurozone will collapse by end of year and he thinks there will be a rush of money to US treasuries driving the 10 year yield below 1.0% from its current 1.5-1.6% range. What do you think and will that drive mortgages even lower if it happens? Keep up the good work. Wayne"

I've been showing the potential for just a minor new low for TNX, perhaps 1.36%, to complete a 5-wave move down from March, which could then set up the start of a larger rally in yields (selling in bonds). So that potential will be watched carefully as TNX heads back down (it's been down 6 out of the last 6 sessions although it actually recovered today to breakeven).

But I too have been wondering about the possibility for sub-1% and I clearly see that potential on the monthly chart, especially if scared money runs into Treasuries if the global stock markets take a big hit. As deflationary worries take front and center we could see bond yields collapse with stock prices. The bottom of a long-term parallel down-channel (from the last high in 1994) and the bottom of a descending wedge from 2010 intersect just below 1% in September/October, the typical time to find a bottom in the stock market (for at least a bounce back up to correct the longer-term decline).

10-year Yield, TNX, Monthly chart

Two equal legs down from 2007 for TNX, for the final a-b-c decline from 1994, would complete a triple zigzag wave count. The final c-wave, which is the move down from 2010, is looking like a typical ending diagonal (descending wedge) and a throw-under finish from panic buying in bonds could see TNX spike down to that 0.735% projection. If the 10- and 30-years yields continue to drop lower then yes, so too will mortgage rates. I've been renting since I sold my last house in 2002 and I'm waiting until I can lock in 2% before I buy a house. ;-)

The dollar has pushed marginally above its June 1st high and could continue rallying at least up to its trend line along the highs from last October and January, currently near 85. But the larger pattern and bearish divergence have me thinking we might see the dollar chop sideways in a large sideways triangle pattern into August before it will be ready for its next rally leg. It's just an idea for now but a turn back down from here would support the idea.

U.S. Dollar contract, DX, Daily chart

Gold has been chopping up and down for about two months now and it's hard to say who's going to win the tug of war here. I think gold will head lower and stay inside its two down-channels shown on its weekly chart below. It means gold should start selling off from here. Back above last week's high at 1610.60 would likely mean a trip up to its 50-week MA and downtrend line from August 2011, near 1685 in August. If the bearish wave count and channels are correct we should see gold down below 1400 by September.

Gold continuous contract, GC, Weekly chart

Since mid-June I thought we'd see a new low for oil and then a bounce into July/August to retrace some portion of the decline from March. So far that has played out and now I'm wondering if it will be a quick a-b-c bounce or a little more drawn out. I'm showing the possibility (dashed line) for a quick bounce up to its 200-dma, 62% retracement and a price projection for two equal legs up from June, all in the 96 area. But a further pullback first could set it up for a lower bounce to the 93 area in August before it will be ready to sell off. I suspect oil will trade similarly to stocks.

Oil continuous contract, CL, Daily chart

Thursday will be relatively quiet as far as economic reports go. There are no major reports expected from overseas either. So the market will be left on its own, possibly reacting to some more earnings reports but they've been largely ignored as well. If most of the bad news has been priced in we could see a rally despite any bad earnings reports. As always, it's not the news itself but instead the reaction to the news that counts.

Economic reports, summary and Key Trading Levels

Heading into the end of the day I thought we had a good setup for a market rally and had recommended being long into tomorrow. We'll find out quickly whether or not that was a good or bad call. At least risk is tight -- any new lows below Wednesday's could be trouble and I would not want to hang around long if that happens.

Everything says the market should sell off from here so if it doesn't then it's talking to us. The price pattern says there's a good chance for a rally in spite of the bad news all around. Again, it's what price does that matters to us, not what news is being reported. If the market continues to sell off from here you'll want to be short but keep your stop relatively close until it drops enough to give yourself some breathing room. If the market rallies and gives us a 5-wave move up from this afternoon's low I'll be looking at a pullback as another buying opportunity. The market is at an important level and we'll know very soon what the rest of the month will probably look like.

The next day or two tend to be a little more volatile as we head for the start of opex week next week. Keep that in mind since there could be a few head-fake moves directly ahead.

Good luck and I'll be back with you next Wednesday.

