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Daily Newsletter, Saturday, 8/24/2013

Table of Contents

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

Market Wrap

Oversold Bounce

by Jim Brown

Click here to email Jim Brown

Depending on your market view last week was an oversold bounce or the beginning of a new move higher.

Market Statistics

Even with the Friday bounce the Dow still lost ground for the week. The S&P gained less than half a point. The Nasdaq was the big winner with a +55 point gain with very little help from the big caps other than the +7% gain in Microsoft on Friday.

The market rallied late in the week for several reasons. The economic numbers from China and Europe came in better than expected suggesting a global recovery may actually be in progress. The market rebounded from very oversold on Wednesday and the taper talk appeared to be changing from taper on to taper off for September.

Friday started off with a sharp decline in equities after the New Home Sales for July plunged from 497,000 to 394,000 and the lowest level since October. Analysts were expecting between 490,000 to 517,000. In addition to the sharp decline in July the June number was revised down from 497,000 to 455,000. April and May were also revised lower. The decline in sales pushed inventory levels from 4.3 months of supply to 5.2 months. The median price rose +7.3% over year ago levels BUT prices have declined -8% since April as mortgage rates rose.

Sales in the U.S. declined -13.4%. Sales in the West fell 16.1%, South -13.4%, Midwest -12.9% and Northeast -5.7%. New homes available for sale rose +4.3% to 171,000. Analysts tried to blame the slowdown on the weather with the South getting an average of 3.5 inches in July and 22% above average. However, that was only in the South and only in July. That excuse does not work for the other regions and the prior months.

The rising mortgage rates are quickly removing homes from the capability of borrowers to finance. Long term mortgage rates have risen from a low of 3.5% to 4.6% in 2013. The payment on the average $300,000 mortgage has risen by $200 a month. The Wells Fargo Housing Opportunity Index fell from 73.7% to 69.3% indicating the average borrower was seeing the price point decline on the maximum house he could afford. Rising rates push payments higher and qualification price points decline. This was the first time under 70% since 2008.

With 70% of jobs created in 2013 being part time the working class is seeing their incomes decline. Add in the higher gasoline prices, higher taxes and lower wages and the housing boom is fading fast. Ironically the number of people who claim they want to buy a house is near an all time high. However, wanting to buy is not the same thing as being able to buy. The number of first time home buyers declined to 29% in July, down -15% from July 2012 and well under the 40% average in a normal market.

Another major retailer moved from full-time to part-time employment for its workers last week. Forever 21, a fashion retailer with 500 stores, sent out a memo stating that the majority of full time positions would become part-time positions effective August 18th. All medical, dental and FSA benefit plans would be terminated as of August 31st. All employees will work a maximum work week that will not exceed 29.5 hours. Workers will no longer be able eligible for paid time off (vacations). Welcome to Obamacare.

UPS announced last week it was dropping spousal insurance coverage for 15,000 employees because it was too expensive under Obamacare according to the UPS announcement. Those spouses will now have to get insurance on their own at a cost of several hundred dollars a month.

The Census Bureau just reported that the average American household is earning 4.4% less now than they did at the end of the recession. In June the average household income was $52,098, down from $54,478 in June 2009 and $55,480 when the recession began. Positions downgraded to part-time, high unemployment and competition for jobs is pushing wages lower, youth unemployment at 25%, higher tax rates and higher healthcare costs. Telling these people the economy is recovering would probably produce an unwelcome reaction.

In the revised chart below note the plateau of home sales in the first half of 2013 and odds are good the July decline will be the first of many.


The economic calendar for next week is headlined by the GDP revision on Thursday. The estimates range from +0.7% to +2.0% with the consensus average at +1.0% growth compared to +1.67% in the initial release. In order for the Fed's growth targets for 2013 to be met the GDP would have to average +3.5% for Q3 and Q4. Given the number of revenue misses in Q2, guidance warnings for Q3 and now wholesale sales declines across the entire retail sector the odds of the Fed forecast coming true are zero. A sharp drop in the Q2 GDP could be another nail in the taper coffin.

As we move closer to the September FOMC meeting the comments from the various Fed heads will become more important ahead of the blackout period preceding the FOMC meeting. I added the speakers for this week to the calendar.

Economic Calendar

We heard last week from several of those Fed heads surrounding the Fed retreat at Jackson Hole.

San Francisco Fed President John Williams said "I am sticking with Bernanke and the decision to taper will be data dependent."

Atlanta Fed President Dennis Lockhart said, "I would be supportive of a taper in September as long as the data that comes in between now and then basically confirms the path we're on. I think the key question is do we have, even at this moderate pace of growth, a sustainable picture, something that is going to continue or is there some risk economy gets knocked off its feet?" Lockhart said he still expects stronger growth in the second half and into 2014 but noted there were no real signs of that to date. He also warned the debt ceiling battle in September could damage consumer confidence.

St Louis Fed President James Bullard said, "I would be cautious about tapering QE." And, "I don't think we have to be in any hurry. Inflation is running low and we have mixed data on the economy." Also, "We want to take our time and assess what's going on before we make a move. We can be very deliberate in our decision making." Bullard speaks twice next week.

The speaker on the list that did not make public comments last week was Jeffery Lacker. He is scheduled to speak on Thursday. When he last spoke he said the Fed must end its bond buying program quickly and the end of the program was "in sight." He said he hoped the quick exit from QE would force Congress to agree quickly on reducing debt. "We need a sustainable solution and the sooner the better." Don't hold your breath on that Jeffrey.

Clearly three of next week's speakers are data dependent and the data is worsening. That suggests the September taper is fading. Lacker is a hawk and has dissented at recent meetings so his stance is not new.

With the sharp drop in July new home sales and the downward revision in the prior three months the outlook for the housing sector as an economic boost took a sharp decline.

That coupled with the statements from Bullard, Lockhart and Williams seemed to take the taper off the table. The yield on the ten-year treasury plunged from the 2.92% high on Thursday to close at 2.81% on Friday.

Ten-Year Yield Chart

The dollar fell sharply and commodities surged higher on expectations for the taper decision to not only be pushed forward from the September FOMC meeting but possibly all the way to January if the data continued to deteriorate. Gold, silver, oil and equities all surged higher.

Silver gained +4.4% on Friday and closed over $24. It is very close to a major breakout over strong resistance at $24.50. This could produce major short covering if the economic outlook continues to push the taper talk into the future.


