Editor's Note:
Good Evening. RL hit our target during this morning's weakness so we are flat the position for a decent +20% gain. The remainder of our short positions looked promising this morning but they were saved on the news of the Goldman Sachs settlement and progress on capping the leaking well in the gulf. These two stories essentially lifted the entire market this afternoon despite the terrible economic data released this morning. We'll have to see if there is any follow through tomorrow in what is shaping up to be a very interesting OPEX Friday. Personally, I don't believe this afternoon's news is all that material in regard to the economy but if the market goes higher we'll have to follow. As I have said in recent days we need a close and follow through above 1,105 on the S&P 500 for me to get behind this rally. And even if that happens we will keep a very tight leash on long trades. I have made further adjustments to targets on most short positions. We will get meaningful pullback in the broader market soon and when we do we will take advantage of exiting these positions at better prices than today. Please email me with any questions.

Current Portfolio:


CALL Play Updates

Merck & Co - MRK - close 36.49 change +0.29 stop 34.79

Target(s): 37.20, 37.75, 38.60, 39.35
Key Support/Resistance Areas: 39.50, 38.75, 38.00, 36.35, 35.80
Current Gain/Loss: +15%
Time Frame: 1 to 2 weeks
New Positions: Yes

Comments:
7/13: MRK closed above resistance of $36.35 and looks like it is headed towards our targets. If the broader market continues bouncing we should have no issues hitting our target(s) and MRK could also act as a defensive play if there is a pullback.

7/12: MRK traded down to $35.84 in early trading which triggered our long entry. The stock then drifted higher throughout the day. MRK appears to be forming a bull flag on its daily chart. A break above Thursday's high of $36.40 should get things moving higher relatively quick. Since we were able to get the lower entry trigger today I am going to offer a lowered 1st target of $37.20 which is a good place to consider at least consider tightening stops. I've also adjusted our primary target of $37.95 down 20 cents to $37.75.

Current Position: August $36.00 CALLS, entry was at $1.21

Entry on July 12, 2010
Earnings Date 7/30/10 (unconfirmed)
Average Daily Volume: 18 million
Listed on 7/10/10


United States Steel - X - close 42.92 change -0.38 stop 39.75

Target(s): 44.90, 46.20, 47.95
Key Support/Resistance Areas: 48.70, 46.25, 50-day SMA, 43.50, 40.50
Current Gain/Loss: +15%
Time Frame: 1 week
New Positions: Yes

Comments:
7/15: X traded down to just under $42.00 this morning which triggered our long entry. The stock made another higher low and looks poised to break higher toward its 50-day SMA. My comments from below have not changed. 7/14: The steel sector has been beaten down and it appears to be gaining momentum and ready for move higher. X has broken out of its primary downtrend line from its highs on 4/6 and has now closed above its 20-day SMA 3 out of the past 4 days. The stock is creating an ascending triangle on its daily and intraday charts and I believe it should easily trade up to its 50-day SMA before the company's earnings on 7/27. I suggest readers initiate long positions on weakness in the stock. Our official trigger is $42.05 but readers may also consider $41.05. I'm just not convinced $41.05 will be triggered prior to the stock advancing. Our stop is relatively tight at $39.75 so if this is a false break out our losses will be limited. NOTE: I view this an aggressive and potentially quick trade. Please use proper position size to manage risk.

Current Position: August $46.00 CALLS, entry was at $1.38

Entry on July 15, 2010
Earnings Date 7/27/10 (unconfirmed)
Average Daily Volume: 13.5 million
Listed on July 14, 2010


PUT Play Updates

Deere & Co. - DE - close 61.08 change +1.36 stop NONE *NEW*

Target(s): 59.10, 58.05, 57.05, 56.30
Key Support/Resistance Areas: 60.00, 57.50, 56.50, 56.00, 54.00, 52.70, 51.50
Current Gain/Loss: -68%
Time Frame: 1 to 2 weeks
New Positions: Yes, with a tight stop

