Current Portfolio:

CALL Play Updates

Human Genome Sciences - HGSI - close 25.94 change +0.78 stop 24.35 *NEW*

Target(s): 25.95 (hit), 26.50, 27.00, 27.50
Key Support/Resistance Areas: 28.00, 27.10, 26.60, 24.70, 24.25
Current Gain/Loss: +4.4%
Time Frame: 1 to 2 weeks
New Positions: Yes

7/30: HGSI printed a bullish engulfing candlestick and gained +3.1% in Friday's session. Our position is now back in positive territory. Our $25.95 lowered target that was added on Thursday for readers who wanted to protect capital was hit on Friday. This level is where HGSI found resistance on Thursday so there could be some give back before the stock makes another attempt to break through it. If there is immediate follow through early next week we should be on the fast path to hitting our targets of $26.50 and possibly $27.50. I suggest taking profits at one of these levels, or at least tighten stops to protect profits. If there is follow though I would also suggest quickly tightening the stop to either $24.70 or $25.25. For now, I have moved it up to $24.35 and plan to tighten it further on any strength.

7/29: HGSI pulled a repeat from yesterday's price action. My comments remain the same except that readers may want to consider adding a $25.95 target to protect capital. This is near today's highs just below Monday's intraday support and HGSI found strong resistance here. It is certainly a good level to consider tightening stops. For now the bullish thesis remains in tact per my comments below but the stock needs to bounce from here.

7/28: HGSI pulled back to its upward trend line and 50-day SMA as mentioned in last night's updates. The stock remains in its upward channel and above its 50-day and 20-day SMA's. I am looking for HGSI to bounce from here and believe this is a good entry point with a tight stop.

Current Position: September $26.00 CALL, entry was at $1.82

Annotated chart:

Entry on July 27, 2010
Earnings Date 10/25/10 (unconfirmed)
Average Daily Volume: 4.2 million
Listed on 7/24/10

ProShares UltraShort 20 YR Treasury - TBT - close 35.85 change -1.10 stop 34.25

Target(s): 36.90, 37.50 (hit), 38.00, 39.25, 40.50, 41.95
Key Support/Resistance Areas: 42.00, 41,00, 39.70, 38.25, 37.55, 34.65
Current Gain/Loss: -23%
Time Frame: Several Weeks
New Positions: Yes

7/30: The price action in bonds on Friday has me scratching my head in amazement. Bond yields tanked and bond prices surged (i.e. money was flowing into the bond market as traders were snatching up bonds at ridiculously low yields) which caused TBT to gap lower and close -2.98% on the day. This was an uncharacteristic huge move and is not normal. What's more interesting is that bonds never gave anything back throughout the day as equities surged higher on Friday morning after their gap lower. One of the two following scenarios has got to give here and the tone should be set in trading on Monday. Either money will flow out of stocks and into bonds creating a big sell off in equities (bad for TBT) or money will flow out of bonds and into equities creating a rally in equities (good for TBT). Medium to longer term I am bearish on equities but in the short term I think the latter is going to happen and we will see stocks rally, or at least hold up, with money flowing out of bonds. This will get our position in TBT moving back in the right direction. I really like new positions in TBT at these levels as well. Looking at a longer term weekly chart of bond prices (i.e. /ZN or TLT) one might think bonds have room to run to their fall 2008/spring 2009 highs. But this was the financial crises and money markets were failing and there is simply no crises like that right now. The other side of that argument is that maybe we are on the verge of a crises and we should listen to what the bond market is telling us. While I believe another crises is bound to happen I'm just not buying that argument quite yet. I believe there can be a sell-off in equities without a surge higher in bond prices or drop in yields. Nonetheless, we have to manage the trade and $36.90 is a level readers may want to consider exiting TBT. This would close the gap lower from today while also booking a winning trade. In the end, I think today's sell-off in TBT was an anomaly that will either be corrected early next week or we are on the verge of a bigger sell-off in equities. Unfortunately, today provided us very few clues as to what will happen. The above targets can be used as guide to tighten stops or simply take profits.

7/29: TBT shot right up to its 50-day SMA this morning and then backed off closing nearly unchanged. The $37.50 to $38.00 area is acting as resistance as I have suspected. I remain bullish on TBT and suggest patience as it works its way through these levels. We've also been suggesting taking some profits off the table to book gains and protect capital and today provided another chance. For options traders, call positions could have sold for about $1.75 on the surge higher today which would have represented about +40% gains. Strength in equities will bode well for TBT so if you believe a big sell-off is pending I suggest protecting profits in this position. $37.50 is still a valid target and I recommend protecting profits if TBT trades up there again. If TBT keeps knocking on the door at this resistance level it should eventually open but there is nothing wrong with booking a gain in these market conditions.

7/28: TBT found resistance right at $37.50 as mentioned in last night's updates and this proved to be a good spot to take a portion of your profits off the table. TBT has intraday support at current levels and all the way down to its 20-day SMA which also corresponds to the backside of the broken downtrend line $36.25. The ETF could pullback down to this area and still be considered bullish. I'm comfortable giving this some room to work and am looking for a better reference point to tighten the stop.

Current Position: September $37.00 CALL, entry was at $1.23

Annotated chart:

Entry on July 26, 2010
Earnings N/A (unconfirmed)
Average Daily Volume: 3.8 million
Listed on July 24, 2010

ProShares Ultra Basic Materials - UYM - close 30.61 change +0.38 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 week

7/30: My comments about a potential double bottom pattern in UYM worked perfectly today. It took a lot of guts to step in and buy anything Friday morning but if you bought UYM you were handsomely rewarded. UYM remains in a bull flag and every time there is weakness in the ETF buyer step in. We've come within 40 cents of our trigger to enter long positions but UYM just won't let us in. UYM will eventually trade to its rising 20-day SMA which should be near our $29.00 entry this week. As such, I'm going keep this play open for a few more days to see if we can get filled and take advantage of the momentum building in the basic materials sector.

7/29: UYM is not letting us in. The ETF hit a low of $29.50 today and bounced hard. This could also be considered as an entry which may set-up a double bottom pattern on another pullback. I'll reevaluate the play this weekend and come up with a game plan. My comments from below have not changed.

7/28: Our trigger to enter long positions at $29.10 is getting close. $29.00 is a key support/resistance area dating back to the fall of 2009 which is why I am sticking with the $29.10 entry price. However, I will also add that the 38.2% retracement from the 7/20 lows to the 7/27 highs is $29.28, the 50% retracement is $28.54, and the 61.8% retracement is $27.78. And the 50-day SMA is near $28.00. All of these areas can be considered as good long entry points but it is a decision that needs to be made as market conditions develop. Conservative traders may want to consider lowering their entry to the $28.55 area but I'm just not certain UYM will make it down there. The broader market strength or weakness will determine how far UYM pulls back.

Suggested Position: September $30.00 CALL, current ask $2.95, estimated ask at entry $2.15 (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)

Annotated chart:

Entry on July xx
Earnings Date N/A (unconfirmed)
Average Daily Volume: 1.9 million
Listed on 7/22/10