Option Investor
Newsletter

Daily Newsletter, Tuesday, 5/21/2013

Table of Contents

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

Market Wrap

Federal President's Rally

by Jim Brown

Click here to email Jim Brown

The Dow extended its streak of consecutive Tuesday gains to 19 weeks thanks to comments from multiple Fed presidents.

Market Statistics

St Louis Fed president, James Bullard, a voting member of the FOMC, said the Fed should continue QE purchases because it remains the best monetary policy option right now. "It is closest to standard monetary policy, involves clear action and has been effective." He said the Fed should either raise purchases or taper purchases based on the actual progress of the economy. The market recovered from an opening dip after Bullard spoke. He was speaking in Frankfurt Germany and warned the ECB needs to take "aggressive QE action to avoid the fate Japan suffered." Japan left interest rates at zero for 15 years thinking the economy would eventually recover and it never happened. Now they are forced to implement extreme QE measures to combat the decade of deflation. The European recession stretched to six-quarters with a GDP of -0.2% in Q1.

New York Fed President William Dudley said he had not decided whether the Fed should taper or increase QE purchases. "Because the outlook is uncertain, I cannot be sure which way, up or down, the next change will be." Dudley is vice chairman of the FOMC so his thoughts count. He said the Fed may need to rethink its plan for eventually normalizing monetary policy. The current plan was adopted in 2011 and is out of date. "We may need to update our thinking with respect to the so-called exit principles." Those principles include a halt to QE, raise rates and finally sell securities owned by the Fed over a 3-5 year period. According to Dudley, "This seems stale in several respects." He also said the Fed may want to abandon the plan to sell its mortgage backed securities and just let them roll off as they mature. He said the slower than expected recovery from 2009-2012 showed in hindsight the Fed did not supply enough stimulus. In the understatement of the year he also warned the markets will overreact to tightening.

Chicago Fed President Charles Evans said the economy has "improved quite a lot" and "I am optimistic that the labor market has been doing much, much better and that unemployment is going to continue to go down." Also, "Currently we have the appropriate monetary policy in place." Evans has been supportive of QE. He said he would like to see monthly employment of 200,000 or more jobs for "at least six more months" before judging the labor market substantially improved enough to taper QE. "If I had high confidence this was going to be maintained over the next six months, I would be amenable to discussions about adjusting the flow of purchases downward. For now "I would like to see a few more months of data."

In the last week we have heard from Philly Fed President Charles Plosser who called for tapering QE purchases now. SF President John Williams favored a cut to purchases as soon as this summer. Boston President Eric Rosengren said low inflation and high unemployment suggested there may be a need for more stimulus, not less. Dallas Fed President Richard Fisher favors cutting QE now saying all we have done is make rich people richer by inflating the stock market.

The comments by Bullard, Evans and Dudley helped rescue the market from an early morning dip that had the S&P in negative territory for over an hour. In the end the Dow managed to add another Tuesday to its streak making it 19 consecutive weeks of Tuesday gains. The second longest streak was 15 set in 1927.

There were no economic reports of note this morning. The weekly Chain Store Sales rose +0.2% compared to a -2.0% decline last week. This report is noise.

The calendar for Wednesday has two major events. Chairman Bernanke will testify before the Joint Economic Committee at 10:AM and it is sure to be must see TV. Later in the day the FOMC minutes will be released for the early May meeting. Both of these events have the potential to rock the market in either direction.

The Existing Home sales are expected to have increased in April but other housing data has been showing some weakness. This report is not likely to be a market mover unless there was a huge shift in the numbers.

Economic Calendar

It was a slow news day with the focus on the grilling of Apple's CEO, Tim Cook, by a Senate committee on taxes, discussion of the Fed heads comments, expectations for Bernanke's comments tomorrow and the JP Morgan shareholder meeting. Throw in a couple earnings reports from Home Depot and Best Buy and the day was complete.

