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Call Updates

Adobe Systems - ADBE - close: 45.11 chg: -0.25 stop: 41.50

Although ADBE was the subject of several news articles this week, including a John C. Dvorak article on MarketWatch about what ADBE needed to do to fight back against MSFT's Silverlight, the end of the week proved to be light on news for ADBE. Volume proved light, too, as ADBE pulled back from its early week high into a retest of its simple 10-day moving average. ADBE's chart and the shape of its daily candles had shown that it was getting stretched to the upside, and it's happily been burning off its slowing momentum through sideways consolidation. That's the way that bulls would prefer that its overbought status be burned off. As suggested midweek, conservative traders may want to take some money off the table, and all readers need to assess the possibility that if that if the channel's midline support is lost on a daily close, ADBE could make a quick trip down to $44.50-$44.66. Our target is the $47.50-50.00 zone, but the more conservative of the traders who elected to stay in the trade with full positions might consider taking at least some of those positions off the table if $47.50 is approached. They might also consider resetting their stops a bit higher if they don't want to risk a downturn through the rising channel, toward our official stop. We'd like to raise that official stop but are waiting for the 30-sma to rise up closer beneath the current price before doing so. The Point & Figure chart is positive with a $71 target.

Picked on August 05 at $ 43.34
Change since picked: + 1.77
Earnings Date 09/16/08 (unconfirmed)
Average Daily Volume = 6.5 million


Illumina - ILMN - cls: 94.09 chg: +0.34 stop: 86.95

ILMN provided a nice start to a bullish trade, but by Friday, it was ready for a rest. During the week, ILMN announced that it had completed its public offering of 7 million shares. The company raised $342.6 million through that public offering. Now that ILMN has bounced so hard, we're somewhat reluctantly leaving our official stop loss at $86.95. It was only 8/08 that ILMN was last trading at that level. However, as we've been suggesting, conservative readers may want to use a stop loss closer to the $88.00 level, just below the 30-sma from which it often bounces. We have two targets. Our first target is $95.25, a target that ILMN came within $0.25 of hitting on Friday. We advise traders to take partial positions at that target. Our second target is $99.50, just below the top trendline of its rising price channel. FYI: ILMN has a 2-for-1 stock split scheduled for September 23rd. Traders might also want to note that ILMN's short interest is about 19% of the 50 million-share float. That's high enough to spark some short squeezes.

Picked on August 14 at $ 91.55
Change since picked: + 2.54
Earnings Date 07/27/08 (unconfirmed)
Average Daily Volume = 1.2 million


Itron Inc. - ITRI - close: 105.03 change: +2.38 stop: 98.45

With its earnings behind it, ITRI powered through our trigger this week and nearly hit the first target, too. Earlier, ITRI's bounce had been on light volume, but Friday's gain was on larger-than-normal volume. ITRI presented at a Global Growth Conference earlier this week, but no news that we could find was published as a result of that presentation. Thursday's action had produced a bullish engulfing candle on the daily chart, and Friday's confirmed the bullishness but brought ITRI perilously close to its late April high of $106.25. Potential resistance exists near the April high, but as mentioned Thursday night, some charts suggested that resistance may begin to kick in around $105.10. We've set two targets. Our first target is $105.75, but Thursday night, we advised conservative traders to consider taking at least partial profits as ITRI passed through $105. Our second target is $109.90. We strongly suggest readers take some money off the table at the first target, if you didn't as ITRI passed $105.