Gold prices gain +1.9% to close just below $1400 with major resistance at $1415-1420. Gold blasted through the 100-day average after two weeks of consolidation at that level. Oppenheimer's Chief Market Technician, Carter Worth, said Friday "if you are not long, get long gold and gold miners." The same would be true for silver since it is even nearer a breakout level.


While I am on the subject of the Fed I have a warning for you. What was one of the worst financial instruments that flourished during the housing boom? Give up? It was the adjustable rate mortgage or ARM. The ARM loans allowed buyers to qualify for a lot more house because their rates were artificially low for the first several years. Then the rates would float to the current rate, which could be significantly higher than the initial rate with mortgage payments rising hundreds of dollars or even a thousand or more in some cases. In the Great Recession unemployment and pay cuts made it impossible for many borrowers to avoid foreclosure as rising payments and falling values made them impossible to maintain. At least they had the option of foreclosure. I doubt anyone would disagree that ARM loans were a terrible instrument that led millions of borrowers and mortgage holders to lose billions.

Why did I bring this up today? I doubt there is anyone reading this that does not expect interest rates to move up sharply over the next several years. A reasonable person would want to load up on debt now at low rates rather than incur a loan today where they knew the rate would spike significantly over the next three years.

That is what a reasonable person would do. The U.S. Treasury apparently did not get the message. Currently the U.S. Treasury enjoys the cheapest interest rates the world has ever seen on its $17 trillion in debt thanks to the Fed's QE program. We all know the Fed is going to eventually halt that program and rates will go up.

With the U.S. debt at $17 trillion and growing the international demand for treasuries has been slowing. To combat this the Treasury is going to begin selling "Floating Rate Notes" in January. These are the equivalent of an ARM on the USA. The interest rate on the notes will float with the market. Before everyone starts heading for Washington with pitchforks and torches to throw the bums out there is a small saving grace to the program. Initially the floating rate notes will only be offered in short term securities. They are hoping the lure of potentially higher rates will attract enough international investors to continue funding our government at ever higher levels of debt. If that does not work they can offer longer term floating rate notes.

If the shorter term notes are not selling well enough and the Treasury Dept lengthens the maturity I see that as the beginning of the end. Once the bond market becomes hooked on the crack cocaine of higher floating rates why would they ever buy fixed rates again? As this process pushes rates higher the payments on our debt will grow and eventually become unsustainable. Homeowners can cancel their loans through bankruptcy and foreclosure. The U.S. government does not have those options. I believe we are walking on thin ice here and we are going to see some serious problems in the years ahead.

Along that same train of thought there are going to be some major terrorist attacks in the years ahead. We found out last week that the phone call that was intercepted between Nasser al-Wuhayshi, the head of Al Qaeda in the Arabian Peninsula (AQAP) and Al Qaeda leader Ayman al-Zawahri promised an attack that "would change the face of history" according to a statement made by Yemen's president on Friday. No details have been released but the closure of 22 U.S. embassies and consulates is proof the promise was believed.

Most Americans would never notice if another embassy in the Middle East or Northern Africa was attacked. That is a world away and nobody they know. However, the U.S. border patrol routinely arrests people crossing the Mexican border from places including Saudi Arabia, Pakistan, Yemen, Egypt, etc. They believe several hundred of these people have successfully infiltrated the USA. There was a report several weeks ago the Mexican drug cartels were being paid 50,000 euros each to smuggle in Hezbollah fighters to the USA.

We know Al Qaeda has been planning attacks on the U.S. ever since 9/11 and they want to do something bigger and better. New York Congressman Pete King has said it is common knowledge that Al Qaeda is infiltrating sleeper cells into the U.S. and has been for some time.

Obviously nobody knows what the big attack on America will be or when but we can be assured it is coming. How would 100 coordinated attacks on shopping malls or attacks on NFL stadiums full of fans change the way we live in the USA? How about 100 car bombs set off randomly in U.S. cities? More than 1,000 Iraqi's died as the result of car bombs in July. How would those headlines play out in the USA?

Osama may be dead but Al Qaeda is not. It is actually growing at the fastest rate on record. Just because nothing has happened in the U.S. since 9/11 does not mean the threat is over. While I doubt they will be able to bring down another building there is always the possibility of a nuclear bomb. Pakistan, not our friend and host to Osama Bin Laden, has more than 110 of them. They could easily spare one or two and not be missed.

Adjustable rate treasuries, $17 trillion in debt, trillion dollar annual deficits, declining purchases of U.S. debt by international buyers and a pack of terrorists infiltrating our borders in attempt to "change the face of history." What could possibly go wrong?

Back to the market. It was a summer Friday and volume was very low at 4.9 billion shares. More than 225 million of those shares came from Microsoft. CEO Steve Ballmer announced he was retiring within a year and investors celebrated with a +7% gain on seven times normal volume. Microsoft options traded five times normal volume with calls far outpacing puts.

Bullishness was extreme. One investor purchased 20,000 January 2015 $45 calls for 75 cents. ($1.5 million) Investors cheered the pending exit of Ballmer since the stock has gone down -37% since he assumed the CEO position in 2000. Investors believe anyone else could do a better job. In July Microsoft reported the biggest earnings miss in a decade and shares declined -11.4%.

To compare the job Ballmer did as CEO at Microsoft you only need to look at Elon Musk. Musk became CEO of PayPal in 2000 and the fledgling company began accepting payments for Ebay items. Now 13 years later Musk sold PayPal for billions and started Tesla and Space X, both highly successful businesses and Microsoft is still languishing as an old tech company. Which CEO would you rather have running your company?

Microsoft has $85 billion in cash and investments and numerous products that are not working. Some analysts believe Xbox would be a good spinoff and be free of the Microsoft culture. The company's Surface tablet is also struggling and their Smartphone product is not competitive.

When Apple announced the iPhone Ballmer proclaimed it would never be competitive and gain market share. Since then every new product Microsoft has announced for the mobile market has not been competitive. Over his CEO term we have seen the birth of Facebook, Google crush Microsoft in the search engine wars and the emergence of Twitter, Linkedin, Pandora, etc. Multiple Windows releases have crashed, no pun intended. Steve Jobs once said, "Nothing will change at Microsoft as long as Ballmer is running it."

