The bulls are firmly in control of this market but it can not stay overbought forever. I am recommending to readers in most of our play updates to consider selling into any strength this week to ensure we lock in profits.
CALL Play Updates
F5 Networks - FFIV - close: 64.76 change: +0.84 stop: 61.40
FFIV has had a remarkable run since it lows in March 2009 and February 2010. The stock has run up +251% since March 2009 and +37.50% in the last two months. The stock broke out to an all-time high last October and has never looked back. Most recently the stock has been consolidating in the $62.00 to $65.00 level for about a month. There is no question the stock is bullish as evidenced by the bottoming tail candlestick on Thursday which had follow through on Friday. If the stock can break-out above $65.75 with conviction it has a good chance of hitting our target of $69.75. Our current call position is doing well and we have made almost a 5% profit at current levels, however, I want to be cautious about a broader market sell-off which would probably take FFIV with it. I also looked at the open interest in April FFIV options to get a sense what the stock may do next week. It appears to me that FFIV could get pinned at the &65 level due to the amount open interest in puts at or below $65 and the amount of calls at or above $65. If the stock gets stuck at this level we will experience a week's worth of time decay. I am recommending readers sell positions into any strength next week (or at least move up stops) to protect profits. We will keep our stop at $61.40 for now. I am not suggesting any new positions at this time. I want to remind readers again that this is an aggressive, higher-risk trade and we want to keep our position size small.
Current Position: CALL MAY $65.00 (FFIV 10E65.00) @ $3.00
Entry on April 6th at $ 65.26
Earnings Date 04/21/10
Average Daily Volume = 1.0 million
Listed on April 5th, 2010
Coca-Cola - KO - close: 54.59 change: +0.83 stop: 52.95
Last week we were looking for a bounce in KO off of its 200-day SMA. This happened on Thursday and the stock followed through very nicely on Friday closing up +1.54%. KO also appears to be forming a higher low on the daily chart. Another positive sign for KO is that it closed above its 20-day and 50-day SMA's. KO is entering a congestion/resistance area just overhead at the $55 to $56 level. KO still looks a little oversold and if it can break through this level the stock should see $57.00. We've lost about $0.60 of the $1.62 call we purchased. I am suggesting readers consider selling into any strength KO exhibits to limit any losses in the position. We still have plenty of time with our May options but KO is a slow mover and I don't want to get stuck in a losing position. KO tends to be a defensive play so it could rally if the overall market is weak. I am moving our target to exit the position from $59.00 to $57.00 but will consider closing position prior to this level if KO starts to struggle.
Current Position: CALL May $55.00 (KO 10E55.00) at $1.62
Entry on March 24th at $ 55.22
Earnings Date 04/21/10
Average Daily Volume = 14.6 million
Listed on March 23rd, 2010
L-3 Communications - LLL - close: 93.91 change: +1.39 stop: 88.90
Our comments on LLL remain the same. We initially viewed this trade as a highly speculative trade and our $0.30 options are now only worth $0.05. I don't think it is worth exiting the options for a nickel so we will hold onto them to see if LLL can muster a rally into next week's expiration. At this point we will probably need some sort of a catalyst or news event on LLL to make any money. Otherwise the $0.30 call options will expire worthless. I am not suggesting any new positions in LLL at this time.
We chose the out of the money $100 calls to keep our capital investment very small and our position size limited.
Current Position: CALL APRIL 100.00 (LLL 10D100.00) @ $0.30
Entry on March 18th at $ 93.88
Earnings Date 04/22/10
Average Daily Volume = 908 thousand
Listed on March 17th, 2010
Occidental Petrol. - OXY - close: 86.58 change: +0.28 stop: 83.45
Buyers stepped in again on Friday and bought OXY on weakness. OXY has strong support in the $84.50 to $85.00 level and are I am expecting this support to hold if there is any weakness in OXY this week. OXY appears poised to rally from here to new 52-week highs. But we will need crude oil and overall market strength to be in our favor. Our calls in OXY have gained about $0.55 and we are up +16%. Conservative readers should consider selling their positions, or at least moving stops up, on any strength in OXY, especially if it reaches its high from last week which was $88.80. I am going to move our first target down $1.00 to $88.75 which is just below last weeks highs. I am looking for OXY to rally to this level in the next week and if it does it will ensure a nice profit on our position. We'll use a longer-term target at $94.00 but this could take several weeks to achieve.
Current Position: BUY CALL MAY $85.00 (OXY 10E85.00) at $3.25
Annotated Weekly Chart:
Entry on April 7th at $85.50
Earnings Date 04/29/10 (unconfirmed)
Average Daily Volume = 5.5 million
Listed on April 6th, 2010
PartnerRe Ltd. - PRE - close: 80.70 change: +0.19 stop: 77.75
PRE keeps poking its head above the $80 and has now reached its highest weekly closing level since January 2008. The stock is still holding its upward trend line from early October 2008 and appears to be forming a nice upward channel. PRE looks poised for another leg up but there is potential resistance near the October 2009 highs ($81.70). If PRE follows through and breaks out above $81.70 we have a good chance to reach our first target, which I have lowered to $83.90 (just below the late 2007 highs). Our second, longer-term target is $89.00 but it could take several weeks to get there. Conservative traders should consider lightening up positions or taking profits if PRE rallies into the $81.70 level, which should also produce a winning trade.
Current Position: CALL MAY $80.00 (PRE 10E80.00) $ $2.40
Annotated Weekly Chart:
Entry on April 6th at $ 80.55
Earnings Date 04/27/10
Average Daily Volume = 989 thousand
Listed on March 20th, 2010
PUT Play Updates
None, stopped out of CERN. See closed plays.
CLOSED BULLISH PLAYS
Wynn Resorts - WYNN - close: 86.23 change: +4.57 stop: 74.45
WYNN has run away from us and through our initial target so we are dropping the play. I would not be surprised to see casino stocks sell off here, at which time we may consider another position. I do not want to chase these stocks right now considering the overbought market conditions and they are very fast movers.
Trigger to buy calls at $78.50
Suggested Position: Dropped
Annotated Weekly Chart:
Entry on April xxth at $ xx.xx
Earnings Date 05/05/10
Average Daily Volume = 2.7 million
Listed on March 24th, 2010
CLOSED BEARISH PLAYS
Cerner Corp. - CERN - close: 86.12 change: +1.23 stop: 88.25
CERN has rallied over +5.00% in two days after hitting our trigger to buy puts. The stock touched our stop late Friday and we are out the trade for a loss of $0.90. The stock did not follow through lower for us and in hindsight we were completely wrong in placing our trigger and stop at $83.75 and $88.25, respectively. Although we believed in our set-up, it did not work so we'll take our medicine, learn from the mistake and get out of the way of this trade as it reversing on us. We are now flat CERN and are looking for better trading opportunities.
Closed Position: PUT MAY $80.00 (CERN 10Q80.00) at $1.00, Entry was at $1.90
Entry on April 8 at $ 85.75
Earnings Date 04/28/10 (unconfirmed)
Average Daily Volume = 526 thousand
Listed on April 3rd, 2010