Tim Cook was grilled by senators on why they pay so little in U.S. taxes. Apple has $102 billion in cash stashed overseas in affiliates because the tax rate to bring it back to the U.S. is prohibitive relative to other countries. They have companies they setup in Ireland in 1984 to handle the cash generated in Europe. The money is earned in Europe and Asia and taxed in those countries. The remaining proceeds are transferred to the Irish holding company. The Irish company invests the money and Apple does pay full U.S. taxes on the proceeds of those investments. Apple also keeps a lot of cash overseas because that is where their products are manufactured. It costs billions to setup assembly lines, manufacture and inventory parts and pay to have the devices assembled. In the hearing Apple was beaten up for avoiding taxes even though the company has paid more than $6 billion in U.S. taxes over the last couple decades. That is more than any other company. Apple claimed it was just following the tax code of the various countries and paying whatever was required. Clearly the Senate committee wanted that to be a lot more payments in the USA. Apple shares were flat on the day with only a minor loss.

I loved Art Cashin's comment on the Senate grilling of Apple. He suggested the CEO say, "Ok, you convinced me. I will start making plans to shut down our U.S. operations and move to a country that appreciates our $6 billion in taxes." Good point Arthur!

Apple Chart

Jamie Dimon survived the JP Morgan shareholder vote and he retained the dual titles of Chairman and CEO. The initial vote was 32% in favor of splitting the positions. That was even lower than the 40% last year and suggests the entire topic is now mute. In a separate vote Dimon received a 98% vote to be retained as a board member. That was second only to Timothy Flynn, retired chairman and CEO of KPMG at 99.4%.

The risk committee barely polled over 50% for retention after the $6 billion whale trade fiasco last year. I would expect the board to revise that committee, consisting of James Crown, David Cote and Ellen Futter, in order to appease shareholders. Proxy advisory firms had recommended against reelecting them.

JP Morgan shares rallied to a new 12 year high after the voting results were announced.

JPM Chart

Best Buy (BBY) reported adjusted earnings of 36 cents that beat estimates of 24 cents but that was the end of the good news. Revenue, excluding Europe, declined -10% to $9.38 billion. The exclusion is due to Best Buy selling its European operations. Same store sales declined -1.1%. The CFO said the factors that hurt sales in Q1 would continue through Q2. The CEO said Best Buy had also decided to reduce sales in some non-core businesses. Even the Samsung store-within-stores project announced with great fanfare last quarter is now expected to decrease revenue. BBY shares declined -5% on the news.

Best Buy Chart

Autozone (AZO) reported earnings of $7.27 compared to estimates of $7.21. Revenue rose from $248.6 million to $265.6 million. Gross margins rose to 51.8%. The company said the longer colder winter produced more wear and tear to vehicles and sales increased noticeably in the Northeast and Midwest as the winter extended into the last four weeks of the quarter. They expect this winter wear to continue to support sales in Q2 since many motorists put off working on their cars until the weather warms up. Shares of AZO rallied +19 on the news.

AZO Chart

Dow component Home Depot (HD) reported earnings that rose +19% to 83 cents compared to estimates for 76 cents. Revenue rose 7% to $19.12 billion compared to estimates for $18.62 billion. The retailer said the housing recovery powered the gains despite a cold wet spring. "Weather negatively impacted our seasonal and exterior business but our core interior project business remained strong throughout the quarter." Same store sales rose +4.3%. The retailer raised guidance for the full year to $3.52, up from $3.37. Shares of HD rose +$2 to a new high on the news.

Home Depot Chart

Saks (SKS) spiked +18% after the New York Post reported the company had hired Goldman Sachs to explore strategic alternatives including a sale. Analysts believe the Manhattan store would be worth more than $1 billion by itself. The news came after Saks shares were already up strongly on better than expected Q1 sales. Same store sales were up +5.9% and that was three times what analysts expected. Saks also reiterated its sales targets for the rest of the year. Macy's reported same store sales of +3.8% and Nordstrom +2.7%.

Saks Chart

Herbalife (HLF) shares were halted midday to allow the company to announce it had successfully retained a new auditor. PriceWaterhouseCoopers LLP (PWC) will take over the auditing duties after KPMG was forced to drop Herbalife after a KPMG partner was caught gving inside information to a trader.

The naming of a new auditor is good news because it implies PWC has looked at their books and accounting methods and found nothing they could not live with. Some auditors may have been reluctant to put their name on the HLF financials given the high profile attack by Bill Ackman claiming they were a pyramid scam and predicting the stock was going to zero. If PWC had found anything questionable in a review of the books they would not have taken the company as a client. Herbalife said PWC would also re-audit the 2011 and 2012 financials.

This is good news for Carl Icahn and his new 16% stake of 16.3 million shares and bad news for Bill Ackman and his 20 million share short. However, Ackman said the re-audit could lead to "some additional interesting disclosures."

