Option Investor
Newsletter

Daily Newsletter, Wednesday, 8/25/2010

Table of Contents

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

Market Wrap

New Home Sales Worst On Record

by James Brown

Click here to email James Brown

Market Stats

The market sell-off continued early this morning with new signs the U.S. economic recovery is stumbling. The Dow Jones Industrial Average briefly traded under psychological support at the 10,000 level and the S&P 500 index traded under support near 1040 on very disappointing economic data. The durable goods report and the new home sales data both missed expectations by a wide margin. However, stocks managed to rebound from support with an oversold bounce and ended a four-day losing streak.

Commodities like gold and oil managed to rally in spite of the dollar's strength. The bounce in crude oil futures is a surprise given the weekly inventory data. This morning the EIA said stockpiles rose 4.11 million barrels, the third weekly rise in a row. Economists were only expecting a rise of 200,000 barrels. Oil prices initially fell to a new 11-week low but like stocks, the price of oil delivered an intraday reversal and the commodity closed higher with a +1.2% gain to $72.52 a barrel. Gold was strong from the start and the precious metal rose nearly $8 to $1,241 an ounce, closing at new eight-week highs. Traders' first reaction was to sell the economic news this morning and money poured into the bond market again hitting a new high. Yields, which move opposite bond prices, spiked to new lows. The yield on the 10-year U.S. treasury hit 2.419% but bonds reversed as well and the yield settled at 2.538%.

Stock market weakness has been widespread with declines across the major global indices. The Hong Kong Hang Seng index lost 0.11% but the Chinese Shanghai index lost -2.0%. The Japanese market continues to struggle with a rising currency. The yen hit a nine-year high versus the euro and tagged another new 15-year high against the dollar. A rising yen makes Japanese exports more expensive and the NIKKEI index lost -1.7% on the session. There has been some speculation that Japan might try and intervene in the currency markets soon.

East of the Atlantic there seems to be a tale of two Europes. Yesterday Standard & Poor's lowered their credit rating on Ireland over banking concerns. This news helped push borrowing costs for countries like Ireland and Greece higher today as investors worry over a potential default. Yields on Irish and Greek bonds soared as traders demand more reward for the risk they're taking. The price of credit default swaps in Greece hit new 18-month highs. Yet in Germany it's a different story.

Germany is Europe's largest economy and the country saw a record-setting +2.2% GDP growth last quarter. Last week Bundesbank raised their GDP forecast for Germany to +3%. Today the Ifo Institute announced that their business climate index, a measure of business confidence, marked its fourth monthly gain n a row and hit a new three-year high in August. Economists were expecting a drop to 105.7 but Ifo said their confidence index rose from 106.2 in July to 106.7 in August. Another eurozone surprise was the strength in Portugal's debt sale. The country of Portugal is on the list of troubled economies that investors are worried about and yet the country managed to sell 1.3 billion euros worth of bonds on Wednesday in five and ten year notes. This was up from the original plan to sell 750 million to 1.25 billion euros in debt. At the end of the day the English FTSE index lost -0.75%. The German DAX lost -0.61%.

The major headlines this morning were focused on the New Home sales numbers and the Durable Goods report. Economic data continues to point to a slowing economy, which is fanning the flames for double-dip recession fears. Yesterday investors were disappointed with the existing home sales, where the National Association of Realtors announced that the pace of existing home sales crashed -27% to a new 15-year low in July. This morning the Commerce Department said New Home sales plunged to the lowest level on record. Economists were expecting a pace of 330,000 sales a year. Unfortunately July's sales came in at 276,000. That is a -12.4% drop and the lowest level since records began back in 1963.

Consumers are nervous about their jobs and they're not buying homes in spite of the record-low mortgage rates. Plus new homes are facing stiff competition from the sale of foreclosures and short-sales although you can see from yesterday's existing home sales data that even these distressed properties are not moving very fast. The median price of a home has fallen to $204,000, which is a -4.8% drop from a year ago. All four regions of the country saw sales decline with the biggest drop in the West at -25%. Another worrisome figure is the supply of new homes on the market, which increased from 8 months in June to 9.1 months in July. Not surprisingly the homebuilder confidence index fell to its lowest level since March 2009.

