Option Investor
Newsletter

Daily Newsletter, Tuesday, 8/25/2009

Table of Contents

  1. Market Wrap
  2. New Option Plays
  3. In Play Updates and Reviews

Market Wrap

Inch By Inch

by Jim Brown

Click here to email Jim Brown

The markets continued to hit new highs but the progress is painstakingly slow with every move two steps forward and one step back but the direction is still higher.

Market Stats Table

Ben Bernanke must have passed the employment review with his Jackson Hole performance last week. President Obama announced today that he was nominating Bernanke for another term and stressed the need for an independent Federal Reserve. Bernanke's current term ends on Jan-31st 2010. Senator Dodd promised a prompt but through confirmation procedure. The markets rallied off the overnight weakness on the news.

Also helping the markets was the news that home prices fell less than expected in Q2. According to the Case Shiller 20-city index the price of a home declined -15.4% from the same period in 2008. Estimates were for a decline of -16.4%. Even more important of the cities in the top 10 index only one city failed to post a gain. That was Las Vegas where prices fell another -2.5% for the month. San Francisco led the list with a +3.8% rise. The 20-city index saw prices rise +0.7% in June for the first gain since May 2006. Removing the seasonal adjustment saw the same index rise +1.4% for June. The rate of increase will continue to be slow because of the large number of foreclosures still coming on the market. Moody's expects housing prices to stabilize by the middle of 2010. The next challenge will be the expiration of the $8,000 first time buyer stimulus in November. The slight improvement in prices barely registers on the chart below.

Home Price Chart

Home Prices Comparisons

The Consumer Confidence numbers for August rebounded to 54.1 from the July decline to 47.4. The expectations component led the gains with a +10 point spike to 73.5 while the current conditions component barely budged with a +1.6 point gain to 24.9. The headline number is still below the 54.8 high for the year in May. Despite the 50% rebound in the stock market and the various stimulus programs like cash for clunkers the level of confidence remains at recessionary levels. Those planning to buy a car rose to 5.2% from 4.8% and a home 2.8% from 2.1%.

Consumer Confidence Chart

The Richmond Fed Manufacturing Survey failed to post a gain but held the big gain we saw in July. The headline number came in at 14 once again. The low was -51 back in February. The shipments component rose +5 points to 21 and capacity utilization rose +8 points to 22. Keeping the survey from posting those gains was a decline of -6 points to 18 on the new orders and a decline in the six-month outlook from 27 to 20. In the Richmond survey any number over zero is considered expansion so there is improvement in the region. In the chart below the current economic activity has rebounded to levels of pre recession activity seen from 2006-2007. This is not strong growth at only 14 points over recession levels but still growth.

Richmond Fed Chart

Wednesday's economic reports include the Mortgage Applications, Durable Goods, New Home Sales and oil and gas inventories. New Home sales could help the market if the expected gains to 400,000 units, up from 384,000, actually appear.

The oil inventory is likely to produce a lot of volatility in oil prices. We saw some apprehension of the number today with a -$3 drop from the touch of $75 intraday. The monster -8.4 million barrel hurricane related drop last week is likely to be erased this week and next when those storm delayed deliveries all show up at once.

Crude Oil Chart

The bond market was busy today with $99 billion in new government debt being sold without a problem. There was $30B in one-month bills, $27B in one-year bills and $42B in two-year notes. Tomorrow has $39B in five-year notes and Thursday has $28B in seven-year notes. This is another record week for debt sales but surprisingly yields are moving down instead of up as you would expect. The yield on the ten-year fell to 3.45% and analysts said it was due to money coming out of the stock market as some cautious funds took profits and shifted cash from equities to bonds to avoid the traditional Sept/Oct market weakness.

Transunion reported today that average credit card delinquency rates fell in all 50 states. The number of bankcard borrowers 90 days or more delinquent fell -1.17% in Q2, down -11.36% from Q1 levels. The average credit card debt fell -1% from Q1 levels to $5,719 but rose +1.78% compared to Q2-2008. This is a positive sign that conditions are improving. However, it could also be the result of delinquent borrowers being charged off and no longer carried as delinquent on Transunion records. I could not find any reference on how charge offs impact these delinquency numbers.


