Option Investor
Newsletter

Daily Newsletter, Wednesday, 4/9/2014

Table of Contents

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

Market Wrap

Bulls and Bears Define the Bounce Differently

by Keene Little

Click here to email Keene Little
The bounce off Tuesday's low looks like the start of another rally, one that could take us to new highs into opex week. But the bears see it as just a quick oversold bounce back up to resistance and a good shorting opportunity. The market has reached a decision point.

Wednesday's Market Stats

Today got a helping hand from a pre-market rally that gave the indexes a gap up to start the day, which is typically how rallies in this market are done, but at least the sellers of the gap up weren't strong enough to reverse it. The bears tried to reverse it but the dipsters stepped back in and drove the market higher in the morning. There was a pause midday and into the release of the FOMC minutes at 14:00 and then a nice addition to the rally following the minutes. All in all it was a nice day for the bulls.

Now the question is whether the bounce was real or if instead it was Memorex. I'm showing my age with that commercial -- Memorex was selling magnetic tapes for copying music files and when they played back a high-pitched sound to break a wine glass you were asked if was the original sound or the copy on Memorex that did it, which of course today seems like no big deal. It's one of those commercials that lives on, kind of like Timex watches -- "takes a licking but keeps on ticking." Don't remember that one either? You're just a bunch of youngsters. But I digress.

Friday's and Monday's trading volume was higher than average and the bounce off Tuesday morning's low has been on declining volume to below average, which is bearish. The bulls would be in better shape if the selling was on low volume and then stronger volume came back in on the buying. Volume is only one measure of how well the market is doing but at the moment the message from it has to be viewed as more bearish than bullish. So far it's a Memorex rally and not a Timex (I know, mixed metaphors).

As I said, the market was doing well into the afternoon and the big boost following the FOMC minutes pushed the indexes over +1% today. The oversold tech indexes did the best, closing up +1.7%, while the RUT was nipping at its heels with a +1.4% rally. You would have thought the FOMC minutes came as a complete surprise with the way it spurted to the upside, which gave the DOW a 100-point boost from about 16330 up to 16438 by the end of the day, 85 of which were tacked on in 30 minutes. I have a feeling it wouldn't have mattered what was in the minutes -- as soon as they were released and there was nothing scary in them the computers were programmed to launch some buy programs.

The bulls will now see the Friday-Monday decline as another dip they should have been brave enough to buy. The bears are of course scrambling to get out of short positions out of fear that the bulls are correct. We've seen countless sharp stabs to the downside merely get reversed and head higher again. Buyers have been thoroughly conditioned to buy the dips and today's bounce has very likely convinced more than a few to jump back in if they were chased out. Those who didn't get spooked out of their trades are patting themselves on the back for ignoring the scary monster under the bed and just sticking with the longer-term uptrend. Who can yet say they're wrong? It's been a winning strategy for a very long time. There is of course worry about the bull market ending but for most it remains a bullish market and dips are to be bought.

But what if last week's high was THE high? The Friday-Monday decline would be the start of what will become a more serious selloff and a small-degree 1st wave down. The Tuesday-Wednesday bounce would be a 2nd wave correction to the 1st wave down. From a psychology perspective, 2nd wave corrections are designed to convince the majority that the decline (in this case) was just a scary selloff but the larger uptrend remains intact. The 2nd wave pulls in more bulls and spits out more bears. But then stronger selling hits the tape and all those new buyers worry that got sucked back in at the wrong time; they become sellers at any price as they recognize the low is not yet in place. The bears eagerly jump back in and the combined selling creates a strong 3rd wave down. The 3rd wave is called the recognition wave for this reason and that's potentially what we have next. We will likely find out which it will be after seeing Thursday's price action.