Comments:
7/15: Well ladies and gentlemen the pain has set in on this trade as DE is defying gravity. The stock has gained +12% in 7 trading days and with little to no pause. Even when the market was lower this morning DE was not. It was hovering around $60 until the afternoon strength and when looking at the open interest in the July strikes the market makers do not want DE to be under $60.00 as there are a ton of puts. I could not have been more wrong on this one and should have kept a tighter leash. However, losses are part of trading and we have some damage to repair. Here is how I want to manage exiting the trade. I want to temporarily remove the stop until after OPEX tomorrow. DE will retrace some of these gains and when it does we will be ready to exit at a better price and/or tighten stops to get the most out what's left in our option premium. Ideally, DE should turn back to test its 20-day and 50-day SMA's which is also near the gap higher on 7/13. I've listed the revised targets above.

7/13: Simply put this trade has turned out to be a disaster and I am looking for an exit. All of the resistance levels mentioned in yesterday's update (see below) have not held. The broader market is at a critical reference point (SPX 1,105 likely tomorrow) and considering it has catapulted to this level with absolutely zero pullback we should get a down day or two soon. I'm not concerned about time decay with August options yet so I am suggesting we be patient here and wait for the exit prices I have listed above. I added $57.55 as the near term target followed by $57.05 and $56.30. $57.55 will close the gap higher from this morning. I believe the stock will print these levels either this week or next week. As DE begins to retrace these recent gains I will be looking to trail the stop down so that the loss on this trade is minimized. So now we have to deal with the stop loss. I am going to go out on a limb and raise the stop to $61.63 which is above the June 21 high and the primary downtrend line from April to June highs. This should provide us enough room to withstand any spikes in the market which appears may happen at the open tomorrow.

Current Position: August $55.00 PUTS, entry was at $3.00

Entry on July 6, 2010
Earnings 8/18/2010 (unconfirmed)
Average Daily Volume: 5.4 million
Listed on July 3, 2010


Ingersoll-Rand - IR - close 34.93 change -0.04 stop 36.60

Target(s): 34.20, 33.25, 32.05, 31.25
Key Support/Resistance Areas: 37.00, 36.50, 35.70, 34.50, 33.11, 31.50, 30.12
Current Gain/Loss: -25%
Time Frame: 1 to 2 weeks
New Positions: Yes

Comments:
7/15: IR was under pressure early and came within 1 penny of our first target before reversing. As a result, this target has been adjusted up 5 cents. IR is forming a bear flag on its daily chart and any broader market weakness should send this stock lower, and fast. My comments from below remain the same.

7/13: IR printed a big green bodied candle and appears to be headed for its 200-day SMA from below. This is only about 25 cents higher and will be its first re-test. IR broke through it on 6/30. When we get a pullback in the broader market I expect IR to retrace today's gains and possibly retest its lows near $33.25. I've listed $34.15 (raised to $34.20) as a target to consider exiting positions to preserve capital. We should see this level quickly on any on any meaningful pullback in the market.

7/12: IR spiked higher this morning but was met with selling which sent the stock lower, and it never really recovered. If there is any weakness in the broader market I expect IR to break lower and easily trade down to our first target of $33.25. Our primary target is $32.05.

Current Position: August $35.00 PUTS, entry was at $2.25

Entry on July 8, 2010
Earnings 7/19/2010 (unconfirmed)
Average Daily Volume: 5.4 million
Listed on July 7, 2010


Lululemon Athletica Inc. - LULU - close 39.60 change +0.298 stop 41.30

Target(s): 38.00, 37.20, 35.80
Key Support/Resistance Areas: 42.25, 39.75, 37.00, 35.16, 32.75
Current Gain/Loss: -19%
Time Frame: 1 week
New Positions: Yes

Comments:
7/15: LULU is being contained by its 20-day and 50-day SMA's. I expect this to hold and LULU to turn lower. $37.20 is the primary target but $38.00 (raised 5 cents) is also an area of interest to exit positions or tighten stops.

7/13: LULU managed to eek out a 26 cent gain today as the market catapulted higher. This is under performance and confirms my bearish outlook for the stock. We could get a little more bounce in this position but when the market pulls back LULU should go lower relatively quick. However, in the spirit of following the market we need to be careful and not get too greedy by expecting LULU to simply rollover and give us a big gain. As such, I've added $37.95 as the first target which just above yesterday's low. This level is -3% lower from our entry price and if you bought options they should return about +15% at $37.95. Tightening stops at this level is suggested to see if we cn get more out off the position.

