Good evening traders. As the markets appear to be continuing their melt-up - closing higher 8 out of the last 9 weeks â€“ I believe traders will be looking for reasons to take profits on their long positions in the coming days/weeks. It is getting more and more stressful to squeeze more gains out of long positions. So until the next larger directional move becomes clear I urge you to be nimble when managing positions.
Intel beat earnings expectations again today when they reported after the bell. When Intel reported on January 14 the markets traded higher initially and then sold off hard which sparked a -9% decline in the ensuing weeks. Time will only tell if something similar happens this time around so we will have to wait and see what the market tells us.
CALL Play Updates
F5 Networks - FFIV - close: 65.21 change: +1.22 stop: 61.40
FFIV had a nice recovery today closing higher by +1.91%. The stock has broke out of the symmetrical triangle I mentioned in yesterday's updates and looks strong here, although it remains stuck below $65.50. I am becoming suspicious whether or not FFIV can ultimately break-out and reach our initial target of $69.75. Therefore, I would like to lower our target to $65.95 which will trigger our exit. Our $3.00 call is currently worth $3.40 for +13.33% gain. Should FFIV continue to rally tomorrow I will be looking to take profits and lock in a nice gain. Our stop remains at $61.40 for now. I am not suggesting any new positions at this time.
Current Position: CALL MAY $65.00 (FFIV 10E65.00) @ $3.00
Entry on April 6th at $ 65.26
Earnings Date 04/21/10
Average Daily Volume = 1.0 million
Listed on April 5th, 2010
Coca-Cola - KO - close: 55.02 change: +0.26 stop: 52.95
KO continued its bounce again off of its 200-day SMA. The stock is still above its 20-day and 50-day SMA's, however, it is entering a congestion/resistance area just overhead in the $55 to $56 area. Our options continue to do better and we still have plenty of time until May options expire. KO also tends to be a defensive play so it could rally if the overall market is weak. Our target to exit the remains at $57.00 but I will consider closing the position prior to this level if KO starts to struggle. Conservative traders should consider exiting their positions if KO rallies into the aforementioned congestion zone, with $55.25 as a potential target.
Current Position: CALL May $55.00 (KO 10E55.00) at $1.62
Entry on March 24th at $ 55.22
Earnings Date 04/21/10
Average Daily Volume = 14.6 million
Listed on March 23rd, 2010
L-3 Communications - LLL - close: 95.18 change: +0.79 stop: N/A
We initially viewed this trade as a highly speculative trade and our April 100 calls purchased for $0.30 are now essentially worthless. At this point we will need some sort of a catalyst or news event on LLL to make any money. If LLL happens to spike and the options become worth something we will sell them immediately. I am not suggesting any new positions in LLL at this time.
We chose the out of the money $100 calls to keep our capital investment very small and our position size limited.
Current Position: CALL APRIL 100.00 (LLL 10D100.00) @ $0.30
Entry on March 18th at $ 93.88
Earnings Date 04/22/10
Average Daily Volume = 908 thousand
Listed on March 17th, 2010
Occidental Petrol. - OXY - close: 85.69 change: -1.10 stop: 83.45
Oil stocks had a tough day and OXY closed down -1.27%. Crude oil struggled early but closed over +$2.00 off of its lows. OXY also struggled early but bounced off support again in the $84.50 to $85.00 level. I expect this support to hold if there is any further weakness in OXY. OXY appears poised to rally from here to new 52-week highs. But we will need crude oil and overall market strength to be in our favor. Our first target is now $88.75 which is just below last weeks highs. I am looking for OXY to rally to this level in the next week and if it does it will ensure a nice profit on our position. We'll use a longer-term target at $94.00 but this could take several weeks to achieve.
Current Position: BUY CALL MAY $85.00 (OXY 10E85.00) at $3.25
Entry on April 7th at $85.50
Earnings Date 04/29/10 (unconfirmed)
Average Daily Volume = 5.5 million
Listed on April 6th, 2010
PartnerRe Ltd. - PRE - close: 79.65 change: -0.14 stop: $78.75
PRE followed through on yesterday's bearish engulfing candlestick closing lower, but only by -0.18%. The stock closed just below its 20-day SMA and is barley holding on to its upward trend line which began on March 10. We moved our stop up to $78.75 yesterday and will step aside if the stock trades to this level. PRE has support at $79.30 and $79.00 so I think PRE could go lower in the short term before bouncing. If PRE can break-out above $81.05 it should test its October 2009 highs of $81.70 which we are going make our new first target. If PRE follows through and breaks out above $81.70 we have a good chance to reach our new second target of $83.90 (just below the late 2007 highs). Conservative traders should consider lightening up positions or taking profits if PRE rallies into the $81.00 level, which should also produce a winning trade.
Current Position: CALL MAY $80.00 (PRE 10E80.00) $ $2.40
Entry on April 6th at $ 80.55
Earnings Date 04/27/10
Average Daily Volume = 989 thousand
Listed on March 20th, 2010
Silicon Laboratories â€“ SLAB â€“ close: 50.51 change: +0.04 stop: 47.95
We are still waiting for a pullback in SLAB prior to initiating positions. Today's Intel earnings probably won't help our matters for a quick retracement, at least in the short term. SLAB broke out of resistance in the $49 area on Monday (4/5). The stock closed the week almost $2 higher at $50.89. SLAB is in the semiconductor sector which has been showing overall relative strength recently. The SOX index and SLAB have been holding their uptrend line, and upward channel, since February. I am expecting a retracement of SLAB down to its prior resistance line (which is now support) at around $49.25 which we will use as a trigger to buy calls. Our first target is $51.95 and our second more aggressive target is $53.95. Both of these levels are near highs from 2006 and 2003. We'll place our initial stop at $47.95.
Trigger to open bullish positions at $49.25
Suggested Position: CALL MAY $50.00, current ask $2.50, estimated ask at trigger price $1.30
Entry on April xxth at $ xx.xx
Earnings Date 4/28/10
Average Daily Volume = 762,000
Listed on April 10th, 2010
PUT Play Updates
SPDR S&P 500 Index - SPY - close: 119.74 change: +0.19 stop: 123.05
We initiated SPY May $119 puts shortly after the open today for $2.05. The S&P 500 looked vulnerable but buyers stepped in once again on weakness. The ETF still appears ready to finally break its steep uptrend line from the February lows. I remain bearish on this index and anticipate a pull back is coming soon, although it may be after options expiry on Friday. Our target is $115.50 and we have a time frame of a couple of weeks. However, if the selling picks up steam our target could be hit relatively quickly. We are using an initial stop of $123.05 but expect to lower the stop if the trade is moving our direction.
Current Position: SPY PUT MAY $119.00, entry at $2.05
Entry on April 13th at $ 2.05
Earnings Date Not Applicable
Average Daily Volume = 164 million
Listed on April 12th, 2010