Good evening traders. BCR hit our target today (twice actually) and we are flat for a healthy gain. SPY also gave us what we were looking for today by trading down to its 20-day SMA. We closed this position for a very small loss. The question now is what will happen after the FOMC announcement tomorrow. If the language changes it could spark some serious selling, but if the language remains consistent it may give the markets an excuse to continue this rally. I am not releasing new plays tonight ahead of the announcement. Please stay nimble with any positions tomorrow as there is bound to be some volatility in the afternoon beginning at about 2:15 PM sharp. We are still waiting for long entries in WFT and HANS. TOL has gotten off to a good start as well.
CALL Play Updates
Hanson Natural Corp. - HANS - close 42.56 change -0.48 stop 40.45 *NEW*
We are still waiting to be triggered on HANS. The stock held up rather well today considering the broader market sell-off. I still like the set-up of this trade and suggest readers buy calls if HANS trades down to our trigger. I am looking for HANS to retrace about half of Friday's gain to $42.30. I suggest readers initiate call positions as outlined below. HANS is still above its 20-day SMA and the stock is forming a longer term ascending triangle. It 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 if we get triggered. There was some unusual call buying late last week so traders may be expecting a good earnings report, but this is just speculation. The stock has good support at about $40.70 so I would like to use a stop just under this at $40.45 if we get triggered. 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 $1.60, estimated ask at entry $1.45
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 17.97 change -0.32 stop 15.90
WFT was strong again this morning, trading higher by +2.7%, before profit takers the stock stepped in and the stock closed lower by -1.75%. I mentioned last night that I did not suggest chasing the stock, rather be patient and wait for WFT to retrace. We are getting close to our trigger and I still like the trade set-up. I am not trying to hit a homerun here; I'm simply trying to catch another upward leg in the stock after a normal healthy retracement. WFT almost traded down to our aggressive entry at $17.85 which is near a recent swing high. Depending on the price action tomorrow we may initiate positions at this level. But ideally I would like to wait until $17.55. The volume on WFT's pullback today was higher than yesterday so I anticipate some pressure tomorrow on the stock. But I also believe that as soon as the selling subsides WFT can resume the recent gains seen over the last week or so. I like the story behind WFT so 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
Toll Brothers - TOL - close 22.16 change -0.63 stop 24.25
We initiated TOL in the portfolio this morning and are now long PUTS at $1.40. After briefly peeking its head into positive territory, the stock sold off the remainder of the day. Our $1.40 PUTS are now worth about $1.75 for a +25% unrealized gain. There will inevitably be a bounce in the coming days but this will probably just be a bounce that makes a lower high on the daily chart. On November 11 TOL made an intraday high of $21.80. This level might act as support, especially if there is not a bounce prior to the price reaching this level. I suggest readers tighten stops and protect profits at this level just in case a reversal starts.
My thesis on this position remains the same so I will leave my comments from last night. TOL surged higher last week along with the other homebuilders, setting new 52-week highs. The surge was credited to a sharp increase in new home sales which many feel was a result of the homebuyer tax credit expiring this week. This probably created pent-up demand and the builders could suffer from it in the future. In addition, TOL is a builder of luxury homes and the tax credit phases out for married persons making more than $225K per year. So TOL may not have benefitted like the other builders. I believe the rally in TOL may have been "dragged along for the ride" and I am expecting a pullback. From a technical standpoint TOL has reached resistance from August 2009 which I think will hold and give us the pullback we are looking for to make a quick profit. Our stop is $24.25 which is above the recent highs. Our target is $21.50, but if $21.80 is reached before a bounce I suggest readers take profits. Our time frame is a couple of days to about two weeks, depending on price action.
Current Position: JUNE $23.00 PUT, entry @ $1.40
Entry on April xx at $ 1.40
Earnings Date Over 2 months
Average Daily Volume = 3.2 million
Listed on April 26, 2010
CLOSED BEARISH PLAYS
Bard (CR), Inc â€“ BCR â€“ close 84.63 change -0.24 stop 90.10
BCR hit our target today at $84.60 and we are now flat on the position for a nice gain. Our $1.45 PUTS were sold for $2.50 for a +70% gain. The stock seems to have found support right at $84.50. I recommend readers who may still have positions to tighten stops or take profits. BCR continues to look bearish to me but it is still hanging on to its 50-day SMA. I initially thought this trade was going to last about 2 weeks but I am glad to take profits here and move on to the next trade.
Closed Position: JUNE $85.00 PUT @ $2.50, entry was 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: 118.48 change: -2.87 stop: 123.05
Finally, we got the intraday sell-off we were anticipating today. Our SPY position was closed as instructed in last night updates. We listed a couple of different potential targets for possible exits because we thought that at some point SPY would have a significant intraday correction before tomorrow's FOMC meeting. Well, that's what happened today except the indices never really saw the dip buyers follow through with any real strength. SPY kept going through our first target and when it hit our second target it was our queue to go flat. The surge in volatility (VIX was up +30%) helped increase the value of our PUT which was sold for $2.00, representing a small loss of -2.5%. Readers who still have positions, congratulations as the PUTS closed the day at $2.50 so you now have a gain. Please don't let this position reverse on you and protect profits. I have listed several support areas on the chart below. I would not be surprised to see SPY curl back upward to test its broken 20-day SMA.
Closed Position: SPY PUT MAY $119.00 @ $2.00, 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