Editor's Note:

Good evening traders. The day ended up with a fierce rally into the close in anticipation of Goldman Sachs earnings tomorrow morning. The earnings report will give GS the chance to publicly speak and defend itself against the SEC allegations. Most analysts expect a very strong earnings report which may spark a rally, but one that I think will be sold into. It feels like the market is going to consolidate here as traders digest earnings. And the longer it sits here without making new highs the chances increase for a sell-off. We got defensive on our positions over the weekend and we our well positioned for a sell-off should it occur. I suggest being nimble with position management as the market is being driven by news which can create whipsaws in both directions.

Current Portfolio:

BULLISH Play Updates

Medicis Pharmaceutical Corp. – MRX – close: $25.12 change -0.15 stop: $23.95 *NEW*

MRX looked weak this morning but buyers stepped in at $24.40 and the stock rallied + $0.72 from there. The stock is still above its 50-day and 100-day SMA's, however, it also dipped below support at $24.75 and its upward trend line before taking them back. This may just be a head fake but we'll have to see how things play out in the coming days. Our stop remains at $23.95, which is below the 50-day SMA. Our first target is $26.50 and our second target is $27.75, which is just below its 52-week high. Readers who do not have positions can consider entering at current levels. Our time frame is a couple of weeks.

Current Position: MRX stock @ $25.00

Entry on April 14 at $25.00
Earnings Date 5/06/2010 (unconfirmed)
Average Daily Volume: 1.0 million
Listed on April 13th, 2010

Patterson Companies - PDCO - close: 31.80 change: -0.22 stop: 30.49

PDCO consolidated today closing down -0.69%. My comments are basically the same as Saturday's updates. I am still suggesting readers be defensive. It appears PDCO wants to test its highs from 2008 (see the weekly chart below), however, if the market corrects PDCO may not be able to get the legs to follow through. The stock is also forming a bearish wedge pattern and if it breaks too far below $31.00 I don't want to be involved. Therefore, we raised our stop to $30.49 and lowered our target to $33.25 on Saturday. Conservative traders should consider taking profits or tightening stops on any strength in the stock. Our time frame is a couple of weeks.

Current Position: PDCO stock at $31.50

Annotated chart:

Entry on April 14th at $31.50
Earnings Date 05/17/10 (unconfirmed)
Average Daily Volume: 975 thousand
Listed on April 6th, 2010

Powershares UltraShort Real Estate - SRS - close: 28.97 change: -0.26 stop: 27.60

After peeking below its 20-day SMA, SRS rallied back to close above it for the second consecutive day. Although SRS gave back some of our gains from last week closing down -0.92%. There is a congestion zone right at $30.00 which is where SRS started to sell-off today. This creates an inflection point and I would like to move down our 2nd target to $29.64 which is just below today's highs. Our 1st target was hit on Friday. A more aggressive 3rd target is $32.90. If SRS trades to our new 2nd target of $29.64 I suggest selling half of your position and move up stops on the remainder. A logical new stop could be placed at $28.25. But until that happens our stop remains at $27.60, which will ensure a +5% gain if SRS reverses from here. Conservative traders should consider exiting positions now to lock in gains.

I want to remind readers that I consider this is a very aggressive play so please use smaller position size to limit risk. *NOTE: Although this is listed as a long position in our portfolio, this is a bearish position on real estate stocks.*

Current Position: Long SRS @ $26.25

Entry on April 14th, 2010
Earnings Date Not Applicable
Average Daily Volume: 11.0 million
Listed on April 8, 2010

BEARISH Play Updates

Powershares QQQQ Trust - QQQQ - close: 49.50 change: -0.03 stop: 50.95

QQQQ was very weak this morning, trading down -1.27%, but rallied back in the afternoon with the broad market to close just about flat. This created a bottom tail candlestick on its daily chart, but QQQQ made new lows so I still like the set-up. In addition, QQQQ has not touched its 20-day SMA (currently at $48.72) since February and it is overdue for a meaningful pullback. Earnings could keep the markets buoyant this week but I feel at some point traders will be looking to take profits. Our target remains $47.00 which is just above the lows from March 15. Our stop is $50.95.

Current Position: Short QQQQ at $49.05

Option Traders:
Suggested Position: Buy PUT May $49.00, Ask at entry, $1.00

Entry on April 12th, 2010
Earnings Date Not Applicable
Average Daily Volume: 49.4 million
Listed on April 10, 2010


AU Optronics - AUO - close: 11.08 change: -0.14 stop: 11.04

AUO traded down to our stop this morning and we are flat on the position. The stock looks weak and is now below its 20-day, 50-day and 100-day SMA's. The stock has been in a recent downtrend and with the overall market under pressure it is time to exit. We are taking a -6.30% loss on the trade. If readers still have positions I would either place a stop below today's low at $10.95 or below the 200-day SMA, which is currently at $10.77. Note: We have considered this an aggressive trade and recommended small position size to limit risk.

Closed Position: AUO stock @ 11.04, entry was at 11.77

Annotated chart:

Entry on April 05 at $11.77
Earnings Date 04/22/10 (unconfirmed)
Average Daily Volume: 2.5 million
Listed on April 3rd, 2010