Option Investor
Newsletter

Daily Newsletter, Tuesday, 11/1/2011

Table of Contents

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

Market Wrap

Sucker Punch

by Jim Brown

Click here to email Jim Brown
Greek Prime Minister George Papandreou waited until after the EU leaders announced their hard fought solution and then supplied a knockout punch when they were not looking.

Market Statistics

The Greek prime minister shocked not only his own party, those in opposition to his party but EU leaders all across Europe and financial markets all around the world when he announced he was putting the austerity measures to a citizen vote. Rewind to the numerous pictures over the last two years of riots in the street, massive strikes and work slowdowns still occurring on a weekly basis and soldiers in riot gear protecting public buildings. There is almost no chance of Greek citizens approving the austerity measures. Also, the vote would not be held until January.

By Papandreou calling a special election he has singlehandedly crashed the entire EU bailout program. There has not been a referendum in Greece since 1974 when the Greek people voted to abolish the monarchy. The vote would not only delay implementation of the EU plan but could scuttle it completely. If the vote failed Greece would default on all its debt and be forced to leave the EU.

EU leaders expressed outrage over this act of "total irresponsibility" and talks immediately shifted back to consideration of kicking Greece out of the Euro zone without waiting for the vote. Headlines on all the news services were full of comments from EU leaders slamming Papandreou. Those leaders have bent over backwards and incurred significant hostility from their own citizens because of their plans to bail out Greece and now the Greek PM has effectively killed all their efforts.

Lastly there was a confidence vote called on Papandreou's government to be held at midnight on Friday. With some high profile party defections after the call for a referendum it is thought he only has a two vote margin in the 300 seat parliament. He could easily lose his position and the government of Greece be thrown even further into disarray.

You have to wonder if Papandreou had this trick up his sleeve all the time. He waited until Greece got the last tranche of EU/IMF bailout funds. Now by opening the austerity plan to a public vote that is sure to fail the country and officially default "by the will of the people" and Greece can erase its debt and start over. They would have to leave the Euro but that has been speculated for many months. They would not be able to borrow money but they would be free of 400 billion in debts. They would be free, independent and broke. Papandreou would have shifted the responsibility for the country's failure onto the people and off his administration. Of course that assumes he would still be in power. There is a strong feeling he won't last the week.

A Greek rejection of the austerity and bailout could cause bank failures in Europe and probably a new recession.

New fears arose of further contagion to Italy and Spain as interest rates spiked on their debt. If Greece was to default as a result of a no vote it could literally tear the banking system apart. Once one domino falls the fears would grow that Italy and Spain, both much bigger economies, would follow suit because the interest on their debt would spike to the point they could no longer pay. A failure of either Italy or Spain in addition to Greece would mean the end of the euro zone and a massive European recession.

While nobody really believed the European debt crisis was over nobody expected it to blow up in such a spectacular fashion. The EU deal last week was long on promises and short on details. It was basically a plan to draw up a plan. Everybody realized that but were hopeful they were on the right track. That plan was derailed by Papandreou and there is no visible solution. If his government fails this week it would take weeks or months to elect a new government and Greece would run out of money before it could happen. Any new government would have to immediately sign on to the same austerity measures or worse now that EU leader confidence has been shaken to the core. That assumes a new PM would want to go against the people in his first major decision. It also assumes a new PM would not be anti austerity. There are so many ways this could collapse the odds of successfully producing a positive result are nearly zero.

Not only was the market knocked back because of Greece but bad news was flowing from all directions. China's Purchasing Managers Index (PMI) for October fell to 50.4 from 51.2. That is the lowest rate of growth since early 2009. Expectations had been for an increase to as high as 52.0. Anything over 50 represents economic expansion. New orders fell to 50.5 from 51.3. The government said the decline in the PMI was due to weakness in export orders to the U.S. and Europe. New export orders declined to 486 from 50.9. Worries over a hard landing in China immediately returned to haunt the market.

Offsetting the surprise from the government PMI numbers was a private sector PMI report from Markit and HSBC that rose to 51.0 from 49.9. The government version gathers data from the country's biggest manufacturers. The HSBC data focuses on the small and medium sized businesses that provide roughly 75% of the jobs in China.

The PMI for the U.K. declined to 47.4 from 51.1 so it appears the economic activity in the European nations is already slipping.

In the U.S. the national ISM for October declined to 50.8 from 51.6. Expectations were for a rise to 52.0. This is another hiccup in the outlook for improving economics and could increase the worries over a drop back into a recession here at home.

