Option Investor
Newsletter

Daily Newsletter, Wednesday, 9/11/2013

Table of Contents

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

Market Wrap

Relief Rally Continues

by Keene Little

Click here to email Keene Little
Further easing of geopolitical tensions helped the stock market extend its rally, giving SPX its 6th positive day in a row. Too bad AAPL spoiled the day for the techs though.

Market Stats

It's been a quiet week for economic reports and that's been good for the market. No sense being distracted by such things. Instead the market has been able to rejoice in what appears to be a peaceful outcome to the situation in Syria that had many worried about military action and what kind of retaliation we might see. It's a new world and military power is not the only weapon of choice any more. Cyber warfare has leveled the playing field somewhat. With some rejoicing of economic stagnation (to keep the Fed from tapering too much) and geopolitical solutions we've had a nice rally off the August 28th lows.

The rally has been good to the techs, which have risen to new annual highs but AAPL spoiled the party today. It gapped down this morning and dragged the tech indexes with it. But while AAPL stayed down there was buying in the rest of the techs and that brought the indexes almost back up to even for the day. But they and the RUT closed marginally in the red while the blue chips did better, especially the DOW thanks to a strong rally in IBM. It's amazing what just one stock can do to the indexes. The DOW had some catching up to do after hanging back last week and the strong 3-day rally this week has it all caught up. Now it's up against resistance like the other indexes and it's do-or-die time for the bulls.

AAPL's decline was a result of investors being disappointed with their latest iPhone offerings. Carl Icahn's "I bought AAPL" rally on August 13th was given up today with its big gap down. Icahn wasted no time trying to protect his investment by coming out today saying he bought more stock since it's a "no brainer." It didn't help the stock as it finished down -27 (-5.4%) at 468 and near its low of the day at 464.81.

On the other end, IBM gapped up after a deal was announced with Synnex (SNX) buying IBM's customer care business. The rally in IBM helped the DOW easily outperform the other indexes. IBM and SNX also signed a multi-year agreement that has SNX becoming IBM's strategic business partner. It was also very good for SNX stock today.

But as I'll review with the rest of the charts and the rally to resistance, IBM's rally has taken it up the bottom of its broken up-channel from July 2012. A failure to continue higher and a rollover instead will leave a bearish back test and kiss goodbye. The bulls and bears each know what they have to do here and we should find out soon who will win.

International Business Machines, IBM, Weekly chart

The DOW has had a strong 3-day rally this week and made up for lost time last week. While the other indexes were giving us high retracements of the August decline, if not new highs (the techs), the DOW was struggling to make it up to just a 38% retracement of its August decline. Today it came within 10 points of tagging its 62% retracement at 15315. Perhaps more importantly for what happens next, the DOW also back tested its broken uptrend line from November-June today, giving the bears a very nice reversal setup (just waiting for the slap and kiss goodbye). The sharp impulsive pattern of the August decline, followed by a choppy bounce back up, gives us a setup to be looking for at least one more leg down and today's setup could be the reversal that's waiting to happen.

Dow Industrials, INDU, Weekly chart

The DOW has made a habit in the past of nudging up underneath its broken uptrend lines and could do so again here. Only in hindsight will we know if today's back test will be followed by an immediate reversal but this is the kind of setup for a short play that traders should take every time -- it's a good reward:risk trade setup. As for a stop level, I see the potential for the DOW to push at least marginally higher to price-level S/R near 15340, which crosses its broken uptrend line tomorrow. A rally above 15350 would be more bullish and I would then abandon the short side since new highs into the end of the month would be the bullish potential.

Dow Industrials, INDU, Daily chart

Key Levels for DOW:
- bullish above 15,350
- bearish below 15,100

Today SPX was able to close its August 15th gap down, at 1685.40, and rally up to price-level resistance near 1687 (May's high and support in July and August). Thanks to a final little jam in the final 5 minutes of the trading day SPX picked up a quick 4 points and closed above its May high at 1687. That was either traders who had shorted today's rally and had to cover at the end of the day or it was purposely jammed higher to spike the shorts out. This is often what sets up an immediate reversal the next day so we'll see what happens. As with the DOW, this is a good setup for the bears to take advantage of but they need to step in now otherwise they might suffer yet another new high this month. It would be more bullish above 1692, which is the 78.6% retracement of the August decline, a retracement that has been common in this market and a good line in the sand for bears to respect.

