Option Investor
Newsletter

Daily Newsletter, Wednesday, 10/17/2012

Table of Contents

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

Market Wrap

Bullish Opex Week

by Keene Little

Click here to email Keene Little
As is typical, we've had a bullish opex week so far. The indexes bounced off support on Monday and are now hitting resistance. The next move is going to be an important one.

Market Stats

Like a slingshot being pulled back, the market's pullback last week led to short-covering this week as buyers stepped back in and shoved the bears back out. That has taken the indexes from support to resistance and now we wait to see if buyers can keep up the pressure.

After last night's dismal showing by IBM and INTC in after-hours trading, following their earnings reports, the techs started off in the hole this morning but it was just another opportunity to fry the bears. There was a sharp rally to a minor new high above yesterday's and then chopped sideways for the rest of the day. The posted sign was easy to read -- NO BEARS ALLOWED HERE.

Causing some of the gyrations was news out of Europe, especially surrounding Spain and what it might do. Spain was going to request a bailout, which is something many are anxiously awaiting so they can see how it's going to work, but then decided it would not seek a bailout unless Italy asked for a similar bailout. Later in the day it was reported that Spain would be offered a lower line of credit than the previously announced 100 billion euros. This will of course be a continuing saga out of Europe.

Other than the little bit of news out of Europe and the mixed reactions to some earnings reports it was a relatively quiet day. It appeared at times the market was simply being manipulated in front of opex (I know, that's shocking to hear) and the choppy price action probably whipped a few traders out of their positions. Opex week has become a week where I don't even open my broker window. So I'll jump into tonight's charts to see what this week's action might mean for the longer term price patterns.

Starting off with a look at the DOW, the weekly chart looks identical to the SPX chart shown last week. The price action since May 2011 has formed a rising wedge pattern with bearish divergence suggesting this wedge will likely be quickly retraced once price breaks down from it. With all the massive intervention in the stock market there's been enough to hold the market up but not enough to demonstrate real buying interest. The wedge pattern is for the c-wave of the A-B-C bounce off the March 2009 low, which is a correction to the 2007-2009 decline (albeit a very high correction). The initial move expected out of this pattern would be a trip back down to the start of the wedge, near 10400, in much less time than it took to build the wedge. I'm thinking early 2013 and then a bounce to a lower high before breaking down into the end of next year. The more immediate question is how high the current bounce will get.

Dow Industrials, INDU, Weekly chart

The top of a parallel down-channel for price action since the 2002 low and 2007 high is where the DOW has been futzin' around since mid-September. A projection for the 5th wave of the move up from July 2010, where the 3rd through 5th waves would equal the 1st wave, is at 13666. The October 5th high was just shy of 13662 so a minor new high would at least tag that 13666 target. Numerologists would have fun with the fact that SPX made a low of 666 in 2009 and the DOW could make its 2012 high at 13666.

The top of the rising wedge pattern, which is the trend line along the highs from May 2011, is shown on the daily chart below and yesterday's and today's highs were tests of that trend line again, currently near 13560. A little higher, near 13620 now, is the top of the 2002-2007 parallel down-channel. Today's hanging man doji at trendline resistance is potentially bearish but obviously it needs confirmation with a red candle tomorrow. In the meantime the bulls have held the uptrend and a break above 13670 would be bullish to at least the price projection at 13714 if not all the way up to the projection at 13972 (call it 14K to hit the top of the up-channel from June). Bulls want to see the downtrend lines on the oscillators broken to the upside to help confirm new highs are coming.

