The wide market swings and volatility is making it difficult to manage swing trades. I wrote in the weekend updates that I anticipated volatility to continue and that we would probably see another bounce early this week before a bigger drop comes later. I just didn't expect the hard reversal to the upside that we got today. This makes me cautiously bearish on the market. I still suggest tightening stops on long positions, especially with today's strength. Our portfolio has some defensive names on the long side and we also have short positions to take advantage of any more sell offs. The balance of longs and shorts will enable you to take profits in both directions. Staying nimble in the name of the game right now.
CALL Play Updates
Biogen Idec Inc. - BIIB - close 53.60 change +0.31 stop 51.15
BIIB didn't trade up to our trigger to buy calls. The stock has formed a bull flag on the intraday charts and I would like to see confirmation of a break out to the upside which means BIIB needs to trade above Friday's highs of $54.04 before entering positions. My comments from the new play release remain the same. BIIB gained +44% between its October 29th low and its March 22nd high. The stock has proceeded to retrace almost 50% of that gain and has found support at about $51.50. The stock appears ready to break through its downtrend line that started on March 22 and I suggest traders take advantage of any strength. BIIB also trades at a low 16.1 PE ratio when compared to its peers in biotechnology. In fact, BIIB trades below the S&P 500 average PE of 21.72. Biotechnology can be defensive so I like the play if the stock trades above Friday's high of $54.04. Our stop is $51.15 which is below the 200-day SMA and a recent swing low. Our target is $56.90 with a more aggressive target at $58.90. The stock may experience some resistance with its 20-day SMA just overhead but if there is momentum it should overcome it. Aggressive traders may consider entering the position at current levels but will have to deal with overhead resistance.
Trigger to buy CALLS if BIIB trades to $54.10
Suggested Position: Long JUNE $55.00 CALL, current ask $1.70
Entry on May xx at $xx.xx
Earnings Date July 15, 2010 (unconfirmed)
Average Daily Volume: 2.7 million
Listed on May 1, 2010
Gold Fields Ltd - GFI - close 13.22 change -0.22 stop 12.79
Gold miners took a breather today and so did GFI closing down -1.64%. I expected the miners momentum to continue today but it just wasn't meant to be. The company reports earnings Thursday before the bell so I suggest readers exit this position prior to Wednesday's close to limit risk and preserve capital. There may not be enough time to reach our target of $13.75 so I would like to lower the target to $13.50 which is just below Friday's high. If GFI can make back up here I will gladly take a small profit on the trade. Our calls are about breakeven right now. The delta on our call position is .59 so if GFI can rally to our target of $13.50 our calls should be worth about 75 cents which is a +25% gain. Gold Miners were one of the strongest sectors on Friday while the market was under severe pressure. This could happen again if the market breaks lower tomorrow. Our stop is $12.79 which is just below the low from April 28th and the 20-day SMA. Our time frame is 1 to 2 days. I am not suggesting new positions at this time. *NOTE: Please use small position size to limit risk as gold stocks tend to be volatile.*
Current Position: Long MAY $13.00 CALL, entry at $0.60
Entry on April 29 at $0.60
Earnings Date May 6, 2010 (unconfirmed)
Average Daily Volume: 5.3 million
Listed on April 28, 2010
Research In Motion - RIMM - close 71.53 change +0.34 stop 69.29
RIMM traded in a tight range today closing higher +0.48%. The stock found resistance right at its 50-day SMA which is $72.17. I am looking for RIMM to break above today's high ($72.19) which should get us headed towards our target of $74.19. However, I also see some resistance at $73.30 which is an area that traders should consider tightening stops or taking some profits off of the table. Readers who haven't initiated positions may consider doing so at this time. Our stop is $69.29. This is just below a swing low on March 5th and also below the 200-day SMA. Our time frame is a couple of weeks.
Current Position: Long JUNE $75.00 CALL, entry at $2.15
Entry on April 30 at $2.15
Earnings Date June 18, 2010 (unconfirmed)
Average Daily Volume: 15.3 million
Listed on April 29, 2010
Weatherford International - WFT - close 17.92 change -0.19 stop 16.55
WFT gave us a scare today as oil stocks were under severe pressure in early trading. However, WFT found support at about $17.25 and then surged in the afternoon, closing near its highs. I mentioned $17.30 as a interesting support level on Saturday and this area proved to be correct as buyers stampeded into the stock. WFT was able to close above $17.80 which is another key support/resistance level. However, the stock broke below its bull flag on the daily chart so I urge traders to be cautious here. Today's initial decline may have been a head fake to shake out the weak hands but there is also a lot of headline risk with the oil disaster in the Gulf of Mexico. Our calls are now just above breakeven and I have identified $18.60 as a logical exit target, which is just below Friday's highs. If WFT trades to this level I would be looking to take profits, especially if the overall market is showing weakness. A move to $18.60 is not too far from our original target ($18.95) and should garner a +34% profit based on the delta and projected move in the stock. A second more aggressive target is $20.45. Longer term I think WFT can easily test $20.45 but I do not suggest hanging on to call options waiting for this target as time decay could end up hurting you. Obviously if WFT and the market are ripping higher we could get lucky and hit the higher target, but more often than not when traders become complacent by waiting they end up losing in the long run. A strategy readers may consider is to take profits if the first target is hit and then buy further dated options. The August $19.00 calls are going for about $1.25 as of the today's close. Readers who haven't initiated positions may consider doing so on weakness in the stock. Today's dip was a perfect opportunity. Our stop is 16.55.
