Editor's Note:

Good evening. Our long positions struggled today but our key support levels have held, for now. Last night I suggested readers consider closing short positions on weakness today. If you did you should have booked very nice gains. I am still urging readers to be careful with short positions down at these market levels as I believe we have seen the bottom in the market for at least a few days, if not weeks. I suppose there could be a push down to the 1,085 to 1,090 area in the S&P 500 but I'm not counting on it. This is just my opinion so take it for what its worth.

We have kept a good balance in the portfolio due to the recent volatility and we have booked nice gains on our short positions, sometimes at the expense of our long positions. But this is what hedging is all about which makes it paramount to take profits when the opportunity presents itself. We are now more biased to the long side and positioned for a relief rally. There will be a time in the near future when we need to get more biased on the short side but I think that could be a couple of weeks away. The S&P 500 range I am focused on now is 1,100 to the 1,155 area. However, I maintain my believe there is much more downside risk than upside opportunity so staying nimble is a must. Please feel free to email me with any questions.

Current Portfolio:

BULLISH Play Updates

AMR Corp. - AMR - close 7.01 change -0.08 stop 6.60

Target(s): 7.95, 8.25, 8.65
Key Support Areas: 7.00, 6.85, 6.75
Key Resistance Areas: 7.64, 8.00, 8.30, 8.70
Current Gain/Loss: -2.91%
Time Frame: Several weeks
New Positions: Yes

AMR gave us scare this morning as the stock sold off hard in the morning, but buyers stepped in and the stock essentially closed where it opened. The result is long bottom tail on the candlestick that I expect to follow through to the upside. AMR also closed above our key support level at $7.00 which is a good sign. I am expecting an overall bounce in the market and in AMR, but our hurdle will be to get over the 20-day SMA at $7.27. If the stock can close above this level we'll be on our way to booking a nice profit..

Current Position: Long AMR stock at $7.22

Entry on May 18, 2010
Earnings Date More than 2 months (unconfirmed)
Average Daily Volume: 19 million
Listed on 5/15/10, 2010

Broadridge Financial Solutions - BR - close 20.72 change -0.34 stop 20.36

Target(s): 21.95, 22.40, 22.75
Key Support Areas: 20.50
Key Resistance Areas: 21.00, 22.00, 22.45, 23.00
Current Gain/Loss: -2.49%
Time Frame: Several weeks
New Positions: Yes

BR found support at our key level listed above of $20.50 today and bounced nicely. The stock has been pummeled lately, albeit unfairly in my opinion, and can't seem to get out of its own way. My line in the sand (stop) is $20.36 which the stock has so far stayed above. My thesis for initiating BR was all of the horizontal support areas and trend lines underneath, along with a bounce in the overall market. So if the market can bounce from here I anticipate BR to bounce. The stock also has good fundamentals with low 13 PE and a business model that could thrive as financial reform takes place. They provide record keeping and technology services to banks, broker dealers and mutual funds, etc. If my thesis does not work we'll honor our stop and step aside.

Current Position: Long BR Stock at $21.25.

Entry on May xx
Earnings Date More than 2 months (unconfirmed)
Average Daily Volume: 1.2 million
Listed on 5/15/10, 2010

Dr. Pepper Snapple Group - DPS - close 38.07 change -0.05 stop 32.49

Target(s): 36.80, 38.80
Key Support Areas: 35.75, 34.75, 32.70
Key Resistance Areas: 36.80, 37.45
Current Gain/Loss: N/A
Time Frame: Several weeks
New Positions: Waiting for trigger

It appears there are simply no sellers in DPS so we will most likely drop the play in the coming days unless sellers show up and DPS trades down to the $35.50 area which is just above the 20-day and 50-day SMA's. I'll leave my comments from last night as they have not changed. DPS may have formed a double top and if it follows through to the downside we may still get triggered. From a contrarian point of view the double top could even be a good short trade but you must be quick for it to work. I won't step in front if it but would welcome a long position if DPS pulls back to its 20/50-day SMA, which it has to at some point. For this reason I would like to leave this position open for a few more days to see if any selling kicks in. So we will wait patiently for the pullback to our trigger near $35.50. If there is significant weakness in the market DPS should make it down here and I want to be ready to take advantage of it. If triggered our stop is $32.49. Please keep your position size small since the market has been so volatile.

