CALL Play Updates
Transocean Ltd - RIG - close 59.47 change -0.42 stop 53.40
Target(s): 62.95, 64.50, 66.50
Key Support/Resistance Areas: 55.50, 58.25, 63.90, 64.90
Current Gain/Loss: -35%
Time Frame: 2 to 4 weeks
New Positions: Yes
9/23: Still not much movement in RIG and it is still consolidating on lighter volume. The main reason this position is negative right now is due to a bad entry at the open last Monday when the stock gapped higher. Now we need a breakout which is going to be tough if the broader market continues lower, but so far RIG has held its own. If things pick back up I expect RIG to do well and I view pullbacks as possible buying opportunities.
9/22: Nothing has changed and volume continues to be light as RIG is consolidating. Today the stock printed a bottoming tail hammer but I am still concerned of a broader market pullback. My comments below remain the same.
9/21 RIG broke out to a new a high today but it was quickly sold into. I continue to like the volume patterns in this stock and today's volume on the pullback was on the one of the lightest days since RIG broke higher on 9/10. However, it appears the broader may get a pullback here so we may need to exhibit some patience. New positions can be considered at current levels or on a pullback to $58.35 where there is solid support.
Current Position: Long November $65.00 CALL, entry was at $2.25
Entry on September 13, 2010
Earnings 11/3/10 (unconfirmed)
Average Daily Volume: 8 million
Listed on September 11, 2010
iPath S&P 500 VIX ST Futures - VXX - close 17.62 change +0.56 stop
Target(s): 18.45, 19.25, 20.40
Key Support/Resistance Areas: 17.50, 19.75, 20.60
Current Gain/Loss: +24%
Time Frame: 1 to 2 weeks
New positions: Yes, preferably on pullbacks
NOTE: I view this as an aggressive trade so small position size is recommended. Long VXX is a bearish play on equities, however, it is listed as long play because we are long the underlying instrument.
9/23: VXX is in an uptrend on its intraday charts and I'm expecting more to come. Readers may want to consider $18.10 as a possible exit target which could come as quick as tomorrow. This price should give you another +20% to our current gain of +24%. My primary targets are $18.45 (a gap fill) and $19.25 which I think we will see in the coming days. If the market sells off hard our final target of $20.40 could get hit fast. I'm sticking with no stop for now.
9/22: We are long VXX at the open today. I am looking for a spike higher in the coming days which means we need to experience some broader market weakness. My comments from the play release are below.
9/21: The market remains overbought and is need of a healthy pullback to regain its energy. Traders are getting complacent as evidenced by VXX printing new 52-week lows multiple times in the past week. I suggest we play for a spike in volatility in the coming days and initiate long positions in VXX at current levels. Our first two targets are +10% and +14% higher from current levels which could happen in a matter of a day or two correction if it is strong enough. If reached, these targets should produce approximately +60% to +80% gains on options positions. I am releasing this play without an initial stop, but will implement one in the next day or two.
Current Position: Long November $18.00 CALL, entry was at $1.25
Entry on September 22, 2010
Earnings N/A (unconfirmed)
Average Daily Volume: 21 million
Listed on September 21, 2010
PUT Play Updates
Archer Daniels Midland - ADM - close 33.01 change -0.38 stop 33.76
Target(s): 32.20, 31.25, 30.85
Key Support/Resistance Areas: 33.50, 31.00, 29.80
Current Gain/Loss: -30%
Time Frame: 1 to 2 weeks
New Positions: Yes
9/23: We got a little reprieve in ADM today as the stock lost -1.14%. We need the stock to break below today's low to get things moving in our direction, which will also break an intraday trend line. I suggest readers remain cautious on the position and my comments from below remain valid.
9/22: My thesis (fundamentally & technically) for entering this position is on the verge of failing and we could get stopped out tomorrow if the strength continues. I've changed the immediate target to $32.20 which is just above the 20-day SMA. $31.25 is still in the cards but ADM needs to turn lower now. The broader market strength or weakness will likely determine our fate. I suggest getting out of the way and taking the loss if our stop is hit.
9/18: Cautious comments from analysts about rising agricultural commodity prices is likely to affect ADM's business. The stock is overbought and is due for correction after an incredible run higher off of the July lows. ADM has also formed a bearish dark cloud cover technical pattern that suggests the decline is imminent. I suggest we open positions at current levels and play for a $1 to $2 move lower. The primary targets are $31.25 and $30.85 and if reached they should produce a +40% to +60% winner. Our stop is above the 52-week high set on Friday.
