Good evening traders. The FOMC meeting was an absolute dud. This may be the excuse the market is looking for to continue this rally. It will be interesting to see how it all plays out and I would not be surprised to see an attempt at new highs that fail. If nothing else the extended low rates seems to be causing inflationary fears which is why I like our new gold miner play. We also released a bearish play on the transports. Hopefully we get filled on HANS in the next day or two or I will probably drop the play. WFT retraced right down to our aggressive entry so we are now long CALLS. Good luck trading to you all!
CALL Play Updates
Hanson Natural Corp. - HANS - close 42.82 change +0.26 stop 40.45
Since Friday's spike higher HANS has had a low volume pullback which is a bullish pattern. We have been waiting to be triggered at $42.30 but the stock just hasn't retraced this much. The stock held up rather well considering the broader market sell-off. I think HANS will rally on any market strength and I suggest readers get a piece of the action. As such, I am looking going to move up the entry target on this trade to $42.60 which where I suggest readers initiate call positions as outlined below. HANS is still above its 20-day SMA and the stock is forming a longer term ascending triangle. It is currently in the middle of an upward channel that has been intact since mid 2009. I believe the stock is poised to breakout higher or at least trade to $43.75 which is our first target. If we get triggered and the stock rallies to our first target, we are looking at a +50% gain which I will gladly take all day long. Our second target is $44.95 but this target may not be reached until after earnings on May 6. I suggest readers sell the position prior to earnings. The stock has good support at about $40.70 so I would like to use a stop just under this level at $40.45 if we get triggered. Our time frame is about one week.
Trigger to buy calls if HANS trades to $42.60
Suggested Position: Buy MAY $43.00 CALL, current ask $1.65, estimated ask at entry $1.50
Entry on April xx at $ xx.xx
Earnings Date 5/06/10
Average Daily Volume = 854,000
Listed on April 21, 2010
Weatherford International - WFT - close 18.23 change +0.26 stop 15.90
WFT hit our trigger of $17.85 at about 11:30 this morning and we are long June $17.00 calls @ $1.58. The stock traded down to $17.76 and then reversed hard closing near its highs. The stock closed up +1.45% on the day. We have a wide stop on this trade at $15.90 because I want to give it some time and room to work which is why we are in June calls. Our initial target was $18.95 but since the stock reversed at $18.80 yesterday I would like to lower our target just a bit to $18.75. This may end up being a quicker trade that I thought if WFT rallies into this area in the coming days. I suggest traders sell half of their position if the $18.75 level is reached. A second more aggressive target is $20.45. Longer term I think WFT will easily test this level but I do not suggest hanging on to call options waiting for this target as time decay could end up hurting you. A strategy readers may consider is to take profits if the first target is hit and then buy further dated options. The August $19 calls are going for about $1.35 as of the close today. Readers who haven't initiated positions can do so on weakness in the stock. Our time frame is one to three weeks.
Current Position: JUNE $17.00 CALL, entry at $1.58
Entry on April 28 at $ 1.58
Earnings Date Over 2 months
Average Daily Volume = 14.9 million
Listed on April 24 2010
PUT Play Updates
Toll Brothers - TOL - close 22.24 change +0.08 stop 24.25
TOL started the day strong and it appeared the bounce we anticipated was going to happen, but buyers stepped in pushing the price back down near the lows from yesterday. The stock closed 8-cents higher, or +0.36%. The stock has four consecutive topping tail candlesticks which indicates to me that sellers are alive and well. We now need TOL to break down below $22.00 to reach our target. Our $1.40 PUTS are now worth about $1.70 for a +21% unrealized gain. I am still eying the $21.80 level as a point to take profits on this trade. It was TOL's intraday high On November 11 and could act as support, especially if there is not a daily bounce prior to the price reaching $21.80. I suggest readers tighten stops and protect profits at this level just in case a reversal starts. This is our target and trying to squeeze another 30-cents out of the stock is probably not the smart thing to do. However, if the overall market is under pressure TOL could just blow right through this level which would enable us to realize more gains. My point is to protect profits as the stock reaches this level and try not to get too greedy. I am not suggesting new position at this time. Our stop $24.25 and our time frame is a 1 to 5 days.
Current Position: JUNE $23.00 PUT, entry @ $1.40
Entry on April 27 at $ 1.40
Earnings Date Over 2 months
Average Daily Volume = 3.2 million
Listed on April 26, 2010