The PWC news was apparently leaked on Monday as HLF shares rallied +10% for no apparent reason. In retrospect we now know what was powering the spike.

HLF Chart

The S&P traded in a 12 point range and ended the day with only a +2.87 gain. The close was almost perfectly in the middle of that range and suggests the buyers and sellers were about even. In the overall market there were 3,565 advancers and 3,019 decliners. New highs totaled 997 out of a universe of 6,885 stocks. Volume matched the A/D ratio perfectly but only 6.1 billion shares were traded.

This could be seen as simply a consolidation day but after the recent rally there is always the rush to label it a topping process or a distribution day. I don't agree with the distribution because of the low volume and the advantage to the advancers. If volume were to increase without any material move higher I would agree more on the distribution call.

There has not been a consecutive two-day loss in the markets since April 18th. There have only been a handful of strong gains with the majority of the move in a step by step fashion. In a market rising 3-5 S&P points a day the consolidation is happening on a daily basis. Some traders take profits and other traders enter new positions on the dips in individual stocks.

Given the continuous gains since mid April it is hard not to want to predict a top but so far we are not seeing any technical indications. As one analyst said, "we are overbought but not overvalued." The more likely reason for the muted gains today is simply the twin challenges of the Bernanke testimony and the FOMC minutes on Wednesday. Investors were probably less interested about adding to long positions ahead of events that could rock the market.

Even a massive upgrade by Goldman Sachs could not push the indexes higher. David Kostin, Chief U.S. Equity Strategist, raised his year end target for the S&P from 1,625 to 1,750. He also targeted 1,900 by the end of 2014 and 2,100 by the end of 2015. The reason for the upgrades was attributed to multiple expansion and the end of economic stagnation in 2014. JP Morgan analyst Thomas Lee recently raised his end of year target to 1,715. Canaccord Genuity's Tony Dwyer raised his target to 1,760.

Unless a headline appears to suddenly change the investing environment I don’t see a meaningful dip in our near future. However, as I have said repeatedly "when investors are ready to take profits they will find an excuse." It could be a Fed headline, sudden economic change or a geopolitical event. On the way up those headlines are seen as stepping stones in the wall of worry. Once sentiment begins to change they are seen as potholes in the yellow brick road.

If Bernanke decides to change the game on Wednesday the market will react appropriately. I doubt he will do it because they have spent so much time and money creating the rally he will not want to crater it.

Initial support is currently 1,650 followed by 1,625.

S&P Chart - Daily

The Dow is fighting uptrend resistance at the top of the long term trend channel. Today it was the 15,400 level causing trouble. Each spike over that level was brief but the dips were immediately bought to close at 15,389. The pressure is building to the upside for a breakout over resistance like we saw on the S&P.

The Dow has risen +1,400 points on the last 19 consecutive Tuesdays. That represents 78% of the year to date gains.

Initial support is 15,325 followed by 15, 225.

Dow Chart - Daily

The Nasdaq Composite has stalled at 3,500 for the last three days but still managed to keep the string of gains alive. The Nasdaq has touched new intraday 12.5 year highs for 17 straight days. The Nasdaq is the most overextended of the major indexes and the RSI is at a whopping 75. The Nasdaq should be the first index to crack simply because of the overextension from the recent consolidation level. There is no guarantee but I would watch it carefully. However, if the index is successful in punching through 3,500 we could see another short covering leg higher.

Initial support would be around 3,450.

Nasdaq Composite Chart - Daily

The Russell 2000 has come to a stop exactly where I expected it to pause and that is the 1,000 level. That is a historic all time high and a very big round number for the small caps. In the Option Investor plays we had a Russell ETF IWM put with a trigger to enter at $99.75 on the IWM. In theory the IWM is a dollar equivalent of the Russell 2000 Index. The Russell index has exceeded 1,000 on both of the last two days but the IWM has failed to reach that $99.75 level. You can't short the Russell index but you can short the IWM and apparently there are enough sellers anticipating that 1,000 resistance or $100 on the IWM that the ETF can't punch through the ceiling.

Russell 2000 Chart

To recap we have the Dow at uptrend resistance at 15,400, the Nasdaq stalled at 3,500 and the Russell stalling at 1,000. In a normal market that would be a clear sign of an impending rally failure. In this market it may be just one more chance to induce the shorts to load up before a headline forces the next great short squeeze. Please be aware of the battle in progress at those levels.

