9:00am (EST)

The Dow fell 130 points, or 1%, to settle at 12,929.  The blue-chips traded to a low of 12,903 after falling to hold 13,000 shortly after the open.  We mentioned the next wave of support comes in at 12,800 which would be another 1% decline from current levels.  This area will be crucial in holding or the bulls risk a test down to 12,600.  Resistance is now at 13,000-13,200.

The S&P 500 dropped 16 points, or 1.1%, to finish at 1,382.  The index traded down to 1,378 and we were looking for a close below 1,375 which would get 1,350 into play.  The bulls will try to reclaim 1,400 this week.

The Nasdaq gave back 33 points, or 1.1%, to end at 3,047.  There was a battle at the 3,050 area for much of the day and the low came in at 3,032 before the bears won the fight.  The bulls will try to push 3,100 again but the lower highs and lower lows suggest a trend change.

The S&P Volatility Index ($VIX, 18.81, up 2.11) surged 13% and closed above 17.50 after reaching a high of 18.94.  A move above 20 should come on the next wave down and would also confirm a possible trend change.

The overseas markets have traded lower for much of the early morning hours and the economic calendar is light today with Wholesale Trade Inventories due out at 10am.  

Despite the bearish tone, futures are showing a slightly higher open and look like this:  Dow (+12); S&P 500 (+1); Nasdaq 100 (+8).  

 

Please remember, ALL “Exit Targets” and “Stop Targets” are targets.  You should not have any “Hard Stops” entered to close any trades or “Exit Orders” in your brokerage account unless we list one.  We will send out a “Profit Alert” or “Trade Update” if we want you to close a position OR if a new trade comes out.  Otherwise, follow instructions at all times in the 9am and 1pm updates.  Also, we will usually give you a heads-up if we think we are going to send an email outside of these time frames but it is rare that we do.

 

Caterpillar (CAT, $103.57, down $2.30) 

May 90 puts (CAT120519P00090000, $0.90, up $0.20)

Entry Price:  $0.90 (4/9/12)
Exit Target: $1.80
Return:  0%
Stop Target:  None

Action:  Shares traded down to $102.80 yesterday while the options reached a high of $1.  We are looking for a drop below $100 this week and our near-term target is $95 which should be enough to get a double out of the put options.

 

Tiffany & Company (TIF, $67.20, down $0.38)

May 62.50 puts (TIF0519P00062500, $0.90, up $0.10)

Entry Price:  $1.05 (4/9/12)
Exit Target: $2.10
Return:  -14%
Stop Target:  None

Action:  Tiffany’s traded down to $65.77 at the open while the options traded up to $1.15.  We believe shares could test $60 over the next month or so which gets the put options to at least $2.50. 

 

Acuity Brands (AYI, $54.33, down $2.11)

May 50 puts (AYI120519P00050000, $1.10, up $0.30)

Entry Price:  $0.55 (4/5/12)
Exit Target: $1.10
Return:  100%
Stop Target:  60 cents (HARD STOP)

Action:  Shares fell 4% on Monday and our near-term target is for a drop below $50.  The options traded to a high of $1.20 and we may close half of the trade on further weakness to lock-in profits.  We have also placed a Hard Stop of 60 cents on the position just in case shares gap up.

 

Lululemon Athletica (LULU, $75.97, down $1.09)

May 67.50 puts (LULU120519P00067500, $0.90, up $0.10)

Entry Price:  $1.05 (4/4/12)
Exit Target: $2.10
Return:  -14%
Stop Target:  50 cents

Action:  Shares kissed a low of $75.26 on Monday and we were looking for a close below $75.  Let’s try again today.   

 

C.H. Robinson Worldwide (CHRW, $64.00, down $1.12)

May 60 puts (CHRW120519P00060000, $0.90, up $0.20)

Entry Price:  $0.65 (4/4/12)
Exit Target: $1.30
Return:  38%
Stop Target:  None 

Action:  Shares traded down to $63.50 yesterday and the 52-week low is $62.30.  Our near-term target calls for a test down to $60, possibly $55, which would make these put options worth at least $5.

 

BroadSoft (BSFT, $38.74, down $1.03)

May 35 puts (BSFT120519P00035000, $1.80, up $0.20)

Entry Price:  $1.35 (4/2/12)
Exit Target: $2.25
Return:  33%
Stop Target:  $1.20, raise to $1.35

Action:  The low came in at $38.28 yesterday and our near-term target is $35 or worse.  A break below the 200-day at $34 would really put pressure on the stock.

