Editor's Note:
Good Evening. Our short positions looked promising this morning but they were saved on the news of the Goldman Sachs settlement and progress on capping the leaking well in the gulf. These two stories essentially lifted the entire market this afternoon despite the terrible economic data released this morning. We'll have to see if there is any follow through tomorrow in what is shaping up to be a very interesting OPEX Friday. Personally, I don't believe this afternoon's news is all that material in regard to the economy but if the market goes higher we'll have to follow. As I have said in recent days we need a close and follow through above 1,105 on the S&P 500 for me to get behind this rally. And even if that happens we will keep a very tight leash on long trades. I have made further adjustments to targets on most short positions. We will get meaningful pullback in the broader market soon and when we do we will take advantage of exiting these positions at better prices than today. Please email me with any questions.

Current Portfolio:


BULLISH Play Updates

Emulex Corp - ELX - close 9.84 change +0.17 stop 9.18 *NEW*

Target(s): 10.40, 10.85, 11.20
Key Support/Resistance Areas: 11.40, 11.00, 10.50, 10.10, 9.70, 9.25
Current Gain/Loss: +1.85%
Time Frame: 1 to 2 weeks
New Positions: Yes

Comments:
7/15: ELX hit our trigger to enter long positions at $9.75 this morning. The stock tested the backside of the broken bounced hard. The good news is that ELX rallied off of its lows early this morning before the market and before the GS and leaking well news. I'm looking for a move up to the 50-day SMA. I've tightened the stop to $9.18.

7/14: ELX broke out of a short term downtrend line today and has been making higher lows since its lows on 6/8. I like the volume patterns recently and over the past two days ELX has surged higher on much heavier volume than its daily average of 1.76 million. I've also been waiting for this stock to close above its 20-day SMA (currently $9.69) which it did today. I believe ELX will easily make a run up to its recent highs near $10.40 which is our first target. The stock may experience a some resistance at this level but ultimately I think it heads toward the $11.00 area. Today's candlestick could be considered a reversal pattern but I don't think ELX will trade below its 20-day SMA ($9.69) unless there is a big drop in the market which is certainly possible. However, I'm viewing the afternoon sell-off from its highs as a test of the 20-day SMA from above and a second chance to get on board the momentum ELX is building. In addition, the stock has made two consecutive higher weekly highs. Our initial stop will $8.95 which is below two upward trend lines. A tighter stop could be placed at $9.20 which is below yesterday's low. I would like to use a trigger of $9.75 to enter positions. NOTE: I view this as a potentially volatile trade so please use proper position size to limit risk. For options traders I am pushing the recommended option out to October as buying the additional time value is cheap.

Current Position: Long ELX stock, entry was at $9.75

Options Traders: October $10.00 CALLS

Entry on July 15, 2010
Earnings Date 8/5/10 (unconfirmed)
Average Daily Volume: 1.76 million
Listed on 7/14/10


Merck & Co - MRK - close 36.49 change +0.29 stop 34.79

Target(s): 37.20, 37.75, 38.60, 39.35
Key Support/Resistance Areas: 39.50, 38.75, 38.00, 36.35, 35.80
Current Gain/Loss: +1.79%
Time Frame: 1 to 2 weeks
New Positions: Yes

Comments:
7/13: MRK closed above resistance of $36.35 and looks like it is headed towards our targets. If the broader market continues bouncing we should have no issues hitting our target(s) and MRK could also act as a defensive play if there is a pullback.

7/12: MRK traded down to $35.84 in early trading which triggered our long entry. The stock then drifted higher throughout the day. MRK appears to be forming a bull flag on its daily chart. A break above Thursday's high of $36.40 should get things moving higher relatively quick. Since we were able to get the lower entry trigger today I am going to offer a lowered 1st target of $37.20 which is a good place to consider at least consider tightening stops. I've also adjusted our primary target of $37.95 down 20 cents to $37.75.

