Option Investor
Newsletter

Daily Newsletter, Tuesday, 9/22/2009

Table of Contents

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

Market Wrap

What A Difference A Day Makes

by Todd Shriber

Click here to email Todd Shriber
As I noted yesterday, Tuesday's trade would be an ideal opportunity for the bulls to catch the bears napping and snatch back some of Monday's losses. They did that and more, sending the major indexes toward yearly highs. The S&P 500 rose 0.7% to 1071.66 and the Dow Jones Industrial Average got a boost from a spate of upgrades, rising 51 points, or 0.5%, to 9829.87. The Nasdaq was no slouch either as the tech-laden index added to yesterday's gains, rising 8.26 points to close at 2146.30, ever closer to the important 2150 level.

Stats Table

Tuesday's trade was basically a complete 180-degree turn from Monday's action. Yesterday, stocks were done in by concerns that the rally had come too far too fast. Not to mention declines among the financials and commodities-related names. Oil was down, the dollar was up and investors just were not feeling all that groovy about equities. Fast forward a mere 24 hours and the script flipped. Investors were once again ebullient and financials and materials names were the toast of the party.

Oil was hampered on Monday by news that Chinese demand is waning, then the Asian Development Bank came out on Tuesday and raised its growth forecasts for China, India and Indonesia. One can only surmise that oil is going to be part of the recipe that fuels the growth in those countries. That news helped crude for November delivery make its way back above $71 a barrel and that of course bolstered the fortunes of Dow components ExxonMobil (XOM) and Chevron (CVX), the two largest U.S. oil explorers.

Crude Chart

The trend of Monday's trash becoming Tuesday's treasure extended to other names that I mentioned yesterday, not the least of which was Caterpillar (CAT). Yesterday, the world's largest construction and mining equipment maker said August sales tumbled 48% on a year-over-year basis. Today, the Dow component got a boost as speculation swirled that global economic growth would fuel increased demand for Caterpillar's products. The stock resumed its recent bullish ways, charging higher by $1.88 to close at $54.34. Despite the glum sales news over the past few months, Caterpillar's chart (below) looks pretty good and you can fetch a fair 3.1% yield for your trouble.

Caterpillar Chart

As I mentioned there was a plethora of Dow stocks that benefited from analyst upgrades today and Hewlett-Packard (HPQ) was among them. Credit Suisse upped its rating on the stock to ''outperform'' from ''neutral,'' citing a bottom in the printer business and improved outlook for HP's hardware business. Credit Suisse hiked its EPS and revenue estimates for HP's next fiscal year, which commences in November, to $4.26 a share from $4.03 on sales of $118.3 billion, up from $117.1 billion.

Allow me to read see the forest through the trees for a minute. The thesis behind the Credit Suisse upgrade of HP, while solid, may have a lot to do with something that did not directly involve HP itself and that would be Dell's (DELL) $3.9 billion acquisition of Perot Systems (PER), which was announced on Monday. More than a few so-called experts have opined that Dell is overpaying for Perot and that led Credit Suisse to downgrade Dell today.

J.P. Morgan Chase (JPM) was another Dow name that was on the receiving end of some kindness. In this case it was rival Bank of America (BAC) upping its third-quarter earnings estimates on J.P. Morgan to 49 cents a share from 46 cents and that was a good for a 4.3% gain in J.P. Morgan's shares. The stock closed at $46.47 and is now within sniffing distance of its 52-week high of $50.63.

Speaking of familiar financials, there was a dash to trash as embattled bond insurers MBIA (MBI) and Ambac (ABK) rose 22% and 14%, respectively. The pops were odd considering there was no news. On the other side of the spectrum was an apparent dash away from trash, at least for a day, as American International Group (AIG) fell more than 5%. The culprit was familiar. AIG apparently has not learned a lesson from other the regional banks as rumors swirled that the downtrodden insurance will commence a secondary share offering.

