Option Investor
Newsletter

Daily Newsletter, Tuesday, 9/15/2009

Table of Contents

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

Market Wrap

What Correction?

by Jim Brown

Click here to email Jim Brown

Money manager Laszlo Birinyi said today that investors who wait to buy stocks until the recession is actually declared to be over will miss out on some huge gains. Bernanke said today, "The recession is very likely over." Is that the proverbial fat lady singing?

Market Stats Table

Investors must have taken Laszlo's words to heart because the major indexes have now broken over all short-term resistance and are clearly in breakout mode. Of course other reasons for the rally include end of quarter window dressing and Friday's triple witching option expiration.

Friday's rally got a lift from the economics with the NY Empire State Manufacturing Survey spiking to 18.9 in September. This was up from only 12.1 in August. This was a much stronger showing than analysts had expected at 14.0. New orders rose to 19.8 from 13.4 indicating an improving trend. This was the third consecutive month of improvement in new orders. At the same time inventories are contracting at an accelerating pace. As inventories contract there are rising expectations from the replenishment cycle. However, the report showed that employment is still declining although losses in August were half the rate of June.

Empire State Bar Chart

Producer Prices for August rose sharply by +1.7% because of increases in energy costs. Excluding food and energy the core inflation was only a mild +0.2%. Core prices for intermediate and crude goods have definitely improved. The deflation scare from large declines in prices early in 2009 has eased. Prices for inputs to the manufacturing process were higher than any point during the recession. Rising orders along with rising prices supports the idea that the recession is over. However, orders are still weak relative to growth periods and will probably remain weak for the rest of 2009.


Retail sales for August spiked unexpectedly by +2.7% compared to analyst estimates for +1.4% growth. The gains were led by autos but there was broad based strength across the board. Apparel, department stores and sporting goods stores had very strong sales gains. Building materials and home furnishings were the only two sectors to post a drop in sales.

The headline number was the strongest gain since January 2006 but obviously the cash for clunkers program generated the sales. Auto dealers posted a +10.6% sales gain for the month. Back to school purchases were also strong at more than +2% and confounding to analysts who had previously said they were weak. We should expect a sharp decline in September without an auto stimulus program to provide the boost.

Retail Sales Chart

Economic reports due out on Wednesday include Mortgage Applications, Current Account, Consumer Price Index, Treasury Capital Flows, Industrial Production, Housing Market Index and Oil & Gas Inventories.

The U.S. dollar is still under pressure and today's close on the dollar index at 76.54 is the lowest close since the 76.46 on Sept-23rd last year. The 52-week lows came at 75.89 on September 22nd as AIG was crashing. Lehman filed bankruptcy on Sept-15th and AIG lost 60% of its value. On the 16th AIG hit its low for the year and the government stepped up to prevent its failure. The dollar index plunged to the 75.89 low but rebounded sharply to 88.46 over the next two months as it became apparent the financial system was not going to collapse.

Today there is a tougher problem. The dollar is crashing on worries over the debt load assumed by the U.S. Fed and Treasury to prevent the collapse of the financial system. This is not something that can be resolved over a couple months. This is going to take a decade to work off the stimulus debt and any new spending by the current administration. The dollar is going to continue to decline and could easily return to the early 2008 lows at 70.69. This almost guarantees that dollar based commodities are going to continue to rise.

Crude oil rose to $71.19 intraday as the dollar fell and Ben Bernanke said the recession is technically over. The prospect for increased demand in a rebounding global economy and the falling dollar rescued it from Monday's drop to $68.02. We are also only a week away from the expiration of crude futures next Tuesday. Oil inventories on Wednesday morning are expected to show a drop of 3-million barrels for the week. There are also three storms forming in the Atlantic. None are currently expected to turn into hurricanes but having three separate storms heading our way is a reason to be cautious. We have been very fortunate over the last several years without a material storm since Katrina. Eventually our luck is going to run out.

Natural gas prices have really been explosive. After reaching an extremely oversold price of $2.41 on Sept 4th on fears of an UNG futures dump the price has rocketed higher. The $2.41 was a 7.5-year low. The CFTC is going to meet on Wednesday to discuss position limits on commodities and that probably triggered some short covering on both oil and gas futures today.

