Option Investor
Play Updates

Clean Slate

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Play Editor's Note: It would be easy to think that stop losses are pretty much worthless when the DJIA has a 900-point intraday range. That would be especially true today since many stocks were so volatile that they hit both our downside stop on our bullish plays and upside stops on our bearish plays. No one can predict a 900-point rally in the last three-hours of trading, especially after a breakdown to new lows in the S&P 500.

We could have just as easily broken support and kept falling to a 900-point loss. People were expecting the worst when the S&P 500 was trading at new five-year lows around 820 today. That's why we have to play with stops in case the market moves against us. If we knew what stocks were going to do beforehand there wouldn't be any risk or need for stop losses.

Trading after this sort of rally can be even more challenging. If you're opening new positions today, where do you put your stop loss?

Unfortunately, it is becoming somewhat cliche that the sharpest rallies happen in bear markets. We remain in a bear market. Today was fueled by plenty of short covering and once the rally was under way it got stronger on fears that investors might "miss the move". Can the market move higher from here? Absolutely! Will it breakout of its trading range? We'll have to wait and see.

Note: We're closing all of our current positions and looking for new ones.

BULLISH Play Updates


BEARISH Play Updates



Anadarko Petroleum - APC - close: 40.15 change: +4.99 stop: 34.75

Grrr... It can be challenging to keep emotions out of your trading on days like today. APC was holding above the $35.00 level until midday when the S&P 500 broke to new lows, APC quickly followed. Shares of APC slipped to $34.03 and almost immediately rebounded to rally past resistance at $40.00 for a 17.6% gain off its lows.

Our first target was $39.95 but APC hit our stop loss at $34.75 first ending our trade.


Picked on November 10 at $38.36 /gap higher entry, stopped out
Change since picked:     + 1.79   			
Earnings Date          11/03/08 (confirmed)    
Average Daily Volume:      10.7 million     


Chipotle Mexican Grill - CMG - close: 44.84 change: +2.64 stop: 47.55

We are hitting the ejection seat on our CMG short play. The market slipped to new relative lows (S&P500) but CMG only fell to $40.93. We were expecting a drop toward $40.00 or worse. Our first target was $40.25. That may not happen anytime soon. The overall trend is still very clearly bearish but CMG may bounce to its 50-dma before rolling over again.

We want to cut our losses immediately and probably consider bullish positions. Important! Traders should note that CMG has a high amount of short interest. The most recent data listed short interest at almost 35% of the 31.9 million-share float. That is a large amount of short interest and a small float, which is traditionally a recipe for a short squeeze.


Picked on November 11 at $44.68 /exiting early 
Change since picked:     + 0.16   			
Earnings Date          02/12/09 (unconfirmed)    
Average Daily Volume:       752 thousand    

Capital One Financial - COF - close: 33.56 change: +3.52 stop: 33.05

We knew that COF was a volatile stock and warned readers that it could see huge intraday moves. Today the stock slipped under the $29.00 level and eventually reversed higher with the market. By the end of the day COF was up almost 12% and had hit our stop loss at $33.05. Volume was above average on the move, which tends to be bullish.


Picked on November 12 at $29.75 /stopped out 33.05
Change since picked:     + 3.81   			
Earnings Date          01/22/09 (unconfirmed)    
Average Daily Volume:      12.8 million 

Plains All American Pipeline - PAA - close: 34.06 chg: -0.33 stop: 40.05

Target achieved. PAA plunged to $30.60 intraday before bouncing back. Our first target for the stock was $31.00. The massive bounce back looks very dangerous for the bears. We're suggesting a complete exit of bearish positions at this time. However, we would keep PAA on our watch list for a failed rally in the $36-38 zone, which may end up being a new bearish entry point to get short again.


Picked on November 11 at $37.16 /1st target hit/early exit
Change since picked:     - 3.10   			
Earnings Date          02/12/09 (unconfirmed)    
Average Daily Volume:       647 thousand    

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