Option Investor
Newsletter

Daily Newsletter, Tuesday, 5/29/2012

Table of Contents

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

Market Wrap

Bad News Ignored

by Jim Brown

Click here to email Jim Brown

They say market bulls like to climb a wall of worry but today they ignored the bad news completely.

Market Statistics

Investors came back from the three day weekend with bargain hunting on their mind and good news from Greece helped push the markets higher. The jump in the Greek polls for the pro-austerity New Democracy party removed some of the worry that Greece will leave the euro sooner rather than later.

The markets opened with another short squeeze but news just after 11:00 that Egan Jones cut its rating on Spain for the third time in less than a month nearly ended that rally. Egan Jones cut Spain to B from BB-minus. The company pointed to deteriorating public finances and expected payments necessary to support the banking system. Spain is going to issue new debt to bail out its banking sector despite yields approaching 7% on that debt. Just a few days ago Moody's downgraded 16 Spanish banks.

This third downgrade in a month by Egan Jones caused the euro to collapse and the dollar to spike to new two year highs. That crushed commodities including oil and gold and pushed the stock markets to their lows for the day.

Euro Chart - Intraday

Dollar Index Chart - Intraday

Gold Chart - Intraday

Oil Chart - Intraday

On the U.S. side of the pond the economic reports were all negative but investors ignored them all. The worst was the Consumer Confidence for May. The headline number fell from the April's previously reported 69.2 to 64.9. That April number was also revised down to 68.7.

The -3.8 point decline was the third consecutive decline in confidence. This survey is impacted more by the stock market than the consumer sentiment survey which was reported last week at a four year high. Both surveys have different sampling methods and different questions.

The biggest hit to the confidence report came from the present conditions component, which fell from 51.2 to 45.9. The expectations component fell from 80.4 to 77.6. Despite the decline in confidence the buying plans by respondents actually improved. Those planning on buying a car rose from 9.9% to 10.4%. Appliance buyers rose from 44.6% to 45.3%. Home buyers declined only slightly from 4.5% to 4.4%.

The stock market component was evident with those expecting stocks to rise falling from 35.0% to 30.8% and is now the lowest level since January. The herd is turning bearish.

Consumer Confidence Chart

The Texas Manufacturing Survey for May declined from -3.4 to -5.1 and the third consecutive decline from the February high at 17.8. The new orders component was negative at -0.6 and backorders -4.0. The employment components also declined with the employment component falling from 11.8 to 8.5 and the average workweek was negative at -2.2.

This is just one more regional survey that has shown a decline in economic activity since March. The weakness in Europe is weighing on U.S. manufacturing.

Moody's Texas Manufacturing Chart

The Case Shiller Home Price Index showed that home prices declined -2.6% from year ago levels. This was actually the third consecutive month of improvement and better than the -3.6% decline in the prior month. This data was for the three months ended in March so it is old data as far as the market is concerned. It was ignored.

Europe controlled our fate for the first two days of the week but the magnitude of the U.S. economic reports out later this week should refocus investor attention back on the USA. That may not be a good thing for equities. There is a strong possibility there will be some disappointments in the data.

The combination of the GDP, ISM Chicago and ADP Employment on Thursday is going to be a potent combination. Friday's Payrolls and ISM Manufacturing could be the knockout punch or the spark that sends us a lot higher. In this case the devil will be in the data.

Economic Calendar

After the bell today Research in Motion (RIMM) announced they had retained JP Morgan and RBC Capital markets to "review" strategic options. That normally means "find a buyer for the company or its assets." CEO Thorstein Heins said in late March he was exploring all options including sale of the company.

RIM noted in its "business update" the company is facing challenges and financial performance in future quarters will also be challenging. The company said it now expects to post a loss for the current quarter. Analysts had been expecting a profit of 42 cents. Reuters reported on Sunday that RIM could announce job cuts of as many as 6,000 workers out of its workforce of 16,500.

RIMM shares declined -14% in afterhours trading and traded as low as $9.50.

RIMM Chart

Faecbook (FB) options began trading today with over 100,000 contracts traded in the first hour. That increased to more than 313,000 for the full day. That represents 31 million shares or roughly 7% of the float. Volume in the stock rose to 78 million shares.

Analysts believe that funds hoping to see a rebound back over $32 as an opportunity to sell their shares finally gave up in the face of persistent declines and threw in the towel.

Mark Zuckerberg has lost nearly $5 billion in stock value over the seven days. That leaves him with $14 billion so I am not feeling sorry for him. He and his wife of a week are vacationing in Rome while his wealth melts away.