Crude Oil Chart

Natural Gas Futures Chart

In stock news Adobe (ADBE) announced earnings after the bell of 35-cents. This was down from the 50-cents earned in the year ago period. Adobe was happy to maintain its earnings in a tough economy and projected earnings of 23-29 cents in the current quarter. Adobe also announced it was purchasing web analytic company Omniture (OMTR) for $1.8 billion. That represents a $21.50 per share purchase of Omniture and 24% over the Tuesday close.

Omniture Chart

Blockbuster (BBI) said today it might close nearly 1,000 stores by the end of 2010. The once mighty giant of the rental business has been knocked down to size by NetFlix (FLIX) and Redbox. A SEC filing today said Blockbuster would close between 810-960 locations by the end of 2010 and that would be more than a fifth of its current stores. Blockbuster's prior guidance anticipated closing only 380-425 stores. BBI said 35% of its stores were "core" and 47% of all stores were profitable but the remaining stores were losing money. BBI is moving to convert its 4,356 domestic stores to the smaller city based footprint and shutdown the large anchor store concept. BBI is also moving to compete with Redbox and currently has 500 video dispensers in place with an expected 10,000 by the end of 2010. Redbox has over 15,000 today. Redbox was originally funded by McDonalds (47% owner) and Coinstar (47%). In February Coinstar purchased the portion it did not own for $175 million.

For those readers not familiar with Redbox this is a coke machine sized dispenser which has an inventory of the top 100 or so DVDs. Users swipe their credit card and select a DVD and it drops into the pickup slot. The cost per DVD is $1 per day. When you return it the machine reads the barcode on the DVD and cancels the billing. These machines are showing up in McDonalds, 7-11s, gas stations, etc. Seems like everywhere I look there is a new Redbox location. Blockbuster is going to really need to explode its rental machine presence if it is going to compete in the new normal. Blockbuster only claims 1.6 million online subscribers while Netflix claims 9.4 million so BBI has its work cut out for it there as well.

Redbox DVD Station

Online brokers Etrade, Schwab ad Ameritrade all said online trades rose significantly in August with double digit percentage gains. Schwab said daily trades were 334,300 in August, up +24% over August 2008 and +15% over July. Ameritrade said trades rose +71% year over year and 16% from July. Etrade posted a +37% rise in trades. Etrade said it had a record number of accounts at 2.7 million.

Fed Chairman Ben Bernanke lifted the markets when he said during some Q&A today "the recession is very likely over at this point." This came in early afternoon and the markets rallied sharply off the comments. Industrial stocks like CAT and AA were already moving higher and his comments pushed them even farther. GE has finally broken out over long term resistance at $15 with a 10% move over the last two days.

For all practical purposes the fear of a correction appears to have passed. That may make it even more likely since everyone appears to be throwing money at the market. Instead of the daily dose of bears on CNBC the bulls are appearing more often. Laszlo Birinyi said U.S. stocks have "A lot of room to run." Laszlo said he expects to see the S&P at 1700 over the next couple of years. He made that prediction back on May 20th and repeated it again this week on Bloomberg. He is still recommending buying financial stocks that are outperforming. I am surprised we have not seen Abbey Joseph Cohen out with a higher prediction this week. Even noted bear Barton Biggs called himself "unfashionably bullish" and said he believed the S&P would rise to 1200-1250 before a material correction appeared.

With all the bears turning bullish and talk of a correction disappearing it makes you wonder what the future has in store for us. I always worry when everyone moves to the same side of the boat. When that happens the boat has a tendency to capsize. If everyone is turning bullish that means we are running out of bears to keep the market moving higher as they cover their shorts. Once everyone is "all in" on the bullish side there is nobody left to buy.

Somebody is buying this market and volume has definitely increased. Volume today was 10.3 billion shares. Really significant was the spike in new 52-week highs to 447. That is the highest level we have seen this year. New 52-week lows totaled only 47. Some of this could be short covering ahead of triple witching. When portfolio managers close their puts they are using for portfolio insurance it provides a bullish lift to the market. This along with end of quarter window dressing could be pushing the market higher. I don't really care why it is happening as long as it continues.

