Well the title of the morning report was “Testy Tuesday Morning” and we got just what we wanted today! On Monday we said: “Back at home, we are so far above levels all we can do is look at psychological barriers”:
- The Dow is sitting between 11,600 (wow!) and 11,500. Tested 11,500 – Check!
- The S&P is just under 1,320 – this will be a contest to watch. Breaking untested support at 1,310 is a nice cash-out signal for us! Tested 1,310 – Check!
- The NYSE is, as we have mentioned, far ahead long-term and is probably going to be the first to pull back so let’s watch 8,300 for bullish support but holding the 50 dma at 8,250 would be just fine. A break above 8,400 will shock the bears. Tested 8,300 – Check!
- The Nasdaq punched through the 40 wma last week and is sitting just above the 200 dma of 2,222. Tested 2,200 – back to 2,222 – Check!
Only the SOX disappointed us but held well above 450, a level we had a very hard time beating since mid-August. I was going to say the transports bothered me but they don’t – I read back my original thoughts on this and I decided to ignore the funky looking daily chart and concentrate on the wild weekly consolidation we were tracking for some time. That remains firmly on track in the rally mode that got me all bullish in the first place! http://stockcharts.com/gallery/?%24tranq Oil may seem like it has fallen off a cliff if you look at the daily movement of the October contracts, but looking at the weekly chart, you see we are just getting back down to where we were at the beginning of the year, BUT looking at the monthly chart – you can see that this correction is just getting started!!! If I were a commodity player, I would be very interested in shorting the Nov ’07 contract at $68.11, as the Nov ’08 contract is $67.47 while this November’s contract is $63.58 and falling. The dollar is just waiting for some strong Fed language to break out over 86 for the first time since July. The last time the dollar broke out of this range was July 17th when it went to 87.33, causing gold to drop $74 in just 6 sessions! Gold finished near its low for the day at $573.55. ====================================== We had a fun day today. The morning’s action gave us a long awaited excuse to cash out a lot of positions but, as you know, I’ve been waiting for an excuse to do that since last week. There were quite a few holdouts that never hit our 20% rule or were holds for other reasons but this is everything we should have still on the play list: ADZA never got a real pullback and it’s still open at $17.44 (up 5%). My stop here is $17 but I’d like to hang on to see a good test of $17.75 (200 dma). ADM seems determined to do nothing with the Mar $40s at $3.20 and the Jan $35 puts at $1.25 (down .10). I’m giving AIR Feb $25s the minor benefit of the doubt at $2 (up 55%) but the bid is dropping to a scary $1.65. AMCC took a little dip but held up at $2.70 (up .12). Selling the Nov $2.50s for .35 is still possible. BBY held $53 but I lost the $47.50s at 6.50 (up 300%) and kept the Dec $57.50s at $2.25 (up 10%) as I am a lot more tolerant on a long roll than an in-the-money call. BC was a silly thing to nail on the head but we’ll take it with the Mar $30s in the money at $3.40 (up 25%). BNI Oct $70s are still $2.65 (up 60%) but I should have sold at $3. CSX did not fare as well… BP Oct $60 puts just weren’t worth selling at .20 (down .10) as they represent the remaining profits from 2 huge plays.. The $65 puts we added yesterday hit $1.30 (up 10%). BSC Oct $140 puts are back at $6.30 (up 375%) – OK, so I got out a little early (but I swapped to MS so we will see tomorrow. CAL’s length let us ride out the dip and the Dec $30s are back in the money at $3.40 (up 180%). CAT is one of the most debated positions in comments and you will have to pry the $70s, now .90 (up 20%) out of my clenched fist on expiration day! Nov $72.50s went all the way back down to .95 (up 25%). We lost CHK but let’s watch those $30 puts at .75, especially if they get cheaper in the morning. CLB short just keeps going down (yawn), now at $62 (up $12.50). I think this is enough for a stock but it’s still $7 more to the 200 dma – notice that, because they don’t have options, we get a pretty honest movement out of them! http://stockcharts.com/gallery/?clb Consolation Prize Member COH just won’t stop and the Oct $32.50s are still $2.30 (up 200%) but I raised the stop to $33.80 after today. COST just dared us to sell it and I maintain a hair trigger on the Oct $50s at $2.20 (up 200%) but I’m going to let the Jan $52.50s ride at $2.35 (up 45%) as it tests the 50 dma at $51. CVX also gave us a good entry yesterday with the $60 puts running up to .75 (up 25%) on our first day out. DELL is all over the place but we took the Jan ’08 $27.50s at $1.55 (up .05) because we expected that. The Oct $22.50s we sold for .60 were taken down for .30 (up 50%) and we are ready to sell again at .50 or better. The Nov $22.50s are still .90 (up .05). DIS $30s held firm on the dips and got back to .95 (up 55%). FRPT was a better pick than I thought, annoying me all week with a huge run after I sold it at 7.63. Now at $9.05, it’s up a whopping $3 (up 50%) from last week’s pick. I need to reconsider my timeframes on straight stocks… FTO Jan $25 puts are still $2.65 but the $25 puts are no longer worth selling against them at $1.15. Beware the 200 dma at $27.50! FO would have made a nice buy on the morning dip but we had a no buy