Picked on August 14 at $ 101.50
Change since picked: + 3.53
Earnings Date 10/30/08 (unconfirmed)
Average Daily Volume = 616 thousand


Research In Motion - RIMM - cls: 128.80 chg: -1.93 stop: 122.50

RIMM spent last week pulling back to its 10-sma to test it, bouncing from tests or near tests Wednesday, Thursday and Friday. We continue to believe that conservative traders should raise their stops to just under $125 and would like to raise our official target to that level. However, with RIMM frequently producing daily ranges of the 5-8 points, doing so could stop out readers if RIMM should dip to test its 10-sma again. With the 10-sma now at 127.30, a stop just beneath the 8/13 low of $125.05 does give readers some leeway. RIMM is capable of exceeding that intraday but still bouncing back above that rising trendline off the July low by the close. We're going to leave our stop loss at $122.50 for now but urge readers to give consideration to their own preferences and risk profiles this weekend, thinking over the risks of each stop loss. We further suggested Thursday night that the more conservative of those who have not stepped out of partial profits as the first target was hit consider doing so if RIMM should approach $132.50, ahead of this week's high and near the midpoint of RIMM's almost two-month-long broadening pattern from earlier in the summer. RIMM did approach that level Friday, with a high of $132.41. RIMM has already exceeded our early target at $129. Our secondary target is $137.00.

Picked on July 31 at $120.50 /1st target exceeded
Change since picked: + 8.30
Earnings Date 09/25/08 (unconfirmed)
Average Daily Volume = 18.6 million


CBOE Volatility Index - VIX - close: 19.58 chg: -0.76 stop: n/a

After showing signs of life earlier in the week, the VIX dropped sharply Thursday and Friday to test and slightly exceed a rising trendline off its 5/19 high. It continues to find resistance just below 22.50, with both the shape of its daily chart and its inability to scale back above 22.50 proving somewhat problematic for this long trade. However, the good news is that it tests potentially significant support, if slightly exceeding that support by Friday. Odd effects can occur during option expiration week, somewhat discounting the slight dip beneath historical and rising trendline support/resistance in the 20.00. Other nearby support, also slightly violated, is the 6/17 low of 20.02, the 6/25 low of 20.34, the 8/05 low of 20.06, and the 8/11 low of 19.66. This was always an aggressive trade, and, with the VIX's formation on intraday charts looking a bit like a broadening formation, it was suggested Thursday night that aggressive traders who understood what they were risking might want to let the VIX drop slightly below the 8/11 low of 19.66 before they decided that near-term support has been broken. The VIX has done that, producing a potential reversal signal on its weekly chart as it did. Potential reversal signals aren't always followed by reversals, of course, and without a quick rebound or a steadying near 20.00, it's time for readers to assess the possibility that the VIX could drop toward 18.25 or even 16.00 before rebounding. As stated last night, this was an aggressive and speculative bet that with all the troubles this market (and economy) is seeing that there will be another significant sell-off before October options expiration. Normally when the market sees a super sharp sell-off the VIX spikes to the 30.00 level and beyond, and now it's poised to either bounce or fall lower. We continue to suggest that subscribers wait for a new rise over 22.50 before considering new positions. We were suggesting the October calls. Our exit target is 29.75 on the VIX, although the least aggressive of the aggressive traders entering this trade might consider locking in at least partial profits if the VIX moves through and above 28.80.

Picked on August 03 at $ 22.57
Change since picked: - 2.99
Earnings Date 00/00/00
Average Daily Volume = x million

Put Updates

Bank of Amer. - BAC - cls: 30.70 change: +0.52 stop: 34.15

Analysts spent all week debating the merits of various banks and their exposure to problems associated with the mortgage market, including BAC. New York State Attorney General Andrew Cuomo held several press conferences either announcing settlements with the likes of MS and JPM, requiring them to pay fines and buy back troubled securities from retail clients, or threatening legal action, as it did with MER. Investors don't know what to do with financials such as BAC, as demonstrated by BAC's charts. While the debates raged, BAC's choppy formation began consolidating into a narrowing triangle with an upper trendline just below our $34.15 stop. Midweek, we warned readers not to be surprised by an oversold bounce from near $28.00 and we speculated Thursday that the bounce might be intended to rise up and test Wednesday's gap lower. It was and it did, with Friday's candle a small-bodied one sitting right in that gap. BAC might attempt to keep testing its simple 10-day moving average from the underside, with that 10-sma now curving lower and hopefully ready to provide resistance on daily closes. MACD dropped below zero this week and has remained negative, even on the late-week bounce attempt. As suggested midweek, conservative traders may want to lower their stops. However, in order to give BAC any room, especially with the triangle's top trendline validating the importance of that level, we're leaving our official stop as it is until BAC has broken below the triangle formation. Whatever optimism buyers felt toward financials midweek, BAC's troubles aren't finished. Those include a rising tide of lawsuits after its acquisition of Countrywide. The midweek update also noted the expiration of the temporary rule to limit short selling in certain stocks. Although the expiration of that rule doesn't appear to have impacted financials this week, it might in the future. Our first target is $28.00. Readers should consider taking partial profits there in case BAC is reaching down intraday to test its triangle's and the 30-sma support, but closes the day back above both. Our second target is $25.50.

