Option Investor
Newsletter

Daily Newsletter, Monday, 8/31/2009

Table of Contents

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

Market Wrap

Is The Well Finally Running Dry?

by Todd Shriber

Click here to email Todd Shriber
For investors looking for a silver lining on a day that otherwise lacked positive signs to point to, Monday represented the last trading day of August and a sixth consecutive monthly gain for the S&P 500. Still, the measure of the 500 largest U.S. stocks closed down 0.8% to 1020.63 and the Dow Jones Industrial Average fared no better, slumping nearly 48 points to 9496.28. Technology provided no respite for the bulls as the Nasdaq tumbled nearly 20 points to finish the day at 2009.06. Certainly not the best way to cap off August and head into September, which is traditionally the worst month of the year for stocks.

Stats Table

While one day does not beget a trend, it is worth noting that Monday's declines follow up some rather meager increases for stocks last week. Last week's market action kind of felt like it was down week although it was not and I am not going to say I told you so because I did not, but the fashion in which the market ended last week did indicate a day like today was right around the corner. Monday's activity probably has increased the population of the ''too far, too fast'' camp. This group seems to get a little louder every time the market has a down day and it seems like they are trying to assuage the world, themselves included, that a couple of down days here and there are not such a bad thing.

Even with Monday's declines, the S&P 500 tacked on 3.4% in August while the Dow added 3.5%. Tidy gains to be sure, but an asterisk may belong next to those statistics because financials were top performers in August, soaring 13%. What is becoming apparent is that U.S. markets are no longer the leader that other global markets look to for direction. The best case scenario is that U.S. indexes now share that crown with the Shanghai Composite Index, which dropped nearly 7% today and that may have been the catalyst that pressured U.S. equities.

If you thought that U.S. stocks had come too far too fast, Chinese stocks will certainly make you blush. The iShares FTSE/Xinhua China 25 Index ETF (FXI) soared 62% from early April to late July, but has had a tough go of things in August. Monday's close $40 is not a good thing. The close below the 50-day moving average at $39.86 might portend more pain is on the way for Chinese equities.

FXI Chart

Beyond the decline in Chinese stocks, there was something else that the bulls may find concerning. Not even a return, albeit probably temporary, of ''Merger Monday'' was enough to stoke the flames of the rally. Two sizable deals totaling $9.5 billion were announced and given the decline in merger and acquisition activity over the past year, which the chart below illustrates, it would have been logical to assume the market would have responded to today's deals.

Well, that just was not the case. Disney (DIS) is shelling out $4 billion in cash and stock to bring Spiderman and the X-Men under the Mickey Mouse umbrella by acquiring Marvel Entertainment (MVL). As I noted in the Market Monitor, Standard & Poors has put Disney's long-term debt ratings on Credit Watch with negative implications because Disney may have to issue some new debt to get the deal done.

In the energy patch, oil services firm Baker Hughes (BHI) said it will acquire BJ Services (BJS) for $5.5 billion to increase its presence in the natural gas shale arena. BJ Services was spun off from Baker Hughes in 1990. An odd bet to be sure considering how much pressure natural gas prices have been under lately, but Bloomberg News said this is the largest takeover by an oilfield services firm in 11 years and even that was not enough to spark stocks to a better day.

M&A Chart

Speaking of M&A activity, Morgan Stanley (MS), the leader in M&A advisory in 2009, was downgraded by Bank of America to ''neutral'' from ''buy'' due to rising compensation costs and the fact Morgan Stanley shares no longer trade at a deep discount. Morgan Stanley was not involved in the Baker Hughes/ BJ Services deal, nor was it involved in the Disney/Marvel. Adding some salt to Morgan Stanley's wounds is the fact that rival Goldman Sachs (GS)advised both Baker Hughes and Disney on their respective deals.

Morgan Stanley had been consolidating around $30, but even though the stock dropped just 55 cents today, that took it below $30 and very close to support at the 50-day moving average of $28.54.

