Current Portfolio:


CALL Play Updates

ProShares Ultra Basic Materials - UYM - close 30.70 change +1.12 stop 27.20

Target(s): 30.35, 31.20,
Key Support/Resistance Areas: 31.30, 30.50, 29.00, 28.00, 27.25
Time Frame: 1 weeks

Comments:
7/24: UYM came within 30 cents of our trigger to enter long positions. This market has a knack for not letting traders into positions and UYM continued motoring higher on Friday. The ETF is near a support/resistance area at $30.50 and I believe it will turn back towards the $29.00 level to gain steam before eventually breaking above Friday's highs. The fact of the matter is that there are probably a lot of people still "holding the bag" from the mid June swing highs (or before) and that overhead supply needs to be worked off before UYM continues higher. This is why it is higher risk to chase it at these levels unless you are trading intraday and using a very tight stop. So the question is how far will it pullback and what is the ideal entry point? UYM has intraday support at $29.30 down to $28.80. If these levels break the next level of support is down at $28.00 which is also near the 50-day SMA. These are three entry levels I suggest readers use as a guide to enter positions. Officially, we are going stick with $29.10 as our trigger. This will be a throwback to the middle of the developing upward channel and is also a just above a key pivot level for UYM dating back November 2009. UYM may even push up to its 200-day SMA before turning down but in the end I think patience will pay off. I've adjusted the strike price to September $30.00 calls.

7/22: Today UYM closed and broke above its primary downtrend line and its 50-day SMA for the first time since April. The ETF surged +6.71% (2x normal returns). Basic material stocks have been beaten down and are gaining momentum. I expect UYM to retrace some of the gains before regaining momentum and testing its 200-day SMA which is near our most aggressive target $31.20. UYM also closed above a key support resistance level of $29.00. I suggest we use $29.10 as a trigger to enter long positions. Our stop will be $27.20 which is below the 50-day SMA and yesterday's lows. NOTE: This is a leveraged instrument so please use proper position size to manage risk. The bid/ask spread is a little wider than I normally like so I suggest using a limit order between the two and you should get filled.

Suggested Position: September $30.00 CALL, current ask $3.10, estimated ask at entry $2.25 (I suggest entering this position with a limit order between the bid/ask spread. Try to enter at no more than 5 to 10 cents above the middle of the bid/ask spread)

Annotated Chart:

Entry on July xx
Earnings Date 8/4/10 (unconfirmed)
Average Daily Volume: 1.0 million
Listed on 7/22/10


PUT Play Updates

Costco Wholesale - COST - close 55.95 change +1.05 stop 57.25

Target(s): 55.40, 54.80, 54.30
Key Support/Resistance Areas: 56.80, 55.60, 54.25, 53.40, 51.50
Current Gain/Loss: -10.8%
Time Frame: 1 week
New Positions: No

Comments:
7/24: COST traded to $55.50 which triggered our entry for short positions. There is intraday resistance right at this level plus a downtrend line from 6/15 so this is a logical spot for COST to retrace some of the gains from the past two days. COST has now had two powerful rallies since 7/7 off of the $53.50 support level (i.e. double bottom). There is obviously a lot of support at this level and I just don't see it revisiting those lows for awhile. As such, we need to adjust so I suggest we stay nimble on this trade and begin looking for an exit. I have adjusted our targets above to use as a guide to tighten stops or simply take profits. I am looking for a small gain on this trade, nothing more. At a minimum COST should turn back to test its 20-day SMA near $55.40. Our next targets are $54.80 and $54.30. I expect the broader market to be weak early this week which should get COST moving towards these targets.

7/22: COST could not even get above yesterday's highs when the market was spring boarding higher. The stock is a relative underperformer and I like it short if we get filled at $55.50. If nothing else a quick turn around from this resistance area can turn into a quick profit. I've added $54.35 as an immediate target. If we get triggered and hit this target, options positions should easily gain 20% to 30%. If we get a meaningful pullback COST should be one of the first stocks to let go.

Current Position: September $55.00 PUTS, entry was at $1.48

Annotated Chart:

Entry on July 23,2010
Earnings 10/7/10 (unconfirmed)
Average Daily Volume: 3.76 million
Listed on July 20, 2010