Another thing that would help create a strong 3rd wave down is the margin debt situation. This has been discussed recently and there are lots of different opinions about it (as to whether or not it should be a concern). There were two charts published by Doug Short at dshort.com that are interesting to say the least. The first chart below shows the percentage growth in margin debt vs. SPX, both adjusted for inflation (notice that SPX has not exceeded its 2000 high when adjusted for inflation), both starting from 1995. Each time margin debt set off on a parabolic rally (into the 2000 and 2007 highs) it was a sign to look for a market peak. One could classify the run up from 2012 as another parabolic climb and therefore not a good sign for the longevity of the current rally. But short term this suggests we might not have seen a market high yet -- the peak in margin debt tends to lead the stock market high by a few months. Whether that will be true again is anyone's guess.

NYSE Margin Debt vs. SPX, 1995-2014, chart courtesy dshort.com

The next chart from Short shows the sum of investors' credit balance, which is calculated as the sum of cash in credit accounts and credit balances and then subtract the margin debt. The latest data is through February 2014. When it's above zero (green) it shows investors have a positive credit balance while below zero (red) shows a negative credit balance. The spike low in 2000 was followed by a higher low in 2007, which led to a spike high in 2008 as investors sold their positions and went to cash. The current spike down into a negative credit balance, far below the low in 2000, is downright scary. The amount of margin selling could become severe at times following this.

NYSE Investor Credit Balances vs. SPX, chart courtesy dshort.com

The above charts are reason enough to be very cautious about this bull market. Chasing prices higher could be hazardous to your financial health. When it stops and reverses it could feel like a steam roller just flattened you. But it's not a timing tool so it's not a reason to mortgage the house and short the market here. We look for better timing signals and for one of them I like to watch the European indexes.

The FTSE-100 and DAX charts tend to be leading indicators for the U.S. and we've seen them typically make their tops and bottoms before the U.S., which makes them good leading indicators for us. At the moment both are looking potentially bearish, as with the U.S. indexes, but the DAX is a little stronger at the moment and could make a new high before it's finished. I would expect the DAX to look a little stronger since the German economy has been the stronger one in Europe but even their banking system is surprisingly weak and highly leveraged, as are most of the banks in Europe (much more so than U.S. banks). This might become an aggravating situation should credit become an issue, perhaps when Greece starts asking for more money again, which is just around the corner.

The DAX shows 3 peaks since January with bearish divergence, not a good indication. But short term I see the potential for a minor new high to complete a 5-wave move up from its March low. Following what could be an a-b-c pullback from January, the 5-wave move up would do a very nice job completing its longer-term rally. So at the moment I would say the DAX is not helpful enough in determining what message it might have for us.

German DAX Composite, DAX, Daily chart

The FTSE has been working hard to make it back up to its May 2013 high, near 6870, after the strong selloff into its June 2013 low. With 4 rally attempts since the June 2013 low it finally made it up for two tests of the high in January and February but with sharp selloffs following each attempt. So far not very bullish, especially with a rounding top pattern. However, the bulls are still hanging on and the bounce off its 200-dma yesterday could be followed by another rally attempt.

London Financial Times index, FTSE, Daily chart

The one change in the FTSE's pattern that's bearish is what I see around the 50-dma (blue MA) -- notice how each break below the MA since April 2013 was followed by a spike back above the MA (highlighted in yellow) and a rally that lasted for weeks thereafter. The one minor exception is the struggle to stay above the 50-dma in August-September. Now look at the latest attempt to get back above the 50-dma in April, and the immediate failure to hold. That's the first time that has happened in a year and it's a change in character. Whether it will develop into something more bearish will be known shortly but for now it's a bearish development and could mean the same for the U.S. market. Today's rally attempt was beaten back by the 50-dma at 6652.

Moving on to the U.S. indexes, SPX is a good index to represent the broader market since it splits the difference between what I see on the daily charts as potentially very bearish for the RUT and NDX but bullish for the blue chips. The biggest problem in getting a clearer reading for what's next is the choppy and whippy price action since March 7th high (actually the choppy price action since mid-February). I could argue both directions here -- the bullish interpretation says the choppy consolidation near the highs is a continuation pattern and will be followed by more rally once it completes; the bearish interpretation says a choppy rise into a high is an ending pattern and the next move will be a sharp decline out of this choppy pattern.