From inception as a public company until Bill Gates turned the CEO job over to Ballmer a $1,000 investment would have returned $554,464. Since Ballmer has been CEO a $1,000 investment would have returned $875. (Numbers courtesy of Bloomberg)

Ballmer said he has been planning his exit since 2010 and has been sending the board potential CEO candidates for the last three months. The board has appointed a search committee that includes Bill Gates.


The retail sector just keeps getting pummeled by earnings reports. Teen retailer Aeropostale (ARO) saw shares decline -20% after reporting weaker than expected earnings. The company reported a loss of -34 cents and warned for the current quarter. Same store sales fell -15% and gross margins declined from 25.3% to 17.9%.


American Eagle (AEO) and Abercrombie & Fitch (ANF) both reported weak earnings and guidance earlier in the week. Shares of ANF declined -20% and AEO -9% for the week.

In addition to AEO, ARO and ANF there has been a long line of ugly retail reports including TGT, WMT, M and KSS to name a few. It is not just a teen retailer problem. It is a problem all across the entire retail sector.

The Wal-Mart CEO was interviewed on CNBC and he blamed the high unemployment, high taxes and high gasoline prices for the drop in consumer spending. Youth unemployment is more than 25% and they are spending their money on cheap t-shirts and smartphones rather than expensive offerings at Abercrombie. The CEO said the high gasoline prices worked as a $40 per paycheck undeclared tax on their average customer. That money comes right out of their discretionary spending and leaves less for items other than food. McDonalds and other fast food chains have been forced to expand their "dollar menu" items in order to compete for the shrinking fast food dollars.

Shrinking consumer spending is another reason the Fed will not taper in September. If you look at all the economic indicators the economy is not expanding. This is a muddle through economy on its way to the next recession. We can't build a successful economy when 70% of the new jobs are part time. Surely the Fed is aware of these facts.

Facebook (FB) finally closed above its $38 IPO price last week. Shares spiked +5% on Friday to close at $40.54 after the company announced Internet.org an initiative to bring the Internet to the 5 billion people in the world that do not have a connection. Facebook partners in Internet.org are Ericsson, Mediatek, Opera Software, Samsung, Nokia and Qualcomm.

FYI, Google already has an "Internet for all" project called Loon. The Loon project has a goal of bringing the Internet to rural, remote and impoverished areas using high-altitude balloons about 12-miles above the earth to beam signals at 3G speeds to the population below. They already successfully tested it with 30 balloons over New Zealand and the next test will be 300 balloons over New Zealand, Australia, Chile and Argentina. They also have the Google Fiber project, which launched in Kansas in 2012.


Moody's warned on Thursday it could cut the credit ratings of Goldman Sachs (GS), JP Morgan (JPM), Wells Fargo (WFC), Bank of America (BAC) and Citigroup (C). BAC and C are under review and could possibly be upgraded instead of cut if changes to their balance sheets outweighed the loss of a government guaranty. State Street (STT) and Bank of New York (BK) were already on notice of a pending downgrade. Moody's said recent regulations suggested the government would be less likely to bail them out if they got into trouble. Reforms under the Dodd-Frank Act ban the use of taxpayer money to save failing banks. If banks get into trouble the government is required to setup a "resolution authority" to liquidate the banks or break them up rather than save them. Bondholders would suffer the losses.

Last week saw the largest equity outflows in five years according to Bank of America Merrill Lynch. (BAML) The Dow declined to support at 14,880 and the S&P hit 1,640. The AAII investor sentiment survey saw bears rise to 42.9% from 28.2%. That level of pessimism has only been seen 29 times since 1950. That is a contrarian buy indicator. VIX call volume was five times put volume. Traders had finally bought into the "correction" scenario.

BAML warned on Friday that the market had more weakness ahead. They cited five factors suggesting the rebound would fail. They said NYSE volume remained lackluster during the decline. There was no capitulation day or 90% volume down day. The ARMS TRIN indicator remains complacent below the 2.0 level that would indicate fear. Lastly the 5-day put/call ratio was at complacency levels last seen in Sept 2012.

A funny thing happens once everyone begins to lean in the same direction. The boat capsizes. When bearishness abounds you can expect a rebound. The oversold markets seized on the "taper off" comments and weak housing and retail sales as evidence the Fed would not taper in September. The opposite of taper is continued QE and possibly for several more months. If the economics continue to decline it could be a long time before QE ends. Suddenly the taper bears were on the run and shorts were being covered.

Traders have such a short memory. Two days does not make a trend. The Dow declined -778 points from the August 2nd high and rebounded only +127 points in the last two days. That is hardly a resounding rally. It did return to the 15,000 level at the close on Friday but that level is now resistance instead of support.

The rebound was just an oversold bounce on low volume on expectations the taper was fading. The Fed wants the markets to be uncertain and there will probably be some Fedspeak next week to put the taper back on the calendar. Remember the Fed minutes said members did not want to give any more QE guidance because it might result in an "unwanted market reaction." Translated that meant the Fed was happy with all the uncertainty because it kept the markets in check. If we knew today what would happen at the September meeting the markets would be highly directional. Not knowing keeps them chopping around without a real direction.

The S&P will be totally dependent on Fedspeak next week. Earnings are over and all eyes are on the approaching FOMC meeting. Volume is going to be low because it is the last week of summer with a three-day weekend ahead.

The S&P declined to 1640 then rebounded to close at 1663, just -2 points from resistance at 1665. That was enough to get it back over the 50-day average at 1659 but just barely. The S&P failed to reach the 100-day on the decline so that rising 100-day and 1640 could coincide over the next several days. That would be some decent support but if we drop that far again I would expect a continued decline.

The S&P came very close to the 50% retracement level of the June rebound gains. The oversold rebound occurred at exactly the right spot.

S&P Chart

S&P Chart

On the Dow the 50 and 100-day averages will be resistance. The Dow closed at 15,010 and the 100-day is 15,122. The Dow decline was deeper than the S&P and Nasdaq. With the Dow only about +125 points above support we could see a return to that level on any material headline. Investors that missed the original dip now have a chance to sell into the rebound.

The headlines in September are too serious not to have a continued decline. Support at 14,880 is calling.

Dow Chart

Microsoft did the Nasdaq a favor on Friday. The +7% gain in MSFT powered the Nasdaq over strong resistance at 3650 and triggered short covering in tech stocks. The Nasdaq spike to 3657 put it within striking distance of the recent closing high at 3692. The Nasdaq is now the best performing index on a relative basis. It has strong support at 3600 that was tested continuously for five days without breaking.

