Editor's Note:

Good evening. Our long positions struggled today but our key support levels have held, for now. Last night I suggested readers consider closing short positions on weakness today. If you did you should have booked very nice gains. I am still urging readers to be careful with short positions down at these market levels as I believe we have seen the bottom in the market for at least a few days, if not weeks. I suppose there could be a push down to the 1,085 to 1,090 area in the S&P 500 but I'm not counting on it. This is just my opinion so take it for what its worth.

We have kept a good balance in the portfolio due to the recent volatility and we have booked nice gains on our short positions, sometimes at the expense of our long positions. But this is what hedging is all about which makes it paramount to take profits when the opportunity presents itself. We are now more biased to the long side and positioned for a relief rally. There will be a time in the near future when we need to get more biased on the short side but I think that could be a couple of weeks away. The S&P 500 range I am focused on now is 1,100 to the 1,155 area. However, I maintain my believe there is much more downside risk than upside opportunity so staying nimble is a must. Please feel free to email me with any questions.

Current Portfolio:


CALL Play Updates

Becton Dickinson & Co. - BDX - close 73.73 change -0.57 stop 72.20

Target(s): 77.50
Key Support Areas: 74.00, 72.50
Key Resistance Areas: 75.65, 76.70
Current Gain/Loss: -13%
Time Frame: Several weeks
New Positions: Yes

Comments:
BDX sold off right into its trend line from 5/5/09 and bounced. The overall market was weak which weighed on the stock but I expecting follow through to the upside from here. I'll leave my technical comments from the play release as they have not changed. We are looking for a move up to the $77.50 area which is our target and near the 50-day SMA. The stock remains near a key pivot level at $74.00 dating back to early 2008 which should act as support if BDX can follow through higher. Our stop is $72.20 and our time frame is several weeks.

Current Position: JUNE $75.00 CALL, entry at $1.55.

Entry on May 18, 2010
Earnings Date More than 2 months (unconfirmed)
Average Daily Volume: 1.6 million
Listed on May 17, 2010


Celgene Corp. - CELG - close 58.29 change +0.29 stop 56.90

Target(s): 60.90, 62.95
Key Support Areas: 58.00, 57.00
Key Resistance Areas: 58.60, 60.00, 61.25
Current Gain/Loss: -17%
Time Frame: Several weeks
New Positions: Yes

Comments:
CELG has been oscillating between $58 and $60 since last Monday and it looked like it might shoot right back up to $60 in early trading today. But sellers stepped in erasing the early gains, however, CELG managed to post a +0.50% gain at the end of the day. CELG remains above a key support area at $58.00 and I'm looking for more follow through to the upside in this stock and the overall market in general. The support looks solid at this level but it needs to bounce from here and get back above its 20-day SMA or our position could be in jeopardy. I want to lower our target just a bit to $60.90 which is just below the 50-day SMA. If the support breaks and things fall apart our stop is in place, which is $56.90 and below the April 22 low.

Current Position: JUNE $60.00 CALL, entry at $2.58.

Entry on May 17, 2010
Earnings Date: More than 2 months (unconfirmed)
Average Daily Volume: 4.3 million
Listed on May 15, 2010


Hewlett Packard Co - HPQ - close 47.00 change +0.21 stop 44.90

Target(s): 49.70
Key Support Areas: 46.50, 45.50
Key Resistance Areas: 48.25, 50.00
Current Gain/Loss: +0.00
Time Frame: Several weeks
New Positions: Yes

Comments:
HPQ traded down to $47 which is where we suggested to initiate CALL positions. We are now long June $47.00 CALLS at $1.47 which is about the price that they closed the day. I'll leave my comments from the play release as they have not changed. HPQ reported earnings after the bell on Tuesday that beat estimates and the company raised its guidance for the remainder of the year to $4.45 to $4.50 per share. This means that HPQ is now trading at less than 11 times forward earnings. The stock also has support at $46.50 and $45.50 which gives us a good reference to place a stop and to limit risk. There is no doubt HPQ's chart looks terrible but most stock charts do, and I'm viewing the pullback as opportunity to enter a quality name that may catch a bid as investors flee from more speculative names. I'm eyeing two areas as a potential entry: $47.10 or $46.10 depending price action on Wednesday. Our time frame is a couple of weeks and our stop $44.90 which is below the low on October 2, 2009.