Oddly enough homebuilders rallied on the news presumably on hopes the worst is behind them. They did get a boost from DHR, which garnered an analyst upgrade this morning. Plus, Toll Brothers (TOL) reported earnings that were better than expected prior to the bell. TOL is the largest luxury homebuilder in the U.S. The company delivered earnings of 16 cents a share, which was 30 cents better than expected (analysts were looking for a loss of 14 cents). Revenues of $454.2 million were also significantly better than expected. TOL said the number of homes sold dropped -16% and the number of contracts signed fell -11%. Believe it or not analysts were expecting these figures to be worse. The stock gapped open higher and closed with a +5.8% gain just over $17 and its 50-dma. Rival builders BZH, PHM, RYL, and DHI were all up sharply with gains in the +3.0% to +4.6% range.

Of course we have been warning readers to expect terrible numbers from the real estate market. I am more concerned with the manufacturing data out today. The Commerce Department said orders for durable goods rose just +0.3%. This was the first gain for the durable goods orders in three months but economists were expecting a gain of +3.0%. The gain was fueled by the one industry and that was transportation, which rose +13.1%. If you back out the transportation number then orders for durable goods actually fell -3.8% in July. That's the biggest drop since January 2009. If you drill down even farther you would see that the transportation gains were fueled by the volatile aircraft component, which saw a +75.9% jump in orders. Naturally investors are concerned. If you're worried about another recession we don't want to see orders for durable goods in negative territory.

In other news today the Department of Agriculture said food price inflation was extremely low and poised to rise at its slowest pace since 1992. The government revised their estimates on food inflation from +1.5-2.5% down to +0.5-1.5% for 2010. This was somewhat surprising given the recent rally (new highs) in wheat and pork prices.

Industry insiders are expecting computer maker DELL to raise their bid for 3PAR (NYSE:PAR). The company is in the data storage business with what 3PAR calls its "utility computing". A couple of weeks ago shares of PAR gapped from the $10 level to $18 on news it was being acquired by DELL for $1.15 billion. On Monday shares of PAR gapped from $18 to $26 on news that HPQ had offered a higher bid of $1.6 billion. Now speculation is growing that DELL will make a higher bid and analysts are estimating a final price near $29 a share.

After hours tonight there were a handful of earnings reports. Guess?, JDSU, and JoAnn Stores made headlines. Apparel designer and retailers Guess? (GES) delivered a profit of 72 cents a share. That was 4 cents better than expected. Revenues managed to beat Wall Street's estimates at $577.1 million. GES issued Q3 guidance that was in-line with estimates but the company's 2011 guidance was under expectations. The stock was trading down about -6.4% after hours.

Shares of JDS Uniphase (JDSU) were trading down under support at $10.00 in after hours following its earnings beat. The company reported a profit of 15 cents a share, better than the street's 14 cent estimate. Revenues rose almost 20% to $398.1 million, which was just enough to beat estimates. Traders were selling the news with a spike toward $9.50 but JDSU appears to be paring its losses with a bounce back to $9.90. Shares closed the regular session at $10.22.

JoAnn Stores (JAS) is up about $2 after hours following a better than expected earnings report. JAS reported a profit of 20 cents, which was 18 cents better than expected. Revenues bested estimates at $439.3 million for the quarter. Management gave relatively optimistic guidance and shares look poised to gap open higher tomorrow near resistance at its 200-dma.

Technically the market had reached oversold levels and traders are buying the dip to support (while bears take profits by covering their shorts). The S&P 500 had lost -4% in the last four days and a decline toward support near 1040 was widely anticipated. On a very short-term basis the S&P 500 could easily see an oversold bounce back toward the 1070-1080 zone. There is some short-term resistance at the simple 10-dma near 1075 to give you a clear target. We may want to wait for the next lower high before considering new bearish positions.

Hourly Chart of the S&P 500 index:

Chart of the S&P 500 index:

The NASDAQ Composite dipped toward the 2100 level this morning and rebounded back toward short-term resistance near 2150. The high today was 2148. Technically this index has produced a bullish engulfing (reversal) candlestick pattern but it needs to see confirmation. We can look for a bounce back toward resistance under the 2200 level.

Chart of the NASDAQ index:

Yesterday and today the small cap Russell 2000 index managed to bounce from its July lows. This was the perfect spot to look for support and now that this support level is holding the $RUT could see a rebound back to 620 or its 50-dma closer to 630.

Chart of the Russell 2000 index:

Tomorrow stocks could react to the weekly initial jobless claims. Last week investors were shocked to see weekly claims jump to 500,000. This week economists are looking for initial claims to come in at 485,000. The bigger event will be Friday's Q2 GDP revision. Many expect the government to lower their Q2 GDP growth estimates down from +2.4% to +1.4% there is speculation it could drop to +1.0%.

