Editor's Note: Good Evening. The market followed through today from Monday's bearish engulfing candlestick and retreat from the 50% retracement level in the SPX. As a result we closed IGT and MHK for nice gains. We've closed 5 winning positions in just the last two days which has narrowed our model portfolio considerably. I'm not complaining as long as our targets are being hit and we are making money. Now we await our trigger on CSCO (long) and we opened SSD (short) this morning.

The SPX is now approaching its 20-day SMA (1,190) from below for the first time since it broke through on 6/11. And I believe this back test may produce a bounce in stocks. The big question now is how high will the bounce go if in fact we do get a bounce bounce? From a bullish perspective this would create a higher low on the daily chart so retesting the highs from Monday, which would also correspond with the 50-day SMA (currently at 1,135 and declining), is not out of the question. The bottom line is that price action will probably remain choppy in the coming days so I anticipate keeping the portfolio somewhat narrow until a direction is resolved. My macro view is more bearish than bullish but I have no problem initiating long positions on strong stocks in strong sectors if the conditions are favorable. If we do in fact get a bounce off of the 20-day SMA It will also give us the chance to initiate more short positions at better prices, and with tighter stops. Please email me with any questions.

Current Portfolio:

BULLISH Play Updates

Cisco Systems - CSCO - close 22.97 change -0.37 stop 22.20

Target(s): 23.65, 24.20
Key Support/Resistance Areas: 23.65, 22.55
Time Frame: 1 to 2 weeks

I anticipate getting filled on CSCO tomorrow at $22.85. This level is just above the recent closing lows and I think this is a good entry to play for a bounce. My comments from the play release remain mostly the same except that I have changed the suggested option position to August $22.00 CALLS. CSCO remains in the base it has built for the past 3 to 4 weeks and is trading in a $1 range (4.5%) between $22.55 and $23.55. $22.50 is key pivot level for the stock dating back to 2006. CSCO looks stable here with a lot of support and I suggest we take advantage of the reliable price pattern that is being built. I would like to use $22.85 as a trigger to enter long positions. If triggered readers should be able to purchase August $22.00 calls for about $1.67 (current ask is $1.74). If CSCO then proceeds to rally to the top of its base at $23.65 we should make about 55 cents on the position for a +35% gain. If CSCO breaks out it could rally to fill a gap which is up near our more aggressive 2nd target of $24.20 and below the stock's 200-day SMA. Another entry could be considered at $23.05. Our stop will be $22.20. NOTE: I view this trade as potentially being quick once it is opened.

Suggested Position: Long CSCO stock if it trades down near $22.85

Option Traders:
Suggested Position: Buy August $22.00 CALL, current ask $1.74, estimated ask at entry $1.67

Entry on June xx
Earnings Date 8/5/10 (unconfirmed)
Average Daily Volume: 69 million
Listed on 6/16/10

BEARISH Play Updates

Simpson Manufacturing Co - SSD - close 26.23 change -0.66 stop 28.82

Target(s): 25.75, 25.35, 24.25
Key Support/Resistance Areas: 28.70, 27.75, 26.90, 26.00, 25.30, 24.00
Current Gain/Loss: +2.71%
Time Frame: 1 to 2 weeks
New Positions: Yes, on bounces

Our SSD short positions was initiated at the open at $26.96. After a quick bounce the stock sold off the remainder the day. Our immediate targets are $25.75 and $25.35 and they could be hit relatively quick if there is any further weakness in the market. If these levels are hit I suggest being quick to take profits as I'm anticipating a bounce when the SPX hits its 20-day SMA which is not too far away from current levels. I'll leave my comments from the play release. SSD hit a key resistance area near $28.70 on 6/14 and has retreated ever since. The stock is barely hanging on to its 200-day SMA and I believe it is poised to retest its June lows and possibly its late February lows near $24.00. The stock remains below its 20-day SMA and if the market continues lower form here we should easily hit our targets. Our stop is $28.82 which is above the highs from 6/14. My only concern is a possible inverse head and shoulders pattern on the daily chart. But if there is a bounce I believe it will be short lived considering today's bearish price action.

Current Position: Short SSD stock at $26.96

Option Traders:
Suggested Position: Buy August $25.00 PUTS

Entry on June 22, 2010
Earnings 7/28/2010 (unconfirmed)
Average Daily Volume: 337,000
Listed on June 21, 2010


International Game Technology - IGT - close 17.68 change -0.43 stop 19.10 *NEW*

Target(s): 17.80, 17.30, 16.80
Key Support/Resistance Areas: 19.00, 18.75, 18.09, 17.60, 17.25, 16.60
Current Gain/Loss: +4.40%
Time Frame: 1 week
New Positions: Closed

IGT collapsed with the selling pressure today and hit our target of $17.80. Considering the sell-off in the markets since yesterday morning and that the SPX is approaching its 20-day SMA from above I think it is prudent to book this gain and not endure any bounces. We have made +4.4% while option traders have made +57% on the trade and I believe taking the gain is the right thing to do. There is also support in the $17.60 area and $17.25 area so readers who still have positions, and who can manage them intraday, I suggest tightening stops as these levels approach. And please protect the profits we have earned.

Current Position: Short IGT at $18.62

Option Traders: Buy July $19.00 PUTS

Annotated chart:

Entry on June 21, 2010
Earnings 7/22/2010 (unconfirmed)
Average Daily Volume: 4.8 million
Listed on June 19, 2010

Mohawk Industries - MHK - close 50.36 change -1.52 stop 56.15

Target(s): 52.05 (hit), 51.50 (hit), 50.40 (hit), 49.10
Key Support/Resistance Areas: 55.00, 52.00, 50.00
Current Gain/Loss: +5.49%
Time Frame: 1 to 2 weeks
New Positions: Closed

MHK gave us what we were looking for and filled the gap from 6/11 to 6/14. Our primary target of $50.40 was at the lower end of that gap and it was hit so we are flat for a +5.49% gain. This is also just above the 200-day SMA which is a logical place for the stock to bounce. For readers who may still have positions I urge you to protect profits. I do not see a lot of resistance in MHK until the $51.50 to $52.00 so please be careful of a reversal. The market is bound to bounce after the selling pressure over the past couple of days and you can always reload some of our recent winners to the short side if they move higher.

Closed Position: Short MHK stock at $53.33

Annotated chart:

Entry on June 17, 2010
Earnings 7/20/2010 (unconfirmed)
Average Daily Volume: 975,000
Listed on July 29, 2010