Option Investor
Newsletter

Daily Newsletter, Wednesday, 4/25/2012

Table of Contents

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

Market Wrap

An AAPL A Day Keeps the Bears Away

by Keene Little

Click here to email Keene Little
AAPL's rally gave NDX its best day of the year and Bernanke didn't spoil the party. Now all the bulls need to do is get some follow through to the upside.

Market Stats

It was all about AAPL today, or at least this morning, and clearly AAPL's earnings report after the bell yesterday had traders giddy with excitement today. It caused many analysts to immediately raise their price targets for the stock and Goldman Sachs' previous $750 estimate is so yesterday. Now they're saying $850. Do I hear $950? How about an even $1000? The Cheerleading Network of Buffoons and Clowns was doing its best to entice more traders to buy the market this morning and now with so many pundits calling the pullback from the April high complete, and new highs ahead, I can't help but wonder if we've seen too dramatic a shift back to the bullish side of the boat. Many were out today with new calls for SPX 1500.

AAPL's huge gain, finishing +8.9% at 610, gave the tech indexes a big boost. NDX had its best day of the year with today's +2.7% for the day. While some might believe all we need to know is how many iPads and iPhones are flying off the shelf, one could be forgiven for believing durable goods orders is a more important metric for the health of the economy. I know this is blasphemous talk, thinking the broader economy might be more important than AAPL, since it's clear that many market participants feel that AAPL IS the economy. Therefore the bad durable goods report today was ignored.

But in case you care (wink), the durable goods report was another sign of a slowing economy. While February was revised higher, from +1.9% to +2.4%, it didn't help soften the -4.2% for March. The estimates from economists were for about -1.5%. The always-volatile transportation part of the number is what dragged it down the most and removing that component left the Durable Goods-ex Transportation down "only" -1.1%, which follows February's -1.8% (revised lower from -1.9%). No matter how you slice it, the number is not good and following other recent economic reports it's another signal of a slowing economy.

While the market has been focused on Europe's woes it's not just Europe slowing down -- the U.S. has been right behind it. Britain has made it official now -- it entered a double-dip recession last quarter for the first time since the 1970s. Friday's Q1 GDP report for the U.S. is not expected to change much from Q4's 3.0% so any disappointment there could have a negative effect on the market.

Once the initial rally was over this morning (by 10:00 AM) the market went on hold while waiting for word from the Mount this afternoon. Everyone knows the Fed's rate is not going to change, which it didn't (still at 0.25%), but the market is still wanting more money coursing through its veins and the best source of that, for a very long time now, has been the Fed (with other global central banks, especially the ECB, helping greatly). The global markets are all now dependent on more money coming into the system to help push prices higher. Without the demand for stocks, helped by the new money coming into the market, the prices will not be able to hold up.

This afternoon's speech by Bernanke had the market spinning and turning a couple of times as hope and fears about what the Fed will and will not do caused the market to gyrate around his words. Still amazes me that the market is so much more interested in what the Fed will do instead of what the economy is doing and how much trouble the financial system is in. But we all know we're not dealing with a logical market (an oxymoron) and it will never be. Human beings drive this ship and we're not exactly logical when it comes to money.

This update from John pretty much says it all (and why the market jerked up and down with each thing Bernanke said):

"Europe has made substantial progress, but they are going to have to do more".
"Inflation will moderate later this year".
"FOMC is comfortable with 2014 guidance"
"Making progress on too-big-to-fail"
"Balance sheet tools are still on the table"
"Fed prepared to do more if appropriate"
"Housing is a headwind to recovery"
"Jobless rate will come down gradually"

We of course heard nothing that we haven't heard multiple times before. It's Bernanke doing only what he can do at this point -- jawbone the market higher. He's hoping he can say soothing things and keep the market propped up long enough to give the economy a chance to recover before the market realizes who the financial wizard is behind the curtain (and that he's not wearing any clothes). I do wonder many times if he still really believes his own, um, words.