S&P 500, SPX, Daily chart

Key Levels for SPX:
- bullish above 1692
- bearish below 1650

The bounce pattern off the August 28th low looks corrective and the sharp spike up from last Friday's low looks like the c-wave to complete the bounce pattern. Holding support at 1685 is bullish and it will be more bullish above 1692. But because high retracements have been so common in this market, which don't lead to new highs, it's a mistake to think that we're heading to new highs from here just because we have a high bounce. Let the market prove it from here since we should find out either way very quickly. I had recommended shorting the rally this afternoon because it's a good setup for a reversal and the stop can b e kept tight. It will either work tomorrow or it won't but it's definitely worth a try. Assuming this bounce is the 2nd wave correction in the decline from August, the next wave down will be very strong and it's the one bears want to ride.

S&P 500, SPX, 60-min chart

Tuesday's candle for NDX was a bearish dragonfly doji at resistance and today's gap down had it looking like a confirmed reversal. AAPL got hit with a lot of selling in the pre-market session and that had NDX gapping down. But that turned into a buying opportunity for some and NDX made it back up and almost closed this morning's gap, which reduced the bearish picture from a candlestick perspective. However, a red day on Thursday would confirm the reversal setup after NDX tagged its trend line along the highs from May-August, which is arguably the top of a rising wedge pattern to complete its rally pattern off the 2009 low. Better confirmation for the bears would be a drop back below price-level S/R at 3150, which it used for support could launch another rally leg.

Nasdaq-100, NDX, Daily chart

Key Levels for NDX:
- bullish above 3200
- bearish below 3150

As a comparison to NDX, the same pattern for the Nasdaq shows more upside potential to the top of its rising wedge pattern from April-May, currently near 3780, about another 60 points higher. It crosses the top of its parallel up-channel from October 2011 on October 2nd near 3820, which is also the 62% projection for the c-wave of an a-b-c move up from June. In fact it would be interesting if the high occurs on October 4th since that would be the 2-year anniversary of the October 4, 2011 low. This chart supports the idea that we'll see the market hold up into the end of this month and top out in October, just like it did in 2007.

Nasdaq Composite index, COMPQ, Daily chart

As already mentioned, hurting the techs today was AAPL, which gapped down about 20 points and then declined another 10 before getting a little afternoon bounce. Following AAPL's 5-wave move up from the end of June into its August 19th high, which completed an a-b-c bounce off the April low, AAPL was due at least a pullback from its August 19th high before proceeding higher. But if the a-b-c bounce from April is all it's going to get before continuing its decline, which is the way I think it's pointed, then the August high was a good shorting opportunity and yesterday's decline was the starting gun for the bears.

At the end of August AAPL had broken below its uptrend line from July 23rd and then rode up underneath the line into Monday's high. Tuesday's big red candle confirmed the bearish back test with a kiss goodbye, signaling the next leg down had begun. Today's big gap down was confirmation. It found support at its crossing 50- and 200-dma's, near 463, as well as its H&S neckline from May-November 2012, near 468, where it closed. It could get a bounce back up from here but AAPL looks like a stock to short on bounces now. If Carl Icahn wants more stock you can sell him yours (I highly doubt he'll tell you when he sells his stock, at least not until he's done selling).

Apple Inc., AAPL, Daily chart

As I've been reviewing for the past few weeks, the RUT's pattern looks more like an a-b-c down from its August 5th high to its August 19th low and now an a-b-c bounce up from there. The c-wave is the leg up from September 3rd and ideally will achieve a 162% projection of the a-wave (the 1st leg up from August 19th), which points to 1059.85. That projection crosses the top of its parallel up-channel from October 2011 tomorrow and makes for a very nice time-and-price reversal setup for the bears to take advantage of. Today's high got within 2 points of the projection and reversed into the close. Was that close enough for government work? Time will tell if the bears will step in here.