The sharp decline from last Friday looks like an impulsive start to what would likely be a strong selloff and the bounce off Tuesday morning's low is therefore a bounce to be shorted. But the sharp decline could also be the completion of the choppy consolidation and that makes Tuesday's low a very good dip to buy. What's a trader to do? We'll take a look at some key levels for guidance and let price lead the way.

The SPX weekly chart below shows the alternating white and red candles since the March 3rd low (1834) and March 7th high (1883), which has pretty much contained the price action for the past month (with the exception of last week's failed breakout attempt). It's not difficult to view that sideways chop, following the February rally, as a bullish continuation pattern. I show the potential for another stab at a new high, hitting the trend line along the highs from April 2012 - May 2013, which will be near 1905 next week (opex). It would be bullish above 1905 although some price projections at 1912 and 1920 would be watched carefully. The bearish price pattern suggests this week's bounce attempt will fail and a break below Tuesday's low near 1837 would be bearish.

S&P 500, SPX, Weekly chart

Next up is the daily chart and it shows today's rally made it up to a broken uptrend line from February 5th through the March 27th low, near 1872 at the close and where SPX closed today). If the bounce is a back-test followed by a bearish kiss goodbye we could see strong selling in the coming week. I show a projection down to about 1800 next week, consolidate and then lower the following week, potentially finishing a 5-wave move down to about 1750 before the end of the month. The bullish potential is for a rally into opex week (not that we've seen many of those, wink) and a rally up to the 1900 area. That's a big spread for opex week -- perhaps a settlement price at either 1800 or 1900. Spread/strangle anyone?

S&P 500, SPX, Daily chart

Key Levels for SPX:
- bullish above 1885
- bearish below 1837

Moving in closer, the 60-min chart shows the bounce up to the broken uptrend line from February, which was also a 50% retracement of its decline (at 1869.358). That's a typical retracement for a 2nd wave correction so the bears have a good trade here if in fact the next move will be a 3rd wave down. But if we see a choppy pullback/consolidation, giving us a small 4th wave correction in the move up from Tuesday, it will likely be followed by another rally to complete a 5-wave move up, depicted in green. Following a sharp pullback into Monday-Tuesday we'd then see another rally leg, one that could achieve 1900 for settlement on opex Friday. It's the price pattern for the next pullback/decline that will provide clues for next week.

S&P 500, SPX, 60-min chart

Just before the FOMC minutes were released this afternoon the DOW had been hanging just below its broken uptrend line from March 14th, near 16365 at the time and near the 38% retracement of the decline. It was a natural place for bears to be lined up to short the bounce. So when it immediately jumped above the line there was likely a scurry to get out of short positions. The little afternoon pause was followed by another leg up into the close once those in short positions realized it wasn't going to work today. At this point the daily chart looks bullish with the bounce back into the broken bear flag pattern. But it too stopped on its broken uptrend line from February 5th through the March 27th low, near 16435. As with SPX, we'll get either a gap up above resistance Thursday morning or resistance will hold and we'll start the next leg of the decline. Other than a quick stop run higher in the morning, stay aware of the reversal potential here.

Dow Industrials, INDU, Daily chart

Key Levels for DOW:
- bullish above 16,535
- bearish below 16,150

I'm showing the Nasdaq Composite index tonight instead of my usual Nasdaq-100 index because of the potentially bullish setup here. It bounced off support at its uptrend line from November 2012 - June 2013 so that line is being recognized by traders as important. If it breaks, confirmed with a break below Monday's low near 4052, it would shake out all the buyers at support. The significance of that is in the bearish wave count, which is a series of 1st and 2nd waves to the downside. The next leg in this series would be a 3rd of a 3rd of a 3rd wave and basically that would be a mini-crash leg lower. Take a break below 4052 very seriously if it happens.

