The market's rally is really starting to look tired. I am expecting the S&P 500 to rally toward the 940-950 zone but after that I'd be more of a seller and looking for short-term bearish trades or new buy-the-dip candidates. Opening new bullish positions this week with the stock market this close to overhead resistance is going to be a high-risk endeavor. The best move might be to just sit on your hands and watch for a few days and keep your capital ready in case we do see a correction.
Alcon Inc. - ACL - close: 96.02 change: -0.24 stop: 92.45 *new* On Thursday I suggested readers look for a dip near $94.00. ACL came close. The low on Friday was $94.37. Unfortunately I'm growing more cautious on ACL. The S&P 500 has rallied to new highs but ACL is still struggling. I am not suggesting new bullish positions at this time. We're raising our stop loss to $92.45 and more conservative traders might want to raise their stop toward $94.00. If we do not see any strength on Monday, May 11th I would strongly suggest that readers exit this play early at Monday's closing bell! Our first target is $101.75. The $102 level is current resistance. I am setting a secondary target at $107.00 but I strongly suggest readers take most of their position off the table at $101.75. Don't forget that ACL has a big cash dividend (about $3.49) payable on May 28th to shareholders on record as of May 11th.
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BHP Billiton Plc - BBL - close: 47.71 change: +2.11 stop: 41.90 No dip yet. BBL continues to show strength and added 4.6% on Friday. Volume was a little light, which should be a caution flag for the bulls. I don't see any changes from our previous comments on this play. The plan is to buy calls on a dip in the $44.50-42.50 zone. We will set our stop loss at $41.90. If triggered our first target is $49.90. Our second target is $54.00. The Point & Figure chart is bullish with a $62 target.
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Energizer Holdings - ENR - close: 56.48 chg: -0.65 stop: 54.95 *new* Momentum in shares of ENR looks like it's fading fast. More conservative traders may want to exit early now and cut their losses. The stock spiked down to $55.00 on Friday morning and bounced but the rebound wasn't very convincing. We're upping our stop loss to $54.95. Wait for a bounce over $58.00 before considering new bullish positions. Our first target is $64.50. I am setting a second target at $69.00 with a six-week time frame.
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Factset Research - FDS - close: 53.46 change: +0.68 stop: 51.65 *new* FDS managed a 1.2% bounce on Friday but that didn't stop the MACD from producing a new sell signal. More conservative traders will want to consider an complete exit of bullish positions now. While the $50.00 level is better support I'm raising our stop loss to $51.65. If we get stopped out keep an eye on a bounce near $50.00 as a new bullish entry point. We're not suggesting new positions at current levels. FDS has exceeded our first target and we're currently aiming for $59.00. The Point & Figure chart is very bullish with a $79 target.
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Flowserve - FLS - close: 74.38 change: +2.98 stop: 69.85 *new* FLS almost hit our first target with Friday's rally. The stock hit an intraday high of $74.59 and closed with a 4.1% gain. The trend is certainly bullish but I am not suggesting new bullish positions at this time. I strongly suggest that readers take off at least half if not 3/4s of their position at our first target. We're raising our stop loss to $69.85. Our first target is $74.95. Our second target is $79.75. The Point & Figure chart is bullish with a $97 target. My time frame is about eight weeks.
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Currencyshares British Pound - FXB - cls: 152.19 chg: +2.13 stop: 147.25 *new* The FXB continues to perform well. Both the Pound and the Euro are rising as the dollar breaks down. Volume was pretty light on Friday's gain in the FXB. I wouldn't be surprised to see corrections back to $150 or even $148. We're raising our stop loss to $147.25. If you're looking for a new entry point watch for a dip in the $148-147 zone. Our target is $157.00, which we expect to hit before June option expiration. That might be a little too aggressive. We'll see. More conservative traders could buy longer-dated options. The Point & Figure chart is bullish with a $176 target.
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iShares China ETF - FXI - close: 35.91 change: +1.56 stop: 31.45 The intraday high for the FXI says $38.00 but that was a bad tick. The Chinese ETF barely made it to $36.00 by Friday afternoon. I'm not suggesting new positions at this time. Wait for a dip near its rising 10-dma before initiating new call positions. We have two targets. Our first target to take profits is $36.45. Our second target is $39.45.
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Intl. Bus. Mach. - IBM - close: 101.49 change: -1.10 stop: 99.65 No one seems to have any idea why IBM has been under performing the last few days. It could be just profit taking but the stock didn't look that overbought considering its April sideways consolidation. Shares just produced a four-day dip and bounced from the $100 level. I would use this pull back as a new bullish entry point. Currently our target is $109.40.
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Lockheed Martin - LMT - close: 82.46 change: +2.78 stop: 78.45 *new* LMT delivered a strong session. The stock gained 3.4% and closed at its highs on Friday just six cents away from our target. I am suggesting that readers go ahead and exit now. If we're lucky the stock gaps open higher on Monday and we'll be taken out at the open. Our target has been $82.50 but more aggressive traders may want to aim for the $85 area. LMT appears to have resistance at $85.00 and its 200-dma. We are not suggesting new bullish positions. I am raising the stop loss to $78.45.
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Mastercard - MA - close: 185.08 change: +4.30 stop: 159.90 MA has done a decent job of holding support at $180 the last few days. More conservative traders might be tempted to raise their stops. I am keeping our stop at $159.90 because MA can be a very volatile stock. If you are looking for a new entry point I would buy a dip in the $176-175 zone. A better entry point would be near $170 and its exponential 200-dma. We have two targets. We want to take some money off the table at $198.50 since the $200.00 mark could be round-number resistance. Our second target is $218.50. The Point & Figure chart is bullish with a $218 target.