I should note that the company did not comment on this news, but a secondary offering makes sense because AIG needs the cash. For really no good reason, this stock has been on fire for the past few months, but if support in the low 40s does not hold, there could be more pain on the way.

AIG Chart

Of course, I cannot fail to mention Bank of America, the largest U.S. bank. Even amidst news that Bank of America's executives are meeting with congressional leaders regarding the Merrill Lynch acquisition and increasingly intense speculation that if Chief Executive Officer Ken Lewis is charged with misleading investors by the Securities and Exchange Commission (SEC), he will resign, the stock moved higher.

None of this kept noted bank analyst Dick Bove of Rochdale Securities from upping his price target on BofA to $25 from $19. That's nearly 33% higher than today's closing price. I am not a Ken Lewis apologist, but I keep wondering when cooler heads will prevail and Congress, the SEC and a certain attorney general from New York will realize that Lewis was forced to take on Merrill Lynch and if he did not, what was the alternative? Probably a fall into the abyss for the U.S. financial system.

At the end of the day, congressional ''leaders'' and the New York attorney general do not really care about BofA shareholders. If they did, they would just be quiet. After all, this is one of the most widely held stocks in the U.S. What they really care about is getting reelected to Congress and eventually becoming governor of New York and that serves no one's interests but their own. Bank of America's chart looks fair and it makes me wonder how good it would look with a little less chatter.

Bank of America Chart

Before I get too bogged down in the minutia of individual stocks, it is worth noting that volume was decent today, especially considering that the Federal Open Market Committee commenced a two-day meeting. It appears that Fed Chairman Ben Bernanke is caught between a rock and a hard place as he tries to jolt economic growth while spurring banks to lend more. The likely outcome of the FOMC's two-day meeting will be the Fed leaving interest rates unchanged at 0.25% while saying that limited access to credit is holding back economic growth.

Another interesting tidbit to note is that there eight initial public offerings scheduled for the remainder of this week. That is a pretty robust pipeline given how lethargic the IPO market has been in the U.S. this year. Activity seems to be picking up as of late, as the chart below illustrates, and that is a good thing if you own shares of Goldman Sachs (GS) and Morgan Stanley (MS). This week could prove to be the most active period for IPOs since the end of 2007.

Some of the names expected to make their public debuts this week are Foursquare, a mortgage real estate investment trust (REIT) backed by AllianceBernstein (AB). That deal is expected to price at $500 million. Ladder Capital Realty might be picking a good time to come public because this REIT focuses on acquiring distressed commercial real estate asset. There should be plenty of pickings for the company after its $400 million offering. Perhaps the most widely anticipated new offering is that of China's Shanda Games, the video game business of Shanda Interactive (SNDA). That deal is expected to price at $725 million.

IPO Chart

With an eye toward Wednesday's trade, the news docket is light beyond the Fed update. Treasury Secretary Timothy Geithner is set to testify before the House Financial Services Committee, which might be worth watching for entertainment purposes only. It can be kind of fun to watch the irascible Barney Frank (D-Mass.), the committee's chairman, go to work on those giving testimony.

There are a couple of earnings plays coming out before the bell. AutoZone (AZO), the auto parts retailer that is one of hedge fund genius Eddie Lampert's biggest holdings, is expected to report profits of $4.45 a share. One of my favorite stocks, General Mills (GIS), also reports before the bell and analysts are calling for profits of $1.03 a share.

As investors have renewed their appetite for risk during the recent market rally, General Mills has kind of been left behind, gaining ''only'' 10% in the past three months compared to about 20% for the S&P 500. The stock recently cleared psychological resistance at $60 and if tomorrow's earnings report is encouraging, that could keep General Mills on its ascent toward its 52-week high of $71. If you are not a short-term trader, General Mills has something for you as well. The five-year dividend growth rate is 9% and the current yield of 3.1% is nearly 50% higher than the S&P 500 dividend yield.