The S&P rallied well over prior resistance to close at 1052 and is in blue-sky territory until it hits the 50% retracement level at 1116. That does not mean there is no upside resistance but the trend is solid. The SPX should run into uptrend resistance around 1075 but that does not mean a crash is imminent. We saw buyers rush into the market on Monday's gap down open and the pace of buying and volume is increasing. Support today is prior resistance at 1035.

S&P-500 Chart

The Dow finally broke over resistance at 9625 and moved over 9700 intraday. Uptrend resistance is about 9800 but the Dow is really in a free fly zone until about 10318. The path should be higher but I am sure there will be thunderstorms along the way. Initial support is 9575.

Dow Chart - Daily

Long term Dow chart

The Nasdaq has gone from weak sister to leader of the pack in two short weeks. The Nasdaq has broken over the 50% retracement level at 2063 and appears to be headed for a test of 2160 this week. Several sectors in the Nasdaq are fueling the rise but nearly all tech stocks are gaining ground. The Nasdaq went from the lagging index in a range bound pattern to exploding higher above major resistance. The Nasdaq actually has more room to run and short covering into triple witching could be the power.

Nasdaq Chart - Daily

Long Term Nasdaq Chart

The small caps in the Russell 2000 are proclaiming a new bull market. If the small caps were not participating I would be telling you that fund managers were not onboard with this rally. If only large cap stocks were rising then fund managers were looking for liquidity for a quick exit. The Russell broke over major resistance at 600 that dates back to 2004. The angle of ascent has gone vertical and while scary it does show that the rally has breadth.

Russell Chart

I have been telling everyone to buy the dips for quite a while now and that message is still true. Eventually we will buy a dip that doesn't rebound but until proven wrong that is the trade that is working. I would also remind you to "sell too soon" because rallies like this don't last forever. Lock in profits by selling early or at the very least make sure you have trailing stop losses. You can always get back into the market but you can't always recover that lost profit.

Sell too soon!

Jim Brown


New Option Plays

Possible Short Squeeze

by James Brown

Click here to email James Brown


NEW DIRECTIONAL CALL PLAYS

SOHU.com Inc. - SOHU - close: 68.73 change: +2.89 stop: 63.25

Why We Like It:
SOHU is a Chinese Internet company and shares are breaking out from a multi-week consolidation. The stock displayed relative strength with a 4.3% gain on stronger than normal volume today. The breakout over resistance at $66.00 suggest a new leg has begun. The stock has above average short interest. If this is a short squeeze it could really move fast. The breakout has also produced a new bullish P&F chart with an $88 target.

I'd rather not chase this move. If we can catch a dip near $67.00 the options should be a lot cheaper. I'm suggesting readers use a trigger at $67.00 to open positions. There is some resistance at $70.00 but our first target is $72.50. Our second target is $77.00.

Suggested Options:
I am suggesting the October calls. I prefer the $70 strike.

BUY CALL OCT 65.00 TKZ-JM open interest=261  current ask $5.90
BUY CALL OCT 70.00 TKZ-JN*open interest=444  current ask $3.10
BUY CALL OCT 75.00 TKZ-JO open interest= 93  current ask $1.30

Annotated Chart:

Picked on September xx at $ xx.xx <-- TRIGGER @ 67.00
Change since picked:       + 0.00
Earnings Date            10/26/09 (unconfirmed)
Average Daily Volume =        577 thousand 
Listed on September 15, 2009         



In Play Updates and Reviews

FDX Scores Again, Five New Stops

by James Brown

Click here to email James Brown


CALL Play Updates

Apple Inc. - AAPL - close: 175.16 change: +1.44 stop: 164.00

Another new high for the market and another new 2009 high for AAPL. Shares hit $175.65. I am not suggesting new bullish positions at this time. More conservative traders may want to raise their stop loss closer to $170.00. AAPL has already hit our first target at $174.00. Our second and final 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:      + 8.66
                             /1st target hit @ 174.00 (+4.5%)
Earnings Date           10/21/09 (unconfirmed)
Average Daily Volume =        14 million  
Listed on August 25, 2009         


Alcon Inc. - ACL - close: 134.77 change: +0.21 stop: 129.49

The trend for ACL is up but I'm starting to worry. Shares have been sliding sideways the last two days and under performing the rest of the market. I am not suggesting new positions at this time. Wait for ACL to test the $132 region and then look to buy calls on a bounce. Our first target is $142.50. Our second target is $148.00.