Major events on Wednesday are the Bernanke testimony and the FOMC minutes. Be prepared for fireworks.

Enter passively, exit aggressively!

Jim Brown

Send Jim an email


New Option Plays

A Clean Sweep

by James Brown

Click here to email James Brown


NEW DIRECTIONAL CALL PLAYS

Ecolab Inc. - ECL - close: 89.05 change: +0.97

Stop Loss: 87.95
Target(s): 98.50
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
ECL is in the consumer goods sector. The company focuses on cleaning products and services. You could label the stock overbought with a multi-week streak of gains. Yet after consolidating sideways for the last few sessions ECL now looks poised to break out higher again.

Shares outperformed the market today thanks to some bullish analyst comments and a new higher price target. Today's high was $89.47. More aggressive traders could buy a rally past $89.50. Tonight we are suggesting a trigger at $90.25. If triggered our target is $98.50.

I am encouraging traders to keep their position size small to limit risk since ECL does look a bit over extended here.

Trigger @ 90.25 *Small Positions*

- Suggested Positions -

buy the Jun $90 call (ECL1322F90) current ask $1.20

Annotated Chart:

Entry on May -- at $---.--
Average Daily Volume = 1.0 million
Listed on May 21 2013



In Play Updates and Reviews

Another Day, Another Record

by James Brown

Click here to email James Brown

Editor's Note:

The S&P 500 index tagged another new record high today. The Dow Jones Industrials followed suit.

Our WDC trade was triggered. WLP was closed as planned.
We added another entry point for the IWM put play.


Current Portfolio:


CALL Play Updates

HanesBrands Inc. - HBI - close: 50.89 change: -0.04

Stop Loss: 50.40
Target(s): 54.75
Current Option Gain/Loss: -12.5%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
05/21/13: HBI's performance today is a bit concerning. Shares flirted with a breakdown below their 10-dma and almost hit our stop loss at $50.40. I would not be surprised to see HBI actually hit our stop loss tomorrow but for now the up trend is still higher. I am not suggesting new positions.

- Suggested Positions -

Long Jun $50 call (HBI1322F50) entry $2.00

05/18/13 new stop loss @ 50.40
05/14/13 new stop loss @ 49.40

Entry on May 08 at $50.72
Average Daily Volume = 1.4 million
Listed on May 07 2013


Michael Kors - KORS - close: 60.58 change: -0.03

Stop Loss: 58.95
Target(s): 64.75
Current Option Gain/Loss: -13.2%
Time Frame: exit PRIOR to earnings on May 29th
New Positions: see below

Comments:
05/21/13: KORS rebounded off its rising 10-dma yet again. I am raising our stop loss to $58.95. More conservative traders may want to raise their stop closer to $60.00 instead.

We have less than two weeks left on this trade. KORS is scheduled to report earnings on May 29th and we do not want to hold over the announcement.

- Suggested Positions -

Long Jun $62.50 call (KORS1322F62.5) entry $3.40

05/21/13 new stop loss @ 58.95
05/13/13 trade triggered on gap open higher at $61.55
trigger was $60.65

Entry on May 13 at $61.55
Average Daily Volume = 3.5 million
Listed on May 11 2013


Lockheed Martin - LMT - close: 106.99 change: +0.43

Stop Loss: 103.45
Target(s): 109.00
Current Option Gain/Loss: +194.1%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
05/21/13: Traders bought the dip in LMT near $106.00 midday. LMT set a new 52-week closing high. I don't see any changes from my prior comments. More conservative traders may want to take profits right now since our call option is up more than +190%.

I am not suggesting new positions.

- Suggested Positions -

Long Jun $105 call (LMT1322F105) Entry $0.85

05/18/13 new stop loss @ 103.45. More conservative traders may want to take profits now with the bid on our call at more than $2.00

Entry on May 15 at $103.05
Average Daily Volume = 1.7 million
Listed on May 14 2013


MEDNAX, Inc. - MD - close: 93.40 change: +0.43

Stop Loss: 90.75
Target(s): 98.50
Current Option Gain/Loss: +38.8%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
05/21/13: The last few days have seen traders buying the dip in MD near $92.50. It happened again today and MD looks poised to breakout past the $94.00 level soon.