General Mills Chart

Taking a look at the charts, it is hard to say that much has changed since I visited with you yesterday, but I looked at a 30-minute chart of the S&P 500 earlier today and it is becoming clear that 1075 looks like the next point of resistance. The 1057 area is the first support area, but a violation of that level could take us to the August peak around 1039. As long as the market keeps bouncing back from days the way it did today, it is hard to argue with the fact that 1100 is going to come into play sooner rather than later.

S&P 500 Chart

Of course everyone wants to know about 10000 when it comes to the Dow. Today's close near 9830 is a good sign and that means 9850 can be taken out with just a lukewarm day tomorrow. The Dow should see support at 9725 and then an even firmer floor at 9625, just below the Augst high, but it is a stretch to think that 9625 is going to be an issue over the next few days. It is probably reasonable to expect some mild consolidation before the Dow ratchets higher.

Dow Chart

As I noted earlier, the Nasdaq is inching ever closer to 2150, and again, it will not take much for that level to be broken as early as tomorrow. The index is a strong uptrend that mirrors that of its 50-day moving average. The 2150 area is where the Nasdaq really started to breakdown last year, but if it can hold there this time and get some help during earnings season, the index could make its way back to the August 2008 high of 2473 before the end of this year. Near-term support can be found around 2118 and then at 2050.

Nasdaq Chart

It is hard to disagree with the fact that ''buy the dips'' lives on and market leadership by financials and materials names indicates risk appetite is also alive and well. None of this changes my stance that stocks are richly valued at this point, but it would be foolish to buck the overall trend.


New Option Plays

No Dips & No Waiting!

by James Brown

Click here to email James Brown

We found a couple of bullish candidates that didn't require waiting for a pull back.


NEW DIRECTIONAL CALL PLAYS

NYSE Euronext - NYX - close: 29.82 change: +0.40 stop: 27.75

Why We Like It:
The NYX recently broke out over key resistance a few days ago. Now traders are quickly buying the dip. While I would prefer to buy calls near $28.00 I don't think we can wait. I'm suggesting new positions right here with a stop loss at $27.75. Our first target is $31.95. Our second target is $34.50.

Suggested Options:
I am suggesting the October or November calls. I prefer the November $30s.

BUY CALL OCT 30.00 NZV-JD open interest=3528 current ask $1.04

BUY CALL NOV 30.00 NZV-KD open interest=  46 current ask $1.83

Annotated Chart:

Picked on September xx at $ xx.xx
Change since picked:       + 0.00
Earnings Date            10/30/09 (unconfirmed)
Average Daily Volume =        3.0 million  
Listed on September 22, 2009         


Wells Fargo - WFC - close: 29.39 change: +1.10 stop: 27.25

Why We Like It:
Financials were leading the market higher on Tuesday and WFC displayed relative strength with a 3.8% gain. This bounce after a three-day slide looks like a new bullish entry point. I'm suggesting call positions now. Our first target is $32.50. Our second target is $34.75 but we may not have time. The plan is to exit ahead of the mid October earnings report.

Suggested Options:
Earnings are expected around October 14th and October options expire after the 16th so I'm suggesting October calls. My preference is the $30 strike.

BUY CALL OCT 30.00 FHU-JD open interest=64613 current ask $1.05

Annotated Chart:

Picked on September 22 at $ 29.39
Change since picked:       + 0.00
Earnings Date            10/14/09 (unconfirmed)
Average Daily Volume =         42 million  
Listed on September 22, 2009         



In Play Updates and Reviews

Another Quiet Day of Gains

by James Brown

Click here to email James Brown


CALL Play Updates

Alcon Inc. - ACL - close: 140.23 change: -0.06 stop: 129.49

The major indices continued to drift higher but ACL was stuck moving sideways near the $140 level. I would prefer to open new positions on a dip near $136 or $134. Our first target is $142.50. Our second target is $148.00.

