Editor's Note:

We closed TPX today for nice gain as it plunged down to our target after breaking support. With our two new long plays and CELG we should be participating in any rally the market offers in the coming days. I am expecting a relief rally in the to potentially close the gap lower from Thursday to Friday. This is about +20 S&P 500 points from today's close. In reality, I think we may be in a sideways consolidation mode for weeks or months which will eventually resolve itself to the downside. The S&P range I'm focused on is 1,115 to 1,170. However, I believe there is much more downside risk than upside opportunity. I urge readers to take profits on positions when they can as getting chopped around is not fun. Stay on your toes.

Current Portfolio:

CALL Play Updates

Celgene Corp. - CELG - close 59.76 change +0.34 stop 39.50

Target(s): 62.95
Key Support Areas: 58.00, 57.00
Key Resistance Areas: 60.00, 61.25
Current Gain/Loss: +3%
Time Frame: Several weeks
New Positions: Yes

CELG opened today and shot right up to $60.00 before immediately reversing down to $58.60. That's when the buying picked sending the stock back up to close near its highs and above its 20-day SMA. Buyers have been stepping into this stock on weakness and I feel it poised to move higher, especially if the overall market can get some legs here. I'll leave my comments from the play release over the weekend. The stock made a nice move on Friday as the overall market was under pressure. The stock also has upward trend line support but that trend line was violated during the plunge on May 6th. Remove that bar and the trend line looks solid. There is some resistance overhead at the 20-day SMA and 50-day SMA but I think the stock can overcome this. I believe the overall market will probably chop around for a few weeks and CELG could catch a bid as a defensive play. Our portfolio is short on long positions and this a good long to have with a good set up. We'll place as stop at $56.90 which is below the low on April 22nd and will adjust it higher if the trade get going in our direction.

Current Position: JUNE $60.00 CALL, entry at $2.58.

Entry on May 17, 2010
Earnings Date: More than 2 months (unconfirmed)
Average Daily Volume: 4.3 million
Listed on May 15, 2010

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: 75.64, 78.50, 82.25
Current Gain/Loss: +1.44%
Time Frame: Several Weeks
New Positions: Yes

BIDU came very close to hitting our first target at $71.50 today. The stock traded down to $71.64 before buyers stepped in. I still think BIDU looks vulnerable from here but if there is a bounce in the overall market we may endure a little pain before its heads back down. We need BIDU to break below $71.50 to get moving towards our final target of $65.10. From a fundamental perspective BIDU trades at a PE ratio of about 100 which makes no sense when compared to its American counterpart GOOG which trades at a PE of about 23. Our stop is $79.10 which is above last Wednesday's high. 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

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

Leggett & Platt, Inc. - LEG - close 24.18 change +0.10 stop 25.35

Target(s): 22.25
Key Support Areas: 23.75, 23.00
Key Resistance Areas: 24.75, 25.15
Current Gain/Loss: -3%
Time Frame: Several Weeks
New Positions: Yes

LEG traded as low as $23.42 at about noon today and our short position was rocking, however, buyers stepped in and the stock closed +3.2% off of its lows. This has created a huge bottom wick on its daily candlestick chart. We are still well below the highs from 4/30 and 5/13 which is the recent downward trend line. Today's price action has me a little concerned but I want to give this some room to develop. I'll leave my comments from the play release over the weekend. LEG is making a lower high on its daily chart and appears overextended at these levels. The stock has upward trend line support below but this support is about -8% lower from current levels. Resistance just overhead includes downward trend line resistance and recent highs at $24.75 and $25.15. I am looking for LEG to trade lower from here to about the $22.25 area which is our target. I suggest readers take advantage of this by initiating short positions in the stock. The overall market looks vulnerable here and LEG probably won't be spared. Our stop is $25.35.

Current Position: June $25.00 PUT, entry at $1.60

Entry on May 17, 2010
Earnings More than 2 months (unconfirmed)
Average Daily Volume: 2 million
Listed on May 15, 2010

Range Resources Corp - RRC - close 46.57 change -1.40 stop 50.75

Target(s): $46.00 (hit), 45.00, 44.00, 42.50
Key Support Areas: 46.00, 45.00, 43.30
Key Resistance Areas: 47.25, 48.40, 49.00, 50.00
Current Gain/Loss: +11%
Time Frame: A couple of days
New Positions: No

RRC continues to test my patience and I am suggesting readers exit positions. Our conservative target of $46 was hit today so anyone who sold positions should have a decent winning trade under ther belt. I thought we were going to hit our $45 target but the stock reversed. We have been whipsawed around over the past week but we have made money and I think it is time to exit here. RRC still remains below a bunch of congestion near $49.00 that I don't think it can overcome, but I can't endure another trip back up to these levels which is why I think readers should take profits here. In addition, oil is definitely oversold and if oil gets some legs and the overall market bounces from here I don't want to be involved in the stock. If RRC is weak at the open we'll trail our stop down and if it is strong we'll exit early. A tight stop could be place at $47.25 if readers want to give this some room to play out. *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

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 34.85 change -0.26 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: -5%
Time Frame: 1 week
New Positions: Aggressive traders only

SINA reported earnings after the bell that were better than expected but their Q2 revenue forecast was lower than consensus estimates. The after hours reaction is fairly muted but it is well off its highs. I'm a little concerned that China's market sold off on hard Monday (-5%) but SINA hung in there relatively well. So if the overall market gets a relief bounce, including Chinese markets, SINA could go against us here. The stock opened at $34 and was immediately bought up to $34.34 which was near our anticipated resistance of $35.40. The stock sold off quickly but was bought up again at the close. I'd like to see how the stock reacts tomorrow and may be looking for a quick exit of SINA trades higher from here.

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 33.88 change +0.20 stop 36.35

Target(s): 32.50 (hit), 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: +50%
Time Frame: 1 to 2 weeks
New Positions: Closed

When TPX broke our key support area at $33.25 it traded right down to our target of $32.50 so we are now flat June $32.50 PUTS at $2.10. We entered at $1.40 so our gain was +50%. The stock spent about an hour and half near $32.50 and at the end of the day retraced all of its losses and squeaked out a gain. Today's price action was very similar to our LEG short position. Maybe the late day action was short covering and if this stock rallies higher from here it is probably a good candidate to short again. I urge readers who still have positions to be careful here and not let this run away from you. I see resistance at $34.60 and $35.10. Placing stops just above these levels is probably a good idea to protect capital.

Closed Position: JUNE $32.50 PUT at $2.10, entry was 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