Another factor weighing on the equity markets was the White House Office of Management and Budget predicting that the deficit will exceed $9 trillion over the next decade. That is more than the sum of all previous deficits since the founding of America. The OMB also said by the end of the next decade the national debt with accrued interest would be $17.5 trillion and equal to three-quarters of the entire U.S. economy. That would be the highest percentage in more than 60 years. This prediction makes it even more amazing that buyers showed up for $99 billion in debt sold today.

The OMB is still projecting unemployment over 10% and a negative GDP for all of 2009 at -2.5% or lower. President Obama's economic adviser Christina Romer said it would complicate the president's vow to cut the deficit in half by 2013. This assessment by the OMB could also complicate the passage of the proposed health plan since that would add another $1.0 to $1.5 trillion in deficits over the next decade. The rising deficit assumptions will also make it nearly impossible to take additional stimulus actions like future tax cuts or tax rebates. The only real option lawmakers have today to reduce the deficit is to cut spending. However, the markets fear the government will instead resort to large tax increases as soon as the economy appears to be on solid footing. Regardless of what party is in the white house the burden on the American taxpayer and on the economy over the next couple decades is going to be huge.

Obviously anyone in the market has already heard those deficit numbers being tossed around but hearing the OMB agree with the Congressional Budget Office in a big public announcement was a depressant to the morning rally.

Toyota said it was boosting production by 14,000 vehicles a month for the rest of the year. However, they also said they were going to cut production capacity by 10% or one-million vehicles in order to improve capacity utilization at other locations. Toyota currently production capacity of about 10 million cars per year but they are only producing about 6.7 million. They are boosting short-term production to replenish inventories depleted by the cash for clunkers program. Three Toyota models were in the top five cars sold under the cash for clunkers program.

The government ended the cash for clunkers program on Monday and the latest estimates suggest more than 625,000 cars were purchased by the government for more than $2.58 billion in vouchers. Analysts believe there was another 245,000 cars sold that did not go through the C-F-C program because their trade vehicle did not qualify or the purchased vehicle did not qualify. The extra sales were still due to the increased buyer traffic. Analysts claim there is no reason to rush to replenish inventory levels since that nearly 900,000 auto sales were undoubtedly sell forwards. That is buyers would probably have bought a car over the next 6-9 months and the program prompted them to accelerate those plans. This suggests sales for the next 3-6 months could be very slow.

Bernanke was the safe choice for the next term Fed president. The market had already expressed its desire to have Bernanke continue as Fed Chairman and changing generals in the middle of a battle would have been dangerous both economically and politically. The President is fighting a lot of battles today and his approval rating is falling. If he wants to continue getting things done before the mid-term elections he needs to avoid any unnecessary battles. I believe he wisely chose not to fight the battle over a new Fed Chairman in order to boost his ratings by going with the perceived winner. The markets rallied on the news with the overnight futures rebounding from negative territory when the news broke about 4:AM this morning. By 10:00 it was old news and the deficit announcement erased the gains. It was good timing by the president to make the market favorable announcement on Bernanke just before the market negative OMB news broke.

A Goldman Sachs analyst said the Fed's balance sheet has grown to $2.06 trillion over the last year with all the various stimulus programs. However, the analyst claims the Fed could expand it nearly another 100% to $4.0 trillion if needed to make sure the economy was truly on the mend before the stimulus should be withdrawn. This would be very dangerous since inflation is already a concern for 12-18 months down the road. The Fed would have to focus on new stimulus that would not be fuel for inflation rather than zero interest rates.

Other than what I have discussed above it was another slow news day as the summer draws to a close. Medtronic (MDT) reported a 38% drop in quarterly profits due to restructuring charges and legal fees in a patent dispute. Sherwin Williams (SHW) was downgraded by Morgan Stanley on the weak outlook for construction spending into 2010. Morgan said nearly 40% of Sherwin Williams sales come from new construction. Anheuser-Busch InBev (ABI) said it was planning raising the price of beer this fall. Prices will rise on its low-end and high-end brands. MillerCoors and Diageo (DEO) also said they were raising prices. This should be a clear sign that the recession is ending if all the brewers believe they can get consumers to pay higher prices.

