Play Editor's Note: There was no follow through on the Wednesday afternoon sell-off. Stocks were acting pretty bullish today. It could just be end-of-year window dressing from some large mutual funds but we're not going to argue with the relative strength. Instead of adding new plays we adjusted our entry points on several bullish candidates in tonight's newsletter.
______________ CALL Play Updates ______________
Burlington Northern - BNI - cls: 86.59 chg: +1.54 stop: 82.45*new*
Lack of any real sell-off following yesterday's late day reversal could empower the bulls tomorrow. We're going to suggest some short-term bullish call positions on BNI right here or on a dip in the $85-84 zone. We'll use a stop loss at $82.45. There is short-term resistance at $90.00 but we're aiming for $94.00. The 100-dma and 200-dma look like big resistance near $95.00. More conservative traders may want to use a slightly tighter stop loss.
Picked on October 30 at $ 86.59
CSX Corp. - CSX - close: 45.05 chg: +1.71 stop: 41.75 *new*
The relative strength displayed in CSX today looks convincing. I would suggest new positions right here. We're upping our stop loss to $41.75. More conservative traders, especially if you're jumping in right now, may want to use a stop loss closer to $44.00 or $43.50. Our target remains $49.90.
Picked on October 23 at $ 40.41 /gap down entry
Freeport McMoran - FCX - close: 30.02 change: +1.78 stop: 27.45*new*
We're going to alter our strategy on FCX too. Instead of waiting for a dip toward $21.00 the market is telling us that the stock wants to move higher from here. We're going to suggest bullish call positions now with a stop loss under today's low (which was 27.52). We're listing two new targets. Our first target is $34.50. Our second target is just under the top of the October 15th gap down at $38.00.
Picked on October 30 at $ 30.02
Hansen Natural - HANS - close: 25.45 change: +1.54 stop: 23.45*new*
HANS turned in a very nice day with a 6.4% gain. The MACD on the daily chart appears to have delivered a new buy signal. Please note that we are changing our exit strategy. Our new first target is here, right now! HANS is up more than 18% from our entry point. We want to take some money off the table immediately. We're adjusting our secondary, more aggressive target from $30.00 to $28.00. We're changing the stop loss to $23.45. If you are looking for a new entry point then wait for a dip or a bounce in the $24.50-24.00 zone.
Picked on October 23 at $ 21.47 /gap down entry/1st Exit 25.45
MasterCard - MA - close: 140.06 chg: + 4.33 stop: 129.90*new*
Shares of MA also showed some intraday strength. I'd be tempted to buy calls again if the newsletter was not already long. If you do decide to buy calls here I'd use a relatively tight stop even on a volatile stock like MA. We're upping our stop loss to $129.90 (new positions probably need a tighter stop). Currently we have two targets. Our first target is $158.00. Our second target is $169.50.
Picked on October 23 at $131.00 *triggered 10/23
Energy SPDR - XLE - close: 50.35 chg: +2.22 stop: 44.75 *new*
Yesterday I didn't want to give up on buying a dip near $40. Looks like the market and XLE are not going to cooperate so we have to trade what the market provides and not what we want to happen. I'm going to list a bullish entry point right here at $50.35 but if you're patient you might get a better entry point somewhere in the $47.50-46.50 zone. We're adjusting the stop loss to $44.75. Our new target is $56.50.
Picked on October 30 at $ 50.35
______________ PUT Play Updates ______________
Volatility Index - VIX - cls: 62.90 chg: - 7.06 stop: n/a
The VIX appears to be in full retreat now.
We're not suggesting readers buy puts at this time. With the VIX this high if you want to bet on its going lower the better bet would be to sell calls instead.
If the VIX is under your call's strike price at expiration (11/19/08) they'll expire at zero ($0.00) and you keep all the premium you sold it for.
Note: The VIX options, which are European style options, have a unique expiration date. 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
__________ Strangle & Spread Play Updates __________
CBOE Volatility Index - VIX - cls: 62.90 chg: - 7.06 stop: n/a
The recent action in the VIX is suggesting the top is finally in place. The index acted weak with a failed rally and a close at its lows. Readers may want to consider new positions now but I'd probably sell the November 40s or 45s and buy the 65s or 70s.
We don't see any changes from our prior comments on the VIX spread plays listed below.
Please see the CBOE website or our Sunday, October 12th play description for details on margin requirements for selling VIX options. Link:
Note: VIX options are European style options that settle for cash at expiration. Furthermore VIX options have unique expiration dates. November options expire on Wednesday, November 19, 2008 and will stop trading on Tuesday, November 18th.
VIX spread #1 has been completed.
VIX spread #2 with November options (date Oct. 12th):
We wanted to SELL the November 30 calls (opening price 10/13/08 was $ 8.60) and BUY the November 50 (opening price was $1.61) as a hedge against the VIX remaining elevated.
In a different format the play is:
SELL CALL NOV 30.00 VIX-KF.
Picked on October 12 at $ 69.95
VIX spread #3 with November options (published 10/22/08):
We wanted to SELL the November 35 calls (10/23/08 opening price was $ 14.00) and BUY the November 60 (10/23/08 opening price was $3.00) as a hedge against the VIX remaining elevated. We'll fill in the prices Thursday morning. Our account will be credited with the amount for selling the November 35 calls, while it the price paid for the 60 calls will be deducted.
In a different format the play is:
SELL CALL NOV 35.00 VIX-KI
Picked on October 12 at $ 69.65
______________ CLOSED PLAYS ______________
iShares Russell 2000 - IWM - close: 51.43 chg: +2.73 stop: 50.75
There was no follow through on yesterday's late day reversal lower. Quite the opposite. The IWM actually gapped open higher at $50.41 and quickly hit our stop loss at $50.75 ending the play in moments. The IWM's performance looks pretty bullish and the MACD on the daily chart has now produced a new buy signal.
Picked on October 29 at $ 50.41 *gap open entry/stopped 50.75
Lockheed Martin - LMT - close: 82.18 change: +3.57 stop: 82.55
Shares of LMT also gapped open higher. The stock did trade back toward $78.81 before bouncing back into a gain. Our first opportunity to open positions was at $80.71 and LMT hit our stop loss at $82.55.
Picked on October 29 at $ 80.71 *gap open entry/stopped 82.55
PetroChina - PTR - close: 75.90 change: +8.05 stop: 71.25
Our bearish failed-rally play in PTR was over before it even started. Oil was trading above $68.00 a barrel this morning and last night we said not to open bearish positions on PTR if oil was above $67.00/bbl. Shares of PTR reacted sharply as the stock gapped open higher at $74.95, well above our stop loss at $71.25. Effectively the play never opened. Now that PTR is above resistance near $70.00 a dip or a bounce near $70.00 might be a new bullish entry point.
Picked on October 29 at $ xx.xx <-- never opened!