Normally the Russell 2000 is the leader but the Nasdaq has sprinted out in front. If Microsoft continues to rally it would supply positive sentiment for tech stocks. With Apple's Sept 10th announcement (still not official) the expectations could power AAPL shares higher and the Nasdaq by association. Carl Icahn tried to pump up Apple shares on Thursday with a new tweet about a share buyback and lunch with Tim Cook but the Nasdaq was offline and the tweet was ineffective. Hello, SEC? Apple shares have been flat at $500 for the last eight-days. The closer we get to September the more upward pressure we will see.

Nasdaq Chart

The Russell 2000 rebounded from its 1013 low to close at 1038 but it is still well off its highs. The 1040 level is now resistance and the Russell is normally headline averse. Monday will be a key day. If the Russell can move over 1040 it could find some new life. If that level proves impossible to pass the bearish sentiment will return.

Russell 2000 Chart

U.S. is preparing for a strike on Syria according to reports out this weekend. Warships have been staged in the Mediterranean with more on the way. Analysts believe a cruise missile attack is in the works since there would be no danger to American lives. The catalyst was the attack with nerve gas that killed hundreds outside Damascus. This will ratchet up antagonism against the U.S. and whatever allies join in the attack. It will also drive up oil prices. Syria, obviously knows it can't fight the U.S. Navy and Air Force and could strike back by attacking neighboring countries friendly to the USA. Oil facilities would be prime targets.

An attack on Syria is not without risks since Assad is strongly supported by Russia and Iran. Russia has already warned the U.S. about intervening. This could lead to a bigger problem. Putin has no respect for Obama and could see this as an opportunity to elevate Russian stature.

The Fed is in tightening mode even though they deny it. Pushing the yield on the ten-year from 1.39% to 2.9% is tightening. They talked it up by producing uncertainty. Make no mistake, they are tightening and the market has not realized it yet.

Every recession since WWII has been preceded by a rate increase by the Fed. EVERY recession. Just because the Fed did not announce a rate hike does not mean they did not engineer this one.

We need to be cautious with long positions and keep our stops tight. Traders can remain bullish as long as they are aware of the risks and plan accordingly. Volume will be low and volatility may increase into month end. September is the real risk.

Enter passively and exit aggressively!

Jim Brown

Send Jim an email

"Don’t worry about catching tops or bottoms, that’s fools play. Keep the number of stocks you own to a controllable number. It’s hard to herd cats, and it’s hard to track a lot of securities."
Jesse Livermore


Index Wrap

A Possible Bottom

by Leigh Stevens

Click here to email Leigh Stevens
THE BOTTOM LINE:

As I wrote Thursday (8/22) in my Trader's Corner article "Assessing Bottom Possibilities", I saw good technical reasons for the major indexes having reached a tradable bottom. Among those reasons were rebounds from a key support trendline (SPX), the amount of 'retracement' of the prior advance and major indexes having hit oversold extremes.

Since this analysis was in some detail and was ahead of Friday's rally extension, this article may be of interest if not seen already.

Since there is almost always a Market bellwether, which is one index moving ahead of the others or leading the others to a small or large extent, I tend to focus on that 'leader' index when looking for a bottom; in this case the Nasdaq and to some degree the Russell 2000 were leading. When looking for a top it's sometimes the case to look for the weaker/weakest index; in the case of the recent top, we could look to the Dow 30's (INDU) rounding top formation and the Head and Shoulder's top formation in the S&P 500 (SPX) and 100 (OEX). Both these patterns were seen in especially good detail on hourly charts.

Back to the lead example of the Nasdaq and taking a look at the Nas 100 (NDX) which offers active options of course. And speaking of HOURLY charts, I lead off with the NDX hourly chart.

Firstly, NDX made a distinct double top in the 3145 area', along with a 'failure' of relative strength on the subsequent second top; i.e., highlighted as a bearish price/RSI divergence. Given these NDX chart/indicator aspects, I suppose I stand corrected in saying that we could ONLY see a potential top forming in the S&P and Dow. Better to say that we could 'BEST' see a top forming further ahead of the downside price gap that occurred in NDX. But, I'm focused on how the limited nature of the tech pullback could be assessed.

NDX only fell a short way back into its prior support zone as seen on the chart. A line of support the was traced out in the 3070 area. This was followed by a decisive upside penetration of previous resistance at 3100. Or, at least an INITIAL upside move above that area of congestion. There were other signs of a bottom that came on the daily charts, which you'll see further along on the various daily charts I present.

I think a significant bottom is in place. This is not to say that there won't be either some backing and filling OR a re-test of the prior lows, etc. However, very often in a bull market bottoms are made suddenly and you don't get much of a second chance to adopt bullish strategies (and exit bearish ones). This is unlike the dynamic we often see at tops whereby double tops are not uncommon, top patterns get traced out such as a Head & Shoulder's, rounding formation, etc.

MAJOR STOCK INDEX TECHNICAL COMMENTARIES

S&P 500 (SPX); DAILY CHART:

The S&P 500 (SPX) chart shows a rebound occurring just where it 'should' so to speak in terms of the bounce from support implied by SPX's internal up trendline. I usually feel I need to mention the nature of a so-called internal trendline as one connecting the MOST number of lows or highs (thank you Jack Schwager). Even someone who uses charts a bunch might get confused when they see a trendline cut through one of more lows in the case of an up trendline; or cut through one or more highs in the case of a down trendline. Such a 'best fit' trendline might seem too subjective or in the eyes of the beholder only.

Anyway, SPX rebounded from support implied by what I consider to be the optimal best-fit (internal) up trendline. Moreover, SPX only retraced a bit less than half/50% of its prior advance. In a moderately bullish trend (not a super-strong advance), as stock or stock index will 'normally' not retrace more than about half of its prior move. In a weaker trend (e.g., the Dow), a retracement can extend to a Fibonacci 62% retracement or a little bit more; most often I find around 66% of the prior move.

Chart wise, a bottom formation looks to be in place. The move back about SPX's 50-day moving average is a bullish plus. As far as moving averages next up is what happens at resistance implied by the 21-day average, implying resistance in the 1680 area. Resistance is then seen at the prior high just over 1700.

Support is at 1640, extending to below the bullish up trendline to the 1620 area.

