Good evening traders. We took a shellacking on TOL today but we aren't too far in the hole. IYT gapped higher at the open which gave us a better entry price. A couple down days in the market will do us some good on these trades. WFT is performing well and we dropped HANS as it has run away from our trigger.
The market whipsaws continue in both directions. I have been saying for the last couple of weeks that often times this indicates that a market top may be forming right in front of our eyes. But these times are extraordinary which make it difficult to navigate the market. We have a good balance in the portfolio to take advantage of the swings. Stay on your toes and good trading to you all.
CALL Play Updates
Gold Fields Ltd - GFI - close 13.26 change -0.02 stop 12.25
GFI consolidated today and closed relatively flat, down -2 cents. No harm done. GFI briefly broke out over its $13.36 resistance level today before pulling back. I expect Gold Miners and Gold to make another leg higher and I suggest readers take advantage of the momentum that is building. Readers who haven't initiated positions can at these levels. GFI has been trading in an upward channel since late February and appears ready to break out of resistance at $13.36. I believe the stock will quickly trade to the $13.95 over the next week. GFI reports earnings on May 6th so I plan to be out of this trade on that date. Our stop is below the 50-day SMA at $12.25 and our target is $13.95 which is just below the YTD highs. Our time frame is about one week or shorter. *NOTE: Please use small position size to limit risk as gold stocks tend to be volatile.*
Current Position: Long MAY $13.00 CALL, entry at $0.60
Entry on April 29 at $0.60
Earnings Date May 6, 2010 (unconfirmed)
Average Daily Volume: 5.3 million
Listed on April 28, 2010
Weatherford International - WFT - close 18.48 change +0.25 stop 15.90
WFT gapped higher this morning but immediately sold off giving readers a second chance to enter at $17.85. The stock immediately rebounded and closed +1.37% higher, near its highs of the day. This $17.80 area is becoming quite an interesting support level. WFT continues to look bullish and on track to hit our target of $18.75. Our $1.58 calls are now worth about $2.00 for an unrealized gain of +26%. If our target of $18.75 is hit the calls should be worth about $2.20 which would be a +39% gain. I suggest traders sell half of their position if the $18.75 level is reached. A second more aggressive target is $20.45. If the $20.45 target is reached our calls would be worth about $2.90 for a +85% gain. Longer term I think WFT will easily test $20.45 but I do not suggest hanging on to call options waiting for this target as time decay could end up hurting you. Obviously if WFT and the market are ripping higher we could get lucky and hit the higher target, but more often than not when traders become complacent by waiting they end up getting bitten in the a**. A strategy readers may consider is to take profits if the first target is hit and then buy further dated options. The August $19.00 calls are going for about $1.45 as of the close today. Earning two +40% gains is the same as one +80% gain so keep that in mind. Readers who haven't initiated positions can do so on weakness in the stock.
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
iShares Dow Transports - IYT - close 85.83 change +1.81 stop 87.10
IYT gapped open higher this morning which gave us a better entry price on our put position. We are long puts in the portfolio at $2.00. This also gives us room to adjust our targets and make a quick profit if IYT reverses from here. I am expecting a quick move down to its 20-day SMA which is increasing (currently $82.87). I suggest traders tighten stops at this level or simply exit to take profits. A second more aggressive target is $81.50. IYT is still below its recent highs which should act as resistance. The ETF is at the top of an upward channel that started in July 2009. All of the technical indicators have remained overbought for sometime and I think it is unsustainable. I expect a pullback to at least the 20-day SMA soon. However, if the market continues to rip higher we will honor our stop at $87.10. Our time frame is 1 to 2 weeks but will have no issues exiting sooner if there is a correction to the aforementioned targets or if our stop takes us out. Readers who haven't initiated positions may do so at current levels. *NOTE: Some of the strike prices in IYT have wider than normal bid/ask spreads. Use a limit order in the middle of the spread and you should get filled.
Current Position: JUNE $83.00 PUT, entry at $2.00
Entry on April 29 at $2.00
Earnings Date N/A
Average Daily Volume = 1.0 million
Listed on April 28, 2010
Toll Brothers - TOL - close 22.89 change +0.65 stop 24.25
Not many stocks were held back in the rally today, including TOL which closed +2.92% higher. We are down about -6% in the position but I still like the trade set-up. Today's bounce may turn out to be a lower high but we'll need to see follow though to the downside. TOL found support at $22.76 today, with the next level of support around $22.20. I am looking for TOL to break these levels which should get the selling started. The stock created more hair on top of its candlestick which is now 5 consecutive days. I am still eying the $21.80 level as a key level to take profits as this was TOL's intraday high On November 11 and could act as support. However, considering the strength of the move in the last two days I suggest readers take a hard look at $22.25 to either tighten stops or exit the position. This is just above the lows of the last few days and will probably act as strong support. Aggressive traders can enter the position at this time. Our stop remains at $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
CLOSED BULLISH PLAYS
Hanson Natural Corp. - HANS - close 44.41 change +1.59 stop *DROPPED*
HANS has still not hit our target and has now run away from us higher, closing +3.71% today. I can't chase the stock at these levels so I am suggesting readers drop the trade. We were close to getting triggered twice and making a very nice profit on this trade but it just never happened. I am sticking to my rules and need to step aside here. Congratulations to any readers who may have opened positions ahead of our trigger. I suggest protecting profits with a tight stop.
Trigger to buy calls if HANS trades to $42.60 *DROPPED*
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