Current Position: Long MRK stock, entry was at $35.85

Options Traders: August $36.00 CALLS

Entry on July 12, 2010
Earnings Date 7/30/10 (unconfirmed)
Average Daily Volume: 18 million
Listed on 7/10/10


BEARISH Play Updates

Lululemon Athletica Inc. - LULU - close 39.60 change +0.298 stop 41.30

Target(s): 38.00, 37.20, 35.80
Key Support/Resistance Areas: 42.25, 39.75, 37.00, 35.16, 32.75
Current Gain/Loss: -1.15%
Time Frame: 1 week
New Positions: Yes

Comments:
7/15: LULU is being contained by its 20-day and 50-day SMA's. I expect this to hold and LULU to turn lower. $37.20 is the primary target but $38.00 (raised 5 cents) is also an area of interest to exit positions or tighten stops.

7/13: LULU managed to eek out a 26 cent gain today as the market catapulted higher. This is under performance and confirms my bearish outlook for the stock. We could get a little more bounce in this position but when the market pulls back LULU should go lower relatively quick. However, in the spirit of following the market we need to be careful and not get too greedy by expecting LULU to simply rollover and give us a big gain. As such, I've added $37.95 as the first target which just above yesterday's low. This level is -3% lower from our entry price and if you bought options they should return about +15% at $37.95. Tightening stops at this level is suggested to see if we cn get more out off the position.

7/12: Finally, LULU hit our trigger of $39.15 to enter short positions. The stock immediately lost $1.25 and then recovered. One thing is clear on the intraday charts and that is the volume when the stock was declining this morning was much greater compared to its recovery. I like the volume pattern and think LULU retests its lows before breaking higher. Should it break higher the 50-day SMA sits at $39.87 which should keep things under control. I've also listed a target of $37.20 which is just above a key support/resistance area of $37.00. Some might view this level as forming an inverse head and shoulders pattern on the hourly chart so it would be prudent to consider tightening stops at this level. This level will also produce a decent gain in the position.

Current Position: Short LULU stock, entry was at $39.15

Option Traders: August $35.00 PUTS

Entry on July 12, 2010
Earnings 9/9/2010 (unconfirmed)
Average Daily Volume: 1.89 million
Listed on July 1, 2010


PowerShares QQQQ Trust - QQQQ - close 45.60 change +0.04 stop 46.90

Target(s): 45.00, 44.40, 43.75, 42.55
Key Support/Resistance Areas: 46.77, 45.25, 44.46, 43.50, 42.50, 41.00
Current gain/loss: -2.93%
Time Frame: 1 to 2 weeks
New Positions: Yes

Comments:
7/15: Google is down -$20 in the after hours after their earnings report. This should keep the Q's in check tomorrow. However, the good news about the GS settlement and the oil spill in the gulf is boosting sentiment despite the terrible economic data that was released today. My comments from 7/13 remain the same except I would place the tighter stop at $46.25 as opposed to $46.15. QQQQ's close on 12/31 was $45.75 which is near the highs of the past two days. We are at the bottom of January's congestion area and this is an important reference point. We've got some wiggle room and think the market moves lower prior to any significant move higher. I've tightened the targets and added $45.00 which is just above QQQQ's 20-day SMA. This is good place tighten stops. 7/13: It appears the Q's are going to spike higher in the morning as a result of earnings from Intel. The NASDAQ 100 futures are currently up over 1% as of this writing. This equates to a price in the Q's of approximately $45.85. The recent patterns after Intel reports show significant market sell offs in the ensuing days after the initial spike. If you believe this time is different and we continue to go higher I suggest exiting early tomorrow or place a new stop above the highs of tomorrow. $46.15 gives you some room and is above the 200-day SMA (near QQQQ's close today) and the 50-day SMA's. But this level could also get picked off as a stop on a spike higher, only to see QQQQ reverse lower. I believe we will see our first target of $43.75 before our official stop of $46.90 so I am sticking with the original plan for now.