Earlier Comments:
If triggered our target is $98.50. However, I am suggesting we keep our position size small. MD doesn't trade a lot of volume and the options do not see a lot of volume either.

*Small Positions* - Suggested Positions -

Long Jun $95 call (MD1322F95) entry $0.90

05/20/13 new stop loss @ 90.75

Entry on May 14 at $91.15
Average Daily Volume = 242 thousand
Listed on May 11 2013


Martin Marietta Materials - MLM - close: 111.98 change: -0.11

Stop Loss: 107.45
Target(s): 118.50
Current Option Gain/Loss: +19.3%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
05/21/13: Hmm... it looks like the current sprint higher in shares of MLM might be running out of oxygen. Shares tagged a new relative high today and then reversed. I would not be surprised to see a correction back toward $110. More conservative traders may want to adjust their stops higher.

Earlier Comments:
MLM is currently hovering below short-term resistance at $110. A breakout here could spark more short covering. The most recent data listed short interest at 11% of the rather small 45.9 million share float.

- Suggested Positions -

Long Jun $110 call (MLM1322F110) entry $3.10

Entry on May 16 at $110.25
Average Daily Volume = 378 thousand
Listed on May 15 2013


Occidental Petroleum - OXY - close: 93.06 change: -0.63

Stop Loss: 89.75
Target(s): 98.50
Current Option Gain/Loss: +18.9%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
05/21/13: OXY spiked past $94 this morning but couldn't hold on to its gains. The stock reversed to a -0.6% decline. OXY looks like it's poised to retest the $92.00 level, which should be new support. I am not suggesting new positions.

Earlier Comments:
On the weekly chart (see below) OXY has created a huge, inverse head-and-shoulders pattern, which is bullish. FYI: The Point & Figure chart for OXY is bullish with a $114 target.

- Suggested Positions -

Long Jun $92.50 call (OXY1322F92.5) entry $1.95

05/18/13 new stop loss @ 89.75

Entry on May 14 at $90.75
Average Daily Volume = 6.3 million
Listed on May 13 2013


Panera Bread Co. - PNRA - close: 192.65 change: +2.31

Stop Loss: 199.00
Target(s): 183.95
Current Option Gain/Loss: +61.1%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
05/21/13: The surge in shares of PNRA continues with another new high today. I would not chase it here.

FYI: The Point & Figure chart for PNRA is bullish with a $234 target.

*Small Positions* - Suggested Positions -

Long Jun $190 call (PNRA1322F190) entry $3.60

Entry on May 20 at $187.00
Average Daily Volume = 558 thousand
Listed on May 18 2013


Six Flags Entertainment - SIX - close: 79.96 change: +0.62

Stop Loss: 77.95
Target(s): 86.00
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Comments:
05/21/13: The rally in SIX continued today with shares testing resistance at the $80.00 mark. Yet the stock did not hit our suggested entry point at $80.25. I don't see any changes from my Monday night comments.

NOTE: SIX's rival, Seaworld Entertainment (SEAS), is scheduled to report earnings tomorrow (probably after the closing bell). SEAS' earnings results could influence trading in SIX tomorrow and Thursday.

Earlier Comments:
I would probably label this trade a higher-risk, more aggressive trade. Shares of SIX have been volatile in recent weeks. Just look at the big swings in April. Yet SIX has recovered and now it's poised to break out of its short-term $78-80 trading range.

We are suggesting a trigger to open small bullish positions at $80.25. If triggered our target is $86.00. FYI: The Point & Figure chart for SIX is bullish with a $96 target.

SIX currently has a relatively high-dividend with a 4.6% yield. Plus, SIX is scheduled to do a 2-for-1 stock split on June 27th. Shares will begin trading ex-dividend on May 28th. The quarterly cash dividend should be 90 cents.

Trigger @ $80.25 *Small Positions*

- Suggested Positions -

buy the Jun $80 call (SIX1322F80) current ask $1.65

Entry on May -- at $---.--
Average Daily Volume = 418 thousand
Listed on May 20 2013


Western Digital - WDC - close: 60.72 change: +1.27

Stop Loss: 58.95
Target(s): 64.75
Current Option Gain/Loss: + 0.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
05/21/13: Bullish analyst comments helped boost shares of WDC today and the stock erased yesterday's losses. Shares also hit a new high and hit our entry trigger at $60.65.