Keene H. Little, CMT

In the end everything works out and if it doesn't work out, it is not the end. Old Indian Saying


New Option Plays

Industrial Goods & Auto Parts

by James Brown

Click here to email James Brown


NEW DIRECTIONAL PUT PLAYS

Illinois Tool Works - ITW - close: 50.29 change: -0.94

Stop Loss: 51.65
Target(s): 45.50
Current Option Gain/Loss: Unopened
Time Frame: exit prior to the July 24th earnings report
New Positions: Yes, see below

Company Description

Why We Like It:
Industrial good stocks continue to sink as investors digest nearly continuous news that the U.S., Europe and China are all slowing down. Shares of ITW have just recently broken down under technical support at its 300-dma and 200-dma. Now ITW is testing round-number support at $50.00.

I am suggesting a trigger to buy puts at $49.75. If triggered we'll ust a stop loss at $51.65 (above today's high). Our target is $45.50 but we'll plan to exit prior to the July 24th earnings report.

Trigger @ 49.75

- Suggested Positions -

buy the Aug $50 PUT (ITW1218T50) current ask $1.55

Annotated Chart:

Entry on July xx at $ xx.xx
Earnings Date 07/24/12 (confirmed)
Average Daily Volume = 3.4 million
Listed on July 11, 2012


WABCO Holdings - WBC - close: 48.09 change: -1.10

Stop Loss: 50.05
Target(s): 44.00 & 41.00
Current Option Gain/Loss: Unopened
Time Frame: exit prior to the July 27th earnings report
New Positions: Yes, see below

Company Description

Why We Like It:
A slowing economy and slowing vehicle sales are a tough combination for the likes of WBC. Shares are trading near the bottom of their $48-54 trading range. If WBC breaks down from here it could signal a drop toward $40.00.

I am suggesting a trigger to buy puts at $47.40. We'll set our first target at $44.00 and our second target at $41.00.

Trigger @ 47.40

- Suggested Positions -

buy the Aug $45 put (WBC1218T45) current ask $1.60

Annotated Chart:

Entry on July xx at $ xx.xx
Earnings Date 07/27/12 (confirmed)
Average Daily Volume = 648 thousand
Listed on July 11, 2012



In Play Updates and Reviews

Five Down Days in a Row

by James Brown

Click here to email James Brown

Editor's Note:

Stocks continue to sink. The FOMC minutes failed to inspire any new buyers. Our AMT call play was stopped out. SOHU was triggered. We want to exit our DECK trade early at the open tomorrow.

Current Portfolio:


CALL Play Updates

Athenahealth, Inc. - ATHN - close: 80.60 change: -1.20

Stop Loss: 79.85
Target(s): 89.00
Current Option Gain/Loss: -25.0%
Time Frame: exit prior to earnings on July 19th
New Positions: see below

Comments:
07/11/12 update: ATHN continues to sink. As we suspected yesterday the stock is headed for support near $80.00. The low today was $80.17. If ATHN breaks $80 it will quickly hit our stop loss at $79.85. I am not suggesting new positions at this time.

Earlier Comments:
We'll aim for $89.00 but conservative traders may want to exit early near the June highs (about $87). We will plan to exit prior to the July 19th earnings report. FYI: The Point & Figure chart for ATHN is bullish with a $92 target.

- Suggested Positions -

Long Jul $85 call (ATHN1221G85) Entry $2.00

07/03/12 new stop loss @ 79.85

Entry on July 03 at $81.51
Earnings Date 07/19/12 (confirmed)
Average Daily Volume = 481 thousand
Listed on July 02, 2012


Dollar General - DG - close: 54.92 change: -0.68

Stop Loss: 53.45
Target(s): 59.50
Current Option Gain/Loss: -24.3%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
07/11/12 update: DG dipped to short-term support near $54.40 and its 10-dma before starting to pare its losses this afternoon. I would use this dip as a new entry point but more conservative traders could wait for a new rise past $55.50 instead (or a rise past $56.00).

- Suggested Positions -

long Aug $55 call (DG1218H55) Entry $2.05

Entry on July 11 at $55.51
Earnings Date 08/30/12 (unconfirmed)
Average Daily Volume = 3.8 million
Listed on July 10, 2012


Westlake Chemical Corp. - WLK - close: 54.01 change: -0.36

Stop Loss: 53.40
Target(s): 62.00
Current Option Gain/Loss: Unopened
Time Frame: 3 to 6 weeks
New Positions: Yes, see below

Comments:
07/11/12 update: WLK is still hovering sideways just above technical support at its simple 50-dma. We wait to wait for a breakout past short-term resistance at $56.00. Currently, I am suggesting a trigger to buy calls at $56.35. We are using a wide stop loss at $53.35 so that does raise the risk on this trade. The $60.00 level might be resistance but we're aiming for $62.00. FYI: The Point & Figure chart for WLK is bullish with a $69 target.

