Apollo Group Inc. - APOL - close: 70.31 change: +0.55 stop: 66.45
Education stock APOL continues to out perform the market. Traders bought the dip at $67.74 and APOL actually closed above the $70.00 mark, which is a victory for the bulls. The stock is building on its bullish pattern of higher lows. We would still consider positions here although more conservative traders may want to tighten stops toward today's lows.
Our target is $79.90. The stock's chart has resistance in the $80-81 zone. The Point & Figure chart is bullish with an $80 target.
Bunge Ltd. - BG - close: 43.50 change: -0.72 stop: 40.49
Shares of BG actually look okay today. The stock dipped toward its 10-dma but traders bought the pull back and the stock was rising into the closing bell. This looks like a new entry point to buy calls although in this market environment I'd hesitate to buy calls on anything. More conservative traders may want to raise their stops toward today's lows near $41.15.
We're setting two targets. Our first target is $49.50. Our second target is $54.75. More aggressive traders may want to try for a rise toward $59.
FYI: The latest data listed short interest at 13% of BG's 133.8 million-share float. That is an above average amount of short interest. If BG continues to rally short-covering could give the stock a boost. Plus, it's worth noting that the P&F chart for BG is very bullish with an $86 target.
ITT Educ. Services - ESI - close: 87.1714 change: +0.03 stop: 83.95*new*
ESI is holding up along with a few additional educational stocks. Traders bought the dip near $84.50 this morning. We remain bullish but would hesitate to open new positions with the major market indices slipping lower. Our previous comments did suggest buying a dip near $85.00 or a breakout over $90.00. We are adjusting our stop loss to $83.95.
Our target will be $94.50. There is some resistance just above $95 (see chart). FYI: The Point & Figure chart is bullish with a $108 target.
FedEx Corp. - FDX - close: 66.50 change: +0.21 stop: 61.95
It is a little surprising to see FDX showing relative strength with the market in a broad-based sell-off. A 5% sell-off in oil is probably the reason FDX managed to close in positive territory. Investors could be pricing in lower fuel costs for the delivery company will outweigh the slowdown in business during the current recession. It is worth noting that volume today was extremely low for FDX so it's tough to put much weight behind today's move. Traders bought the dip to its 10-dma.
More conservative traders may want to raise their stop loss toward the $64.00 mark.
We have two targets. Our first target is $68.85. Our second target is 73.00 or its 50-dma, whichever one FDX hits first. FYI: The Point & Figure chart is bullish with a $100 target.
Volatility Index - VIX - cls: 61.44 chg: + 1.46 stop: n/a
The short-term action in the VIX is actually starting to look bullish again, which is bearish for the markets. The VIX rose toward last week's highs but failed to breakout. If stocks continue lower tomorrow then the VIX could push to new relative highs.
If you entered new bearish positions like buying puts or selling calls then you will want to consider cutting your losses tomorrow and exiting if the VIX rises over 65.00 or 66.00. It's up to you if you want to exit intraday or wait to see if the VIX closes over these levels.
We are not suggesting new positions in the VIX at this time.
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. 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.
SPDR GOLD Trust - GLD - close: 72.05 change: +1.53 stop: n/a
Another sharp rally for the U.S. dollar pushed gold prices lower. The GLD lost 2% and appears to have broken down from its consolidation pattern. You could still open positions if you want to but do it quick. At this point you might just want to switch to directional put plays.
We listed two strangles to take advantage of what appears to be an imminent breakout, up or down, in gold prices.
The first strangle uses November options, which expire in two weeks. Thus it's much more risky. The second strangle uses December options.
What is a strangle?
CBOE Volatility Index - VIX - cls: 61.44 chg: + 1.46 stop: n/a
We have five trading days left for the VIX November options. If the VIX breaks out over 65.00 this could end up being very painful.
Please see the CBOE website 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 #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.