Current Position: Long October $32.00 PUT, entry was at $0.82
Entry on September 20, 2010
Earnings: 11/2/2010 (unconfirmed)
Average Daily Volume: 6 million
Listed on September 18, 2010
SPDR S&P 500 ETF - SPY - close 112.49 change -0.92 stop 114.10 *NEW*
Target(s): 112.10, 111.50, 110.75
Key Support/Resistance Areas: 115.00, 113.00, 110.60, 50-day, 20-day
Current Gain/Loss: -20%
Time Frame: 1 week
New Positions: Yes, if playing for a quick pullback
9/23: On Tuesday SPY printed a red candle high which has been confirmed with a red candle yesterday and another new low today. This is a fairly strong reversal pattern that doesn't happen often. It has happened 4 or 5 times over the past year and the smallest drop in the S&P was about -40 points from the red candle high closing price, with the largest being -170 points, i.e. the flash crash. A -40 point drop from Tuesday's close puts the S&P 500 at 1,100 which is near our final target of $110.75 (raised 10 cents to account for the rising 20-day SMA). As such, I'm looking for more downside but it could come fast. The 1,100 level has support which is logical spot for the dip to be bought so be prepared to either take profits or tighten stops to protect them as targets approach. We are nearing breakeven on the trade and our first target was almost hit today. My best guess is SPY will bounce after reaching this target tomorrow because it is near the 200-day SMA and a prior resistance level. But the bounce should be short lived and I'm looking for SPY to eventually trade down toward our final target. In case this analysis is wrong, let's move the stop down to $114.10.
9/21 & 9/22: The bulls have made an impressive run but it appears they are getting exhausted. If the selling starts, which will most likely come fast, I think traders will run for the exits to lock in profits. This is when we want to exit this position or tighten stops to protect capital. I tweaked the middle target above due to a calculation error.
9/20: My comments from below have not changed. SPY broke out today but I do believe it will get sold into which sets things up for a much need healthy pullback in the broader market. I suggest using this pullback as an opportunity to close positions or tighten stops, even if we have to take a loss. I've adjusted our targets. The first target is just above the 200-day SMA while the final target is a gap fill which is just above the rising 20 and 50-day SMA's.
Current Position: Long October $109.00 PUT, entry was at $1.56
Entry on September 14, 2010
Earnings: N/A (unconfirmed)
Average Daily Volume: 198 million
Listed on September 13, 2010
Charles Schwab - SCHW - close 13.47 change -0.16 stop 14.42
Target(s): 13.10, 12.85, 12.55
Key Support/Resistance Areas: 14.10, 13.35, 13.05, 12.65
Current Gain: +0.00%
Time Frame: 1 to 3 weeks
New Positions: Yes
9/23: The gap down this morning triggered our entry into SCWH at 50 cents instead of 45 cents. In hindsight, my instructions should have been enter at 45 cents. Nonetheless, SCHW looks vulnerable but we have to get below $13.36 before the stock will head towards its lows. My comments from below remain vailid.
9/22: We are going with a cheapie in the financial services sector tonight, which looks terrible across all industries, from banks, to lenders, to broker dealers. A study released today said that the 85% of Americans do not trust the financial markets and have therefore reconsidered their investment activities. Retail trading volumes are way down which will hurt firms like Chuck (SCHW). Technically, the stock has run right up into prior support (now resistance) from July and has turned lower. The stock has also been making lower highs and lower lows and I see no reason for this pattern to stop if the broader market cooperates. It would be nice to see some retracement of today's losses but a breakdown is also a good set-up. I suggest readers initiate short positions with one of two triggers. If SCHW trades up to $13.70 or down to $13.55. If triggered at $13.70 we are playing for an 85 cent pullback which is our 2nd target and a gap fill. If this target is reached the estimated gain on the position is +60%. If we are wrong we won't get hurt too bad as the option is cheap.
NOTE: November strikes were just recently released in SCHW so the open interest not as great as other months. The spreads are reasonable and I am not worried about liquidity as trading will begin to pick up.
Current Position: Long November $13.00 PUT, entry was at $0.50
Entry on September 23, 2010
Earnings: 10/14/2010 (unconfirmed)
Average Daily Volume: 11 million
Listed on September 22, 2010
CLOSED BULLISH PLAYS
Stillwater Mining - SWC - close 16.10 change -0.11 stop 15.77 *NEW*
Target(s): 15.45 (hit), 15.90 (hit), 16.30, 16.60
Key Support/Resistance Areas: 14.40 to 14.70, 15.00
Final Gain/Loss: +20.8%
Time Frame: 1 to 3 weeks
New Positions: Closed
9/23: Ugh! SWC hit our stop in early trading like the market makers knew it was there. In hindsight it was probably a little too tight. The stock then proceeded to rip higher up to our next target where we would have gained another +20% on the position. Nonetheless, a win is a win and we are flat the position for +20% gain. This is a volatile little sucker so if you still have positions pick your exit and protect profits. Time decay is going to start to kick in here so don't get stuck holding the position.
9/22: Material stocks like SWC are benefiting from the money printing promises of the Fed. SWC surged +5.6% today and closed on its high. I am looking to take profits on this trade. If SWC gets a pullback tomorrow intraday support begins at $16.00 down to $15.90. Let's raise the stop to $15.77 and I suggest we take profits at the close tomorrow if our remaining targets of $16.30 and $16.60 (lowered) are not reached tomorrow. $16.60 will fill a gap from 5/13. Traders may want to consider a 15 or 20 cent trailing stop to see how much more we can get out of the trade.
9/21: SWC sold off hard this morning and had a nice recovery this afternoon. I suggest readers use caution and consider exiting positions, especially on strength. All of the above targets remain valid. My comments from below remain the same.
Closed Position: Long October $15.00 CALL at $1.45, entry was at $1.20
Entry on September 3, 2010
Earnings 11/4/2010 (unconfirmed)
Average Daily Volume: 1.62 million
Listed on September 2, 2010