Nasdaq Composite, COMPQ, Daily chart

Key Levels for COMPQ:
- bullish above 4286
- bearish below 4052

Typically when I see the kind of bearish wave count shown on the chart above it's bullish instead -- the choppy pullback is usually a correction to the rally and points higher. So I'm watching for a break out of its down-channel to help confirm it's likely bullish instead of bearish. A line along the lows since the March 14th low is also where Monday's decline stopped and I've got two parallel lines attached to the March 21st and April 3rd highs. Today's rally stopped at the lower parallel line and it's another reason I felt cautious about any further upside from here. The higher parallel line will coincide with the downward crossing 20-dma over the 50-dma on Thursday at 4222-4223 so that remains upside potential for a higher bounce. It takes a rally above 4225 to help the bulls and then above the April 2nd high near 4286 to negate the bearish wave count so stay cautious about the long side until that happens. The bearish setup could start with a bang to the downside.

NDX has a very similar pattern to the COMPQ and on its 60-min chart below I'm showing some price projections that it achieved and bounced off of in its decline. This supports the bullish view that the decline is a choppy pullback correction and that a new rally leg is coming. Countering that, and plenty reason enough to stay cautious is the same 1-2, 1-2, 1-2 wave count to the downside potential. Stopping at its broken uptrend line from October 2013 was another reason to consider the short side, considering the downside potential. Not shown on the chart is the 62% retracement of its decline, at 3601.99, which it tagged with a high at 3602.35 and closed slightly below. The risk of course is a gap up over resistance Thursday morning so we'll find out soon enough which side will take it from here.

Nasdaq-100 index, NDX, 60-min chart

The RUT has the same potentially bearish wave count as the techs so if the market breaks down it will very likely be the techs and small caps leading the way lower. Considering the amount of margin debt currently being used and the retail traders' penchant for owning the sexy techs and small caps, it's not hard to imagine a sudden and strong disconnect to the downside. Again, see the risk even if it doesn't play out that way. A rally above a 78.6% retracement of its decline from April 3rd, near 1180, would be the first bullish sign, especially since it would be a recovery back above its broken 20- and 50-dma's and a break of its down-channel. Its 50-dma, near 1164 on Thursday bears watching for possible resistance if reached.

Russell-2000, RUT, Daily chart

Key Levels for RUT:
- bullish above 1180
- bearish below 1120

The U.S. dollar has taken a nose dive in the past 2 weeks, dropping 1.24 from a high at 80.77 on April 4th to today's low at 79.53, a drop of -1.5%. That doesn't seem like a big move when comparing to the stock market but for the currency market, which typically moves at a glacial pace, that's a big move. But when viewed on the weekly chart below you can see it's only part of a sideways consolidation that it's been in since October 2013. While it looks bearish longer-term, we need to see the dollar break below 79 to confirm we're probably looking for a decline to the $75 area this year.

U.S. Dollar contract, DX, Weekly chart

For the past couple of weeks I've been showing an expectation for a bounce in gold's price before continuing lower and now that we've got a bounce I'm wondering if it's ready to start the next leg of its decline. The dollar's large decline in the past 2 weeks helped gold rally some but not as much as one might think. The bounce off its March 31st low has run into its 20- and 50-dma's, now crossing near 1313 (as well as its 50-week MA, also near 1313), and it has retraced 38% of its March decline, at 1312. The chart below is using the log price scale and shows how the rally into the March 17th high was stopped by the downtrend line from October-November 2012. When viewed with the arithmetic price scale that downtrend line is right where the current bounce has stopped. So at the moment we've got a Fib retracement, a downtrend line and the MA's all conspiring against the bulls. It will obviously be bullish above 1313 but at the moment it's a bearish setup until proven otherwise.

Gold continuous contract, GC, Daily chart

Oil has been helped by the dollar's decline but it will be important for oil bulls to keep up the buying from here. It has run into its downtrend line from August 2013 - March 2014 at the same time it has achieved two equal legs up from March 17th, completing a possible a-b-c bounce before starting back down. Above 103.75 would be bullish while it takes a drop below its April 2nd low at 98.86 to confirm the next leg down has probably started.

