Option Investor
Newsletter

Daily Newsletter, Thursday, 6/13/2013

Table of Contents

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

Market Wrap

SPX Bounces From Trendline

by Thomas Hughes

Click here to email Thomas Hughes
Introduction

The broad markets have broken the Tuesday streak and had their first run of three down days in three months. The S&P is also down over 4% from its recent all-time high. With the index sitting just above the long term trend line and showing the early signs a technical buy it is possible the long awaited correction has just come and gone. If so, it was a mild one and leaves the indexes in a position for some more upside. Based on past performance a bounce of this nature, if successful, will take the index higher over the next 6-8 weeks. However, there is significant risk that the index will not hold the trend. Next week is full of economic events and could easily see the end of any more upside.


Yet another uber-important FOMC meeting is upon us. The committee meets next week and releases their decision on interest rates Wednesday. There is little to no expectation of a change in policy, it will be the statements that make event. Tapering is on the table, the markets fear it is coming soon or just it's coming. The statements should reveal some indication of where the Fed stands on the subject and when we can expect it to come. Bernanke has been very clear that he and the Fed would be very transparent about the whole process so I think it unlikely at this time there will be any kind of big negative surprise. Many analyst think that the September meeting is the soonest we could see tapering and I tend to agree with that. It may even be as late as next year.

Even if the index does hold trend now and makes a bounce there is also resistance ahead and the possibility of a top forming. The tapering/no-tapering argument is a double-edged sword. The economic signs that will keep tapering at bay are the ones that could derail a recovery driven market rally. The new all-time high near 1675 is now a resistance level in need of watching. As of today I have erased all my previous analysis and redrawn all my support/resistances and trend lines. I think everything happening before the break above the previous all-time highs around 1570 is of less consequence then what is happening now. This makes 1570-1575 long term support. Near term support on a break below the trend line is 1600, this level is also a potential neck line for reversal patterns.

SPX daily

Today's action shows there is support at the trend line. This is the second bounce from this trend line and is confirmed by technical indicators. The daily charts above show trend line support matched by MACD and stochastic signals. The MACD shows that bearish near-term momentum is weakening as the index brushes up against the trend line. The stochastic has already displayed the early trend following buy signal as labeled, now it looks very likely that the second and stronger signal is on the way. If the index breaks below the trend line this signal may take another week or more to come...if at all. There is a lot going on next week that could derail any further rally.

SPX Hourly

Futures trading was negative this morning, influenced by yesterday's drop and the follow up fall in the Nikkei. Trading was fairly steady going into today's release of economic data at which time there was an obvious up-tick in sentiment. Trading turned positive shortly before the open, then hovered around break even for the first few minutes. The second round of today's data came out at 10AM, sharping the bullish edge to today's trading and sending the markets up for the rest of the day.

Today's Data

Thursday's usual round of unemployment claims was accompanied by retail sales, import/export prices, business inventories and a downgrade of global GDP expectations by the World Bank. First the jobless claims. Initial claims for unemployment fell by an unexpectedly large number and came close to reaching the five year low. Claims fell by 12,000 from an unrevised previous figure for a total of 334,000 new claims for unemployment insurance. This is the third week of declines since hitting the recent peak above 350,000. The moving average is also now below 350,000 again. Initial claims are not falling as much as needed for a real strong recovery but they are coming down. Coupled with lower lay-off's, semi-strong jobs creation numbers and a higher participation rate I am seeing evidence of an improvement in labor markets. Now it's time to look for sustainability.


Continuing claims and total claims move in opposite directions from each other but both made negligible moves. Continuing claims rose by 2,000 to reach 2.97 million. This is on top of a 20K upward revision to the previous weeks data. Continuing claims are still below the 3 million mark and still near the long term lows and still trending lower if gradually. Total claims fell by close to 130,000 to reach 4.515 million and a new long term low. Based on these two charts it does look like employment is improving. Claims are down over the long term but again it is time now to look for sustainability in these numbers.



Import/export prices were released simultaneously to the claims data. This data was mixed, import and export prices both fell. On the one hand this shows that prices and inflation are tame, providing relief to the consumer, but on the other it also shows that global demand is down. Import prices, ex oil, fell by -0.3% and export prices fell by -0.7% ex autos. Both numbers are slightly larger than the more modest declines expected by the economists. Balancing out these numbers was retail sales, which increased by 0.6% and well ahead of the expectations. The final element of the daily economic round-up is business inventories which rose by the expected 0.3%.

