Editor's Note:

Good evening traders. The sell-off on Friday appears to be a thing a past as the indices have gained back most of their losses, but not all of them. Sellers are showing up and the indices are below the highs from last week. Apple may boost the markets tomorrow as they reported better than expected earnings, again! This is par for the course with Apple though and if the stock acts anything like other companies who have reported blockbuster earnings, then we may see some profit taking come in. I want to reiterate that being nimble with position management is paramount as the market is being driven by news which can create whipsaws in both directions. Be sure to protect profits.

I also wanted to take a moment to share with you how I manage exiting positions when there is a gap up or down in stocks at the open. This happened with OXY today and enabled us to stay in the position longer and exit at a better price. If you want to exit a position that has a gap up or down (or is very close to a stop) I suggest you devise a rule that fits your style. For long positions here is my rule of thumb: If the stock gaps down, 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, i.e. below the 15-minute bar. Reverse the entire scenario for short positions. The reason I do this is because I want to measure the real strength or weakness in the stock. And 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, keeping me in the position. In OXY’s case this worked perfectly today and the stock ultimately hit our target, keeping us in the position.

Current Portfolio:

CALL Play Updates

Goodyear Tire & Rubber Co. – GT – close 14.31 change +0.20 stop 13.50

We initiated calls on GT this morning at $1.90. The stock spent most of the day bouncing back and forth but did close higher by +1.42%. I am expecting GT to rally from here and will be looking to exit the trade if GT trades into the $14.70 to $14.75 area which is our target. A more aggressive target is $15.90. GT has earnings on April 28 and I plan to be out of the trade by then. There is a key pivot level at $14.00 that I expect to hold as support if there is any weakness in GT. Readers who have not initiated positions may do so on any weakness but I am viewing this as a quick trade and plan to be out prior to earnings. Our target is $14.75. Our time frame is about one week.

Current Position: Long MAY CALL $12.50, entry @ $1.90

Entry on April 20th at $ 1.90
Earnings Date 4/28/10
Average Daily Volume = 4.3 million
Listed on April 19th, 2010

PUT Play Updates

Simon Property Group – SPG – close: 84.66 change: +1.76 stop: 86.35

Why We Like It:
The overall market rally was not enough hold back SPG as it closed +2.12%. There is still plenty of resistance overhead that I expect to be a drag on the stock. SPG is still below its 20-day SMA (currently $85.17) and broken trend line from March 22. Often times when stocks break through SMA's and trend lines they will reverse to go back and test these levels prior to continuing in the direction of the break out, or break down in SPG's case. This may be what SPG is doing now. Our stop at $86.35 is above both of the aforementioned areas. Conservative traders may want to move up their target on SPG to $82.05 which is just above Friday's low. Should SPG trade to this level I will be looking to take profits and/or tighten stops depending on overall market weakness. A more aggressive target would be $79.50.

Current Position: BUY MAY PUT $80.00, entry at $2.20.

Entry on April 19th at $ 83.75
Earnings Date 4/30/2010
Average Daily Volume = 2.6 million
Listed on April 17th, 2010

SPDR S&P 500 Index - SPY - close: 120.88 change: +1.07 stop: 123.05 XXX

Friday's sell-off appears to be a thing of the past as the indices have just about regained all of their losses, but not all of them. Many stocks that have reported earnings have been selling off on the good news. This may be a sentiment change as traders are eagerly taking profits. As such, I want to give SPY some room here to get moving back down in our direction. There is resistance from last week just overhead and I suspect SPY may retreat from here, although there may a push higher in the morning. Conservative traders should consider moving up their target to $118.85 which is just above Friday's low. Should SPY trade to this level I will be looking to exit the position. A second target could be $117.75. Our stop remains 123.05 which is just above SPY's 200-week SMA.

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


Coca-Cola - KO - close: 55.47 change: -0.85 stop: $53.95

The price action in KO right from the opening bell was our queue to close the position for a loss. After beating earnings the stock proceeded to sell off hard and we are flat for a loss on the position. I have been suggesting to readers in the updates to considering exiting positions to preserve capital as KO was not performing well. The stock could not break through congestion in the $55 to $56 area. KO tends to be a defensive stock but investors are simply not enthused with their earnings report as the company missed revenue estimates. I suggest readers who still have positions exit soon. There is resistance in the $54.60 area on the intraday charts.

Closed Position: CALL May $55.00 (KO 10E55.00) at $1.00, entry was $1.62

Annotated Chart:

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: $86.59 change: +1.90 stop: 83.45

OXY has been very volatile lately and we closed the position this morning for a small gain. The volatility often times signals a change in trend and I would rather preserve capital than hope OXY breaks out to new highs. I also wrote in the editor's note how traders could have managed exiting the position this morning as OXY rallied up to our target at $86.75. This could have kept you in the trade longer as the market was moving hogher.

Annotated Chart:
Closed Position: CALL MAY $85.00 (OXY 10E85.00) at $3.50, entry 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