Morgan Stanley Chart

It was not the best of days for commodities either as the Reuters/Jefferies CRB Index, which tracks 19 commodities, slumped 1.6% led by crude oil's decline back below $70 a barrel and retreats in heating oil and gasoline. It is not really surprising to see commodities show some weakness on a day when Chinese stocks do the same and that made Alcoa (AA), the world's largest aluminum maker, the biggest loser in the Dow.

Of course, if I am going to mention China and commodities that means copper has to be in the discussion and that means I have to mention Freeport McMoRan. The world's largest copper producer is a name I mention frequently and the stock has nearly doubled since April. I started to get curious about put activity in the Freeport and found some decent action in the September 60 and 65 puts today. My best guess is that if these puts were purchased they may be protection for long stock positions. Either way, the commodities story is a China story and Freeport will likely be held hostage by that scenario going forward.

CRB Chart

As you have probably gathered if you regularly join me here on Mondays, I am a big fan of interesting little facts that can serve to illuminate broader trends. You know, the kind of facts that will win you a few bets at the 19th hole or make you the toast of the next cocktail party you attend. Today's tidbit concerns the rapid pace of stock sales by company executives, which according to TrimTabs, reached $6.1 billion in August. The ratio of insider selling to buying now resides at 30 to 6, the highest level since TrimTabs starting tracking insider purchases and sales in 2004.

In dollar terms, the $6.1 billion in August sales is the most since May 2008. Now there is nothing wrong with taking some profits and the recent market rally has given ample opportunity to do so. Company executives should be entitled to do so. That said, history has proven that it does pay to watch insider buying and selling. TrimTabs added that U.S. public companies have shed $105.2 billion of their own shares in the past four months.

I could not find a chart that illustrates the insider sales, but I did find one that highlights the decline in insider buying over the past few months. If you had followed this chart, the rise in insider selling would not have caught you by surprise.

Insider Buying Chart

Insider sales are just one factor that may indicate the rally may finally be poised to take a breather. The other bearish indicator I came across over the weekend (perhaps I should get out more) is that short interest on the New York Stock Exchange fell by more than 10% in the second half of July. Short interest is an inverse indicator, meaning that declining short interest is not necessarily a good thing because if there are fewer short positions, that means there will be less buying to cover and less buying period.

Many a pundit has argued that this rally has been fueled in large part by short covering and if that well proves dry, the bulls may indeed be forced to head for the sidelines. One individual example may be American International Group (AIG), which, let me be honest, rose nearly eight-fold in less than two months for no good reason, at least no good fundamental reason. It is hard to quantify in percentage terms, but it is safe to assume that the bulk of AIG's rally was due to short covering.

AIG was down almost 10% on Monday and guess what? Its short interest was down 2% through the first half of August.

There is a cavalcade of economic data this week that will determine the tenor of the market heading into the Labor Day holiday and perhaps for the rest of September. Tuesday brings an update on the ISM Manufacturing Index, which is expected to rise to 50.5 from 48.9. Wednesday will have two news catalysts with factory orders and minutes from the Federal Open Market Committee's August meeting. On Thursday, the ISM non-manufacturing report is released and that is expected to show an uptick to 48 from a previous reading of 46.4.

Of course the Big Kahuna of economic reports is released on Friday before the market opens and that is the August unemployment report. As I have been saying for several weeks, volume is typically benign heading into Labor Day, but this Friday should be different. If nothing else, there should be some volatility early in the session. The range of estimates is uncomfortably wide with some experts saying there could be positive job growth while some think as many as 350,000 jobs were shed by U.S. employers in August. The consensus estimate calls for 225,000 lost jobs and while not good, that would be better than the 247,000 jobs lost in July.

Looking at the charts, Monday's decline brought the Dow within sniffing distance of support at 9475. The index bumped up against resistance at 9625 a couple of times last week and was beaten back. There is probably some resistance at 9655 as well, so that is another potential stumbling block on the way to 10,000. If 9400 is broken, 9275 should be the next support area. Hopefully 9275 will not come into play this week, or at all.

