DIAMONDS Trust - DIA - close: 83.75 change: -1.80 stop: n/a
I won't repeat the obvious about how volatile Friday was. I do want to point out that the DIA gapped open lower at $82.39, which gave us a better entry point. If you were able to buy the dip near $80.00 then things look even better. The intraday bounce and the massive volume on DIA could be signs of a bottom but there are no guarantees. Right now, I would wait for another dip into the $81.00-80.00 zone before buying new (very speculative) October calls on the DIA. Instead of aiming for $95, if you're buying calls around $80, I would plan to exit in the $89-90 zone. We are going to adjust our exit strategy and set our first target at $89.50 and our second target at $95.00. Remember, these are very risky bets. October options expire in five days.
Picked on October 09 at $ 85.55/82.39open
PowerShares QQQ - QQQQ - close: 31.32 change: -0.20 stop: n/a
Stocks continued to crash on Friday morning and the QQQQ actually gapped open at $30.52, providing a better entry point for our very speculative bounce play. The trend is still down but we're so oversold we're way overdue for a correction higher. You could argue that this play is relying on the gambler's fallacy, which suggests that the market has been "red" eight days in a row then it's time to bet on "black" to use a roulette analogy. I would counter that we've had a constant string of bad news and uncertainty for eight weeks straight. How much worse can the news get that hasn't already been factored into the market at these prices. Our biggest risk here is time frame. We are gambling on a bounce before October options expire. If you're nimble, try opening positions on another dip near $30.00 again. Currently our target is $35.00.
Picked on October 09 at $ 31.52/gap open 30.52
ITT Educational Servc - ESI - cls: 69.10 chg: +3.10 stop: 73.30*new*
Shares of ESI came pretty close to our secondary target at $61.00. The intraday low on Friday morning was $62.77. The stock actually appears to be showing a little relative strength. It closed up sharply on Friday afternoon and didn't seem the same early afternoon Friday meltdown that the wider market did. We are adjusting our stop loss lower to $73.30. We're not suggesting new put positions at this time. ESI has already hit our target at $67.50.
Picked on October 06 at $ 73.30 *triggered/gap down
Volatility Index - VIX - cls: 69.95 chg: + 6.03 stop: n/a
This never-ending ramp up in the volatility index will eventually collapse. It may not happen all at once but it will revert back to its normal trading range. We are facing the possibility that the VIX could trade at an elevated level for a few weeks like it did back in 2002 and 1998 but odds are against it. Of course this past week has been a week against the odds with record-breaking moves in the market and record-breaking highs for the VIX. We're not suggesting new put positions even though Friday's high for the VIX was an all-time high. Due to these extreme highs in volatility option prices are hugely inflated and we are basing some new plays on that fact. Check out our new play section.
Note: The VIX options, which are European style options, have a unique expiration date. October VIX options expire on October 22nd, 2008. November VIX options expire on November 19th, 2008. The last day of trading for these options is the Tuesday before expiration. For more information check this link.
Our September 16th put position (suggested entry at 30.30) has a 25.50 target. In all honesty this position may be dead. We still have plenty of time with these next two. The September 29th position (suggested entry at 46.72) has two targets at 36.00 and 31.00. Our October 8th position (entry 57.53) has two targets at 40.00 and 35.00.
Picked on September 16 at = 30.30 first position
Cisco Systems - CSCO - close: 17.23 change: +0.04 stop: 16.45
We have good news and bad news with our attempt at buying CSCO near support. The bad news is that CSCO blew through support in the $17.00-16.80 zone and hit our stop loss at $16.45. The good news is that CSCO gapped open lower on Friday at $16.49. The play was over in seconds. At this point I would keep an eye on CSCO and might be tempted to buy calls if shares can trade over $18.25 or $18.50.
Picked on October 09 at $ 17.19 Open 16.49/stopped 16.45
Freeport McMoran - FCX - close: 36.35 chg: -1.56 stop: 36.85
Everyone knew that FCX has been volatile lately but Friday's gap down to $34.81 was very painful. Shares actually hit a low of $32.50 before bouncing back. I do think that there will be a great opportunity to bet on FCX rising in the future but that opportunity may be closer to the 2005 lows around $30 or the 2004 lows near $28.00. We would have been stopped out at the open on Friday.
Picked on October 08 at $ 42.60 /stopped out 34.81 gap down
Hasbro Inc. - HAS - close: 30.00 change: +1.26 stop: 32.05
Target exceeded. The market's gap down on Friday morning led shares of HAS to open at $27.63 and then fall to $27.02 before bouncing back into the green. Our target to exit was $27.65. The overall trend in HAS remains very bearish with its H&S pattern so we'd keep an eye on it for another opportunity. When the market eventually bounces HAS could struggle as it nears overhead resistance.
Picked on October 06 at $ 32.25 *triggered 10/06/08