Oil continuous contract, CL, Daily chart

Tomorrow will be another quiet one as far as economic reports go so the market will be on its own following the initial reaction to any move in the pre-market futures.

Economic reports and Summary

The market has reached a decision point, a fork in the road. As Yogi would have advised us, we should take it (or maybe wait for someone else to show the way). The bears had a setup at the end of the day to short the bounce since the indexes rallied up to resistance and price targets for the bounce. The risk of course is that this market loves to make mincemeat out of the bears with gaps up over resistance the following morning. The strong bounce off Tuesday's low also makes it scary to even think about shorting. But that's usually when the trade works and we'll find out quickly Thursday morning if the setup was real or just another sucker hole for the bears.

As an aside, for non-pilot types, a sucker hole is when you're flying under the clouds, using visual flight rules, and you want to get above the clouds. You see a patch of blue sky through the clouds and you climb through the hole to get above the clouds. As soon as you do that the hole closes up and you can't see the ground for hundreds of miles. It's a very scary place to be for non-instrument-rated pilots. That be a sucker hole. So bears getting sucked into shorting resistance are understandably tired of sucker holes.

But there's a possibility that the bulls got suckered into their own hole this time by responding to yet another bounce. JBTFD has been their mantra and it could very well work again. But considering the bearish setup it's not a trade I'd want to take any more when up against resistance. One of these days that resistance is going to hold and buyers are going to be left holding the bag as the market gaps down and drops way below them. It's a time of great caution and nibbling on small trades until we get a clearer signal which side is going to take the reins into opex week. Trade safe.

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

Poised For A Breakout

by James Brown

Click here to email James Brown

Editor's Note:

If you are looking for a bearish candidate then check out shares of General Motors (GM). The stock continues to underperform and it is poised to breakdown below support near $33.50 and hit new multi-month lows. I would not be surprised to see a drop toward $30.00. However, we would not want to hold over GM's earnings report in about two weeks (April 24th).



NEW BULLISH Plays

Analog Devices, Inc. - ADI - close: 54.30 change: +0.34

Stop Loss: 52.75
Target(s): 59.75
Current Gain/Loss: unopened

Entry on April -- at $--.--
Listed on April 09, 2014
Time Frame: 6 to 8 weeks
Average Daily Volume = 2.4 million
New Positions: Yes, see below

Company Description

Why We Like It:
ADI is in the technology sector. The company makes integrated circuits (semiconductors). After ADI reported earnings in February the company has seen multiple analysts either upgrade the stock or raise their price targets on ADI. Investors also applauded the news that ADI was raising its dividend and increasing its stock buyback program.

Shares of ADI are currently sitting at multi-year highs. The stock has been consolidating under resistance near $54.30 for the last three weeks and now it looks poised for a breakout.

I am suggesting a trigger to open bullish positions at $54.55. If triggered our target is $59.75.

Trigger @ 54.55

Suggested Position: buy ADI stock @ (trigger)

- (or for more adventurous traders, try this option) -

Buy the May $55 call (ADI1417E55) current ask $1.05

Annotated chart:




In Play Updates and Reviews

Wednesday's Widespread Bounce

by James Brown

Click here to email James Brown

Editor's Note:
The NASDAQ and Russell 2000, recent underperformers, turned outperformers today as traders bought a number of unloved stocks today.

BBY, HPQ, and TSL hit our entry triggers. AMAT was closed. INCY hit our stop loss.


Current Portfolio:


BULLISH Play Updates

Best Buy Co. Inc. - BBY - close: 27.36 change: -0.01

Stop Loss: 26.90
Target(s): to be determined
Current Gain/Loss: - 0.7%

Entry on April 09 at $27.55
Listed on April 05, 2014
Time Frame: 6 to 8 weeks
Average Daily Volume = 5.4 million
New Positions: see below

Comments:
04/09/14: Yesterday we decided to be more aggressive on our BBY trade and moved the suggested entry point to $27.55. The stock rallied this afternoon and hit $27.55 but shares reversed to close virtually unchanged. That doesn't inspire a lot of confidence on a day the rest of the market is in rally mode.