Dow Chart

The S&P 500 did not have much of a range on Monday, less than 11 points and 1030 is now looking like a resistance point, at least from an intraday perspective. Buyers have done an admirable job of bidding the S&P 500 up almost every time the index reaches an important support level and continuation of that trend is imperative to get the index to 1050 and then 1100, though the latter might be a tough road to travel in September.

S&P 500 Chart

I mentioned a couple of weeks ago that the Nasdaq's leadership of the rally might be in jeopardy as earnings season drew to a close, but plenty of catalysts emerged on Friday to help the Nasdaq traverse 2030. Surprise guidance from Intel (INTC), a solid earnings report from Dell (DELL) and news that Apple's (AAPL) iPhone will finally make its way to China helped the Nasdaq scoot higher, but the gains were tempered by a late-day sell-off.

With Monday's glum performance, support seems firmly in place at 2000 and resistance looms at 2037 and then 2063, which would be a 50% rebound off the March low.

Nasdaq Chart

With plenty of economic reports looming, Monday's losses could be erased in a heartbeat if those reports meet or exceed expectations. The other side of the coin is traders may take a pass on the week and leave early to enjoy the long weekend. Tuesday will be important not only because it is the first day of September, but also because it may serve to prove or discredit the ''buy the dips'' phenomenon that has carried the market higher this summer. A break in that trend could indicate this September may follow a majority of Septembers past.


New Option Plays

Tone May Be Changing

by James Brown

Click here to email James Brown
Editor's Note:

The stock market has not been responding well to positive news, which suggests the tone of the market may be changing. Investors were spooked by the nearly 7% plunge in the Chinese Shanghai index. If the Chinese market continues to fall it will continue to influence investor confidence. Plus, we have the ISM data out tomorrow.

I am not suggesting new plays at this time. Let's see how the market shapes up tomorrow. We already have several candidates with triggers to buy the dip.


In Play Updates and Reviews

Trigger Monday

by James Brown

Click here to email James Brown


CALL Play Updates

Apple Inc. - AAPL - close: 168.21 change: -1.84 stop: 163.40

The pull back in AAPL wasn't that bad. Shares traded sideways in a narrow $2.00 range after the initial gap down. Readers may want to wait for a new bounce from $165 or a new rise over $169 to launch call positions. Our first target is $174.00. Our second target is $179.00. FYI: The P&F chart points to a $231 target.

Picked on   August 26 at $166.50 *(small positions 1/2 to 1/4)
Change since picked:      + 1.71
Earnings Date           10/21/09 (unconfirmed)
Average Daily Volume =        14 million  
Listed on August 25, 2009         


Allegheny Tech. - ATI - close: 30.37 change: -1.64 stop: 27.95

Our new call play on ATI has been opened. The stock dipped back toward round-number support at $30.00. The low was $30.03 and our trigger to buy calls was at $30.25. I'd still jump in now if you missed it. Our first target is $34.50. Our second target is $39.00. Time frame on the first target is only two or three weeks. The $39 target could take several weeks.

Chart:

Picked on   August 31 at $ 30.25 *triggered         
Change since picked:      + 0.12
Earnings Date           10/21/09 (unconfirmed)
Average Daily Volume =       2.7 million  
Listed on August 27, 2009         


CF Industries - CF - close: 81.66 change: -0.46 stop: 79.75

The trading action in CF is actually starting to look more bearish lately. The stock is testing its 30-dma and should find additional support near $80.00. CF is tired of playing games with Terra Industries (TRA), the company it's trying to acquire. CF has filed a lawsuit to force TRA to hold its annual meeting, which would give CF a chance to nominate directors to TRA's board of directors (people more friendly to a merger with CF).

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: 72.00 change: -1.25 stop: 69.90

The sell-off in China drug the commodities down. Crude oil collapsed with a $3.00 plunge under $70.00. This weighed on the oil stocks. EOG dipped toward its 50-dma near $71.00. Over the weekend I suggested readers cut back on their position sizes in EOG since the stock's posture looks more bearish. Wait for the bounce before considering new bullish positions.