The Dow moved over 9600 at the open and came very close to resistance at 9625 before easing back on the deficit news. Just after lunch the Dow tried again to move back over 9600 but was unable to hold the gains. This two steps forward, one step back is agonizing to watch because every small sell cycle rekindles worries that the markets are about to fall. Despite the daily gains there is still a constant worry that we are due for a correction. As long as that worry is visible and getting face time on stock TV I doubt a correction will appear. Corrections don't advertise in advance that they are coming. Most occur when the markets appear most bullish. Today we have a mildly bullish market with a great deal of concern that we could correct. That encourages the shorts to take positions on each rally and then forces them to cover on the next move higher. I want to see this happen at resistance at 9625. If we can get a short squeeze over 9625 then we should be able to add another couple weeks to the current rally. The real problem is finding some event to produce that short squeeze. Support is well below at 9400 so we have plenty of room to wander on low volume.

Dow Chart

The S&P-500 is well over resistance at 1014 and should not encounter new resistance until around 1060. That prior resistance at 1014 should now be support. The real challenge facing the S&P is finding buyers at this level. The S&P is up nearly 60% since the March lows but the S&P is made up of 500 individual stocks so buyer interest in each stock is the key. How much higher can Google, Apple, Microsoft go after their rebounds from the March lows. Most analysts believe they can go much higher as profits increase. However, that is a long-term proposition and may not produce a big jump over the next week. This is next to last week of summer and bullish volume is going to be a challenge. Support at 1014 will probably be tested.

SPX Chart

The Nasdaq has been the weaker index and today was no exception. Several major stocks gave up their early gains and the Nasdaq was lucky to close in the green. For instance Dell, QCOM and Oracle all closed negative for the day. The Nasdaq did manage to move over downtrend resistance from Oct 2007 and has now established initial support at 2012. However, there is simply nothing on the tech front to energize buyers. The good news is priced in and without some new event to trigger a squeeze it may be difficult to move higher in a hurry. I believe it will happen but I suspect it will be more of the "inch by inch" variety of gains.

Nasdaq Chart

I am concerned about the markets for the rest of the week. We continue to hit new highs but we are starting to see that end of day sell cycle increase. The end of day short covering is turning into end of day selling. I said above that corrections to not advertise in advance but there are subtle signs. I am not saying we are about to fall off a cliff and as long as that is the prevalent mood in the market I doubt it will happen. I am still in buy the dip mode until proven wrong. I am hopeful there will be something happen to blow out the shorts one more time. Unfortunately volume is a weapon of the bulls and volume until Labor Day is going to be hard to find. On the NYSE only three stocks accounted for 35% of all the volume today. That was C, FRE, FNM with nearly 2 billion shares between them. We are not going to get a major market move with $3-$4 stocks providing all the volume. We need to be patient and keep our fingers crossed that the markets can keep their inchworm rise on track until after Labor Day.

I apologize for the lateness of the newsletter today. We had an error that prevented us from uploading the content on schedule.

Jim Brown


New Option Plays

Two different takes on technology

by James Brown

Click here to email James Brown

We've got one bullish strategy and one neutral strategy.


NEW DIRECTIONAL CALL PLAYS

Apple Inc. - AAPL - close: 169.40 change: +0.34 stop: 163.40

Why We Like It:
There are plenty of reasons to be bearish on AAPL. You could point out that shares are overbought having risen more than 100% from their 2009 lows. You could just point to the $35 rally from its July lows. Technical traders might point to the megaphone pattern building on the daily chart (see below). Yet until the trend eventually breaks buying dips is one of the best ways to play AAPL. We know that money managers are desperate to get long the winners to help them perform better. Many mutual funds only have two months left as their fiscal year ends at the end of October. That's why corrections in AAPL should be shallow.

I am suggesting readers buy calls (small positions only, 1/2 to 1/4 our normal trade) on a dip at $166.50. We'll use a tight stop loss at $163.40. More aggressive traders can use a stop loss under $160 and the August low of $159.42. If we are triggered at $166.50 our first target to take profits is at $174.00. Our second target is $179.00. FYI: The P&F chart points to a $231 target.