Russell-2000, RUT, Daily chart

Key Levels for RUT:
- bullish above 1060
- bearish below 1035

A week ago I showed a chart of the 30-year bond (ZB, the e-mini) and a setup for a reversal off the bottom of its bullish descending wedge and a Fib projection for the decline at 128.774 (128'25). It did a little throw-under below the bottom of the wedge last Thursday and then bounced back up inside the wedge, creating a buy signal. So far it's having trouble getting up off the ground as the bears continue to pound on it but the setup remains a good one for a rally and it should get started any day now.

30-year Bond, ZB, Daily chart

There's a sentiment measure that is tracked by CarpenterAnalytix.com that shows bond and stock exposure and when either leans too much to one side or the other it tends to identify a point where the market reverses. The chart below shows the 5-year bond exposure by hedge funds and as mentioned in their report, "Managed Futures funds are a key segment of the hedge fund universe. They use long, short, and hedged strategies. They shift freely among asset classes. They are canny players, tactically agile and market sensitive, adapting quickly to emerging market trends. Tracking CTA asset exposures offers unique insight into active professional outlook and sentiment." The top graph on the chart below shows net long and net short positions (zero in the middle) and currently there's a large net short position, the largest net short position since 2008. Sentiment is ready for a shift and the above chart of ZB supports a coming rally.

Hedge fund bond exposure, chart courtesy CarpenterAnalyticx.com

The bounce for the banking index, BKX, has been very choppy and it continues to support the idea that it's just a correction to its August decline. It is close to retracing 50% of its decline, at 64.54, which is only 10 cents below its 50-dma at 64.64. Watch that level, if tested, for resistance. Once the bounce has finished we should get a strong decline than the August decline.

KBW Bank index, BKX, Daily chart

Not surprisingly, the TRAN's pattern looks very similar to the RUT's. Why these two are so similar I'm not sure but it's been true for a long time. Divergence between the two is a reason to take note. As with the RUT, the 3-wave move down into its August 15th low has been followed by a 3-wave bounce, which is called an expanded flat correction in EW terminology because the b-wave (the August 30th low) dropped below the August 15th low. I placed some Fibs on the chart to show how they're working. The new b-wave low should reverse near the 127% extension of the a-wave, which is at 6235 and the August 30th low was at 6237. The c-wave is typically 162% of the a-wave, which is shown at 6607. Today's high was 6592 so there's a little more upside potential but close enough to be called done. As with the others, the next wave down is a larger-degree wave-C, which should be a strong decline and one that should quickly make it down to its June low at 5952.

Transportation Index, TRAN, Daily chart

The U.S. dollar looks intent on testing its uptrend line from 2011-2013, again, as geopolitical worries melt away. It's been a stubborn index to call for a rally but I haven't given up on it yet. Below 81 would be worrisome for dollar bulls.

U.S. Dollar contract, DX, Daily chart

Over the years we've heard many reasons why gold will rally to new highs. The threat of economic collapse and runaway inflation are some of the biggest reasons cited. But many analysts have also been telling us the demand for gold has been increasing while the amount of gold being mined is not keeping up. However, the facts don't back that up.

As the chart below shows, the demand for gold has been dropping since at least 2010, as noted with the downtrend line along the highs in each of the 2nd quarters and currently sits at its lowest level for the past 4 years. So demand is not one of the driving forces for gold and if and when fear of global calamity subsides we will likely see gold prices continue downward, which is what it's been doing since the high of its bounce on August 28th.

Gold Demand, 2010-2013

The price pattern that I've been following for gold suggests we have not seen a low yet for its decline from 2011. The 3-wave bounce off the June low, so far, points to a continuation lower but what we don't know yet is whether the 3-wave bounce will turn into a 5-wave rally. As long as the current pullback holds above the July 23rd high at 1348 it could turn around and head back up to a new high and give us the 5-wave move. That would tell us the June low was an important low and once a pullback follows the 5-wave move up we'd have a good buying opportunity (shown with the green dashed line). A drop below 1348 would also be a break of its uptrend line from June and back below its broken downtrend line from February-April, neither of which would be bullish.