However, the new orders component rose to 52.4 from 49.6 and backorders rose to 47.5 from 41.5. The new orders component rose to levels not seen since April so that is also positive. They had been in contraction territory under 50 for the prior three months. While the backorders are still in contraction mode they did improve significantly. The prices paid component declined to 41.0 from 56.0 and that is a big positive suggesting inflation pressures are moderating. That is the first time under 50 since early 2009.

As you can see on the chart the trend does not look good. Analysts still expect a rebound into 2012 but the constant cloud of worry over the market and economy is not providing a positive business environment.

ISM Chart

Vehicle sales for October were nearly flat but they did climb from 13.07 million to 13.23 million. That may not sound like much on an annualized basis but that is an increase of 160,000 vehicles. It was also the highest rate of sales since February and the earthquake related decline over the summer. There are still some shortages in the supply chain for parts but consumers are still buying cars and that suggests we are not yet headed for a recession.

The reports due out tomorrow include the ADP Payroll and the Challenger Employment report. This is the preliminary data ahead of Friday's Nonfarm Payrolls. The ADP report is expected to show a gain of 90,000 jobs and the Nonfarm Payroll report is expected to show a gain of 100,000 jobs.

The big event for Wednesday is the Fed announcement at 12:30 and the Bernanke press conference at 2:15. With Europe melting down the Fed will probably try and talk up the economy but they are not likely to announce any new stimulus programs. They will want to save their bullets to use if the situation in Europe does not improve. They would rather announce a new program when it will have the most impact rather than do it now and then have nothing left to add if the situation turns worse.

Economic Calendar

Earnings were completely ignored thanks to the Greek headlines and the meltdown of MF Global. Sirius (SIRI) posted a strong quarter with earnings of 2-cents on a +6% increase in revenue to $763 million. That was a penny above analyst estimates. Sirius added 334,000 new subscribers but that was below the estimates for 400,000. Their guidance for the full year is for 1.6 million net new subscribers and they have added 1.16 million year to date. CEO Mel Karmazin said they were still on track for that guidance and it would require adding 440,000 new subs in Q4.

SIRI shares dropped sharply intraday, rebounded back to positive territory but then ended down -3% at $1.75.

SIRI Chart

CME reported earnings of $4.74 and beating the street estimates of $4.64 but that was significantly higher than the $3.66 it earned in the year ago quarter. Income rose +29.4% to 4316.1 million. Revenue rose +19.2%. Average daily volume surged more than 27% to 14.7 million contracts. During the quarter the CME bought back 5.9 million shares for $155 million and bringing the total of shares repurchased in 2011 to 8.0 million. Shares of CME declined -8% but it was related to the MF Global news not the earnings.

CME Chart

Pfizer (PFE) reported earnings of 62-cents, up from 11-cents in the comparison quarter. Analysts were expecting 55-cents. Revenue rose +7% to $17.2 billion. Pfizer is facing a stiff headwind when Lipitor goes off patent at the end of next month. Lipitor accounts for $11 billion or 23% of its total revenue. Pfizer said it was working with the pharmacy benefit plans on ways to incentivize the continued use of Lipitor instead of a generic. The company also said it was considering selling an over the counter version of Lipitor. Pfizer increased its plans to buy back another $2 billion in stock in 2011 pushing the total to $9 billion. Pfizer shares finished positive for the day but only fractionally.

Pfizer Chart

Open Table (OPEN) reported adjusted earnings after the close of 30-cents and that was in line with estimates. However, the company projected a decline in reservations and revenue per diner will decline. Shares of OPEN declined to $36.88 in after hours.

Open Table Chart

JDS Uniphase (JDSU) reported earnings of 18-cents compared to estimates of 13-cents. This would have been a great report but they warned the floods in Thailand would knock up to $45 million off the current quarter. They also warned they were seeing macroeconomic challenges. Shares of JDSU rose slightly after the close.

JDSU Chart

Outside of Greece the main topic was the implosion of MF Global. The exchanges are moving to delist the stock, which should be no surprise. Account holders at MF are still struggling to get their trades closed and accounts freed so they can move them to another broker. MF was the fifth largest managed commodity broker and there were billions in outstanding trades.