Speaking of GDP estimates, Nouriel Roubini, the infamous economics professor at NYU, made headlines this afternoon on his Twitter account. Nouriel suspects that Q3 GDP growth will be in the +0.0-to-1.0% range and closer to 0% than +1%. He is concerned about capex spending, which was very healthy in Q2, but appears to have stalled in Q3. Mr. Roubini estimates that our risk of a double-dip recession is greater than 40%.

Roubini wasn't the only analyst sharing their opinion today. Arnaud Mares, with Morgan Stanley, issued a report today highlighting the risks of sovereign debt default. To paraphrase, this Morgan Stanley director believes it's not a matter of if governments will default on their debt but a question of how they will default. The aging populations of the Western world are too great and governments will try and pay back their creditors in devalued currencies or at a lower rate of return. Another analyst, this time at Goldman Sachs, said the parade of disappointing economic data in the U.S. will force the Federal Reserve into a new round of quantitative easing. Jim O'Neill, the Chief Global Economist at Goldman Sachs believes we will see the Fed come out with a new program by October this year.

In summary, the trend is down but stocks were oversold and we're bouncing from support. This bounce could last a couple of days or all of next week but everything could change on Friday if the U.S. Q2 GDP estimates are worse than expected.

-James


New Plays

Technology Play

by Scott Hawes

Click here to email Scott Hawes


NEW BULLISH Plays

Rackspace Hosting, Inc - RAX - close 19.55 change +0.95 stop 17.95

Company Description:
Rackspace Hosting, Inc. (Rackspace Hosting) operates in the hosting and cloud computing industry. The Company offers its products under the Fanatical Support brand. The Company’s services are sold to businesses in more than 120 countries. During the year ended December 31, 2009, the Company served more than 90,000 business customers and managed more than 56,000 servers, 1,600,000 e-mail accounts, and 259,000 cloud hosting domains.

Target(s): 20.75, 21.30, 23.00
Key Support/Resistance Areas: 23.50, 21.40, 20.00, 19.00, 18.00
Time Frame: 3 to 5 weeks

Why We Like It:
M&A activity is heating up in the tech sector. Dell and Hewlett-Packard are in a bidding war over a 3Par at a huge premium 160% premium over its closing price just a couple of weeks ago. Whoever loses the bid will most likely be looking for a similar firm to acquire and there seems to be none better than RAX. Regardless of whether RAX fits the bill for an acquisition they are in the red hot cloud computing industry which is outperforming the broader market. I suggest we take advantage of the momentum and initiate long positions now. More nimble traders could wait for a breakout or time an entry on weakness. Technically, RAX is above all of its moving averages and is forming an ascending triangle. Our stop will be $17.95 and I have three targets with the most aggressive being the YTD highs near $23.00. I envision this trade lasting several weeks or more but if the stock surges we won't hesitate to book profits.

Suggested Position: Long RAX stock at current levels

Options Traders: Buy December $21.00 CALL, current ask $1.30

Annotated daily chart:

Entry on August xx
Earnings 11/9/2010 (unconfirmed)
Average Daily Volume: 1.75 million
Listed on August 25, 2010


In Play Updates and Reviews

Stocks Look Ready for a Relief Bounce

by Scott Hawes

Click here to email Scott Hawes
Current Portfolio:


BULLISH Play Updates

Athenahealth, Inc. - ATHN - close 28.34 change -0.85 stop 26.90

Target(s): 28.75, 29.50, 31.50 (hit), 32.95, 34.00
Key Support/Resistance Areas: 34.25, 31.75, 30.00, 28.25, 25.75
Current Gain/Loss: -6.31%
Time Frame: 1 to 2 weeks
New Positions: No

Comments:
8/25: We are moving in the right direction with ATHN. Let's ee where this bounce takes the stock, however, the broader market is weak so readers may want to consider looking for an exit using the above targets.

8/24: The sell-off in ATHN continued today and we are getting very close to being stopped out. The stock closed below its upward trend line from the 7/22 lows today, while also closing below its 20-day and 100-day SMA's. The 50-day SMA is below our stop and it appears ATHN may visit this level near $26.00. The stock has retraced just about 50% of its gains from the 7/22 low and there is support at current levels, so this is a logical place for ATHN to bounce. However, the broader market is weak so readers may want to consider looking for an exit. $28.75 and 29.50 are intraday resistance levels and should be considered as areas to selling positions or tightening stops to protect capital.

