NEWSLETTERS & RECOMMENDATIONS - June 19, 2011

Dear Friends & Fellow Traders,

I guess the big story is that at least the sky didn't come crashing down. We saw plenty of Chicken Little's running around without their heads scaring investors. Still the S&P managed to hold above the 200 DMA. The "Trading Bible" notes that when the S&P has been away from its 200-day Average for an extended time we usually get a 35-50 point rally. So a further bounce should be expected at almost any time.

On the downside and having the markets come into last week's expiration trading short-term oversold and considering the mixed news backdrop including the better-than-expected retail sales, the leading economic indicators in the US and a unified front from France and Germany on the Greek debt crisis, the markets quite frankly weren't overly impressive after six consecutive losing weeks. It was instead like your typical weekly expiration we have grown accustomed to experiencing at NET with some very good short-term trading opportunities for those catching the highs and lows. Last week was one of the best in the last few weeks. Still we can thank the trading "Gods" for another most profitable week.

Let's focus on the big picture for a moment. Investors are still focusing on past fears more that looking ahead to a better economic environment over the next 6-12 months. Why? Because over the past 10 years the markets have suffered through two 50% or more corrections so just maybe investors have a right to be nervous. However this causes investors to err on the side of caution - selling 10s of billions of stocks at the March '09 bottom and putting the funds into bonds didn't help either. Then they re-entered the markets early this year near the highs only compounded the problem. Now investors have pulled out $15 billion from stocks and selling over $6 billion from commodity ETFs since April to put $29 billion more into bonds at the worst possible time.

In addition to the above, the stock market has suffered through 10 5% corrections during this recent two-year rally. Each time investors fret the rally is over, the rally again continues higher. It didn't help either that during this time we suffered through sharply higher energy prices followed with the Japanese disaster. However, as Japan slowly starts to recover, you will see brighter economic numbers across the globe this summer and over the rest of this year. None of this hasn’t been seen before.

All this negative news will pass. Congress will extent the debt ceiling and Greece will get their loans and we can reach higher highs into year end. Whether the markets correct some more doesn't matter as we want to own stocks for what I expect will be a 10-15% rally later this year.

I would own all the SIGA I could near $11 and if you are nervous I would sell OTM calls with Sept/Dec strikes. I fully expect Congressman Issa's look into the BARDA contract will only delay the deal and not cancel it. I believe he's trying to get Obama's attention on the Boeing plant situation by this focus on democratic political contributions of Ron Perleman.

I love buying PIP here, of course it's lower on the troubles of SIGA and burying some shareholders in a $3.50 spot secondary offering two weeks ago didn't help. That's why I recommended we sell all the Sept 5 strike calls we could between $0.75 and $1.00 a few weeks back. I'm also selling the 2.50 strike puts near $0.60 for Sept. I sold both puts and calls Mar and June options big time on PIP and all expired worthless. My PIP shares are nearly paid for with these premiums and the opportunistic fringe trading I teach. Buy hold and pray doesn't work anymore. I knew this over 25 years ago. Investors are only now learning this.

Starting Monday I will do a 3-2 ratio buy right on PIP at these levels against the Sept/Dec 5 strike calls. We want to take in as much premium that we can. Somebody bought 2,200 Sept 5 calls at $0.40 on Friday. The open position was nearly 7,000. We'll know tomorrow if this was a new buy or close of a losing long.

There was an interesting deal with an investor in SA, our gold stock. It seems the Investor put up $100 million to buy stock higher near $30 and he gets a 1.5% royalty on all gold production. I have more research work to do here. The stock popped over $3.00 early in the day. I am a seller of 2012 and 2013 SA puts and a buyer of 2013 30-35 strike calls. Here’s the story link.

I saw all the new Patrick Cox comments on BTX. It’s still the best longer term idea I have ever found. Yes, everything I sent you or wrote on the Yahoo message board is true. Nevertheless BTX and all the stem cells companies still have not recovered from the heavy short attacks and that NY Times negative article on stem cells. The good stories get buried on page 92 while the negative ones are page 1. We will know more after the annual meeting. I will keep you posted.

CIGX is my current love squeeze because there is so much short-term potential given the expected positive news releases coming out shortly. I have now paid for my Jan 2012 long call options after selling both the April 4 strike and, then 2 weeks ago, the June 5 strike options both for a total over $1.00. Both strikes written against my long calls expired worthless as expected. Now let the games begin. The news can start coming at any time now.

Trade of the Week in Review
This really should be called trades of the week. I started off the week with a call buy alert late Wednesday morning to buy the 570 strike calls near $1.70 but one must scale-in and especially hedge. I won't bore you with all the details except the calls hit a $1.10. There were at least 8 hedging opportunities that netted more than $400 per call profit. I'm assuming only a 50% hedge even with these near the money options. I recommended selling the calls Thursday morning. The calls traded as high as $2.15.

There was, in hindsight, a great 565 put purchase at that time. These OTM puts went from $2.00 to $5.00 in less than 3 hours. Still great work if you can get it. NET traders were focused on selling the E-minis short while waiting to buy back the 570 OTM calls staring at $0.85 and scale-in as noted on the Thursday "B" chart posted at 2:00. The calls hit $0.60 within an hour. There were 4 hedges that could have earned over $200 over the next 2 trading hours.

There were 2 Alert Emails Friday morning. The first before 8:30 was to sell the E-minis near 1275 to hedge the calls. I noted I was 80% hedged. The second Alert was sent out after the opening with instructions to start legging out of the hedged trade. We were at a Tenet #3 sell level and I expected that the market would be in a trading range for awhile. If you covered the E-minis lower and sold the calls at the opening and had sold subsequent market rallies the profits could have been much larger or at least $200 more per $0.65 long call or $600 for an 8-10X return! The calls traded as high as $2.45 but I assume most were sold over $2.00 giving a trader a potential 11-13X return in about 4 trading hours! See Friday "A" Chart, NET Weekly Money Chart 2011-06-17A.

In the Chat Room I mentioned after 1:00 to try to get long the 565 puts starting at $0.40. These puts had a low at $0.15 by 2:30. Shortly after 3:00 the puts were $0.65. (I noted the A/Ds were 5-1 positive near the opening but were only 3/2, that’s not good.) At that time, 3 PM, these puts could have been sold or hedged with E-mini longs.

The put trade doubled but a long hedge against $0.30 puts could have earned over $350 profit on the 7.5 point E-mini rally back to resistance or earned over a 10X return in about 30 minutes. See Friday "C" 2011-06-17 (modified).

Again nobody ever did or does all these trades every week to the best of my knowledge but this is looking more and more like the best reward/risk trading style ever developed and taught by anyone on the planet. Just getting pieces of these trades turns my juices on. Even as much as I try I still only get pieces too. But it does add up every week to one hell of a return nevertheless year in and year out.

As always keep those cards and letters coming I read every one of them.

Good trading,

Stan Moore
702.558.1814