Trigger @ 56.35

- Suggested Positions -

buy the Aug $60 call (WLK1218H60)

07/11/12 removed the July option

Entry on July xx at $ xx.xx
Earnings Date 07/31/12 (unconfirmed)
Average Daily Volume = 543 thousand
Listed on July 09, 2012


PUT Play Updates

Deckers Outdoor Corp. - DECK - close: 46.49 change: +1.63

Stop Loss: 50.05
Target(s): 42.00
Current Option Gain/Loss: Jul45p: - 48.1% & Aug45P: - 3.4%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
07/11/12 update: I could not find any news to explain DECK's relative strength today (+3.6%). The larger trend is still very much down but DECK could bounce back toward resistance near $50 and its 50-dma before rolling over again.

We are suggesting an early exit immediately tomorrow morning to avoid or minimize any losses. Traders can keep DECK on their watch list for a new failed rally near $50.00 as another bearish entry point.

- Suggested (SMALL) Positions -

Long Jul $45 PUT (DECK1221S45) Entry $1.35

- or -

Long Aug $45 PUT (DECK1218T45) Entry $2.90

07/11/12 prepare to exit at the open tomorrow morning
07/07/12 it's been a volatile couple of days for DECK and more conservative traders may want to exit now following Friday's bounce in these put options.
06/29/12 DECK almost hit our target but bounced at $42.16
06/25/12 readers may want to take profits early now.

Entry on June 21 at $47.31
Earnings Date 07/26/12 (unconfirmed)
Average Daily Volume = 1.45 million
Listed on June 20, 2012


FLIR Systems - FLIR - close: 18.84 change: -0.03

Stop Loss: 20.35
Target(s): 17.75
Current Option Gain/Loss: Jul20p: -78.9% & Aug19p: +23.0%
Time Frame: exit prior to the late July earnings report
New Positions: see below

Comments:
07/11/12 update: FLIR is not moving very much. Shares still look bearish with the close under support at $19.00. The stock is down four days in a row. Currently our target is $17.75 but more aggressive traders may want to aim lower.

NOTE: Something happened to the bid/ask spread on FLIR's $20 July puts today. It might be a typo ($0.20bid/$1.75ask) but it's the same value on two different quote feeds.

FYI: The Point & Figure chart for FLIR is bearish with a $7 target.

- Suggested Positions -

Long Jul $20 PUT (FLIR1221S20) Entry $0.95

- or -

Long Aug $19 PUT (FLIR1218T19) Entry $0.65

07/11/12 odd bid/ask spread on the July $20 puts affecting our P/L.

Entry on July 02 at $19.56
Earnings Date 07/20/12 (unconfirmed)
Average Daily Volume = 1.7 million
Listed on June 30, 2012


Fossil, Inc. - FOSL - close: 65.13 change: -0.95

Stop Loss: 70.05
Target(s): 60.50
Current Option Gain/Loss: + 1.9%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
07/11/12 update: FOSL continues to sink. Shares opened at $65.99 and fell to $64.34 this afternoon. The stock is down seven days in a row so don't be surprised to see an oversold bounce back toward the $67-68 area. Such a bounce will probably be a new bearish entry point to buy puts.

FYI: The Point & Figure chart for FOSL is bearish with a $54 target.

- Suggested Positions -

Long Aug $60 PUT (FOSL1218T60) Entry $2.60

Entry on July 11 at $65.99
Earnings Date 08/07/12 (unconfirmed)
Average Daily Volume = 1.3 million
Listed on July 10, 2012


J.C.Penney Co. - JCP - close: 20.30 change: -0.46

Stop Loss: 22.51
Target(s): 19.50, 15.50
Current Option Gain/Loss: +35.0%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
07/11/12 update: After yesterday's bearish breakdown in the stock, shares underperformed again with a -2.2% loss. The stock is now testing round-number, psychological support at the $20.00 mark. Also in the news today was a story that S&P had downgraded JCP's credit rating from BB- to B+ and their outlook on the company remains negative.

