Option Investor
Newsletter

Daily Newsletter, Monday, 9/28/2009

Table of Contents

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

Market Wrap

Return Of Merger Monday Spurs Stocks

by Todd Shriber

Click here to email Todd Shriber
The return of Merger Monday lifted U.S. stocks to their highest levels in five weeks as major acquisition announcements from Abbot Laboratories (ABT) and Xerox (XRX) boosted investor hope that merger and acquisition activity is rebounding from its previously sluggish pace. Stocks performed markedly better today than on the last Merger Monday, August 31, when big acquisitions by Disney (DIS) and Halliburton (HAL) failed to jolt stocks. The S&P 500 gained 1.8% to close at 1062.98 and the Dow Jones Industrial Average turned in a triple-digit gain, adding 124.17 to close at 9789.36. Tech issues were no slouch either, helping the Nasdaq add almost 40 points to close at 2130.74.

Stats Table

Overall, it was obviously a good day for equities as buyers significantly outnumbered sellers and that helped stocks end three days of losses and take back nearly all of last week's losses. Not to rain on anyone's parade, but it is worth mentioning that volume was fairly light, probably attributable to the Yom Kippur holiday. Less than 980 million shares changed hands on the New York Stock Exchange, well below the daily average for September of 1.3 billion shares and below the 200-day moving average of 1.42 billion shares.

As is usually the case, the devil is in the details and those details show that Bank of America (BAC) and Citigroup (C) combined to trade more than 442 million shares, so from a volume perspective, Monday's trade provided little worth writing home about. That said, it would be foolish to ignore the pick-up in M&A activity. With September drawing to a close, deals involving U.S. firms have reached $49.1 billion, a robust uptick from the $26.6 billion spent on acquisitions in August and $36.8 billion in July.

M&A Activity

Pharmaceuticals giant Abbott said it will pay $6.6 billion for the pharmaceuticals business of Belgian conglomerate Solvay. The deal looks like it makes sense as the hefty price tag may be more attributable to the euro's strength against the dollar than Abbott overpaying for the business. Abbott said it expects the deal to add $3 billion in sales, with half of that number coming from international markets. The acquisition is expected to add 10 cents a share to per share earnings in 2010 and as much as 20 cents a share by 2012.

The Street apparently took kindly to the Abbott news as investors sent the stock higher by $1.25 for a close at $48.58. Normally, the acquiring company endures a hit to its a share price when a mega-deal is announced. That is exactly what happened with Xerox after the world's largest maker of high-speed printers agreed to acquire Affiliated Computer (ACS) for $6.4 billion. The cash and stock deal values Affiliated Computer at $63.11 a share, 34% higher than Friday's closing price. Xerox shares took it on the chin, tumbling $1.29, or 14%, to $7.68. That made Xerox the biggest loser in the S&P 500.

Not to be outdone is Dow component Kraft Foods (KFT), the world's second-largest food company. Earlier this month, Kraft was rebuffed in its attempt to acquire Cadbury (CBY), the number two candymaker in the world. Well, Kraft is not going quietly into night. The company recently froze its dividend and there was scuttlebutt today that Kraft is preparing a $17.5 billion hostile bid for Cadbury. The new offer represents a fair increase to Kraft's initial offer of $16.7 billion. A combined Kraft-Cadbury would have $50 billion in annual sales. Regardless of what happens with Kraft and Cadbury, one thing is apparent and that is companies with strong balance sheets, like Abbott and Kraft, can brave the weak dollar and look overseas for acquisitions that make sense.

And if you are a believer that today's news is just the beginning of more deals to come, it may be time to look at stocks that benefit from increased M&A activity. Obviously that means the likes of Goldman Sachs (GS) and Morgan Stanley (MS) and some boutique advisors like Jefferies Group (JEF).

All three of those names can be found among the top 10 holdings in the SPDR KBW Capital Markets ETF (KCE). The ETF was up $1.27, or 3.4% today, to close at $38.85, putting it within striking distance of its 52-week high of $42.22. Support seems to be firmly established at the 50-day moving average of $36.35 and if psychological resistance at $40 is broken, the 52-week high could fall in the near-term.

