Editor's Note:

Good evening. Considering the critical level where the S&P 500 sits, tomorrow morning's employment report is shaping up to be a significant event that should give us clues about the immediatie direction of the market. The talk all day has been how the numbers will turn out with Goldman Sachs even raising their estimates from 500,000 new jobs to 600,000 new jobs. In addition, VP Biden was caught saying the numbers were going to beat expectations yesterday. The bottom line is that it doesn't matter how good or bad the report is. What really matters is how the market reacts to the numbers.

The report could blow out expectations and the market could still sell-off. My concern is that the expectations are now so high that a sell the news event could spark a move lower, especially after Wednesday's rally as the better than expected numbers could already be baked in. We may even get a spike higher tomorrow morning and tank later, similar to last Friday. Its anyone's guess at this point but I remain in the camp that the S&P 500 is due for another leg higher before a bigger fall later, probably in July. But the leg higher will not come in one trading day and we could also go lower prior to going higher. The S&P 500 is still below its 200-day SMA (1,106) and 20-day SMA (1,111) so the bottom line is that until we break out above 1,111 or below 1,070 we are in no man's land as evidenced by the choppy trading lately.

As such, I am inclined and suggest to readers to be quick to tighten stops tomorrow on any strength (assuming there is strength) with the anticipation that your long positions will be closed or stopped out, regardless of whether listed targets are achieved. The aforementioned levels are the areas of the S&P 500 that could be reversal points so I suggest paying close attention to the SPX or ES futures and be ready to harness profits should things begin to turn. It is always best to sell into strength rather than weakness. Nothing would make me more happy than to see our positions hit targets and book profits going into the weekend, even if it means we are flat going into next week. And if the S&P 500 breaks out above these levels it will most likely turn back to retest them which we will use as a reference point to initiate more long positions. Having a narrow portfolio in this environment is the prudent approach, especially if you can not trade intraday. I'll be back this weekend with 3 or 4 more new plays and ready to take what the market gives us. Good luck and feel free to email me with any questions.

Current Portfolio:

CALL Play Updates

Diana Shipping, Inc - DSX - close 13.44 change -0.22 stop 12.90

Target(s): 14.00, 14.35, 14.75
Key Support/Resistance Areas: 15.00, 14.40, 14.15, 13.50, 13.25, 13.00
Current Gain/Loss: -10%
Time Frame: 1 to 2 weeks
New Positions: Yes

I couldn't find any specific news that caused DSX to sell off today but when the stock traded down to our $13.25 support level buyers stepped in and the stock closed well off of its lows. DSX needs to break above its 20-day SMA and if it does we will have nice returns. Ultimately, $14.35 is our original target which is just below the stock's 50, 100, and 200-day SMA's. This is the area I will be looking to take profits. The stock also has resistance at $14.15 which is why I have also listed $14.00 as a lower target. I would expect some resistance here and is also a good place to tighten stops.

Current Position: July $12.50 CALL, entry $1.55

Entry on 5/28/10
Earnings Date More than 2 months (unconfirmed)
Average Daily Volume: 1.4 million
Listed on 5/27/10

Qualcomm Inc - QCOM - close 36.47 change +0.45 stop 33.45

Target(s): 36.45 (hit), 36.95, 38.00, 38.95
Key Support/Resistance Areas: 37.50, 37.00, 36.25, 35.25, 34.50
Current Gain/Loss: +36%
Time Frame: 1 to 2 weeks
New Positions: No

QCOM continued its bounce today and closed just above its 20-day SMA. Our first target of $36.45 was hit and our current gain in the position is +36%. This is a good place to tighten stops to protect profits. For now, I'm keeping our original stop in place due to the volatility but a tighter stop could be placed below today's low which gives QCOM room to continue higher. Tomorrow's employment report is sure to move the markets and if they surge higher I suggest readers consider taking profits or using tight stops to protect against a reversal. If they surge lower protect the profits we have. The targets and support/resistance areas above can be used as a guide to exit positions. Ideally, I'm looking for our $38.00 target to be hit but tightening stops on the way up is the prudent thing to do. Our next target of $36.95 is an area where I would be inclined to take profits.