Reportedly FaceBook is considering building its own smartphone and investors are not encouraged about the company getting distracted into a field that is extremely competitive and already full of losers.

There is also speculation Facebook may be getting ready to make an offer for Face.com a facial recognition company with a price tag of less than $100 million. They have an app that automatically tags photos you put on Facebook with the person's name based on their recognition software.

There was another rumor that Facebook could make an offer for Opera Software. That is the maker of the Opera browser and quite a bit of advanced mobile phone technology. Opera makes web browsers that work across a variety of platforms including mobile phones, tablets, PCs and TVs. The price tag could be over $1 billion but the CEO said while he would love to further integrate with Facebook he wants the company to remain public and grow organically. The founder Jon S. Von Tetzchner said basically the same thing. The company has 200 million users today and they expect 500 million in 2013. Google also has extensive relationships with Opera and any Facebook bid would surely spark a bidding war. Opera is listed in Oslo Norway.

Facebook Chart

JP Morgan (JPM) said it sold an estimated $25 billion in high yielding, profitable securities in an effort to increase earnings to offset the trading loss. The move will produce more than $1 billion in profits for JPM but analysts were not happy. They said the sales will trigger higher taxes and costs and the portfolio of high quality, high yielding securities will be hard to replace and the sales will reduce future earnings capability. The sale could generate a $380 billion tax bill but Dimon had previously said the bank would likely sell assets where the taxable gains would be offset by the loss. That suggests the tax impact could be minimal. The securities sold yielded between 3.15% and 3.41%. Since JPM has more than $300 billion in cash they did not need to sell the securities. It was done to generate profits to offset the trading loss so the quarterly earnings were not impacted. Some analysts believe they should have just taken the earnings hit and kept the high yield income. $25 billion at an average of 3.3% a year is $825 million in earnings a year. It will be very hard to replace that.

JPM shares have held at just under $34 since the news broke two weeks ago. Investors don't seem to be ready to bargain hunt here until the trading loss is completed. Dimon said at the time it could grow to $3 billion. Some analysts believe it could be as high as $5 billion now that the hedge funds understand how badly they want to close these trades.

JPM Chart

The CME cut margins for crude oil by -13% and gold by 10%. Volume in the products had declined along with the volatility. The new margins will be effective after the close of business today. Initial margin on the E-Mini crude (QM) declined to $3,274 for contracts 60-120 days out. Initial margin on a gold contract declined to $10,125.

Goldman Sachs upgraded the coal sector after the recent plunge to new lows. Goldman said the sector was "attractive" due to the severe oversold conditions and the equalization of natural gas and coal prices to a neutral state. The cost to burn gas or coal for electrical energy is about even today. Goldman raised Peabody Energy (BTU) to buy from neutral.

DollarTree (DLTR) announced plans for a 2:1 stock split for shareholders of record on June 12th to be paid on June 26th. DLTR shares closed at $102 after stalling at that level since mid April. The company said the spilt was designed to increase the liquidity of the company stock and provide an attractive entry point for shareholders as they attempt to broaden the shareholder base.

DLTR Chart

The S&P broke through resistance at 1325 at the open to touch 1334 and then dropped back to use that 1325 level as support on the 11:00 dip. If the S&P can hold that level on the inevitable retest on Wednesday it would be bullish. Don't be mistaken, today was a short squeeze. Aggressive traders went home short over weekend on expectations of more negative news out of Greece. The release of the polls showing the surge by the pro-austerity pro-euro party caught those shorts off guard and the race was on at the open.

I am surprised the 11:00 dip did not have more traction. However, as I reported in the weekend commentary I saw a lot of stock charts in my Friday research that appeared to be trying to form a bottom. While I am not expecting an early summer rally after the big May decline I still believe there are serious problems in Europe and having the New Democracy party win the election is just one step in keeping Greece in the euro. They may not be able to form a ruling coalition and the entire process start over. Since Greece is going to run out of money at the end of June there is a timing problem to consider.

My key ahead of the major economic reports late this week is for the S&P to hold over 1325. A break there restarts the entire cycle with a potential retest of 1295. Resistance is now 1340.

S&P Chart

The Dow managed to surge over resistance at 12,575 at the open but almost immediately fell back below that level and only managed to close +5 points above that level. The Dow chart is less bullish than the S&P. The major Dow movers were CAT +2.58, IBM +2.16, UTX +2.07 and CVX +1.38. All others produced much smaller gains with MCD and XOM negative on the day.