There were conflicting headlines all day suggesting the company may have used millions in account holder funds in an attempt to stave off bankruptcy. The FBI, CFTC and SEC said they was investigating how some $600 million of MF customers money had gone missing. The CME said it had determined MF Global had broken government and CME rules requiring it to keep customer funds separate from company funds. Late in the day a lawyer for MF said the company had accounted for all the customer money and none was missing. The lawyer told the bankruptcy judge late Tuesday, "To the best knowledge of management, there is no shortfall." It remains to be seen if management was in possession of all the facts. The missing money is what killed the sale of MF to Interactive Brokers over the weekend. All MF funds were frozen until the details and money flow could be tracked.

Part of the volatility in the futures markets and the equity markets was related to the panic at MF and the resulting lockdown of the accounts. Volume on the futures exchanges declined to 50% of normal, which reduced liquidity and prompted higher volatility. The Securities Investor Protection Corp (SIPC) has appointed a trustee to liquidate the assets in the broker. All CME brokers and traders were barred from the trading floors. MF had assets of $41 billion when it filed bankruptcy and that makes it the eighth largest U.S. bankruptcy.

With Greece imploding and the fifth largest commodities broker in lockdown the odds of profit taking, after a +19.5% rebound in the S&P from the October lows, were about 100%. We saw serious declines in the sectors which had seen serious rallies in the days leading up to month end and the end of the fiscal year for mutual funds. They tried to keep the window dressing in place on Monday but the headline news was simply too strong.

I warned last week about the potential for headline risk once November arrived. When investors want to take a profit they will seize on whatever headline is available as a reason to do so. This week has been especially fertile in headlines. Nothing scares investors more than to see a big broker fail and fail in spectacular fashion. They immediately begin rethinking their account locations and their open trades. Nobody wants to get locked out of their accounts with open trades at risk.

I remember times during the Internet bubble when my Internet broker had some equipment challenges and there were sometimes hours when we could not trade. When stocks were moving $100 a day that was sheer terror. That is the same feeling commodities traders had this week when they did not know if the other side of their commodities trade might have been frozen at MF or when a spike related to MF could cause limit moves in their positions.

The S&P has corrected -5% from Thursday's close. That is a major drop but when compared to the +19.5% rebound in October it is just a start of a normal bout of profit taking. The S&P closed at 1218 and back below the 100-day average at 1230. In theory this would be a minor sell signal but given the consolidation pattern from the last two weeks I think the real number to watch is 1200. If we break below 1200 I would worry. I see that as the line in the sand where aggressive traders should buy the dip.

S&P Chart

The Dow has declined -664 points from the Thursday high at 12,284. Support at 11,600 came very close to being tested and another day like today could knock us back to 11,400. This is a dramatic decline but given the +1,880 point rebound from the October lows it only represents a -30% retracement. Under normal conditions that should be the point where aggressive traders start bargain hunting. Unfortunately the headlines are so ugly nobody showed up at the close with cash in hand. Critical support is now 11,400.

Dow Chart

The Nasdaq gapped down to 2600 at the open and then held that level all day despite repeated tests. This was a headline event and only the strong technical support at 2600 kept the Nasdaq from an even larger loss. There were downgrades to multiple tech stocks headlined by Nvidia but the decline was not fundamental. It was a headline event only. Even the news Apple would release the iPhone 4s in 15 more countries in November failed to support Apple stock. That brings the total to 44 countries and suggests Q4 sales should be huge.

The Nasdaq 2600 level is critical support and any further decline could trigger some strong technical selling.

Nasdaq Chart - Intraday

Nasdaq Chart

Volume was strong at 10.2 billion shares after a relatively light 7.4 billion on Monday. It was a 10:1 day in favor of declining volume. Futures are positive late Tuesday so at least there was no continued selling after the close. Early Wednesday morning in Greece Papandreou was still firm on his decision to hold the referendum on austerity. After a 7-hour cabinet meeting his ministers expressed "total support for the initiatives taken by the prime minister" and confirmed the referendum would be held as soon as possible. That suggests we could see more uneasiness on Wednesday as the details are dribbled out to the press.

If you have to be in the market I would be a dip buyer to S&P 1200 with a stop at 1185. I would suggest waiting in cash on the sidelines until this mess is sorted out and the Fed completes its meeting and Bernanke press conference. There will be a point at which the markets shrug off this Greek story but obviously nobody knows when that will happen.

Definitely, sell too soon or at least tighten your stops to protect profits.