Next week the economic calendar is full again. Not only is there an FOMC meeting but the next wave of real estate data will crash onto the market. Early in the week the data deluge begins with long term tic flows and Empire manufacturing. Later in the week we'll get housing index, mortgage index, housing starts, new home permits and existing sales. Mid week is the FOMC rate decision, Thursday will be jobless claims and the week will round out with the Philly Fed survey and Leading Indicators.

Yen Retreats To Original Target

The USD/JPY has made quite a drop over the last few days. Much more than I first expected. Now it is trading around the original target level Abe announced way back last fall, 95. The pair traded sharply lower early today, breaking that level, and then recovered some of the losses later on. Volatility is likely to persist in this pair but more evidence of a potential bottom is present. Today's candle is hammerish and helps to support the early indications I mentioned Tuesday. It is reasonable to target the 95 area as a potential jumping off point for another leg up to retest the highs over 100 but I am not so sure about the timing. I do not think the yen will move lower, or much more lower. If that happens and the BOJ or Abe do nothing about it then their credibility and the budding Japanese recovery is shot.

USD/JPY

Gold Volatility Remains

Gold is still volatile. Today the metal made another $20 swing, this time down after retesting the previous support now turned resistance level of $1390. The gold chart is winding up and the volatility is spilling over into the gold stocks. The Gold Index has been winding up alongside the underlying metal for over two months. It is now sitting back on the bottom of the two month range and the 78.2% retracement of the 2009-2012 bull market with weak and weakening technicals. It is possible that buyers could step in at this level scooping up cheap gold stocks but I don't see any reason for this at this time. I think there is still the possibility of some more downside in gold which could help the index break below support and make a full retracement. Volatility in gold will likely persist into next weeks FOMC decision/statement. Watch $110.42-$111.15 for support.

The Gold Index

Oil Hurt By GDP Downgrade

Oil prices were initially trading to the downside after the World Bank downgraded world GDP estimates. Prices found support early and eventually regained positive territory before the end of today's session. Oil prices remain near the top of the four month range. The downgrade may impact oil demand outlook but I think that impact will be short lived. The Oil Index has been in retreat even while the price of oil has been up. The index is now sitting on support but indicators are dubious. The index may be in a range, may move up, may move down. However, if the general market moves up then I think oil stocks will move up as well.

The Oil Index

Early Earnings Pre-Season Head's Up

I didn't see too much of interest today in the story stock area so I thought I'd expound upon the early earnings outlook I started Tuesday. Next week is what I think of as the start of earnings season. It's the week when Oracle, Micron, Adobe and Redhat report earnings. The companies nor their sector of the technology world is earth shattering or market moving but they are an important part of over-all tech and earnings picture. Plus, it is the first look at what has happened since earnings estimates, guidance and outlook from the previous quarter were released. Tech may also be a little more important this time around since all the talk of sector rotation into cyclicals like techs and financials.

Adobe is sitting on support after correcting from a strong up trend. Adobe reports on Tuesday and is expected to earn $0.21 per share, a penny drop from the last quarter. Technicals are neitral at this time. Look for Adobe to meet or beat expectations but also look for next quarter guidance to be more important. Weak guidance, outlook or anything referring to poor business conditions could send the stock below $42.50 and lower. If the earnings report satisfies investors look for the stock to move up and confirm the early bounce at the end of May.

Adobe

Micron has had a really nice run up. It seems they have over come the loss of their CEO last year. The stock has doubled since the first of the year but is now showing signs of correction. Divergent MACD and overbought stochastic suggest weakness and lower prices but that is nothing a little consolidation can't fix. Micron reports earnings on Tuesday and is expected to report $0.03 per share, reversing last quarters loss of nearly a quarter. Again look for Micron to either meet or beat expectations but also look to the forward-looking-statements for signs of strengthening demand or outlook. Resistance is at $13, first support at $12 with additional levels in the $10.75-$11.50 region.

Micron

The Technology Sector Spyder is showing a strong set up for a stochastic buy signal on the daily charts. This ETF includes both all four of the listed stocks reporting earnings next week. The signal is not quite there yet but next week could trigger the move. The ETF is sitting on support, support is supported by indicators and this coincides with my bullish analysis of the market. There is resistance ahead for technology though, just like the broader market. The $32.50-$32.50 area will need to be breached to maintain a longer term bullish outlook on the sector. A failure here will put the ETF in danger of reversal.