Current Position: Long ATHN stock, entry was at $30.25

Options Traders: Long September $31.00 CALL

Entry on August 16, 2010
Earnings 10/28/2010 (unconfirmed)
Average Daily Volume: 767,000
Listed on August 14, 2010


The Andersons, Inc - ANDE - close 37.24 change +0.29 stop 34.45

Target(s): 38.90, 40.50, 41.50
Key Support/Resistance Areas: 41.50, 40.50, 39.20, 38.00, 35.50
Current Gain/Loss: +0.59%
Time Frame: 1 to 3 weeks
New Positions: Yes

Comments:
8/26: ANDE is hanging tough and if it breaks above $37.50 to $38.00 our targets should easily be reached.

8/24: ANDE surged +3.44% higher today on a very weak tape in the broader market. We are just about break-even on this trade but I urge readers to be cautious as ANDE can't buck the broader market trend forever. However, if the market bounces from here ANDE should head towards our first target of $38.90 (lowered 25 cents). I want to raise the stop up to $34.45 which is below the 50-day SMA and well below the recent congestion area and key resistance level of $35.50. This should protect us from a head fake lower and protect against a hard reversal.

Current Position: Long ANDE stock, entry was at $37.02

Options Traders: Buy December $40.00 Calls, current ask $2.10

Entry on August 19, 2010
Earnings 10/28/2010 (unconfirmed)
Average Daily Volume: 180,000
Listed on August 18, 2010


Newmont Mining Corp - NEM - close 58.74 change +1.62 stop 56.40

Target(s): 59.30 (hit), 59.85, 61.50
Key Support/Resistance Areas: 62.00, 59.50, 58.16, 55.00, 54.30, 52.30
Current Gain/Loss: +0.65%
Time Frame: Several weeks
New Positions: Yes

Comments:
8/26: NEM is heading back up towards our $59.30 target. I suggest not letting this reverse again. Protect profits.

8/25: NEM gapped lower but was immediately bought and closed well off of its lows. This is more of a defensive play that can do well in broader market weakness. I've adjusted the 2nd target and suggest we take profits this time if they are reached. $59.30 was hit last week and still remains a valid target.

Current Position: Long NEM stock, entry was at $56.75

Entry on August 13, 2010
Earnings 11/3/2010 (unconfirmed)
Average Daily Volume: 7.7 million
Listed on August 10, 2010


Oceaneering International - OII - close 49.77 change +0.74 stop 46.60

Target(s): 50.75, 51.75, 53.00, 54.40
Key Support/Resistance Areas: 57.50, 54.50, 53.40, 49.00
Current Gain/Loss: +1.16%
Time Frame: 1 to 2 weeks
New Positions: Yes

Comments:
8/25: OII gained +1.5% today and is heading towards our targets. My comments below remain unchanged.

8/24: OII is hanging tough and is maintaining its upward trend line from the 6/1 lows. Let's stick with the set-up and see if the stock bounces from here. I've added a lower target of $50.75 which will produce a small +3% gain if reached. Readers should consider tightening stops or taking profits as the targets are reached.

Current Position: Long OII stock, entry was at $49.20

Options Traders: Long September $50.00 CALL

Entry on August 16, 2010
Earnings 10/28/10 (unconfirmed)
Average Daily Volume: 807,000
Listed on August 14, 2010


UltraShort Semiconductor ETF - SSG - close: 18.97 change: -0.16 stop: 18.40

Target(s): 22.00
Key Support/Resistance Areas: 22.00, 20.00, 19.00, 17.00
Current Gain/Loss: -3.65%
Time Frame: 4 to 6 weeks
New Positions: No

Comments:
NOTE: This is a bearish trade using a long position in an inverse ETF. Since we are bullish on the inverse ETF it is listed as a bullish trade.

8/25: Unfortunately, we were triggered at $19.65 as opposed to the pullback to $17.80. We have tight stop so if the Semi's bounce much more there is good chance we will get taken out. I like this ETF on weakness but will suggest stepping aside and possible entering at a lower price if our stop is hit.

8/24: SSG looks on the verge of breaking out and hitting our trigger to buy positions at $19.65. I think pullbacks in SSG can be bought as well so I would like to add a trigger of $17.80 to buy positions which is just above the 200-day SMA and upward trend line from the 7/27 lows. If triggered at $17.80 we'll use a stop loss at $16.45.

