It was actually Friday the 3rd but it felt like the 13th with heavily shorted stocks seeing sharp rebounds.

Editor's Note:

We remain hostage to headlines from Europe and for the second consecutive Friday we saw heavily shorted stocks rebound significantly on no individual news but on rumors from Europe.

Hewlett Packard and Red Robin were stopped out and several other short positions gave up sizeable gains from the Thursday decline. Most of those positions were at or near 52-week lows at the close on Thursday and heavily shorted.

The rebound is just a trading reality that traders close positions first and ask questions later when the futures are up +20 points at the open. It is a defensive reaction called fight or flight. When you can't fight anyone you flee quickly.

The MGM play should be closed on Monday at the close due to earnings scheduled for Tuesday morning.

I dropped Focus Media (FMCN) as I warned on Thursday as it continues to creep higher despite the market. I will suggest to James that he consider it as a long position next week. When stocks fail to decline in a bad market that is a sign they will run when the market turns around.

I changed the stop losses on the stocks in yellow on the portfolio graphic.

James is on vacation this week but will be back on Monday.

Current Portfolio:


BULLISH Play Updates

Jarden Corp. - JAH - close: 47.54 change: +.69

Stop Loss: 46.50 (new)
Target(s): 49.00
Time Frame: 6 to 8 weeks
Earnings Date 07/24/12
Average Daily Volume = 652 thousand
Listed on July 26, 2012
New Positions: Yes, see below

Company Description

Update 8/04/12:
Another nice gain in Jarden. On Wednesday evening S&P announced they were adding Jarden to the S&P Midcap 400 at the close on August 7th. No complaints here. I raised the stop loss again to $46.15.

When these kind of additions take place there is typically a run up into the announcement as speculators try to front run the funds. The day after the actual addition the stocks usually sell off as excess stock bought on speculation is sold. I suggest we close the JAH position at the open on Tuesday or $49 whichever comes first.

Our multi-week target was $49.00.

Position: Long JAH Stock @ $45.55 on July 27th.

JAH Chart


Sandisk Corp. - SNDK - close: 40.75 change: -.68

Stop Loss: 40.35
Target(s): 50.00
Time Frame: 4 to 6 weeks
Entry on July 30 at $ 42.75
Earnings Date 07/20/12 (past)
Average Daily Volume = 4.5 Million
Listed on July 28, 2012
New Positions: Yes, see below

Company Description

8/04/12 update:
Sandisk still battling resistance at $42 after Monday's spike triggered the entry into the play at $42.75 followed by an immediate collapse back into a consolidation pattern. Initial support at $40.65 appears to be solid. Remember, the market was actually down the first four days of last week and Sandisk did not decline. A positive market should produce a breakout over that $42 level.

No news. No change in play.

Trigger @ 42.75 hit 7/30/12

Suggested Position:

Long SNDK stock @ $42.75

OR

Long SNDK Sept $44 Call, @ $2.28.

SNDK Chart


BEARISH Play Updates

Groupon, Inc. - GRPN - close: 6.57 change: +0.21

Stop Loss: 6.75
Target(s): 6.25
Entry on July 09 at $8.40
Time Frame: exit prior to the Aug. 13th earnings report
Earnings Date 08/13/12 (confirmed)
Average Daily Volume = 8.1 million
Listed on July 07, 2012
New Positions: No

Company Description

8/04/12 update:
After closing only 14 cents away from the exit target of $6.25 on Thursday we saw a small short squeeze on Friday but it was purely market related. That squeeze almost hit the stop loss at $6.75 but we escaped with a 2-cent margin. Maintain the exit target.

The exit target is $6.25.

Current Position: short GRPN stock @ $8.40

- or -

Long Aug $8.00 PUT (GRPN1218T8) Entry $0.80

08/02/12 lowered stop to $6.75.
07/27/12 lowered stop to $8.25.
07/18/12 readers may want to start taking some money off the table
07/12/12 new stop loss @ 9.05

GRPN Chart


MGM Resorts - MGM - close: 9.26 change: +0.26

Stop Loss: 9.65
Target(s): 8.10
Entry on July 23 at $9.69
Earnings Date 08/07/12 (confirmed)
Average Daily Volume = 8.9 million
Listed on July 21, 2012
New Positions: No

Company Description

8/04/12 update:
Big 3% short squeeze along with the market. Our time has run out on this position. They announce earnings on Tuesday before the open.

