Drop in Oil Punctuates Month End
The Dow was in danger of posting the worst April in 35 years until the bottom
fell out of the oil market. Crude dropped more than $2 just prior to the close
of trading and was credited for several buy programs that hit the tape. The end
of day sell off in oil was obviously influenced by month end portfolio shuffling
but that point was all but ignored by TV commentators. The sharp end of day
moves in oil, bond, and equities were likely all related to rebalancing
Long Play Updates
Short Play Updates
Broadcom - BRCM - close: 29.90 chg: +0.34 stop: 31.11
Hmmm... it looks like our data concerning the semiconductor billings was off. Now the report is due out on Monday. Traders need to be prepared for volatility in the chip stocks if this report is skewed too far one way or the other. We remain bearish on BRCM as the stock continues to sink under a steady trend of lower highs. The P&F chart remains bearish as it points to a $21 target. The SOX looks like it could bounce a bit on Monday given Friday's intraday reversal. Keep an eye on BRCM for a bounce back toward the $31 level. Our target remains the $27.00-26.00 range.
Picked on April 27 at $29.90
Boston Scientific - BSX - cls: 29.58 chg: +0.11 stop: 31.51
BSX remains a strong candidate for shorts based on its bearish trend and relative weakness. Although it is true that shares are consolidating sideways above support near $28.50-28.75. The trend of lower highs suggest that BSX will breakdown again. However, we expect a possible bounce early next week. The BTK biotech index produced a bullish intraday reversal on Friday yet at the same time the BTK produced a new MACD sell signal. We would expect the BTK to bounce higher on Monday but we don't expect the bounce to last very long. If the biotech index and/or the market averages do bounce then shares of BSX could reach toward the 50-dma near $30.31. We would use a failed rally (up to the 50-dma and then back down under the $30.00 mark) as a new bearish entry point. More conservative traders can wait for BSX to trade under $28.75 or $28.50 before opening shorts. Our target is the $25.00-24.00 range.
Picked on April 19 at $29.05
Novellus - NVLS - close: 23.43 change: -0.23 stop: 25.01
NVLS is a new bearish play from the Thursday night newsletter. We suggested a trigger at $23.40 and NVLS hit our entry point during the Friday morning weakness. The play is now open. However, readers should note that the semiconductor billings report was not released on Friday and should be expected on Monday instead. Our strategy has not changed and a reprint of the Thursday play description follows:
Technology stocks, especially semiconductor stocks, look poised to begin a new leg lower. The SOX index is trading right near precarious support and the NASDAQ Composite is barely holding on to the 1900 level. Likewise shares of NVLS have been consolidating mostly sideways above the $23.50 region. Is this a new "bottom" or is NVLS merely biding its time as bears rest up for another round? Currently the Point & Figure chart for the SOX is bearish. NVLS also has a bearish P&F chart that currently points to a $17.00 target. Short-term technical oscillators on NVLS are bearish and the daily chart shows a breakdown under its multi-month trendline of support. Tomorrow is an important day for chip companies or at least their stock prices as Wall Street waits for the latest semiconductor billings data. If the data is positive then NVLS and the SOX are likely to rebound. If negative then chip stocks should begin their next leg lower. That's why we want to use a TRIGGER to open the play in NVLS. If shares of NVLS trades at $23.40 or below then we'll open the play as a short. Our target is the $20.50-20.00 range. Our time frame is six weeks.
Picked on April 29 at $23.40
Catalina Mktg - POS - close: 23.25 chg: +0.40 stop: 25.25
Advertising stock POS continues to show plenty of relative weakness following its technical breakdown a week ago. Shares broke through its simple and exponential 200-dma's in addition to round-number support at the $25.00 level. We've been expecting an oversold bounce and Friday produced one. On Thursday we warned that POS could trade up toward the $23.50 level and shares hit $23.58 on Friday. The bounce may not be over. Watch for POS to trade up toward the $24.00 level near its 10-dma, which should be new resistance. Our target remains $21.25-21.00.
Picked on April 22 at $23.80
Sina Corp - SINA - close: 27.47 chg: -0.22 stop: 28.52 *new*
Good news! There was no follow through to Thursday's rally despite the broader market bounce on Friday. Resistance at the 200-dma overhead is holding. We remain bearish but we're running out of time. SINA is expected to report earnings on Thursday, May 5th. We do not want to hold over the report. Our plan is to exit on Wednesday afternoon at the close. We are adjusting our stop loss to $28.52.
Picked on April 13 at $28.52
Westlake Chem. - WLK - close: 26.25 chg: +0.35 stop: 28.01
The lack of participation in the market's bounce on Friday is yet another sign of WLK's relative weakness. The stock is relatively close to our target/exit range of $25.50-25.00. Therefore we are not suggesting new bearish positions at this time. More conservative traders may do well to exit now.
Picked on April 08 at $29.19
Closed Long Plays
Closed Short Plays
Lowes Companies - LOW - cls: 52.11 change: +0.37 stop: 54.01
Target achieved. Weakness on Friday morning pulled LOW to a new seven-month low. Shares traded to $50.72 before the afternoon rally began. Fortunately, this was enough for LOW to enter our target range of $51.00-50.00. We are closing the play.
Picked on April 10 at $54.81
Today's Newsletter Notes: Market Wrap by Jim Brown and all other plays and content by the Option Investor staff.
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