Jim Brown

Send Jim an email


New Plays

Small Caps and Copper

by James Brown

Click here to email James Brown


NEW BULLISH Plays

iShares Russell 2000 ETF - IWM - close: 71.39 change: -2.62

Stop Loss: 67.49
ETF target: 75.75
November Call Target: 73.75
January Call Target: 75.75
Current Gain/Loss: unopened
Time Frame: 2 to 8 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
The small caps experienced a huge bounce off their October lows (+25%) and they were due for some profit taking. Shares of the IWM have paused near support after a -6.5% correction. I suspect that the IWM will test its 50-dma before bouncing.

We are suggesting small bullish positions on a dip at $69.50 with a stop loss at $67.45, which is under the mid October lows. Readers can buy the ETF of you can buy the call options.

Trigger @ 69.50 (small positions)

Suggested Position: buy the IWM @ 69.50
Target: 75.75

- or -

buy the NOV $72 call (IWM1119K72)
Target: 73.75

- or -

buy the JAN $73 call (IWM1221A73)
Target: 75.75

Annotated chart:

Entry on November xx at $ xx.xx
Earnings Date --/--/--
Average Daily Volume = 84 million
Listed on November 1, 2011


Copper ETN - close: 45.35 change: -1.55

Stop Loss: 41.90
Target(s): 48.00
Current Gain/Loss: unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
Copper prices experienced a huge bounce in October. The metal was due for some profit taking. Prior resistance near $44.00 should offer new support. I am suggesting we buy a dip. This is a bullish bet that the U.S. and China will continue to see improving economic data. What could hamper this trade is a real breakdown in Europe since a hard default by Greece would damage Europe's economy.

We want to keep our position size small. The JJC tends to gap open every morning, which raises our risk. I am suggesting a trigger to open bullish positions at $44.35 with a stop loss at $41.90. More conservative traders might want to consider a tighter stop loss. Our target is $48.00 although more aggressive traders may want to aim for $50.00 instead.

buy the dip Trigger @ 44.35

Suggested Position: buy the JJC @ 44.35

- or -

buy the NOV $45 call (JJC1119K45)

- or -

buy the JAN $47 call (JJC1221A47)

Annotated chart:

Entry on November xx at $ xx.xx
Earnings Date --/--/--
Average Daily Volume = 438 thousand
Listed on November 1, 2011



In Play Updates and Reviews

Triggering Entries & Stops

by James Brown

Click here to email James Brown

Editor's Note:
The stock market's pull back has been very sharp and we're starting to see some stop losses get hit.

PAY, RHT, and the XLF were all stopped out today. I am suggesting an early exit for our ACOM trade. Meanwhile FAST, NTAP and XLNX were all opened today.

-James

Current Portfolio:


BULLISH Play Updates

Beazer Homes - BZH - close: 2.04 change: -0.11

Stop Loss: 1.84
Target(s): 3.25
Current Gain/Loss: -6.8%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
11/01 update: This is it. I cautioned readers to look for a dip back toward likely support in the $2.00-2.05 zone. Shares actually dipped to $1.95 before paring its losses. I would consider new positions now. Or if you're really bearish on the market then look for a dip into the $1.85-1.80 zone. Please note that we're adjusting our stop loss down to $1.75.

Earlier Comments:
We have listed a very high target at $3.25 but I anticipate scaling that down. This is sort of a just-in-case BZH delivers better than expected earnings and the stock explodes kind of target. This industry is very heavily shorted so a short squeeze is a definite possibility.

Please note we are going to take the unusual step and hold over BZH's earnings in November. Normally we try to always exit ahead of earnings to avoid holding over the announcement.

FYI: You could buy calls but the spreads are so wide they could actually increase your risk (but they'll definitely leverage any move higher).

current Position: Long BZH stock @ $2.19

- or -

Long 2012 Jan $3.00 call (BZH1221A3) Entry $0.15

Entry on October 31 at $2.19
Earnings Date 11/15/11 (confirmed)
Average Daily Volume = 2.4 million
Listed on October 29, 2011


Fastenal Co - FAST - close: 37.20 change: -0.89

Stop Loss: 35.75
Target(s): 39.90
Current Gain/Loss: + 0.0%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
11/01 update: Our new trade in FAST is open and at a better entry point. We planned to launch bullish positions at $37.25 but the stock gapped open lower at $37.17. Considering the market's recent weakness readers may want to wait for a dip into the $36.50-36.00 zone before initiating new bullish trades.

