Good evening traders. The Goldman Sachs fraud charges appear to be the catalyst we needed for a meaningful market correction. This will also put the financial reform bill on front and center stage in Washington which I think will drag down bank stocks for a while. The new reforms will chip away at bank profits and I believe traders will begin selling the financials in earnest. We are adjusting many of our long positions and getting defensive.
CALL Play Updates
Coca-Cola - KO - close: 54.97 change: +0.71 stop: $53.95 *NEW*
KO behaved like a defensive stock on Friday, closing higher +1.31% as the market sold off. As I mentioned in Thursday's updates I suspected KO would get pinned in the $55 area and that's exactly what happened. The congestion/resistance area I have been mentioning in the $55 to $56 area still needs to be dealt with but Friday was a nice rebound. The stock formed a bullish engulfing candlestick on Friday as it opened below Thursday's close and then engulfed that entire bar. It also peeked its head above Tuesday's high so I am optimistic KO may start to chip away at the aforementioned congestion zone. We are in the red on our call position right now but if Friday's rally continues we are poised to make money. I am still suggesting readers consider selling positions on any continued strength in KO. For now our target remains at $57.00 but I would like to move our stop up to $53.95, which is just below Thursday's low. Our time frame is one to two weeks.
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
Occidental Petrol. - OXY - close: $85.06 change: -1.41 stop: 83.45
OXY is holding above the key support/resistance level at $84.50. OXY closed above its 20-day SMA and still has upward trend line support; however, I am concerned broader market weakness may prove to be too much for the stock to overcome. I suspect we will see a bounce early next week and I want to be a seller into any strength. As such, I am going to lower our target to $86.75 and plan to exit the trade and take profits should OXY rally to this level. Our official stop remains at $83.45 but a more conservative stop could be placed $84.25 which is below the recent breakout. I would like to exit the position this week.
Current Position: CALL MAY $85.00 (OXY 10E85.00) at $3.25
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: 79.59 change: -1.12 stop: $79.10 *NEW*
PRE is breaking its upward trend line that started on March 10 and I am not enthused. After rallying early on Friday the stock ended with a topping tail candlestick and also closed below its 20-day SMA. There is minor support at current levels and I suggest traders exit positions soon. I am lowering our target to just below Friday's highs at $80.30 but traders may want to exit at the open on Monday to limit risk as broader market weakness would probably take PRE down. I would like to move up our stop to $79.10 and will step aside if it is hit. Our time frame is one to two days.
Current Position: CALL MAY $80.00 (PRE 10E80.00) @ $2.40
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
SPDR S&P 500 Index - SPY - close: 119.36 change: -1.93 stop: 123.05
The Goldman Sachs fraud charges appear to be the catalyst we needed for a meaningful market correction, sending SPY down -1.59% on Friday. This will also put the financial reform bill on front and center stage in Washington which I think will drag down bank stocks for a while. The new reforms will chip away at bank profits and I believe traders will begin selling the financials in earnest. And considering the S&P 500 is heavy in banks our position looks very promising. Friday's price bar engulfed the prior 4 days and erased all of the SPY's gains from Monday to Thursday. I suspect we will see a short term relief bounce on Monday after the heavy selling on Friday, but I think SPY has put in at least a short term top. Our plan remains the same on this trade for now. Our target is $115.50 and we have a time frame of a couple of weeks. Our stop is $123.05 but I expect to lower the stop in the coming days as the trade gets moving in our direction. I just need to see a better inflection point.
Current Position: SPY PUT MAY $119.00, entry at $2.05
Entry on April 13th at $ 2.05
Earnings Date Not Applicable
Average Daily Volume = 164 million
Listed on April 12th, 2010
CLOSED BULLISH PLAYS
Holly Corp - HOC - close: 24.97 change: -0.92 stop: 24.95
Brutal, that about sums it up! Our stop was triggered on HOC and we are flat as the sell-off blew right through prior support, upward trend line support, and its 200-day SMA. The stock acted as if these levels were not even there which signals to me it is time to step aside as our trade set-up did not work. In hindsight we were probably too early and the broader market weakness didn't do us any favors. So we are flat on the position and move onward. Readers who may still have positions should consider selling as the stock rallies into the $26.50 area. A new stop could be placed at $24.45 which is just below Friday's low.
Closed Position: MAY CALL $25.00 @ $1.40, entry @ 2.55
Entry on April 15th at $ 26.79
Earnings Date May 6th (unconfirmed)
Average Daily Volume = 811,000
Listed on April 14th, 2010