Editor's Note: You may have noticed that the S&P 500 index appears to be building a bearish head-and-shoulders pattern. The neckline to this pattern is near the 880 support area. Should the S&P 500 breakdown under this neckline then the H&S pattern would forecast a drop toward the 810-800 zone, which comes close to the 50% retracement of its bounce from the March lows. Should the S&P 500 break that neckline I would exit any bullish positions that don't get stopped out in the process. Traders may want to start planning now how they can take advantage of this bearish formation. An easy way to play it would be puts on the SPY or calls on the SDS (double short ETF).
Alcon Inc. - ACL - close: 116.03 change: -1.86 stop: 111.90 The action in the market on Thursday was bearish and ACL gave up its Wednesday gains. The stock tested support near $115.00 again. Upward momentum is slowing. Traders need to turn more defensive. I'm raising our stop loss to $113.45. More conservative traders might want to adjust their stop closer toward $115.00. Even though ACL held the $115.00 level I hesitate to open new bullish positions at this time. Our first target is $119.90. Our second target is $124.50.
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Becton Dickinson - BDX - close: 69.05 change: -1.65 stop: 67.75 The early morning market weakness was enough to push BDX back under support at $70.00. The stock has also fallen back under its 10-dma and exponential 200-dma. My previous update cautioned readers to expect a dip into the $69-68 zone. Look for a bounce near its simple 200-dma in the $68.50-68.00 region as a new bullish entry point. I would keep a tight stop as the action last week looks like a bearish reversal, especially on the weekly chart. Our first target to take profits is $74.90. Our second target is $79.00. Currently the Point & Figure chart is bullish and forecasts an $86 target.
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Bunge Limited - BG - close: 60.07 change: -1.52 stop: 58.49 Some of the momentum indicators in BG are suggesting the next move will be lower. More aggressive traders might want to consider bearish strategies if BG breaks the June lows near $57.50. The longer-term trend is still bullish and we're suggesting readers buy calls on a breakout over resistance at $62.55. If triggered at $62.55 our first target is $67.45. Our second target is $69.95. More aggressive traders may want to aim for the $74-75 zone but we plan to exit ahead of the late July earnings report.
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Covance Inc. - CVD - close: 48.50 change: -0.28 stop: 45.90 CVD held up reasonably well. The stock lost 0.5% versus 2.9% in the S&P 500. Traders were quick to buy the dip this morning. What worries me is that the rebound was just enough to fill the gap from this morning. If CVD rolls over from here it could be bad news! Traders need to decide do you keep your stop loss under clearly defined support at $46.00 or do you adjust your stop for the bullish trend of higher lows. If you choose the trend of higher lows then you may want to raise your stop loss to $46.45ish or toward Thursday's low near $47.15. I am not suggesting new bullish positions at this time. Our first target is $52.40. Our second target is $57.00 but we may run out of time.
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Quest Diagnostic - DGX - close: 55.00 chg: -1.73 stop: 53.40 DGX has erased three days of gains with Thursday's profit taking. We can expect a dip back toward broken resistance and what should be support near $54.00. Wait for a dip or a bounce near the $54.00 level before considering new call positions. Our first target to take profits is $58.25. Our second target is $59.90. More aggressive traders may want to aim higher. The Point & Figure chart has a new triple-top breakout buy signal with a $75 target. We do not want to hold over the late July earnings report.
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Express Scripts - ESRX - close: 66.25 change: -1.82 stop: 63.75 ESRX also suffered some profit taking that erased several days of gains. I would expect a dip back toward the $65.00 level, which should be support. More conservative traders might want to consider a stop loss closer to $65.00. Our first target is $69.90. Our second target is $74.75.
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Edwards Lifesciences - EW - close: 66.12 change: -0.92 stop: 64.85 EW was not immune to the market-wide sell-off. Shares traded sideways near $66 most of the session. I am suggesting readers buy calls near the $66.00 or $65.00 levels so this dip is an entry point. However, bear in mind that if the S&P 500 really begins to breakdown I do not expect EW to hold the current up trend. More conservative traders might want to raise their stop toward Thursday's low near $65.80. The Point & Figure chart is bullish with an $84.00 target. Our target is $74.00. We will plan to exit ahead of the July 20th earnings report.
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Euro Currency ETF - FXE - close: 140.00 chg: -1.44 stop: 137.90 The U.S. wasn't the only one with a disappointing jobs number and rising unemployment. The 16-nation euro zone also saw unemployment rise to new multi-year highs. The U.S. dollar managed a bounce and the euro dipped back to the $140 level. The larger trend is still bullish. I would use the dip as an entry point. Our first target is $144.50. Our second target is $148.50. The P&F chart is bullish with a $168 target.
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Lorillard Inc. - LO - close: 67.95 change: -1.39 stop: 67.30 Hmm.... being a high-dividend yielding defensive stock did not save LO from the market's widespread weakness on Thursday. The inverse H&S pattern is still there. Really nimble traders might want to try buying a dip or bounce near $68.00. Officially our plan is to wait for a breakout over $70.00. I'm suggesting readers buy calls at $70.10. Our first target is $74.00. Our second target is $76.75. FYI: The Point & Figure chart is very bullish and currently forecasts a $92 target.
