Editor's Note:

Good evening. Last week was extremely volatile which forced us to close most positions in our portfolio due to targets and stops being hit. The volatility is making things extremely difficult to manage and also making our time in the trades quicker than we anticipated. But the volatility also brings opportunity with it. We are biased more to the long side, at least early this week, as I am anticipating a relief rally in the markets. I am in the camp that we will be in a trading range for several weeks if not months and that we are currently in the bottom of that range. In the S&P 500 I think 1,050 to 1,115 or slightly higher is the shorter term range to focus on. Please feel free to email me with any questions.

Current Portfolio:

BULLISH Play Updates

EMC Corp. - EMC - close 17.96 change +0.28 stop 16.95

Target(s): 18.20, 20-day SMA, 18.70
Key Support Areas: 17.65, 17.55, 17.45, 17.10
Key Resistance Areas: 17.80, 18.00, 18.50, 18.85
Current Gain/Loss: +1.18%
Time Frame: 1 to 2 weeks
New Positions: Yes, on weakness with a tight stop

EMC gapped down with the rest of the market on Friday but immediately rebounded and closed near its highs of the day, +1.58% higher. The stock is now battling its long term pivot level dating back to June of 2007 at $18.00. EMC is finding support on a trend line that began with the 9/3/09 lows to 2/5/10 lows, and finally the flash crash lows on 5/6/10. But the stock still faces overhead congestion like many others. If EMC can get over $18.00 we should hit our first target at $18.20. Our more aggressive second target has been lowered to $18.70 which is just below the stock's 50-day and 20-day SMA's. I've also listed the 20-day SMA as a target and urge readers to exit positions or tighten stops if the stock trades anywhere near this level to protect capital and protect against a reversal. EMC could trade up to its 50-day SMA if the bounce in the overall market can continue this week. With the extreme up and down volatility and oversold conditions we could easily see a continued short covering rally creating a sharp move higher and if that happens we need to be taking profits.

Current Position: Long EMC Stock, entry at $17.75.

Annotated chart:

Entry on May 20, 2010
Earnings Date: More than 2 months (unconfirmed)
Average Daily Volume: 25 million
Listed on 5/19/10

Dr. Pepper Snapple Group - DPS - close 36.27 change -1.80 stop 32.49

Target(s): 36.80 (hit), 37.95
Key Support Areas: 35.75, 34.40, 32.70
Key Resistance Areas: 36.93, 37.45
Current Gain/Loss: +3.44%
Time Frame: 1 to 2 weeks
New Positions: Only on a pullback

Our patience paid off as DPS gapped lower at the open right at our trigger of $35.5. This is right where we wanted to enter near the 20/50-day SMA's. We are now long the stock. DPS immediately reversed and actually traded through our first target of $36.80. For readers who have positions I encourage you to use tight stops on this trade and be a seller into strength to protect against a reversal and to protect profits. The stock has good support with its 20-day and 50-day SMA's below. Our second and final target is $37.95. Our time frame is 1 to 2 weeks and our stop remains at $32.49. This is an overall relative strength play which should do well if the bounce on Friday continues in the overall market. But I still view this as an aggressive trade so please keep your position size small since the market has been so volatile.

Current Position: Long DPS stock at $35.50.

Annotated chart:

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

General Electric - GE - close 16.42 change +0.16 stop 15.94

Target(s): 17.00, 17.45, 18.25
Key Support Areas: 16.25, 16.00
Key Resistance Areas: 16.80, 17.20, 17.80, 18.00
Current Gain/Loss: -3.41%
Time Frame: Several weeks
New Positions: Yes, on weakness with a tight stop

GE gapped opened significantly lower on Friday and below our stop. When this happens I have a rule for exiting positions if the stock has an opening gap up or down through, or very close to stops. For long positions here is my rule of thumb: If a stock gaps down below the stop that has been established, wait for the first 15 minutes of trading before doing anything. Then place a new protective stop just under the low of that first 15 minutes of trading. Reverse the entire scenario for shorts. The reason I do this is because I want to measure the real strength or weakness in the stock. I don’t want a Good Til Cancelled (GTC) stop to be unnecessarily triggered at the open because often times stocks gap and reverse immediately, which keeps us in the position and looking for a better exit. In GE’s case this worked perfectly on Friday and kept us in the position. GE closed above its 200-day SMA but still looks vulnerable here. The stock is now going to have to battle the key pivot level of $17.00 dating back to September 2008. We're hanging on by a thread here and it is do or die time for GE and the market in general. I'm looking for the bounce off of Friday's lows to continue and I urge readers to be careful. I suggest selling into strength or tightening stops if GE gets up to the $17.00 level. This is our first target which is breakeven on the trade. Our nest target is $17.45 which is near highs from September 2009. We'll keep our stop at $15.94.

Current Position: Long GE Stock at $17.00.

Annotated chart:

Entry on May 19, 2010
Earnings Date More than 2 months (unconfirmed)
Average Daily Volume: 88 million
Listed on 5/18/10, 2010

BEARISH Play Updates