Editor's Note:

Good evening. We were able to close TEVA today for a slight gain but were stopped out of IACI for a loss. We initiated RINO and it performed well. The extreme volatility is causing our trades to be much quicker than we anticipated which is simply unavoidable due to the circumstances. We have taken some losses this week so we've regrouped and have released a few trades with potential, and will be releasing more plays this weekend. Please email me with any questions.

Current Portfolio:

CALL Play Updates

Rino International - RINO - close 13.31 change +0.93 stop 11.70 *NEW*

Target(s): 14.00, 14.50, 15.95, 16.90
Key Support/Resistance Areas: 13.75, 13.30, 13.00, 12.75, 11.75
Current Gain/Loss: +14%
Time Frame: Several weeks
New Positions: Yes, if there is a pullback to support

RINO gapped higher this morning but quickly pulled back to $12.68 which was very close to a key support/resistance area of $12.75 listed in the play release. This was enough for us to get long July $12.50 CALLS at $1.50. Traders can enter positions on pullbacks but I do not suggest chasing the stock, rather be patient and use the support areas above as a guide. I've also listed a target of $14.00 which is near the stock's 20-day SMA as a potential stall point for RINO. Traders who have positions may want tighten stops at this level to protect profits. I'll leave my comments from last night's play release. RINO has been taken out to the woodshed recently and I believe it is due for a turnaround. The stock appears to have found support in the $10.75 area which dates back to prior support in August 2009 and prior resistance in June of 2008. The stock bounced nicely off of this level and followed through nicely. In addition, the stock trades at a ridiculously low PE ratio of about 5. I think there is a lot of room to for this stock to run and I suggest readers take advantage of the building momentum. I think we can make $2 in this trade but there could be some volatility so please use proper position to manage risk.

Current Position: July $12.50 CALL, entry at $1.50

Entry on May 27, 2010
Earnings Date More than 2 months (unconfirmed)
Average Daily Volume: 926,000
Listed on 5/25/10, 2010

Walter Energy - WLT - close 80.05 change +4.85 stop 71.95 *NEW*

Target(s): 77.25, 80.95
Key Support/Resistance Areas: 81.00, 79.00, 77.75, 74.50, 72.50
Current Gain/Loss: N/A
Time Frame: 1 week
New Positions: Waiting to be triggered

WLT gapped higher again this morning and has almost ran through both of our targets. The stock has gained +25% since Friday lows. This can't go on forever and I am expecting a pullback. If WLT trades down near $75.25 I would like to enter positions. One bad day in the market could get us triggered and I suggest taking advantage of the weakness if that happens. So we will wait patiently for the trade to come to us and not jump the gun. The new entry would be a back test of the stock's 20-day SMA that I think will hold. I believe the recent sell off in coal stocks was overdone and they are building momentum. WLT has retaken its 200-day SMA and 20-day SMA, but I would like to see some retracement in the recent gains before entering long positions. If triggered, I am looking for a move up to $80.95. I view this trade as aggressive and quick so please use small position size to manage risk.

Suggested Position: June $75.00 CALL if WLT trades down near $75.25

Entry on May xx
Earnings Date: More than 2 months (unconfirmed)
Average Daily Volume: 3.4 million
Listed on 5/25/10

PUT Play Updates

The Gymboree Corporation - GYMB - close 45.01 change +0.95 stop 46.60

Target(s): 42.90, 42.40, 40.25
Key Support/Resistance Areas: 46.30, 46.00, 44.00, 43.60
Current Gain/Loss: -2%
Time Frame: 1 to 2 weeks
New Positions: Yes

GYMB traded up to our entry point of $44.90 so we are long July $45 PUTS at $2.95. The stock keeps getting knocked down on any rally attempt and remains below its 200-day SMA. Some market weakness would do wonders for our position. But if the market continues to rip higher from here this could be a short lived trade. We have a fairly tight stop on this trade to limit risk and also a realistic targets. I've listed another target at $42.90 which is a place to consider exiting. We should know fairly quickly the direction of this trade. My technical comments from the play release have not changed. GYMB is forming a bearish pennant and I believe it will break lower. Retailers have been offering weak guidance for the remainder of 2010 and I think it is a matter of time before more selling starts. I would like to enter short positions if GYMB trades up near the $44.90 level. The pennant also provides a good reference point to place a protective stop at $44.60 which is above the 100-day SMA. GYMB has also been finding resistance at its 200-day SMA. NOTE: the bid/ask spread on GYMB options is a little wide. Place a limit order between the two and you should get filled.