8/21: Semiconductor companies that supply materials to the smart phone market have been doing better than their peers that provide chips for the PC market. Yet the chip sector in general has been underperforming. The SOX index broke down under significant support a few days ago and looks ready to begin a new leg lower. I am suggesting we take advantage of this weakness with a bullish position on the SSG.

The plan is to buy the SSG when it breaks out past the July high and hits $19.65. Our multi-week target is $22.00. More nimble traders may want to cross their fingers and hope for a pull back toward $17.25-16.75 as an alternative entry point but if you do buy the dip I would use a relatively tight stop loss. FYI: This is a double, inverse ETF. Expect volatility!

Suggested Position: Long SSG stock/ETF if trades to $19.65 or $17.80

Entry on August XX
Earnings Date: N/A
Average Daily Volume: 178,000
Listed on August 21, 2010


BEARISH Play Updates

Automatic Data Processing - ADP - close: 38.93 change: +0.12 stop: 41.26

Target(s): 37.25, 36.50, 34.00
Key Support/Resistance Areas: 41.00, 39.00, 37.30
Current Gain/Loss: -0.46%
Time Frame: Several weeks
New Positions: Yes

Comments:
8/25: ADP continues to look vulnerable but we may need to be patient until the broader market is finished this bounce which should be short lived. There is plenty of overhead resistance.

8/24: We were triggered on our short entry in ADP at $38.75. This is the lowest close since 10/8 and the stock looks vulnerable. I've added $37.25 as a first target because it is near a long term upward trend line and prior swing low from 9/3/09.

8/21: Our new bearish play on ADP was almost triggered Friday. Shares dipped to $39.10. I am suggesting readers use a trigger to open bearish positions at $38.75. There are no changes from my Thursday comments.

Is it possible that businesses are cutting back on bookkeeping as they reduce the number of employees? For whatever reason shares of ADP are losing ground. In late July, at the company's latest earnings report, management lowered their guidance. Now the stock is trading near the bottom of its $39-42 range. If you check out the weekly chart you can see ADP's bearish H&S pattern.

I am suggesting a trigger to open bearish positions at $38.75. If triggered our first target is $36.00. Our second target is $34.00. Use a stop at $41.26.

Current Positions: Short ADP stock, entry was at $38.75

Option Traders: Long November $37.00 puts

Entry on August 24, 2010
Earnings Date 10/28/10 (unconfirmed)
Average Daily Volume: 3.2 million
Listed on August 19, 2010


Chesapeake Energy - CHK - close 20.04 change -0.19 stop 22.10

Target(s): 19.70 (hit), 18.80, 18.05
Key Support/Resistance Areas: 22.50, 21.60, 20.30, 19.65, 18.75, 18.00
Current Gain/Loss: +3.70% Time Frame: 1 to 2 weeks
New Positions: Yes

Comments:
8/25: CHK traded right down to its 52-week low which was the target I suggested taking profits at last night. CHK still looks weak but I believe the stock may bounce here with the broader market. If things turn back down CHK should break these levels.

8/24: CHK lost -1.70% and today and is close to printing new 52-week. Our first target is just above those 52-week lows at $19.70. If CHK get there we will have +5% gains in the trade. I suggest taking profits at this level or tightening stops to protect them.

Current Position: Short CHK stock, entry was at $20.81

Options Traders: Long October $20.00 PUTS

Entry on August 16, 2010
Earnings: 11/2/2010 (unconfirmed)
Average Daily Volume: 10 million
Listed on August 14, 2010


Con-way Inc. - CNW - close: 27.18 change: -0.34 stop: 31.55

Target(s): 28.25, 26.75, 25.50
Key Support/Resistance Areas: 25.00, 28.00, 32.00
Current Gain/Loss: N/A
Time Frame: Several Weeks
New Positions: Yes, trigger 29.20

Comments:
8/25: My comments remain the same from below. Let's see if CNW gives us an entry on a bounce in the coming days.

8/24: CNW managed to gain +1.33% to close at $27.52. This stock is shortable on strength but we are still waiting on our trigger. The plan is to initiate bearish positions if CNW can bounce to $29.20. The stock is still very oversold with its recent decline from $35.00. A normal 38.2% Fibonacci retracement and the declining 20-day SMA are near $29.80. If the stock can manage to bounce to $29.20 I would be short seller.