While Bernanke has been attempting to jawbone the market higher with soothing words and promises of more to come, the Fed has actually been slowly letting some air out of the balloon. It's a bit like distracting your child while the doctor gives him his vaccination. The chart below shows the money supply has peaked and is slowly turning down (note that SGS stands for Shadow Government Statistics from shadowstats.com). Some of this has to do with the slowing in the velocity of money (lower lending by banks decreases the velocity of the growth) but we also know the Fed has been injecting less (the Operation Twist is not growing their balance sheet). The question of course is whether the Fed will try something more to boost the money supply (print more money), which may or may not be effective if people and businesses withdraw into their cocoons and borrow even less.

It should be noted that the money supply continues to increase as long as the line is above zero. The chart above is from shadowstats.com and they've been tracking the components of M3 since the Fed stopped reporting it in 2006. When the line starts to tip over above zero it simply means the growth of money has slowed down.

The stock market isn't all about how much money is being created or destroyed but credit is the lifeblood of the financial system and what the Fed is trying to do is keep that lifeblood flowing. A fiat-based currency system only works as long as people have faith in the system. Lose the faith and you lose the system and that's what was so worrying about the financial collapse back in 2008. The Fed and other central governments will do and say anything to prevent that from happening again.

But human nature is a fickle thing and the mood of people appears to be swinging back towards more pessimism than optimism about the economy. While the Fed has programs to address monetary issues they can't do much about these mood swings. If the economy continues to slow down and borrowing continues to contract we'll see that reflected in the stock market. We continue to see evidence of this in the housing market where banks are unwilling to lend to anyone without a pristine credit record (which means only those who don't need to borrow are the ones eligible to borrow). The housing market continues to suffer from a combination of banks' tightened lending standards and people's unwillingness to take on more than they can afford (unwilling to take on additional risks).

This process will take time to heal and while I very much look forward to what's on the other side of this period, we still have a few more years to stay cautious about the market and stay in a trading frame of mind. That affects more what you do with longer-term investments like your retirement plans but as traders we will look to trade both directions and that gives us an advantage over most stock market participants.

So let's see what the next trading opportunities look like. I'll start off with the DOW's charts tonight since I want to show what could be happening from a short-term bullish perspective. Keep in mind that I will show why you'll want to short this market tomorrow if it pushes a little higher but to keep the bears in check (cautious) I'll show what the choppy pattern we've seen this month could mean.

The weekly chart of the DOW shows a leg up into the middle of May for a minor new high, potentially back up to the broken uptrend line from July 2009, which has stopped the rally repeatedly since first testing it in October. Between that line and the middle of an up-channel from December we could see the DOW press up to the 13400 area before finishing its rally. For a longer perspective, the a-b-c rally from last year's lows should complete the larger rally from 2009 and set up the next major bear market leg down.

Dow Industrials, INDU, Weekly chart

Price action since the April 10th low has been very choppy (3-wave moves) with no follow through in either direction. It's either a correction to the initial leg down from April 2nd (as I'll point out on the SPX charts) or it's going to be a rising wedge pattern for the final 5th wave of the move up from November, which is what I'm depicting on the DOW's chart. It will be a mess to trade (as it has been for the past two weeks) but in another 2-3 weeks it would set up one of the best shorting opportunities you'll have in this market. There's clearly some upside potential by this pattern but it pales in comparison to the downside risk and this market could let go at any time (usually starting with something that happens overseas). But for the moment the DOW stays bullish until it drops below Monday's low near 12845

Dow Industrials, INDU, Daily chart

Key Levels for SPX:
- bullish above 13,270
- bearish below 12,845

Zooming on what the rising wedge might look like, the chart below shows a typical pattern, which is full of 3-wave moves but a total of 5-waves to complete it. It means day trading only until this is either proven or disproven. Some of that day trading will mean holding a position overnight to capture the move but then get out once the early-morning move completes (such as buying Tuesday's close and covering at this morning's open). I'm projecting the choppy rise higher into May's opex but clearly that's just speculation at the moment. The pattern will of course be updated each day to reflect actual price moves.