The Dow needs to hold its gains at the open on Wednesday in order for this rally to have a chance.

Dow Chart

The Nasdaq managed to post a decent +33 point gain and break above the trendline I showed in the weekend commentary. It did not change the overall formation. This is still a bearish continuation pattern until it moves over 2900.

Google closed slightly positive at $593 but still under the 200-day average. Apple managed to add +10 points and is trying to break above the $575 level that has been resistance since early May. Should Apple succeed in that breakout it could drag the Nasdaq higher. That would be a key event to watch for on Wednesday.

Apple has a developer meeting coming up in a few weeks and this rebound could be speculation on coming events.

Apple Chart

Nasdaq Chart - 30 Min

Nasdaq Chart - Daily

I view Tuesday as a throwaway day. Volume was only mediocre at 6.0 billion shares and it was basically a short squeeze due to the Greek polls. Thursday and Friday have some heavy duty economic reports that could change the focus of investors from Europe to the USA and depending on the data that could be very good or very bad.

I would be cautious about entering new longs unless we see a move higher on strong volume. The mess in Europe has not gone away.

Enter passively, exit aggressively!

Jim Brown

Send Jim an email


New Plays

Pharmaceuticals

by James Brown

Click here to email James Brown

Editor's Note:

In addition to tonight's new candidate, consider these stocks as possible trading ideas and watch list candidates:

(bullish ideas) EBAY, TUDO, SBUX, Z, PATK, CMS, AVD, BSFT

(bearish ideas) DPM, LRE, BVN, BCOV,


NEW BEARISH Plays

Teva Pharmaceuticals - TEVA - close: 38.10 change: -0.51

Stop Loss: 40.05
Target(s): 35.25
Current Gain/Loss: unopened
Time Frame: 3 to 6 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
Most of the market managed an oversold bounce last week to end a three-week slide. Shares of TEVA did not and is now down four weeks in a row. Today's underperformance could be signaling a fifth week of losses. Not only has the oversold bounce failed at resistance but TEVA could see additional selling pressure due to index changes. TEVA is getting booted out of the NASDAQ-100 index tomorrow.

I am suggesting bearish positions at the open tomorrow. We will start with a stop loss at $40.05 but more conservative traders could use a stop closer to the 10-dma instead. Our multi-week target is $35.25. The $35.00 level should be support.

Suggested Position: short TEVA stock @ (the open)

- or -

buy the Jun $37.50 PUT (TEVA1216R37.5) current ask $0.87

Annotated chart:

Entry on May xx at $ xx.xx
Earnings Date 07/25/12 (unconfirmed)
Average Daily Volume = 4.8 million
Listed on May 29, 2011



In Play Updates and Reviews

Stocks Rebound Toward Month End

by James Brown

Click here to email James Brown

Editor's Note:
Equity markets around the world were in rebound mode today. The U.S. market delivered another widespread bounce.

We saw both CRUS and POT hit our triggers to open bullish positions. APKT and SOHU were stopped out. GM was closed as planned.

Current Portfolio:


BULLISH Play Updates

Cirrus Logic - CRUS - close: 29.39 change: +1.94

Stop Loss: 26.35
Target(s): 32.00
Current Gain/Loss: + 3.6%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
05/29 update: It was a strong day for semiconductor stocks but CRUS outpaced them with a +7.0% gain. The stock has broken out past resistance near $28.00 and hit our trigger to open bullish positions at $28.35. A large part of today's rally may have been due to rumors that CRUS will be a big winner if Apple Inc. (AAPL) decides to move into the TV set top box market (or some other Apple-TV product).

I would not chase CRUS now. Wait for a pull back. $28.00 should be new support.

current Position: Long CRUS stock @ $28.35

- or -

Long Jul $30 call (CRUS1221G30) Entry $1.85

05/29/12 triggered @ 28.35

Entry on May 29 at $28.35
Earnings Date 07/19/12 (unconfirmed)
Average Daily Volume = 2.4 million
Listed on May 26, 2011


Market Leader, Inc. - LEDR - close: 4.40 change: -0.06

Stop Loss: 4.15
Target(s): 6.00
Current Gain/Loss: + 1.1%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
05/29 update: LEDR hit some profit taking today (-1.3%). Shares look poised to dip to their 10-dma near $4.33 but I suspect LEDR could dip to $4.20, which is where I would look for a new entry point.

We are going to try and reduce our risk by raising the stop loss to $4.15.

