Good evening traders. It is almost impossible to manage swing trades in this market environment without getting whipsawed around like a rag doll. After finding some footing on Monday post Friday's sell off, the market ripped lower on Tuesday and made new lows. Our position in RIMM was stopped out and WFT experienced a set back. But our short positions in IYT, TOL, and SINA all performed very well. GFI reports earnings on Thursday before the bell so I suggest traders exit positions tomorrow. Please see the play update below for my thoughts on how to manage the exit. We are currently breakeven on the GFI trade. We were also triggered NDAQ (long) and I want to initiate BIIB tomorrow with a tight stop.
Over the last couple of days I wrote that I anticipated volatility to continue and that we would probably see another bounce early this week before a bigger drop came later. I just didn't expect this much volatility to happen during the first two days of this week. It appears the bears are winning the fight right now. I would expect some sort of relief bounce after today's massive sell off but I suspect the bounce will be sold into before going lower again. So I remain cautiously bearish on the market. It is a good idea to take profits off the table on long or short positions when there are huge moves like today. This is exactly what I did with some short positions and will do the same with long positions on a relief bounce. We must stay nimble here and be prepared for anything.
CALL Play Updates
Biogen Idec Inc. - BIIB - close 52.30 change -1.30 stop 50.90
BIIB retreated along with the remainder of the market today so we were not triggered to buy calls. The stock has been in a downtrend on the daily charts but appears poised to break to the upside. However, the intraday bull flag that BIIB had formed clearly broke to the downside today. The interesting thing though is that BIIB has not taken out its recent lows like the overall market and most other equities have. This has me wondering whether or not we should initiate a positions at current levels to take advantage the weakness and the ensuing break out above its recent downtrend line from March 22nd. When I look at the stock's YTD chart it did not suffer from the overall market weakness experienced from mid January through early February. It also has strong support here and sets up a very nice risk reward trade. Plus the stock has retraced almost 50% of the gain between its October 29th low and its March 22nd high. BIIB also trades at a low 16.1 PE ratio when compared to its peers in biotechnology and it also trades below the S&P 500 average PE of about 21. Biotechnology can be defensive so I like the play at these levels and suggest traders take advantage of the weakness. Our stop will be $50.90 so we will be out quick if the set-up fails from here. This is also below the 200-day SMA and a recent swing low. Our target is $56.90 with a more aggressive target at $58.90. The stock may experience some resistance with its 20-day SMA just overhead but if there is momentum it should overcome it.
Suggested Position: Long JUNE $55.00 CALL at current levels, current ask $1.40
Entry on May xx at $xx.xx
Earnings Date July 15, 2010 (unconfirmed)
Average Daily Volume: 2.7 million
Listed on May 1, 2010
Gold Fields Ltd - GFI - close 13.22 change +0.00 stop 12.79
GFI found support $12.85 and bounced the remainder of the day, closing flat. We are about breakeven on the trade. GFI has earnings before the market opens on Thursday and I do not suggest holding positions, unless you know something that I don't. As such, I suggest readers exit GFI at $13.33 tomorrow, or at the close, whichever occurs first. If the price action is under pressure tomorrow in gold miners and/or gold it is probably wise to exit the position early. I would wait for the first 15-minutes of trading and see where the price goes from there. As the price breaks above or below the first 15 minute high or low it may give you clues as to the direction for the remainder of the day. In other words, if GFI happens to gap down but then overtakes its first 15-minute high the stock may have a good chance of recovering, and vice-versa. If any readers have questions on this please feel free to email me. Gold miners were one of the stronger sectors today so if there is weakness in the market GFI could do well. Our stop is $12.79 and we plan to exit the position tomorrow. I am not suggesting new positions at this time. *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
The NASDAQ OMX Group - NDAQ - close 20.40 change -0.71 stop 19.75 *NEW*
We took advantage of the gap down this morning to initiate calls in NDAQ. We are now long June $21.00 calls for 80 cents. The market was too much for NDAQ to hang on to its 50-day SMA and the stock also closed below $20.60 which is a key pivot level dating back August 2009. The stock also has good support down to $20.00 so I am still optimistic the trade will work. I would like to move our stop down a few cents to $19.75 which is below the swing low from March 15th and the 200-day and 100-day SMA's. Our target is $22.25 with a more aggressive target at $22.90. However, if NDAQ trades up to its 20-day SMA (near $21.65) I suggest traders tighten stops or take profits. Our time frame is about two weeks.
