Good evening traders. The markets made more 52-week highs today before retreating at the end of the day. I expect to see some weakness in the markets heading into Wednesday's FOMC announcement but the dips are probably going to be short lived as they have been for the past 3 months. Although, the democratic version of the financial reform bill was voted down tonight so that may give a boost to the financials tomorrow. It will be interesting to see what the Fed says on Wednesday. If their language changes it could spark some serious selling so please stay nimble with any long positions. We are looking to exit BCR for a nice profit and SPY for loss in the next day or two. We are still waiting entry for triggeres on HANS and WFT, and plan initiate PUTS in TOL tomorrow (new play).
CALL Play Updates
Hanson Natural Corp. - HANS - close 43.04 change -0.04 stop 39.25
We are still waiting to be triggered on HANS at $42.30. The stock traded in a very tight range today and found support at $42.83. If there is a selloff in the next few days I want to be ready to purchase calls on HANS as outlined below. I'll leave my comments from Saturday for those readers who may not have read them. Our trigger was almost hit on Thursday (it traded down to $40.82) which would have been beautiful because the stock closed +4.26% higher on Friday. When I released this play I thought about setting the trigger at $41.05 and in hindsight that was probably an error on my part. With that being said, this stock looks very bullish to me. My only concern is a broader market pullback, but that doesn't seem to be happening either. So I ponder whether or not this trade can still work, and I think it can. Here is what I want to do. If HANS retraces about half of Friday's gain to $42.30 I suggest readers initiate call positions as outlined below. From a technical standpoint HANS almost touched its upward trend line and a recent support/resistance level at about $40.75 before bouncing hard. In addition, the stock is forming a longer term ascending triangle and is currently in the middle of an upward channel that has been intact since mid 2009. I believe the stock is poised to breakout higher or at least trade to $43.75 which is our first target. Our second target is $44.95. The company reports earnings on May 6 so we will be out of this trade prior to the report. Although there was unusual call buying late last week so traders may be expecting a good earnings report, but this is just speculation. Let's use a stop of $39.25. Our time frame is 1 to 2 weeks.
Trigger to buy calls if HANS trades to $42.30
Suggested Position: Buy MAY $43.00 CALL, current ask $1.75, estimated ask at entry $1.40
Entry on April xx at $ xx.xx
Earnings Date 5/06/10
Average Daily Volume = 854,000
Listed on April 21, 2010
Weatherford International - WFT - close 18.29 change +0.56 stop 15.90
WFT kept on going today and has run away from our trigger. I do not suggest chasing the stock, rather be patient and wait for WFT to retrace. I am optimistic WFT will eventually trade down to our trigger at $17.55. Aggressive traders could consider raising their trigger up to $17.85 which is near a recent swing high. Depending on the price action we may initiate positions at this level. But ideally I would like to wait until $17.55. Overall market direction and volume is what I will be looking at to make the call. I'll leave my comments from Saturday for readers who may not have read them. On the intraday charts WFT double bottomed last week on April 19 and 22 and has since exploded. This was probably due to data released late last week regarding oil rig count activity which is through the roof. Rig counts are near all time highs in many parts of the United States. We are talking about 25%+ sequential quarterly growth in both oil and gas. This should bode well for WFT and their sector. And I would like to participate in this momentum on the first WFT pullback. I suggest traders buy June calls if WFT trades to $17.55. There is some resistance at $17.80 but I think it's only a matter of time before it busts through this level. I am going to place a wide stop on this trade at $15.90. I think this trade has some potential but we may need to give it some time and room to work which is why I want to buy June calls.
Trigger to buy June Calls if WFT trades to $17.55, or a more aggressive entry at $17.85
Suggested Position: JUNE $17.00 CALL, current ask $1.83, estimated ask at entry $1.40
Entry on April xxth at $ xx.xx
Earnings Date Over 2 months
Average Daily Volume = 14.9 million
Listed on April 24 2010
PUT Play Updates
Bard (CR), Inc â€“ BCR â€“ close 84.87 change -1.07 stop 90.10
BCR almost hit our target today to exit the trade at $84.60. The stock traded down to $84.63 so we are still long puts. I'm looking for BCR to remain under pressure in the coming days and plan to exit the position. I continue to believe healthcare related companies will struggle and be volatile as more details surface about the healthcare reform bill, but the downside momentum may be waning as the sector is approaching key longer term support levels. If good news surfaces it could spark a rally and turn a winning position into a losing one. From a technical standpoint, BCR is forming a bearish wedge pattern on its daily chart and looks vulnerable. The stock closed well below its 20-day SMA today and has broken an upward trend line that started on February 5. I initially thought this trade was going to last about 2 weeks but I am now looking for a quick exit and suggest readers take profits when they have the chance. Our $1.45 puts are now worth about $2.30, representing a +58% unrealized gain. I will gladly take profits if BCR is under pressure again tomorrow. I am keeping our stop on the position at $90.10 (above Friday's high) due to its recent volatility. Our time frame is 1 to 2 days.
Current Position: JUNE $85.00 PUT, entry at $1.45
Entry on April 23 at $ 1.45
Earnings Date Greater than 1 month
Average Daily Volume = 1.5 million
Listed on April 22
SPDR S&P 500 Index - SPY - close: 121.81 change: +0.79 stop: 123.05
SPY made another 52-week high today before retreating at the end of the day. I expect to see some weakness in the markets heading into Wednesday's FOMC announcement but the dips are probably going to be short lived as they have been for the past 3 months. My comments from Saturday remain the same on how to exit this position. I expect the volatility to continue this week and at some point SPY should have a significant intraday correction before getting bought. When that happens I will be looking to exit the position. I have two targets: the first is $120.05 which is just above the lows on Wednesday and Thursday, and the second is just above SPY's 20-day SMA (now at $119.55), which SPY bounced off of twice last week. I will tighten stops if these levels are reached with the assumption that I will be taken out. I also suggest traders tighten stops prior to these levels if the market starts to reverse on weakness. $120.75 is a level of interest to tighten stops as well. If SPY trades down to $120.75 our put should be worth about $1.30, at $120.00 our put should be worth about $1.60, and at $119.35 it should be worth about $1.80. If volatility surges it could be worth more. Our stop remains $123.05 which is just above SPY's 200-week SMA. Our time frame is 1 to 4 days.
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