Picked on September 10 at $136.75
Change since picked:       + 3.48
Earnings Date            10/21/09 (unconfirmed)
Average Daily Volume =        299 thousand 
Listed on September 10, 2009         


Allegheny Tech. - ATI - close: 35.77 change: +0.90 stop: 30.99

Commodity stocks rallied and steel stocks displayed relative strength. ATI gained 2.5% and managed a new relative high before paring its gains. I'm not suggesting new positions at this time. ATI has already exceeded our first target. We're currently aiming for our second and final target at $37.00.

Picked on   August 31 at $ 30.25 *triggered         
Change since picked:      + 5.52
                               /1st target hit @ 33.85 (+11.9%)
Earnings Date           10/21/09 (unconfirmed)
Average Daily Volume =       2.7 million  
Listed on August 27, 2009         


Best Buy Inc. - BBY - close: 38.32 change: -0.13 stop: 36.45

The bounce in BBY didn't see much follow through today. I would still consider new bullish positions in the $37.50-38.50 zone but I'd rather buy calls on the bounce instead of the dip. Our first target to take profits is at $41.40. Our second target 46.50. The Point & Figure chart is bullish with a $54 target.

Picked on September 21 at $ 38.45
Change since picked:       - 0.13
Earnings Date            12/16/09 (unconfirmed)
Average Daily Volume =        8.7 million  
Listed on September 21, 2009         


Caterpillar - CAT - close: 54.34 change: +1.88 stop: 47.49

CAT was very strong with a 3.5% gain. Shares are now testing their highs from last week. Unfortunately, our play isn't open yet. The plan is to buy calls at $50.00. We may want to raise our trigger a point or two.

If we are triggered at $50.00 our first target is $54.50. Our second target is $59.00. FYI: The P&F chart is bullish with an $85 target.

Picked on September xx at $ xx.xx <-- TRIGGER @ 50.00
Change since picked:       + 0.00
Earnings Date            10/20/09 (unconfirmed)
Average Daily Volume =         10 million  
Listed on September 19, 2009         


CF Industries - CF - close: 88.89 change: -0.13 stop: 84.75

CF is still trading sideways and I'm not convinced it's done correcting. I would prefer to buy calls on dips near $86.00. 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:       + 2.96
Earnings Date            10/27/09 (unconfirmed)
Average Daily Volume =        653 thousand 
Listed on September 05, 2009         


Compass Minerals - CMP - close: 59.90 chg: +1.29 stop: 54.75

CMP rallied to a new six-month high at $60.45. I'm not suggesting new positions at this time. CMP has already hit our first target at $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:       + 4.35
                               /1st target hit @ 59.75 (+7.5%)
Earnings Date            10/28/09 (unconfirmed)
Average Daily Volume =        415 thousand 
Listed on September 02, 2009         


Consol Energy - CNX - close: 49.28 change: +2.30 stop: 39.45

Coal stocks continued to show strength. CNX soared again adding 4.8%. I really don't want to chase it given the rally from its lows near $36.00 but I suspect CNX could keep going. For now I'm sticking to the plan to buy a dip but we'll raise the entry point from $42.50 to $44.00. If triggered our first target is $48.50. Our second target is $52.40. We'll plan to exit ahead of the late October earnings report. FYI: The Point & Figure chart is forecasting a $73 target.

Picked on September xx at $ xx.xx <-- TRIGGER 44.00
Change since picked:       + 0.00
Earnings Date            10/22/09 (unconfirmed)
Average Daily Volume =        3.0 million  
Listed on September 19, 2009         


Danaher Corp. - DHR - close: 68.33 change: +0.67 stop: 63.95

DHR gained 1% but I would still expect a correction before it climbed much higher. Keep an eye on the $65.00 region. Wait for the bounce before considering new positions. I'm upping our stop loss to $63.95. 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:       + 1.96
Earnings Date            10/15/09 (unconfirmed)
Average Daily Volume =        2.4 million  
Listed on September 05, 2009         


Diamond Offshore - DO - close: 95.40 change: +2.22 stop: 88.49

The U.S. dollar plunged to new lows for the year and crude oil bounced. This gave the oil service stocks a lift and DO gained 2.3%. The plan was to use small position sizes.