Technology Spyder

There is also a strong retail presence among the early earnings release's. Kroger, Pier 1, Carmax and Rite Aid make a broad cross-section of the retail sector. You've got food, housewares, autos and everyday necessities. The retail sector as portrayed by the XRK Retail Spyder has been in a consolidation band for the last month. The ETF is now sitting at the lower end of that band and just above the 30 day EMA. This level looks good for support and has the weight of the indicators behind it as well. This sector looks good to move higher and at least retest resistance around $80. A break above is bullish and could carry the ETF as high as $90.

Retail Spyder

The End Of The Day

At the end of the day my trend line bounce theory for the S&P looks pretty good. But it all hinges on the FOMC, the economic data and earnings. I could be completely wrong which is always possible. The trifecta will come to a full boil next week and could alter the course of the markets. However, at this time there is really no reason for the Fed to stop QE, unless they see some danger to the economy. The unemployment rate, though down, is far from the target level and so is inflation. Until either one of those change tapering is only a debate and not an action about to happen. Of course, the Fed could change it's mind about the health of the economy and the need for QE. This could result in a new plan altogether but if this is the case I also expect a really good heads-up from Bernanke and the crew.

There are signs of continuation in the market everywhere. Every chart I follow is on the verge of showing a strong signal. As of now only weak signals are present with the chance of heavy resistance also present. Next week is going to be a big one I think. The FOMC decision and statements will be the center of attention. Just how the market will react is a mystery but signs are pointing up for now. A break above 1675 is really needed for a long term bullish view.

Until then, remember the trend!

Thomas Hughes


New Option Plays

Showing Relative Strength

by James Brown

Click here to email James Brown

Editor's Note:

In addition to tonight's new candidate(s), consider these stocks as possible trading ideas and watch list candidates. Some of these stocks may need to see a break past key support or resistance:

(bullish ideas) MDSO, D, PPG, PXD, RKT, KSU, MLM, TRW, ACT, VRX, WAT, GPOR, SBUX, FEIC, TRIP

(bearish ideas) PANW,



NEW DIRECTIONAL CALL PLAYS

Toyota Motor Co. - TM - close: 121.30 change: +2.17

Stop Loss: 118.25
Target(s): 130.00
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
The Japanese NIKKEI index plunged another -6.3% today and officially hit a new bear market, closing at ten-week lows. Part of the sell-off in Japanese markets is the big bounce in the yen. The Japanese currency was very oversold so a bounce is not that surprising. What is surprising is how shares of TM have somehow disconnected themselves from the carnage happening back home in Japan. Normally a rising yen would be bearish for a large exporter like TM since it makes their products more expensive.

About a week ago TM bounced near its long-term up trend of higher lows. Today was a good example of TM showing relative strength and ignoring the sell-off in Japan.

There is a risk that this is just a temporary bounce in TM and the new down trend in the NIKKEI and the rally in the yen will reassert their influence on shares of TM. Currently we're not seeing it in TM's stock.

Tonight we are suggesting a trigger to buy calls if TM can trade at $122.10 or higher. The stock does tend to gap open higher so we could see TM gap open above this level. If triggered our initial target is $130.00 while more aggressive traders may want to aim higher.

Trigger @ 122.10

- Suggested Positions -

Buy the Jul $125 call (TM1320G125) current ask $3.20

Annotated Chart:

Entry on June -- at $---.--
Average Daily Volume = 821 thousand
Listed on June 13, 2013



In Play Updates and Reviews

Another Bounce Off the 50-dma

by James Brown

Click here to email James Brown

Editor's Note:

The S&P 500 index delivered another bounce off its simple 50-dma. The broader market experienced a widespread rally.

We are removing AEGR as a candidate.
COST has been closed.
WDC has been stopped out.
We want to exit our CRR trade at the open tomorrow morning.


Current Portfolio:


CALL Play Updates

Colfax Corp. - CFX - close: 51.80 change: +0.81

Stop Loss: 49.45
Target(s): 55.00
Current Option Gain/Loss: - 3.2%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
06/13/13: CFX managed a +1.58% gain and closed just below short-term resistance at the $52.00 level. This is a new all-time high for the stock. Readers may want to start ratcheting up their stop loss.