It is reasonable to expect M&A activity might pick-up as the economy rebounds. According to the Commerce Department, U.S. companies had $1.5 trillion in cash flow at the end of June and new data from Bloomberg and Credit Suisse shows that number should rise. Cash relative to share prices will climb to its highest level in 20 years in 2010 when compared to the yield offered by corporate bonds, according to the data.

KCE Chart

There was more than just M&A lifting stocks on Monday as some bellwether tech names contributed to the market's bullish ways. Cisco Systems (CSCO) jumped 4.4% to close at $23.61 after Barclays raised its rating on the stock to ''overweight'' from ''equal weight.'' Cisco is now just 39 cents away from its 52-week high of $24.

Of course, it is hard to have a day where the Nasdaq performs as well it did on Monday without mentioning Apple (AAPL). Combining Research In Motion's (RIMM) dour earnings report last week and its 20% decline over the past five days along with Palm (PALM) slashing prices on the Pre (head to Wal-Mart and you can get a Pre for $80) and it is obvious that the iPhone is easily winning the smartphone war.

The good news from Apple just keeps coming. Today, the company said 2 billion iPhone and iPod apps have been downloaded. Here are some fun anecdotes to put that into context: Nearly one out of every three people in the world has made a purchase from Apple App store. There are now more than 85,000 apps available and over 125,000 developers in the iPhone Developer Program.

In other Apple news France's Orange Telecom announced it would start selling the iPhone in the U.K. before the end of this year and China Unicom (CHU) confirmed it will roll out the iPhone in China next month. Now here is the real good news for Apple shareholders on the China front. Not only will China eventually prove to be the most lucrative smartphone market in the world (as the chart below shows), China Unicom will be charging the equivalent of $732 for each iPhone. That is a far cry above what the iPhone costs in the U.S. and it means the Apple profit machine will likely just keep chugging along. Accordingly, Thomas Weisel raised its price target on Apple shares to $210 from $180.

Smartphone Sales Chart

Financials also chipped in on Monday as the group was the top performer among the 10 industry groups tracked in the S&P 500. Even in the face of more bad news, Bank of America found a way to finish up on the day. Another attorney general wants to take a turn going after BofA and CEO Ken Lewis. This time it is Ohio Attorney General Richard Cordray, who is managing a class action suit on behalf of five pension funds. Cordray claims BofA could owe members of the class action ''billions of dollars.''

Beyond BofA, insurance stocks took their turn in the spotlight today as all 21 companies in the group finished up on the day on news that property and casualty insurers returned to profitability on underwriting in second quarter. That means the group made more on premiums than it paid out in claims and expenses. Hartford Financial (HIG), a name that suffered mightily at the hands of the financial meltdown of 2008, was up almost 11% on Monday and Dow member Travelers (TRV) added 3%.

With the group performing so well, I decided to look for a corresponding ETF that might be of interest and that would be the iShares Dow Jones U.S. Insurance Index (IAK), which added nearly 5% today on nearly triple its average daily volume. I should note that IAK is thinly traded, averaging less than 28,000 shares a day, so it may not be ideal for an intraday trade, but with support in place just above $26 and plenty of room to run to the $31-$32 area, the ETF is probably worth a look at this point.

IAK Chart

If nothing else, Tuesday should bring an uptick in volume as the pre-market news docket is chocked full of reports that have market-moving potential. Weekly chain store sales will be announced at 7:45 AM EST. The final second-quarter GDP reading will be released at 8:30 AM. The consensus estimate is calling for a decline of 1.1%. Case Shiller home prices for July will be released at 9 AM, followed by the all-important consumer confidence number at 10 AM. Consumer confidence for September is expected to come in at 56.7, above the August reading of 54.1 and this number is likely to have a profound impact on how stocks trade tomorrow.