Dow Industrials, INDU, Daily chart

Key Levels for DOW:
- bullish above 13,670
- bearish below 13,300

SPX looks bullish here -- it bounced off support at the bottom of its bull flag pattern for the pullback from September 14th, which was also its uptrend line from June and its 50-dma. It was simply too tempting a spot for bulls to ignore. The short-term pattern for SPX supports the idea that it will make it to its broken uptrend line from July 24th, near 1467 Thursday morning, before pulling back. The big question then would be whether it will be just a back test followed by a bearish kiss goodbye (shown in red) or just a pullback before heading higher again (shown in green). At the moment, with the high and impulsive bounce off last Friday's low it's looking like we're going to see new highs (so a pullback and then higher next week). The a-b-c pullback from September 14th gets the nod at the moment but stay cautious about the potential for a triple top. It takes a decline below Friday's low near 1426 to put the bears back in control.

S&P 500, SPX, Daily chart

Key Levels for SPX:
- bullish above 1471
- bearish below 1426

The leg up from last Friday has created a clean 5-wave count, shown more clearly on the 30-min chart below, and this afternoon's rally is the final 5th wave of the leg up (the bearish divergences since Tuesday's highs helps confirm the wave count). I have projections for the 5th wave at 1461, 1464 and 1469, which is where the 5th wave would be 62% 100% and 162% of the 1st wave, resp. The upper projection coincides up with trend lines about 11:00 AM on Thursday. It's possible it finished at this afternoon's high so longs are at risk here for at least a pullback. Once a 5-wave move completes we'll get a correction of it, likely into Friday and possibly early next week, before heading higher again. But there remains the risk that the impulsive move up from last Friday will complete the longer-term rally and therefore bulls should be defensive until we see what kind of pullback pattern we get (choppy and corrective, which would be bullish, vs. an impulsive decline, which would be bearish).

S&P 500, SPX, 60-min chart

As compared to SPX using its 50-dma as support, NDX is finding its 50-dma to be resistance, and its 20-dma will be dropping to its 50-dma on Thursday, adding to the resistance near 2786. This is just one example of why traders are feeling confused by this market -- one index uses its 50-dma for support while another is finding it to be resistance. The recent strength in the banks has helped SPX while the weakness in the techs is more worrisome -- I would argue the techs offer a better "tell" as far as what's happening in the economy vs. how the Fed is helping the banks. But as I had mentioned yesterday when the banks were underperforming the broader averages, the rally needs the banks onboard otherwise the rally can't be trusted. So the banks obliged today.

NDX will obviously be bullish above its 20- and 50-dma's with a rally above today's high. But I suspect we'll see at least a pullback first and then we'd have to figure out whether or not it will make another assault and climb over resistance, in which case new highs should be next (or at least a test of the high). A drop back below its H&S neckline (thus far negated with Tuesday's rally), near 2757, would be more bearish and a drop below last Friday's low near 2714 would be much more bearish.

Nasdaq-100, NDX, Daily chart

Key Levels for NDX:
- bullish above 2790
- bearish below 2714

The RUT made it back above its 20-dma today, thanks to an afternoon rally following a drop back down to the 20-dma, which is something it wasn't able to do during the bounce from September 26th to October 5th (intraday poke above but not a close above). Now all it has to do is break out of its bull flag pattern, the top of which is near 845. With the other indexes looking ready for a pullback (possibly after a new morning high for the current bounce) I suspect the RUT will also pull back from resistance before climbing above it next week. But if the bears grab hold here and drive the RUT below 815 the price pattern would turn very bearish and I would expect a sharp decline from there.

Russell-2000, RUT, Daily chart

Key Levels for RUT:
- bullish above 854
- bearish below 815

Bond yields rallied strong today (bonds sold off) and that had TNX (10-year) rallying up to its downtrend line from March and its 200-dma, both at 1.81%. Obviously it would be bullish above this level (although there will be potential resistance at its downtrend line from April 2011, near 1.852%, and then its September 14th high at 1.892%) but with short-term overbought conditions it would be natural for at least a pullback here. That could result in some rotation out of stocks and into bonds for the next couple of days. If the bounce off the September 28th low is to be just an a-b-c bounce correction it will be followed by a strong selloff from here (strong buying in bonds and likely strong selling in stocks). So it's a potentially important inflection point here. As with the stock indexes, the bulls want to see the downtrend line on MACD broken to the upside.