Earlier Comments:
Our target is $39.90. FYI: The Point & Figure chart for FAST is bullish with a $50 target.

current Position: Long FAST @ 37.17

- or -

Long NOV $37.50 call (FAST1119K37.5) Entry $1.00

11/01 FAST gapped open lower at $37.17, trade opened.

Entry on November 1 at $37.17
Earnings Date 01/18/12 (unconfirmed)
Average Daily Volume = 3.0 million
Listed on October 31, 2011


Juniper Networks - JNPR - close: 23.28 change: -1.19

Stop Loss: 21.95
Target(s): 29.00
Current Gain/Loss: *see below*
Time Frame: 6 to 8 weeks
New Positions: Yes, see below

Comments:
11/01 update: Shares of JNPR were a bit more volatile than expected. Our plan was to launch bullish positions on a dip at $24.00 with a stop loss at $22.75. Well today's market decline saw JNPR gap open lower at $23.46 (trade opened) and then drop to $22.75 (trade closed) before paring its losses. That's a -3% loss for us. The plan was to keep positions small to limit our risk.

I still think JNPR offers potential. We will keep JNPR on the newsletter. I am suggesting readers buy JNPR (or calls) if both stock and the S&P 500 index both open positive tomorrow morning. We'll adjust our stop loss down to $21.90.

*see Entry Details Above* (small positions)

Suggested Position: buy JNPR stock @ at the open

- or -

buy the JAN $25 call (JNPR1221A25)

11/01 Try again. New strategy. Buy JNPR if stock and S&P500 opens positive tomorrow, stop loss @ 21.90.
11/01 trade opened at $23.46, stopped out @ 22.75 (-3.0% loss)
option opened @ $1.80, exit $1.36 (-24.4%)
10/29 alternative entry point: dip at $23.00

Entry on October xx at $ xx.xx
Earnings Date 10/18/11
Average Daily Volume = 13 million
Listed on October 29, 2011


NetApp Inc. - NTAP - close: 39.74 change: -1.22

Stop Loss: 37.25
Target(s): 44.50
Current Gain/Loss: - 0.0%
Time Frame: 2 to 3 weeks
New Positions: see below

Comments:
11/01 update: Our new trade on NTAP is open. Shares gapped open lower at $39.75, which was under our trigger to open positions at $40.00. We are adjusting our stop loss down to $37.25 but more conservative traders may want to keep their stop closer to $38.00 instead. I would wait for a rally past $40.50 or consider launching positions if both NTAP and the S&P 500 index both open positive tomorrow.

Earlier Comments:
This is going to be a short-term trade. We do not want to hold over the November 16th earnings report. We'll set our target at $44.50 but we'll plan to exit ahead of earnings.

current Position: Long NTAP stock @ 39.75

- or -

Long NOV $40 call (NTAP1119K40) Entry $1.71

11/01 new stop loss @ 37.25
11/01 NTAP gaps open lower at $39.75, our new entry point.

Entry on November 1 at $39.75
Earnings Date 11/16/11 (confirmed)
Average Daily Volume = 6.8 million
Listed on October 31, 2011


Xilinx Inc. - XLNX - close: 32.52 change: -0.94

Stop Loss: 31.40
Target(s): 35.75
Current Gain/Loss: + 0.0%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
11/01 update: Our trade on XLNX has been opened at $32.50 as planned. The stock is now resting on its simple 200-dma, which should be support. If you're concerned the market has further to fall then you might want to wait for a dip near $32.00 or its 10-dma before considering new bullish positions.

Earlier Comments:
The plan was to keep our position size small to limit risk. Our multi-week target is $35.75. FYI: The Point & Figure chart for XLNX is bullish with a $46 target.

(small positions)

Current Position: Long XLNX stock @ 32.50

- or -

Long Jan $35 call (XLNX1221A35) Entry $0.95

Entry on November 1 at $32.50
Earnings Date 10/19/11
Average Daily Volume = 5.0 million
Listed on October 29, 2011


BEARISH Play Updates

Dish Network - DISH - close: 23.84 change: -0.33

Stop Loss: 24.75
Target(s): 21.25
Current Gain/Loss: +6.0%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
11/01 update: Hmm... I am a bit disappointed that DISH did not drop further today. The stock market is down -5% in just two days. The S&P 500 lost -2.8% today alone. Yet DISH only fell -1.3%. Shares of DISH slipped to $23.00 intraday before paring its losses.

I am not suggesting new positions at this time. We will adjust our stop loss lower to $24.75.

