The bears desperately need a failed bounce today. Not a small green close. Not a flat close. Not even a higher close than the open (which still happens to be red). They need this bounce to fail and for dip-buyers to be hurt. Unfortunately, 10 or 20 basis points aren't going to leave a mark, but you have to start somewhere. I had been looking for the SPDR S&P 500 (SPY) to target the $196-$197 area and it did hit that. It makes for a logical top on the charts, but when did logic last rule this market?
I'm watching Coca-Cola (KO) for any kind of break. I really don't care if it is higher or lower, but I want to see this consolidation channel break and I am willing to chase it. Based on the RSI and the overall market, the squeeze right now does favor the bulls. But until $41.25 or even $41.30 is seen on a closing basis, I don't have any interest in the stock.
On the flip side, a close below $40.40 would put me on the lookout for the entire post-earnings move higher to be erased and KO giving up $2 to the downside. A break in either direction is worth at least a buck. Given KO's relatively low inverse volatility, the options on a break would make for a very attractive trade in terms of risk-reward.
Call me crazy, but Intuitive Surgical (ISRG) is looking very attractive right now. I know this company is not without its challenges, but the chart makes a gap fill a potential play. The chart has its challenges, too, with the $390-$394 area being solid resistance. It won't be easy for the stock to get through its 50-day moving average. A spread is likely the better option play or a half position now with a move above $395 being the trigger for the next entry. Any close below $370 puts us below the support levels and means a long trade is wrong at this time.
Overall, I like the pessimism along with the volatility squeeze. A move above $400 all the way up to $425 by the end of July looks very possible. The July 19 $385-$415 call spread for $11.50 looks like a potential play.
Some other gap fill plays out there are Fabrinet (FN), Penn National Gaming (PENN) and Millennial Media (MM). I have ISRG at the top likely followed by PENN, then FN and MM last, as I consider it to be the one with the most risk.