Although earnings season does not truly begin until October 7, there are a few earnings reports out tomorrow that might be worth watching. Before the bell, drugstore operator Walgreen (WAG) is expected to tell investors it earned 39 cents a share on sales of $15.68 billion. There are a few reports after the bell, including Darden Restaurants (DRI) and Jabil Circuit (JBL), but the one to watch is Nike (NKE). The apparel and footwear maker is expected to turn a profit of 97 cents a share on revenue of $4.89 billion. Nike shares are up 15% this year.

Looking at the charts, the Dow did traverse 9800 today, but could not stick there, closing just below 9790. On the bright side, the low of the day was also the opening price. Still, it was somewhat disappointing to see that the positive news from Cisco and bullish insurance sector news that benefitted Travelers, was not enough to get the Dow to a close above 9800.

When the Dow passed 9900 last week, it was sold off with some vigor, so that level remains as the next hurdle to be cleared before 10000 can be talked about seriously. If the Dow has not made its way closer to 10000 before Alcoa's (AA) October 7 earnings report, then earnings season will likely be the deciding factor in the Dow's near-term and 2009 performance.

With 9,600 looking like first support, a violation of that level could take the industrials down to 9300 and from there, the picture is not pretty, but a move to 9000-9100 would take some seriously bearish news.

Dow Chart

With 1080 on the S&P 500 acting as the equivalent of 9900 on the Dow, Monday's close around 1062 means the index has some work to do to make its way back to the next important resistance level. Monday's close is significant in that it keeps the index a fair bit away from Friday's low of 1041, which if broken could portend a move to 1035 and then lower, perhaps to 980. The catalysts do exist this week to spur volatility and perhaps big moves in the major U.S. indexes. Consumer confidence and GDP tomorrow and Friday's jobs report will certainly have their say in this week's performance by stocks and with earnings season right around the corner, investors will discover sooner than later if a 2009 close at 1100 is in the cards for the S&P 500.

S&P 500 Chart

The Nasdaq looked to be in trouble after least week's punk earnings report from RIMM and while that stock is one of the ''four horsemen'' of the Nasdaq, the index shrugged off another big decline for RIMM on Monday and moved higher led by Apple and Cisco. After moving above 2160 last week, the Nasdaq was sold off and now must regain solid footing above 2150 before greener pastures can be conquered. The 2160 area has been acting as resistance for over a year, so a string of closes above that level would be significant, but the Nasdaq will likely need more days like today where stocks like Cisco and Applied Materials (AMAT) contribute to the move higher because Apple cannot do all the Nasdaq's heavy lifting by itself.

A couple of closes below 2100 could mean the Nasdaq tests 2063 and a violation of that level could mean some pain is on the way in the form of a move to 2000.

Nasdaq Chart

This week's data points are going to have a heavy hand in where the major indexes reside at the start of earnings season. Then, it becomes of matter of the S&P 500's ability to not only beat estimates, but show some revenue growth and increased market share. Mergers and acquisitions are nice and certainly a good trend as is the continued spate of good news from marquee names like Goldman Sachs and Apple, but the market is going to require more to get the Dow to 10000 and the S&P 500 to 1100. Simply put, some other stocks are going to have to join this party and do so soon.


New Option Plays

Oil Services

by James Brown

Click here to email James Brown


NEW DIRECTIONAL CALL PLAYS

Oil Service Holders - OIH - close: 117.40 chg: +2.65 stop: 112.99

Why We Like It:
Traders are buying the dip in the oil service stocks. Instead of singling out one specific company (since we already have DO on the play list) I'm adding the OIH oil services HOLDRs. Buy calls now on the bounce with a tight stop under Friday's low. Our first target is $124.00.

Please note that this is a slightly aggressive play. The OIH will be strongly influenced by the price of crude oil. Last week oil broke down under a key trendline of support. Yet rising tensions with Iran could keep oil from seeing any significant declines.

Suggested Options:
I'm suggesting the October or November calls. Octobers expire in about three weeks. My preference is the November $125 strike.