- Suggested Positions -

long SEP $55 call (CFX1321i55) entry $1.55

Entry on June 10 at $51.05
Average Daily Volume = 1.29 million
Listed on June 04, 2013


Domino's Pizza - DPZ - close: 60.02 change: +0.59

Stop Loss: 57.75
Target(s): 64.75
Current Option Gain/Loss: - 9.3%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
06/13/13: Traders bought the dip in DPZ near its 20-dma, just as expected. Thanks to a narrow trading range yesterday, today's rally looks like a bullish engulfing candlestick reversal pattern. Today's high was $60.23. I would consider new positions on a rally past $60.30 again.

Earlier Comments:
I am suggesting that investors keep their position size small.

*Small Positions* - Suggested Positions -

Long Jul $60 call (DPZ1320G60) entry $2.15

Entry on June 04 at $60.30
Average Daily Volume = 733 thousand
Listed on May 30, 2013


DaVita Healthcare - DVA - close: 129.86 change: -0.15

Stop Loss: 124.75
Target(s): 134.00
Current Option Gain/Loss: +43.2%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
06/13/13: DVA has been outperforming the market these last few days so today shares took a day off. There was some profit taking this morning but traders bought the dip and DVA pared its losses. I am not suggesting new positions at this time.

Earlier Comments:
It is possible that the May highs near $131.25 could be overhead resistance but we're targeting a move to $134.00. FYI: The Point & Figure chart for DVA is bullish with a $141 target.

*small positions* - Suggested Positions -

Long Jul $135 call (DVA1320G135) entry $1.85

Entry on June 11 at $128.05
Average Daily Volume = 573 thousand
Listed on June 10, 2013


Monster Beverage - MNST - close: 62.00 change: +0.10

Stop Loss: 60.90
Target(s): 68.50
Current Option Gain/Loss: Unopened
Time Frame: 3 to 6 weeks
New Positions: Yes, see below

Comments:
06/13/13: Hmm... the stock market produced a very widespread rally and MNST does not participate. That's a bit worrisome. Shares merely continued to drift sideways in the $61.00-62.50 zone. For the moment I do not see any changes from my prior comments.

I do consider this a more aggressive, higher-risk trade since shares of MNST can be volatile. Tonight I am suggesting we use a trigger to launch small bullish positions at $62.65. If triggered our target is $68.50. FYI: The Point & Figure chart for MNST is bullish with a $76 target.

Trigger @ 62.65 *Small Positions*

- Suggested Positions -

Buy the Jul $65 call (MNST1320G65) current ask $1.60

Entry on June -- at $---.--
Average Daily Volume = 2.1 million
Listed on June 12, 2013


The Fresh Market, Inc. - TFM - close: 52.30 change: +0.10

Stop Loss: 49.75
Target(s): 54.75
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Comments:
06/13/13: The action in TFM today is also a little head scratching. Shares were initially weak this morning but managed a bounce back to just above breakeven for the day. The stock did not participate in the market's widespread rally, which is troubling. At the moment we are still on the sidelines and still waiting for a dip toward $50.00.

NOTE: I am adjusting our buy-the-dip trigger to $51.00 since the 10-dma has risen to $50.93.

Earlier Comments:
Chart readers will notice that traders have been buying the dips in TFM near its rising 10-dma. Technically the recent breakout past $50 and its 200-dma is also bullish. If this trend continues TFM could see more short covering. The most recent data listed short interest at 13.9% of the small 40 million share float.

I suspect we're going to see TFM retesting its 10-dma soon. If triggered we will try and limit our risk with a stop loss at $49.75. Our upside target is $54.75. FYI: The Point & Figure chart for TFM is bullish with a long-term $85 target.

Trigger @ 51.00

- Suggested Positions -

Buy the Jul $50 call (TFM1320G50)

06/13/13 adjust buy-the-dip trigger to $51.00 from $50.75

Entry on June -- at $---.--
Average Daily Volume = 741 thousand
Listed on June 11, 2013


Whirlpool Corp. - WHR - close: 127.82 change: +4.97

Stop Loss: 120.90
Target(s): 132.00
Current Option Gain/Loss: +41.4%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
06/13/13: It was a big day for WHR. Traders quickly bought the dip this morning and the stock surged to a +4.0% gain, outperforming the broader market. I am raising our stop loss up to $120.90.