Dow Industrials, INDU, 60-min chart

Compare the SPX 60-min chart below with the DOW's chart above. Instead of projecting a move higher into the 3rd week of May I'm expecting the market to roll over following the current rally. This is based on an a-b-c bounce pattern off the April 10th low. Two equal legs up projects to 1294.16. The c-wave, which is the leg up from Monday, needs to be a 5-wave move and that's how I've got it labeled so far. This afternoon's rally was choppy as it moved higher and therefore has the potential to be the entire 5th wave (with only a minor new high above this morning's 3rd-wave high). Ideally I'd like to see a move up to 1397-1400 to set up the short play (or at least 1394) and that's what I'll be watching for on Thursday. But I had suggested entering a small short position at today's close because of the possibility we'll see an immediate reversal lower from here. The bearish wave count here calls for a sharp selloff into May (at least 60 SPX points and probably 100).

S&P 500, SPX, 60-min chart

The SPX daily chart below is a bit crowded with trend lines and moving averages but I'm trying to show both the DOW possibility (rising wedge with an upside target at 1429 -- the Gann target) and the more bearish possibility. The sideways consolidation following the April 2-10 decline looks like a bear flag continuation pattern and a drop to its 200-dma, near 1274, is the bearish potential from here. A break below Monday's low (for all indexes) would likely lead to much stronger selling.

S&P 500, SPX, Daily chart

Key Levels for DOW:
- bullish above 1400
- bearish below 1358

Other the DOW's potential bullish pattern, I've been looking at the NDX as potentially bullish as well. The choppy pullback from its April 3rd high has looked more like a bull flag than something more bearish. I've seen enough of these corrective pullbacks lead to a sudden break lower so remains a distinct possibility here. What the NDX does here at resistance at the top of its flag pattern and its 20-dma, both near 2718 on Thursday (about 7 points higher than today's high), will tell us plenty. A break above would clearly be bullish whereas a deep retracement would be worrisome. A break below Monday's low near 2629 would be bearish and below 2600 would be a breakdown from a bullish pattern and a failed pattern tends to fail hard.

Nasdaq-100, NDX, Daily chart

Key Levels for NDX:
- bullish above 2740
- bearish below 2600

The RUT is more like SPX than any of the other indexes and at the moment that's bearish and could be tie-breaker index for us. Between its 20-and 50-dma's and a downtrend line from May 27th, it takes a rally above 825 to get me bullish the small caps. Two equal legs for an a-b-c bounce off the April 10th low points to 817.86. I'm sure it's only coincidental (wink) that it would close its April 9th gap at 817.91. If it pushes up to that level by tomorrow afternoon that's also where the downtrend line from March 27th will be located. That would be a very sweet setup for a short play since you could keep your stop relatively tight (near 820, although keep in mind that a 62% retracement of the April decline is at 823.33).

Russell-2000, RUT, Daily chart

Key Levels for RUT:
- bullish above 825
- bearish below 785

Following up on last week's daily chart of the 10-year yield, TNX, the weekly chart below gives a longer-term perspective of what I think is playing out in bonds. TNX rose slightly today but gave back a bunch of the day's gain following Bernanke's talk, as bonds rallied in anticipation of the bond-buying program being reinstated. Considering support is now very close -- its uptrend line from September is now near 1.86% -- I suspect the bond market will soon sell off (yields rise) when it worries that the Fed may not buy enough longer-term debt (through an extension of their Operation Twist program). That's just speculation at this point but the pattern calls for at least a bounce off support. What can't be known yet, assuming we'll see a bounce off support, is whether the bounce will only be up to its downtrend line from April 2011 (and 50-week MA) before heading lower or up to the top of its ascending triangle pattern before dropping to new low later this year. Longer term I think Bernanke is going to get his wish for lower rates.

10-year Yield, TNX, Weekly chart

SPX is more heavily influenced by the financials than is the DOW and therefore it's not surprising to see the bank indexes looking more like SPX than the DOW. The sideways consolidation since April 10th looks like a sideways consolidation before heading lower. Currently BKX is battling between its 20-dma above, which it tested again today, and its 50-dma below, which held Monday's close. The bears need to see BKX below 46.70.

KBW Bank index, BKX, Daily chart

The TRAN is not presenting a clear picture at the moment. Last week's back test and failure at its broken uptrend line from October was bearish but it doesn't mean it can't try it again (light red dashed line). The choppy price action leaves the door open to a push higher (for a possible triple top) or a decline right from here.