Earlier Comments:
We'll try and limit our risk by keeping our position size small. FYI: The Point & Figure chart for LEDR is bullish with a $6.75 target. Remember, small positions. Don't go overboard just because the share price is low. I would consider this a higher-risk trade.

Current Position: Long LEDR stock @ $4.35

05/29/12 new stop loss @ 4.15
05/23/12 new stop loss @ 3.95
05/21/12 triggered at $4.35

Entry on May 21 at $4.35
Earnings Date 05/01/12
Average Daily Volume = 77 thousand
Listed on May 19, 2011


Potash Corp. - POT - close: 40.04 change: +0.26

Stop Loss: 38.90
Target(s): the 50-dma (currently 43.15)
Current Gain/Loss: - 0.6%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
05/29 update: The stock market's morning rally was strong enough to lift POT past resistance near $40.00. The stock hit our trigger to open small bullish positions at $40.30. I would still consider new positions now. More conservative traders may want to wait for a rally past $40.50.

Earlier Comments:
POT can be a volatile stock so I am suggesting we keep our position size small. We want to use a trigger at $40.30 to open small bullish positions. We'll stop loss at $38.90. There is potential resistance near $42.00 but we're aiming for the 50-dma (currently at $43.20).

(small positions)

current Position: Long POT stock @ $40.30

- or -

Long JUN $40 call (POT1216F40) Entry $1.36

05/29/12 triggered @ 40.30

Entry on May 29 at $40.30
Earnings Date 07/26/12 (unconfirmed)
Average Daily Volume = 5.4 million
Listed on May 24, 2011


EXCO Resources - XCO - close: 7.92 change: -0.03

Stop Loss: 7.45
Target(s): 9.25
Current Gain/Loss: - 1.6%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
05/29 update: XCO is struggling to get past resistance near the $8.00 level. Shares rallied to $8.25 intraday but then closed back under $8.00. This failed breakout is potentially bearish. I am not suggesting new positions with XCO trading under $8.00.

Earlier Comments:
If XCO can see a convincing breakout it could see a short squeeze. The most recent data listed short interest at 27% of the 135 million-share float.

current Position: Long XCO stock @ $8.05

- or -

Long JUN $8.00 call (XCO1216F8) Entry $0.50

05/25/12 triggered at $8.05

Entry on May 25 at $8.05
Earnings Date 07/31/12 (unconfirmed)
Average Daily Volume = 7.0 million
Listed on May 22, 2011


BEARISH Play Updates

American Railcar Ind. - ARII - close: 21.57 change: +0.21

Stop Loss: 22.75
Target(s): 20.05 or 18.55
Current Gain/Loss: + 3.0%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
05/29 update: ARII produced a +1% bounce but shares stalled near their 10-dma. The bear-flag pattern is still intact.

Earlier Comments:
We have two targets. Our conservative target is $20.05. Our aggressive target is $18.55. FYI: The Point & Figure chart for ARII is bearish with a long-term $14.00 target.

Suggested Position: short ARII stock @ $22.23

05/26/12 new stop loss @ 22.75
05/17/12 new stop loss @ 23.55

Entry on May 16 at $22.23
Earnings Date 07/25/12 (unconfirmed)
Average Daily Volume = 108 thousand
Listed on May 15, 2011


DeVry Inc. - DV - close: 28.59 change: +0.37

Stop Loss: 29.05
Target(s): 26.75
Current Gain/Loss: + 3.5%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
05/29 update: DV bounced toward the $29.00 level this morning but gains faded to a +1.3% gain. More aggressive traders will want to keep their stop loss above resistance near $30.00 and the top of its bearish channel. We have a tighter stop at $29.05 to limit our risk. I am not suggesting new positions at this time.

FYI: The Point & Figure chart for DV is bearish with a $19.00 target.

current Position: short DV stock @ $29.62

- or -

Long Jun $30 PUT (DV1216R30) Entry $1.35

05/26/12 new stop loss @ 29.05
05/24/12 adjusting exit target to $26.75
05/17/12 new stop loss @ 30.35

Entry on May 14 at $29.62
Earnings Date 08/09/12 (unconfirmed)
Average Daily Volume = 1.0 million
Listed on May 12, 2011


Ebix, Inc. - EBIX - close: 17.97 change: +0.04

Stop Loss: 19.05
Target(s): 16.05
Current Gain/Loss: - 0.4%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
05/29 update: Tuesday proved to be another very quiet day for EBIX. Shares are still hovering near the $18.00 level. The stock did underperform the major averages today. I would still consider new positions now at current levels.