- Suggested Positions -

Long Jul $125 call (WHR1320G125) entry $4.70

06/13/13 new stop loss @ 120.90
06/07/13 trade opened on gap higher at $123.49, trigger was 123.35

Entry on June 07 at $123.49
Average Daily Volume = 826 thousand
Listed on June 06, 2013


PUT Play Updates

CARBO Ceramics - CRR - close: 67.69 change: +1.80

Stop Loss: 70.05
Target(s): 62.00
Current Option Gain/Loss: -64.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
06/13/13: Oil stocks and related equities were showing relative strength today. Shares of CRR outperformed most of its peers with a +2.7% bounce. I am suggesting we throw in the towel and exit immediately. Close positions at the opening bell tomorrow morning. Unfortunately, our put option was cut in half today and has a bid of 45 cents.

Earlier Comments:
If triggered we do want to keep our position size small. The most recent data listed short interest at 33% of the very small 19.8 million share float. That does raise the risk of a short squeeze but the last squeeze attempt (May 20th) didn't last very long.

*small positions* - Suggested Positions -

Long Jun $65 PUT (CRR1322R65) entry $1.25

06/13/13 prepare to exit immediately tomorrow morning

Entry on May 31 at $67.65-
Average Daily Volume = 266 thousand
Listed on May 30, 2013


Discovery Communications - DISCA - close: 76.06 change: +2.49

Stop Loss: 76.55
Target(s): 68.50
Current Option Gain/Loss: -58.3%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
06/13/13: Bullish analyst comments on DISCA this morning fueled a big bounce in the stock. Shares rallied +3.3% and closed right on resistance near $76.00 and its 100-dma. If there is any follow through higher tomorrow we could see DISCA hit our stop loss at $76.55. I am not suggesting new positions.

Earlier Comments:
Our target is $68.50 but I will warn you that the $70.00 level could be round-number support and DISCA might bounce at $70.00. More conservative traders may want to exit near $70.00 instead.

- Suggested Positions -

Long Jul $70 PUT (DISCA1320S70) entry $1.20

06/11/13 triggered on gap down at $73.30. Trigger was $73.95

Entry on June 11 at $73.95
Average Daily Volume = 1.4 million
Listed on June 10, 2013


eBay Inc. - EBAY - close: 51.48 change: +0.73

Stop Loss: 52.05
Target(s): 45.50
Current Option Gain/Loss: Unopened
Time Frame: 3 to 6 weeks
New Positions: Yes, see below

Comments:
06/13/13: Shares of EBAY essentially kept pace with the bounce in the S&P 500 with both adding +1.4%. EBAY remains beneath both its 10-dma and the 200-dma. We are waiting for a breakdown.

I am suggesting a trigger to buy puts at $49.85. If triggered our target is $45.50. FYI: The Point & Figure chart for EBAY is bearish with a $44 target.

Trigger @ 49.85

- Suggested Positions -

Buy the Jul $50 PUT (EBAY1320s50)

Entry on June -- at $---.--
Average Daily Volume = 10.7 million
Listed on June 12, 2013


iShares Russell 2000 - IWM - close: 98.48 change: +1.72

Stop Loss: 100.65
Target(s): 93.50
Current Option Gain/Loss: -21.6%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
06/13/13: Warning! Our Russell 2000 small cap ETF trade is in trouble. The stock market's big bounce today has created a bullish engulfing candlestick reversal pattern on the IWM. More conservative traders may want to exit immediately. However, I will point out that normally these reversal patterns need to see confirmation and the IWM has not yet broken the three-week bearish trend of lower highs. Although it definitely looks poised to move higher tomorrow.

We have a stop loss at $100.65 but more conservative traders may want to tighten their stops closer to Monday's high (98.80) instead.

Our target is the rising 100-dma. Currently the 100-dma is at $93.36. We will temporarily set our exit target at $93.50.

*Small Positions* - Suggested Positions -

Long Jul $95 PUT (IWM1320S95) entry $1.80

06/13/13 conservative traders may want to exit ASAP. The IWM has produced what appears to be a bullish reversal pattern but it needs confirmation.

Entry on June 11 at $97.45
Average Daily Volume = 43 million
Listed on June 08, 2013


Susser Holdings - SUSS - close: 49.12 change: +1.79

Stop Loss: 49.25
Target(s): 45.25
Current Option Gain/Loss: -48.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
06/13/13: Ouch! Our put option has been cut in half with today's move. SUSS was so close to breaking down to new relative lows. Yet today's widespread market rebound has reversed the stock higher with a +3.7% gain. Readers may want to abandon ship immediately. The high today was $49.14 and if there is any follow through tomorrow we will likely see SUSS hit our stop loss at $49.25.