Suggested Options:
I am suggesting the September calls although Octobers would probably work just as well and give you more time.

BUY CALL SEP 165 APV-IM open interest=15999 current ask $7.90
BUY CALL SEP 170 APV-IN open interest=17419 current ask $5.05
BUY CALL SEP 175 APV-IO open interest=17898 current ask $2.96

Annotated Chart:

Picked on   August xx at $ xx.xx <-- TRIGGER @ 166.50
Change since picked:      + 0.00
Earnings Date           10/21/09 (unconfirmed)
Average Daily Volume =        14 million  
Listed on August 25, 2009         


NEW MARKET NEUTRAL STRANGLE PLAYS

(What is a strangle? It's when a trader buys an out-of-the-money (OTM) call and an OTM put on the same stock. The strategy is neutral. You do not care what direction the stock moves as long as the move is big enough to make your investment profitable.)

Research In Motion - RIMM - close: 75.56 chg: -0.70 stop: n/a

Why We Like It:
RIMM has been consolidating sideways in a wide, neutral triangle formation of rising lows and falling highs. The stock is poised to breakout soon. While it looks like the next move is going to be down betting against the market has been a losing proposition lately. That's why I'm suggesting a strangle. We don't care what direction RIMM goes as long as it moves far enough. I would open positions now in the $73.50-76.50 zone.

Suggested Options:
September options expire in just less than four weeks so this is slightly aggressive. You could always try this with October options. I'm suggesting the September $80 calls and the September $70 puts. Our estimated cost is $2.64. We want to sell if either option hits $6.00 or higher.

BUY CALL SEP 80.00 RFY-IP open interest=22616 current ask $1.47
-and-
BUY PUT SEP 70.00 RFY-UN open interest=20757 current ask $1.17

Annotated Chart:

Picked on   August 25 at $ 75.56
Change since picked:      + 0.00
Earnings Date           09/24/09 (confirmed)
Average Daily Volume =      11.7 million  
Listed on August 25, 2009         



In Play Updates and Reviews

Tweaking Our Entry Points

by James Brown

Click here to email James Brown


CALL Play Updates

CF Industries - CF - close: 82.19 change: -0.93 stop: 79.75

CF tried to rally this morning but it failed at $84.48. The session produced a bearish reversal/bearish engulfing candlestick pattern. We can probably expect a dip back toward $80.00 if the market's rally doesn't pick up some speed.

Currently our plan is to buy calls on a breakout over resistance with a trigger to launch positions at $85.25. If triggered at $85.25 our stop loss is at $79.75 and our first target is $89.85. Our second target is $97.50. My time frame is four to six weeks. FYI: A breakout over $85.00 would produce a new triple-top breakout buy signal on the Point & Figure chart.

Trading note: Investors should note that Agrium (AGU) has been trying to buy CF for months. CF has been trying to buy Terra Industries (TRA) for months. Nobody is selling because they claim the offers don't fully value the company (a.k.a. it's not enough money). There is potential upside if AGU finally makes a high enough offer or someone else steps in. There is potential downside if CF makes too high a bid for TRA and the market thinks they overpaid. This M&A merger dance hasn't affected the stock much lately but it is a risk either direction.

Picked on   August xx at $ xx.xx <-- TRIGGER 85.25
Change since picked:      + 0.00
Earnings Date           10/27/09 (unconfirmed)
Average Daily Volume =       872 thousand 
Listed on August 24, 2009         


EOG Res. Inc. - EOG - close: 74.41 change: -1.42 stop: 69.90 *new*

*Updated Trigger and Stop Loss*

Crude oil rallied right to resistance near $75.00 and immediately failed plunging more than 3% on the session. The oil sector stumbled on the move. After taking a closer look at the trading action in the OIX oil index I suspect the OIX could dip toward the 610 level before bouncing. With that in mind I'm adjusting our entry point to buy calls on EOG down to $72.50 and our stop loss down to $69.90. Our first target is $79.50. Our second target is $88.00. The daily chart is building an inverse H&S pattern that is forecasting a rally toward $100.

