Current Portfolio:


CALL Play Updates

Petroleo Brasileiro - PBR - close 36.71 change +0.12 stop 33.70

Target(s): 37.40, 38.65
Key Support/Resistance Areas: 39.00, 37.50, 36.60, 34.00
Current Gain/Loss: +16%
Time Frame: 1 to 2 weeks
New Positions: Yes

Comments:
10/5: PBR experienced a wave of selling early today but recovered nicely. The stock continues drifting higher and I am expecting first target to be reached, perhaps tomorrow or Thursday. I suggest taking profits or tightening stops to protect them at $37.40.

10/4: All things considered, PBR held up well today as the market sold off. The stock is hanging on to an intraday upward trend line that began last Monday, however, if a broader market correction gains momentum PBR will most likely head lower. I would view dips as buying opportunities. The comments below remain valid.

10/02: PBR is holding up relatively well. While everyone was impressed with the size of the company's recent secondary offering many analysts were worried it would depress the stock going forward. So far those worries seem to be unfounded. I agree with Scott that the broader market is overdue for a correction and PBR will likely trade lower if the market does pull back. More conservative traders may want to consider a tighter stop loss (maybe closer to $35.00). PBR looks poised to move higher but given my expectation for a market dip I would keep bullish positions very small. The Nov. $37 call closed with a bid at $1.37 on Friday.

Suggested Position: Long November $37.00 CALL, entry was at $1.25

Entry on September 25, 2010
Earnings 11/11/2010 (unconfirmed)
Average Daily Volume: 13 million
Listed on September 23, 2010


Visa, Inc. - V - close 74.99 change +1.75 stop 67.40

Target(s): 74.90, 76.90, 79.40
Key Support/Resistance Areas: 79.80, 77.50, 75.00, 70.50, 68.00
Time Frame: 3 to 5 weeks

Comments:
10/5: Nimble traders may want to consider entering long positions on a breakout over today's highs. I would prefer to enter long positions on a pullback to at least V's 100-day SMA (currently $73.04). Let's raise our trigger to enter long positions to $73.25 which will also fill today's gap higher.

10/4: V was taken out to the woodshed after FinReg and a Department of Justice anti-trust suit. The company, along with MasterCard, announced a non-monetary settlement has been made with the DOJ today which puts this issue behind them. There has been many analysts/brokerages defend the stock in recent weeks and I think V is on the verge of running higher into the company's earnings report on 10/27. Technically, the stock has made a higher high and closed above its 50-day and rising 20-day SMA. I would like to see V pullback a little more with the broader market and use $71.80 as our trigger to enter long positions. If triggered, our first two targets are estimated to produce +80% and +130% gains. This is a good addition to our model portfolio and will also provide more balance as we are currently firmly biased to the short side.

Suggested Position: Buy November $75.00 CALL, current ask $2.85, estimated ask at entry $1.90

Entry on October XX
Earnings 10/27/2010 (unconfirmed)
Average Daily Volume: 6.8 million
Listed on October 4, 2010


Volatility Index - VIX - close 21.76 change -1.77 stop 20.85 Target(s): 26.00, 27.25, 29.50
Key Support/Resistance Areas: 21.00, 24.00, 28.00, 30.00
Current Gain/Loss: -41%
Time Frame: 2 to 3 weeks
New positions: Yes

Comments:
10/5: A surprise shift in monetary policy suggesting significant quantitative easing by the Bank of Japan caused volatility to collapse today. This provides more liquidity in the market and traders are feeling more and more comfortable buying stocks. If there is follow through tomorrow there is a good chance we will be stopped out of the position.

10/4: We are long October $25.00 call options in VIX as of the open this morning. My primary targets are $26.00 and $27.25 (added today). The comments below remain valid.

10/2 I really like Scott's play on the VXX. The market is very overbought with the huge rally off its August lows. Now upward momentum has stalled and we're about to move into earnings season after a very weak third quarter. Volatility is almost guaranteed. I think options on the VIX might offer an even better trade than the VXX. I'm suggesting bullish positions now. We'll plan on taking profits at $26.00 and at $29.50. I do consider this somewhat aggressive so consider keeping your positions small. Traders will also want to keep in mind that VIX options don't expire on the same schedule as normal equity options but it shouldn't matter since our time frame is only two to three weeks.