Gold continuous contract, GC, Daily chart

Silver has the same pattern as gold but its c-wave (or 3rd wave) extended further, which gives it a lot more room to pull back before overlapping its July 23rd high. Gold would give us an earlier heads up in that regard. But a drop below support at 22 would be a bearish heads up for silver.

Silver continuous contract, SI, Daily chart

Oil has been in a very choppy pattern since its strong move up in early July. It has been chopping its way marginally higher for more than two months and it has the look of an ending pattern. It has been unable to break above the top of its parallel up-channel from June 2012, currently near 110.65, as well as it 110.55 high on March 1, 2012, both of which stopped last Friday's rally. Other than twice popping above 110.55, on August 28th and September 6th, it has been unable to close above these lines of resistance. It's still a choppy mess and could continue to work its way a little higher but oil is looking vulnerable to the downside and could coincide with a decline in the stock market. The weekly chart below shows momentum waning as price has chopped marginally higher.

Oil continuous contract, CL, Weekly chart

It will be another relatively quiet day tomorrow for economic reports so the market will be left to fend for itself and overseas news.

Economic reports and Summary

Most of the indexes, as well as some key stocks, suggest tomorrow could be an important day for the market. I've had Wednesday, 9/11, as a potentially important turn date for a high for the bounce off the August 28th lows. The time for a 2nd wave bounce correction is typically 62% of the time for the 1st wave, which is today. Some cycle study work done by others also points to Wednesday/Thursday as a potentially important turn date. The form of the pattern for the bounce looks complete so time and price have come together as the indexes press up against strong resistance.

If the market rolls over from here, or after only a small pop up Thursday morning, my recommendation is to short the market for the next leg down. Use the day's high for your stops and manage your risk carefully. A more conservative entry is to wait until we get a sharp decline for a day (impulsive 5-wave move down) and then look to get short subsequent bounces, using each previous high for your stop. Legging into a larger position as the decline develops is a way to control your risk exposure. Trade carefully as we enter opex week next week and keep in mind that the Thursday prior to opex is known for its head-fake moves.

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

Keene H. Little, CMT

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


New Option Plays

Construction & Defense

by James Brown

Click here to email James Brown


NEW DIRECTIONAL CALL PLAYS

Fluor Corp. - FLR - close: 67.15 change: +0.43

Stop Loss: 64.75
Target(s): 74.50
Current Option Gain/Loss: Unopened
Time Frame: 4 to 8 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
FLR is in the industrial goods sector. The company provides heavy construction services. If you're bullish on the economy then cyclical stocks should perform well. Shares of FLR have been struggling to get past resistance near $67.00 for months. Today's move places FLR on the verge of a major breakout.

Today's high was $67.49. I am suggesting a trigger to buy calls at $67.65. If triggered our target is $74.50. You may want to aim higher. The Point & Figure chart for FLR is bullish with an $82 target.

Trigger @ 67.65

- Suggested Positions -

Buy the Oct $70 call (FLR1319j70) current ask $0.90

- or -

Buy the 2014 Jan $70 call (FLR1418a70) current ask $2.95

Annotated Chart:

Weekly Chart:

Entry on September -- at $---.--
Average Daily Volume = 1.1 million
Listed on September 11, 2013


Northrop Gruman - NOC - close: 95.11 change: +0.66

Stop Loss: 92.75
Target(s): 99.75
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
NOC is in the aerospace & defense industry. The defense-related names have continued to hold up well. The broader market saw a sharp sell-off in August but the correction in NOC was pretty mild over the same period. Traders bought the dip at NOC's 40-dma back in June and July and now they're doing it again.

The current two-day rally in NOC has produced a bullish breakout over the four-week trend of lower highs. You could certainly argue that the August highs in the $96.25-96.50 zone are overhead resistance, odds are good that NOC will make a run at the $100 level.

