Editor's Note: Good Evening. I think the S&P 500 may have a little more upside left, but not too much until it runs into formidable resistance. The 61.8% retracement from the April highs to May lows is at 1,150, while the 50% retracement is at 1,130. There is also the 50-day, 100-day, and 20-week SMA's all in the 1,130 to 1,140 area. I anticipate all of these levels holding as resistance before we see more downside in the markets. As such, I am starting to position the model portfolio with more bias to the short side, especially as these levels approach. Current long positions should be managed with tight stops and I suggest being quick to take profits as targets are reached and I have made several adjustments to our long positions. Please email me with any questions.

Current Portfolio:

CALL Play Updates

Cisco Systems - CSCO - close 23.49 change +0.32 stop 22.20

Target(s): 23.55, 24.20
Key Support/Resistance Areas: 23.65, 22.55
Time Frame: 1 to 2 weeks

I'm sticking with our set-up on CSCO and waiting for $22.85. If there is a pullback in the market this a stock I feel comfortable owning and will be looking for a bounce. Hopefully we can get filled this week so let's see what the market gives us. The stock hit a low of $23.05 on Thursday which was another entry for more aggressive traders. CSCO remains in the base it has built for the past 3 to 4 weeks and is trading in a $1 range (4.5%) between $22.55 and $23.55. $22.50 is key pivot level for the stock dating back to 2006. If the stock trades up to $23.80 and breaks higher out of the base that could also be used a trigger to enter for aggressive traders, but until that happens we are playing for a pullback. The remainder of my comments remain the same from the play release. CSCO looks stable here with a lot of support and I suggest we take advantage of the reliable price pattern that is being built. I would like to use $22.85 as a trigger to enter long positions. If triggered readers should be able to purchase July $22.00 calls for about $1.30 (current ask is $1.73). If CSCO then proceeds to rally to the top of its base at $23.55 we should make about 55 cents on the position for a +40% gain. If CSCO breaks out it could rally to fill a gap which is up near our more aggressive 2nd target of $24.40 and below the stock's 200-day SMA. Another entry could be considered at $23.05. Our stop will be $22.20. NOTE: I view this trade as potentially being quick.

Suggested Position: Buy July $22.00 CALL if CSCO trades down near $22.85, current ask $1.73, estimated ask at entry $1.30

Annotated Chart:

Entry on June xx
Earnings Date 8/5/10 (unconfirmed)
Average Daily Volume: 69 million
Listed on 6/16/10

Express Scripts, Inc - ESRX - close 52.02 change -0.72 stop 49.80

Target(s): 53.70, 54.75
Key Support/Resistance Areas: 54.00, 51.25, 50.00
Current Gain/Loss: +3%
Time Frame: Several weeks
New Positions: Yes

ESRX gapped lower on Friday which triggered our entry to buy August $52.50 calls at $2.55. The stock bounced perfectly off of its 20-day and 50-day SMA's. This could also be a logical point for the stock to make a higher low and proceed higher. The early morning weakness was attributed to news in the industry which I wrote about in the market update on Friday and will reprint here: "CVS and Walgreens have settled their differences and signed a new Pharmacy Benefit Manager (PBM) network agreement. On June 7th Walgreens ended participation in CVS's PBM plans, citing that CVS's terms did not fit within their needs. Shares of WAG and CVS are up +3%. ESRX was seen as a primary beneficiary of the fall out between CVX and WAG. As a result of the news ESRX gapped lower this morning and is down -1%." Hmmm, just 12 days after terminating the agreement the companies are now back in cahoots. The news is simply something we can't predict but have to deal with it when it affects our positions. In the end, ESRX is a better stock than CVS and WAG and has been a strong performer despite the market weakness over the past six weeks. So I've adjusted the stop up a bit to $50.30 which is at the bottom of the congestion area and also provided some adjusted targets. These are areas to at least consider tightening stops to protect profits. I'll leave my comments from the play release as they remain valid. The stock has built quite an impressive congestion area between $50.00 and $51.50 since late March and recently broke out printing a new high. The stock is now turning back to retest the key pivot area and I suggest we take advantage of any weakness the stock gives us. In addition, the stock's 20-day and 50-day SMA's are near $51.25 which should provide solid support if the ESRX trades down there. I would like to use $51.90 as an area to initiate long positions. I believe the market will give us this level and allow ESRX to break out to new highs.

Current Position: August $52.50 CALL, entry was at $2.55

Annotated Chart:

Entry on June 18, 2010
Earnings Date 7/29/10 (unconfirmed)
Average Daily Volume: 5.5 million
Listed on 6/17/10

Ormat Technologies - ORA - close 29.67 change +0.06 stop 27.25

Target(s): 30.37, 30.95, 31.80
Key Support/Resistance Areas: 32.00, 30.60, 29.00, 27.50
Current Gain/Loss: -10%
Time Frame: Several weeks
New Positions: Yes

ORA closed above its 50-day SMA for the fourth consecutive day and is forming a bull flag on its intraday and daily charts. I am looking for a move to $30.37 (adjusted first target) this week which is just below the 100-day SMA. This is an area where I suggest tightening stops to see if we can get more out of the stock, or simply taking profits. We should be able to get about $1.30 for the CALLS at this level. If it breaks through the 100-day SMA there is little resistance until our next two targets. Ultimately, I think ORA can make it up to the $31.80 area but it may take some time depending on the overall strength or weakness in the broader market. I suggest readers take advantage of any spikes and take profits on the trade. A strategy to consider would be placing a GTC sell limit order on your option at $1.25, for example, and see if you get filled. ORA has been stubborn to pullback so I wouldn't be surprised to see some sort of retracement before proceeding higher. We are keeping a wide stop to account for volatility and will adjust it this week. If readers want to keep a tighter leash on the trade a stop could be placed below the 20-day SMA or just below our entry price if you want it really tight.

Current Position: July $30.00 CALL, entry was at $1.00

Annotated Chart:

Entry on June 16, 2010
Earnings Date 8/4/10 (unconfirmed)
Average Daily Volume: 345,000
Listed on 6/15/10