Earlier Comments:
Our first target is $16.15. We want to keep our position size small to limit our risk because EBIX could see a short squeeze. The most recent data listed short interest at 29% of the small 34.6 million share float. Readers may want to use put options to limit risk instead of shorting the stock.
FYI: The Point & Figure chart for EBIX is bearish with a $12.00 target.

Current Position: short EBIX stock @ $17.90

- or -

Long JUN $18 PUT (EBIX1216R18) Entry $0.90

05/24/12 triggered @ 17.90

Entry on May 23 at $17.90
Earnings Date 08/07/12 (unconfirmed)
Average Daily Volume = 386 thousand
Listed on May 23, 2011


Fusion-io, Inc. - FIO - close: 21.09 change: +1.17

Stop Loss: 22.05
Target(s): 17.00
Current Gain/Loss: - 5.0%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
05/29 update: FIO continues to see a lot of volatility. Positive analyst comments in an article out this morning helped fuel a +5.8% gain. If the market rally continues we could see FIO hit our stop loss at $22.05. I am not suggesting new positions at this time.

Earlier Comments:
This is a higher-risk, aggressive trade. We want to keep our position size small because there has been some M&A rumors with FIO as a takeover target. Traders may want to limit their risk by using put options. FYI: The Point & Figure chart for FIO is bearish with a $16.00 target.

(small positions)

Suggested Position: short FIO stock @ $20.09

- or -

Long Jun $17.50 PUT (FIO1216R17.5) Entry $0.85

Entry on May 18 at $20.09
Earnings Date 08/02/12 (unconfirmed)
Average Daily Volume = 4.1 million
Listed on May 17, 2011


Foster Wheeler AG - FWLT - close: 19.32 change: +0.50

Stop Loss: 19.75
Target(s): 17.25
Current Gain/Loss: + 1.1%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
05/29 update: Widespread gains in Asia and Europe today helped lift the U.S. markets and FWLT outperformed with a +2.6% bounce. Today's close above the simple 10-dma is short-term bullish. I am not suggesting new positions at this time.

current Position: short FWLT stock @ $19.53

- or -

Long Jun $20 PUT (FWLT1216R20) Entry $1.40

05/26/12 new stop loss @ 19.75
05/22/12 new stop loss @ 20.35

Entry on May 17 at $19.53
Earnings Date 08/02/12 (unconfirmed)
Average Daily Volume = 1.4 million
Listed on May 16, 2011


Hospira Inc. - HSP - close: 32.60 change: +0.22

Stop Loss: 33.55
Target(s): 30.25
Current Gain/Loss: + 1.1%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
05/29 update: The market's widespread rally today fueled a pop in HSP. Shares challenged resistance near $33 and its 150-dma before paring its gains. I am not suggesting new positions at this time.

FYI: Readers should note that HSP does have above average short interest. The most recent data listed short interest at 7.8% of the 165 million share float.

current Position: short HSP stock @ $32.95

- or -

Long Jun $30 PUT (HSP1216R30) Entry $0.35

05/23/12 new stop loss @ 33.55
05/14/12 opened on the gap down at $32.95, trigger was 33.20

Entry on May 14 at $32.95
Earnings Date 07/26/12 (unconfirmed)
Average Daily Volume = 1.1 million
Listed on May 9, 2011


Netgear Inc. - NTGR - close: 30.88 change: +1.02

Stop Loss: 31.55
Target(s): 26.00
Current Gain/Loss: - 3.8%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
05/29 update: Technology stocks were in rally mode today and NTGR outperformed the major indices with a +3.4% gain. The close back above $30.00 is short-term bullish. Odds just jumped that we will see NTGR bounce back toward short-term resistance near $32.00 and its 10-dma. A move that high would hit our stop loss at $31.55.

current Position: short NTGR stock @ $29.75

- or -

Long Jun $30 PUT (NTGR1216R30) Entry $1.70

05/25/12 triggered @ 29.75

Entry on May 25 at $29.75
Earnings Date 07/26/12 (unconfirmed)
Average Daily Volume = 549 thousand
Listed on May 24, 2011


Silicon Motion Tech. - SIMO - close: 14.31 change: +0.89

Stop Loss: 14.15
Target(s): 10.25
Current Gain/Loss: unopened
Time Frame: 3 to 6 weeks
New Positions: Yes, see below

Comments:
05/29 update: The rally in tech stocks today sparked some short covering in SIMO. The stock soared to a +6.6% gain. If the rally continues tomorrow we'll probably drop SIMO as a candidate. Currently the plan is to launch bearish positions if SIMO hits $12.85.