Picked on September 10 at $136.75
Change since picked:       - 1.98
Earnings Date            10/21/09 (unconfirmed)
Average Daily Volume =        299 thousand 
Listed on September 10, 2009         


Allegheny Tech. - ATI - close: 34.13 change: +0.41 stop: 29.85

ATI is still slowly inching higher. The stock added another 1.2% and hit a new relative high at $34.60. I am not suggesting new bullish positions at this time. ATI has already hit our first target at $33.85. Our second and final target is $38.00 but that might be a little too optimistic. ATI has produced an inverse (bullish) H&S pattern, which would suggest a $38 target but it could take a few weeks to get there.

Picked on   August 31 at $ 30.25 *triggered         
Change since picked:      + 3.88
                               /1st target hit @ 33.85 (+11.9%)
Earnings Date           10/21/09 (unconfirmed)
Average Daily Volume =       2.7 million  
Listed on August 27, 2009         


CF Industries - CF - close: 87.88 change: +0.63 stop: 83.49

After three days of consolidating sideways it looks like CF is hinting the next move is higher. More aggressive traders may want to consider bullish positions on a move over $89.00. I'd prefer to buy calls on a dip near $85.00 but we may not see that opportunity. Our first target to take profits is at $92.50. Our second target is $98.00. FYI: The P&F chart has a quadruple-top bullish breakout buy signal with a $99 target.

FYI: Agrium (AGU) is trying to buy CF but CF keeps rejecting the offer calling it too late. At the same time CF is trying to buy Terra Industries (TRA) and TRA keeps rejecting the offer calling it too low. Eventually one of these companies is going to give up or they're finally going to make a big enough offer or somebody else might step in and start bidding. There is a risk that someone bids too much and the market could think they overpaid, which might push the stock lower. This M&A dance has been going on for months and it will probably continue for months so I'm not expecting it to have much short-term impact on the stock. However, it's worth noting that CF recently filed a lawsuit to force TRA to hold their annual shareholder meeting. This way CF can try and vote some members onto the board of directors.

Picked on September 05 at $ 85.93
Change since picked:       + 1.95
Earnings Date            10/27/09 (unconfirmed)
Average Daily Volume =        653 thousand 
Listed on September 05, 2009         


Compass Minerals - CMP - close: 58.64 chg: +0.64 stop: 54.75 *new*

CMP is bouncing back to the top of its five-day trading range. The short-term trend has a very hard to see pattern of higher lows but it suggests the next move will be a breakout over resistance near $59.00. Please note our new stop at $54.75. Officially our first target to exit is $59.75. Our second and final target is $64.00. FYI: The Point & Figure chart has turned bullish with a $69 target.

Picked on September 03 at $ 55.55
Change since picked:       + 3.09
Earnings Date            10/28/09 (unconfirmed)
Average Daily Volume =        415 thousand 
Listed on September 02, 2009         


Danaher Corp. - DHR - close: 67.93 change: -0.01 stop: 62.95 *

The rally in DHR looks like it's losing some steam and shares are due for a pull back. Look for a dip back toward $65.00 as a new bullish entry point. Our first target is $69.50. The Point & Figure chart is bullish with a $77 target.

Currently we only have half a position open to limit our risk given the aggressive entry point.

Picked on September 05 at $ 66.37 (buy 1/2 position)
               /originally listed at $65.76, gap higher entry @ 66.37
Change since picked:       + 1.56
Earnings Date            10/15/09 (unconfirmed)
Average Daily Volume =        2.4 million  
Listed on September 05, 2009         


Diamond Offshore - DO - close: 94.69 change: +0.59 stop: 87.75

The U.S. dollar has slipped to new lows and crude oil is bouncing from its trendline of support. Meanwhile DO is still rebounding from its recent test of the $92.00 level. I am altering our strategy. Originally we wanted to either buy calls on a breakout at $96.00 or a dip at $90.25. The recent action looks strong enough that I'd buy calls on DO right here at $94.69. More conservative traders who'd rather see a breakout over resistance can wait for the move over $96.00. I'm suggesting small positions at least 1/2 to 1/4 your normal trade.