policy… GE is another one I just won’t sell. The $35s are down to .40 (up 166%) but I do have a stop at .20. GLW Feb $25s are still $1.75 (up 25%) as it tests the 200 dma. http://stockcharts.com/gallery/?glw Still watching GR for entry point. We added another gaggle of Google calls in a special section. HET is another wild one we are glad to be long in as the Jan $70s hold $2.10 (up 15%). We stop out at $1.80 here as these are just profits from our old trade. I know the charts say now but I have to at least take some INTC $20s for .45 just in case the Nasdaq explodes. I will not be surprised to be taking the $17.50s for the same price next month if we don’t get a breakout this week. http://stockcharts.com/gallery/?intc LNG Jan $30 puts are still just $2.90, despite going in the money today. I still like these a lot and also the safe(er) play of selling the $30 puts against it for $1.60. MDR $45 puts gave us our entry yesterday for $2.35 and, mysteriously, opened today at $2.60 before finishing at $3.60 (up 40%). MRVL Jan 21.25s held $2.20 (up 65%) and we have .55 in our pocket from the first round so I’m a little more tolerant on this one… but SOX were scary today! I am sweating out the MS $70 puts into earnings tomorrow with an average entry at $1.45, from where it is still down 15% (near where I should just stop and give up!). MSFT needs to do more than flatline for the $27.50s to move past .30 (up 100%) and I am going to roll out of the $25s at $2.05 (up 105%) in favor of the post earnings Nov $27.50s for .60 which will be a free ride after locking in 50% profits. We can’t keep NAK ($6.89) and MRB ($2.94) if gold keeps going down. We just keep buying those NOK $20s, now .40 (down 33%) and there are 30,000 contracts on the plus side vs. 43,500 put contracts against us! PCL actually went up today! The $35s are still .30 as no one can believe it! PD forced us out of the Oct $95 puts yesterday with a big run-up but the Jan $82.50 puts gave us the cushion we needed to ride it out at $7.50 (up 85%). PEG is another one that’s killing me (because I chased it and MS on news – kick, kick, kick) but at least the Oct $60 puts are holding $1 (down 30%). PETS is being ridden out at $10.46 as we sold the Oct $10s for .65. I feel like I was tricked out of the QQQQ $39s as they went back to $1.55, .65 more than we entered at last week. Either way, always defend a double, and that’s what we did. RDS.A just never gave us a good enough reason to sell yesterday (another profit roll) and the $65 puts look good at $1.60 (up 220%). Consolation Prize Teammate RSTO is hanging tough at $7.75 (up .71). Someone pointed out that SBUX $35s fell to .50 in comments and we should have picked them up again, now .60. SHFL Nov $30s are still attractive to me at .55 (down 20%). David Phillips, who people think is me and vs. vs., raked my buddies at SMVD over the coals, and for good reason, it looks like! The stock dove to $1.15 and my faith is certainly shaken! It was a low volume sell-off but, if I didn’t love the technology, that article would make me walk so I need to think hard on this one… SLB $55 puts had a nice first day, finishing at $1.35 but I took half out at $1.40 (up 30%) and ran in comments. SRE is banging around and the $50 puts dropped back to our entry at $1.55 and the Jan $45 puts fell to .60 (up .10) but I still like this play. STX has got me buying on the dips at this point! What a move today against a 2% down SOX.. The Mar $22.50s are in the money at $2.70 (up 60%) on our third profitable dip in this pool (stop at $2.25) and the anti-roll Oct $25s are down a nickel at .35. OK, now my stop on TGT is $54 but, as with yesterday, it’s a little soft, maybe $53.50. After today’s great jump but we must protect our doubles with the $52.50s at $2.80 (up 180%), $50s at $4.90 (up 205%) and the $47.50s at $7.20 (up 260%). How can you sell this chart? THE Dec $35 puts look very safe at $3.20 (up 10%) but the planned sale of the $35s for $2 is not triggered yet (and may not be necessary if it tanks tomorrow). This is a placeholder to remind me to buy TIF again if it hits the 50 dma. TXN is another one I hold through thick and thin but today was very thin with the $32.50s barely getting back to .85 (up .10). I’d like to see TINY consolidate here at $12.50 for a week or two so we can get back in. UPS Jan $75s are holding $2.40 (up 20%) but this is a holiday play. We the $75s held on at .90 (down 10%) but need to be sold at .75. VLO $50 puts had what the scientific community refers to as an amazing day! Valero bounce off the 5% rule and the $50 puts finished at $1.90 (up 80%) and I got half out on the afternoon pump ahead of the UN – which came to nothing. WM is hanging on by a thread with the Jan $45s at .80 (down 20%). WSM Oct $32.50s stopped us out with a triple but we are stuck with the $35s, not worth selling at .15 (down a nickel). XOM $65 puts came in at .95 on yesterday’s pump and already made it back to $1.20. XTO Nov $35 puts are down a nickel to .40 (remember this was a fun trade). YHOO fell off a cliff so fast I went from 40% up to 20% down and I felt lucky to get out! We went back in at EOD on the $27.50s at .60 (down $1.90 on the day – come on!). The Jan $32.50s dropped to .50 (down 65%) and it was hard to stop out. The safe(er) play of the Jan ’08 $25s for $7.80 cost $2.40 (down 30%) and the Jan $32.50s we sold for $1.35, now .50 (up 170%) is a small consolation (assuming it does come back one day).
