Editor's Note:

Good evening. We closed TGT today for a nice gain and were able to exit CLF for a relatively small loss. Our portfolio is now firmly biased to the downside. Our PUTS struggled some today but I am expecting more downside in the coming days. JPM is also struggling with headline risk related to investigations in the banking sector and mortgage-backed securities. Traders may want to consider exiting this position if the selling gets heavy. I have offered several key areas to help manage exiting JPM.

Current Portfolio:

CALL Play Updates

JP Morgan - JPM - close 40.81 change -0.88 stop 39.50

Target(s): 43.00, 44.70, 46.50
Key Support Areas: 41.00, 40.50, 39.75
Key Resistance Areas: 42.05, 43.75, 45.00, 47.00
Current Gain/Loss: -30%
Time Frame: 1 to 2 weeks
New Positions: No

The headline risk in JPM is affecting our position. The NY Times broke a story today that the NY Attorney General is investigating a bunch of banks, including JPM, over their influence on ratings agencies in their mortgage-backed securities dealings. This is putting pressure banks and the overall market looks weak here. Conservative readers may want to consider exiting this position to protect capital. The stock closed right at yesterday's low and pierced the entire wick of yesterday's candlestick. This is normally a bearish signal so please be cautious. However, JPM also has long term horizontal support and upward trend line support right at $40.50 and it closed just above this level today. $43.00 is just below the 20-day and 50-day SMA's which should provide resistance. With the market volatility showing no signs of waning this is a logical place to exit the position and is listed above as a new target. If JPM is weak in the coming days $40.50 could hold as support. A tighter stop just below this is probably a smart move.

Current Position: JUNE $42.00 CALL, entry at $1.95

Entry on May 11, 2010
Earnings Date July 15, 2010 (unconfirmed)
Average Daily Volume: 46 million
Listed on May 10, 2010

PUT Play Updates

Powershares QQQQ Trust - QQQQ - close 47.85 change -0.77 stop 49.60

Target(s): 46.80
Key Support Areas: 47.73, 47.20
Key Resistance Areas: 49.00, 49.30
Current Gain/Loss: +22%
Time Frame: 1 to 2 weeks
New Positions: Yes

QQQQ tried to rally towards $49.00 this morning and failed. Per the new play release we are long June $48 PUTS at $1.25. $47.70 is intraday support and if it breaks QQQQ should trade down to $47.20. If that breaks we should be well on our way to our target. My technical comments from last night remain the same. The snap back rally from last week's plunge has been nothing short of incredible. But I believe it is time for a snap back down and I suggest readers take advantage of it by initiating PUT positions in QQQQ. The ETF is approaching the 20-day SMA from below and has also retraced over 61.8% of the decline from the April 26 highs of $50.65 to the May 7 low of $44.28. I threw out the long bottom wick from Thursday's plunge because it may or may not have been "real." In any event, anyone who has held positions throughout the past couple of weeks has to be thinking about selling positions now that the retracement back up has come so far. And if they were stopped out they are probably hesitant to jump right back in. In addition, QQQQ is approaching a secondary and primary downward trend line and volatility has been sucked out of the option premium over the last several days. An increase in volatility will be good for our option premium. Volume has been lighter than normal on this impressive rally which is also a bearish signal. I believe now is a good time to initiate PUT positions at current levels or a failed rally into the $49 area just overhead. This also gives us a good reference point to place a stop at $49.60 which is above the downtrend line and the 20-day SMA. I will be surprised if QQQQ can break through this congestion but if it does we should have a relatively small loss. The trade also sets up a good 2:1 risk reward ratio. We are risking $1.00 to make $2. Our stop is $49.60.

Current Position: JUNE $48.00 PUT, entry at $1.25

Entry on May xx
Earnings N/A
Average Daily Volume: 100 million
Listed on May 12, 2010

Range Resources Corp - RRC - close 48.76 change +0.71 stop 50.75

Target(s): 45.00, 44.00, 42.50
Key Support Areas: 46.00, 45.00, 43.30
Key Resistance Areas: 49.00, 50.00
Current Gain/Loss: -36%
Time Frame: 1 to 2 weeks
New Positions: Yes

RRC is testing our patience but still remains below a bunch of congestion near $49.00 that I don't think it can overcome. The stock peaked its head up to $49.50 today before it started to sell off. All of its daily SMA's are overhead along with several downtrend lines and broken uptrend lines. I continue to like the way this trade sets up but we may have been a little early. However, RRC tends to be volatile and when you look at a daily chart, after the stock has had several green bars they are typically followed by violent big bodied red bars to the downside. This is what we need to happen. We're keeping a tight stop at $50.75. We are looking for a $3.00 to $5.00 move to the downside from here which should garner a nice profit on the trade if it happens. We chose further out of the money options than usual to reduce risk in the trade. *NOTE: Please use small position due to the volatility in this stock and the recent sell off in oil oversold.