10-year Yield, TNX, Daily chart

The banks had a good day today, correcting some of the strong decline over the past week. The BIX broke its uptrend line from June last Friday, found support at its 50-dma and uptrend line from October 2011 and then broken both yesterday. Today's strong rally (+1.8%) got it back above its 50-dma and trend line, recovering from yesterday's head-fake breakdown. I've drawn in a support zone at approximately 158-159, which is where it bounced off of so as long as that holds we could see another rally leg following the 3-wave pullback from September. But a drop below 158 would be a bearish move and strongly suggest the top is already in place.

S&P Banks index, BIX, Daily chart

Another index that looks very confused is the transportation index. Since June we've seen the TRAN make multiple +/- 6% sharp moves up and down and there's clearly disagreement from market participants. At the moment I see upside potential to about 5200 where it would again run into its downtrend line from July 2011 and achieve two equal legs up from its September 28th low. Back below 5082 from here would leave another confirmed 3-wave bounce and suggest lower prices but for now neither side is in control of this mess.

Transportation Index, TRAN, Daily chart

The dollar has basically chopped sideways since its September 14th low, which is of course when the stock market made its high. If the dollar continues to sink lower from here it will likely help boost the stock market to new highs. Today's decline in the dollar had it testing the uptrend line from October 2011 through the September 14th low (therefore an untested trend line except for today). If today's low holds and the dollar rallies back above its October 10th high at 80.31 it's going to be a bullish move. But if the dollar continues lower below today's low at 78.97 there is support near 78 and then lots of air down to 75.

U.S. Dollar contract, DX, Daily chart

One bearish signal on the dollar's chart is the 50-dma crossing down through the 200-dma last Friday. The last time the two crossed was back in October 2011 and the dollar rallied from there into the high in July.

Considering the dollar's weakness gold has been acting weaker. After multiple attempts to get through its broken uptrend line from October 2008 it then broke its uptrend line from August and its 20-dma last week, bounced back up for back test and kiss goodbye and dropped to new lows for its pullback this week. So far that's all bearish price action and I'm not seeing a reason to get bullish and buy this dip. At a minimum I expect to see gold drop down to its 50-dma, near 1720 tomorrow, and then possibly giving us a bigger bounce. But the pattern would then be confirmed bearish at that point and I'd be looking for a multi-day bounce to turn into a shorting opportunity. Gold bulls need to drive gold higher from here and get it back above 1777 to turn the pattern bullish again.

Gold continuous contract, GC, Daily chart

For oil I'm showing its weekly chart below so that I can show a possible bullish sideways triangle that might play out into next year (green path). While I consider this to be the lower-probability move I can see a lot of merits from a strictly price pattern perspective. It calls for another rally leg to the downtrend line from May 2011, currently near 107 and then another leg down that stays above 80 before it would be ready to rally to new highs in the latter part of 2013. The more bearish pattern calls the September 14th high the completion of the correction to the February-June decline and the next leg down should break well below 60. A drop below the October 3rd low at 87.70 would be likely confirmation of the bearish wave count (red).

Oil continuous contract, CL, Weekly chart

The dollar's weakness in the past week has not helped the commodities index much. As a side note, the CRB Index, with all its history, is no longer being tracked (something about low volume not making it worth ICI's effort to keep it going, which we might find happening more and more as trading volume takes a dive). The next best index is the Dow Jones UBS Commodity index, which I show below, as it is very similar in form. There are a couple of important things to note about the index and why it's going to be important for the stock market to see the commodities continue to rise (indicating inflation is taking hold, which helps stock prices).

