Editor's Note:
Good Evening. Our short positions have come back to life and I am expecting more downside this week. We may incur a bounce but I think any strength will be sold into. I've adjusted targets and stops on most positions and I want to ride the short positions as long as we can to exit at the best price possible. The targets I have listed are good areas to tighten stops on the way down. Please email me with any questions.

Below are the June results for all recommended trades. We had a phenomenal run during the last half of June and overall had a winning month.

Current Portfolio:


CALL Play Updates

Merck & Co - MRK - close 35.91 change -0.58 stop 35.38 *NEW*

Target(s): 36.30, 36.55, 36.95, 37.45
Key Support/Resistance Areas: 39.50, 38.75, 38.00, 36.35, 35.80
Current Gain/Loss: -8%
Time Frame: 1 to 2 weeks
New Positions: Yes, with a tight stop on weakness

Comments:
7/17: MRK broke out to new daily highs on Friday not seen since April but the breakout failed and the stock looks vulnerable to the down side. The stock has long term horizontal support between $35.80 and $35.60 and its 20-day, 100-day, and 200-day SMA's (all right at $35.60) are below Friday's closing price. This should provide support for the stock but if this sell-off gains steam I doubt MRK can hang in at these levels. If this support is broken the next stop will most likely be somewhere just below $35.00 which could also set-up an inverse head and shoulders pattern(see ovals on chart). This area is also near an upward trend line and its 50-day SMA. So the question is should we adjust our stop down a bit and sit through a -2% to -3% pullback if the $35.60 support level breaks? Considering the broad market sell off on Friday when even the more defensive sectors like pharmaceuticals were down over -2%, I say no. I am going to keep a tight leash on this trade and raise the stop to $35.38 while also bringing down the targets to see if we can make this a winner. MRK may go test the aforementioned SMA's prior to bouncing and I suggest we sell positions into strength using the above targets. These are good areas to consider tightening stops to see how much we can get out of the position.

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

Annotated Chart:

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 41.36 change -1.56 stop 39.75

Target(s): 43.25, 44.60, 46.20
Key Support/Resistance Areas: 48.70, 46.25, 50-day SMA, 43.50, 40.80, $40.00
Current Gain/Loss: -22%
Time Frame: 1 week
New Positions: Yes, with tight stop

Comments:
7/17: Friday was blow to the bullish thesis on X but many things still exist to support it. X has intraday support at $40.80 and longer term support from June at $40.00. It also sits near its 20-day SMA and there are some important retracement levels from the July lows to recent highs in the $40.00 to $41.00 area that may support X on this pullback. I still think X should trade up near its 50-day SMA prior to moving much lower so I am sticking with the set-up on this trade but will be out if our stop is hit. Considering Friday's broad sell off I've adjusted the targets offered a lower first target of $43.25 which is good place to consider tightening stops or taking profits. I chose a further out of the money call than normal with a small delta of .28 to limit risk on this trade. NOTE: I view this an aggressive and potentially quick trade. Please use proper position size to manage risk.

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

Annotated Chart:

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 59.73 change -1.35 stop NONE *NEW*

Target(s): 59.10, 58.20, 57.05, 56.30, 55.40
Key Support/Resistance Areas: 59.00, 58.00, 56.85, 56.15, 55.00, 54.15
Current Gain/Loss: -59%
Time Frame: 1 to 2 weeks
New Positions: Yes, with a tight stop

Comments:
7/17: DE gave some back on Friday and I expect the selling to continue, at least in the short term. Since May DE has made 4 round trips between $60 and $55. Obviously I never thought that the stock would do it again when the trade was released so now we are left to manage the exit at the best possible price. My plan going forward is to trail DE's decline with stops to see how much we can get out of the trade. The problem right now is that I do not see a proper level to place a new stop just yet. So for now I am keeping the trade open without one. Once a better reference point is established I will place a new stop. I've adjusted the targets above which are just above the updated key support/resistance areas. DE may find some support near these areas on the way down so I suggest readers use these levels as a guide to exit positions. $58.20 is just above the stock's 20-day and 50-day SMA's and is an area of high interest. The overall strength or weakness in the broader market should determine how far we can take this.

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.

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

Annotated Chart:

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 34.37 change -0.56 stop 35.75 *NEW*

Target(s): 34.20, 33.70, 33.25, 32.55
Key Support/Resistance Areas: 37.00, 36.50, 35.60, 34.20, 33.11, 31.50, 30.12
Current Gain/Loss: -12%
Time Frame: 1 to 2 weeks
New Positions: Yes

Comments:
7/17: IR held up better than I thought it would on Friday's sell off but still closed down -1.60%. The stock almost hit our first target again. This is obviously a key support level so if breaks through we will have a chance to take profits. The stock remains in a bear flag on the daily chart and appears to be consolidating before breaking lower. I've adjusted the targets above and suggest readers use these as a guide to tighten stops and exit positions if the stock heads lower from here. I've also tightened the stop to $35.75 which above the 200-day SMA.

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

Annotated Chart:

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 38.00 change -1.60 stop 40.42

Target(s): 38.00 (hit), 37.25, 35.80, 34.55
Key Support/Resistance Areas: 42.25, 39.75, 37.00, 35.16, 32.75
Current Gain/Loss: +0.00%
Time Frame: 1 week
New Positions: Yes

Comments:
7/17: My comments from 7/15 haven't materially changed so I am adding to them in the 7/17 post. LULU is being contained by its 20-day and 50-day SMA's and the backside of its broken upward trend line that began in February. I expect this resistance to hold and LULU to turn lower. Friday's -4% decline took away 6 prior days gains. Our target of $38.00 was hit on Friday but I am looking for more downside. $37.25 is now the immediate target below but if LULU breaks its upward trend line that began last July this could gain steam to the downside towards the 200-day SMA. I've tightened the stop to $40.42.

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.

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

Annotated Chart:

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 44.34 change -1.26 stop 46.10 *NEW*

Target(s): 44.40 (hit), 43.75, 43.25, 42.55
Key Support/Resistance Areas: 46.77, 45.25, 44.46, 43.50, 42.50, 41.00
Current gain/loss: -8%
Time Frame: 1 to 2 weeks
New Positions: Yes

Comments:
7/17: QQQQ hit our target of $44.40 and we are now approaching breakeven on the trade. I've moved the stop down to $46.10 which just above last week's highs. I'm comfortable giving this some room to work and suggest we ride it as far down as we can. Friday didn't really give us a good reference point to place a tighter stop but there is an intraday congestion area between $45.00 and $45.40 so a tighter stop could be placed above there. QQQQ may bounce and retrace some of Friday's losses but I expect the selling to resume. I've adjusted the targets above and suggest readers tighten stops as they are hit to protect against a reversal. $43.25 is a high area of interest to tighten stops or take profits. This level should give us a nice +30% gain.

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

Annotated Chart:

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


Starbucks Corp. - SBUX - close 25.35 change -0.78 stop 26.05 *NEW*

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: -27%
Time Frame: 1 to 2 weeks
New Positions: Yes, with a tight stop

Comments:
7/17: On Friday morning SBUX closed its gap lower on 6/29 (referred to in the update below) and then took a nose dive and closed its gap higher from 7/13. All of the stock's weekly gains were essentially erased with Friday's -3% loss. Similar to the Q's above SBUX didn't give us a good reference point on Friday to place tighter stop so I have moved the stop down to the top of last week's congestion area at $26.05. This should be enough room to see how far we can ride SBUX back down so we can turn this trade into a winner. The targets can be used as a guide to for potential bounce points on the way down.

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.

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

Annotated Chart:

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