Trader sentiment as plotted above (my daily call-put volume ratio line) is more or less neutral, or at least not an extremely bullish outlook. Extremes in bullishness get me a little nervous as I'd rather see my call/put readings not getting above the 'overbought' line or not consistently. Pullbacks tend to keep traders from getting overboard in bubble like patterns.

The 13-day RSI got to a 'fully' oversold extreme at the recent low and that's quite bullish for a bottom.

The SPX September 1660 calls finished Friday bid at 26.50, offered at 28.70, versus a last trade the week prior at 28.50. No real gain in calls with a recently lower VIX (CBOE Volatility Index). The Sept 1660 puts last traded on the week at 28.10 -3.70 from a week ago Friday. I favor shorting puts as a way to play a likely bottom given the fat premiums that can erode if there has been an upside reversal from a prior sharp bear downswing.

S&P 100 (OEX) INDEX; DAILY CHART

The S&P 100 (OEX) chart is bullish for the same reasons as described above with the S&P 500. If your game is the OEX, please also read the above commentary on SPX. Only the price levels (support and resistance) are different of course. The Dow is a different story as its technical picture is its own more unique formation and story.

As with SPX, OEX looks to have made a bottom. Enough so that I would at least exit bearish strategies. *CORRECTION* from Saturday: OEX hasn't yet penetrated its 50-day moving average, which does NOT yet fit the pattern of big brother SPX. I'd watch the 50-day average (744) to see if OEX backs off from there or goes through this line easily. Resistance implied by the prior downside price gap as well as the 21-day average is seen in the 753 area; resistance extends to the 760 area. The prior intraday top at 765 should be noted as well.

Last but not least, OEX, which is not always the case, ALSO (along with SPX) got to what I consider to be a 'fully' oversold extreme in terms of the Relative Strength Index (RSI), which bodes well for an oversold bottom having formed.

Trendline support is highlighted in the 736 area; next pivotal support comes in around 720 in OEX.

The OEX September 745 calls were last on Friday at 9.0, +.90 from Thursday. The Sept 745 puts traded at week's end at 12.10, -1.40 on the day. Per my SPX comments, I like the odds in shorting puts at likely bottoms. Of course you have to be accurate in assessing trend reversals. 12 would be a nice chunk of premium to capture if OEX finishes at or above 745 by September 20th.

THE DOW 30 (INDU) AVERAGE; DAILY CHART:

The Dow 30 (INDU) has made more of a 'faltering', less obvious (so to speak) bottom in that it pierced its well-defined up trendline. However, INDU didn't fall below the important 2/3rds-66% retracement of its prior advance. Its up trendline is still of chart significance as this line tends to 'become' a resistance on the way back up. For this reason, I've noted initial technical resistance at 15150, per the intersection of the previously broken support (trendline). Next key resistance comes in around 15400, which was also prior support.

Near support is seen at 14900. Next support then looks to come in around 14700.

Key Dow stocks that contributed to the sell off in the 30 stokc Dow Average were CSCO, DIS, HD, IBM, JNJ, MCD, UTX, WMT and XOM. Of these all but JNJ, MCD, WMT and XOM have stabilized. Prior dog of the Dow HPQ has taken another bearish tumble. MSFT has rebounded, hoping for a savior CEO with new vision. A mixed bag but INDU could start to do better.

The Dow Index (DJX) September 151 calls last traded at week's end at 1.20, -.80 from the prior week. The DJX Sept 151 puts traded at 2.50, unchanged from the week but down -.59 on the day. The largest DJX call Open Interest (OI) remains in the Sept 153 calls (last at .44) and the 153 puts (bid at 3.60, offered 3.75). DJX is not index I want to trade as the trend seems most unclear and unclear as to how soon it could have upside follow through.

NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:

The Nasdaq Composite (COMP) Index chart looks to have regained its bullish footing given that COMP found support in the 3600-3585 area and then has had a strong rebound from there. Also bullish is the fact that COMP gave back so little of its prior advance in that the Index only retraced approximately 25% of its prior advance; this is a 'minimal' retracement. Normally, if I can say there's a 'normal' in the market, a limited retracement will be not more than a Fibonacci 38% of a prior move.

The move in COMP to back above its 21-day moving average also bodes well in thinking tech stocks will start to see some more upside ahead. Pivotal resistance is suggested at 3700, then in the 3737-3750 zone. Some view tech stocks as fundamentally overvalued or at least already 'fairly' valued. All I can say is that the recent correction didn't do much to derail the current strong bullish chart. Prices are not far under the upper end of its broad uptrend channel and I wonder how long COMP can continue to keep on this much upside momentum going but the Index isn't back up at its upper channel line again either. If it gets there and falters again, I'll reassess.

Technical support is highlighted in the 3600 area, then at 3550. A couple of closes below the 50-day moving average would suggest that the bloom had worn off the tech rose.

NASDAQ 100 (NDX); DAILY CHART:

The Nasdaq 100 (NDX) chart has regained bullish upside momentum. When NDX found support in the 3070 area, it was holding above its prior line of technical support and well above the important, and widely followed, 50-day moving average. NDX, like the more inclusive COMP, had a minimal retracement of its prior advance. That it quickly regained buying interest suggests that tech is still on a strong bullish track. With money coming back from previously hot foreign markets (think India, Brazil, Turkey, etc.) there's plenty of money looking for above-average gains.

Fairly major support comes in around 3000 and that's still significantly above strong technical support implied by its up trendline, currently intersecting in the 2950 area.

I wrote last time that I'd have interest in buying calls on a pullback to the 3050 area, risking to a Close below 3000. I was being conservative but that's ok with this index. It can rip either way but for now looks like its back into a renewed up leg, with next resistance in the 3150 area, with resistance extending to 3185-3200.

The NDX out of the money September 3065 puts last traded Friday at 26.22, -9.38 (bid at 24.9, offered 26.40). A lot of premium in those things and not for the faint of heart to be short them. Still, long-term weekly charts (not shown) for NDX look bullish, especially if the Index achieves a decisive upside penetration of 3150.

NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:

The Nasdaq 100 (QQQ) chart picture is technically the same as NDX and there's not more to say about the Q's regaining bullish momentum. Of course, as usual, the bearish break caused some hectic selling, but it was short-lived. I don't fault traders to exit as QQQ had already had such a strong run up. Many, with good reason, fear overstaying in the next 'bubble'. Amen.