Trigger @ 12.85

Suggested Position: short SIMO stock @ (trigger)

- or -

buy the Jun $15 PUT (SIMO1216R15)

Entry on May xx at $ xx.xx
Earnings Date 07/26/12 (unconfirmed)
Average Daily Volume = 819 thousand
Listed on May 26, 2011


Marriott Vacations Worldwide - VAC - close: 28.69 change: +0.74

Stop Loss: 29.25
Target(s): 25.25
Current Gain/Loss: - 2.1%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
05/29 update: Hmm... the rebound in VAC was a big stronger than expected. The stock outperformed with a +2.6% gain. Yet the rally stalled at technical resistance near the 50-dma. If shares turn lower tomorrow then readers could use this move as a new entry point for bearish positions.

(small positions)

current Position: short VAC stock @ $28.10

05/26/12 new stop loss @ 29.25

Entry on May 25 at $28.10
Earnings Date 08/02/12 (unconfirmed)
Average Daily Volume = 495 thousand
Listed on May 24, 2011


CLOSED BEARISH PLAYS

Acme Packet, Inc. - APKT - close: 24.48 change: +1.24

Stop Loss: 25.05
Target(s): 20.50
Current Gain/Loss: - 3.6%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
05/29 update: Big gains in Asian markets and a pop for tech stocks this morning helped push APKT past resistance near $25.00. Shares hit our stop loss at $25.05.

Earlier Comments:
We also want to keep our position size small because the most recent data listed short interest at 17% of the 58.2 million-share float, which does raise the risk of a short squeeze. FYI: The Point & Figure chart for APKT is bearish with a $13.00 target.

(small positions)

closed Position: short APKT stock @ $24.18 exit $25.05 (-3.6%)

- or -

Jun $25 PUT (APKT1216R25) Entry $1.90 exit $1.05 (-44.7%)

05/29/12 stopped out at $25.05
05/19/12 new stop loss @ 25.05, adjust exit target to $20.50
05/17/12 new stop loss @ 25.55

chart:

Entry on May 14 at $24.18
Earnings Date 07/19/12 (unconfirmed)
Average Daily Volume = 2.3 million
Listed on May 12, 2011


General Motors - GM - close: 22.85 change: +0.41

Stop Loss: 22.65
Target(s): 19.25
Current Gain/Loss: - 4.9%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
05/29 update: Ouch! The timing of today's market bounce did not help with our exit plans in GM. Friday saw GM breakout above key technical resistance at the 20-dma so we decided to exit early on Monday morning. Unfortunately widespread gains across the globe today fueled a pop for the U.S. markets and GM gapped open higher at $22.62.

closed Position: short GM stock @ $21.57 exit $22.62 (-4.9%)

- or -

Jun $20 PUT (GM1216R20) Entry $0.39 exit $0.07 (-82.0%)

05/29/12 planned exit at the open
05/26/12 prepare to exit at the open on Tuesday morning
05/19/12 new stop loss @ 22.65
05/15/12 after the closing bell it is discovered in a 13F filing that Berkshire Hathaway has initiated a position in GM.
Shares of GM are trading higher after hours.

chart:

Entry on May 15 at $21.57
Earnings Date 08/02/12 (unconfirmed)
Average Daily Volume = 10.5 million
Listed on May 14, 2011


Sohu.com - SOHU - close: 45.47 change: +1.63

Stop Loss: 45.55
Target(s): 40.50
Current Gain/Loss: - 1.4%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
05/29 update: Gains in the Asian markets and then a pop in the U.S. markets this morning helped fuel more short covering in SOHU. The stock rallied past resistance near $45.00 and hit our stop loss at $45.55.

Earlier Comments:
I do consider this a more aggressive, higher-risk trade. We want to keep our position small because the most recent data listed short interest at almost 34% of the small 29.75 million-share float.

closed Position: short SOHU stock @ $44.90 exit $45.55 (-1.4%)

- or -

Jun $42.50 PUT (SOHU1216R42.5) Entry $1.95 exit 0.90 (-53.8%)

05/29/12 stopped out at $45.55
05/19/12 new stop loss @ 45.55, adjust exit to $40.50
05/17/12 new stop loss @ 46.25
05/14/12 triggered @ 44.90

chart:

Entry on May 14 at $44.90
Earnings Date 07/30/12 (unconfirmed)
Average Daily Volume = 915 thousand
Listed on May 10, 2011