7/12: QQQQ backed off right at its 20-day SMA this morning which also corresponds to the ETF's February highs. This level is a logical reversal point for QQQQ, however, Intel reports earnings tomorrow after the bell so that is the wild card for the short term price direction. I've adjusted our near term target to $43.75 which is just above the lows on 7/8.

Current Position: Short QQQQ stock, entry was at $44.30

Options Traders: August $45.00 PUTS

Entry on July 8, 2010
Earnings N/A (unconfirmed)
Average Daily Volume: 100 million
Listed on July 7, 2010


Starbucks Corp. - SBUX - close 26.13 change +0.67 stop 26.75

Target(s): 25.30, 24.85, 24.25, 23.70
Key Support/Resistance Areas: 26.50, 26.00, 25.25, 24.80, 24.00, 23.60, 22.50
Current Gain/Loss: -5.58%
Time Frame: 1 to 2 weeks
New Positions: Yes, with a tight stop

Comments:
7/15: SBUX was headed for our target this morning but reversed with the broader market. The stock has retraced about 50% of its recent decline and is below its 50-day SMA. We need a reversal and are looking to exit. I've tightened the targets and suggest readers exit on weakness. Ultimately SBUX should fill its gap higher on 7/13 (near $25.30) and I think it will prior to moving much higher. But the stock may be headed for $26.40 to close the gap down on 6/29. This is about +1% higher than current levels. I suggest being patient and waiting for a pull back to exit positions.

7/13: SBUX is just not giving us the pullback I anticipated. The stock has rallied +10% from its lows last week in five trading days. It bounced straight up from its 200-day SMA right into its 50-day and 20-day SMA's. I keep anticipating a reverse lower and if it doesn't happen soon I suppose the concerns of strapped consumers buying $5 latte's are a thing of the past. There is a gap to be filled up to $26.39 and that might be where this is headed before a turn back down. I've tightened the above targets and suggest we begin to exit positions on weakness. These levels are good places to at least tighten stops.

7/12: SBUX sold off this morning but drifted higher the remainder of the day. SBUX has resistance at current levels and I am looking for the stock to make a lower high and reverse to retest its lows.

Current Position: Short SBUX stock, entry was at $24.25

Options Traders: August $25.00 PUTS

Entry on July 8, 2010
Earnings 7/21/2010 (unconfirmed)
Average Daily Volume: 10 million
Listed on July 3, 2010


CLOSED BEARISH PLAYS

SPDR S&P 500 ETF - SPY - close 109.65 change -0.00 stop 112.60

Target(s): 108.20, 107.25, 106.25
Key Support/Resistance Areas: 110.50, 108.80, 107.60, 106.00
Time Frame: DROPPED

Comments:
7/15: This would have been a perfect trade had the overnight futures held on to their gains but they were gone before the open. SPY proceed to trade down to our target 108.20 almost to the penny. In light of the near miss entry I think it is best to simply drop the play. We may release another play on SPY soon.

7/14: This is fairly simple. I'm looking for SPY to spike a tad bit higher to the 110.50 area (equivalent to 1105 in the S&P 500) and then retrace to fill its gap higher on 7/13 which is also just above its 20-day SMA. This is the primary target and is a good place to tighten stops to see if we can get more out of the trade. If we get filled I like this set-up a lot and I think the retracement could come quick. Our trigger to enter short positions is $110.35 and our stop will be above all recent closing highs $112.60 and the 200-day SMA. If we get filled on this trade I will be thoroughly amazed if we get stopped out prior to hitting our target. But the market can do anything so it is possible, but nor probable in my opinion. I think we have a 50/50 chance of getting filled so traders may consider entering at current levels with a tighter stop just above the 200-day SMA at $111.75.

Suggested Position: August $108.00 PUTS, current ask $2.64, estimated ask at entry $2.35

Annotated chart:

Entry on July xx
Earnings N/A (unconfirmed)
Average Daily Volume: 251 million
Listed on July 14, 2010