BULLISH Play Updates
Emulex Corp - ELX - close 9.52 change -0.18 stop 9.15 *NEW*
Target(s): 9.59(hit), 9.89 (hit), 10.04
Key Support/Resistance Areas: 11.40, 11.00, 10.50, 10.10, 9.70, 9.25
Final Gain/Loss: -2.36%
Time Frame: 1 to 2 weeks
New Positions: Closed
7/21: ELX gapped higher and hit our second target of $9.89 was hit. This proved to be a formidable resistance point as indicated in the 7/20 updates below. The stock sold off immediately, then found support near $9.65 and bounced over 1% higher towards the $9.75 level twice which provided more selling opportunities. I'm going to stick with the set-up here with the above targets still being valid areas to consider tightening stops or exiting positions. I am going to loosen the stop just a bit to $9.15 which is just below the upward trend line on the daily chart.
7/20: ELX benefited from the reversal in the market today and the stock looks poised to make a trip up to our more aggressive targets and possibly its 50-day SMA which is near our final target of $10.25 (lowered 4 cents). ELX reversed immediately from its lows and blew through our conservative target. There was no real pullback to hit a stop so we remain in the position. ELX closed right on a downtrend line from last Thursday so there could be a little pullback in the morning. If the market can follow through with today's gains ELX should do fine. The above targets are areas where ELX may find some resistance. Readers should consider tightening stops to see how much we can get out of the position.
Current Position: Long ELX stock, entry was at $9.75
Options Traders: October $10.00 CALLS
Entry on July 15, 2010
Earnings Date 8/5/10 (unconfirmed)
Average Daily Volume: 1.76 million
Listed on 7/14/10
BEARISH Play Updates
Costco Wholesale - COST - close 53.61 change -1.48 stop 57.25
Target(s): 53.80, 53.00, 52.25
Key Support/Resistance Areas: 56.80, 55.60, 54.25, 53.40, 51.50
Time Frame: 1 week
7/21: COST tanked -2.69% today has already hit our first target. It's probably wishful thinking that the stock will rally up to our target of $55.80, but if we are patient we might get one of those rally days so I suggest we see how the rest of the week plays out. I will lower the trigger to $55.50 which is near the 20-day SMA and $55.60 resistance area which is where I expect COST to hit a brick wall.
7/20: COST has broken through key support/resistance areas at $56.80 and $55.60 and is below all of its major moving averages which are declining. The stock is rallying to test these areas from below and I suggest readers using a trigger of $55.80 to enter short positions on any further strength COST exhibits in the coming days. This area is near the most recent downtrend line. We'll use a tight stop at $57.25 which is just above the 50-day and 20-day SMA's, the recent downtrend line, and the congestion area overhead. COST has a large gap to be filled down near the $52 level which is near our most aggressive target and could happen if weakness reappears in the broader market. NOTE: September options were just recently released so the open interest is less than other months.
Suggested Position: Short COST stock at $55.30
Options Traders: September $55.00 PUTS, current ask $2.66, estimated ask at entry $1.45
Entry on July xx
Earnings 10/7/10 (unconfirmed)
Average Daily Volume: 3.76 million
Listed on July 20, 2010
PowerShares QQQQ Trust - QQQQ - close 44.64 change -0.62 stop 45.10 *NEW*
Target(s): $45.05 (hit), 44.60 (hit), 44.40 (hit 7/17, 7/20), 44.15, 43.90
Key Support/Resistance Areas: 46.77, 45.25, 44.46, 43.50, 42.50, 41.00
Current gain/loss: -0.77%
Time Frame: 1 week
New Positions: Yes, but expect a quick exit
7/21: QQQQ gapped higher and essentially sold off the remainder of the day. The stock hit our first target of $45.05 and drifted higher to the $45.40 area which is where the real selling began. For intraday traders I've provided an intraday chart to illustrate where protective stops could have been placed to protect against a reversal and to get the most of the price action that was happening (see red lines on the chart). The initial stop could have been placed near the $45.50 level which was above the initial swing high (see small oval). QQQQ then proceeded to sell off hard hitting our targets of $44.85 and then finally $44.60 at the end of the day. Once these targets were hit the stops could have been moved down to the $45.10 area which was above prior intraday support areas of the past few days (which should now act as resistance). This is the ideal way to deal with the current volatility upon us. So now we are ready to lower the stop to $45.10 going into tomorrow. $44.10 is still a valid target just above the 20-day SMA that has been previously hit. This is the area where I suggest tightening stops to see if we can get even more out of the position. If things continue to the downside the immediate next targets are $44.15 and $43.90 with the most aggressive target at $43.40. I know managing a trade like this is difficult for traders who do not trade intraday. A possible solution would be to initiate a trailing stop which will protect you from a hard reversal back to the upside. In this case the trailing stop would be about 45 cents. My goal is to exit this positions this week.
7/20: QQQQ gapped lower and traded to within 11 cents of our $43.75 target. The market looked ugly and after an early bounce and the Q's even retreated to retest its lows. For intraday traders a stop should have place above the first 30 minute high of $44.12 which would have protected small profits in this position. After this level was broken the Q's proceeded to bounce and never looked back, surging +3% from its lows. Will there be follow though? It appears there will be some with AAPL's earnings report which is boosting the NASDAQ 100 futures +0.50% in the aftermarket. This equates to about 23 cents in QQQQ which is below our stop and last week's highs. It is amazing how things changed on a whim this morning which we have seen a lot of lately, and it has helped and hurt our positions. This time it is painful but we have a plan and we need to stay nimble to find a proper exit. So I have listed additional immediate targets above which are intraday support/resistance areas. QQQQ should retrace some of these gains and these are areas where the ETF may find support. They are good areas to tighten stops or exit positions. It wouldn't surprise me to see QQQQ retrace a good portion today's gains and retest its declining 20-day SMA (currently $44.51 and declining). The Q's are also below two downtrend lines and its 200-day and 50-day SMA's. It will be interesting to see how it plays out.
Current Position: Short QQQQ stock, entry was at $44.30
Options Traders: August $45.00 PUTS
Entry on July 8, 2010
Earnings N/A (unconfirmed)
Average Daily Volume: 100 million
Listed on July 7, 2010