More conservative investors may want to wait for a rally past the January 16th high before initiating positions.

current Position: long BBY stock @ $27.55

- (or for more adventurous traders, try this option) -

Long May $28 call (BBY1417E28) entry $0.94

04/09/14 triggered @ 27.55
04/08/14 strategy update: use an entry trigger at $27.55, move the stop loss to $26.90 (old trigger was $28.30 and stop was $26.45).



Hewlett-Packard Co. - HPQ - close: 32.72 change: +0.27

Stop Loss: 31.55
Target(s): to be determined
Current Gain/Loss: - 0.4%

Entry on April 09 at $32.85
Listed on April 07, 2014
Time Frame: 6 to 8 weeks
Average Daily Volume = 14.0 million
New Positions: see below

Comments:
04/09/14: HPQ was making headlines today. The company agreed to a $108 million settlement with the DoJ and the SEC over "potential" violations of the foreign Corrupt Practices Act. The investigation focused on HPQ conduct in Poland and Russia. The $108 million bill sounds like a lot but HPQ's annual revenue is $112 billion with gross profits nearing $26 billion.

HPQ did hit our new entry trigger at $32.85 but just barely. The intraday high was $32.88. Readers may want to wait for a rally past $33.00 before initiating new positions.

Earlier Comments:
Plan on exiting prior to HPQ's earnings report in late May.

current Position: Long HPQ stock @ $32.85

- (or for more adventurous traders, try this option) -

Long May $33 call (HPQ1417E33) entry $0.96

04/09/14 triggered @ 32.85
04/08/14 adjust the trigger from $33.15 to $32.85



Trina Solar Limited - TSL - close: 13.52 change: +0.53

Stop Loss: 12.40
Target(s): to be determined
Current Gain/Loss: +1.8%

Entry on April 09 at $13.15
Listed on April 08, 2014
Time Frame: 6 to 8 weeks
Average Daily Volume = 5.2 million
New Positions: see below

Comments:
04/09/14: Our new trade on TSL is open. The stock was showing relative strength today with a +4.0% gain. Unfortunately a good chunk of that was with the gap open higher at $13.28. Our plan was to open bullish positions at $13.15 so the gap higher triggered our play. The stock did see an intraday dip back to $13.10 before traders bought the dip and pushed it back toward the 10-dma.

Earlier Comments:
The stock could see some short covering. The most recent data listed short interest at 15% of the 65.8 million-share float. I am labeling this an aggressive, higher-risk trade because TSL can be so volatile. Therefore I am suggesting small positions to limit our exposure.

*small positions*

current Position: long TSL stock @ $13.28

04/09/14 triggered on gap higher at $13.28. suggested trigger was $13.15



BEARISH Play Updates

Apollo Education Group - APOL - close: 28.68 change: -1.03

Stop Loss: 31.85
Target(s): to be determined
Current Gain/Loss: + 3.9%

Entry on April 08 at $29.85
Listed on April 07, 2014
Time Frame: 6 to 8 weeks
Average Daily Volume = 2.2 million
New Positions: see below

Comments:
04/09/14: Bearish analyst comments on APOL today helped push the stock lower. Seeing APOL down -3.4% on a day most of the market was higher is good news for the bears. I do want to caution traders that the 150-dma near $27.70 and the exponential 200-dma near $27.55 could both be potential support. APOL also has some price congestion in the $27.00 area, this too could offer some support.

I am not suggesting new positions at this time.

Earlier Comments:
We're not setting a target yet but probably in the $26-25 zone. The P&F chart for APOL is bearish with a $26 target.

Investors may want to use small positions to limit their risk. The most recent data listed short interest at 14% of the 98.2 million share float.

current Position: short APOL stock @ $29.85

- (or for more adventurous traders, try this option) -

Long May $30 PUT (APOL1417Q30) entry $1.45*

04/08/14 triggered @ 29.85
*option entry price is an estimate since the option did not trade at the time our play was opened.