Transportation Index, TRAN, Daily chart

The dollar continues to chop its way lower and that continues to have me leaning toward the upside but now that it's broken its uptrend line from October-April I wonder if it will drop to its next uptrend line from August-October, near 78.75, before starting the next leg up. I suspect the dollar and stock market will continue to trade inversely and therefore I'll be looking for confirmation between the two for direction.

U.S. Dollar contract, DX, Daily chart

The metals have been just as choppy as the dollar and it makes it difficult to figure out the next move. I've tried to capture the moves with trend lines and it's a bit like herding wild cats. So far gold remains below its downtrend line from February 29th, which it tested yesterday and today. It's also below its 20-dma near 1650. If it climbs above 1650 I'll be watching for the possibility of one more touch of the top of a sideways triangle, near 1665, before heading lower. A rally above 1670 would be at least short-term bullish. If it starts to drop lower from here I'll be looking for at least a drop to the 1575 area.

Gold continuous contract, GC, Daily chart

What a surprise, oil has also been in a very choppy pattern. It seems no one feels strongly enough about these commodities to get them to establish a trend. Oil needs to get above 105 to break resistance at its 50-dma and downtrend line from March 1st. A drop below last week's low would likely be followed with a drop down to the bottom of its down-channel, currently near 98.70.

Oil continuous contract, CL, Daily chart

Is it time to finally take a nibble on the long side of natural gas? It had dropped a little lower than I thought it would but the bullish descending wedge since the end of February, with the accompanying bullish divergence, says the bounce off last week's low is probably the start of at least a bigger bounce. But so far the bounce is only a 3-wave move with two equal legs up at 2.09 (today's high). If the bounce develops into a 5-wave move I'd look to buy the next pullback to a higher low. A break above 2.15 should also be a good signal the bottom is in for now. UNG is an ETF you can use to play NG but use it more for trading, not longer-term buy and hold.

Natural gas continuous contract, NG, Daily chart

Tomorrow will be quiet as far as economic reports. The pending home sales might jostle the market if it comes in much different than expected but so far the market is not paying much attention to housing. As for the unemployment claims, not many trust the government's data anyway. From overseas tonight we'll get Germany's CPI numbers, the EU's report on economic sentiment (a broad measure of consumer and business sentiment) and the Bank of Japan's policy announcement.

Economic reports, summary and Key Trading Levels

Following AAPL's big rally this morning, which basically happened after hours yesterday and pre-market this morning, it went dead flat after a small pullback in the morning. In other words there was no follow-on buying to what appears to be mostly short covering. All the calls for $850 didn't seem to get more wannabe bulls off the bench to take another swing at the AAPL. That's not encouraging.

The broader averages at least got a little more buying into the close but because it was choppy as it rose marginally higher it actually looked more like an ending pattern to the upside. That interpretation calls for at least a pullback Thursday morning before heading higher. More bearishly it calls for the resumption of selling and the bearish pattern calls for hard selling into May so be careful about buying a pullback.

If the market does press marginally higher Thursday morning it would do a nice job completing the leg up from Monday and that in turn would set up a very good opportunity for the bears. As per the SPX chart, look for a rally to 1394-1400 to set up the short play. But this market has been hiding its intentions well and as per the DOW's chart I see the possibility for a choppy climb higher into mid-May at least. The bottom line is that I see much more downside potential from here but it doesn't mean go short, close your eyes and hope for the best. Risk management, proper stop management, position size, etc. are all very important right now. It's far better to not be in a trade that you wish you were in than to be in a trade that you wish you were not.

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 Plays

Drugs & Healthcare Technology

by James Brown

Click here to email James Brown


NEW BULLISH Plays

Teva Pharma - TEVA - close: 45.51 change: +0.16

Stop Loss: 44.45
Target(s): 49.50
Current Gain/Loss: unopened
Time Frame: exit prior to the mid May earnings report
New Positions: Yes, see below

Company Description

Why We Like It:
Shares of this drug maker are slowly building on a bullish trend of higher lows. If the stock can breakout past resistance near $46.00 it should be an entry point. I am suggesting a trigger at $46.25 to launch positions. We'll use a stop loss at $44.45 to start. Our target is $49.50 but we will probably exit early to avoid the mid-May earnings report.