Current Position: JUNE $42.50 PUT, entry at $0.95

Entry on 5/11/2010
Earnings Date 7/22/2010 (unconfirmed)
Average Daily Volume: 3.1 million
Listed on 5/8/2010

Sina Corporation - SINA - close 35.41 change +0.30 stop $37.05 *NEW*

Target(s): 33.25 (hit), $33.50, 32.50, 30.50
Key Support Areas: $33.40 32.50, 30.50
Key Resistance Areas: 35.40, 36.00, 36.80
Current Gain/Loss: -16%
Time Frame: 1 week
New Positions: Yes, but only as a quick trade

SINA gave us a scare today when it rocketed higher at the open towards our stop. However, the stock immediately reversed and closed the day at its lows and below its 20-day SMA. This signals to me that shorts were covering and taking some profits but the sellers stepped in and the stock sold off the remainder of the day. My biggest concern at this point is that SINA is right at a key pivot level at $35.30. If it stays above here buyers may step in but I think the overall market is going to be weak in the coming days which should push price back down. I expect the overhead resistance, congestion, and SMA's to hold. Our first target of $33.25 was hit last week. SINA is approaching earnings on May 17th so we plan to be officially out of the trade on or before this date. I urge readers to book gains or tighten stops as SINA approaches $33.50. This target is just above the low from Tuesday and is probably a good place to tighten stops or take profits. The stock remains below all of its major daily and weekly SMA's. The 50-day SMA crossed below the 200-day SMA which is a bearish signal that confirms our outlook for this stock.

Current Position: JUNE $35.00 PUT, entry at $2.20

Entry on May 4th at $2.20
Earnings Date May 17, 2010 (unconfirmed)
Average Daily Volume: 1.1 million
Listed on May 1, 2010

Tempur-Pedic International - TPX - close 34.50 change -0.56 stop 36.30 *NEW*

Target(s): 31.50, 30.25
Key Support Areas: 34.15, 33.25, 32.40, 31.30, 30.00
Key Resistance Areas: 35.10, 36.30
Current Gain/Loss: -14%
Time Frame: 1 to 2 weeks
New Positions:

We got a little reprieve on TPX today but it tested our will. Rumors were flying early that a private equity firm was interested in buying the company but those appeared to have been put to rest because the stock sold off hard soon after it came out. The stock also retested its highs from April and immediately reversed closing down -1.60%. There was never a closed bar above our stop so we remain in the position. If this afternoon's price action is any indication of what's to come I feel good about the position. Volume continues to look bearish and signals distribution. Declining volume today was heavier than advancing volume.

Current Position: JUNE $32.50 PUT, entry at $1.40

Entry on May 12, 2010
Earnings July 15, 2010 (unconfirmed)
Average Daily Volume: 1.1 million
Listed on May 11, 2010


Cliffs Natural Resources - CLF - close 56.30 change -1.04 stop 54.75

Target(s): 58.95, 60.95, 65.90, 69.50
Key Support Areas: 55.60, 54.75, 52.75
Key Resistance Areas: 59.00, 61.00, 66.00
Current Gain/Loss: -22%
Time Frame: 1 to 2 weeks
New Positions: Yes, with tight stop

CLF traded up to our $58.95 target and we decided to cut our losses per last night's updates. Our calls took a beating with Tuesday's shellacking and since they are so far out of the money it is time to say goodbye to this position for a relatively small loss. Hoping the stock recovers is not a smart strategy. The stock actually gave us a second chance by hitting our target twice and when it could not make a new high it was over. For readers who still have positions the targets and support/resistance areas above can used as guide to manage positions going forward. The good news is that the stock remains above key support at $55.60. This is a logical place for a tight stop.

*Note: Please use small position size due the high volatility of this stock and political risks involved from the Australian government's proposed miner tax.*

Closed Position: JUNE $65.00 CALL at $2.40, entry was at $3.10

Annotated Chart:

Entry on 5/10/2010
Earnings Date 7/29/2010 (unconfirmed)
Average Daily Volume: 8.7 million
Listed on 5/8/2010

Target Corporation - TGT - close 55.07 change -2.06 stop 55.48 *NEW*

Target(s): 58.00
Key Support Areas: 54.75, 52.30,
Key Resistance Areas: 55.85, 56.50, 58.00
Current Gain/Loss: +42%
Time Frame: 1 to 2 weeks
New Positions: No

It was apparent early on that it was not TGT's day. When the stock gapped lower and didn't recover it was our clue to exit the position per last night's updates. We are flat CALLS at $1.70 for a +42% gain. The stock traded lower the entire day and even blew right through our new updated stop and ended up right at the 50-day SMA. Readers who still have position should tighten stops here to protect capital. If you held through today's sell-off your positions are now negative. We may get a bounce but I'm not holding my breath as I feel the market is going lower from here. The above support/resistance areas can be used as guide. A tight stop could be placed at $54.45 if you want to give this room to bounce.

Closed Position: JUNE $57.50 CALL at $1.70, entry was at $1.20

Annotated Chart:

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