Where to from here? There's potential resistance in the 77 are, then at 78. QQQ could go to 80. It's a nice big fat round number. Longer term charts suggest this stock could reach 83 or higher.

Near support is seen in the 75.3 area, with support extending to 74.5-74. At 73.6, QQQ would fill in its prior upside price gap. Gap areas below current levels tend to 'act as' support.

I don't look for spikes in daily trading volume on rallies like this but I do watch that the On Balance Volume (OBV) line continues to trend higher in order to match bullish price action.

The QQQ September 75 calls last traded on Friday at 1.78, +.30. The September 75 puts traded at .09 at week's end, -.12. These puts went out around 1.40 the prior week as I recall. Nice short for a few days 'work'!

The QQQ 76 strike in puts currently has the largest Open Interest versus the 77 strike in calls.

RUSSELL 2000 (RUT); DAILY CHART:

The Russell 2000 (RUT) has made a nice recovery from support in the 1020 area and is now approaching technical resistance just over 1040. Next key resistance is then highlighted in the 1060 area.

Support is expected on any pullback to 1020, with technical/chart support extending to just over 1000, at RUT's up trendline.

It doesn't often happen that the Russell gets to what I consider to be a 'fully' oversold reading around 35 in the Relative Strength Index/RSI, but that was seen at the recent low. This indicator consideration suggests that a significant bottom has been made. You can see the corresponding price development when RSI gets at or near the lower 'oversold' RSI line with the consistent tendency for a renewed advance. Such supposed fail-safe patterns are 'made' to be broken eventually but it hasn't been seen yet in the current trend.

The RUT September 1025 puts were last traded at 13.79 on Friday, -3.20, versus trade at the end of the prior week at 21.40. Nice to be short puts at an apparent bottom which I think occurred this past week in the 1020 area. Of course, it's some ways yet to Sept. 20th expiration. I suppose one wild card is that the Government gets shut down! Yes, that would be wild as in wild and crazy!!



GOOD TRADING SUCCESS!


New Option Plays

Deliveries, Reservations, and Burgers

by James Brown

Click here to email James Brown


NEW DIRECTIONAL CALL PLAYS

FedEx Corp. - FDX - close: 110.69 change: +0.08

Stop Loss: 108.99
Target(s): 118.00
Current Option Gain/Loss: Unopened
Time Frame: exit PRIOR to earnings on Sep. 18th
New Positions: Yes, see below

Company Description

Why We Like It:
FDX is part of the Dow Jones transportation average and the stock is outperforming most of its peers. Shares have just spent the last three weeks consolidating sideways in the $107.50-110.00 zone and the Thursday-Friday rally has produced a bullish breakout to new multi-year highs. The next level of significant resistance could be FDX's all-time highs near $120 set back in the 2006-2007 time frame.

More aggressive traders could buy calls now. Friday's high was $110.89. I am suggesting a trigger to buy calls at $111.00. If triggered our multi-week target is $118.00. However, we will plan to exit prior to FDX's earnings report on September 18th.

Trigger @ 111.00

- Suggested Positions -

Buy the Oct $115 call (FDX1319j115) current ask $2.35

Annotated Chart:

Entry on August -- at $---.--
Average Daily Volume = 1.9 million
Listed on August 24, 2013


OpenTable, Inc. - OPEN - close: 74.63 change: +0.38

Stop Loss: 73.45
Target(s): 79.75
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
OPEN manages an electronic restaurant reservation book where consumers can book reservations online or through their mobile apps. Shares of OPEN surged in mid August on headlines that Facebook (FB) is planning to make its mobile pages more functional by including the ability to use OpenTable's reservation system (source: Techcrunch.com). The reaction pushed OPEN to new multi-year highs. Since then traders have been buying the dips near its rising 10-dma. Now OPEN is poised to breakout past the $75.00 level.

If this rally continues OPEN could see a short squeeze, or at least additional short covering. The most recent data listed short interest at 22% of the small 22.4 million share float. I am suggesting a trigger to buy calls at $75.25. If triggered our short-term target is $79.75. More aggressive traders may want to aim a lot higher. The Point & Figure chart for OPEN is bullish with a $103 target.

Trigger @ 75.25

- Suggested Positions -

buy the Oct $80 call (OPEN1319j80) current ask $2.30

Annotated Chart:

Entry on August -- at $---.--
Average Daily Volume = 900 thousand
Listed on August 24, 2013


NEW DIRECTIONAL PUT PLAYS

McDonald's Corp. - MCD - close: 95.13 change: -0.33

Stop Loss: 96.05
Target(s): 90.50
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
MCD is clearly not participating in the market's recent bounce. After a two-week drop in mid August, shares of MCD just spent the last week consolidating sideways in the $95-96 zone and below its simple 200-dma. Wall Street is worried about the consumer. The carnage in the retail stocks has been pretty widespread. Dread over a slowing consumer is also hitting some of the restaurant stocks. It looks like MCD is on the list.

Shares are sitting on support near $95.00. Friday's intraday low was $94.91. I am suggesting a trigger to buy puts at $94.75. If triggered our target is $90.50.

Trigger @ 94.75

- Suggested Positions -

buy the Sep $92.50 PUT (MCD1321u92.5) current ask $0.65

Annotated Chart:

Entry on August -- at $---.--
Average Daily Volume = 4.8 million
Listed on August 24, 2013



In Play Updates and Reviews

Back Above the 50-dma

by James Brown

Click here to email James Brown

Editor's Note:

The market's bounce continued on Friday and the S&P 500 index is now back above the simple 50-dma.

DLR has been stopped out. HBI has been removed.


Current Portfolio:


CALL Play Updates

Alliant Techsystems - ATK - close: 100.62 change: +0.59

Stop Loss: 97.90
Target(s): 108.00
Current Option Gain/Loss: Unopened
Time Frame: 6 to 9 weeks
New Positions: Yes, see below

Comments:
08/24/13: ATK ended the week with a gain. The stock appears to be coiling for a bullish breakout higher. The intraday high on Friday was $101.08.

We are suggesting a trigger to buy calls at $101.25. If triggered our target is $108.00. The option spreads on ATK are a little bit wide therefore I am suggesting we use small positions to limit our risk.