Trigger @ $46.25

Suggested Position: buy TEVA stock @ (trigger)

- or -

buy the May $45 call (TEVA1219E45) current ask $1.46

Annotated chart:

Entry on April xx at $ xx.xx
Earnings Date 05/09/12 (unconfirmed)
Average Daily Volume = 3.3 million
Listed on April 25, 2011


NEW BEARISH Plays

Quality Systems - QSII - close: 38.45 change: +0.86

Stop Loss: 40.25
Target(s): 34.50
Current Gain/Loss: unopened
Time Frame: exit prior to the late May earnings report
New Positions: Yes, see below

Company Description

Why We Like It:
On Monday QSII broke down from a two-week consolidation sideways. Shares had been trading with a bearish trend of lower highs. Now the stock appears to be in another leg lower. Traders were selling the bounce this morning.

I am suggesting we launch bearish positions at the open tomorrow. We'll start with a stop loss at $40.25 since the $40.00 level should be resistance. I do see potential support at $36.00 and $34.00 and we are going to set our exit target at $34.50 but we plan to exit prior to the late May earnings report. Readers may want to use small positions. The most recent data listed short interest at 12% of the relatively small 39.4 million share float so that does raise the risk of a possible short squeeze.

open positions tomorrow morning

Suggested Position: short QSII stock @ (the open)

- or -

buy the May $40 PUT (QSII1219Q40) current ask $2.15

Annotated chart:

Entry on April xx at $ xx.xx
Earnings Date 05/24/12 (unconfirmed)
Average Daily Volume = 476 thousand
Listed on April 25, 2011



In Play Updates and Reviews

Stocks Produce A Widespread Bounce

by James Brown

Click here to email James Brown

Editor's Note:
Positive earnings results from big cap tech giant AAPL helped spark a widespread rebound in stocks on Wednesday. Participation in the rally among our newsletter candidates was definitely mixed with some stocks surging and others failing to participate.

Current Portfolio:


BULLISH Play Updates

Hain Celestial Group - HAIN - close: 46.79 change: +1.90

Stop Loss: 43.90
Target(s): 49.00
Current Gain/Loss: + 3.8%
Time Frame: exit prior to the May 3rd earnings report
New Positions: see below

Comments:
04/25 update: HAIN continues to show a lot of volatility the last few days. Today shares produced a sharp reversal higher. I couldn't find any news to explain the relative strength (+4.2%). If you're holding the May calls I would be tempted to exit early now and lock in a gain. I am not suggesting new positions at this time.

current Position: long HAIN stock @ $45.05

- or -

Long May$45 call (HAIN1219E45) Entry $1.85

04/21/12 new stop loss @ 43.90
04/03/12 triggered @ 45.05

Entry on April 03 at $45.05
Earnings Date 05/03/12 (unconfirmed)
Average Daily Volume = 279 thousand
Listed on April 02, 2011


rue21, Inc. - RUE - close: 29.86 change: +0.20

Stop Loss: 28.45
Target(s): 33.50
Current Gain/Loss: - 1.9%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
04/25 update: The trading action in RUE was a bit disappointing. The stock only gained 20 cents and the rally reversed near its short-term trend of lower highs this morning. It still looks like RUE is forming a bull-flag consolidation pattern (with a really short flag pole) but the trend of higher lows is still intact. Readers may want to raise their stop loss closer to the simple 30-dma (near $29.00).

Our multi-week target is $33.50. We want to exit prior to the late May earnings report. FYI: The Point & Figure chart for RUE is bullish with a long-term $48.00 target.

(small positions)

Suggested Position: Long RUE stock @ $30.25

- or -

Long May $30 call (RUE1219E30) Entry $1.70

04/17/12 triggered at $30.25

Entry on April 17 at $30.25
Earnings Date 05/24/12 (unconfirmed)
Average Daily Volume = 304 thousand
Listed on April 164, 2011


ProShares UltraPro Short QQQ - SQQQ - close: 11.14 change: -0.97

Stop Loss: 10.60
Target(s): 13.25
Current Gain/Loss: - 3.9%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
04/25 update: Ouch! I warned you last night that today would be rough for the SQQQ. AAPL is a big part of the NASDAQ-100 and the company knocked the ball out of the park with its earnings results last night. AAPL's +8.8% gain today helped fuel a +2.6% pop in the NDX index. The SQQQ lost -8.0%. More conservative traders may want to raise their stop loss closer to the $11.00 level. I am not suggesting new positions at this time.