Today's high was $95.11. I am suggesting a trigger to buy calls at $95.25. If triggered our target is $99.75.

FYI: The Point & Figure chart for NOC is bullish with a long-term $160 target.

Trigger @ 95.25

- Suggested Positions -

Buy the Oct $97.50 call (NOC1319j97.5) current ask $1.00

- or -

Buy the 2014 Jan $100 call (NOC1418a100) current ask $2.00

Annotated Chart:

Entry on September -- at $---.--
Average Daily Volume = 1.2 million
Listed on September 11, 2013



In Play Updates and Reviews

RGR Hits Our Target

by James Brown

Click here to email James Brown

Editor's Note:

Shares of Sturm, Ruger & Co. Inc. (RGR) hit our bullish exit target on Wednesday.

APC was triggered. Our long-term play on VGK opened this morning.


Current Portfolio:


CALL Play Updates

Alnylam Pharmaceuticals - ALNY - close: 55.96 change: -1.24

Stop Loss: 53.20
Target(s): sell half at $60.0 and half at $64.00
Current Option Gain/Loss: -20.4%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
09/11/13: Biotech stocks underperformed the broader market today but ALNY underperformed its peers with a -2.1% decline. I didn't see any specific news behind the sharp drop this morning but traders did buy the dip twice near the $55.00 area. If you were waiting to buy the dip, you got one.

Earlier Comments:
We want to keep our position size small to limit our risk. I am suggesting we sell half of our position at $60.00 and then we'll aim for $64.00 with the other half.

*small positions* - Suggested Positions -

Long Oct $60 call (ALNY1319j60) entry $2.45

Entry on September 09 at $56.50
Average Daily Volume = 464 thousand
Listed on September 07, 2013


Anadarko Petroleum - APC - close: 94.67 change: +1.27

Stop Loss: 91.65
Target(s): 99.50
Current Option Gain/Loss: + 1.6%
Time Frame: 3 to 5 weeks
New Positions: see below

Comments:
09/11/13: APC started off weak this morning but traders bought the dip near $93.00 this morning. By mid afternoon APC had broken out past resistance near $94.00, hit our trigger at $94.25, and closed at a new all-time high.

- Suggested Positions -

Long Oct $95 call (APC1319j95) entry $3.05*

*option entry price is an estimate since the option did not trade at the time our play was opened.

Entry on September 11 at $94.25
Average Daily Volume = 2.55 million
Listed on September 09, 2013


Hanesbrand Inc. - HBI - close: 61.34 change: -1.66

Stop Loss: 59.90
Target(s): 68.50
Current Option Gain/Loss: Unopened
Time Frame: 3 to 6 weeks
New Positions: Yes, see below

Comments:
09/11/13: There was no follow through on yesterday's rally to new relative highs in HBI. Instead this stock shot lower at the open before finding support near $61.00. The drop may have been investor disappointment to HBI merely reaffirming their prior guidance. Currently we are still on the sidelines.

I am suggesting a trigger to buy calls at $63.25. If triggered our target is $68.50. I do expect to see some temporary resistance at the prior high near $65.00.

Trigger @ 63.25

- Suggested Positions -

buy the Oct $65 call (HBI1319j65)

Entry on September -- at $---.--
Average Daily Volume = 612 thousand
Listed on September 10, 2013


Lennox Intl. - LII - close: 73.42 change: +0.64

Stop Loss: 69.65
Target(s): 74.90
Current Option Gain/Loss: +25.8%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
09/11/13: LII recovered from its morning lows to close up +0.8% and outperform the major indices. I am raising our stop loss to $69.65. I am not suggesting new positions at this time.

Our short-term target is $74.90. More aggressive traders could aim higher.

- Suggested Positions -

Long Oct $70 call (LII1319j70) entry $3.10*

09/11/13 new stop loss @ 69.65
*option entry price is an estimate since the option did not trade at the time our play was opened.