Current Position: July $36.00 CALL, entry at $1.30

Entry on 6/1/2010
Earnings Date 7/21/2010 (unconfirmed)
Average Daily Volume: 26 million
Listed on 5/29/10

Quest Software - QSFT - close 20.02 change +0.76 stop 18.40

Target(s): $19.60, 20.50, 21.00
Key Support/Resistance Areas: 18.60, 19.36
Time Frame: Several weeks

QSFT gapped higher this morning and never looked back. I would not be chasing the stock up at this level unless it is an intraday trade or you are using a tight stop and monitoring the position. I suggest patiently waiting for a throwback to our trigger near $19.00. This level is above the recent breakout of resistance at $18.70 and the highs from 5/20, 5/21, and 5/26. If QSFT trades down near $19.00 I am confident the prior resistance will hold as support. The stock traded up to $18.87 in 12/2007 which adds to the thesis as this level holding. My comments remain valid from the play release last night. QSFT is relative strength play that is involved in virtualization software and cloud computing, among other things. These stocks have done extremely well as the market has been under pressure over the past month. QSFT has recently broken out of a resistance level near $18.60 to $18.70 which has acted as support the last couple of days. The stock made new all time highs on 5/19 and if the market can continue its bounce from today I expect QSFT to make new highs again. I have also noticed unusual option activity picking up in the July strike prices and above average volume, both bullish signals. I would like to see QSFT pullback near the $19.00 level which we will use as a trigger to enter long positions. With all of that said I want to keep a tight leash on the trade with a stop at $18.60 to protect capital if things reverse lower. I am also choosing a $20.00 out of the money call option to limit capital at risk.

Suggested Position: July $20.00 CALL if QSFT trades down near $19.00

Entry on June xx
Earnings Date 8/10/10 (unconfirmed)
Average Daily Volume: 1.9 million
Listed on 6/2/10

Rino International - RINO - close 13.23 change +0.62 stop 12.55 *NEW*

Target(s): 13.25 (hit), 13.65 (hit), 14.00, 14.50, 15.95, 16.90
Key Support/Resistance Areas: 15.00, 14.50, 13.75, 12.75, 11.75
Current Gain/Loss: +7%
Time Frame: One week
New Positions: No

RINO ripped higher this morning trading up through our first two targets before retreating. I mentioned yesterday that $13.65 was a potential stall point for RINO and that's what happened. This was also near our resistance level listed above and is also RINO's highs from last Friday. Ironically, the SPX also stalled at the highs from last Friday as well. Further, RINO is approaching a downtrend line on the daily chart. All of these factors should have been enough to close the position but I'm suggesting we tighten our stops and see what happens tomorrow. The option price is simply not giving me enough to call it quits yet. Let's move our stop up to $12.55 which is below yesterday's close. This should give RINO enough room to run higher if that is what the market ultimately wants to do. There are several targets listed above readers can use as a guide to exit positions or tighten stops. I'm still eyeing $13.65 as a potential stall point again for RINO but if the broader market continues higher we could see a nice rally. If not, we will be taking a small loss. $13.65 is still a logical place to at least tighten stops or take some profits off of the table. If RINO can't make it through this level tomorrow I suggest exiting positions. Fundamentally, RINO trades at a low PE ratio of about 5 and I think there is a lot of room to for this stock to run which is why I want to give this more time.

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

Trina Solar - TSL - close 17.52 change +0.48 stop 16.45

Target(s): 17.45 (hit), 17.95, 18.20, 19.00
Key Support/Resistance Areas: 16.55, 17.25, 18.50, 19.00, 20.00, 21.00
Current Gain/Loss: +0.00%
Time Frame: 1 to 2 weeks
New Positions: Yes, with a tight stop

TSL gapped higher and almost hit our 2nd target today before reversing, closing the gap, and then proceeding higher again. The whipsaws are frustrating but I think TSL will make it to its declining 20-day SMA which is the point I suggest taking profits on this trade. This could happen quick so I suggest pulling the trigger or come up with your exit strategy and don't look back. Our third target has been lowered to $18.20 to account for the declining 20-day SMA.

Current Position: July $18.00 CALL, entry at $1.50

Entry on 6/1/2010
Earnings Date 7/21/2010 (unconfirmed)
Average Daily Volume: 5.4 million
Listed on 5/29/10