We will take some money off the table at $99.90 (1st target). Our second target is $104.50. More aggressive traders can aim for $110. The P&F chart is forecasting a $114 target.

Picked on September 15 at $ 94.69 *adjusted entry point
Change since picked:       + 0.00
Earnings Date            10/22/09 (unconfirmed)
Average Daily Volume =        1.8 million  
Listed on September 12, 2009         


Factset Research - FDS - close: 61.37 chg: +0.82 stop: 56.45 *new*

FDS continues to extend its gains. The stock hit $61.52 this afternoon. The stock looks very short-term overbought and I am suggesting readers start taking profits now. Officially our first target to exit is $62.00. Our second target is $64.75. The point and figure chart is bullish with a $76 target. I am raising our stop loss to $56.45. Please note that FDS is due to report earnings on September 22nd and we'll plan to exit the day before the company announces.

Picked on September 08 at $ 57.55
Change since picked:       + 3.82
Earnings Date            09/22/09 (confirmed)
Average Daily Volume =        331 thousand 
Listed on September 05, 2009         


General Dynamic - GD - close: 63.13 change: +0.03 stop: 57.85

The recent action in GD continues to grow more bullish with a short-term trend of higher lows. Yet the S&P 500 and the defense indices are looking more overbought and due for a dip. Aggressive traders might want to consider small positions in GD if the stock breaks out over $64.00. I'm sticking to our plan and waiting to buy calls on a dip at $61.00.

Our first target is $64.90. Our second target is $69.00. Investors with a longer-term time frame may want to aim a lot higher. GD has produced an inverse H&S pattern that is forecasting an $85

Picked on September xx at $ xx.xx <-- TRIGGER @ 61.00
Change since picked:       + 0.00
Earnings Date            10/28/09 (unconfirmed)
Average Daily Volume =        2.3 million  
Listed on September 09, 2009         


Goldman Sachs - GS - close: 176.66 change: -1.05 stop: 164.90

The last three trading days have seen GS struggle with the $178.00 level. Could this be new short-term resistance? Is the stock about to correct? If shares do pull back I'd look for support near $170.00 or the $167 level. Such a dip can be used as a new bullish entry point. Our first target to take profits is at $179.00. Our second target is $184.00. The $185-190 zone looks like potential resistance.

FYI: The Point & Figure chart is bullish with a $228 target. Remember, we want to trade small position sizes.

Picked on September 8 at $166.75
Change since picked:      + 9.91
Earnings Date           10/13/09 (unconfirmed)
Average Daily Volume =       8.8 million  
Listed on August 29, 2009         


Genesse & Wyoming - GWR - close: 32.50 change: +0.09 stop: 28.90

The rally in the railroad stocks has paused for a bit and GWR is drifting under resistance near $33.00. Upon further review of the daily chart a move over $33.00 or $33.25 might be a new bullish entry point for GWR but if you buy calls there I'd raise your stop loss. Our first target is $32.90. More conservative traders may want to take profits now. Our second and final target is $34.75.

FYI: We want 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:      + 3.84
Earnings Date           11/03/09 (unconfirmed)
Average Daily Volume =       230 thousand
Listed on August 15, 2009         


Grainger W.W. - GWW - close: 89.23 change: -0.07 stop: 84.75

GWW continues to trade sideways in the $88.00-90.00 range. I am not suggesting new positions until GWW trades at $90.35 or higher. I'm starting to wonder if GWW will be pinned to the $90.00 level for September option expiration this Friday. Our first target is $93.50. Our second target is $97.50.