Remember, this is the triple inverse ETF on the QQQ so expect volatility.

current Position: Long SQQQ @ $11.60

- or -

Long May $12.00 call (SQQQ1219E12) Entry $0.73

04/16/12 triggered at $11.60

Entry on April 16 at $11.60
Earnings Date --/--/--
Average Daily Volume = 2.3 million
Listed on April 10, 2011


BEARISH Play Updates

Barrick Gold - ABX - close: 39.97 change: +0.36

Stop Loss: 42.20
Target(s): 37.50
Current Gain/Loss: + 2.6%
Time Frame: up to the May 2nd earnings report
New Positions: Yes, see below

Comments:
04/25 update: Shares of ABX underperformed its peers in the gold industry. The stock is struggling with resistance near $40.00. I am not suggesting new bearish positions at this time.

Our exit target is $37.50. We do not want to hold over the early May earnings report. FYI: The Point & Figure chart for ABX is bearish with a $32.00 target.

(small positions)

current Position: short ABX stock @ $41.02

- or -

Long May $40 PUT (ABX1219Q40) Entry $1.13

04/21/12 new stop loss @ 42.20

Entry on April 17 at $41.02
Earnings Date 05/02/12 (confirmed)
Average Daily Volume = 7.9 million
Listed on April 164, 2011


American Public Education - APEI - close: 34.81 change: -0.17

Stop Loss: 36.60
Target(s): 31.00
Current Gain/Loss: + 0.6%
Time Frame: up to its May 10th earnings report
New Positions: see below

Comments:
04/25 update: The rally attempt in APEI didn't last that long and shares quickly reversed lower. I would use today's relative weakness as a new entry point for bearish positions.

Earlier Comments:
The plan was to limit our risk with small positions. Our exit target is $31.00 but we do not want to hold over the May 10th earnings report. This is a higher-risk trade. Lots of investors think APEI is going lower and the most recent data listed short interest at 20% of the very small 16.8 million share float. That does raise the risk of a short squeeze. You may want to limit your exposure by trading options.

(small positions)

Suggested Position: short APEI stock @ $34.75

- or -

Long May $35 PUT (APEI1219Q35) Entry $2.10

04/23/12 new stop loss @ 36.60
04/19/12 triggered at $34.75

Entry on April 19 at $34.75
Earnings Date 05/10/12 (unconfirmed)
Average Daily Volume = 202 thousand
Listed on April 18, 2011


Consolidated Graphics - CGX - close: 39.79 change: +0.09

Stop Loss: 42.25
Target(s): 36.50
Current Gain/Loss: + 2.6%
Time Frame: up to its early May earnings report
New Positions: see below

Comments:
04/25 update: CGX underperformed the rest of the market again. The stock briefly traded above $40 this morning but eventually saw gains fade. The trend remains bearish. I am not suggesting new positions at this time.

Bear in mind that we may have to exit early ahead of the early May earnings report. FYI: The Point & Figure chart for CGX is bearish with a $28.00 target.

(small positions)

current Position: short CGX stock @ $40.85

04/23/12 new stop loss @ 42.25
04/20/12 triggered at $40.85

Entry on April 20 at $40.85
Earnings Date 05/01/12 (unconfirmed)
Average Daily Volume = 45 thousand
Listed on April 19, 2011


Ctrip.com Intl. - CTRP - close: 20.98 change: -0.11

Stop Loss: 22.26
Target(s): 18.00
Current Gain/Loss: + 3.3%
Time Frame: exit prior to the May 16th earnings report
New Positions: see below

Comments:
04/25 update: As we expected CTRP saw a spike higher this morning but we were fortunate the rally attempt quickly ran out of steam. CTRP eventually underperformed the market with a decline. Nimble traders could use a drop under $20.50 as a new entry point.