Suggested Position: Long DPS stock if it trades near $35.50

Entry on: May xx
Earnings Date: More than 2 months (unconfirmed)
Average Daily Volume: 1.9 million
Listed on: May 8, 2010

Quicksilver Resources, Inc. - KWK - close 12.22 change -0.25 stop 11.75

Target(s): 13.30, 14.25
Key Support Areas: 12.00, 12.35, 12.00
Key Resistance Areas: 13.30, 14.00
Current Gain/Loss: -3.78%
Time Frame: Several weeks
New Positions: Yes

Natural Gas took a hit today which affected many stocks in the space, including KWK. But KWK may have formed a double bottom with the today's low and the May 5 and 6 lows. When the stock traded down there buyers stepped in and KWK re-took its upward trend line on the intraday hourly charts. KWK also remains in the bottom end of the sideways channel that has been intact for 9 months. The stock has very strong support at $12.00 which was a prior resistance level dating back to October 2008. This is where we want to be on a long position in an oversold market. If the markets bounce from here KWK should do well. I am going to list a new lower first target at $13.30. If KWK makes it to this level the position will have earned about +5% and I would encourage readers to take some profits off of the table. This level is just below a prior support which may cause some resistance for the stock.

Current Position: Long KWK Stock at $12.70.

Entry on May 17, 2010
Earnings Date More than 2 months (unconfirmed)
Average Daily Volume: 3.0 million
Listed on 5/15/10, 2010

BEARISH Play Updates

Baidu, Inc. ADR - BIDU - close 70.13 change -1.44 stop 72.75 *NEW*

Target(s): 71.50 (hit), 69.10, 65.10
Key Support Areas: 68.50, 65.00
Key Resistance Areas: 75.64, 78.50, 82.25
Current Gain/Loss: +5.55%
Time Frame: Several Weeks
New Positions: No

BIDU hit our first target of $71.50 yesterday and today the stock traded down to a few cents below our key support area of $68.50 listed above before immediately reversing. BIDU still closed -2% on the day. I mentioned yesterday that traders may want to exit positions at current levels or on any further weakness to protect profits. If you took that suggestion and exited the position before noon today you have a very nice gain in the +7% to 8% range. At current levels we still have a nice +5.55% gain in the position and I urge readers to be careful of a reversal here and to protect profits. I'm listing a new target of $69.10 that I think is a great place to exit positions. BIDU looks vulnerable from here but if there is a bounce in the overall market we will endure pain before it heads back down. Ultimately I think BIDU easily trades to $65.10 but that may not happen within days or even weeks and we do not want to sit through a bounce. We need to take profits when the ducks are quacking and the stock is weak, and not wait through a hard reversal. If the market is moving higher tomorrow morning and showing relative strength compared to the last few days I would suggest exiting this position and booking a nice gain. I'm placing a tight stop at $72.75 to protect profits here. This stock can be volatile and is prone to gaps so please be smart when considering position size.

Current Position: Short BIDU stock at $74.25.

Option Traders:
Suggested Position: Buy JUNE $73.00 PUT

Entry on May 14, 2010
Earnings July 15, 2010 (unconfirmed)
Average Daily Volume: 68 million
Listed on May 13, 2010

Leggett & Platt, Inc. - LEG - close 23.60 change -0.23 stop 24.25 *NEW*

Target(s): 23.35, 23.00, 22.25
Key Support Areas: 23.75, 23.42, 23.00
Key Resistance Areas: 24.75, 25.15
Current Gain/Loss: +1.99%
Time Frame: Several Weeks
New Positions: No

LEG closed below its 20-day SMA for the 2nd consecutive day, which is the first time since January. The stock traded down to within 15 cents of our $23 target before reversing and closing at $23.60. I am concerned of a reversal here in LEG and the overall market in general so I urge readers to protect their profits and consider exiting LEG tomorrow. I am going to tighten our stop to $24.25 and move our target up to $23.35. If the market rebounds tomorrow LEG could get some bids. Our position is up +2% right now but to reach lower targets we are probably going to have to live through a bounce which I suggest avoiding. LEG is still below its downward trend line which started on April 30. If the overall market remains weak LEG will probably trade down to its 50-day SMA at $22.66 but I anticipate a bounce which is why I want to book profits. I suggest taking profits here and not holding through any bounce.

Current Position: Short LEG stock at $24.00

Option Traders:
Suggested Position: Buy JUNE $25.00 PUT

Entry on May 17, 2010
Earnings More than 2 months (unconfirmed)
Average Daily Volume: 2 million
Listed on May 15, 2010