Current Portfolio:

PUT Play Updates

Baidu, Inc. ADR - BIDU - close 73.98 change -1.66 stop 79.10

Target(s): 71.50, 65.10
Key Support Areas: 71.40, 68.50, 65.00
Key Resistance Areas: 78.50, 82.25
Current Gain/Loss: -4%
Time Frame: Several Weeks
New Positions: Yes

BIDU chopped around today and quite frankly I was a little disappointed there was not more selling. But we will wait for things to develop. Per the play release we are now long June $73 PUTS at $4.65. My technical comments remain the same from the play release, except I want to add that I think BIDU and GOOG is a classic pairs trade. I suggest being long GOOG and short BIDU. If the divergence between these companies narrows the pairs trade would be legendary and could go on for weeks if not months. My bearish comments on BIDU are as follows: BIDU had a 10:1 stock split on Wednesday and investors piled into the stock on Thursday, only to be met with fierce selling. I believe this has created a climax high. There also appears to be a nasty candlestick pattern forming that I have learned called a red candle high. Usually this signals more downside to come as buyers get exhausted and start to lock in profits and sell stock. From a fundamental perspective BIDU trades at a PE ratio of about 100 which is simply too high. BIDU's American rival Google has lost about -20% since its January highs, while BIDU has went on to gain about +80%. This is a clear divergence from two very similar companies that some may argue is justified due to BIDU's early stage growth. However, I believe it is a clear disconnect and I think investors will start dumping the stock on any further weakness. I believe the conditions are ripe for quick decent. Our stop is above Wednesday's highs at $79.10 and our time frame is several weeks. Our first target is $71.50 which would fill the gap higher from last Wednesday and coincide with a secondary trend line that started on January 29th. I'm ultimately looking for a move down to $65.10 which is our 2nd target. This stock can be volatile and is prone to gaps so please be smart when considering position size.

Current Position: JUNE $73.00 PUT, entry at $4.65

Annotated chart:

Entry on May 14, 2010
Earnings July 15, 2010 (unconfirmed)
Average Daily Volume: 68 million
Listed on May 13, 2010

Range Resources Corp - RRC - close 47.97 change -0.79 stop 50.75

Target(s): $46.00, 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: -21%
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 daily chart of this stock looks like spaghetti so I have opted to provide a weekly chart below which removes most of the noise. In summary, the chart looks terrible and appears poised to break down from here. The stock remains below all of its daily SMA's along with several downtrend lines and broken uptrend lines. To me the trade is simple at this point. I'm not looking to hit a home run, rather I want to book a nice profit. I am suggesting readers take profits when RRC trades down to the levels listed on the chart and in the targets above. $45 is the target I am focusing on. Conservative traders should consider $46 as a point to take profits. If we can exit at around $45 this week our calls should be worth about $1.40 which will be a nice gain. *NOTE: We chose further out of the money options than usual to reduce risk in the trade. Please use small positions due to the volatility in this stock and the recent sell off in oil looks oversold.

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

Annotated Weekly Chart:

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 35.11 change -0.30 stop $37.05

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: -9%
Time Frame: 1 week
New Positions: Aggressive traders only

Anyone who has bought SINA in the grey shaded area on the chart below has to be wondering why they have held onto their positions and I believe this overhead congestion will continue to be a drag on the stock. However, there are always turning points in stocks so we can't get too confident here. But I am sticking with the thesis that this stock goes lower with the overall market. SINA has formed a downward channel on the daily chart (see dashed red lines) and as soon as it gets moving towards the bottom of this channel I suggest readers take profits. Our first target of $33.25 was hit last week but this is not a bad place to consider taking profits again. $32.50 is another support area just below which is where I also suggest readers take profits. Our stop is $37.05. SINA may bounce with the overall market early this week but I expect the overhead resistance and congestion to hold. With all that being said SINA reports earnings on Monday after the bell. I have rules but rules are meant to be broken on occasion. In this circumstance I think the overall news driven market and ensuing weakness may be too much for SINA's earnings to really matter that much, even if they are better than expected. And many stocks have sold off after earnings lately regardless of their results. Officially, I anticipate holding this position over earnings, unless there is a big flush on Monday to 33.25. Traders who are uncomfortable holding the position over earnings should exit on Monday to protect capital. We have stops in place so if SINA does rally we'll get taken out for a loss.