Entry on September 09 at $71.00
Average Daily Volume = 386 thousand
Listed on September 07, 2013


NetSuite Inc. - N - close: 106.85 change: +1.17

Stop Loss: 101.45
Target(s): 109.00
Current Option Gain/Loss: +74.5%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
09/11/13: The rally in N continues with shares outperforming the major indices again with a +1.1% gain on Wednesday. I am adjusting our stop loss up to $101.45.

Earlier Comments:
Our multi-week target is $109.00.

- Suggested Positions -

Long Oct $105 call (N1319j105) entry $2.75*

09/11/13 new stop loss @ 101.45
09/10/13 new stop loss @ 99.45
*option entry price is an estimate since the option did not trade at the time our play was opened.

Entry on September 09 at $101.05
Average Daily Volume = 294 thousand
Listed on September 03, 2013


Starbucks Corp. - SBUX - close: 75.39 change: +1.18

Stop Loss: 69.95
Target(s): 78.00
Current Option Gain/Loss: Oct75c: +85.5% & 2014Jan75c: +33.8%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
09/11/13: The rally in SBUX is accelerating higher with shares surging +1.5% and closing at a new all-time high (above the early August peak). Shares are arguably short-term overbought here and more conservative traders might want to take profits early. I am not suggesting new positions at this time.

- Suggested Positions -

Long Oct $75 call (SBUX1319j75) entry $1.18

- or -

Long 2014 Jan $75 call (SBUX1418a75) entry $3.25

09/11/13 SBUX at new highs. Cautious traders may want to lock in some gains.

Entry on September 05 at $72.35
Average Daily Volume = 3.0 million
Listed on September 04, 2013


Tractor Supply Company - TSCO - close: 130.88 change: +1.58

Stop Loss: 124.75
Target(s): 134.00
Current Option Gain/Loss: +86.3%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
09/11/13: TSCO delivered its third strong gain in a row with today's +1.2% rally. The close above $130.00 is very encouraging since the $130 level could have been round-number, psychological resistance. I am raising our stop loss to $124.75.

Earlier Comments:
Our target is $134.00. More conservative traders may want to take profits near $130 instead.

NOTE: The company has announced a 2-for-1 stock split set for Friday, September 27th.

- Suggested Positions -

Long Oct $130 call (TSCO1319j130) entry $2.20*

09/11/13 new stop loss @ 124.75
*option entry price is an estimate since the option did not trade at the time our play was opened.

Entry on September 09 at $125.25
Average Daily Volume = 352 thousand
Listed on September 05, 2013


UnitedHealth Group - UNH - close: 75.18 change: +0.83

Stop Loss: 73.40
Target(s): 79.75
Current Option Gain/Loss: Unopened
Time Frame: 3 to 6 weeks
New Positions: Yes, see below

Comments:
09/11/13: UNH managed to break out past resistance at $75.00 yet it has not hit our suggested entry point at $75.25. The high today was $75.19. Odds are extremely high that if the market opens positive tomorrow that we will see UNH hit our entry point.

Earlier Comments:
I am suggesting a trigger to buy calls at $75.25. If triggered our target is $79.75.

Trigger @ 75.25

- Suggested Positions -

Buy the Oct $75 call (UNH1319j75) current ask $2.31

Entry on September -- at $---.--
Average Daily Volume = 3.3 million
Listed on September 10, 2013


PUT Play Updates

Bed Bath & Beyond Inc. - BBBY - close: 72.29 change: +0.51

Stop Loss: 73.55
Target(s): 66.50
Current Option Gain/Loss: Unopened
Time Frame: exit PRIOR to earnings on Sept. 25th
New Positions: Yes, see below

Comments:
09/11/13: BBBY dipped to a new relative low this morning but rebounded near the $71.50 level. The intraday low was $71.47. Thus our trade is not open yet. I don't see any changes from my prior comments.

