CALL Play Updates
Human Genome Sciences - HGSI - close 26.36 change +0.54 stop 23.95
Target(s): 26.60, 27.05, 27.55
Key Support/Resistance Areas: 28.00, 27.10, 26.60, 25.00, 24.25
Time Frame: 1 to 2 weeks
7/26: HGSI came within 7 cents of hitting our trigger to enter long positions. We are having trouble getting into positions as the stock's are nearly missing our triggers. HGSI has an upward tend line from its 7/1 lows and I think the stock will turn back to touch it in the comings days. I'm keeping the set-up and trigger the same.
7/24: HGSI broke and closed above its primary down trend line that began on 4/13. The stock has made a higher low and has convincingly broken above its 20-day and 50-day SMA's. I suggest we initiate long positions on weakness in the stock. I expect a pullback somewhere between $25.50 and $25.10. Officially, we'll use $25.50 as a trigger with a stop at $23.95 which is below the upward trend line and the 50-day SMA. I believe HGSI should trade up to its 200-day SMA near our second target of $27.05. Our first target is $26.60 which can be used an area to begin tightening stops.
Suggested Position: September $26.00 CALL, current ask $2.25, estimated ask at entry $2.08
Entry on July xx
Earnings Date 10/25/10 (unconfirmed)
Average Daily Volume: 4.2 million
Listed on 7/24/10
ProShares UltraShort 20 YR Treasury - TBT - close 36.52 change +0.10 stop 34.25
Target(s): 37.50, 39.40, 40.50, 41.95
Key Support/Resistance Areas: 42.00, 41,00, 39.70, 38.25, 37.55, 34.65
Current Gain/Loss: -4%
Time Frame: Several Weeks
New Positions: Yes
7/26: TBT was initiated at the open. The ETF is finding some resistance at its secondary downtrend line but it appears it is only a matter of time before this is broken and TBT breaks to the upside. My comments from the play release remain the same.
7/24: I think bonds are way overvalued and are due for a correction. TBT is an leveraged inversely correlated instrument. Typically bond prices move opposite of stock prices, i.e. as the stock prices decline prices of bonds generally move higher and bond yields move lower, and vice-versa. So a long play in TBT is a bet that bond prices will decline and bond yields will rise which means that money will be flowing out of the bond market and probably into the stock market. In general, bonds are slow movers so TBT gives you more bang for your buck and is highly liquid with average daily volume of about 8 million shares. TBT mad a double bottom on 7/1 and 7/21 and I believe it is poised to move higher. The ETF closed above its 20-day SMA and a prior resistance level at $36.30. TBT has a downtrend line to deal with but I am not expecting it to experience too much trouble here. Our immediate target is $37.50 which near a prior resistance level and just under the ETF's 50-day SMA. TBT will probably find resistance there and when it finds its footing and moves higher we will have a reference point to trail the stop higher. My intention is that this trade could last several weeks and I think TBT could make a run up to its October 2009 lows which is near $42.00. Interest rates are at all time lows and I just don't see them going any lower which will bode well for a long position in TBT. Our stop is $34.25 which is below the YTD lows. NOTE: If there is weakness in equities early this week TBT will probably pullback so patience is most likely needed. A lower entry could be considered in the $36.00 area but I'm not certain we will get it.
Current Position: September $37.00 CALL, entry was at $1.23
Entry on July xx
Earnings N/A (unconfirmed)
Average Daily Volume: 3.8 million
Listed on July 24, 2010
ProShares Ultra Basic Materials - UYM - close 31.15 change +0.45 stop 27.20
Target(s): 30.35, 31.20,
Key Support/Resistance Areas: 31.30, 30.50, 29.00, 28.00, 27.25
Time Frame: 1 weeks
7/26: My comments from 7/24 have not changed. We are looking for UYM to retrace some of its recent gains prior to entering long positions with a trigger of $29.10.
7/24: UYM came within 30 cents of our trigger to enter long positions. This market has a knack for not letting traders into positions and UYM continued motoring higher on Friday. The ETF is near a support/resistance area at $30.50 and I believe it will turn back towards the $29.00 level to gain steam before eventually breaking above Friday's highs. The fact of the matter is that there are probably a lot of people still "holding the bag" from the mid June swing highs (or before) and that overhead supply needs to be worked off before UYM continues higher. This is why it is higher risk to chase it at these levels unless you are trading intraday and using a very tight stop. So the question is how far will it pullback and what is the ideal entry point? UYM has intraday support at $29.30 down to $28.80. If these levels break the next level of support is down at $28.00 which is also near the 50-day SMA. These are three entry levels I suggest readers use as a guide to enter positions. Officially, we are going stick with $29.10 as our trigger. This will be a throwback to the middle of the developing upward channel and is also just above a key pivot level for UYM dating back November 2009. UYM may even push up to its 200-day SMA before turning down but in the end I think patience will pay off. I've adjusted the strike price to September $30.00 calls.
Suggested Position: September $30.00 CALL, current ask $3.30, estimated ask at entry $2.20 (I suggest entering this position with a limit order between the bid/ask spread. Try to enter at no more than 5 to 10 cents above the middle of the bid/ask spread)
Entry on July xx
Earnings Date N/A (unconfirmed)
Average Daily Volume: 1.9 million
Listed on 7/22/10
PUT Play Updates
Costco Wholesale - COST - close 55.71 change -0.24 stop 57.25
Target(s): 55.40, 54.80, 54.30
Key Support/Resistance Areas: 56.80, 55.60, 54.25, 53.40, 51.50
Current Gain/Loss: -5.4%
Time Frame: 1 week
New Positions: No
7/26: My comments from 7/24 have not changed. COST drifted lower the entire day and traded to within 5 cents of our first target above before bouncing. We are looking for a pullback in the broader market and COST should easily trade towards our revised targets giving us the chance to exit a winning position.
7/24: COST traded to $55.50 which triggered our entry for short positions. There is intraday resistance right at this level plus a downtrend line from 6/15 so this is a logical spot for COST to retrace some of the gains from the past two days. COST has now had two powerful rallies since 7/7 off of the $53.50 support level (i.e. double bottom). There is obviously a lot of support at this level and I just don't see it revisiting those lows for awhile. As such, we need to adjust so I suggest we stay nimble on this trade and begin looking for an exit. I have adjusted our targets above to use as a guide to tighten stops or simply take profits. I am looking for a small gain on this trade, nothing more. At a minimum COST should turn back to test its 20-day SMA near $55.40. Our next targets are $54.80 and $54.30. I expect the broader market to be weak early this week which should get COST moving towards these targets.
Current Position: September $55.00 PUTS, entry was at $1.48
Entry on July 23,2010
Earnings 10/7/10 (unconfirmed)
Average Daily Volume: 3.76 million
Listed on July 20, 2010