The most obvious thing at the moment is the triangle pattern and a break out the top or bottom will likely be a tradable direction. The September 14th high was a one-day break above the downtrend line from July 2008 followed by a sharp reversal (on the daily chart you can see an island top with the gap up on September 14th, a little spinning top doji, and then a gap down on September 15th and back below the line). The retracement of the previous decline -- April 2011 to June 2012 -- was slightly more than 50%, replicating the retracement of the 2007-2008 decline at the April 2011 high. The vertical lines show the Fib relationships between the length of time for the February 2009 - April 2011 rally and the subsequent pullback, which took 50% of the time, and the September 2012 high, which took 62% of the time. The first reversal occurred at the February 2012 bounce high at the 38% time projection. These Fib price/time relationships should not be ignored and it could be a good signal that September's high will stand (bad for stocks but good for our pocket books in that case). The next important time projection is in July 2013, which is the 100% projection.

DJ UBS Commodity index, DJUBS, Weekly chart

Tomorrow's economic reports include the usual unemployment claims numbers (watch for a possible correction to last week's steep decline) and then the Philly Fed index and Leading Indicators, as well as existing home sales. The trouble with these economic reports is that we can never know how the market will react to them. If the numbers are terrible, indicating a faster slowing in the economy, it would normally knock the supports out from under the market. But in this bizarro world of ours, where bad economic news is good because it helps the Fed continue to help the stock market, I mean economy, we can't predict what will happen. So we have to unfortunately ignore economic news and simply react to what the market is telling us, which in actuality is what we've always had to do anyway but with today's market distortions it's become much more difficult. In fact there was a good article in MarketWatch about this: Bizarro World

Economic reports and Summary

Other than the U.S. economic data, as well as reactions to earnings reports, we could have some fireworks before the open if China's reports create/alleviate economic concerns. They'll be reporting their GDP, real estate prices, industrial production and retail sales. We'll also have the results of Spain's efforts to sell 3-, 4- and 10-year notes and considering all the concern surrounding their bailout request the results could be market moving (which direction is the challenge).

It's opex week and we know it tends to be bullish, which this one has been. The decline on Thursday, Friday and into Monday set the bear trap and the short-covering fuel has helped propel the indexes back up for a bullish week (so far). Will real buying come in behind the short-covering? Time will tell but at most I'd expect a quick new high for the bounce on Thursday morning and then the start of at least a pullback into Friday before heading higher next week and possibly through the elections (which is a common pattern although October typically pulls back more than it has before rallying into elections).

Watch for a pullback, which could offer a trading opportunity on the short side, but depending on the form of the pullback we may be looking for a better trade on the long side next week. What it means for the next two days, to finish up opex, is that we could see some choppy whipsaws. The other possibility, which is common, is for the market to go dormant on us from Thursday afternoon through Friday. Don't force trades and end up just feeding your broker.

Good luck and I'll be back with you next Wednesday with hopefully a clear signal as to whether the market is likely to rally higher into the elections or instead start or more serious decline.

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

Breaking Multiple Layers

by James Brown

Click here to email James Brown


NEW DIRECTIONAL PUT PLAYS

Garmin Ltd. - GRMN - close: 39.60 change: -0.37

Stop Loss: 40.60
Target(s): 36.00
Current Option Gain/Loss: Unopened
Time Frame: exit prior to the Oct. 31st earnings report
New Positions: Yes, see below

Company Description

Why We Like It:
GRMN is known for its GPS technology. The stock isn't looking very healthy. There was a false breakout above its 200-dma a couple of weeks ago. Now GRMN is breaking down below support near $40 and its 300-dma.

I am suggesting small bearish positions at the open tomorrow. We want to limit our position size since the most recent data listed short interest at 16% of the 123 million share float.

We'll start with a stop loss at $40.60. Our target is $36.00 but we will plan to exit prior to the October 31st earnings report.

- Suggested *Small* Positions -

buy the NOV $40 PUT (GRMN1217w40) current ask $1.84

Annotated Chart:

Entry on October xx at $ xx.xx
Average Daily Volume = 787 thousand
Listed on October 17, 2012



In Play Updates and Reviews

The Rebound Continues

by James Brown

Click here to email James Brown

Editor's Note:

Positive news on housing starts and building permits kept the rally alive today.