Picked on September 1 at $ 86.00 *triggered  
Change since picked:      + 3.23
Earnings Date           10/14/09 (unconfirmed)
Average Daily Volume =       635 thousand 
Listed on August 22, 2009         


iShares Financials - IYF - close: 52.23 change: +0.14 stop: 49.49

It took almost all day but IYF finally managed to breakout to new relative highs over $52.60. Our trigger was to buy very small call positions on the IYF at $52.60 so the trade is open. Our first target is $57.00. Our second target is $60.00.

Chart:

Picked on September 15 at $ 52.60 *triggered  
Change since picked:       - 0.37
Earnings Date            00/00/00
Average Daily Volume =        5.1 million  
Listed on September 01, 2009         


Mettler Toledo - MTD - close: 91.21 change: +0.99 stop: 85.95 *new*

The rally in MTD is starting to gather strength now that shares have cleared the $90.00 level. I am upping our stop loss to $85.95. I'm not suggesting new positions at this time. 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:      + 2.71
Earnings Date           11/05/09 (unconfirmed)
Average Daily Volume =       234 thousand 
Listed on August 22, 2009         


Newmarket Corp. - NEU - close: 90.82 change: +2.17 stop: 84.40 *new*

NEU hit a new 52-week high with its breakout over round-number resistance at $90.00. The high today was $91.72. More conservative traders may want to start exiting positions now. Our second and final target to exit is $92.50. More aggressive traders can aim for $99 but keep in mind that the all-time high was April 2008 at $93.90. Please note our new stop loss at $84.40. 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:      + 6.74
                               /take profits @ 87.97 (+4.3%)

Picked on September 1 at $ 80.50 *triggered 2nd half
Change since picked:      +10.57
                               /take profits @ 87.97 (+9.2%)
Earnings Date           10/27/09 (unconfirmed)
Average Daily Volume =       141 thousand 
Listed on August 24, 2009         


Occidental Petrol. - OXY - close: 78.02 change: +1.03 stop: 72.50 *new*

The bounce in crude oil on Tuesday helped fuel new highs for some of the oil stocks. OXY tagged $78.50 this afternoon. I am raising our stop loss to $72.50. Our second and final target is $79.85. More aggressive traders could aim for the $83-84 zone.

Picked on   August 27 at $ 72.00 *triggered         
Change since picked:      + 6.02
                    /1st target exceeded, gap higher @ 77.23 (+7.2%)
Earnings Date           10/28/09 (unconfirmed)
Average Daily Volume =       5.0 million  
Listed on August 26, 2009         


PPG Inds. Inc. - PPG - close: 59.41 change: +1.50 stop: 54.40 *new*

PPG displayed some relative strength with a 2.5% rally and a new 2009 high. Shares hit $59.60. Our first target to take profits is at $59.80. I am upping our stop loss to $54.40. Currently we do have a second target at $63.00 but I'd exit at least half our position at $59.80.

Picked on   August 28 at $ 55.65
Change since picked:      + 3.76
Earnings Date           10/27/09 (unconfirmed)
Average Daily Volume =       1.6 million  
Listed on August 27, 2009         


SPX Corp. - SPW - close: 63.41 change: -1.31 stop: 57.25

After several days of gains SPW finally hit some profit taking. I am suggesting traders buy calls on a dip at $60.50. If triggered our first target is $64.00. Our second target is $67.50.

Picked on September xx at $ xx.xx <-- TRIGGER @ 60.50
Change since picked:       + 0.00
Earnings Date            10/28/09 (unconfirmed)
Average Daily Volume =        570 thousand 
Listed on September 12, 2009         


State Street (Bank) STT - close: 53.18 change: -0.12 stop: 49.45

STT under performed the banking sector and the broader market. I am raising our stop loss to $49.90. Readers may want to wait for a new relative high as an entry point (maybe $54.25 or $54.85, and aim for the second target at 59.80).

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 31 at $ 52.00 
Change since picked:      + 1.18
Earnings Date           10/13/09 (unconfirmed)
Average Daily Volume =       5.3 million  
Listed on August 19, 2009         


United Health - UNH - close: 27.70 change: -1.06 stop: 27.49

Obama spoke on healthcare reform in front of cheering labor unions and the healthcare stocks tumbled in response. UNH lost 3.6% and appears to have broken down from its recent sideways consolidation. Nimble traders may want to consider puts.