Picked on   August xx at $ xx.xx <-- TRIGGER @ 72.50 *new*
Change since picked:      + 0.00
Earnings Date           11/03/09 (unconfirmed)
Average Daily Volume =       2.4 million  
Listed on August 22, 2009         


FISERV Inc. - FISV - close: 49.50 change: +0.20 stop: 46.60

FISV is still inching higher. I suspect that when FISV hits $50 it will dip and readers can jump back in on a pull back near $48.50-48.00 again. Our first target to take profit is at $52.50. I'm setting a second target to exit completely at $54.00.

Picked on   August 21 at $ 48.60 *triggered         
Change since picked:      + 0.90
Earnings Date           10/28/09 (unconfirmed)
Average Daily Volume =       1.5 million  
Listed on August 19, 2009         


Fluor Corp. - FLR - close: 54.96 change: -0.52 stop: 49.95

FLR suffered a little bit of profit taking with a 0.9% decline. I don't see any changes from my prior comments. If you're looking for a new entry point I'd wait for a dip near $52.00. FLR has already hit our first target near $55.00. Our second and final target is $59.00.

Picked on   August 17 at $ 51.00 *triggered            
Change since picked:      + 3.96
                           /1st target exceeded @ 55.10 gap open (+8.0%)
Earnings Date           08/10/09 (confirmed)
Average Daily Volume =       2.4 million  
Listed on  July 25, 2009         


Flowserve - FLS - close: 89.53 change: -0.37 stop: 84.75

Technical indicators on FLS' daily chart are starting to roll over and turn bearish. We can probably expect a dip into the $87.00-85.00 zone soon. We currently have a trigger to open small positions at $87.50. More conservative traders may want to hold out for a lower entry point. If triggered at $87.50 our first target is $92.25. Our second target is $98.50. Our time frame is several weeks.

Picked on   August xx at $ xx.xx <-- TRIGGER @ 87.50 (1/2 pos)
Change since picked:      + 0.00
Earnings Date           10/28/09 (unconfirmed)
Average Daily Volume =       1.1 million  
Listed on August 17, 2009         


Genesse & Wyoming - GWR - close: 31.82 change: +0.46 stop: 27.75

GWR displayed some relative strength with a 1.4% gain but shares did trim their intraday gains from $32.41. The stock is arguably a little short-term overbought. Readers may want to go ahead and take some profit off the table right now. I'm not suggesting new positions at this time. Our first target is $32.90. Our second target is $34.75.

FYI: The plan was to use small position sizes to limit our risk.

Picked on   August 15 at $ 28.66 /gap down entry
                               /originally listed at $29.30
Change since picked:      + 3.16
Earnings Date           11/03/09 (unconfirmed)
Average Daily Volume =       230 thousand
Listed on August 15, 2009         


Grainger W.W. - GWW - close: 89.32 change: +0.45 stop: 84.50

GWW is still trading sideways. The good news is that there was not any follow through on yesterday's bearish reversal candlestick. The bad news is that we're waiting for a dip to $86.50 to buy calls. I suggest readers continue to wait. Our first target is $93.50.

Picked on   August xx at $ xx.xx <-- TRIGGER @ 86.50      
Change since picked:      + 0.00
Earnings Date           10/14/09 (unconfirmed)
Average Daily Volume =       635 thousand 
Listed on August 22, 2009         


Intl.Business Machines - IBM - cls: 118.83 change: -0.49 stop: 117.45

I am still concerned that IBM was unable to hold on to yesterday's breakout over resistance. The stock slipped again on Tuesday. I am suggesting readers wait for a close over $120.00 or an intraday move over Monday's high before launching new call positions. Our first target is $124.50. Our second target is $129.00.

