Editor's Note:

Good evening traders. The Goldman Sachs fraud charges appear to be the catalyst we needed for a meaningful market correction. This will also put the financial reform bill on front and center stage in Washington which I think will drag down bank stocks for a while. The new reforms will chip away at bank profits and I believe traders will begin selling the financials in earnest. We are adjusting many of our long positions and getting defensive.

Current Portfolio:


BULLISH Play Updates

AU Optronics - AUO - close: 11.22 change: -0.16 stop: 11.04 *NEW*

The moving average ping pong continues in AUO. After peeking its head below its 50-day SMA the stock managed to rally back and close above it. I have mixed signals on this stock right now. It has been in a clear downtrend for the past two weeks, however, it remains above its 50-day SMA. The stock also closed just below an upward trend line that began on March 11, but remains above an upward trend line that began on November 12. The weakness in the broader market has me concerned as well. If AUO can rally higher and get above $11.35 it will get the trade moving in the right direction, but if it fails from here we need to exit the trade as it will most likely trade down to $10.75, and maybe even farther if the market is weak. As such, I would like to move our stop up to $11.04 (below today's low of $11.11) and will get out of the way if the stop is hit as this will signal to me that AUO is going lower. I would also like to change our target to $11.93 which is just below the recent highs. Conservative traders should consider exiting positions now. I am not suggesting new positions at this time. Note: We have considered this an aggressive trade and recommending small position size to limit risk.

Current Position: AUO stock @ 11.77

Annotated chart:

Entry on April 05 at $11.77
Earnings Date 04/22/10 (unconfirmed)
Average Daily Volume: 2.5 million
Listed on April 3rd, 2010


Medicis Pharmaceutical Corp. – MRX – close: $25.27 change -0.33 stop: $23.95 *NEW*

MRX quickly rallied to yesterday's high of $25.81 prior to retreating, creating a shorter term double top. When the GS news hit the stock sold-off. The stock has had support at the $24.75 level for the past couple of weeks, which is also just above prior resistance from October 2009. I expect this level to hold if there is any weakness in MRX next week. The stock's 50-day and 100-day SMA's are just below current levels and there is also upward trend line support. I would like to move our stop up a bit to $23.95, which is just below the 50-day SMA. Our first target remains $26.50 and our second target is $27.75, which is just below its 52-week high. Readers who do not have positions can consider entering at current levels. Our time frame is a couple of weeks.

Current Position: MRX stock @ $25.00

Annotated chart:

Entry on April 14 at $25.00
Earnings Date 5/06/2010 (unconfirmed)
Average Daily Volume: 1.0 million
Listed on April 13th, 2010


Patterson Companies - PDCO - close: 32.02 change: +0.21 stop: 30.49 *NEW*

PDCO kept on going today and closed +0.66% while the overall market sold off hard. I am suggesting readers be defensive with this position. It appears PDCO wants to test its highs from 2008 (see the weekly chart below), however, if the market corrects PDCO may not be able to get the legs to follow through. The stock is also forming a bearish wedge pattern and if it breaks too far below $31.00 I don't want to be involved. Therefore, I am raising our stop to $30.49 and lowering our target to $33.25. Conservative traders should consider taking profits or tightening stops on any strength on the stock. Our time frame is a couple of weeks.

Current Position: PDCO stock at $31.50

Annotated chart:

Entry on April 14th at $31.50
Earnings Date 05/17/10 (unconfirmed)
Average Daily Volume: 975 thousand
Listed on April 6th, 2010


Powershares UltraShort Real Estate - SRS - close: 29.23 change: +1.24 stop: 27.60 *NEW*

It appears we were almost perfect with our entry into SRS as it keeps on trucking! The ETF tacked on another +4.46% today and blew right through our first target of $28.90. We are now up +11.35% in this trade. SRS has convincingly broken the downtrend line from early February and closed above its 20-day SMA today. SRS is entering a resistance zone so I am going to tighten the stop on this trade and move it up to $27.60, which will ensure a +5% gain if SRS reverses. I suspect there may be some weakness in SRS (or a bounce in the RE stocks) on Monday but our stop should be far enough away to account for it. I think any significant weakness in SRS will be bought. If a broader market correction gets going this play has a lot of potential but must be managed properly to protect profits. If SRS trades to our 2nd target of $30.20 on Monday I will sell half of my position and move my stop up on the remainder, which I will communicate in Monday's updates. We have a more aggressive 3rd target at $32.90 which is just below the 50-day SMA. Conservative traders should consider exiting positions now to lock in gains. Our time frame is one to two weeks.

