Editor's Note:

Good evening. We closed SINA today for a loss and RRC for a gain. I suggest readers consider closing short positions on weakness tomorrow. S&P futures are down almost -10 points as I write this but this is creating an oversold market and we must be smart in taking profits when the opportunity presents itself. That time could be tomorrow morning. There is inevitably going to be a relief rally and we have good quality longs to take advantage of the bounce. I'm still focused on an S&P range in the 1,115 to 1,155 area (lowered from 1,170 after today's sharp reversal). However, I also continue to believe there is much more downside risk than upside opportunity so staying nimble is paramount. This environment remains difficult to manage swing trades but the important thing is we are booking more profits than losses in our model portfolio. Please email me with any questions.

Current Portfolio:

CALL Play Updates

Becton Dickinson & Co. - BDX - close 74.30 change +0.52 stop 72.20

Target(s): 77.50
Key Support Areas: 74.00, 72.50
Key Resistance Areas: 75.65, 76.70
Current Gain/Loss: +0.00%
Time Frame: Several weeks
New Positions: Yes

BDX gapped higher this morning and then sold off right into $74.25 which was the maximum price we wanted to enter CALL positions. As such, we are now long June $75 CALLS at $1.55. The stock hung in fairly well considering the overall market's descent. Our position is breakeven. I'll leave my technical comments from the play release as they have not changed. BDX got some publicity after hours on Monday as news came out that Berkshire Hathaway initiated a large stake in the company last quarter. I like the stock at these levels and believe it will trade up to the $77.50 area which is our target and near the 50-day SMA. BDX's prices have been coiling and it is sitting near an upward trend line that started on 5/5/09. The stock has a ways to go to get up to the downtrend line which sits near $79.00. I also believe this is a good defensive play that will do well if there is a relief rally in the broader market or a sideways consolidation. The stock is near a key pivot level at $74.00 dating back to early 2008 which should act as support if BDX can push up through. I suggest readers initiate long positions at no more than $74.25. BDX traded at $75.00 in the after market so be patient and wait for the pullback near $74.00. Our stop is $72.20 and our time frame is several weeks.

Current Position: JUNE $75.00 CALL, entry at $1.55.

Entry on May 18, 2010
Earnings Date More than 2 months (unconfirmed)
Average Daily Volume: 1.6 million
Listed on May 17, 2010

Celgene Corp. - CELG - close 58.00 change -1.76 stop 56.90

Target(s): 62.95
Key Support Areas: 58.00, 57.00
Key Resistance Areas: 60.00, 61.25
Current Gain/Loss: -28%
Time Frame: Several weeks
New Positions: Yes

CELG has been oscillating between $58 and $60 since last Monday. As soon as CELG hit $60 early this morning the trap door swung open and the stock immediately traded down to $58 which is where it closed, down -2.95%. Buyers stepped in but the bounce was quickly sold into. CELG now finds itself sitting at horizontal support and an upward trend line from its February lows. The support looks solid at this level but it needs to bounce from here and get back above its 20-day SMA or our position could be in jeopardy. If the support breaks and things fall apart our stop is in place, which is $56.90 and below the April 22 low.

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

Steel Dynamics - STLD - close 14.50 change -0.36 stop 14.15

Target(s): 16.25, 16.80
Key Support Areas: 14.50, 14.25
Key Resistance Areas: 15.50, 15.85
Current Gain/Loss: -18% Time Frame: About 2 weeks
New Positions: Yes

STLD gapped higher at the open and quickly sold off with the remainder of the market. This gave readers a chance to initiate CALL positions once the gap was filled at about 85 cents. If you were patient and did not enter call positions due to the overall market weakness I think now is good time to consider it with a tight stop. My technical comments from the play release remain the same. STLD finds itself right at the its long term support area at $14.50. $14.25 is also a support level. STLD has been trading in a sideways channel between $14.50 and $18.00 for the past 9 months and finds itself at the bottom of the channel (see dashed lines on chart in the new play release). There have been times when the stock has peaked its head above and below the channel but these are key pivot levels that have been fairly reliable. In addition, the $14.50 price level is converging with an upward trend line that started on 7/8/2009 and we have a good reference point to place a stop just below these levels. I am looking for a relief bounce in this stock and the overall market and I suggest readers initiate call positions at current levels. Our first target is $16.25 which is about +9% higher than current levels. Our time frame is about 2 weeks. I also like the 2:1 risk reward ratio of this trade: we are risking about 70 cents to make $1.40.

current Position: JUNE $15.00 CALL, entry at $0.85.