*small positions* - Suggested Positions -

Long Jun $60 call (WDC1322F60) entry $2.55

Entry on May 21 at $60.65
Average Daily Volume = 3.3 million
Listed on May 18 2013


Energy ETF - XLE - close: 83.11 change: -0.17

Stop Loss: 80.50
Target(s): 89.00
Current Option Gain/Loss: Jun85c: +64.2% & Sep85c: +25.5%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
05/21/13: The XLE hit new relative highs this morning before reversing all of its gains. Shares look short-term overbought and we might see this ETF pullback toward $82 or its 10-dma soon.

- Suggested Positions -

Long Jun $85 call (XLE1322F85) entry $0.42

- or -

Long Sep $85 call (XLE1321i85) entry $1.80

05/20/13 new stop loss @ 80.50

Entry on May 17 at $81.55
Average Daily Volume = 13.0 million
Listed on May 14 2013


PUT Play Updates

Allergan Inc. - AGN - close: 98.54 change: +0.04

Stop Loss: 102.25
Target(s): 97.00
Current Option Gain/Loss: +62.1%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
05/21/13: AGN didn't move much today as the stock hovered near its simple 200-dma. I don't see any changes from my prior comments. More conservative traders may want to take profits right here. The bid on our put has risen to $3.00. Our exit target is $97.00.

- Suggested Positions -

Long Jun $100 PUT (AGN1322R100) entry $1.85

05/20/13 new stop loss @ 102.25, readers may want to take profits now
05/16/13 new stop loss @ 104.25, adjust exit target to $97.00

Entry on May 09 at $103.46
Average Daily Volume = 2.4 million
Listed on May 08 2013


Covidien - COV - close: 65.80 change: +0.26

Stop Loss: 67.05
Target(s): 62.00
Current Option Gain/Loss: -25.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
05/21/13: COV saw a brief spike higher this morning. The rally stalled at short-term resistance near $66.00 and its 50-dma (and 10-dma). Readers might want to wait for a new drop under $65.50 before initiating new positions.

- Suggested Positions -

Long Jun $65 PUT (COV1322R65) entry $1.20

Entry on May 17 at $65.55
Average Daily Volume = 3.5 million
Listed on May 16 2013


iShares Russell 2000 - IWM - close: 99.23 change: +0.02

Stop Loss: 102.25
Target(s): 95.25
Current Option Gain/Loss: Unopened
Time Frame: 2 to 3 weeks
New Positions: Yes, see below

Comments:
05/21/13: Hmm... that is two days in a row now that the Russell 2000 index has hit the 1,000 mark but the IWM has not made it to the 100 level yet. Yesterday the IWM's intraday high was $99.60. Today it was $99.55.

We will keep our trigger to buy puts at $99.75 for now. However, I am also adding a breakdown trigger to buy puts at $98.75 as well. Our stop loss remains at $102.25 and our target remains $95.25.

Earlier Comments:
Readers may want to keep their position size small since this is a riskier entry point. Most traders avoid trying to catch a falling knife and pick a bottom in a rapidly falling stock. At the same time, trying to pick a top can be just as dangerous.

Trigger @ 99.75 or Trigger @ 98.75

- Suggested Positions -

buy the Jun $95 PUT (IWM1322R95) current ask $0.74

05/21/13 added a secondary entry trigger at $98.75
05/18/13 adjust entry trigger to $99.75
adjust the stop loss to $102.25, adjust the exit target to $95.25.

Entry on May -- at $---.--
Average Daily Volume = 41.8 million
Listed on May 16 2013


CLOSED BULLISH PLAYS

WellPoint Inc. - WLP - close: 78.10 change: +0.61

Stop Loss: 75.95
Target(s): 79.50
Current Option Gain/Loss: +59.6%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
05/21/13: Last night we decided to close our WLP trade at the open today. Shares opened at $77.53. The option opened about five cents lower.

- Suggested Positions -

Long Jun $75 call (WLP1322F75) entry $1.91 exit $3.05 (+59.6%)

05/21/13 planned exit this morning
05/20/13 prepare to exit tomorrow at the opening bell
05/18/13 new stop loss @ 75.95, adjust exit target to $79.50
05/14/13 new stop loss @ 74.65

chart:

Entry on May 08 at $75.25
Average Daily Volume = 2.0 million
Listed on May 07 2013