Good evening traders. I'm not sure what exactly happened today in the market but it sure seemed manipulated. Chatter was that there was a bad tick in Procter & Gamble that caused some computer programs to sell, which started the cascade. I also heard that there were human errors in entering trades and that some trades may be cancelled as a result. Who really knows but I am sure we will find out. What I do know for sure is that it is almost impossible to manage swing trades in this environment. The bid/ask spreads on all securities widened to levels I don't think I've ever seen, not even in the fall of 2008.
In any event, our portfolio performed well today as we booked almost +100% gains in our IYT and TOL short positions and got stopped out of our BIIB and NDAQ long positions for relatively small losses. These recovered most of their losses and for the record, I still like these trade set-ups but we must follow the rules and honor stops. Today's events have narrowed our portfolio immensely but keeping your powder dry at this juncture is probably not a bad idea. Staying on your toes is an understatement and taking profits off the table when the opportunity presents itself is a must.
NOTE: James will be filling in for me this weekend with new plays and updates. I will be back next week and we will have the portfolio ramped back up in no time.
CALL Play Updates
IMAX Corporation - IMAX - close 18.90 change -0.15 stop 16.75
We are still in IMAX after all of the nonsense today and I still like the momentum and fundamentals of this stock. My comments from the play set-up remains the same. IMAX bounced nicely around $18.15 on Tuesday and Wednesday which was a prior resistance level that should now act as support. The stock has also created two back to back bottoming tail candlesticks on its daily chart which may indicate that sellers of the stock are waning. Buyers have been piling into the stock in recent months and IMAX reported earnings on 4/29 that beat expectations (.53 compared to .37 estimate). The company is experiencing a surge in earnings due to the onslaught of 3-D movies on the horizon. I suggest readers take advantage of the momentum and initiate positions if IMAX pulls back to $18.50. We will place our stop at $16.75 which is just below the 50-day SMA. Our target is $20.95 which is just below the stock's 52 week highs.
Current Position: Long JUNE $20.00 CALL, entry at $1.10
Entry on May 5th at $1.10
Earnings Date More than 2 months (unconfirmed)
Average Daily Volume: 1.9 million
Listed on May 4, 2010
Target Corporation - TGT - close 56.06 change +0.48 stop 52.10
TGT gapped down this morning and triggered our entry to buy CALLS. We are now long June $57.50 calls at $1.20. TGT was immediately bought when the stock hit its 50-day SMA and held up well considering the cascading market. Our about breakeven despite this. My comments on the trade set-up remain the same. TGT is approaching a major trend line that started on July 8th which also converges with a key support level (see dashed line on chart of the new play). The stock's 50-day SMA is also just below which should also provide support if TGT breaks any lower than this. There is also a prior support/resistance area just below which gives us a good reference point to place a stop at $52.10. TGT is also a defensive play that could do well if the overall market continues its decent. I suggest readers take advantage of any pullback to $54.80 to buy June $57.50 calls. Our target is $58.00. Our time frame is a couple of weeks. Target reports earnings on May 20th so we plan to be out of the trade prior to this date.
Current Position: Long JUNE $57.50 CALL, entry at $1.20
Entry on May 6, 2010 at $2.00
Earnings Date May 20, 2010 (unconfirmed)
Average Daily Volume: 5.2 million
Listed on May 5, 2010
PUT Play Updates
Sina Corporation - SINA - close 33.00 change -1.50 stop $38.80
SINA hit our first target of $33.25 today and kept on going. Our PUTS have made about +50%. This would not be a bad time to take some profits off of the table or tighten stops. SINA is below all of its major daily and weekly SMA's. I expect the overhead resistance and SMA's to hold. Our stop is $38.80 but we will adjust it as the trade develops. Our first target of $33.25 was hit and our aggressive 2nd target is $30.50. If a market correction keeps going I think SINA could easily trade down to this level but I don't want to get whipsawed back and forth so please protect profits. Our time frame is several weeks.
Current Position: JUNE $35.00 PUT, entry at $2.20
Entry on May 4th at $2.20
Earnings Date June 9, 2010 (unconfirmed)
Average Daily Volume: 1.1 million
Listed on May 1, 2010
CLOSED BULLISH PLAYS
Biogen Idec Inc. - BIIB - close 50.70 change -2.00 stop 50.90
BIIB stopped us out as the market cascaded lower, but then recovered. We will honor the stop and are flat our calls for -30 cent loss, or -23%. Once again I like the set-up of this trade but the market forces shook us out. The loss is not too bad considering the events of today and that were able to book +100% gains in other positions. Readers who may still have positions can place a protective stop just below today's low.
Current Position: Long JUNE $55.00 CALL, entry at $1.30
Entry on May xx at $xx.xx
Earnings Date July 15, 2010 (unconfirmed)
Average Daily Volume: 2.7 million
Listed on May 1, 2010
The NASDAQ OMX Group - NDAQ - close 20.15 change -0.70 stop 19.75
NDAQ hit our stop right when the market flushed and reversed. So we are out of the trade for a 30 cent loss, or -37.5%. I still like this set-up but we will follow the rules and honor our stop. Traders who still have positions could place a stop just below today's lows.
Current Position: Long JUNE $21.00 CALL, entry at $0.80
Entry on May 4th at $0.80
Earnings Date More than 2 months (unconfirmed)
Average Daily Volume: 2.9 million
Listed on May 3, 2010
CLOSED BEARISH PLAYS
iShares Dow Transports - IYT - close 79.62 change -2.74 stop 84.45
IYT hit our final target today so we are flat on the position for a +97.5%. If traders still have positions the next target is $80.80 which is just above the 50-day SMA and a prior resistance level. I suggest traders begin to exit positions soon to protect profits. At tight stop can be placed at $82.80. *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.
Closed Position: JUNE $83.00 PUT at $3.95, 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
Toll Brothers - TOL - close 21.50 change -0.52 stop 24.25
TOL followed through to the downside for us today and hit our final target of $20.60. We are now flat on the position for +100% gain. I suggest traders who may still have positions to protect profits or simply take profits.
Closed Position: JUNE $23.00 PUT at $2.80, entry was @ $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