Current Position: JUNE $47.50 CALL, entry was at $1.47

Entry on May 19, 2010
Earnings Date More than 2 months (unconfirmed)
Average Daily Volume: 16 million
Listed on May 18, 2010


PUT Play Updates

Baidu, Inc. ADR - BIDU - close 70.13 change -1.44 stop 72.75 *NEW*

Target(s): 71.50 (hit), 69.10, 65.10
Key Support Areas: 68.50, 65.00
Key Resistance Areas: 75.64, 78.50, 82.25
Current Gain/Loss: +32%
Time Frame: Several Weeks
New Positions: No

Comments:
BIDU hit our first target of $71.50 yesterday and today the stock traded down to a few cents below our key support area of $68.50 listed above before immediately reversing. BIDU still closed -2% on the day. I mentioned yesterday that traders may want to exit positions at current levels or on any further weakness to protect profits. If you took that suggestion and exited the position before noon today you have a very nice gain. At current levels we still have a nice +32% gain in the position and I urge readers to be careful of a reversal here and to protect profits. I'm listing a new target of $69.10 that I think is a great place to exit positions. BIDU looks vulnerable from here but if there is a bounce in the overall market we may endure a little pain before it heads back down. Ultimately I think BIDU easily trades to $65.10 but that may not happen within days or even weeks and we do not want to sit through a bounce. We need to take profits when the ducks are quacking and the stock is weak, and not wait through a hard reversal. If the market is moving higher tomorrow morning and showing relative strength compared to the last few days I would suggest exiting this position and booking a nice gain. I'm placing a tight stop at $72.75 to protect profits here. This stock can be volatile and is prone to gaps so please be smart when considering position size.

Current Position: JUNE $73.00 PUT, entry at $4.65

Entry on May 14, 2010
Earnings July 15, 2010 (unconfirmed)
Average Daily Volume: 68 million
Listed on May 13, 2010


Leggett & Platt, Inc. - LEG - close 23.60 change -0.23 stop 24.25 *NEW*

Target(s): 23.35, 23.00, 22.25
Key Support Areas: 23.75, 23.42, 23.00
Key Resistance Areas: 24.75, 25.15
Current Gain/Loss: +25%
Time Frame: Several Weeks
New Positions: No

Comments:
LEG closed below its 20-day SMA for the 2nd consecutive day, which is the first time since January. The stock traded down to within 15 cents of our $23 target before reversing and closing at $23.60. I am concerned of a reversal here in LEG and the overall market in general so I urge readers to protect their profits and consider exiting LEG tomorrow. I am going to tighten our stop to $24.25 and move our target up to $23.35. If the market rebounds tomorrow LEG could get some bids. Our position is up +25% right now but to reach lower targets we are probably going to have to live through a bounce which I suggest avoiding. LEG is still below its downward trend line which started on April 30. If the overall market remains weak LEG will probably trade down to its 50-day SMA at $22.66 but I anticipate a bounce which is why I want to book profits. I suggest taking profits here and not holding through any bounce.

Current Position: June $25.00 PUT, entry at $1.60

Entry on May 17, 2010
Earnings More than 2 months (unconfirmed)
Average Daily Volume: 2 million
Listed on May 15, 2010


CLOSED BULLISH PLAYS

Steel Dynamics - STLD - close 14.50 change -0.36 stop 14.15

Target(s): 16.25, 16.80
Key Support Areas: 14.50, 14.25
Key Resistance Areas: 15.00, 15.50, 15.85
Current Gain/Loss: -35% Time Frame: About 2 weeks
New Positions: Stopped

Comments:
STLD found our stop this afternoon so we are flat on the position for a relatively small loss of 30 cents. Although I never like a loss it simply can't be avoided. When I reviewed the thesis on this long trade I don't know that I would have done much different. Maybe a loser stop to keep us in the trade longer but hindsight is 20/20. I think the market bounces here and I think STLD will perform. Readers who still have positions could place a new stop at $13.95, which is below today's low. I would use the resistance areas and targets listed above as guide to exit positions.

Closed Position: JUNE $15.00 CALL @ $0.55, entry was at $0.85.

Annotated Chart:

Entry on May 17, 2010
Earnings Date More than 2 months (unconfirmed)
Average Daily Volume: 6.7 million
Listed on May 17, 2010