Earlier Comments:
I am suggesting a trigger to buy puts at $71.45. If triggered our target is $66.50, just above the simple 200-dma. Please note that I would not be surprised to see a short-term bounce from the $70.00 level and the $72.00 area, once broken as support, should be new resistance. FYI: BBBY is expected to report earnings on September 25th. We will most likely exit prior to the earnings report to avoid any surprises.

Trigger @ 71.45

- Suggested Positions -

buy the Oct $70 PUT (BBBY1319v70)

Entry on September -- at $---.--
Average Daily Volume = 1.45 million
Listed on September 10, 2013


Diamond Offshore Drilling - DO - close: 65.29 change: +0.11

Stop Loss: 66.01
Target(s): 57.50
Current Option Gain/Loss: -55.2%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
09/11/13: I am urging caution here. Traders bought the dip in DO again. That's two days in a row that investors bought the dip near $64.65. More conservative traders may want to abandon ship early.

I'm not suggesting new positions at this time.

Earlier Comments:
Our target is the $57.50 level. I would not be surprised to see a temporary bounce near the $60.00 mark.

- Suggested Positions -

Long Oct $60 PUT (DO1319v60) entry $0.85

09/11/13 DO is not cooperating and traders may want to exit early now

Entry on September 03 at $63.75
Average Daily Volume = 1.0 million
Listed on August 28, 2013



Longer-Term Play Updates



Chicago Bridge & Iron - CBI - close: 64.15 change: +1.17

Stop Loss: 57.65
Target(s): 74.50
Current Option Gain/Loss: +33.3%
Time Frame: 4 to 6 months
New Positions: see below

Comments:
09/11/13: CBI continues to charge higher after breaking out from its massive consolidation pattern. Shares outperformed the market indices with a +1.8% gain. The stock is nearing potential resistance at its May 2013 highs near the $64.65-65.00 area. I would not be surprised to see a short-term pullback.

I am raising our stop loss to $57.65.

FYI: After the closing bell tonight CBI announced an interim dividend on its stock of five cents per share, payable on September 30th, 2013 to shareholders of record on September 20th.

*Small Positions* - Suggested Positions -

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

09/11/13 new stop loss @ 57.65
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

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


Vanguard FTSE Europe ETF - VGK - close: 53.95 change: +0.38

Stop Loss: 50.95
Target(s): 58.50
Current Option Gain/Loss: + 0.0%
Time Frame: exit PRIOR to 2014 March option expiration
New Positions: see below

Comments:
09/11/13: The bullish breakout in VGK continued on Wednesday with shares opening at $53.60 and posting a +0.7% gain by the closing bell. Our plan was to launch positions at the opening bell this morning.

Earlier Comments:
We are taking a multi-month time frame with this trade. 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.

- Suggested Positions -

Long 2014 Mar $55 call (VGK1422L55) entry $1.80*

09/11/13 trade opens. VGK @ 53.60
*option entry @ 1.80 is an estimate.
09/10/13 entry trigger met. open positions tomorrow.
09/10/13 new stop loss @ 50.95
08/24/13 adjust the option strike from 2013 Dec $55 to $2014 Mar $55.

Entry on September 11 at $---.--
Average Daily Volume = 3.0 million
Listed on August 10, 2013


CLOSED BULLISH PLAYS

Sturm, Ruger & Co. Inc. - RGR - close: 58.63 change: +2.69

Stop Loss: 51.75
Target(s): 57.50
Current Option Gain/Loss: +117.7%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
09/11/13: Target achieved.

I cautioned readers that RGR could see some short covering. Today's +4.8% gain certainly looks like a little bit of a short squeeze. RGR managed to close at new all-time highs, just above its March 2013 highs near $58.50. Our exit target was hit at $57.50 this afternoon.

- Suggested Positions -

Oct $55 call (RGR1319j55) entry $1.24 exit $2.70 (+117.7%)

09/11/13 target hit
09/10/13 new stop loss @ 51.75
09/07/13 new stop loss @ 50.90
08/28/13 trade opened on gap higher at $53.45. Trigger was 52.65

chart:

Entry on August 28 at $53.45
Average Daily Volume = 341 thousand
Listed on August 27, 2013