Earlier Comments:
Readers may want to keep their position size small or limit their risk by trading put options. The most recent data listed short interest at about 10% of the 131 million share float. That could raise the risk of a short squeeze. It's possible the $20.00 level could act as round-number, psychological support but we are aiming for $18.00. The Point & Figure chart for CTRP is bearish with a $15.00 target.

current Position: short CTRP stock @ $21.70

04/21/12 new stop loss @ 22.26
04/19/12 planned exit for the April puts: 10 cents (-84.6%)
04/18/12 prepare to exit the April $21 puts at the close tomorrow
04/12/12 new stop loss @ 22.51

Entry on April 02 at $21.70
Earnings Date 05/--/12 (unconfirmed)
Average Daily Volume = 3.6 million
Listed on March 31, 2011


First Solar, Inc. - FSLR - close: 18.30 change: -0.34

Stop Loss: 22.25
Target(s): 15.25
Current Gain/Loss: + 4.6%
Time Frame: exit prior to earnings in early May
New Positions: see below

Comments:
04/25 update: FSLT posted another loss (-1.8%) and set another record low. I am not suggesting new positions at this time.

We have a stop loss at $22.25. More conservative traders may want to use a tighter stop but I want to warn you that FSLR shares can be volatile.

Earlier Comments:
Broken support at $20.00 should be new resistance. Please note that we want to keep our position size small to limit our risk because the most recent data listed short interest at 42% of the 59.8 million share float. That does raise the risk of a short squeeze. Readers might want to use put options to really limit risk.

(small positions)

current Position: short FSLR stock @ $19.19

- or -

Long May $18 PUT (FSLR1219Q18) Entry $1.36

Entry on April 24 at $19.19
Earnings Date 05/03/12 (unconfirmed)
Average Daily Volume = 7.1 million
Listed on April 23, 2011


Hi Tech Pharmacal - HITK - close: 33.75 change: +1.23

Stop Loss: 35.05
Target(s): $30.50
Current Gain/Loss: + 1.9%
Time Frame: 2 to 4 weeks
New Positions: see below

Comments:
04/25 update: HITK took a big chunk out of our unrealized gains with a +3.7% gain today. The stock remains under resistance and a bearish trend of lower highs but I'm not suggesting new positions.

More conservative traders may want to lock in gains on a dip near $32.00. Currently we're aiming for $30.50.

current Position: short HITK stock @ $34.40

04/21/12 new stop loss @ 35.05, adjust exit target to $30.50
04/19/12 planned exit for our April put: $1.30 (-13.3%)
04/18/12 prepare to exit our April $35 puts at the close tomorrow
04/14/12 new stop loss @ 35.55
04/10/12 triggered at $34.40

Entry on April 10 at $34.40
Earnings Date 07/05/12 (unconfirmed)
Average Daily Volume = 155 thousand
Listed on April 09, 2011


ICICI Bank Ltd. - IBN - close: 32.26 change: -0.09

Stop Loss: 34.85
Target(s): 30.25
Current Gain/Loss: - 0.7%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
04/25 update: IBN failed to participate in the market's widespread rally on Wednesday. There is no change from my prior comments. I would still consider new bearish positions here or you could wait for a new failed rally near $33.00, which should be new overhead resistance.

Our target is $30.25. More aggressive traders could aim lower.

Suggested Position: short IBN stock @ 32.05

- or -

Long May $32 PUT (IBN1219Q32) Entry $1.32

04/23/12 triggered on gap down at $32.05, trigger was 32.75

Entry on April 23 at $32.05 (gap down)
Earnings Date --/--/-- (unconfirmed)
Average Daily Volume = 1.9 million
Listed on April 14, 2011


ChipMOS Tech. - IMOS - close: 13.46 change: +1.42

Stop Loss: 14.05
Target(s): 11.50
Current Gain/Loss: - 2.9%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
04/25 update: I had warned readers that IMOS was a volatile stock and that shares might see a big bounce today but a +11.8% gain still hurts! IMOS rallied right to resistance near $14.00 and its 10-dma before starting to pare its gains. I'm not suggesting new positions at this time.

The plan was to keep our position size small to limit our risk. IMOS can be a volatile stock. FYI: The Point & Figure chart for IMOS is bearish with a $8.00 target.

(small positions)

current Position: short IMOS stock @ $13.08

- or -

Long May $12.50 PUT (IMOS1219Q12.5) Entry $0.99

04/24/12 new stop loss @ 14.05, readers may want to take profits now with our trade up +8%.