Earlier Comments:
FYI: The Point & Figure chart for DISH is bearish with a $16 target.

current Position: short DISH stock @ $25.38

- or -

Long NOV $25 PUT (DISH1119W25) Entry $1.20

11/01 new stop loss @ 24.75

Entry on October 28 at $25.38
Earnings Date 11/07/11 (confirmed)
Average Daily Volume = 3.0 million
Listed on October 27, 2011


CLOSED BULLISH PLAYS

VeriFone Systems - PAY - close: 39.69 change: -2.52

Stop Loss: 39.95
Target(s): 44.85
Current Gain/Loss: -1.7%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
11/01 update: It was not a great day for PAY. Shares gapped open lower at $40.48 and fell to $39.48 before settling with a -5.9% decline. Our stop loss was hit at $39.95 closing this trade. Readers may want to wait for PAY to close over its 200-dma before considering new bullish positions.

closed Position: Long PAY stock @ $40.65, exit $39.95 (-1.7%)

- or -

NOV $42 call (PAY1119K42) Entry $1.05 exit $0.95 (- 9.5%)

11/01 stopped out at $39.95
10/29 new stop loss @ 39.95
Readers may want to go ahead and take profits now, especially with the Nov $42 calls (+114%)
10/27 new stop loss @ 38.40
10/27 Trade opened. PAY gapped higher at $40.65

chart:

Entry on October 27 at $40.65
Earnings Date 12/01/11 (unconfirmed)
Average Daily Volume = 2.3 million
Listed on October 13, 2011


Red Hat, Inc. - RHT - close: 48.28 change: -1.37

Stop Loss: 47.80
Target(s): 54.75
Current Gain/Loss: -2.7%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
11/01 update: Stocks were trading lower prior to the opening bell and RHT gapped open lower at $47.70. This was under our stop loss at $47.80. The play was closed immediately. Technically the $48 level was supposed to be support. I would be tempted to re-launch bullish positions if both RHT and the S&P 500 index can open positive tomorrow morning.

closed Position: Long RHT stock @ 49.05, exit $47.70 (-2.7%)

- or -

NOV $50 call (RHT1119K50) Entry $1.20 exit $0.75 (-37.5%)

11/01 stopped out on gap open lower at $47.70
10/29 new stop loss @ 47.80
readers may want to take profits on the calls now, which are already up +137%
10/27 trade opened at trigger $49.05

chart:

Entry on October 27 at $49.05
Earnings Date 12/21/11 (unconfirmed)
Average Daily Volume = 2.8 million
Listed on October 26, 2011


Financial Sector ETF - XLF - close: 12.86 change: -0.64

Stop Loss: 13.25
Target(s): 14.45
Current Gain/Loss: + 1.0%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
11/01 update: Financial stocks were getting hammered overseas as investors reacted to news that the Greek government is proposing a referendum vote on the recent EU bailout plans. This has the potential to be a disaster. When our markets opened the U.S. financial sector plunged. The XLF gapped open lower at $12.84, which was well under our stop loss of $13.25. The play was closed immediately.

current Position: Long XLF @ $12.71, exit $12.84 (+1.0%)

11/01 XLF gaps open lower at $12.84, under our stop of $13.25
10/28 exited Nov. $13 calls @ $1.00 (+138.0%)
10/27 plan to exit Nov. $13 calls at the open tomorrow
10/27 new stop loss @ 13.25
10/20 trade opened. XLF at $12.71
10/19 try again. New stop loss @ 11.95

chart:

Entry on October 20 at $12.71
Earnings Date --/--/--
Average Daily Volume = 125 million
Listed on October 18, 2011


CLOSED BEARISH PLAYS

Ancestry.com Inc. - ACOM - close: 22.77 change: +0.10

Stop Loss: 24.35
Target(s): 18.75
Current Gain/Loss: -3.3%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
11/01 update: ACOM is not cooperating. The stock market is down huge these last two days and yet ACOM will not break support near $22.00-21.50. I am suggesting an early exit now. Readers might want to consider keeping ACOM on your watch list for a breakdown under $21.50 as a possible entry point for bearish positions.

closed Position: short ACOM stock @ $21.80, exit $22.77 (-3.3%)

- or -

NOV $22.50 PUT (ACOM1119W22.5) Entry $1.41 exit $1.20 (-14.8%)

11/01 We want to exit early!

chart:

Entry on October 28 at $21.80
Earnings Date 10/26/11 (confirmed)
Average Daily Volume = 840 thousand
Listed on October 27, 2011