BUY CALL OCT 120 OIH-JD open interest=8093 current ask $2.89
BUY CALL OCT 125 OIH-JE open interest=8165 current ask $1.28

BUY CALL NOV 120 OIH-KD open interest= 661 current ask $5.80
BUY CALL NOV 125*OIH-KE open interest= 371 current ask $3.80

Annotated Chart:

Picked on September 28 at $117.40
Change since picked:       + 0.00
Earnings Date            00/00/00
Average Daily Volume =        6.6 million  
Listed on September 28, 2009         



In Play Updates and Reviews

Using the Bounce

by James Brown

Click here to email James Brown

Volume was low but today's rebound is offering us a couple of new bullish entry points.


CALL Play Updates

Alcon Inc. - ACL - close: 140.86 change: -0.33 stop: 132.99

The action in ACL was a bit odd. The market shot higher and ACL did too but shares of ACL suddenly reversed and slid lower the rest of the session. I couldn't find any specific news behind this relative weakness.

Wait and watch for a bounce near the $136-134 zone before considering new bullish positions. ACL has already hit our first target. Our second target is $148.00.

Picked on September 10 at $136.75
Change since picked:       + 4.11
                             /1st target hit @ 142.50 (+4.2%)
Earnings Date            10/21/09 (unconfirmed)
Average Daily Volume =        299 thousand 
Listed on September 10, 2009         


Allegheny Tech. - ATI - close: 35.55 change: +1.13 stop: 31.45

ATI rallied 3.2% but volume was light and momentum indicators are still slightly bearish.

More conservative traders will want to consider an early exit now. I'm not suggesting new positions until we see ATI test support. ATI has exceeded our first target. We're currently aiming for $37.00.

Picked on   August 31 at $ 30.25 *triggered         
Change since picked:      + 5.30
                               /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: 37.73 change: +0.43 stop: 36.45

The RLX retail index gained 1.7% and BBY lagged behind with a 1.1% gain. An oversold bounce is not surprising with BBY so close to the trendline of support but the rally today stalled under $38.00. I'm still wary here and would wait for a move over $38.25 or even $39.00 before launching new positions. 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:       - 0.72
Earnings Date            12/16/09 (unconfirmed)
Average Daily Volume =        8.7 million  
Listed on September 21, 2009         


Caterpillar - CAT - close: 52.18 change: +0.98 stop: 47.49

Volume on CAT's bounce today was pretty low - only 6 million shares versus the normal 10 million. I still think CAT will retest the $50 level. Right now our plan is to buy calls at $50.50. Considering the weakness in the S&P 500 readers may want to wait for a dip closer to the $49.00 level.

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 @ 50.50
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: 86.06 change: +1.77 stop: 83.65

CF probably tagged a few stop losses with the morning gap down under short-term support at $84.00. Yet shares quickly rallied from its low of $83.82. The stock was due for an oversold bounce after a multi-day decline. I suggested buying calls on a bounce and we got it!

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. CF started their bid in January at $2.1 billion, bumped it to $2.2 billion in March, and then raised it to $4 billion in August. TRA has consistently rejected CF's offers.

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.

Late Thursday night (Sept. 24th) TRA announced a one-time, special cash dividend to shareholders of $7.50 per share, worth about $750 million. Details and dates of the dividend are not know yet but it's expected to be paid in the fourth quarter of 2009. It's been suggested that TRA is doing this to make themselves look less attractive to CF.

M&A UPDATE 09/28/09 :
CF is getting more aggressive with its bid to acquire TRA. The company announced this morning that it had already purchased 7 percent of TRA's stock on the open market.

Picked on September 05 at $ 85.93
Change since picked:       + 0.13
Earnings Date            10/27/09 (unconfirmed)
Average Daily Volume =        653 thousand 
Listed on September 05, 2009         


Core Labs - CLB - close: 101.72 change: +2.65 stop: 92.25

News that Iran began test firing missiles over the weekend helped produce a bounce in oil. This fueled a move in the oil service stocks and CLB gained 2.6%. Volume was very light today and I'm not suggesting positions at this time.