Hypothetically we have sold the November 30 calls at $8.60 (credit). We bought the Nov. 50 calls for $1.61 (debit). Based on these numbers we would need the VIX to close under 37.00 for us to be profitable. If it closes higher than 37.00 then the intrinsic value of the Nov. 30 calls will be higher than what we paid for it and we'll have to come up with the difference. Example: if the VIX is at 40.00 another $1.40 will be taken out of our accounts when the VIX options are settled because the Nov. 30 call will be worth $10.00.
Now, if you sold the higher-strike call (Nov.50) when we discussed it a couple of weeks ago you could have gotten $9.00-11.00 for it. Let's say you got $10.00 for it. Now our "credit" to our account is $8.60 for the Nov. 30 calls and $8.39 ($10.00 for selling Nov. 50 call minus the $1.61 we paid for it) for a total income of $16.99. This gives us a much wider margin for error. With this scenario, the VIX would have to close over 47.00 before we lost any money.
Alternatively if you sold the Nov. 50 call around $5.00 then our breakeven point is a VIX settling at 42.00.
In a different format the play is:
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.
Hypothetically we have sold the November 35 calls at $14.00 (credit). We bought the Nov. 60 calls for $3.00 (debit). Based on these numbers we would need the VIX to close under 46.00 for us to be profitable. If it closes higher than 46.00 then the intrinsic value of the Nov. 35 calls will be higher than what we paid for it and we'll have to come up with the difference. Example: if the VIX is at 50.00 at settlement another $6.00 because the Nov. 35 call will be worth $20.00.
Now, if you sold the higher-strike call (Nov.60) when we discussed it a couple of weeks ago you could have gotten $5.50-6.50 for it. Let's say you got $6.00 for it. Now our "credit" to our account is $14.00 for the Nov. 35 calls and $3.00 ($6.00 for selling the Nov. 60 call minus the $3.00 we paid for it) for a total income of $17.00. This gives us a much wider margin for error. With this scenario, the VIX would have to close over 52.00 before we lost any money.
Alternatively if you sold the Nov. 50 call around $3.00 then our breakeven point is a VIX settling at 49.00.
In a different format the play is:
Update: Currently we're down about $2.75 on this play.
Sold Nov.50 call (9.50 - 6.00) - Bought Nov.65 call (2.50 - 1.75) = $2.75 increase in short call value.
Since we're short the call, an increase in the Nov. 50 call's value is a loss for us offset by any gains in the Nov. 65 call.
We wanted to SELL the November 50 calls (11/10/08 opening price was $ 6.00) and BUY the November 65 (11/10/08 opening price was $1.75) as a hedge against the VIX remaining elevated. Our account will be credited with the amount for selling the November 50 calls, while the price paid for the 60 calls will be deducted.
In a different format the play is:
Becton, Dickinson & Co. - BDX - close: 68.27 change: -2.50 stop: 67.45
It does not look good for BDX. The stock lost 3.5% and closed back under the $70.00 level and closed under its simple 10-dma. Short-term support near $68.00 held for today and more aggressive traders may want to let it ride. The recent weakness has me thinking that BDX might retest its October lows. A move under $67.50 and readers may want to buy puts.
Compass Minerals Intl. - CMP - close: 52.96 change: -4.72 stop: 52.35
We had a wide stop loss on CMP because we knew the stock could be volatile. When Alcoa (AA -7%) announced they were cutting back on production it affected anything related to commodities. Another sharp rise for the U.S. dollar could also account for the weakness in CMP. Shares of CMP plunged 8.1% and while they haven't broken what could be support at $52.50 or its 50-dma yet we are electing to exit early. The stock might dip toward the top of its broken bearish channel or the $50.00 level before trying to rebound. We would keep CMP on your watch list.
Hess Corp. - HES - close: 56.64 change: -5.68 stop: 56.95
The recent decoupling between rising oil stocks and falling oil prices may ended today. While not all oil stocks were on the rise shares of HES had been out performing the sector and the markets. Today's 5% drop in crude oil sparked a 9% sell-off in HES. The stock hit our stop loss at $56.95 ending the play.
This has not been a good play for us. Yesterday the stock gapped open higher and sticking us with a poor entry point at $64.25. Today we're stopped out.
Traders might want to switch to bearish positions if HES breaks down under $55.00. You could target the $45 region.