Trigger @ 101.25 *small positions*

- Suggested Positions -

buy the Nov $105 call (ATK1316k105) current ask $3.20

chart:

Entry on August -- at $---.--
Average Daily Volume = 462 thousand
Listed on August 20, 2013


Buffalo Wild Wings Inc. - BWLD - close: 108.41 change: -1.14

Stop Loss: 106.25
Target(s): 118.50
Current Option Gain/Loss: Unopened
Time Frame: 3 to 6 weeks
New Positions: Yes, see below

Comments:
08/24/13: BWLD underperformed on Friday. I couldn't find any headlines to explain the sudden drop to $107.00 on Friday morning. Traders did buy the dip and BWLD still looks poised for a breakout past resistance near $110.00. I am raising the suggested stop loss to $106.75.

We are suggesting a trigger to buy calls at $110.25. If triggered our target is $118.50. The Point & Figure chart for BWLD is bullish with a $121 target.

Trigger @ 110.25

- Suggested Positions -

buy the Oct $115 call (BWLD1319j115)

08/24/13 new stop loss @ 106.75

chart:

Entry on August -- at $---.--
Average Daily Volume = 425 thousand
Listed on August 22, 2013


Lumber Liquidators - LL - close: 99.53 change: -3.15

Stop Loss: 98.25
Target(s): 108.00
Current Option Gain/Loss: -27.2%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
08/24/13: Warning! LL produced a bearish engulfing candlestick reversal pattern on Friday. I could not find any news to explain the -3.0% sell-off. It's possible it was a reaction to the disappointing home sales number but LOW and HD didn't see a very big reaction. The low on Friday was $98.25. If there is any follow through lower we could see LL hit our stop at $98.25 soon.

Earlier Comments:
A breakout past the $100 level could spark some short covering. The most recent data listed short interest at 25% of the small 26.2 million share float.

Our target is $108.00. More conservative traders may want to exit near $105.00 instead.

- Suggested Positions -

Long Sep $105 call (LL1321i105) entry $2.20

08/24/13 warning! LL has produced a one-day bearish reversal pattern on Friday
08/22/13 new stop loss @ 98.25

chart:

Entry on August 21 at $100.25
Average Daily Volume = 611 thousand
Listed on August 20, 2013


Shire plc - SHPG - close: 113.59 change: -0.40

Stop Loss: 111.75
Target(s): 118.50
Current Option Gain/Loss: + 1.9%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
08/24/13: SHPG gapped down on Friday morning but the stock found support near $113 again. More conservative traders may want to raise their stops again. I am not suggesting new positions.

Earlier Comments:
The plan was to keep our position size small to limit risk.

*small positions* - Suggested Positions -

Long Sep $115 call (SHPG1321i115) entry $2.60

08/22/13 new stop loss @ 111.75
08/10/13 new stop loss @ 109.40

chart:

Entry on August 02 at $111.50
Average Daily Volume = 347 thousand
Listed on August 01, 2013


SINA Corp. - SINA - close: 82.19 change: +0.66

Stop Loss: 78.60
Target(s): 89.00
Current Option Gain/Loss: - 7.6%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
08/24/13: SINA managed a +0.8% gain on Friday but most of the move was sideways. Nimble traders might want to consider buying dips in the $81-80 zone. We are raising our stop loss up to $78.60.

- Suggested Positions -

Long Sep $85 call (SINA1321i85) entry $2.75

08/24/13 new stop loss @ 78.60
08/21/13 adjust stop loss from $77.70 to $77.49

chart:

Entry on August 19 at $81.35
Average Daily Volume = 2.9 million
Listed on August 17, 2013


PUT Play Updates

Apache Corp. - APA - close: 79.80 change: +0.81

Stop Loss: 80.55
Target(s): 71.00
Current Option Gain/Loss: -21.2%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
08/24/13: The combination of a bounce in oil prices, a widespread bounce in stocks, and what appears to be a slowdown for violence in Egypt has helped shares of APA produce a dramatic bounce over the last four days.

APA has recovered almost $5.00 of its $8.50 decline from its mid August highs. Friday's close above its simple 200-dma is technically bearish. Yet at the same time APA still has round-number, price resistance at the $80.00 mark.

More conservative traders may want to abandon ship immediately. I am suggesting we hold on and see if APA actually rallies through resistance at $80.00. Currently our stop loss is at $80.55.

- Suggested Positions -

Long Oct $75 PUT (APA1319v75) entry $1.60

08/24/13 More conservative traders may want to exit given the dramatic reversal higher in APA these last four days.
08/19/13 trade opened on gap down at $78.42. Trigger was $78.75

chart:

Entry on August 19 at $78.42
Average Daily Volume = 2.6 million
Listed on August 17, 2013


Boeing Company - BA - close: 105.48 change: +0.34

Stop Loss: 105.55
Target(s): 100.25
Current Option Gain/Loss: -60.0%
Time Frame: 1 to 2 weeks
New Positions: see below

Comments:
08/24/13: BA garnered some bullish analyst comments on Friday but shares underperformed the market with a +0.3% gain. The stock essentially churned sideways on Friday but BA is on the verge of breaking out past its bearish short-term trend of lower highs. Thus more conservative traders may want to exit early right now. I am not suggesting new positions. The high on Friday was $105.50. Our stop is at $105.55. (BA has stopped at $105.50 two days in a row).

- Suggested Positions -

Long Sep $100 PUT (BA1321u100) entry $1.75

08/24/13 BA looks like it's about to move higher. Readers may want to exit bearish positions now.
08/15/13 trade opened on gap down at $103.19. Trigger was $103.75

chart:

Entry on August 15 at $103.19
Average Daily Volume = 4.6 million
Listed on August 14, 2013


eBay Inc. - EBAY - close: 51.65 change: +0.57

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:
08/24/13: It was a down week for EBAY but shares did follow the market higher on Friday with a +1.1% bounce. Overall EBAY still looks poised to move lower and we're waiting for a breakdown.

Earlier Comments:
EBAY is nearing major support near $50.00. I am suggesting a trigger to buy puts at $49.90. More conservative traders may want to wait for a drop below the March 2013 low of $49.55 before initiating new put positions. If we are triggered at $49.90 our first target is $45.50.

Trigger @ 49.90

- Suggested Positions -

buy the Sep $50 PUT (EBAY1321u50)

- or -

buy the Oct $45 PUT (EBAY1319v45)

chart:

Entry on August -- at $---.--
Average Daily Volume = 8.6 million
Listed on August 21, 2013


iShares Russell 2000 ETF - IWM - close: 103.17 change: +0.26

Stop Loss: 105.25
Target(s): 98.50
Current Option Gain/Loss: -39.1%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
08/24/13: Small caps produced a decent oversold bounce over the last four days. The IWM has delivered a 50% retracement of its decline from the early August high. The rebound could stall here or the ETF could try and fill the gap with a move to $104.00.

