Editor's Note:

Good evening. Boy, what a day. I have to say the gap down in the market today caught me off guard and our long positions in the model portfolio suffered from it, but our shorts performed very well more than offsetting those losses. We closed 4 positions today as 2 were stopped out and 2 targets were hit for nice gains. The net percentage gain/loss on the closed positions is +80%. Our portfolio is narrow going into Friday options expiration and we will group this weekend with several more new plays. Trying to predict what happens tomorrow is simply a guess.

Our short positions have saved us on our long positions with losses. With all of the geopolitical events happening right now cash is a position and probably the best place to be until things get sorted out, especially if you are holding positions for any length of time. There has to be some sort of bounce in the markets and we still have a couple of longs to take advantage of it. My S&P 500 range is getting lower by the day and I expect more volatility, so staying on your toes is extremely important. Please feel free to email me with any questions.

Current Portfolio:


CALL Play Updates

EMC Corp. - EMC - close 17.68 change -0.52 stop 16.95 *NEW*

Target(s): 18.20, 19.00, 19.50
Key Support Areas: 17.65, 17.55, 17.44, 17.10
Key Resistance Areas: 17.80, 18.00, 18.50, 18.85
Current Gain/Loss: -3%
Time Frame: 1 to 2 weeks
New Positions: Yes, on weakness with a tight stop

Comments:
We were able to initiate CALL positions in EMC on the gap down today at $0.65. The stock bounced around and closed off of its lows but the market did not. EMC is now below a long term pivot level dating back to June of 2007 at $18.00. The stock also broke through its upward trend line that began in May 2009. EMC is still above its 200-day SMA which should offer support below. I am playing this stock for a bounce and believe that we will get it but there could be another flush first. Since we entered at a better price this morning I want to move the stop down to $16.95 which is below the 200-day SMA and the plunge low of May 6th. There is no doubt this is aggressive so readers who want to avoid risk should exit the position to preserve capital. You can still exit for almost breakeven. I like the specific technology sector of EMC's business and I believe the stock is poised to bounce here with the overall market. EMC closed above the May 7 low of $17.66 which makes me want to give this some time to work. In light of the overall bearish tone in the market I would also like to offer a new lowered target of $18.20 which is near its 100-day SMA.

Current Position: June $18.00 CALL, entry at $0.65.

Entry on May 20, 2010
Earnings Date: More than 2 months (unconfirmed)
Average Daily Volume: 25 million
Listed on 5/19/10


Hewlett Packard Co - HPQ - close 45.95 change -1.05 stop 44.60 *NEW*

Target(s): 48.20, 48.60, 49.70
Key Support Areas: 45.11,
Key Resistance Areas: 46.50, 48.25, 48.70, 50.00
Current Gain/Loss: -18%
Time Frame: Several weeks
New Positions: Yes, on weakness with a tight stop

Comments:
HPQ traded right down to the low on October 2nd and bounced that I mentioned in last night's updates. The stock closed the day higher than where it opened while the market did not, but still closed down -2.23% which was basically the gap down. This is an encouraging sign but I urge readers to be cautious. If you are not comfortable in this environment you can still exit the position for a relatively small loss. I remain in the camp that the market is due for an oversold bounce if nothing else and I believe that HPQ will catch a bid when that happens. Due to the volatility I want to move our stop down slightly to $44.60. If HPQ trades and closes below this level there is most likely a couple of more dollars of downside risk. At this level I suggest stepping aside. We have room underneath to account for some volatility and give us the best chance to make this trade a winner. I would also like to offer a lowered targets of $48.20 and $48.60 which is the gap area from 5/13 to 5/14. These would be logical places to exit and where a relief could stall. HPQ is a quality company and that has great fundamentals, i.e. trading at 11 times forward earnings. I'm viewing the recent pullback as opportunity to enter a quality name that may catch a bid as investors flee from more speculative names.

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

NONE. All PUTS CLOSED THURSDAY ON MARKET WEAKNESS.


CLOSED BULLISH PLAYS

Becton Dickinson & Co. - BDX - close 71.65 change -2.08 stop 72.20

Target(s): 77.50
Key Support Areas: 71.60, 71.00
Key Resistance Areas: 72.00, 72.50, 72.80
Current Gain/Loss: -36%
Time Frame: Several weeks
New Positions: Yes

Comments:
Our thesis for taking this trade was a converging trend line and horizontal support near the $74.00 level. The thesis was still valid as of yesterday's close but today proved too much for BDX and the set-up failed, hitting our stop at $72.20. The surge in volatility prevented our calls from dropping further in value. If you didn't sell the position at the stop the calls are still worth about $0.80 so I would be selling into any strength or simply exiting positions to protect capital at this point. The above support/resistance areas can be used as a guide. I see limited support below $71.00 so I urge readers to be careful here.

Closed Position: JUNE $75.00 CALL at $1.00, entry was at $1.55.

Annotated Chart:

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 55.81 change -2.48 stop 56.90

Target(s): 60.90, 62.95
Key Support Areas: 55.75, 54.00
Key Resistance Areas: 56.80, 57.50, 58.25
Current Gain/Loss: -32%
Time Frame: Several weeks
New Positions: Yes

Comments:
Our thesis for taking this trade is basically the same as BDX, horizontal support and an upward trend line converging near the $58 level. The market was too much for CELG and our set-up failed so we were taken out early in the session. If you still have positions I would not be hanging on hoping price comes back. The surge in volatility prevented our calls from dropping further in value. If you didn't sell the position at the stop the calls are still worth about $1.30 so I would be selling into any strength or simply exiting positions to protect capital at this point. The above support/resistance areas can be used as a guide.

Closed Position: JUNE $60.00 CALL at $1.75, entry was at $2.58.

Annotated Chart:

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


CLOSED BEARISH PLAYS

Baidu, Inc. ADR - BIDU - close 67.58 change -2.55 stop 72.75 *NEW*

Target(s): 71.50 (hit), 69.10 (hit), 65.10
Key Support Areas: 67.00, 65.00
Key Resistance Areas: 69.69, 71.00.
Current Gain/Loss: +82%
Time Frame: Several Weeks
New Positions: Closed

Comments:
BIDU gapped below our second target so per last night's updates we are flat on the position for a +82% gain. For readers who still have positions I would take profits here and book the gain. Use the above support/resistance areas as a guide. Unless we crash, which is a possibility, stocks should get some relief soon.

Closed Position: JUNE $73.00 PUT at $8.45, entry was at $4.65

Annotated Chart:

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 22.54 change -1.06 stop 24.25

Target(s): 23.35 (hit), 23.00 (hit), 22.25
Key Support Areas: 22.50, 22.00
Key Resistance Areas: 23.25, 23.65
Current Gain/Loss: +66%
Time Frame: Several Weeks
New Positions: Closed

Comments:
LEG gapped open lower and quickly traded below our second target so per last night's updates we are flat on the position for a +66% gain. For readers who still have positions I would take profits here and book the gain. Use the above support/resistance areas as a guide. Unless we crash, stocks should get some relief soon.

Closed Position: June $25.00 PUT at $2.65, entry was at $1.60

Annotated Chart:

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