Right now the plan is to buy calls on a breakout with a trigger 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 once triggered.

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         


Union Pacific - UNP - close: 63.61 change: +0.83 stop: 59.40

UNP is bouncing back above the $63.00 level, which offers us another entry point to buy calls. Our first target is $69.00. FYI: The P&F chart is currently bullish with an $88 target.

Picked on September 09 at $ 63.00
Change since picked:       + 0.61
Earnings Date            10/22/09 (unconfirmed)
Average Daily Volume =        3.2 million  
Listed on September 05, 2009         


U.S. Oil Fund - USO - close: 36.70 change: +0.99 stop: 34.49

Another new 2009 low for the dollar helped lift oil from its trendline of support. The USO gained 2.7%. I am suggesting readers use the bounce as a new bullish entry point to buy calls. Our upside target is $39.95.

Picked on   August 31 at $ 36.50 
Change since picked:      + 0.20
Earnings Date           00/00/00
Average Daily Volume =      11.5 million  
Listed on August 15, 2009         


Waters Corp. - WAT - close: 53.64 change: -0.76 stop: 49.30

WAT is still seeing some profit taking and drawing closer to our trigger at $53.10. If triggered our first target is $59.50.

Picked on September xx at $ xx.xx <-- TRIGGER 53.10
Change since picked:       + 0.00
Earnings Date            10/20/09 (unconfirmed)
Average Daily Volume =        809 thousand 
Listed on September 12, 2009         


PUT Play Updates

*Currently we do not have any put play updates*


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.)

Cigna Corp. - CI - close: 31.39 change: -0.69 stop: n/a

Obama's new push today to revive the government-run healthcare option has sent healthcare stocks lower. CI lost 2.1%. I'm not suggesting new strangle positions at this time unless the stock retests the $30.00 region.

The options I suggested were the October $35 calls (CI-JG) and the October $25 puts (CI-VE). Our estimated cost was $1.20. We want to sell if either option hits $2.50 or higher. The closer we can open this trade to $30.00 the better.

Picked on September 08 at $ 29.40
Change since picked:       + 1.99
Earnings Date            11/05/09 (unconfirmed)
Average Daily Volume =        3.8 million  
Listed on September 08, 2009         


Research In Motion - RIMM - close: 83.14 chg: +1.73 stop: n/a

We might just luck out after all thanks to relative strength in RIMM. The stock added another 2.1%. The September $80 calls hit $3.60 this afternoon. More conservative traders may want to consider an early exit. We only have three days left and any dip toward $80 will make this call value vanish. Given our time frame I am lowering our exit target to $5.00 or more. If either option hits $5.00 we want to cash in and exit. I'm not suggesting new positions at this time.

The options suggested were the September $80 calls (RFY-IP) and the September $70 puts (RFY-UN). Our estimated cost was $2.64.

Picked on   August 25 at $ 75.56
Change since picked:      + 7.58
Earnings Date           09/24/09 (confirmed)
Average Daily Volume =      11.7 million  
Listed on August 25, 2009         


Schlumberger - SLB - close: 59.83 change: +0.02 stop: n/a

The action in SLB was disappointing. A rally in crude oil was not enough to fuel an move in SLB. We only have three days left and need to see a charge toward $62.50. I'm not suggesting new strangle positions.

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:      + 7.83
Earnings Date           10/15/09 (unconfirmed)
Average Daily Volume =       9.2 million  
Listed on August 15, 2009         


CLOSED BULLISH PLAYS

Fedex - FDX - close: 79.53 change: +0.65 stop: 71.75

Target achieved. FDX extended its gains and hit $80.00 midday. Our second and final target to exit was $79.75. Our play is closed but I'd keep FDX on your watch list for a dip back toward $73 to fill the gap.

Chart:

Picked on September 04 at $ 70.55 *triggered
Change since picked:       + 9.20 <-- 2nd target hit (+13.0%)
                  /1st target exceeded, gap higher @ 75.95 (+7.6%)
Earnings Date            09/17/09 (unconfirmed)
Average Daily Volume =        2.7 million  
Listed on September 03, 2009