Catamaran Corp. - CTRX - close: 41.89 change: +0.61

Stop Loss: 42.25
Target(s): to be determined
Current Gain/Loss: + 3.5%

Entry on April 04 at $43.40
Listed on April 03, 2014
Time Frame: 6 to 8 weeks
Average Daily Volume = 2.4 million
New Positions: see below

Comments:
04/09/14: After a five-day plunge shares of CTRX finally produced an oversold bounce and gained +1.4% today. If there is any follow through tomorrow we could see shares hit our stop at $42.25.

Earlier Comments:
Plan on exiting prior to CTRX's earnings report in early May.

current Position: short CTRX stock @ $43.40

- (or for more adventurous traders, try this option) -

Long May $45 PUT (CTRX1417Q45) entry $2.90*

04/07/14 new stop @ 42.25
04/04/14 triggered @ 43.40
*option entry price is an estimate since the option did not trade at the time our play was opened.



Gogo Inc. - GOGO - close: 19.36 change: +1.23

Stop Loss: 19.55
Target(s): to be determined
Current Gain/Loss: unopened

Entry on April -- at $--.--
Listed on April 08, 2014
Time Frame: 6 to 8 weeks
Average Daily Volume = 3.1 million
New Positions: Yes, see below

Comments:
04/09/14: GOGO announced a deal with Air Canada today. This news, along with the market's bounce, has sparked some short covering. GOGO closed up +6.78%. At the moment we are on the sidelines waiting for a breakdown below support near $18.00.

Earlier Comments:
We are suggesting a trigger for bearish positions at $17.95. Investors may want to use small positions or consider using put options to limit their risk. There are already a lot of bears in this name. The most recent data listed short interest at 31% of the small 30.9 million share float. There is definitely fuel for a short squeeze but that doesn't guarantee one. The Point & Figure chart for GOGO is bearish with an $11.00 target.

Trigger @ $17.95 *small positions*

Suggested Position: short GOGO stock @ (trigger)

- (or for more adventurous traders, try this option) -

Buy the MAY $17.50 PUT (GOGO1417Q17.5)




CLOSED BULLISH PLAYS

Applied Materials - AMAT - close: 19.99 change: +0.14

Stop Loss: 19.75
Target(s): to be determined
Current Gain/Loss: - 4.2%

Entry on April 03 at $20.85
Listed on April 01, 2014
Time Frame: exit PRIOR to earnings on May 15th
Average Daily Volume = 14.8 million
New Positions: see below

Comments:
04/09/14: AMAT has been underperforming. That's why we decided in last night's newsletter to exit positions this morning. AMAT opened at $19.97.

closed Position: Long AMAT stock @ $20.85 exit $19.97 (-4.2%)

04/09/14 planned exit
04/08/14 prepare to exit tomorrow morning
04/03/14 triggered @ 20.85

chart:



CLOSED BEARISH PLAYS

Incyte Corp. - INCY - close: 52.01 change: +2.96

Stop Loss: 51.25
Target(s): 45.25
Current Gain/Loss: - 3.9%

Entry on April 08 at $49.35
Listed on April 05, 2014
Time Frame: exit PRIOR to earnings on May 1st
Average Daily Volume = 2.2 million
New Positions: see below

Comments:
04/09/14: Biotechs produced some of the biggest bounces today. The IBB surged +4.0%. Shares of INCY, after underperforming yesterday, completely erased Tuesday's losses with a big +6.0% bounce today. Our stop loss was hit at $51.25.

Earlier Comments:
This newsletter considers biotech stocks to be aggressive, higher-risk trades. The stocks can see huge moves both up and down on headlines. I suggest traders use caution and limit their position size.

closed Position: short INCY stock @ $49.35 exit $51.25 (-3.9%)

04/09/14 stopped out
04/08/14 triggered @ 49.35

chart: