The S&P 500 came close to producing "inside day" with the index consolidating inside yesterday's range. This doesn't tell us much except that investors are indecisive. Bears will point out that the market was fading lower into the close. We're pretty much in no-man's land with potential support in the 875-870 zone on the S&P and resistance at 930-950. Most of the momentum indicators have turned bearish but this happened a month ago around April 20th and stocks still managed to power higher. If you are considering new positions (bullish or bearish) I suggest you reduce your position size to limit your risk even further.
Agrium Inc. - AGU - close: 46.92 change: +2.25 stop: 43.40 AGU, along with most of the chemical-fertilizer group, turned in a strong session. AGU added 5% and closed back above its 200-dma again. Volume was relatively strong, which is bullish. More conservative traders can think about upping their stop loss closer to the $44.00 level. Our first target to take some money off the table is $49.95. Our second target is $54.00. The Point & Figure chart is bullish with a $59 target. FYI: Traders need to know that AGU is currently trying a hostile takeover of rival CF Industries (CF). CF believes that AGU's offer is too cheap. In the meantime CF is trying a hostile takeover of Terra Industries (TRA). One of our biggest risks by trading AGU is that AGU might raise its offer to buy CF. The company did so in late March and the stock gapped down on the news. AGU raised its offer a second time yesterday, which may have accounted for the spike down toward $43.50. AGU raised the cash portion of their offer by $5 to $40 a share in cash and one share of AGU stock for CF.
BHP Billiton Plc - BBL - close: 43.11 change: +0.70 stop: 41.90 BBL delivered a 1.6% bounce but volume was somewhat anemic. Traders could still speculate on a further rebound but the $44.00 level might be considered new resistance instead of support. I would still be tempted to buy calls on this bounce but readers need to realize the market's move today doesn't really tell us anything. We got a minor oversold bounce after a three-day decline. If the S&P 500 moves lower tomorrow (under 882 or 875, depends on your tolerance for risk) traders may want to abandon ship in BBL. Our first target is $49.90. Our second target is $54.00. The Point & Figure chart is bullish with a $62 target.
Emerging Markets Bear 3x ETF - EDZ - close: 18.82 change: -0.76 stop: n/a There was nothing out of the ordinary here. The EDZ produced a minor pull back (for itself, remember its a triple-leveraged ETF) that was just strong enough to fill the gap from Wednesday morning. I'm still bullish on the EDZ but some readers may want to wait for a new rally over the $20.00 level. If you feel more comfortable with a stop I would put one around $16.65. The newsletter does not have a stop loss. This a very aggressive trade and I am suggesting readers only use a very, very small portion of their trading capital. Use money management to limit your risk. Our first target is $24.75. Our second target is $29.45. FYI: If you can't pull up a chart of the MSCI Emergin Markets index you can watch the EEM instead.
More info on the EDZ:
Factset Research - FDS - close: 55.55 change: +1.00 stop: 51.90 FDS continues to impress. The stock added 1.8% and closed at new relative highs. The close above $55.00 is a bullish development. I don't see any real changes from our previous comments. More conservative traders may just want to exit completely or raise their stop again. 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.
Currencyshares British Pound - FXB - cls: 152.16 chg: +0.88 stop: 147.25 The U.S. dollar rolled over after yesterday's bounce. The FXB rebounded from its rising 10-dma. The trend is still up. I don't see any changes from our previous comments. Our target is $157.00. More conservative traders could buy longer-dated options. The Point & Figure chart is bullish with a $176 target.
iShares China ETF - FXI - close: 33.77 change: +0.19 stop: 31.45 The FXI may have delivered a minor bounce today but I'm still expecting a dip near the $32.50 zone. Wait for that dip as our next entry point. More conservative traders may want to consider a stop loss closer to $32.00. We have two targets. Our first target to take profits is $36.45. Our second target is $39.45.
SPDR Gold Trust - GLD - close: 91.03 change: -0.06 stop: 87.75 The GLD spent the session trading sideways. If you are looking for a new entry point to buy calls I would watch for a pull back near $90.00 or $89.00. Our first target is $94.75. Our second target is $97.45.
Intl. Bus. Mach. - IBM - close: 101.05 change: -1.21 stop: 99.65 I am growing more concerned with the action in IBM. Technicals continue to get worse. The stock did not participate in the market's bounce today. I would strongly consider an early exit right here and just get out. The stock bounced at $99.83 on May 8th. That's why we have our stop at $99.65 (you could inch it closer to $99.83 if you want). I'm not suggesting new positions at this time. Currently our target is $109.40.
Lockheed Martin - LMT - close: 80.87 change: +0.34 stop: 79.40 *new* LMT is still oscillating sideways around the $80 level. I'm not suggesting new positions. The momentum indicators continue to weaken. More conservative traders will want to consider an early exit right now. I'm raising our stop loss to $79.40. Our exit target is $82.50. Aggressive traders could aim for resistance in the $85 region.
Mastercard - MA - close: 173.35 change: +2.59 stop: 159.90 It was not surprising to see a bounce in MA today. Shares had pulled back toward support at $170. I remain wary. The action in the S&P 500 didn't tell us anything today. I still suspect a dip toward 875 for the index. If the S&P 500 breaks 875-870 then MA will probably plunge toward $160. I don't see a need to rush in with new bullish positions on MA even though technically it is bouncing from support. 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.
ProShares UltraShort - SDS - close: 60.40 change: -0.73 stop: 57.40 The SDS looks like it's crouching ready to spring higher. More aggressive traders might want to jump in now or wait for a move over today's high at $61.64. I am moving our entry point to buy calls down to $62.05. I'm adjusting our stop loss to $57.40. 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
Visa - V - close: 64.52 change: +0.05 stop: 65.45 Nothing happened in shares of V today. The stock traded sideways in a narrow range. Currently we have two triggers to buy calls. Our first trigger to buy calls is at $69.00 with a stop loss at $65.45. Our second trigger to buy calls is at $60.50 with a stop loss at $57.40. Our first target, if triggered at $69.00, is the $74.00 level. The P&F chart is very bullish with a $95 target.
Becton Dickinson - BDX - close: 65.89 change: +0.56 stop: 68.25 Our put play on BDX is finally open. The stock bounced to $66.63 this morning. Our entry point to buy puts was $66.50 (actually anywhere in the 66.50-68.00 zone). Our first target to take profits is $61.00. Our second target is $55.15. At this point I would take off at least half of the position at $61.00.
Chart:
Harman Intl. - HAR - close: 16.60 change: -0.17 stop: 20.05 HAR came so close to our target this morning. We are aiming for $16.05 and shares hit $16.10. More conservative traders may want to go ahead and take profits now with HAR down more than 12.5%. Or you could lower your stop loss toward our entry point near $19.00. I am not suggesting new positions at this time. Our target is $16.05. This should be considered a higher-risk play. I would only trade a small position.
iShares Russell 2000 - IWM - close: 47.94 change: +0.66 stop: 50.25 Thankfully we did not have to wait very long for IWM to hit our entry point. This small cap ETF rallied to $48.75 and I suggested readers buy puts at $48.50. If you missed it I'd be tempted to go ahead and buy puts now. Our first target is $45.25.
Chart:
Nike Inc. - NKE - close: 50.95 change: +1.43 stop: 54.05 NKE delivered a pretty good bounce with a 2.8% rebound. It was almost enough to erased yesterday's decline. The stock remains under previous support and new resistance at the $52.00 level. More conservative traders could move their stop near $52.50 or $52.00 instead. Our downside target is $48.15.
Northrop Grumman - NOC - close: 48.83 change: +0.45 stop: 50.85 After analyzing the latest defense budget details NOC reaffirmed their earnings forecast but it didn't help the stock price today. NOC ran into resistance at the $49.00 level that was pretty consistent all day long. This looks like another entry point for bearish positions. Our target is $44.25 or the 50-dma, whichever one NOC hits first.
Volatility Index - VIX - close: 31.37 change: -2.28 stop: 38.55 The VIX continues to inch closer and closer to our second target at 31.00. More conservative traders will want to strongly consider an early exit right here and just cash out now. If you bought the May options they're due to expire next Wednesday. I'm not suggesting new positions. The VIX has surpassed our first target to take profits at $35.00. 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.
(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: 122.95 change: +3.46 stop: n/a AAPL produced an oversold bounce after plunging to $120 yesterday. Tomorrow is our last day for May options and we can close the book on this failed trade. 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.
Gold ETF - GLD - close: 91.03 change: -0.06 stop: n/a The GLD traded sideways in spite of the bounce in the U.S. dollar rolling over. We're not suggesting new strangle 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.
Google - GOOG - close: 387.50 change: - 2.04 stop: n/a It's very interesting that GOOG failed to participate in the market's bounce today. Shares struggled at the $390 level most of the session and rolled over. I suspect the stock is poised for a retracement back toward $365 and its 200-dma. Tomorrow is our last day for May options. This play is essentially dead. We're just running out the remaining 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 $18.10 or higher
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