Suggested Options: BUY CALL AUG 70.00 LO-HN open interest=1182 current ask $2.30 BUY CALL AUG 75.00 LO-HO open interest= 313 current ask .85
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Millicom Intl. - MICC - close: 56.54 change: -0.75 stop: 53.95 *new* I am surprised that MICC did not show additional weakness. The European markets were hit pretty hard on Thursday. MICC gapped down and retested short-term support near $56.00 again. I expect that shares will continued to slip toward $55.00 and its rising 50-dma. I am raising the stop loss to $53.95. More aggressive traders may want to keep their stop loss under the June low of $52.93. Look for a bounce from $55.00 as a new entry point. Our first target is $59.95. Our second target is $64.50. We only have about two weeks before MICC's earnings so we may not reach the second target.
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Agrium Inc. - AGU - close: 40.37 change: +0.96 stop: 41.65 The fertilizer-potash stocks were showing relative strength on Thursday. There were a couple of news items out suggesting there might be a bounce in demand and potentially some pricing strength for potash products. AGU dipped to $38.91 and bounced back over $40.00. The trend is still down and I'm sticking to the plan, which is to buy puts at $38.75. If triggered our target is $31.00. FYI: Readers should note that AGU is trying a hostile takeover for CF Industries, which is itself trying a hostile takeover of Terra Industries.
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Core Labs - CLB - close: 82.80 change: -1.73 stop: 88.30 Oil service stocks continue to look weak and shares of CLB actually gapped open lower at $83.16 on Thursday. We've adjusted our entry point. I could see a little oversold bounce toward $85-86 so more patient traders may want to wait for a bounce before opening new put positions. Not only does CLB has a bearish trend of lower highs and a breakdown under its trendline but I can also see a bearish head-and-shoulders pattern. Our first target is $80.25. Our second target is $76.00. FYI: The P&F chart is bearish and forecasts a $71 target.
Suggested Options: BUY PUT JUL 85.00 CLB-SQ open interest=131 current ask $4.10 BUY PUT JUL 80.00 CLB-SP open interest=473 current ask $1.50 BUY PUT AUG 85.00 CLB-TQ open interest= 25 current ask $6.30 BUY PUT AUG 80.00 CLB-TP open interest= 26 current ask $3.80
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Compass Minerals Intl. - CMP - cls: 55.40 change: +0.20 stop: 56.26 CMP has spent the last two and a half weeks consolidating sideways. On a very short-term basis the technical indicators are starting to turn positive. Longer-term the trend looks very negative. I am still waiting for a breakdown with a trigger to buy puts at $52.25. Our first target is $47.50. Our second target is $43.00.
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L-3 Comm. - LLL - close: 65.75 change: -2.88 stop: 73.55 Target achieved! LLL really under performed the market on Friday with a 4.1% loss and a new three-month low at $65.51. Our first target to take profits was at $66.00. I'm not suggesting new positions at this time and we're lowering the stop loss to $70.25. Our second target is $61.00.
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United Parcel Serv. - UPS - close: 50.85 change: +0.86 stop: 51.55 *new* The Dow Jones Transportation index was a relative strength loser with a 3.6% loss. The Wednesday-Thursday action is a failed rally pattern. While the path of least resistance should be down the question is whether or not the transportation index will break support near 3000 and its 100-dma. Meanwhile shares of UPS rolled over under resistance at their 200-dma. This looks like a new entry point to buy puts if you haven't done so yet. Please note the new stop at $51.55. Our first target to take profits is $45.50. We do not want to hold over the late July earnings report.
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Wynn Resorts - WYNN - close: 33.41 change: -1.98 stop: 37.65 The DJUSCA U.S. gambling index gave up 4.3% on Thursday putting an end to a rather dour week for the sector. Shares of WYNN led the way lower with a 5.5% decline. My only concern is potential support at the 100-dma near $31.25. Our first target is $30.25. Our second target is $26.00.
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Deckers Outdoor - DECK - close: 68.29 change: -3.30 stop: 67.75 I believe it's time to abandon ship in DECK. Thursday's breakdown under $70.00 is bearish. At best the stock will probably retreat toward $66.50. At worst it has begun a new down trend or at least a larger correction. More nimble and aggressive traders could buy puts right here with a stop above Wednesday's high and a target near the rising 50-dma.
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Murphy Oil - MUR - close: 51.70 change: -2.94 stop: 49.90 I am growing more concerned about the trend in oil and the oil stocks. While MUR still has support near $50.00 and its 100-dma I don't want to count on that support holding at this time. Exit early now so we can look for a different entry point later.
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Symantec - SYMC - close: 15.70 change: +0.07 stop: 16.10 The NASDAQ posted a 2.6% loss on Thursday and yet SYMC managed a gain. It wasn't a very big gain but we don't want to see any relative strength in our put plays. The stock continues to have overhead resistance near $16.00 and its 50-dma. More aggressive traders may want to keep the play open. I'm suggesting an early exit so we can reapply our capital elsewhere.
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