Current Position: Long October $25.00 CALL, entry was at $1.80

Entry on October 4, 2010
Earnings N/A (unconfirmed)
Average Daily Volume: N/A
Listed on October 2, 2010


iPath S&P 500 VIX ST Futures - VXX - close 16.43 change -0.93 stop 16.23

Target(s): 17.55, 18.45, 19.25
Key Support/Resistance Areas: 17.50, 19.75, 20.60
Current Gain/Loss: -16%
Time Frame: 1 to 2 weeks
New positions: Yes

Comments:
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.

10/5: A surprise shift in monetary policy suggesting significant quantitative easing by the Bank of Japan caused volatility to collapse today. This provides more liquidity in the market and traders are feeling more and more comfortable buying stocks. If there is follow through tomorrow we will likely be stopped out of the position.

10/4: VXX is moving in our direction as the market sold off today. I suggest picking your exit and sticking with it. My primary targets are $18.45 and $19.25. If a market correction gains momentum VXX may surge higher than these targets, but tightening stops and protecting profits at these levels is suggested. Our comments below remain valid.

10/02: After September's huge gains in the stock market and a week of moving sideways, odds are pretty good the market will see a correction soon. That means the VXX has a lot of potential here. It is an aggressive trade but personally I would adjust the targets higher and plan to take profits near $18.75 and $19.90. FYI: The Nov. $18 call closed with a bid of $1.15.

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

Alliant Techsystems - ATK - close 74.45 change -2.26 stop 76.25

Target(s): 72.25, 71.25, 70.50
Key Support/Resistance Areas: 76.00, 74.00, 72.00, 71.25, 70.00
Current Gain/Loss: -17%
Time Frame: 1 to 2 weeks
New Positions: Yes, with tight stops

Comments:
10/5: ATK reversed yesterday's losses and then some as the stock surged +3.13%. Yesterday's gain is now a loss and readers should use caution.

10/4: ATK's slide continued today as the stock broke through its 20-day SMA. There is support near $71.00 so I have added $71.25 as a target. Protecting profits is key here as we already have a nice profit in the trade.

10/2: The rally in this defense stock just failed at significant resistance near $76.00 and its simple 200-dma. Combine that with an overbought market that has seen its upward momentum stall and it looks like a good spot to speculate on some puts. Now the intermediate trend for ATK is still higher so we're only looking for a correction toward support. I'm suggesting bearish positions now. More cautious traders may want to wait for a little confirmation of Friday's bearish reversal pattern before initiating positions. I am targeting the 50-dma (currently $70.31).

Current Position: Long November $70.00 PUT, entry was at $1.45

Entry on October 4, 2010
Earnings: 11/11/2010 (unconfirmed)
Average Daily Volume: 310,000
Listed on October 2, 2010


Carbo Ceramics - CRR - close 79.44 change +1.46 stop 80.25

Target(s): 75.75, 74.25, 72.25
Key Support/Resistance Areas: 84.00, 82.00, 80.00, 78.00, 76.00, 74.00
Current Gain/Loss: -24%
Time Frame: 1 to 2 weeks
New Positions: Yes, with tight stops

Comments:
10/5: CRR has resistance just overhead but if the broader market follows through higher in the coming days our stop will likely get hit. Readers should use caution.

10/4: CRR hit our trigger to buy puts at the open this morning. The stock is approaching support with an upward trend line and its 100-day SMA converging. As such, I want to add a target of $75.75. Taking profits or tightening stops to protect them is suggested at the first target.

10/02: Oil service stocks have been surging on the strength in crude oil (oil has been moving on weakness in the dollar). Shares of CRR appeared to breakout from a consolidation pattern on September 28th but the rally reversed. Now shares are testing short-term support at $78.00 and the bottom of its previous trading range. The current failure also looks like a bearish double top pattern.