Suggested Position: Short CNW stock if it trades to $29.20

Entry on August xx
Earnings Date 11/03/10 (unconfirmed)
Average Daily Volume: 1.0 million
Listed on August 7, 2010


HNSI, Inc - HNSI - close 27.24 change +0.66 stop 29.11

Target(s): 25.05, 23.50, 22.25
Key Support/Resistance Areas: 28.90, 27.25, 25.80, 200-SMA, 23.50, 22.00
Time Frame: 1 to 2 weeks

Comments:
8/25: HSNI hit our target on the late day rally so we are short the stock. I believe this rally will be short lived and the stock should turn back lower in the coming days. My comments from the play release are below.

8/24: Retailers are weak and HSNI looks like it is headed to test its 200-day SMA and possibly its recent swing lows. The stock has made a great comeback off of its 2009 lows but the selling has picked back up in recent weeks. The stock lost -5.3% today on strong volume and I expect it to continue if the broader market cooperates. I would like to see a retracement of some of today's gains to initiate short positions but if the stock breaks down I also suggest initiating short positions. Let's use triggers on a bounce to $27.20 or a breakdown to $25.69. More nimble traders can initiate positions now. We'll keep a tight stop at $29.11 which is above the downtrend line and Monday's high. If we get filled at $27.20 our first target is nearly 8% lower and above the 200-day SMA. HSNI closed below its 20, 50, and 100 day SMA's today.

Current Position: Short HSNI stock, entry was at $27.20

Options Traders: Long October $25.00 PUTS

Entry on August xx
Earnings: 11/11/2010 (unconfirmed)
Average Daily Volume: 495,000
Listed on August24, 2010


Starbucks Corp. - SBUX - close: 24.04 change: -0.46 stop: 25.05

Target(s): 22.10, 21.30, 20.00
Key Support/Resistance Areas: 25.00, 23.50, 22.00, 21.00, 20.00
Current Gain/Loss: -0.17%
Time Frame: Several weeks
New Positions: Yes

Comments:
8/25: The rally in SBUX may have been short covering today and the stock could fill the gap down from yesterday before the selling resumes. There is plenty of overhead resistance to keep bounces in check.

8/24: We were triggered in SBUX at the open this morning and the stock sold off the remainder of the day. I've adjusted our targets and suggest readers begin to tighten stops or take profits as they are reached.

8/21: There is no change from my Thursday comments. SBUX is still consolidating sideways but the path of least resistance is down. Entry point to open bearish positions is at $23.40.

The rally in shares of SBUX appears to have cooled off. It isn't surprising with more and more signs of the economy slowing down, consumers cutting back and saving more. SBUX's latest earnings report was ho-hum. Profits were inline but what impressed was the better than expected revenues. Unfortunately, management guided 2010 inline with prior estimates and guided 2011 lower.

Shares of SBUX are now testing support near $23.50 and its 200-dma. It looks like the stock is ready to break. The weekly chart shows a bearish head-and-shoulders pattern. I am suggesting we wait for a drop under the early July lows. Therefore our entry point to open bearish positions is $23.40. Our target is the $21.00 and 20.00 levels. More nimble traders could try an alternative entry point with another failed rally near $25.00.

Current Position: Short SBUX stock, entry was at $23.30

Options Traders: Long October $23.00 puts

Entry on August 24, 2010
Earnings Date 11/04/10 (unconfirmed)
Average Daily Volume: 8.0 million
Listed on August 19, 2010


SPDR Retail ETF - XRT - close 36.98 change +0.61 stop 38.62

Target(s): 36.00, 35.25, 34.65
Key Support/Resistance Areas: 39.00, 38.00, 37.60, 36.50, 35.80, 35.00
Current Gain/Loss: +1.44%
Time Frame: 1 to 2 weeks
New Positions: Yes

Comments:
8/25: XRT printed a bullish engulfing candlestick today and closed the gap lower from yesterday. In this case I believe the selling will resume. My comments from below remain the same.

8/24: XRT hit our first target of $36.00 this morning and bounced. I see no reason the ETF won't trade down to its July lows which are just below our second target of $35.25. Let's move our stop down to $38.62.

Current Position: Short XRT stock, entry was at $37.52

Options Traders: Long September $36.00 PUTS

Entry on August 17, 2010
Earnings: 11/2/2010 (unconfirmed)
Average Daily Volume: 12 million
Listed on August 16, 2010