7/12: Finally, LULU hit our trigger of $39.15 to enter short positions. The stock immediately lost $1.25 and then recovered. One thing is clear on the intraday charts and that is the volume when the stock was declining this morning was much greater compared to its recovery. I like the volume pattern and think LULU retests its lows before breaking higher. Should it break higher the 50-day SMA sits at $39.87 which should keep things under control. I've also listed a target of $37.20 which is just above a key support/resistance area of $37.00. Some might view this level as forming an inverse head and shoulders pattern on the hourly chart so it would be prudent to consider tightening stops at this level. This level will also produce a decent gain in the position.

Current Position: Buy August $35.00, entry was at $1.30

Entry on July 12, 2010
Earnings 8/19/2010 (unconfirmed)
Average Daily Volume: 700,000
Listed on July 1, 2010


PowerShares QQQQ Trust - QQQQ - close 45.60 change +0.04 stop 46.90

Target(s): 45.00, 44.40, 43.75, 42.55
Key Support/Resistance Areas: 46.77, 45.25, 44.46, 43.50, 42.50, 41.00
Current gain/loss: -33%
Time Frame: 1 to 2 weeks
New Positions: Yes

Comments:
7/15: Google is down -$20 in the after hours after their earnings report. This should keep the Q's in check tomorrow. However, the good news about the GS settlement and the oil spill in the gulf is boosting sentiment despite the terrible economic data that was released today. My comments from 7/13 remain the same except I would place the tighter stop at $46.25 as opposed to $46.15. QQQQ's close on 12/31 was $45.75 which is near the highs of the past two days. We are at the bottom of January's congestion area and this is an important reference point. We've got some wiggle room and think the market moves lower prior to any significant move higher. I've tightened the targets and added $45.00 which is just above QQQQ's 20-day SMA. This is good place tighten stops. 7/13: It appears the Q's are going to spike higher in the morning as a result of earnings from Intel. The NASDAQ 100 futures are currently up over 1% as of this writing. This equates to a price in the Q's of approximately $45.85. The recent patterns after Intel reports show significant market sell offs in the ensuing days after the initial spike. If you believe this time is different and we continue to go higher I suggest exiting early tomorrow or place a new stop above the highs of tomorrow. $46.15 gives you some room and is above the 200-day SMA (near QQQQ's close today) and the 50-day SMA's. But this level could also get picked off as a stop on a spike higher, only to see QQQQ reverse lower. I believe we will see our first target of $43.75 before our official stop of $46.90 so I am sticking with the original plan for now.

7/12: QQQQ backed off right at its 20-day SMA this morning which also corresponds to the ETF's February highs. This level is a logical reversal point for QQQQ, however, Intel reports earnings tomorrow after the bell so that is the wild card for the short term price direction. I've adjusted our near term target to $43.75 which is just above the lows on 7/8.

Current Position: August $45.00 PUTS, entry was at $1.85

Entry on July 8, 2010
Earnings N/A (unconfirmed)
Average Daily Volume: 100 million
Listed on July 7, 2010


Starbucks Corp. - SBUX - close 26.13 change +0.67 stop 26.75

Target(s): 25.30, 24.85, 24.25, 23.70
Key Support/Resistance Areas: 26.50, 26.00, 25.25, 24.80, 24.00, 23.60, 22.50
Current Gain/Loss: -50%
Time Frame: 1 to 2 weeks
New Positions: Yes, with a tight stop

Comments:
7/15: SBUX was headed for our target this morning but reversed with the broader market. The stock has retraced about 50% of its recent decline and is below its 50-day SMA. We need a reversal and are looking to exit. I've tightened the targets and suggest readers exit on weakness. Ultimately SBUX should fill its gap higher on 7/13 (near $25.30) and I think it will prior to moving much higher. But the stock may be headed for $26.40 to close the gap down on 6/29. This is about +1% higher than current levels. I suggest being patient and waiting for a pull back to exit positions.