Current Position: Long November $75.00 PUT, entry was at $3.10

Entry on October 4, 2010
Earnings: 10/28/2010 (unconfirmed)
Average Daily Volume: 226,000
Listed on October 2, 2010


SPDR DJIA ETF - DIA - close 109.40 change +1.83 stop 110.55

Target(s): 107.25, 106.55, 105.40
Key Support/Resistance Areas: 112.00, 110.00, 107.30, 106.40, 105.00
Current Gain/Loss: -16%

Time Frame: 1 to 3 weeks
New Positions: Yes, with tight stops

Comments:
10/5: DIA has resistance at $110.00. Our stop is $110.55. I still like the short set-up with a tight stop. However, the massive amount of quantitative easing being announced in recent weeks from various countries (US, China, UK, and now Japan to name a few) will/is providing liquidity to the market and investors are beginning to feel more comfortable buying equities. DIA will correct but I am concerned of another push higher first, perhaps up to its YTD highs. I suggest using caution and honoring stops if we are taken out.

10/4: DIA took out last weeks lows and looks like it is headed lower. My primary target is $105.40 but taking profits or tightening stops on any further weakness should also be considered. The 20-day SMA is just below which may provide a bounce.

10/02: Upward momentum in the market has clearly stalled. Stocks have been trading sideways for a week. Thursday's action looks like a bearish reversal but Friday did not confirm the signal. Instead Friday produced an inside day. While I remain bearish here more cautious traders may want to look for a move under Thursday's low (107.47) before initiating positions. Personally, I would target a correction toward $105.25 but keep an eye on the rising 50-dma, which could be support (currently $104.81). FYI: The November $105 put closed with a bid of $1.85.

Current Position: Long November $105.00 PUT, entry was at $1.75

Entry on September 30, 2010
Earnings: N/A (unconfirmed)
Average Daily Volume: 6.5 million
Listed on September 25, 2010


PNC Financial - PNC - close 53.48 change +1.38 stop 54.92 *NEW*

Target(s): 51.05, 49.50, 48.75
Key Support/Resistance Areas: 54.50, 53.50, 50.50, 49.50, 48.75, 47.00
Current Gain/Loss: -35%
Time Frame: 1 to 2 weeks
New Positions: Yes, with tight stops

Comments:
10/5: PNC has been consolidating below its 20-day SMA for the past 2 weeks but the stock closed above it today. There is resistance at current levels up to $54.00. I want to raise the stop to $54.92 to account for the declining 50-day SMA and a trend line. 10/4: PNC reversed off of its declining 20-day SMA today and looks to be headed lower if the broader market correction continues. The comments from the weekend remain valid.

10/02: Financial stocks have been a drag on the market of late and the path of least resistance seems to be down. Yet Friday's action in PNC was uncomfortably bullish. Shares posted a +1.79% gain and closed above the simple 10-dma. I'm not saying we should panic yet but the relative strength is a warning sign. Look for short-term overhead resistance near $54.00. I would prefer to see a failed rally under $54.00 or a new close under $51.50 before launching new positions.

Current Position: Long November $48.00 PUT, entry was at $1.26

Entry on September 30, 2010
Earnings: 10/20/2010 (unconfirmed)
Average Daily Volume: 5 million
Listed on September 29, 2010


CLOSED BEARISH PLAYS

Charles Schwab - SCHW - close 14.36 change +0.34 stop 14.42

Target(s): 13.45, 13.10, 12.85
Key Support/Resistance Areas: 14.10, 13.35, 13.05, 12.65
Final Gain/Loss: -60%
Time Frame: 1 to 3 weeks
New Positions: Closed

Comments:
10/5: SCHW hit our stop so we are flat the position for a loss. The closed above its 50-day SMA and printed a new high. The next resistance level is near $14.75.

10/4: We need SCHW to get below $13.80 to get things moving in our direction. This should happen if the broader market correction continues. Our stop is in place if SCHW breaks higher.

10/02: I am somewhat surprised by the strength in shares of SCHW the last few days. I use the term strength somewhat loosely but you can see a trend of higher lows. Thus far the stock has been unable to breakout past technical resistance at its 50-dma. The third quarter has seen terribly low trading volumes and investors have been pulling money out of stock funds for weeks. It should not be a good quarter for the likes of SCHW so odds favor this oversold bounce in the stock rolling over. Personally, I would consider giving SCHW a little bit more room and placing the stop loss above $14.50 (maybe $14.51 or $14.55). I would prefer to see a drop or a close under $13.80 before launching new positions.

Closed Position: Long November $13.00 PUT at $0.20, entry was at $0.50

Annotated Chart:

Entry on September 23, 2010
Earnings: 10/14/2010 (unconfirmed)
Average Daily Volume: 11 million
Listed on September 22, 2010