 

Apache (APA, $94.58, down $1.29)

April 92.50 puts (APA120421P00092500, $1.20, up $0.35)

Entry Price:  $0.90 (3/29/12)
Exit Target: $1.80 (closed half at $1.40 on 4/9/12)
Return:  44%
Stop Target:  90 cents (HARD STOP)

Action:  We closed half of the trade earlier yesterday and set a Hard Stop of 90 cents on the other half.  Shares traded to a low of $93.57 while the options kissed a high of $1.48. 

 

Potash (POT, $44.10, down, $1.03)

April 42.50 puts (POT120421P00042500, $0.45, up $0.20)

Entry Price:  $0.55 (3/29/12)
Exit Target: $1.10
Return:  -18%
Stop Target:  None

Action:  Our near-term target is $43 but shares could test $40 if the market continues to pullback.

 

First Solar (FSLR, $20.19, down $0.79)

May 19 puts (FSLR120519P00019000, $1.85, up $0.25)  

Entry Price:  $0.75 (3/28/12)
Exit Target: $1.50
Return:  147%
Stop Target:  $1.20, raise to $1.30 (HARD STOP)

Action:  We closed the other half of our April 23 put options for a 171% gain yesterday near $3.  The May options will continue to surge on a drop below $20 but we have raised the Hard Stop in case shares hold support.

       

Arena Pharmaceuticals (ARNA, $3.12, up $0.05)

May 3.50 calls (ARNA120519C00003500, $1.00, up $0.10)  

Entry Price:  $0.85 (3/26/12)
Exit Target: $1.70 (closed half at $1.10 on 3/14/12) 
Return:  24%
Stop Target:  70 cents (Hard Stop) 

Action:  Arena reached a high of $3.25 yesterday and the May 5 calls were super active.

The company will meet with the Endocrinologic and Metabolic Drugs Advisory Committee in early May to discuss the safety and efficacy of its obesity drug, Lorcaserin.  We expect a good outcome from the committee which will make a recommendation to the FDA for a meeting scheduled in June.  Support has been solid at $3 and there is further help at $2.40.  A break above $3.50 would be bullish for another leg higher.

 

Other 2012 Portfolio OPEN positions (8):  These are trades that are still open in the portfolio that have longer expiration dates or are on “hold” but are not worth mentioning until they turn around.  This means we would not open any new positions.  We are still keeping track of the trades and we will record the results, accordingly, when we close them or the options expire.  Click on the 2012 Portfolio link in the Members Area to view ALL open/ closed trades.

 

magicJack VocalTec April 30 calls (from March 2012) – shares soared 11% yesterday but we are still in the woods with these calls 

E*Trade Financial July 12 calls (from March 2012) – we still like this position and will bring back coverage once shares reclaim the $11 level. 

Bank of America January 12.50 calls 2013, July 12 calls (from March 2012) – same deal with BAC as we will bring back coverage when shares crack $10. 

Acme Packet April 40 calls (from February 2012) – will not recover in time.  

Dendreon May 22 calls (from January 2012) – still hope for a buyout offer.    

Silver Wheaton April 42 calls (from March 2012) – silver looks cheap but is not helping us with this trade.

U.S. Oil Fund April 45 calls (from February 2012) – the close below $40 was the nail in the coffin.  

Sony April 22 calls (from February 2012) – having trouble holding $20.  

 

WATCH LIST SECTION

These trades are NOT recommendations.  They are trades that we like but have not added to the portfolio as an official recommendation because of market conditions or because we are waiting for better entry prices.  We try not to have more than 12-15 open trades at any one time which is why we created a Watch List.  We will not list entry prices because these stocks are on the verge of breaking out or they could sell off.

 

Sears Holdings (SHLD, $61.37, down $0.82)

May 45 puts (SHLD120519P00045000, $1.00, up $0.05)

Thoughts:  Watch for now.   

 

Apollo Group (APOL, $36.28, up $0.01)

May 36 puts (APOL120519P00036000, $1.35, down $0.10)

August 30 puts (APOL120818P00030000, $0.90, down $0.05)

Thoughts:  Watch for now.     

 

MGM Resorts (MGM, $13.51, down $0.09)    

January 17.50 calls 2013 (MGM130119C00017500, $0.80, down $0.10)

Thoughts:  Watch for now.          

 

Scientific Games (SGMS, $11.61, down $0.27)     

July 12.50 calls (SGMS120721C00012500, $0.70, down $0.10)

Thoughts:  Watch for now.