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ProShares UltraShort - SDS - close: 58.75 change: +1.54 stop: 59.95 There was no follow through on Thursday's bounce in the SDS thanks to new follow through on the S&P's failed rally. Shares of the SDS were pounded to new lows. I am adjusting our entry point to buy calls down to $64.05. We don't have to catch the very bottom to be profitable on a move in the SDS. If triggered our first target is $69.95. Our second target is $74.40. FYI: Don't forget that the SDS is the ultra-short or double-short inverse ETF so it should see twice the volatility of the S&P 500
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Shaw Group Inc. - SGR - close: 30.11 change: -0.01 stop: 28.45 *new* The action in SGR has been pretty disappointing. There was no follow through on the early May bounce. Shares ran into resistance near $32.00. The stock plunged to $28.50 on Friday before paring its losses. I'm willing to give it another day. If we don't see strength on Monday we're dropping this play. In the mean time I'm adjusting the stop loss up to $28.45. I am not suggesting new positions. Our first target is $33.45. Our second target is $38.45.
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Visa - V - close: 68.43 change: +2.90 stop: 65.45 *new* It looks like Visa is not going to cooperate with our buy the drip strategy. The stock spent three days digesting its gains and roared higher again on Friday. I am adjusting our entry point to buy calls on Visa at $69.00. The recent highs have been around $68.50. If triggered we'll use a stop loss at $65.45. Our first target is the $74.00 level. This is a much more aggressive and higher-risk trade than the buy the dip near $60 plan. The P&F chart is very bullish with a $95 target.
Suggested Options: BUY CALL JUN 70.00 V-FN open interest=14333 current ask $2.70 BUY CALL JUN 75.00 V-FO open interest= 6443 current ask $1.15
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Becton Dickinson - BDX - close: 62.82 change: +1.22 stop: varies BDX is still trying to rebound. I don't see any changes. We're still waiting for an entry point. Hopefully it will be the $66.50 entry point. I am listing two different entry points and exit strategies for this stock.
Entry point #1.
Entry point #2.
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Northrop Grumman - NOC - close: 50.54 change: +1.70 stop: 50.85 Uh-oh! It looks like I may have been a little early calling a top in NOC. The defense stocks surged sharply on Friday with the DFI index up 4.1%. Shares of NOC closed above round-number resistance at $50.00 and technical resistance at its 200-dma. This isn't good news for the bears. If there is any follow through higher on Monday we'll be stopped out at $50.85. Wait for another drop under $49.00 or $48.00 before considering new bearish positions. Our target is $44.25 or the 50-dma, whichever one NOC hits first.
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Volatility Index - VIX - close: 32.05 change: -1.39 stop: 40.55 The VIX came very close to our second target on Friday with an intraday low of 31.19. Odds are pretty good that if there is any follow through higher for stocks on Monday that the VIX will hit our target. Readers can prepare to exit. More aggressive traders may want to let it right but be sure to read this weekend's market wrap. The rally might not last much longer. I am not suggesting new positions on the VIX. The VIX has surpassed our first target to take profits at $35.00. We have a second target to exit completely at 31.00. Initially we suggested the May puts but readers might want to use July or August puts instead due to the SEC's plan to re-instate the up tick rule is more than two months away. FYI: The May 2009 vix options are set to expire on Wednesday, May 20th.
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(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.) Apple Inc. - AAPL - close: 129.19 change: +0.13 stop: n/a This is it. We're down to our last five days for this AAPL strangle. Considering our time frame I am adjusting our exit target to breakeven at $5.12. This will require AAPL to trade at $135.00ish for the call side of our strangle to recoup our cost. More conservative traders may want to exit earlier based on how fast you want to get out. I am not suggesting new strangle positions at this time. The options we suggested were the May $130 calls (APV-EF) and the May $110 puts (QAA-QB). Our estimated cost was $5.12. We want to sell if either option hits $5.12 or higher.
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Gold ETF - GLD - close: 89.98 change: +0.54 stop: n/a The U.S. dollar is breaking down as expected but gold is not performing like I thought it would. The short-term trend is higher but the GLD is encountering more resistance at $90.00 than expected. We're not suggesting new positions at this time. The options we suggested were the June $95 calls (GLD-FQ) and the June $80.00 puts (GLD-RB). Our estimated cost was $1.95. We want to sell if either option hits $4.85 or higher.
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Google - GOOG - close: 407.33 change: +10.72 stop: n/a GOOG managed to rally to a new relative high at $410.12 on Friday thanks to an analyst up grade. One firm raised their price target on GOOG to $600. While the trend in GOOG is definitely bullish the momentum indicators have turned bearish. If the wider market decides to roll over I expect GOOG to follow. We are down to our last five days and GOOG needs to produce some big moves if we have any hope of recouping our cost. I am not suggesting new positions at this time. The options we suggested were the May $420 calls (GOP-ED) and the May $340 puts (GGD-QE). Our estimated cost was $18.10. I'm adjusting our target toward breakeven. We want to sell if either option hits $19.00 or higher
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iShares Financials - IYF - close: 46.01 change: +2.77 stop: n/a Target achieved, again. The IYF traded over $46.00 for the second time in a row but this time the ETF closed above this level. The May $38 calls are now trading above $8.00. It was our plan to exit if either side of our strangle hit $8.00 or higher. The May strangle involves the May $38 call (IYI-EL) and the May $32 put (IYI-QF). Our estimated cost is $5.14.
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