Picked on   August 24 at $120.25 
Change since picked:      - 1.42
Earnings Date           10/08/09 (unconfirmed)
Average Daily Volume =       7.9 million  
Listed on August 08, 2009         


IDEXX Labs - IDXX - close: 51.16 change: +0.31 stop: 49.75

IDXX rallied this morning and hit $52.00 before paring its gains. We had an aggressive trigger to buy calls (small position sizes) at $51.75. IDXX had been trading under resistance at $51.50 for the month of August. Today's rally hit our trigger so the play is open. Unfortunately, IDXX's failure to close above $51.50 makes this look like a bearish failed rally/reversal pattern.

Currently our first target to take profits is at $54.90. Our second target is $58.00. However, I would not suggest new positions until we see IDXX close over $51.50 or produce an intraday move over $52.00 (your choice).

Chart:

Picked on   August 25 at $ 51.75 *small position sizes (1/2 to 1/4)
Change since picked:      - 0.59
Earnings Date           07/24/09 (confirmed)
Average Daily Volume =       383 thousand 
Listed on  July 25, 2009         


Legg Mason - LM - close: 28.77 change: +0.59 stop: varies

LM continues to trade sideways. The good news here is that there was no follow through on yesterday's bearish reversal candlestick. However, it's nothing to get excited about because the trading action today merely indicates indecision. We have two different strategies to enter bullish plays on LM.

Our aggressive trade is to buy calls with a trigger at $29.50 and a stop loss at $26.40 and we want to use small position sizes (1/2 to 1/4 normal size).

Our buy the dip trade is to open positions on a dip at $26.60 with a stop loss at $24.95. We want to trade small here as well. FYI: The P&F chart is bullish with a $39 target.

Picked on     July xx at $ xx.xx <-- TRIGGER 26.60 & 29.50
Change since picked:      + 0.00
Earnings Date           07/20/09 (confirmed)
Average Daily Volume =       3.4 million  
Listed on  July 25, 2009         


Lorillard Inc. - LO - close: 77.18 change: -0.86 stop: 72.75

LO saw a little bit of profit taking after yesterday's 4.2% rally. If the stock corrects broken resistance near $75.00 should be new support. Right now our only target to take profits is at $79.90.

Picked on   August 24 at $ 75.75 *triggered   
Change since picked:      + 1.43
Earnings Date           07/27/09 (confirmed)
Average Daily Volume =       1.5 million  
Listed on August 01, 2009         


Mettler Toledo - MTD - close: 87.29 change: -0.09 stop: 83.95

Two days in a row MTD has traded sideways in a $1.00 range. Both Monday and Tuesday saw an intraday spike toward $88.00 first thing in the morning and about 20 minutes later MTD was testing the bottom of the range near $87.00. I am lowering our entry point to buy calls from $86.50 to $86.00. More aggressive traders might want to consider a breakout trigger over $88.00. If triggered our first target is $93.50. Our second target is $99.00. I am labeling this an aggressive play because volume is pretty light for this stock.

Picked on   August xx at $ xx.xx <-- TRIGGER @ 86.00 *updated*
Change since picked:      + 0.00
Earnings Date           11/05/09 (unconfirmed)
Average Daily Volume =       234 thousand 
Listed on August 22, 2009         


Newmarket Corp. - NEU - close: 86.13 change: +2.59 stop: 79.00 *new*

NEU continues to show impressive relative strength. The stock actually gapped open higher at $84.33 so our entry point suffered a bit. Volume was even stronger than yesterday at more than three times the normal volume. Currently we only have 1/2 of our position open. The plan is to buy the second half on a dip at $80.50. I am raising our stop loss to $79.00.

Our first target to take profits is at $88.50. Our second and final target is $92.50.

Picked on   August 24 at $ 84.33 <- buy half now 8/24/09
                    /originally listed at $83.54, gapped higher @ 84.33
Change since picked:      + 1.80

Picked on   August xx at $ xx.xx <-- TRIGGER @ 80.50 for 2nd half
Change since picked:      + 0.00
Earnings Date           10/27/09 (unconfirmed)
Average Daily Volume =       141 thousand 
Listed on August 24, 2009         


State Street (Bank) STT - close: 54.23 change: +0.93 stop: varies

I am adjusting our entry strategy on STT. I'm lowering our buy-the-dip entry point from $52.50 to $52.00. Yet I'm adding a breakout trigger at $55.60, which would be a new high for the year. To clarify:

We have an aggressive breakout trigger at $55.60 and we'll use a stop loss at $51.45. Our first target is $59.80. This is an aggressive entry so I'm suggesting smaller position sizes at least 1/2 to 1/4 our normal trade.