Our first target is the 2010 lows near $19.50. Our second much more aggressive target is $15.50. FYI: The Point & Figure chart for JCP is bearish with a $7.00 target.

- Suggested Positions -

Long Aug $20 PUT (JCP1218T20) Entry $1.20

07/10/12 triggered @ 21.30

Entry on July 10 at $21.30
Earnings Date 08/08/12 (unconfirmed)
Average Daily Volume = 9.3 million
Listed on July 03, 2012


Sohu.com Inc. - SOHU - close: 39.33 change: -0.72

Stop Loss: 41.75
Target(s): 35.25
Current Option Gain/Loss: July40p: + 3.4% & Aug37.50p: + 2.7%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
07/11/12 update: SOHU underperformed the major indices today with a -1.79% loss. Shares broke down under support near $40.00 and hit our trigger to launch positions at $39.65. I would still consider new positions now.

We will want to keep our position size small to limit our risk because the most recent data listed short interest at 23% of the small 29.6 million-share float. FYI: The Point & Figure chart for SOHU is bearish with a $32 target.

*Small Positions* - Suggested Positions -

(July options expire in less than two weeks)
Long Jul $40 PUT (SOHU1221S40) entry $1.45

- or -

Long Aug $37.50 PUT (SOHU1218T37.5) entry $1.85

07/11/12 triggered @ 39.65

Entry on July 11 at $39.65
Earnings Date 07/30/12 (unconfirmed)
Average Daily Volume = 634 thousand
Listed on July 09, 2012


Weight Watchers Intl. - WTW - close: 48.10 change: +0.13

Stop Loss: 50.75
Target(s): 42.00
Current Option Gain/Loss: Jul47.50p: -27.2% & Aug45p: -12.9%
Time Frame: exit prior to the early August earnings report
New Positions: see below

Comments:
07/11/12 update: Shares of WTW have fallen asleep. The stock is stuck churning sideways in a narrow range. There is no change from my prior comments. The $50.00 level and the 10-dma remain overhead resistance. A failed rally near $50.00 could be used as a new bearish entry point.

FYI: The most recent data does list short interest at 10% of the small 26.6 million share float. That raises the risk of a short squeeze but lately the any short covering has failed at the 10 or 20-dma.

NOTE: July options expire in two weeks.

- Suggested Positions -

Long Jul $47.50 PUT (WTW1221S47.5) Entry $1.10

- or -

Long Aug $45 PUT (WTW1218T45) Entry $2.01

Entry on July 09 at $48.28
Earnings Date 08/02/12 (unconfirmed)
Average Daily Volume = 764 thousand
Listed on July 07, 2012


Youku Inc. - YOKU - close: 18.21 change: -0.86

Stop Loss: 21.25
Target(s): 16.00
Current Option Gain/Loss: +38.7%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
07/11/12 update: YOKU underperformed the market with a -4.5% loss today. The stock had been down -9.7% at its worst levels of the day (intraday low was $17.22). Readers may want to adjust their stop loss closer to the $20 level, which should be resistance.

FYI: We want to keep our position size small because YOKU already has a high amount of short interest. The most recent data listed short interest at almost 19% of the 50.2 million share float and that raises the risk of a short squeeze higher.

*Small Positions* - Suggested Positions -

Long Aug $19 PUT (YOKU1218T19) Entry $1.55

07/10/12 triggered @ 19.90

Entry on July 10 at $19.90
Earnings Date 08/08/12 (unconfirmed)
Average Daily Volume = 1.3 million
Listed on July 02, 2012


CLOSED BULLISH PLAYS

American Tower Corp. - AMT - close: 70.20 change: +0.30

Stop Loss: 69.35
Target(s): 74.50
Current Option Gain/Loss: -25.5%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
07/11/12 update: After yesterday's bearish reversal move in AMT I am not surprised to see the stock showing relative weakness this morning. AMT dipped to $69.04 before bouncing back. Our stop loss was hit at $69.35.

- Suggested Positions -

Long Aug $70 call (AMT1218H70) entry $2.15 exit $1.60 (-25.5%)

07/11/12 stopped out at $69.35
07/02/12 new stop loss @ 69.35
06/29/12 triggered @ 70.25

chart:

Entry on June 29 at $70.25
Earnings Date 08/02/12 (unconfirmed)
Average Daily Volume = 2.3 million
Listed on June 27, 2012