The S&P 500 bounced exactly where we thought it would. The oversold bounce could last a few days.


CALL Play Updates

Teva Pharmaceutical - TEVA - close: 56.76 change: -1.16 stop: 54.95

Traders bought the dip in TEVA near short-term support at $56.00 and the rising 50-dma. This late day bounce looks like a new bullish entry point to buy calls. Of course it would really help if the market would see some follow through on its late-day Friday bounce. More conservative traders may want to up their stops toward Friday's low (near $55.91). This should be a short-term trade. TEVA reports earnings on Feb. 16th and we do not want to hold over the announcement. Our short-term target to take profits is at $59.50. Our second target is $61.50.

Suggested Options:
I am suggesting the February $57.50 calls.

Annotated Chart:

Entry  on  February 02 at $ 57.58 
Change since picked:       - 0.82
Earnings Date            02/16/10 (confirmed)
Average Daily Volume =        6.0 million  
Listed on  February 02, 2010         


PUT Play Updates

Apple Inc. - AAPL - close: 195.46 change: +3.14 stop: 210.51

Traders bought the dip in AAPL near $190 again. I'm a little surprised that the rebound in AAPL wasn't stronger given the huge bounce in the major indices. We can expect shares of AAPL to bounce back to $200 and possibly toward $205-210. The $200 level is a 38.2% Fib retracement of the January decline. The $206 level is a 61.8% Fibonacci retracement. More conservative traders may want to lower their stops closer to $206.

I am suggesting readers wait for the coming bounce to stall or roll over again before initiating new put positions. Our first target to take profits is at $182.50. Our second target is $165.00 although we might exit at the 200-dma. This is an aggressive trade and I'm suggesting small positions.

Suggested Options:
If AAPL provides a new entry point I would buy the March puts.

Annotated Chart:

Entry  on   January 28 at $201.08 (small positions)/gap open entry
Change since picked:       - 5.62
Earnings Date            01/25/10 (confirmed)
Average Daily Volume =         26 million  
Listed on   January 28, 2010         


Franklen Resources Inc. - BEN - close: 98.00 change: -0.28 stop: 106.80

It looks like BEN is about to bounce. Shares followed the market lower and higher as stocks rebounded from their Friday lows. BEN dipped under $95 and its exponential 200-dma before bouncing. The low was $94.43. In retrospect the $95 level was probably a good spot to take some money off the table. Now we're faced with the prospect of BEN bouncing back toward its 50-dma near $106.00. If we're lucky shares will stall near $100 or $103. I am not suggesting new bearish positions at this time. Wait for any rebound to stall or reverse. More conservative traders will want to consider an early exit now. I am adjusting our exit target from $91.50 to $92.50.

Suggested Options:
No new positions at this time.

Annotated Chart:

Entry  on   January 30 at $ 99.59 /gap higher entry point (small positions)
Change since picked:       - 1.59
Earnings Date            01/28/10 (confirmed)
Average Daily Volume =        1.2 million  
Listed on   January 30, 2010         


Gymboree - GYMB - close: 40.66 change: -0.16 stop: 42.75

The bounce in GYMB has started to stall as shares churn between their 200-dma and 50-dma. If the market continues to rebound we can expect GYMB to challenge the $42.00 level. I am inching our stop down to $42.26. Wait for a failed rally near $42.00 before launching new positions. Our first target is $35.50. Our second, longer-term target is $32.00. Consider using small positions to limit your risk.

Suggested Options:
If GYMB provides a new entry point we would use the March puts.

Annotated Chart:

Entry  on   January 23 at $ 39.74 
Change since picked:       + 0.92
Earnings Date            03/04/10 (unconfirmed)
Average Daily Volume =        513 thousand 
Listed on   January 23, 2010         


Intl. Bus. Mach. - IBM - close: 123.52 change: +0.52 stop: 131.55

IBM spiked under last week's low only to rebound sharply on Friday afternoon. The move looks like a short-term double bottom. Given the bounce I'm adding IBM as a very short-term call play in the calls section tonight. However, we will plan to exit the call play at $127.50 and switch to puts. Our new trigger to buy puts is at $127.75. Our new stop loss on this put play is $131.55. If triggered at $127.75 our first target is $122.00. Our second target is the 200-dma.

Suggested Options:
I am suggesting the March $125.00 puts (IBM1020o125), trigger @ 127.75.

Annotated Chart:

Entry  on  February xx at $ xx.xx <-- TRIGGER @ 127.75
Change since picked:       + 0.00
Earnings Date            04/20/10 (unconfirmed)
Average Daily Volume =        8.2 million  
Listed on  February 03, 2010         


Infosys Tech. - INFY - close: 50.93 change: +0.24 stop: 55.15

Target achieved. INFY hit our first target at $50.15 on Friday. Shares dipped to an intraday low of $49.55 before bouncing. The stock is oversold and due for a bounce. I believe shares could rally back to the $54 level before rolling over again. Our second target remains $46.50.

TRADING NOTE: Our original trade suggested the Feb. $50 puts. February options expire in two weeks. I am suggesting readers exit any February positions right now. The Feb. 50 put closed at $0.90. We can re-open positions on a failed rally under $55.00. We'll list a new trigger to buy March puts at $54.50 with a new stop at $55.15.

Suggested Options:
No new positions at this time. Wait for INFY to hit our new trigger at $54.50. Buy the March $50 puts (IUN1020O50).