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.

*The plan was to trade small from the beginning to cutting our position in half now should leave us with a very small position.

Picked on   August 26 at $ 73.25 /gap down entry point 
                               /listed at $73.98
Change since picked:      - 1.54
Earnings Date           11/03/09 (unconfirmed)
Average Daily Volume =       2.4 million  
Listed on August 22, 2009         


FISERV Inc. - FISV - close: 48.25 change: -0.96 stop: 46.60

Hopefully no one was surprised to see a dip in FISV. I've been warning readers to expect a pull back toward the $48.00 level. We got it. I am suggesting readers use this dip or a dip toward the 50-dma as a new bullish entry point to buy calls. 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:      - 0.35
Earnings Date           10/28/09 (unconfirmed)
Average Daily Volume =       1.5 million  
Listed on August 19, 2009         


Fluor Corp. - FLR - close: 52.90 change: -0.68 stop: 49.95

FLR is providing traders another bullish entry point with today's pull back. The stock has dipped to its longer-term bullish trendline of higher lows (support) and its 50-dma. More conservative traders could up their stops toward the $51.00 or $51.50 levels if you're feeling super cautious. 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:      + 1.90
                           /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: 86.25 change: -3.15 stop: 84.75

FLS under performed the rest of the market with a 3.5% decline. Technical indicators are starting to decay. I am not suggesting new bullish positions at this time. This is an aggressive trade with small positions. Our first target is $92.25. Our second target is $98.50. Our time frame is several weeks.

Picked on   August 26 at $ 87.50  (1/2 pos)
Change since picked:      - 1.25
Earnings Date           10/28/09 (unconfirmed)
Average Daily Volume =       1.1 million  
Listed on August 17, 2009         


Goldman Sachs - GS - close: 165.46 change: +1.04 stop: 159.00

It was an interesting day for GS. The stock gapped open lower, dipped to $161.25 and then shot higher again closing in positive territory. Our plan is to buy calls on a breakout. I'm suggesting readers open small call positions (smaller than our normal trade size) at $166.75. If triggered our first target is $179.00. FYI: The Point & Figure chart is bullish with a $228 target.

Picked on   August xx at $ xx.xx <-- TRIGGER @ 166.75
Change since picked:      + 0.00
Earnings Date           10/13/09 (unconfirmed)
Average Daily Volume =       8.8 million  
Listed on August 29, 2009         


Genesse & Wyoming - GWR - close: 31.38 change: -0.05 stop: 28.90

GWR held up pretty well. The railroad index lost 1.8% but GWR only gave up 0.15%. I am not suggesting new positions at this time but we can watch for another bounce from the $30.00 level. 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:      + 2.72
Earnings Date           11/03/09 (unconfirmed)
Average Daily Volume =       230 thousand
Listed on August 15, 2009         


Grainger W.W. - GWW - close: 88.93 change: -0.39 stop: 84.75

Hmm... more aggressive traders may want to buy this bounce. We have a trigger at $86.00 to buy calls. GWW dipped to $86.14 this morning and then when the morning bounce faded it dipped to $86.25 and rallied to its best levels of the day. This looks like a potential entry point and another higher low. I'm going to stick to our plan, which calls for waiting for a dip at $86.00 or a breakout over $90.00 (trigger @90.50). We want to trade smaller positions on the breakout. Our first target is $93.50. Our second target is $97.50.

Picked on   August xx at $ xx.xx <-- TRIGGER @ 86.00 or 90.50
Change since picked:      + 0.00
Earnings Date           10/14/09 (unconfirmed)
Average Daily Volume =       635 thousand 
Listed on August 22, 2009         


IDEXX Labs - IDXX - close: 50.76 change: -0.24 stop: 49.75

IDXX tested support near $50.00 and its rising 30-dma. Readers may want to buy the afternoon bounce given our stop loss at $49.75 but I suggest waiting for a breakout over $52.00.

Currently our first target to take profits is at $54.90. Our second target is $58.00.