I am suggesting an early exit for our October options in CVLT and EQT. We saw MOS and TECD get stopped out.

Current Portfolio:


CALL Play Updates

Commvault Sys. - CVLT - close: 57.84 change: -0.70

Stop Loss: 54.90
Target(s): 62.00
Current Option Gain/Loss: -91.9%
Time Frame: exit prior to earnings on Oct. 30th
New Positions: see below

Comments:
10/17/12: There was no follow through on yesterday's rally. I fear that CVLT will remain stuck inside the $55-60 zone until after option expiration.

I am suggesting we exit our October calls at the closing bell tomorrow assuming there is a bid for them.

- Suggested Positions -

Long Oct $60 Call (CVLT1220j60) Entry $1.24

10/17/12 prepare to exit at the close tomorrow!
10/03/12 adjust exit target to $62.00
10/01/12 new stop loss @ 54.90
09/29/19 new stop loss @ 54.40

Entry on September 20 at $56.07
Average Daily Volume = 427 thousand
Listed on September 19, 2012


Diageo Plc. - DEO - close: 114.60 change: -0.53

Stop Loss: 111.90
Target(s): 119.75
Current Option Gain/Loss: + 0.0%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
10/17/12: Shares of DEO gapped open lower at $114.24 but traders bought the dip almost immediately. I don't see any changes from my prior comments. I would still consider new positions now or on a dip near $114.00.

Earlier Comments:
The stock tends to gap open each morning as shares here in the U.S. react to trade that started in Europe. Thus we want to limit our position size due to the volatility.

- Suggested *Small* Positions -

Long NOV $115 call (DEO1217k115) Entry $1.90

Entry on October 17 at $114.24
Average Daily Volume = 529 thousand
Listed on October 16, 2012


EQT Corp. - EQT - close: 61.07 change: +0.55

Stop Loss: 58.75
Target(s): 61.50
Current Option Gain/Loss: + 72.1%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
10/17/12: EQT almost hit our exit target today. The intraday high was $61.39. We were aiming for $61.50. Since we're almost out of time I am suggesting we go ahead and exit positions at the opening bell tomorrow. More aggressive traders could hold on but remember you only have two days left.

- Suggested Positions -

Long Oct $60 call (EQT1220j60) Entry $0.61

10/17/12 prepare to exit at the open tomorrow
10/15/12 new stop loss @ 58.75, readers may want to exit now
10/13/12 adjust exit down to $61.50
10/11/12 new stop loss @ 58.40, readers may want to take profits now with the bid on our option at $1.30 (+113%)
10/08/12 readers may want to take profits now
10/06/12 new stop loss @ 57.75
10/04/12 new stop loss @ 57.45
09/27/12 new stop loss @ 56.45

Entry on September 24 at $57.89
Average Daily Volume = 1.0 million
Listed on September 22, 2012


Medivation, Inc. - MDVN - close: 51.53 change: -0.33

Stop Loss: 49.95
Target(s): 57.00
Current Option Gain/Loss: -31.5%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
10/17/12: I am about ready to pull the plug on our MDVN trade. The stock is not cooperating. Shares should have bounced at support near its rising 50-dma. Instead MDVN has been underperforming the market and has now closed underneath this level of technical support.

More conservative traders will want to seriously consider an exit immediately. I am not suggesting new positions.

Earlier Comments:
We will plan to exit prior to the early November earnings report.