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:       + 0.71
Earnings Date            10/22/09 (unconfirmed)
Average Daily Volume =        1.8 million  
Listed on September 12, 2009         


Flowserve - FLS - close: 100.86 change: +2.68 stop: 88.95

FLS is starting to run away without us. After a week of consolidating under resistance at $100 I was expecting a little more of a pull back. I'm upping our trigger to buy a dip from $92.50 to $95.00. More aggressive trades may want to go ahead and open small positions on this breakout over resistance.

If we are triggered our first target is $99.25. Our second target is $107.50. However, we will plan to exit ahead of the late October earnings report. FYI: The P&F chart is bullish with a $128 target.

Picked on September xx at $ xx.xx <-- TRIGGER @ 95.00
Change since picked:       + 0.00
Earnings Date            10/28/09 (unconfirmed)
Average Daily Volume =        1.2 million  
Listed on September 19, 2009         


General Dynamic - GD - close: 63.86 change: +0.22 stop: 57.85

GD is still drifting sideways. We're waiting for a dip to buy calls 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         


Genesse & Wyoming - GWR - close: 31.94 change: +0.01 stop: 29.90

Nothing has changed. GWR is still sliding sideways. We've already taken profits once and our second target is $34.75. I am not suggesting new bullish positions at this time.

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:      + 3.29
                              /take profits 09/16/09 @ 32.45 (+13.2%)
Earnings Date           11/03/09 (unconfirmed)
Average Daily Volume =       230 thousand
Listed on August 15, 2009         


Grainger W.W. - GWW - close: 90.87 change: +0.83 stop: 87.40

GWW almost completely erased yesterday's losses but the stock is still struggling under short-term resistance near $91.50. Our first target is $93.50. Our second target is $97.50.

Picked on September 1 at $ 86.00 *triggered  
Change since picked:      + 4.87
Earnings Date           10/14/09 (unconfirmed)
Average Daily Volume =       635 thousand 
Listed on August 22, 2009         


Intl. Bus. Mach. - IBM - close: 121.61 chg: +0.04 stop: 117.75

IBM is also drifting sideways. Odds are still good the stock will retest support near $120. I would look for dips near $120 as entry points. Our first target to take profits is at $126.00. Our second target is $129.75. We will plan to exit ahead of IBM's earnings report in mid October.

Picked on September 16 at $121.82
Change since picked:       - 0.21
Earnings Date            10/15/09 (unconfirmed)
Average Daily Volume =        5.3 million  
Listed on September 16, 2009         


iShares Financials - IYF - close: 54.07 change: +0.85 stop: 49.49

Financial stocks led the market higher thanks to a couple of key upgrades this morning. The IYF gained 1.59%. I would wait for a dip and a bounce from $52.00 or the $50.00 level before considering new bullish positions. Our first target is $57.00. Our second target is $60.00.

Picked on September 15 at $ 52.60 *triggered  
Change since picked:       + 1.47
Earnings Date            00/00/00
Average Daily Volume =        5.1 million  
Listed on September 01, 2009         


Mettler Toledo - MTD - close: 90.98 change: -0.78 stop: 87.49 *new*

MTD is still slowly correcting and shares are nearing potential support near $90.00. Wait for a bounce before considering new positions. I am inching up our stop loss to $87.49. MTD has already hit our first target at $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:      + 2.48
                             /1st target hit @ 93.50 (+5.6%)
Earnings Date           11/05/09 (unconfirmed)
Average Daily Volume =       234 thousand 
Listed on August 22, 2009         


Occidental Petrol. - OXY - close: 78.32 change: +1.23 stop: 74.75 *new*

The dollar drop and surge in oil helped push OXY to a 1.5% gain. OXY has exceeded our first target and I'm officially raising our second target from $79.85 to $82.50. I'm also raising the stop loss to $74.75. The P&F chart is bullish with a $92 target.