I want to remind readers that I consider this is a very aggressive play so please use smaller position size to limit risk. *NOTE: Although this is listed as a long position in our portfolio, this is a bearish position on real estate stocks.*

Current Position: Long SRS @ $26.25

Annotated chart:

Entry on April 14th, 2010
Earnings Date Not Applicable
Average Daily Volume: 11.0 million
Listed on April 8, 2010


BEARISH Play Updates

Powershares QQQQ Trust - QQQQ - close: 50.13 change: +0.22 stop: 50.95

QQQQ was already weak on Friday morning after mixed earnings reports from Google and AMD, and then the GS news hit and the markets sold off hard. This may have been the catalyst to get a market correction going and the excuse traders are looking for to take profits. But we'll need to see follow though next week. I am sticking to our set-up and QQQQ is right at our key level of $49.50 that we need it trade below next week, which should get things rolling in our direction. The moving averages should provide some support if QQQQ begins to sell off in earnest. Our target remains $47.00 which is just above the lows from March 15. Our stop is $50.95 (see weekly chart below). Traders that have not entered positions could do so now and be rewarded nicely if the trade works. Our time frame is a couple of weeks.

Current Position: Short QQQQ at $49.05

Option Traders:
Suggested Position: Buy PUT May $49.00, Ask at entry, $1.00

Annotated chart:

Entry on April 12th, 2010
Earnings Date Not Applicable
Average Daily Volume: 49.4 million
Listed on April 10, 2010


CLOSED BULLISH PLAYS

MAXIMUS Inc. - MMS - close: 63.69 change: -0.46 stop: 59.75

As instructed in Thursday's updates we closed MMS at the open on Friday and are now flat the stock at $64.15 for a gain of +3.05%. The stock continues to look bullish but I would rather not chase gains at these levels, especially after the GS news on Friday. I suggest to readers who did not close MMS to keep a tight stop to protect profits. A logical stop could be placed below today's low (which was $63.50) at $63.42. If the stock trades below this level it will be at $62.00 before you know it.

Closed Position: MMS stock at $64.15, entry was %62.05

Annotated chart:

Entry on April 9 at $62.25
Earnings Date 05/06/10 (unconfirmed)
Average Daily Volume: 83 thousand
Listed on March 31st, 2010


BorgWarner Inc. - BWA - close: 39.04 change: +0.15 stop: 37.95

We are dropping BWA as a bullish candidate. Our trigger to open positions was not hit. BWA had a bearish reversal day like the rest of the market and I am dropping this play as a bullish candidate. I believe there is just too much congestion on its weekly chart to provide good opportunities right now, especially with the bearish market action exhibited on Friday.

Suggested Position: BWA stock @ 40.25 (DROPPED)

Annotated chart:

Entry on DROPPED
Earnings Date 04/29/10 (unconfirmed)
Average Daily Volume: 1.8 million
Listed on April 3rd, 2010


Cash America - CSH - close: 40.85 change: -0.83 stop: 40.59 *NEW*

The market makers managed to find our new stop on CSH to the penny. We are now flat CSH for a -1.12% loss. This is frustrating but considering the bearish market action I think it is best to just step aside. We can't cry over spilled milk so we move onward and look for better opportunities. My guess is we will be happy CSH is out of the portfolio in the coming days/weeks. If readers are still holding CSH I suggest placing a stop below today's low at $40.49 and sell the stock into any strength next week. If the market corrects CSH probably won't be spared. The company reports earnings on April 22.

Closed Position: CSH stock at $40.59, entry was $41.05

Annotated chart:

Entry on April 06 at $41.05
Earnings Date 04/22/10 (unconfirmed)
Average Daily Volume: 263 thousand
Listed on April 5th, 2010