Picked on   August 25 at $ 51.75 *small position sizes (1/2 to 1/4)
Change since picked:      - 0.99
Earnings Date           07/24/09 (confirmed)
Average Daily Volume =       383 thousand 
Listed on  July 25, 2009         


Legg Mason - LM - close: 28.76 change: -0.16 stop: 26.40

LM held up reasonably well. Readers can use the bounce as an bullish entry point but I'd prefer to see another rise over $29.50. The plan is to use small position sizes.

Our first target is $32.45. Our second target is $34.85. FYI: The P&F chart is bullish with a $39 target.

Picked on   August 28 at $ 29.50 *triggered               
Change since picked:      - 0.74
Earnings Date           07/20/09 (confirmed)
Average Daily Volume =       3.4 million  
Listed on  July 25, 2009         


Mettler Toledo - MTD - close: 87.40 change: -1.17 stop: 84.99

MTD tested its 10-dma again. I would wait for a dip near $86.50 or a new rise over $88.00 as our next entry point. 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 27 at $ 88.50 *triggered  (1/4 normal size)
Change since picked:      - 1.10
Earnings Date           11/05/09 (unconfirmed)
Average Daily Volume =       234 thousand 
Listed on August 22, 2009         


Newmarket Corp. - NEU - close: 83.12 change: -0.73 stop: 79.00

Profit taking in NEU was relatively light and shares consolidated sideways all day long. Right now the plan is to buy the second half of our call position on a dip at $80.50.

Our first target to take profits is at $88.50. Our second and final target is $92.50. FYI: The Point & Figure chart is bullish with a $116.00 target.

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:      - 1.21

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         


Occidental Petrol. - OXY - close: 73.10 change: -1.42 stop: 69.45

The sharp sell-off in China pushed commodities lower. Oil gave up $3 and closed under $70 a barrel. This pushed oil stocks lower. OXY fell toward $72.00 but was starting to rebound into the closing bell. I'm suggesting readers use the dip as another entry point. Our first target is $77.00. Our second target is $79.85.

Picked on   August 27 at $ 72.00 *triggered         
Change since picked:      + 1.10
Earnings Date           10/28/09 (unconfirmed)
Average Daily Volume =       5.0 million  
Listed on August 26, 2009         


PPG Inds. Inc. - PPG - close: 55.40 change: -0.54 stop: 52.95

The dip in PPG today also looks like another entry point. Our first target is $59.80.

Picked on   August 28 at $ 55.65
Change since picked:      - 0.25
Earnings Date           10/27/09 (unconfirmed)
Average Daily Volume =       1.6 million  
Listed on August 27, 2009         


State Street (Bank) STT - close: 52.48 change: -0.50 stop: 49.45

Early morning weakness in the financials was enough to push STT to $51.70. We had a trigger to buy calls at $52.00. Our stop loss is now $49.45. Currently STT has a short-term trend of lower highs. If you don't want to buy this dip today then consider buying calls on a move over $53.50 or just wait for our breakout trigger at $55.60.

Now that our play is open our first target is $55.00. Our second target is $59.80. Currently the Point & Figure chart is bullish with a $62 target.

Chart:

Picked on   August 31 at $ 52.00 
Change since picked:      + 0.48
Earnings Date           10/13/09 (unconfirmed)
Average Daily Volume =       5.3 million  
Listed on August 19, 2009         


United Health - UNH - close: 28.00 change: -0.18 stop: 27.49

Nothing has changed for us. We're still waiting for a breakout over $30.00.

I am suggesting a trigger to buy calls at $30.55. If triggered our first target to take profits is $34.50. Our second target is $37.50. My time frame is about eight weeks.

Picked on   August xx at $ xx.xx <-- TRIGGER @ 30.55
Change since picked:      + 0.00
Earnings Date           10/20/09 (unconfirmed)
Average Daily Volume =       9.2 million  
Listed on August 29, 2009         


U.S. Oil Fund - USO - close: 36.05 change: -1.61 stop: 34.49

Weakness in the commodities was a little unexpected but when the Chinese market fall almost 7% in one day investors were rushing to lock in gains. The USO gapped open lower at $36.57 and dipped to $35.80 at its worst levels. We had a trigger to buy calls at $36.50 so the play is now open. Our first target to take profits is at $39.95.