7/13: SBUX is just not giving us the pullback I anticipated. The stock has rallied +10% from its lows last week in five trading days. It bounced straight up from its 200-day SMA right into its 50-day and 20-day SMA's. I keep anticipating a reverse lower and if it doesn't happen soon I suppose the concerns of strapped consumers buying $5 latte's are a thing of the past. There is a gap to be filled up to $26.39 and that might be where this is headed before a turn back down. I've tightened the above targets and suggest we begin to exit positions on weakness. These levels are good places to at least tighten stops.

7/12: SBUX sold off this morning but drifted higher the remainder of the day. SBUX has resistance at current levels and I am looking for the stock to make a lower high and reverse to retest its lows.

Current Position: August $25.00 PUTS, entry was at $1.40

Entry on July 8, 2010
Earnings 7/21/2010 (unconfirmed)
Average Daily Volume: 10 million
Listed on July 3, 2010


CLOSED BEARISH PLAYS

Polo Ralph Lauren - RL - close 77.68 change +1.56 stop 82.50

Target(s): 75.50 (hit), 73.50
Key Support/Resistance Areas: 82.00, 80.00, 78.00, 75.00
Final Gain/Loss: +20%
Time Frame: 1 week
New Positions: Closed

Comments:
7/15: RL sold off this morning and hit our target to exit positions at $75.50. We are flat the position for a +20% gain. If this position were still open I would tighten the stop to at least $80.10 and probably $70.40.

7/13: I've adjusted the first target on RL up 25 cents so that it is just above last week's low. I expect RL to hit this target within the next week. The stock bounced today but the volume was light when compared to the selling recently. I expect that to continue as the market pulls back.

7/12: RL sold off at the open and never really recovered. I'm expecting RL to hit our first target relatively quick, possibly tomorrow. This would fill its gap higher on 7/8. My comments below haven't changed.

7/10: We initiated AUG $75 PUTS at the open for $3.00. The opening print was all RL could muster for the day as the stock drifted lower throughout the day. There is a lot of resistance to keep RL in check. I am looking to book a quick gain on this position and expect the stock to hit our first target of $75.25 relatively quick. This should give us a +20% gain on the position and is good place to tighten stops to protect profits. My primary target is $73.50 but that may take a bit longer depending on earnings, news, and how the market is reacting to it.

Closed Position: August $75.00 PUTS at $3.60, entry was at $3.00

Annotated Chart:

Entry on July 9, 2010
Earnings 8/5/2010 (unconfirmed)
Average Daily Volume: 1.8 million
Listed on July 8, 2010


SPDR S&P 500 ETF - SPY - close 109.65 change -0.00 stop 112.60

Target(s): 108.20, 107.25, 106.25
Key Support/Resistance Areas: 110.50, 108.80, 107.60, 106.00
Time Frame: DROPPED

Comments:
7/15: This would have been a perfect trade had the overnight futures held on to their gains but they were gone before the open. SPY proceed to trade down to our target 108.20 almost to the penny. In light of the near miss entry I think it is best to simply drop the play. We may release another play on SPY soon.

7/14: This is fairly simple. I'm looking for SPY to spike a tad bit higher to the 110.50 area (equivalent to 1105 in the S&P 500) and then retrace to fill its gap higher on 7/13 which is also just above its 20-day SMA. This is the primary target and is a good place to tighten stops to see if we can get more out of the trade. If we get filled I like this set-up a lot and I think the retracement could come quick. Our trigger to enter short positions is $110.35 and our stop will be above all recent closing highs $112.60 and the 200-day SMA. If we get filled on this trade I will be thoroughly amazed if we get stopped out prior to hitting our target. But the market can do anything so it is possible, but nor probable in my opinion. I think we have a 50/50 chance of getting filled so traders may consider entering at current levels with a tighter stop just above the 200-day SMA at $111.75.

Suggested Position: August $108.00 PUTS, current ask $2.64, estimated ask at entry $2.35

Annotated chart:

Entry on July xx
Earnings N/A (unconfirmed)
Average Daily Volume: 251 million
Listed on July 14, 2010