- Suggested Positions -

Long Nov $55 CALL (MDVN1217K55) Entry $2.00

10/17/12 MDVN is not cooperating and closed under the 50-dma, readers may want to exit immediately.
10/15/12 triggered @ 52.50

Entry on October 15 at $52.50
Average Daily Volume = 780 thousand
Listed on October 12, 2012


Noble Energy, Inc. - NBL - close: 96.14 change: +1.45

Stop Loss: 92.75
Target(s): 99.75
Current Option Gain/Loss: Oct95c: - 3.4% & Nov95c: + 6.4%
Time Frame: exit prior to earnings on Oct. 25th
New Positions: see below

Comments:
10/17/12: Oil and energy stocks were showing strength today and NBL rallied to a new four-week high. I am raising our stop loss to $92.75. Since we only have two days left on our October calls I am suggesting an immediate exit at the opening bell tomorrow for our October $95 call. More aggressive traders could hold on since NBL might be able to extend its gains. Our exit target for the November call remains $99.75. I am not suggesting new positions at this time. Keep in mind that we do not want to hold over the late October earnings report.

Trigger @ 94.25

- Suggested Positions -

Long Oct $95 call (NBL1220j95) Entry $1.45

- or -

Long Nov $95 call (NBL1217k95) Entry $3.10

10/17/12 new stop loss @ 92.75
Prepare to exit the Oct. $95 call at the open tomorrow morning

Entry on October 08 at $94.25
Average Daily Volume = 1.0 million
Listed on October 2, 2012


Six Flags Entertainment - SIX - close: 63.49 change: -0.50

Stop Loss: 60.90
Target(s): 64.75
Current Option Gain/Loss: +38.0%
Time Frame: exit prior to the Oct. 24th earnings report
New Positions: see below

Comments:
10/17/12: SIX saw some profit taking after yesterday's rally. Broken resistance near $62.00 should offer a little short-term support.

I am not suggesting new positions at this time. Don't forget that we do not want to hold over the October 24th earnings report.

FYI: The Point & Figure chart for SIX is bullish with a long-term $98 target. NOTE: Readers may want to keep their position size small. The bid/ask spread on options for SIX are a little wide.

- Suggested Positions -

Long Nov $65 call (SIX1217k65) Entry $1.05

10/16/12 adjust exit target down to $64.75

Entry on October 12 at $62.25
Average Daily Volume = 334 thousand
Listed on October 10, 2012


SPX Corp. - SPW - close: 68.85 change: -0.05

Stop Loss: 68.40
Target(s): 74.00
Current Option Gain/Loss: Unopened
Time Frame: exit prior to earnings on Oct. 31st.
New Positions: Yes, see below

Comments:
10/17/12: SPW was little changed on the session. Traders bought the dip near $68.00. We are waiting for a breakout past $70.00.

I am suggesting a trigger to buy calls at $70.25. If triggered our target is $74.00 but we'll plan on exiting prior to the Oct. 31st earnings report. FYI: The Point & Figure chart for SPW is bullish with an $85 target.

Trigger @ 70.25

- Suggested Positions -

buy the NOV $70 call (SPW1217k70)

Entry on October xx at $ xx.xx
Average Daily Volume = 594 thousand
Listed on October 15, 2012


PUT Play Updates

CACI Intl. - CACI - close: 50.13 change: +0.66

Stop Loss: 50.60
Target(s): 45.25
Current Option Gain/Loss: -28.2%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
10/17/12: CACI may have gotten a boost today after news surfaced the company won another large contract with the U.S. Army. Today's close above its 10-dma and the $50.00 mark is definitely short-term bullish. More conservative traders may want to exit immediately!

I am not suggesting new positions. We will lower our stop loss down to $50.60.

- Suggested Positions -

Long Nov $50 PUT (CACI1211w50) Entry $2.30

10/17/12 Readers may want to exit immediately. New stop loss @ 50.60
10/11/12 new stop loss @ 51.25

Entry on October 09 at $49.64
Average Daily Volume = 373 thousand
Listed on October 8, 2012


ITT Educational Services - ESI - close: 27.76 change: -1.88

Stop Loss: 30.40
Target(s): 25.15
Current Option Gain/Loss: + 8.0%
Time Frame: exit prior to earnings on Oct. 25th
New Positions: see below

Comments:
10/17/12: It was a good day for ESI bears with the stock falling -6.3%. This was likely a reaction to APOL's earnings warning last night. We are adjusting our stop loss lower to $30.40. I am not suggesting new positions at this time.