- Suggested Positions -

Long Jun $50 PUT (SUSS1322R50) entry $2.60

06/10/13 readers may want to exit early now
06/06/13 new stop loss @ 49.25
06/01/13 new stop loss @ 50.25

Entry on May 30 at $48.75
Average Daily Volume = 369 thousand
Listed on May 29 2013



Longer-Term Play Updates



Chicago Bridge & Iron - CBI - close: 58.61 change: +0.72

Stop Loss: 61.45
Target(s): 74.50
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 months
New Positions: Yes, see below

Comments:
06/13/13: CBI managed a bounce from its 50-dma but I am not convinced the correction is over. We will re-evaluate our entry point strategy this weekend.

Earlier Comments:
Last time we added CBI we successfully caught the bounce from mid April back toward its March highs. You can read the background details and bullish fundamentals for CBI in our original play description
here, since it still applies. Just scroll down to the "longer-term trades" section of the page.

I am suggesting a trigger to buy calls at $65.25. If triggered our long-term target is $74.50. NOTE: the broader market does look vulnerable to more selling. Thus traders may want to start this trade with small positions to limit risk. Even though CBI looks strong it is up six weeks in a row and could succumb to profit taking. More conservative traders may want to wait for shares of CBI to close above $65.25 and then launch bullish positions the next morning as an alternative entry point strategy.

Trigger @ 65.25 *Small Positions*

- Suggested Positions -

Buy the 2014 Jan $70 call (CBI1418A70)

Entry on June -- at $---.--
Average Daily Volume = 1.8 million
Listed on June 01, 2013


CLOSED BULLISH PLAYS

Aegerion Pharma. - AEGR - close: 69.47 change: -2.58

Stop Loss: 71.90
Target(s): 84.00
Current Option Gain/Loss: Unopened
Time Frame: 3 to 6 weeks
New Positions: Yes, see below

Comments:
06/13/13: The correction lower in shares of AEGR continues. Shares underperformed the market today with a -3.5% decline. The close below $70.00 is also bearish. Our trade has not opened yet. Tonight we are removing AEGR as a candidate. More aggressive traders may want to consider bearish trades instead.

Trade did not open.

06/13/13 removed from the newsletter

chart:

Entry on June -- at $---.--
Average Daily Volume = 980 thousand
Listed on June 08, 2013


Costco Wholesale - COST - close: 110.88 change: +1.48

Stop Loss: 108.80
Target(s): 118.50
Current Option Gain/Loss: - 54.1%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
06/13/13: Last night we decided to close our COST trade because the stock had been underperforming. Naturally COST produces a bullish reversal higher today. I'm not surprised by the bounce from its 50-dma but I am a little surprised that today's session has created a new bullish engulfing candlestick reversal pattern.

Our trade closed this morning when COST opened at $109.17. Readers may want to give COST another look if shares can breakout past $112.00.

*Small Positions* - Suggested Positions -

Jul $115 call (COST1320G115) entry $1.20 exit $0.55 (-54.1%)

06/13/13 early exit at the opening bell
06/12/13 prepare to exit tomorrow morning
06/07/13 triggered

chart:

Entry on June 07 at $111.50
Average Daily Volume = 2.0 million
Listed on June 06, 2013


Western Digital - WDC - close: 64.26 change: +0.35

Stop Loss: 63.35
Target(s): 66.00
Current Option Gain/Loss: +43.1%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
06/13/13: Traders bought the dip in WDC yet again today. Unfortunately, the intraday low this morning was just low enough to hit our new stop loss at $63.35. Our trade is closed.

Investors may want to keep WDC on their watch list for a correction lower and buy it on a pullback near support.

*small positions* - Suggested Positions -

Long Jun $60 call (WDC1322F60) entry $2.55 exit $3.65 (+43.1%)

06/13/13 stopped out
06/12/13 new stop loss @ 63.35, you may want to exit early now!
06/11/13 new stop loss @ 62.95
06/08/13 new stop loss @ 62.40, adjust target to $66.00
06/04/13 new stop loss @ 61.75
06/01/13 new stop loss @ 61.45, readers may want to exit now
05/29/13 more conservative traders may want to lock in gains now.
05/28/13 new stop loss @ 59.65

chart:

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