Editor's Note: Good Evening. Thursday was a difficult trading day. We got picked off on our long NYX play only to see it reverse. The market seemed on the verge of collapse again before sellers disappeared and buyers showed up. I have been calling for a relief rally for several days and have been dead wrong. We will get it and if tomorrow's non-farm payrolls report is already priced into the market it could create a "buy the news" event. There is no way to predict what will happen until 8:30 AM tomorrow so initiating new plays without being able to manage them intraday is not advised. We have one short position opened and another new short play, both in the retail sector. Please email me with any questions.

Current Portfolio:


PUT Play Updates

Children's Place - PLCE - close 44.63 change +0.61 stop 48.10

Target(s): 43.40, 41.70, 40.70, 40.05
Key Support/Resistance Areas: 46.40, 47.00, 46.00, 44.50, 43.40, 41.50
Current Gain/Loss: -20%
Time Frame: 1 to 2 weeks
New Positions: Yes

Comments:
7/1: The follow through to the downside in PLCE just didn't happen today. In hindsight I should not have listed our lower trigger to enter, especially with the oversold market conditions. My thought process was PLCE would hit our $41.70 target relatively quick on a breakdown, but things reversed. And I didn't think we would snap right back up after breaking down. The good news is PLCE is testing the backside of its broken downtrend line and remains below its declining 20-day and 50-day SMA's. There is a lot of congestion overhead which I think will keep bounces under control. A tighter stop could be placed at $47.05 which above both of the aforementioned SMA's. We may need to exhibit some patience with this trade but I think the sellers will show up.

6/30: PLCE has two consecutive closes below an upward trend line that began in December 2009. The stock has broken below its 20-day and 50-day SMA's and they are declining. I am anticipating a bounce up towards its 50-day SMA and a key resistance area near $46.00. I suggest readers initiate short positions at $45.75 which is an ideal entry. However, if PLCE breaks below today's low and trades to $43.19 use that as a trigger also, whichever occurs first. Our targets are down near the stock's recent lows. Our stop is $48.10 which is above the 20-day SMA and lots of congestion that I think PLCE will have a hard time navigating through on any bounces. It will be adjusted once we are in the position.

Current Position: August $45.00 PUTS, entry was at $4.00

Entry on July 1, 2010
Earnings 8/19/2010 (unconfirmed)
Average Daily Volume: 700,000
Listed on June 30, 2010


CLOSED BULLISH PLAYS

NYSE Euronext - NYX - close 27.57 change -0.06 stop 26.69

Target(s): 28.40, 29.35, 29.80
Key Support/Resistance Areas: 30.50, 29.40, 27.50, 26.80
Final Gain/Loss: -21.95%
Time Frame: 1 week
New Positions: Closed

Comments:
7/1: Ouch! This is a tough loss to take. That about sums it up. NYX broke down this morning and traded right down to our stop before immediately reversing, regaining all of the early losses very quickly. The stock collapsed at 10:00 AM and was back to its opening price by 12:30 PM. I've provided a 30-minute chart below to illustrate. I placed the stop below all of NYX's closing prices since February which I honestly though would be enough if the stock was weak today. However, there was a wick below our stop on June 8 but I threw it out which proved to be the wrong choice. When I saw this happening I could not believe my eyes. The market has a way of humbling traders and this time it was brutal for me. For readers who still have positions, I'm still a believer in this trade. I suggest sticking with the set-up and trailing stops up if NYX starts moving higher. For those interested, I've shared a stop rule below that I sometimes enforce on my swing trades.

For traders that can trade intraday, I have a stop rule that I sometimes use if my swing trades are moving against me and are nearing stops. First, I typically use 15 or 30 minute candlestick charts for monitoring swing trades and I do not use GTC stops. Rather I place new stops everyday and change them frequently on open positions. If my position is nearing a stop I want to see the candlestick close below my stop. If it does, then I reconsider the circumstances and place a new stop below that candlestick or just exit the position if it is moving too fast. Often times this saves me from getting stopped out and looking for a better exit. The volatility in this market environment is extremely tough to deal with, especially if you can not make these decisions intraday.

6/30: NYX Broke out of a steep downtrend line, rallied to test its 50-day SMA and has now to a key support level near $27.50. The stock has upward trend line from the its 2/5 lows to its 6/8 lows. This has outperformed the overall market by a mile. NYX should also benefit from the FinReg bill and I suggest we play this stock for a bounce. Our stop is below the trend line and our targets are fairy tight and achievable. $29.35 is +6% from current levels.

Closed Position: August $27.00 CALLS at $1.60, entry was at $2.05

Annotated 30-minute Chart:

Entry on July 1, 2010
Earnings Date 8/3/10 (unconfirmed)
Average Daily Volume: 3 million
Listed on 6/30/10