Picked on August 07 at $ 31.52
Change since picked: - 0.80
Earnings Date 10/16/08 (unconfirmed)
Average Daily Volume = 90.4 million


Freddie Mac - FRE - close: 5.85 change: -0.09 stop: 8.15

As happened with many entities likely to be impacted by the mortgage mess, FRE spent the week consolidating while analysts and official entities debated what would happen in the future. In addition to the information detailed in the BAC update, the
Securities Industry and Financial Markets Associated this week took steps that some believe could shore up the mortgage market. They agreed to include newly originated jumbo loans in a market for mortgage-backed securities, the details of which are yet to be announced. We advised midweek to strongly consider an early exit right away, and Thursday advised that even aggressive traders might consider locking in at least some profits. Thursday's slight dip provided an opportunity to do so.
FRE remains well below our new $8.15 stop, appropriately set just above the simple 30-day moving average. It remains to be seen if the Securities Industry and Financial Markets' action made any material change to the situation and finally break FRE out of the triangle pattern into which it's narrowed. As noted earlier, many on Wall Street still believe FRE and FNM will not be able to survive the housing crisis without the government stepping in. The big fear is that if the U.S. government does step in they will wipe out the shareholders. Our short-term target has been the $5.00 level. More aggressive traders may want to aim lower, but all traders might consider locking in some profits now.

Picked on July 20 at $ 9.18
Change since picked: - 3.30
Earnings Date 08/06/08 (confirmed)
Average Daily Volume = 45.5 million

Strangle Updates

(What is a strangle? It's when a trader buys an out-of-the-money (OTM) call and an OTM put on the same stock. The strategy is neutral. You do not care what direction the stock moves as long as the move is big enough to make your investment profitable.)


Lehman Brothers - LEH - close: 16.17 chg: -0.03 stop: n/a

LEH spent the week churning, producing the fifth week in a row of small-bodied weekly candles that went nowhere. The news articles concerning financials have been detailed in other play updates, but specific news about LEH surfaced Friday. According to a Reuters article, LEH wants to sell its $40 billion portfolio of securities and commercial real estate in an attempt to shore up its finances. LEH has told prospective buyers that it will accept the first $5 billion in losses on that portfolio following the sale. As of May 31, the Reuter's article says, the portfolio's real estate assets were valued at $10.4 billion and its mortgages and mortgage-backed securities at $29.4 billion. We wonder what they would be valued at now. A FINANCIAL TIMES article concerning the sale was titled "Lehman faces fight to shed real estate assets," so we're guessing the financial world isn't exactly confident of LEH's ability to clinch that sale. At the close of trading Friday, LEH had fallen back slightly from its near approach to the converging simple 10- and 30-sma's and the trendline that had formerly supported it as it climbed off the July low. LEH needs to drop below last week's $15.14 low, however, to confirm that former support as new resistance. We have several weeks left before September options expire and need to see LEH significantly above $24.00 or under $10.00. We're not suggesting new positions at this time. The options we suggested were the September $24.00 calls (LYH-IR) and the September $10.00 puts (LYH-UB). Our estimated cost is $2.15. We want to sell if either option hits $3.50 or higher.

Picked on July 27 at $ 17.05
Change since picked: - 0.85
Earnings Date 09/18/08 (unconfirmed)
Average Daily Volume = 63 million

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