We still think the IWM will see new relative lows before September option expiration. Just in case the market gets volatile we're adjusting the stop loss higher to $105.25. More conservative traders may want to leave their stop at $104.25 or even tighten theirs lower instead.

I am not suggesting new bearish positions at this time.

- Suggested Positions -

Long Sep $100 PUT (IWM1321u100) Entry $1.48

08/24/13 new stop loss @ 105.25
08/19/13 new stop loss @ 104.25
08/15/13 adjust exit target from $97.00 to $98.50
08/03/13 readers may want to consider an early exit

chart:

Entry on July 30 at $103.69
Average Daily Volume = 31 million
Listed on July 29, 2013


ManpowerGroup Inc. - MAN - close: 67.01 change: -0.07

Stop Loss: 67.05
Target(s): 61.00
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Comments:
08/24/13: MAN underperformed the market on Friday. Shares tried to bounce but failed near the 10 and 20-dma. If MAN does not see some follow through lower soon we'll drop it. Currently we're on the sidelines waiting for a new relative low.

We are suggesting a trigger to buy puts at $65.75. There is arguably potential short-term support at $65.00 but we are aiming for a drop to $61.00.

Trigger @ 65.75

- Suggested Positions -

buy the Sep $65 PUT (MAN1321u65)

chart:

Entry on August -- at $---.--
Average Daily Volume = 530 thousand
Listed on August 21, 2013


Time Warner Cable - TWC - close: 108.73 change: -0.23

Stop Loss: 111.60
Target(s): 105.00
Current Option Gain/Loss: -23.4%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
08/24/13: We need to be careful with our TWC trade. The stock's downward momentum is slowing. You could argue that TWC produced a very short-term bullish double bottom with the intraday lows on Wednesday and Friday. The $110 level should be overhead resistance but a normal retracement of the recent sell-off could mean a bounce back to the $111-112 zone. I am not suggesting new positions.

Earlier Comments:
We do want to keep our position size small. There is potential support at $108.00. The next level of support is $104.00. If we are triggered at $109.50, our target is $105.00.

- Suggested Positions -

Long Sep $105 PUT (TWC1321u105) entry $2.35

chart:

Entry on August 16 at $109.50
Average Daily Volume = 2.3 million
Listed on August 15, 2013



Longer-Term Play Updates



Chicago Bridge & Iron - CBI - close: 61.37 change: +0.12

Stop Loss: 55.75
Target(s): 74.50
Current Option Gain/Loss: - 7.8%
Time Frame: 4 to 6 months
New Positions: see below

Comments:
08/24/13: Without Friday's advance CBI would not have managed a gain for the week. The stock has been consolidating sideways in a neutral pattern of lower highs and higher lows for the last three months. As the consolidation narrows a breakout one way or the other becomes more imminent. Investors might want to consider buying calls when CBI closes above the trend line of lower highs (see chart).

*Small Positions* - Suggested Positions -

Long 2014 Jan $65 call (CBI1418A65) entry $2.55

07/20/13 new stop loss @ 55.75
06/29/13 CBI might be poised to dip into the $57-55 zone again.
06/24/13 triggered @ 56.75
06/22/13 adjust entry trigger to $56.75
06/15/13 entry strategy change: change the breakout trigger at $65.25 to a buy-the-dip trigger at $56.50. Adjust the stop loss to $53.75.
Adjust the option strike to the 2014 Jan. $65 call

chart:

Entry on June 24 at $56.75
Average Daily Volume = 1.8 million
Listed on June 01, 2013


Vanguard FTSE Europe ETF - VGK - close: 53.17 change: +0.27

Stop Loss: 51.25
Target(s): 58.50
Current Option Gain/Loss: Unopened
Time Frame: exit PRIOR to 2013 December option expiration
New Positions: Yes, see below

Comments:
08/24/13: Investor sentiment remains bullish for a rebound in Europe and the VGK has bounced off its Wednesday lows. The stock is once again trading near 52-week highs.

NOTE: I am adjusting our option strike from the 2013 December $55s to the 2014 March $55s.

Earlier Comments:
We are taking a multi-month time frame with this trade. I am suggesting we wait for the VGK to close above $53.50 and then buy calls the next morning. If we are triggered our target is $58.50 but we'll adjust it as the trade progresses.

FYI: The Point & Figure chart for VGK is bullish with a $63 target.

Trigger: Wait for a close above $53.50,
then buy calls the next morning.

- Suggested Positions -

Buy the 2014 Mar $55 call (VGK1422L55) current ask $2.00

08/24/13 adjust the option strike from 2013 Dec $55 to $2014 Mar $55.

chart:

Entry on August -- at $---.--
Average Daily Volume = 3.0 million
Listed on August 10, 2013


CLOSED BEARISH PLAYS

Digital Realty Trust - DLR - close: 53.30 change: +0.72

Stop Loss: 54.25
Target(s): 50.25
Current Option Gain/Loss: -42.8%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
08/24/13: A drop in ten-year treasury yields inspired some bargain hunters to buy the beaten down REIT names. The oversold bounce in DLR accelerated on Friday with a +2.6% gain. The stock hit our stop loss at $54.25 as it broke through resistance near $54.00.

- Suggested Positions -

Sep $50 PUT (DLR1321u50) entry $1.05 exit $0.60* (-42.8%)

08/23/13 stopped out
*option exit price is an estimate since the option did not trade at the time our play was closed.
08/19/13 new stop loss @ 54.25

chart:

Entry on August 14 at $53.75
Average Daily Volume = 1.8 million
Listed on August 13, 2013


Hanesbrands Inc. - HBI - close: 61.09 change: -0.03

Stop Loss: 60.60
Target(s): 55.25
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
08/24/13: HBI is not cooperating. Shares produced a big bounce on Wednesday and now HBI looks poised to break the bearish trend of lower highs. Our trade has not opened yet so we're removing HBI as a candidate.

Trade did not open.

08/24/13 removed from the newsletter, un-hit trigger was $58.95

chart:

Entry on August -- at $---.--
Average Daily Volume = 1.1 million
Listed on August 20, 2013