NOTE: Oddly enough even though ESI dropped sharply our option value declined.

Earlier Comments:
I want to reiterate my caution about using small positions. ESI already has a high amount of short interest because so many investors think this stock is going lower.

- Suggested *SMALL* Positions -

Long 2013 Jan $27.50 PUT (ESI1319m27.5) Entry $3.10

10/17/12 new stop loss @ 30.40

Entry on October 04 at $29.47
Average Daily Volume = 408 thousand
Listed on October 3, 2012


Starbucks Corp. - SBUX - close: 48.39 change: -0.57

Stop Loss: 50.05
Target(s): 44.00
Current Option Gain/Loss: - 4.0%
Time Frame: exit prior to the early November earnings report
New Positions: see below

Comments:
10/17/12: There was no follow through on yesterday's bounce in SBUX. The stock underperformed today with a -1.1% decline. I am not suggesting new positions at this time.

Our target is $44.00. More aggressive traders could aim lower since SBUX appears to be in a new trend of lower highs and lower lows.

- Suggested Positions -

Long Nov $50 PUT (SBUX1211w50) Entry $2.73

Entry on October 08 at $48.40
Average Daily Volume = 8.1 million
Listed on October 6, 2012


CLOSED BEARISH PLAYS

Deckers Outdoor - DECK - close: 38.81 change: +2.38

Stop Loss: 36.55
Target(s): 30.25
Current Option Gain/Loss: Unopened
Time Frame: exit prior to the late October earnings report
New Positions: see below

Comments:
10/17/12: DECK is not working for us. Today's short covering rally pushed it above short-term resistance at $38.00. I am dropping DECK as a bearish candidate. Our trade never opened.

Trigger @ 34.45

Trade did not open.

10/17/12 removed from the newsletter

chart:

Entry on October xx at $ xx.xx
Average Daily Volume = 2.5 million
Listed on October 9, 2012


Mosaic Co. - MOS - close: 54.99 change: +0.50

Stop Loss: 55.55
Target(s): 50.15
Current Option Gain/Loss: -48.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
10/17/12: Sometimes the market does not make sense. MOS rival Potash Corp (POT) lowered their earnings forecasts. This should have sent the industry stocks lower. Instead MOS gapped down at the open and rallied. It's possible investors think weakness in POT means MOS is gaining market share but that's just speculation.

The bounce in MOS today hit our stop at $55.55.

- Suggested Positions -

Nov $52.50 PUT (MOS1217w52.5) Entry $1.25 exit $0.65 (-48.0%)

10/17/12 stopped out @ $55.55
10/15/12 trade opened

chart:

Entry on October 15 at $53.90
Average Daily Volume = 4.2 million
Listed on October 12, 2012


Tech Data Corp. - TECD - close: 44.50 change: +0.71

Stop Loss: 44.25
Target(s): 42.00
Current Option Gain/Loss: -12.8%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
10/17/12: The oversold bounce in TECD continued and shares rallied +1.6% on top of yesterday's +2% gain. TECD broke through short-term resistance at $44.00 and hit our stop loss at $44.25.

Earlier Comments:
I would keep our position size small to limit our risk.

*Small Positions* - Suggested Positions -

Long Nov $45 PUT (TECD1211w45) Entry $1.95 exit $1.70 (-12.8%)

10/17/12 stopped out at $44.25
10/15/12 new stop loss @ 44.25
10/10/12 new stop loss at $44.65
10/09/12 new stop loss @ 45.15
10/03/12 new stop loss @ 45.75
10/01/12 triggered @ 44.90

chart:

Entry on October 01 at $44.90
Average Daily Volume = 333 thousand
Listed on September 29, 2012