Chart:

Picked on   August 31 at $ 36.50 
Change since picked:      - 0.45
Earnings Date           00/00/00
Average Daily Volume =      11.5 million  
Listed on August 15, 2009         


Valmont Ind. - VMI - close: 82.33 change: -2.51 stop: 79.45

Thankfully we didn't have to wait very long for VMI to pull back. The stock dipped to $81.95 and spent most of the day bouncing around the $82-83 zone. Our trigger to buy calls was hit at $82.00. Our first target is $88.00. I'm setting a second target at $94.00 but that might be a little too optimistic. Currently the Point & Figure chart is bullish with a $104 target.

Chart:

Picked on   August 31 at $ 82.00
Change since picked:      + 0.33
Earnings Date           10/15/09 (unconfirmed)
Average Daily Volume =       315 thousand 
Listed on August 29, 2009         


PUT Play Updates

First Solar - FSLR - close: 121.58 chg: -2.63 stop: 135.25

FSLR flirted with a drop under the $120 level this morning. Shares hit $118.85 but bounced back pretty quickly. 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:      -14.30
                               /1st target hit @ 122.50 (-9.8%)
Earnings Date           11/03/09 (unconfirmed)
Average Daily Volume =       3.5 million  
Listed on August 15, 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.)

Research In Motion - RIMM - close: 73.06 chg: -0.77 stop: n/a

RIMM dipped to $72.00 before bouncing. Our entry zone to launch new strangles is the $74.50-75.50 range. The options suggested were the September $80 calls (RFY-IP) and the September $70 puts (RFY-UN). Our estimated cost was $2.64. We want to sell if either option hits $6.00 or higher.

Picked on   August 25 at $ 75.56
Change since picked:      - 2.47
Earnings Date           09/24/09 (confirmed)
Average Daily Volume =      11.7 million  
Listed on August 25, 2009         


Schlumberger - SLB - close: 56.20 change: -0.95 stop: n/a

Traders bought the dip at its SLB's 10-dma this morning. I am not suggesting new strangle positions at this time but readers might want to consider directional call plays.

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:      + 4.20
Earnings Date           10/15/09 (unconfirmed)
Average Daily Volume =       9.2 million  
Listed on August 15, 2009         


CLOSED BULLISH PLAYS

Intl.Business Machines - IBM - cls: 118.05 change: -0.17 stop: 117.45

IBM fell to $116.92 this morning and eventually bounced back closed to unchanged for the session. The stock hit our trigger at $117.45. IBM has been churning sideways for over a month now. We may be better off waiting to buy a dip near $110 and its rising 100-dma before considering new positions (or a close over $121.00).

Chart:

Picked on   August 24 at $120.25 
Change since picked:      - 2.80<-- stopped @ 117.45 (-2.3%)
Earnings Date           10/08/09 (unconfirmed)
Average Daily Volume =       7.9 million  
Listed on August 08, 2009         


CLOSED BEARISH PLAYS

Marvel Entertainment - MVL - close: 48.37 change: +9.72 stop: 39.05

It's days like today I'm happier owning puts than shorting stock. Anyone short MVL was in big trouble. Disney (DIS) announced they had signed a $4 billion deal to buy MVL. Shareholders of MVL stock will receive $30 in cash and 0.745 shares of DIS stock, which values MVL close to $50 a share. MVL gapped open at $48.60 and closed with a 25.1% gain. Our puts vanished into thin air but our risk was limited to what we paid for them.

Chart:

Picked on   August 17 at $ 37.90 *triggered  (DIS bought MVL)
Change since picked:      +10.47<-- stopped/gap higher exit
Earnings Date           11/04/09 (unconfirmed)
Average Daily Volume =       710 thousand 
Listed on August 10, 2009