Picked on   August 27 at $ 72.00 *triggered         
Change since picked:      + 6.32
                    /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: 60.12 change: +0.43 stop: 54.95

PPG set a new eleven-month closing high with today's move over $60.00. I'm not suggesting new positions at this time. PPG has already exceeded our first target and we're currently aiming for $63.00. The P&F chart is very bullish with a $90 target.

Picked on   August 28 at $ 55.65
Change since picked:      + 4.47
                             /1st target exceeded @ 60.05 (7.9%)
Earnings Date           10/27/09 (unconfirmed)
Average Daily Volume =       1.6 million  
Listed on August 27, 2009         


SPX Corp. - SPW - close: 64.12 change: +1.21 stop: 57.75 *new*

I'm starting to wonder if waiting for a dip in SPW is going to leave us on the sidelines too long. The stock continues to move sideways. I am raising our trigger to buy calls from $60.50 to $61.00. I'm also raising our stop loss to $57.75. If triggered our first target is $64.95. Our second target is $68.75.

Picked on September xx at $ xx.xx <-- TRIGGER @ 61.00
Change since picked:       + 0.00
Earnings Date            10/28/09 (unconfirmed)
Average Daily Volume =        570 thousand 
Listed on September 12, 2009         


SOHU.com Inc. - SOHU - close: 68.29 change: -0.57 stop: 63.25

SOHU is still correcting. It looks like we could get triggered at $67.50 tomorrow. More conservative traders may want to hold out for a dip closer to $66.00.

Our first target is $72.50. Our second target is $77.00.

Picked on September xx at $ xx.xx <-- TRIGGER @ 67.50
Change since picked:       + 0.00
Earnings Date            10/26/09 (unconfirmed)
Average Daily Volume =        577 thousand 
Listed on September 15, 2009         


State Street (Bank) STT - close: 53.27 change: +1.01 stop: 49.45

After really under performing yesterday STT managed a 1.9% bounce. More conservative traders may still want to consider an early exit or a stop near $52.00. I'm not suggesting new bullish positions at this time.

STT has already hit our first target. 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:      + 1.27
                             /1st target hit @ 55.00 (+5.7%)
Earnings Date           10/13/09 (unconfirmed)
Average Daily Volume =       5.3 million  
Listed on August 19, 2009         


United Health - UNH - close: 27.58 change: -1.01 stop: 27.49

Healthcare stocks under performed. The HMO index lost 1.1%. Shares of UNH really fell with a 3.5% decline and a close under its 50-dma. If we don't see a rebound soon I'll drop UNH as a bullish candidate.

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.

FYI: Readers may want to consider a strangle or a straddle on this stock instead. That way you don't care what direction it moves. Just make sure you give yourself enough time.

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: 36.98 change: +1.13 stop: 34.95

The U.S. dollar fell to new lows for the year and commodities rallied on the move. The USO rose more than 3% but failed to close over short-term resistance at $37.00.

Our first target is $39.95. Our second target is $42.50.

Picked on   August 31 at $ 36.50 
Change since picked:      + 0.48
Earnings Date           00/00/00
Average Daily Volume =      11.5 million  
Listed on August 15, 2009         


Waters Corp. - WAT - close: 55.76 change: -0.54 stop: 49.30

WAT experienced some profit taking today. Nothing has changed from my prior comment. We're still sitting on the sidelines waiting for a dip.

Currently the plan is to buy calls on a pull back at $53.50. If triggered our first target is $59.50. The P&F chart is bullish with a $69 target. We do not want to hold over the mid October earnings report.

Picked on September xx at $ xx.xx <-- TRIGGER 53.50
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: 31.31 change: -0.44 stop: n/a

Healthcare stocks slipped and CI gave up 1.3%. I would still consider new strangles on a dip in the $30.25-29.75 zone but readers may want to use November or January options instead.

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:       + 1.91
Earnings Date            11/05/09 (unconfirmed)
Average Daily Volume =        3.8 million  
Listed on September 08, 2009