Current Position: JUNE $17.00 CALL, entry at $1.58
Entry on April 28 at $ 1.58
Earnings Date Over 2 months
Average Daily Volume = 14.9 million
Listed on April 24 2010
PUT Play Updates
iShares Dow Transports - IYT - close 86.56 change +2.20 stop 87.10
We are getting whipsawed in our IYT position. The ETF re-gained all of its losses from Friday, and then some, closing up +2.20%. I have tried to keep a good balance of CALLS and PUTS in the model portfolio to take advantage of the extremely volatile price action so it should be expected some positions will struggle, while other perform better. Our $2.00 PUTS are now worth about $1.70 for -15% unrealized loss. My thesis on this trade was to catch a quick pullback in an extremely overbought sector and a market that desperately needs a healthy correction. But every time the transports head lower buyers step in. And every time the sector heads higher sellers step in. So there is quite a fight going on between the bulls and bears which I anticipate ending soon. Someone will eventually get exhausted. I expect IYT trade down to its 20-day SMA soon, but this is increasing everyday (currently at $83.47). Conservative traders may want to tighten stops at this level or simply exit to take profits. A second more aggressive target is $81.50. If the market gets any sustainable correction IYT could easily reach this level. There is still plenty of trend line resistance overhead as well as a congestion area from 2008 to keep IYT in check. But if IYT breaks out and hits our stop $87.10 I will have been proven wrong and suggest readers step aside. Our time frame is 1 to 2 weeks but will have no issues exiting sooner if there is a correction to the aforementioned targets or if our stop takes us out. Readers who haven't initiated positions may do so at current levels with a tight stop. *NOTE: Some of the strike prices in IYT have wider than normal bid/ask spreads. Use a limit order in the middle of the spread and you should get filled.
Current Position: JUNE $83.00 PUT, entry at $2.00
Entry on April 29 at $2.00
Earnings Date N/A
Average Daily Volume = 1.0 million
Listed on April 28, 2010
Sina Corporation - SINA - close 36.68 change -0.02 stop 42.25
We did not get triggered on SINA today as it traded in a tight range. The stock traded as high $37.31 in the first 15-minutes but was weak the remainder of the day. My comments from the weekend remain the same. SINA is forming a descending triangle on its daily and weekly charts. The stock did find support at $35.25 last week and bounced nicely. However, I feel the conditions are ripe for this stock trade lower in the coming weeks, especially if we get a sustainable market correction. Its 20-day SMA and 20-week SMA are overhead which should provide good resistance. The 50-period and 200-period SMA's are providing some support for the stock right now, but I feel it is only a matter of time before the stock breaks these SMA's. I suggest readers buy PUTS if SINA trades up to $37.60 or if the stock trades down to $34.95, whichever occurs first. I am going to place a wide initial stop at $42.50 until we know where the position was entered. Once we are triggered the stop will be adjusted. Our first target is $33.25 which is a point where I would tighten stops to protect profits. A more aggressive 2nd target is $30.50. If a market correction gets going I think SINA could easily trade down to this level.
Suggested Position: JUNE $35.00 PUT, current ask $1.60
Entry on May xx at $xx.xx
Earnings Date June 9, 2010 (unconfirmed)
Average Daily Volume: 1.1 million
Listed on May 1, 2010
Toll Brothers - TOL - close 23.15 change +0.58 stop 24.25
My comments on TOL are not too different than my comments on IYT. TOL regained all of its losses from Tuesday and then some, closing higher +2.57%. The bulls and bears are putting on quite a fight. Our calls are in the red by -25 cents. The recent bounce still looks like it is trying to form a lower high on the daily chart, but we TOL to follow though to the downside and break $22.00, which should see sellers step in and push TOL down to its breakout level near $21.50. I have identified three targets as possible exit points: $21.80, $21.50, and $20.60. These are the levels where I suggest traders tighten stops or simply take profits. The $22.00 to $22.25 area should act as support this week. Aggressive traders can enter the position at this time. Our stop remains at $24.25 and our time frame is about 1 week.
Current Position: JUNE $23.00 PUT, entry @ $1.40
Entry on April 27 at $ 1.40
Earnings Date Over 2 months
Average Daily Volume = 3.2 million
Listed on April 26, 2010