Entry on April 23 at $13.08
Earnings Date 05/14/12 (unconfirmed)
Average Daily Volume = 356 thousand
Listed on April 21, 2011


Rovi Corp. - ROVI - close: 28.95 change: +0.99

Stop Loss: 30.25
Target(s): 26.25
Current Gain/Loss: + 1.1%
Time Frame: exit prior to the May 3rd earnings report
New Positions: see below

Comments:
04/25 update: Last night I cautioned readers that ROVI might bounce toward technical resistance at its 10-dma. That's exactly where the stock settled today. While the larger trend is still down today's +3.5% bounce still hurts.

Earlier Comments:
There is potential support near $28.00 and $26.00. We are setting our exit target at $26.25.

open positions on Monday morning

Suggested Position: short ROVI stock @ $29.27

- or -

Long MAY $30 PUT (ROVI1219Q30) Entry $2.45

04/23/12 new stop loss @ 30.25

Entry on April 16 at $29.27
Earnings Date 05/10/12 (unconfirmed)
Average Daily Volume = 1.2 million
Listed on April 14, 2011


Red Robin Gourmet Burgers - RRGB - close: 34.13 change: -0.51

Stop Loss: 35.55
Target(s): 31.50 or 200-Ema
Current Gain/Loss: unopened
Time Frame: exit prior to the mid May earnings report
New Positions: Yes, see below

Comments:
04/25 update: The stock market's broad-based rally today produced +1.5% gain in RRGB. If you look at the daily chart you'll see that shares still have a bearish trend of lower highs.

Currently I am suggesting a trigger to open small bearish positions at $33.75. We'll use a stop loss at $35.55 to start. Our target is $31.50 or the exponential 200-dma, whichever RRGB hits first. We do want to keep our position size small because the most recent data listed short interest at 12% of the very small 13.3 million share float. That does raise the risk of a possible short squeeze. You may want to trade the put options to limit your risk

Trigger @ $33.75

Suggested Position: short RRGB stock @ (trigger)

- or -

buy the May $35 PUT (RRGB1219Q35)

Entry on April xx at $ xx.xx
Earnings Date 05/17/12 (unconfirmed)
Average Daily Volume = 205 thousand
Listed on April 24, 2011


St. Jude Medical - STJ - close: 38.20 change: +0.31

Stop Loss: 40.05
Target(s): 34.25
Current Gain/Loss: - 2.0%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
04/25 update: STJ produced a bounce toward short-term technical resistance at its simple 10-dma. Readers may want to look for a new drop under $37.90 as an entry point for bearish positions.

Our target is $34.25. FYI: The Point & Figure chart for STJ is bearish with a $31.00 target.

current Position: short STJ stock @ $37.45

- or -

Long May $37.50 PUT (STJ1219Q37.5) Entry $1.20

04/23/12 new stop loss @ 40.05
04/23/12 triggered at $37.45

Entry on April 23 at $37.45
Earnings Date 04/18/12
Average Daily Volume = 5.1 million
Listed on April 21, 2011


CLOSED BEARISH PLAYS

Blue Nile Inc. - NILE - close: 31.25 change: +0.85

Stop Loss: 32.51
Target(s): 26.00
Current Gain/Loss: - 4.6%
Time Frame: exit prior to the early May earnings report
New Positions: see below

Comments:
04/25 update: We have been concerned about the relative strength in NILE the last couple of days. Last night we decided to exit positions at the open this morning. NILE opened higher at $30.69.

Earlier Comments:
The plan was to keep our position size small to limit our risk. The most recent data listed short interest at 31% of the very small 13.7 million share float. That does raise the risk of a short squeeze. You may want to use options to limit your risk.

(small positions)

closed Position: short NILE stock @ $29.35, exit $30.69 (-4.6%)

- or -

May $30 PUT (NILE1219Q30) Entry $2.40 exit $1.65 (-31.2%)

04/25/12 planned exit
04/24/12 prepare to exit at the open tomorrow morning
04/23/12 Warning! NILE has reversed higher. This could be a bullish double bottom. Readers may want to exit immediately to limit losses.

chart:

Entry on April 23 at $29.35
Earnings Date 05/03/12 (unconfirmed)
Average Daily Volume = 246 thousand
Listed on April 21, 2011