Entry on May xx at $xx
Earnings Date More than 2 months (unconfirmed)
Average Daily Volume: 6.7 million
Listed on May 17, 2010

PUT Play Updates

Baidu, Inc. ADR - BIDU - close 71.57 change -1.61 stop 79.10

Target(s): 71.50 (hit), 65.10
Key Support Areas: 71.40, 68.50, 65.00
Key Resistance Areas: 75.64, 78.50, 82.25
Current Gain/Loss: +16%
Time Frame: Several Weeks
New Positions: Yes

BIDU hit our first target of $71.50 today. Conservative traders may want to exit positions at current levels or on any further weakness to protect profits. BIDU looks vulnerable from here but if there is a bounce in the overall market we may endure a little pain before it heads back down. We need BIDU to break and close 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 23.83 change -0.35 stop 25.35

Target(s): 23.00, 22.25
Key Support Areas: 23.75, 23.42, 23.00
Key Resistance Areas: 24.75, 25.15
Current Gain/Loss: +13%
Time Frame: Several Weeks
New Positions: Yes

LEG gapped higher this morning near our key resistance level of $24.75 and then sold off the remainder of the day. On the intraday charts LEG may be forming a bullish inverse head and shoulders pattern. If the market is strong tomorrow this is probably going to bode well for LEG. If not, the pattern will probably fail. Our position is up +13% right now but we may have to live through a bounce for LEG to ultimately reach our target. From a bearish perspective LEG is piercing the bottom wick of yesterday's price bar and also closed below its 20-day SMA. And LEG is still below its downward trend line which started on April 30. However, we need LEG to break through $23.75 and yesterday's low of $23.42 to keep things moving in the right direction. I am going to list a new first target of $23.00 which is just above the stock's 50-day SMA and the low on May 10. If LEG breaks $23.42 support we should see the 50-day SMA in short order but I wouldn't try to squeeze out the remainder of the gap between $23.00 and the 50-day SMA. Rather, I suggest readers take profits or tighten stops to protect profits. Our CALL position should be worth about $2.40 if LEG trades down here which would garner a +50% gain. I suggest taking profits here and not holding through any bounce.

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: +32%
Time Frame: A couple of days
New Positions: Closed

After gapping higher at open RRC sold off with the remainder of the market and ultimately hit our target of $46.00 for the second time. When RRC could not close a 15 minute bar over the first bar the stock sold off hard the remainder of the day. We are flat the position for a decent gain of +32% and are ready to move on to other opportunities. This position tested my patience and I am glad to exit. For readers who may still have positions you may get lucky tomorrow as the after market is currently under pressure. I suggest not getting too greedy though and take profits on any further weakness. I'll leave my comments from last night as they are still valid. 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 placed 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 at $1.25, entry was at $0.95

Annotated 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 37.57 change +2.72 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: -50%
Time Frame: 1 week
New Positions: Closed

Ouch! I broke my rules and paid for it with SINA. SINA reported earnings after the bell that were better than expected but their Q2 revenue forecast was lower than consensus estimates. The forecast didn't seem to matter as investors piled into the stock. I am frustrated with the way I managed this trade. Essentially I let a winner turn into a loser, did not take profits when we hit our target of $33.25, and decided to hold the position over earnings. All mistakes that I typically avoid and it reinforces the importance of following rules. But its not the end of the world and the recent winners we have booked eases some of the pain. In any event, we'll pick ourselves up, note the mistakes, and look for better opportunities. Every trade can't be a winner.

Closed Position: JUNE $35.00 PUT at $1.10, 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