Exit this position at the close on Monday. Normally I would say exit at the open but I expect some retracement of Friday's short squeeze so we are likely to get a better fill at the close as traders flee the stock ahead of what could be an earnings miss.

current Position: short MGM stock @ $9.69

- or -

Long Aug $9.00 PUT (MGM1218T9) Entry $0.27

MGM Chart


EZCORP, Inc. - EZPW - close: 21.90 change: +0.07

Stop Loss: 22.85
Target(s): 20.05
Time Frame: 3 to 4 weeks
Entry on Aug 1st at $ 21.80
Earnings Date 07/24/12
Average Daily Volume = 381 thousand
Listed on July 26, 2012
New Positions: Yes, see below

Company Description

8/04/12 update:
The gap down on Thursday to a new 52-week low was followed by a big short squeeze on Friday right back to resistance. If the market gives back its big gains from Friday I expect EZPW to give back as well. No change in play.

Why We Like It:
You might think that with the U.S. economy struggling and unemployment still elevated that pawnshops would be doing strong business. Instead EZPW is struggling to meet its numbers. The company recently reported earnings and missed both the top and bottom line estimate. Furthermore management lowered their earnings guidance for 2012.

Now the stock is sitting on support at the $22.00 level. The June low was $21.91. I suggested a trigger to launch bearish positions at $21.80. Conservative traders can target a drop to $20.00. More aggressive traders could aim for the $18.00 level. The newsletter will plan on exiting at $20.05. FYI: The Point & Figure chart for EZPW is bearish with a long-term $10 target.

Trigger @ 21.80 hit on opening gap on Aug 2nd.

Suggested Position: short EZPW stock @ (trigger)

- or -

Long the Sep $20 PUT (EZPW1222U20) @ $0.50

EZPW Chart


CTrip.com. - CTRP - close: 12.51 change: -0.19

Stop Loss: 13.25
Target(s): 10.25
Time Frame: 4 to 6 weeks
Entry on July 30 at $ 13.15
Earnings Date 07/24/12
Average Daily Volume = 2.8 Million
Listed on July 28, 2012
New Positions: Yes, see below

Company Description

8/04/12 update:
Same story as the rest of the puts. Close at critical support on Thursday was met with a big +3.7% short squeeze gain on Friday. No news, no change in play.

The chart is really ugly and there is no real support until $10.

Trigger @ 13.15 hit 7/30/12 @ 10:40

Position: short CTRP stock @ $13.15

- or -

Long the Dec $12 PUT @ $1.10

CTRP Chart


Ingram Micro - IM - close: 14.50 change: +.05

Stop Loss: 15.25
Target(s): 12.00
Time Frame: 6 to 8 weeks
Entry on August 2nd at $ 14.60
Earnings Date 08/09/12
Average Daily Volume = 1.3 Million
Listed on August 1, 2012 New Positions: Yes, see below

Company Description

Update 8/04/12
Ingram spiked at the open on Friday but immediately rolled over to close with only a minimal 5-cent gain. I hope this lackluster performance is a preview of things to come.

Why We Like It:
Ingram is a technology company that sells all types of computer hardware and components. The hardware sector is very soft today. Companies are holding off on new purchases until they see how the election plays out and what happens to the fiscal cliff.

Ingram posted earnings this week of 39 cents that beat estimates by a penny. Revenue only rose +0.3% from the year ago quarter. Currency translation cost the company 5% of their earnings. The company used the Europe excuse for the lackluster earnings.

They also complained about product mix saying customers are buying cheaper products with lower margins. Expenses rose +2.2% and operating margin declined to 4.0%. That does not leave a lot for profit.

They guided lower for Q3 saying revenue would be flat and gross margins to decline further. They warned they would be facing an additional interest burden of $2 million for debt incurred to fund the Brightpoint acquisition.

Wednesday's close at $14.72 is last ditch support dating back to mid 2010 and again in March 2008. The stock traded lower in the recession to $10 and below. If Ingram declines below today's closing support I believe it will retest congestive support at $12.

Trigger @ 14.60 hit 8/2/12

Suggested Position: Short IM stock @ $14.60

Premiums on options are skewed so shorting is the only play.