Current Position: July $45.00 PUT, entry at $2.95

Entry on May 27, 2010
Earnings More than 2 months (unconfirmed)
Average Daily Volume: 1.1 million
Listed on May 22, 2010


Teva Pharmaceuticals - TEVA - close 55.70 change +1.40 stop 53.75 *NEW*

Target(s): 55.30 (hit), 56.44 (hit), 57.40, 57.95
Key Support Areas: 54.85, 54.25, 53.21
Key Resistance Areas: 55.75, 56.44, 58.00
Final Gain/Loss: +5.8%
Time Frame: 1 to 2 weeks
New Positions: Closed

We were able to exit TEVA today per last night's update for a small gain as the stock rallied and hit our $55.30 target. TEVA is now testing its 200-day SMA below so there could be a pullback. Once the dust settles from my comments below we may consider reentering the trade. I'll leave my comments from last night as the reason we exited this position early. We need to re-think our TEVA position as news broke today regarding Morgan Stanley removing Israel from its emerging markets index and adding it to its world index. I was surprised TEVA did not follow through higher today and was trying to find out what was going on, but to no avail. Then I heard Jim Cramer on CNBC talking about TEVA. TEVA is based in Israel so this is significant. Here is what he had to say and what is posted on CNBC's Web site: TEVA is "a great opportunity" right now, Cramer said. TEVA, a generic and proprietary drug company, was down about $1.90, or 3.4%, in today's trading session, but not because there's anything wrong with the company. As of Thursday, Morgan Stanley will remove Israel from its emerging-markets index and add it to its world index. As a result, funds that track Morgan's emerging-markets index have been forced to sell the stock, and that has hurt the share price. Cramer is still bullish on TEVA, citing its acquisition of Ratiopharm and ability to withstand the pressure from Europe right now. He expects the stock to pick back up "over time" as the funds that track Morgan's world index begin to buy the stock.

The key quote to this statement is "he expects the stock to pick back up over time." I also do not know how quickly the transition will take from one fund to another. But I know one thing for sure and that is time is not on our side when owning options. Our +50 gain yesterday has been wiped out and is now down -15%. Considering the circumstances the smart thing to do is exit TEVA tomorrow and wait for the dust to settle. I've listed 3 lowered targets above as logical exit points. All of these targets are within today's price range and I urge readers to tighten stops at these levels, assuming we hit them. And I have also listed a new stop at $53.75 to limit downside risk. Our initial first target was hit yesterday so if readers happened to exit congratulations. Technically TEVA has support and holding an upward trend line, but when institutions are involved these don't really matter.

Closed Position: June $55.00 CALL at $1.80, entry at $1.70

Annotated Chart:

Entry on May 25, 2010
Earnings Date: More than 2 months (unconfirmed)
Average Daily Volume: 3.7 million
Listed on 5/24/10


IAC/Interactive Corp - IACI - close 22.57 change -0.04 stop 23.10

Target(s): 22.50, 21.40, 20.90, 20.50, 20.05
Key Support Areas: 22.40, 21.15
Key Resistance Areas: 22.90
Current Gain/Loss: -47%
Time Frame: Several Weeks
New Positions: Yes, with tight stop

Well, I was completely wrong on this short play and we are out of the position for a loss as our stop was hit today. IACI has rallied +10% off of its lows on Monday and has broken through its 20, 100, and 50-day SMA's, and its downtrend line from April 28, all in 4 short days. It was like these levels weren't even there. That's enough for me to get out of the way and salvage the $0.40 that's left in the option premium. If readers still have positions you could place a new stop above today's highs. I've also listed a new target of $22.50 which is just above today's lows.

Closed Position: June $22.50 PUT at $0.40, entry was at $0.85

Annotated Chart:

Entry on May 24
Earnings More than 2 months (unconfirmed)
Average Daily Volume: 1.4 million
Listed on May 22, 2010