Annotated Chart:

-2nd Entry-
Entry  on  February 00 at $ 00.00 <-- trigger @ 54.50
Change since picked:       - 0.00

-1st Entry Closed-
Entry  on   January 28 at $ 53.40
Change since picked:       - 2.47 <-- early exit @ 50.93 (-4.6%)
                            /1st target hit @ 50.15 (-6.0%)
Earnings Date            04/15/10 (unconfirmed)
Average Daily Volume =        1.5 million  
Listed on   January 25, 2010         


JPMorgan Chase - JPM - close: 38.30 change: -0.05 stop: 41.65

JPM was sinking to new six-month lows on Friday and hit $37.02 before bouncing. We can expect the oversold bounce to lift JPM back toward resistance at $40.00. Conservative traders may want to lower their stops closer to $40.00. The 50-dma, which should be overhead resistance is currently at $41.60 so I'm leaving the stop at $41.65. Wait for this bounce to stall or reverse before considering new put positions. Our first target to take profits is at $35.25. Our second target is $32.00.

Suggested Options:
No new positions at this time but if JPM does provide a new entry point we want to buy the March puts.

Annotated Chart:

Entry  on   January 26 at $ 38.44 
Change since picked:       - 0.14
Earnings Date            04/15/10 (unconfirmed)
Average Daily Volume =         46 million  
Listed on   January 26, 2010         


Mckesson Corp. - MCK - close: 58.28 change: -0.32 stop: 62.51

MCK sank to $57.23 before traders bought the dip. We can expect shares to bounce back toward potential resistance near $60 or resistance near $62 and its 50-dma. Wait for this bounce to stall or reverse before launching new positions. Our first target to take profits will be $54.00.

Suggested Options:
If MCK provides a new entry point we want to use the March puts.

Annotated Chart:

Entry  on   January 30 at $ 58.82 
Change since picked:       - 0.54
Earnings Date            01/26/10 (confirmed)
Average Daily Volume =        2.8 million  
Listed on   January 30, 2010         


Retail Holders - RTH - close: 90.56 change: +0.24 stop: 94.10 *new*

Traders bought the dip in the retailers late Friday afternoon. Look for a bounce in the RTH to carry this ETF up toward potential resistance in the $92-93 zone. Wait for the bounce to stall or reverse before launching new positions. I am lowering our stop loss down to $94.10. Our first target is the $87.00 level. The 200-dma will probably be support. The RTH moves kind of slow so make sure you use an option that gives you enough time.

Suggested Options:
If RTH provides a new entry point we want to use the March puts.

Annotated Chart:

Entry  on   January 23 at $ 91.42 
Change since picked:       - 0.86
Earnings Date            --/--/--
Average Daily Volume =        1.7 million  
Listed on   January 23, 2010         


SIEMENS - SI - close: 85.47 change: -0.82 stop: 94.05 *new*

Big declines in Europe led shares of SI to gap open lower on Friday. The stock fell to $82.88 before bouncing back to close just above its 200-dma. SI is very short-term oversold and due for a bounce. I would expect shares to rebound toward the $90-92.50 zone. More conservative traders may want to use a tighter stop. Actually more conservative traders may want to close positions right here. The March $90 puts closed at $6.60. Our entry point was $2.85. You could jump back in as the bounce fails.

Wait for the bounce to stall or reverse before launching new positions. Our second and final target is $81.00. More aggressive traders may want to aim lower.

Suggested Options:
No new positions at this time.

Annotated Chart:

Entry  on   January 26 at $ 94.34 /gap higher entry
Change since picked:       - 8.87
                            /1st target hit @ 87.55 (-7.1%)
Earnings Date            01/26/10 (confirmed)
Average Daily Volume =        368 thousand 
Listed on   January 26, 2010         


United Technology - UTX - close: 66.50 change: +0.12 stop: 69.05

There was no gap down for UTX so the play opened normally. Shares slipped to $65.05 before bouncing. If the market sees any follow through on Friday's bounce then we can expect UTX to bounce back toward short-term resistance near $68.00-68.50. Wait for the bounce to stall or reverse before initiating new positions. Our target to take profits is $61.00, just above the simple 200-dma. Our time frame is just two or three weeks.

Suggested Options:
Wait for the bounce to stall. I'm suggesting the March $65 puts.

Annotated Chart:

Entry  on  February 04 at $ 66.38 
Change since picked:       + 0.12
Earnings Date            04/21/10 (unconfirmed)
Average Daily Volume =        5.1 million  
Listed on  February 04, 2010         


CLOSED BULLISH PLAYS

Volatility Index - VIX - close: 26.11 change: +0.03 stop: 19.90

The market was in freefall earlier today and that sent the VIX spiking higher. The volatility index hit an intraday high of 29.22, not quite enough to hit our first target at 29.50. Unfortunate the VIX reversed as traders bought the dip in stocks. The low in the S&P 500 on Friday was 1044.50. I have been suggesting that the S&P would find a bottom in the 1050-1035 zone so the bounce was right on schedule. The market's rebound definitely looks like a bullish reversal but this pattern needs to see confirmation. I suspect that the market will bounce.

Traders have to ask themselves how much volatility they are willing to endure. I think we could easily see the S&P 500 bounce back toward the 1090-1100 zone before it rolls over again. Do you want to hold your March calls on the VIX while we watch stocks bounce (and watch your calls decay in value)? Or do you want to exit right here for breakeven and then re-enter as the market nears resistance. The high for the March 30 calls today was $2.25 but they reversed back to $1.65 by the close. Our estimated entry was $1.60.

More aggressive traders can hold on. I'm going to suggest we go ahead and exit the VIX trade now and we'll re-enter when the bounce begins to roll over again. Keep the VIX on your watch list. We'll be looking for another entry point.

Chart:

Entry  on   January 28 at $ 23.73 
Change since picked:       + 2.35 <-- exit early @ 26.11
Earnings Date            --/--/--
Average Daily Volume =          x million  
Listed on   January 28, 2010