IM Chart

IM Chart


Apollo Group - APOL - close: 26.65 change: +.62

Stop Loss: 28.60
Target(s): 21.00
Current Gain/Loss: unopened
Time Frame: 4 to 6 weeks
Entry on Aug xx at $ xx.xx
Earnings Date 09/24/12
Average Daily Volume = 1.7 Million
Listed on August 2, 2012
New Positions: Yes, see below

Company Description

Update 8/4/12:
Apollo rebounded slightly on the short squeeze but failed to gain any traction after the initial gap open. Aggressive traders may want to short it at this higher level rather than wait until the trigger at 25.75 is hit.

Why We Like It:
Apollo is a for-profit education company. The companies have been trashed recently and the release of a Senate report last week was especially harsh on the group. Included in that group are APOL, BPI, COCO, DV, STRA and LOPE.

The Senate report (249 pages) said these colleges failed to give students a reasonable bang for their bucks. Since they are all taxpayer funded that means we are paying for their education.

Unfortunately 64% of students trying to get an associate's degree end up dropping out. The colleges spend nearly 25% of their revenue on marketing and basically dragging any candidate with a pulse into the program to get Federal funding for that student. Because the students are lobbied so heavily to sign up there is an inordinate number that give up quickly as opposed to those attending a regular college because they want to be there. Degrees at these for-profits cost an average of 19% more than at regular schools.

The report found that the average salary of an executive at these colleges was $7.3 million a year. This makes me want to go teach investment education somewhere but I bet teachers are closer to minimum wage.

The Federal government ends up paying 80% of the tuition bill at these colleges as a result of various student loan programs and veteran programs.

The report urged stronger rules, additional oversight and requirements for graduation in order to obtain funding. Basically these colleges have run into a buzz saw of lawmaker hostility. Odds are good there will be additional regulation and scrutiny of their admission procedures.

Apollo is trading at an 11 year low.

I am recommending a short of APOL with a trigger of 25.75. I want to see a new low as an entry point.

Trigger @ 25.75

Suggested Position: Short APOL stock @ $25.75

OR

Buy APOL Sept $25 Put, currently $1.58.

APOL Chart

APOL Chart


CLOSED BULLISH PLAYS

No closed long plays


CLOSED BEARISH PLAYS

Focus Media Holdings - FMCN - close: 19.83 change: +.56


Stop Loss: 20.10
Target(s): 15.25
Entry on July 17 at $18.40
Earnings Date 05/29/12
Average Daily Volume = 2.2 million
Listed on July 16, 2012

8/04/12 update:
FMCN rebounded again and appears to be ready to breakout over resistance at $20. I am dropping this position for no movement as I mentioned on Thursday evening.

Close the FMCN short at the open on Monday.

Position: short FMCN stock @ $18.40

- or -

Long Aug $18 PUT (FMCN1218T18) Entry $1.50

FMCN Chart


Hewlett Packard - HPQ - close: 18.25 change: +0.71

Stop Loss: 18.25
Target(s): 16.50
Time Frame: Close prior to Aug. 22nd earnings
Entry on July 23 at $18.38
Earnings Date 08/22/12 (unconfirmed)
Average Daily Volume = 18.0 million
Listed on July 21, 2012 New Positions: No

8/04/12 update:
HPQ rebounded from a new 52-week low on Thursday to trigger the stop loss at $18.25 on Friday. I still believe we will see lower numbers but we are out of this play.

Suggested Position: short HPQ stock @ $18.38, exit $18.25, +.13 gain.

- or -

Long Aug $18 PUT (HPQ1218T18) Entry $0.54, exit 0.41, -.13 loss

08/02/12 lowered stop loss to 18.25
07/27/12 lowered stop loss to 19.25
07/23/12 trade opened on gap down at $18.38. Trigger was $18.40

HPQ Chart


Red Robin Gourmet Burgers - RRGB - close: 29.59 change: +.76

Stop Loss: 29.75
Target(s): 26.00
Time Frame: 3 to 6 weeks
Entry on July 24 at $29.85
Earnings Date 08/09/12 (unconfirmed)
Average Daily Volume = 170 thousand
Listed on July 23, 2012

8/04/12 update:
After two days of nice declines to 28.66 we were stopped out with a +4% opening gap to $30. Fortunately the tight stop prevented any material losses.

FYI: The Point & Figure chart for RRGB is bearish with a $22.00 target.

current Position: short RRGB stock @ $29.85, exit $29.75, +0.10 gain

- or -

Long Aug $30 PUT (RRGB1218T30) Entry $1.60, exit $1.35, -0.25 loss

RRGB Chart