Editor's Note:
Good Evening. Does this market have your head spinning yet? Mine sure is after the head fakes we have seen over the past several days. We were stopped out of QQQQ as it gapped above our stop at the open. I suggest treading lightly until we know whether this market is truly heading higher or it is setting up for another fall. I like our short play set-up in COST and our new long play set-up in HWD, should we get filled. Small postion size is suggested. Please email me with any questions.

Current Portfolio:


BULLISH Play Updates

Emulex Corp - ELX - close 9.79 change -0.18 stop 9.42 *NEW*

Target(s): 9.59(hit), 9.89 (hit), 9.99, 10.15
Key Support/Resistance Areas: 11.40, 11.00, 10.50, 10.10, 9.70, 9.25
Final Gain/Loss: +0.41%
Time Frame: 1 to 2 weeks
New Positions: Closed

Comments:
7/22: ELX had an inside day and is consolidating. The stock has drifted higher over the past few weeks and is above its 20-day SMA. I think the stock should eventually make a trip up towards its 50-day SMA which is near our most aggressive target. However, our fate is going to be determined by the overall strength or weakness in the broader market. I suggest readers look to tighten stops or take profits on this trade as the above targets approach, which are all still valid. $9.99 is an area of high interest and a good level to see if ELX can break higher. Let's move the stop up to $9.42 to protect against a reversal from here.

7/21: ELX gapped higher and hit our second target of $9.89 was hit. This proved to be a formidable resistance point as indicated in the 7/20 updates. The stock sold off immediately, then found support near $9.65 and bounced over 1% higher towards the $9.75 level twice which provided more selling opportunities. I'm going to stick with the set-up here with the above targets still being valid areas to consider tightening stops or exiting positions. I am going to loosen the stop just a bit to $9.15 which is just below the upward trend line on the daily chart.

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


BEARISH Play Updates

Crown Holdings - CCK - close 26.71 change +0.15 stop 28.38 *NEW*

Target(s): 26.75, 26.30, 26.00, 25.60
Key Support/Resistance Areas: 27.35, 27.00, 26.25, 25.90, 25.50, 25.00
Current Gain/Loss: +0.36% Time Frame: 1 week
New Positions: Yes

Comments:
7/22: CCK gapped opened higher at $27.56 which was near our stop and where short positions should have been initiated. The stock proceeded to decline and then bounce back in the afternoon closing near the opening price. CCK finds itself near its YTD highs and I like a short play here for move lower. I am not trying to hit a home run, rather I am looking for a countertrend move lower to retrace some of the +8% gains of the past three days. I suggest readers set a target and take profits or tighten stops if CCK heads lower. I've adjusted the targets above to use as a guide.

7/21: CCK printed an ugly reversal candlestick after their earnings report on 7/19. The stock has rallied right up into a congestion area that lasted 2.5 months in March/April. I expect CCK to turn back towards its 200-day SMA which is near our first target of $26.00, and possibly its 20-day and 50-day SMA's near our more aggressive targets. The stock made a lower low in late May and appears to be making a lower high now. I think we can catch some of this move for a quick gain with a tight stop above today's highs. I suggest readers use the above targets as areas to tighten stops to see how far we can ride CCK down.

Suggested Position: Short CCK stock, entry was at $27.56

Options Traders: September $25.00 PUTS

Entry on July 22
Earnings 10/7/10 (unconfirmed)
Average Daily Volume: 1.43 million
Listed on July 21, 2010


Costco Wholesale - COST - close 54.90 change +1.29 stop 57.25

Target(s): 54.35, 53.80, 53.00, 52.25
Key Support/Resistance Areas: 56.80, 55.60, 54.25, 53.40, 51.50
Time Frame: 1 week

Comments:
7/22: COST could not even get above yesterday's highs when the market was spring boarding higher. this stock appears is a relative underperformer and I like it short if we get filled at $55.50. If nothing else a quick turn around from this resistance area can turn into a quick profit. I've added $54.35 as an immediate target. If we get triggered and hit this target, options positions should easily gain 20% to 30%. If we get a meaningful pullback COST should be one of the first stocks to let go.

7/21: COST tanked -2.69% today has already hit our first target. It's probably wishful thinking that the stock will rally up to our target of $55.80, but if we are patient we might get one of those rally days so I suggest we see how the rest of the week plays out. I will lower the trigger to $55.50 which is near the 20-day SMA and $55.60 resistance area which is where I expect COST to hit a brick wall.

7/20: COST has broken through key support/resistance areas at $56.80 and $55.60 and is below all of its major moving averages which are declining. The stock is rallying to test these areas from below and I suggest readers using a trigger of $55.80 to enter short positions on any further strength COST exhibits in the coming days. This area is near the most recent downtrend line. We'll use a tight stop at $57.25 which is just above the 50-day and 20-day SMA's, the recent downtrend line, and the congestion area overhead. COST has a large gap to be filled down near the $52 level which is near our most aggressive target and could happen if weakness reappears in the broader market. NOTE: September options were just recently released so the open interest is less than other months.

Suggested Position: Short COST stock at $55.30

Options Traders: September $55.00 PUTS, current ask $1.86, estimated ask at entry $1.50

Entry on July xx
Earnings 10/7/10 (unconfirmed)
Average Daily Volume: 3.76 million
Listed on July 20, 2010


CLOSED BEARISH PLAYS

PowerShares QQQQ Trust - QQQQ - close 45.77 change -1.13 stop 45.10

Target(s): $45.05 (hit), 44.60 (hit), 44.40 (hit 7/17, 7/20), 44.15, 43.90
Key Support/Resistance Areas: 46.77, 45.25, 44.46, 43.50, 42.50, 41.00
Final Gain/Loss: -2.17%
Time Frame: 1 week
New Positions: Closed

Comments:
7/22: Well, you certainly have to pick your spots very carefully in this environment and obviously our spot to exit this position was at the close yesterday. QQQQ proceeded to gap open above our stop so we were taken out at the open at $45.26. We are flat the position for a loss and finding better opportunities. The ETF backed off of its primary downtrend line today while the other major indexes (except RUT) closed above their trend lines. But with the huge reversal it appears this may be taken out. Price will soon tell us and it will be interesting to see how this plays out.

7/21: QQQQ gapped higher and essentially sold off the remainder of the day. The stock hit our first target of $45.05 and drifted higher to the $45.40 area which is where the real selling began. For intraday traders I've provided an intraday chart to illustrate where protective stops could have been placed to protect against a reversal and to get the most of the price action that was happening (see red lines on the chart). The initial stop could have been placed near the $45.50 level which was above the initial swing high (see small oval). QQQQ then proceeded to sell off hard hitting our targets of $44.85 and then finally $44.60 at the end of the day. Once these targets were hit the stops could have been moved down to the $45.10 area which was above prior intraday support areas of the past few days (which should now act as resistance). This is the ideal way to deal with the current volatility upon us. So now we are ready to lower the stop to $45.10 going into tomorrow. $44.10 is still a valid target just above the 20-day SMA that has been previously hit. This is the area where I suggest tightening stops to see if we can get even more out of the position. If things continue to the downside the immediate next targets are $44.15 and $43.90 with the most aggressive target at $43.40. I know managing a trade like this is difficult for traders who do not trade intraday. A possible solution would be to initiate a trailing stop which will protect you from a hard reversal back to the upside. In this case the trailing stop would be about 45 cents. My goal is to exit this positions this week.

Closed Position: Short QQQQ stock at $45.26, entry was at $44.30

Options Traders: August $45.00 PUTS

Annotated chart:

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