We also have a buy the dip entry point at $52.00 with a stop loss at $48.90. Our first target is $55.00. Our second target is $59.80. Currently the Point & Figure chart is bullish with a $62 target.

Picked on   August xx at $ xx.xx <-- TRIGGER 52.00 or 55.60
Change since picked:      + 0.00
Earnings Date           10/13/09 (unconfirmed)
Average Daily Volume =       5.3 million  
Listed on August 19, 2009         


U.S. Oil Fund - USO - close: 37.17 change: -1.13 stop: 33.99

Crude oil futures are struggling with heavy resistance at $75.00. Oil hit $74.96 and reversed falling 3.3% on the day. Our plan is to buy calls on the USO on a dip at $36.00. More conservative traders may want to wait for a dip closer to the trendline of higher lows and its 50-dma near $34.40. I'm adjusting our stop loss to $33.99. If triggered at $36.00 our first target to take profits is $39.75.

Picked on   August xx at $ xx.xx <-- TRIGGER @ 36.00 
Change since picked:      + 0.00
Earnings Date           00/00/00
Average Daily Volume =      11.5 million  
Listed on August 15, 2009         


PUT Play Updates

First Solar - FSLR - close: 128.18 chg: +4.10 stop: 141.50

FSLR is finally mounting a decent oversold bounce. The stock gained 3.3%. I would expect a bounce toward its 10-dma near $133.00-134.00 or resistance near $140. More conservative traders may want to exit early than endure that kind of volatility. I am not suggesting new bearish positions at this time. FSLR has already hit our first target at $122.50. Our second and final target is $111.00.

Picked on   August 17 at $135.88 *triggered/gap down entry
Change since picked:      - 7.70
                               /1st target hit @ 122.50 (-9.8%)
Earnings Date           11/03/09 (unconfirmed)
Average Daily Volume =       3.5 million  
Listed on August 15, 2009         


Marvel Entertainment - MVL - close: 38.64 change: +0.37 stop: 39.05

I am not suggesting new positions at this time. Wait for a new drop under $38.00 to launch new put plays. Our target is $34.10.

Picked on   August 17 at $ 37.90 *triggered         
Change since picked:      + 0.74
Earnings Date           11/04/09 (unconfirmed)
Average Daily Volume =       710 thousand 
Listed on August 10, 2009         


Shanda Interactive - SNDA - close: 47.97 chg: -0.78 stop: 50.75

SNDA slowly drifted lower on Tuesday closing with a 1.6% decline. Volume was pretty light so it's hard to put much confidence behind this move. More conservative traders may want to ratchet down their stops closer to the $50.00 level. Our target is the $41.50-40.00 zone. Remember, SNDA is a volatile stock and readers may want to use smaller position sizes.

Picked on   August 08 at $ 48.10 /gap higher entry
                               /originally listed at $47.83
Change since picked:      - 0.13
Earnings Date           09/01/09 (unconfirmed)
Average Daily Volume =       1.5 million  
Listed on August 08, 2009         


Strangle & Spread Play Updates

(What is a strangle? It's when a trader buys an out-of-the-money (OTM) call and an OTM put on the same stock. The strategy is neutral. You do not care what direction the stock moves as long as the move is big enough to make your investment profitable.)

Schlumberger - SLB - close: 56.13 change: -1.21 stop: n/a

SLB rallied again with the strength in oil this morning but gave up a good chunk of its gains. I am not suggesting new positions at this time.

The options we suggested were the September $60.00 calls (SLB-IL) and the September $45.00 puts (SLB-UI). Our estimated cost is $1.00 and we want to sell if either option hits $2.50 or higher.

Picked on   August 15 at $ 52.00 /gap down entry Aug. 17th
Change since picked:      + 4.13
Earnings Date           10/15/09 (unconfirmed)
Average Daily Volume =       9.2 million  
Listed on August 15, 2009