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

Annotated Chart:

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 33.68 change -0.82 stop 36.35

Target(s): 32.50, 31.50, 30.25
Key Support Areas: 33.25, 32.40, 31.30, 30.00
Key Resistance Areas: 34.60, 35.10, 36.30
Current Gain/Loss: +14%
Time Frame: 1 to 2 weeks
New Positions: Yes

TPX was stubborn this week and tested our will but things appear to be going in the right direction now. The stock made a double top on Thursday and quickly retreated. It also found support around $33.25 on Friday which is a key support level over the past 3 weeks. I have listed this as potential exit target. I suggest readers consider selling a portion of their positions at this level to lock in some profits. Ultimately I think TPX visits $31.50 fairly quick and easy, but when we buy options we need to book profits when we can as time is not on our side. We may see a relief bounce in TPX early this week but I want to be patient too because I don't think the below support is very strong. At the same time I don't want to sit around and wait for the support to break so we may be adjusting targets and stops as the week develops. At the end of the day we are in no man's land and in the middle of a congestion area from the past 3 weeks. In the coming days we should know what we need to do.

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

Annotated Chart:

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


JP Morgan - JPM - close 39.89 change -0.92 stop 39.50

Target(s): 40.50, 41.25, 42.25, 43.00, 44.70, 46.50
Key Support Areas: 39.25, 40.50, 39.75
Key Resistance Areas: 42.05, 43.75, 45.00, 47.00
Current Gain/Loss: -47%
Time Frame: 1 to 2 weeks
New Positions: No

The market weakness and headline risk was simply too much for JPM, and banks in general, to overcome this week. Stories started surfacing mid week concerning their influence on ratings agencies in their mortgage-backed securities dealings. Our trade simply fell apart and our stop was hit. On Thursday the stock closed right at Wednesday's low and pierced the entire wick of that candlestick. This is normally a bearish signal which to me was the writing on the wall. JPM blew right through a key pivot level at $40.50 dating back to August 6th. The stock has also tested last week's lows while the indexes have not. JPM may be leading here and if so, I don't want to be involved on the long side. Inevitably there will be some sort of relief bounce this week. But I wouldn't hold your breath for any significant rally to hold very long. For readers who may still have positions I have listed several lower targets to help manage exits. These are below overhead resistance levels. I do not think it is prudent to hold this option position for an extended period as time decay will start to chip away at the premium you paid for. We are flat the position at $1.05 for a -47% loss on the calls.

Closed Position: JUNE $42.00 CALL at $1.05, entry was at $1.95

Annotated Chart:

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


Powershares QQQQ Trust - QQQQ - close 46.93 change -0.92 stop 49.60

Target(s): 46.80
Key Support Areas: 46.75, 46.25, 45.75
Key Resistance Areas: 47.20, 47.80
Current Gain/Loss: +80%
Time Frame: 1 to 2 weeks
New Positions: No

I liked the QQQQ set up but didn't think our target would be hit in 2 days, but I'm not complaining either. We'll take our gain and look to reload on bounces into resistance. We are flat June $48 PUTS at $2.25 for a +80% gain. This gain more than offsets our losses on JPM. I anticipate some sort of relief bounce early this week so if readers still have positions the decision is whether or not to hold through the bounce. It could work but with options it is important to book gains when you have the opportunity. If the market gets a bounce and chops sideways time decay will start eating away at your premium and you will get frustrated, which is not good when you own options. So don't let the position get away from you and be sure to protect profits. I have listed several support/resistance areas above which you can use as a guide to place stops or exit positions when opportunities present themselves.

Closed Position: JUNE $48.00 PUT at 2.25, entry was at $1.25

Annotated Chart:

Entry on May 13, 2010
Earnings N/A
Average Daily Volume: 100 million
Listed on May 12, 2010