Current Position: Long JUNE $21.00 CALL, entry at $0.80
Entry on May 4th at $0.80
Earnings Date More than 2 months (unconfirmed)
Average Daily Volume: 2.9 million
Listed on May 3, 2010
Weatherford International - WFT - close 17.33 change -0.59 stop 16.55
WFT closed down -3.29% today, but the stock closed above the key support area at $17.30. Our calls took a hit and are down about -17%. I am still urging traders to be cautious here as WFT broke below its bull flag on the daily chart and the headline risk with the oil disaster in the Gulf of Mexico is still alive and well. $17.80 and $18.60 are logical exit targets for traders to keep an eye on. If WFT trades to either of this levels I suggest taking profits, especially after today's market weakness. A move to $17.80 would get us to about breakeven on the trade and considering the bearish tone set today this is a likely target. A move to $18.60 is not too far from our original target ($18.95) and should garner a +34% profit based on the delta and projected move in the stock. Longer term I think WFT can 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 this target, but more often than not when traders become complacent by waiting they end up losing in the long run. 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 $1.07 as of the today's close. This is not a bad spot to initiate positions but please keep a tight stop in case everything falls apart. Our stop is 16.55.
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 83.43 change -3.13 stop 87.10
Our bearish positions sure paid off today as IYT closed down -3.62%. Our $2.00 PUTS are now worth almost $3.00 for +50% unrealized gain. IYT traded well below its 20-day SMA today and ended up closing just below it at $83.43. I suggested yesterday that traders tighten stops at this level or simply exit to take profits. If you did you should have a nice profit. Our second target on this trade is $81.50 but we need the market to follow through lower form here. IYT did bounce off of the $82.60 area which it has done three times since March 18th. We need it break this level if we have any shot at reaching our next target. Our time frame is 1 to 2 weeks but will have no issues exiting sooner if there is a more downside in the coming days. I am not suggesting new positions at this time. *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
Sina Corporation - SINA - close 34.18 change -2.55 stop $38.80 *NEW*
SINA triggered our entry to buy PUTS at $34.95 today. We are now long June $35.00 PUTS at $2.20. Once the stock broke below $35.00 it was all she wrote. SINA closed the day down -6.95%. The stock has now broken all of its major daily and weekly SMA's except for the 100-week SMA, which it closed just above today. SINA is bound to get a relief bounce from here but I expect the overhead resistance and SMA's to hold. Our new stop is $38.80 but we will adjust it as the trade develops. Our first target is $33.25 which is a point where I would tighten stops to protect profits. We are less than $1.00 away from hitting this target. If SINA trades down there in the coming days I will be happy to take profits. A more aggressive 2nd target is $30.50. If a market correction gets going I think SINA could easily trade down to this level but I don't want to get whipsawed back and forth so please protect profits. Our time frame is several weeks.
Current Position: JUNE $35.00 PUT, entry at $2.20
Entry on May 4th at $2.20
Earnings Date June 9, 2010 (unconfirmed)
Average Daily Volume: 1.1 million
Listed on May 1, 2010
Toll Brothers - TOL - close 22.42 change -0.73 stop 24.25
TOL was under severe pressure the first half of the day and but bounced back in the afternoon. The stock closed -3.15% lower. If you took profits at $21.80 great job. Our PUTS are now worth about $1.60. I would like to give this some more time to play out as I think TOL will ultimately hit our next targets of $21.50 and possibly even $20.60. The bears won today but the bulls did step in at the end to pare some the stock's losses. I'll keep our targets listed here as possible exit points: $21.80, $21.50, and $20.60. These are the levels where I suggest traders tighten stops or simply take profits. Aggressive traders can enter the position at this time. Our stop remains at $24.25 and our time frame is about 1 to two weeks.
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
Research In Motion - RIMM - close 71.53 change +0.34 stop 69.29
Our set-up on RIMM failed so we are out of the trade for a relatively small loss. Our $2.15 calls were sold for $1.70, or about -20%. I expect some sort of relief bounce from here so traders who may still have positions should consider selling if RIMM trades up to the $70.00 area. RIMM may even trade back up to its 20-day SMA around $71.00.
Closed Position: Long JUNE $75.00 CALL at $1.70, entry was at $2.15
Entry on April 30 at $2.15
Earnings Date June 18, 2010 (unconfirmed)
Average Daily Volume: 15.3 million
Listed on April 29, 2010