Picked on September xx at $ xx.xx <-- TRIGGER @ 96.00
Change since picked:       + 0.00
Earnings Date            10/22/09 (unconfirmed)
Average Daily Volume =        175 thousand 
Listed on September 23, 2009         


Compass Minerals - CMP - close: 60.82 chg: +1.62 stop: 54.75

The widespread market bounce helped lift CMP to new multi-month highs over $60.00.

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:       + 5.27
                               /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: 45.71 change: +1.42 stop: 39.45

CNX erased Friday's loss with a 3.2% bounce today. I would still consider new positions here in the $44-46 zone but a better entry point would be a dip near $42.00.

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 25 at $ 43.77 /gap down entry
Change since picked:       + 1.94
Earnings Date            10/22/09 (unconfirmed)
Average Daily Volume =        3.0 million  
Listed on September 19, 2009         


Danaher Corp. - DHR - close: 67.11 change: +1.00 stop: 63.95

Volume was almost half the norm with today's 1.5% bounce. I'm not suggesting new positions at this time.

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:       + 0.74
Earnings Date            10/22/09 (confirmed)
Average Daily Volume =        2.4 million  
Listed on September 05, 2009         


Diamond Offshore - DO - close: 93.37 change: +2.12 stop: 88.49

The rebound in oil helped lift DO, which was already bouncing from support near $90.00. I would still consider new positions right here. 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:       - 1.32
Earnings Date            10/22/09 (unconfirmed)
Average Daily Volume =        1.8 million  
Listed on September 12, 2009         


Dril-Quip, Inc. - DRQ - close: 49.18 change: +1.35 stop: 45.90

DRQ has broken out to new highs and hit our trigger to buy calls at $48.50. Our first target is $53.00. Our second target is $57.50. The Point & Figure chart is bullish with a $65.00 target.

Chart:

Picked on September 28 at $ 48.50
Change since picked:       + 0.68
Earnings Date            11/10/09 (unconfirmed)
Average Daily Volume =        282 thousand 
Listed on September 26, 2009         


Flowserve - FLS - close: 98.78 change: -0.04 stop: 88.95

FLS under performed the market on Monday by trading sideways under the $100 level instead of participating in the widespread rebound. We're still waiting for a dip into the $95-92 zone. More cautious traders may want to raise their stops closer to $92.00. Our plan is to buy calls on a dip at $95.00.

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         


Fomento Economico Mex. - FMX - close: 36.70 chg: +0.41 stop: 34.99

FMX is still coiling for a bullish breakout higher. Our trigger is at $37.55. If triggered our first target is $40.00. Our second target is $42.50. The Point & Figure chart is much more bullish with a $66 target.

Picked on September xx at $ xx.xx <-- TRIGGER @ 37.55
Change since picked:       + 0.00
Earnings Date            10/26/09 (unconfirmed)
Average Daily Volume =        1.0 million  
Listed on September 24, 2009         


General Dynamic - GD - close: 64.54 change: +1.55 stop: 57.85

Hmm... we may need to alter our entry plans for GD. The stock gapped higher this morning after getting upgraded before the bell. The rally stalled near its 2009 highs.

We'll keep our entry point at $61.00 for now but we might want to raise it toward $62.00.

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: 31.51 change: +0.98 stop: 29.75

Today's bounce did not alleviate the bearish trend for the railroad sector. GWR is still out performing its peers but if the sector sinks I doubt GWR will hold up on its own. Technically GWR is bouncing from support near $30 and its 50-dma but it stalled near its short-term trend of lower highs.

We've already taken profits once and our second target is $34.75. 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:      + 2.85
                              /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         


Intl. Bus. Mach. - IBM - close: 119.33 chg: -1.75 stop: 117.75

Warning! More conservative traders may want to exit immediately. IBM saw its early morning bounce reverse at the $122 level and the stock under performed the market with a 1.4% decline. The close under $120 is also bearish. I am not suggesting new bullish positions at this time.

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:       - 2.49
Earnings Date            10/15/09 (unconfirmed)
Average Daily Volume =        5.3 million  
Listed on September 16, 2009         


Illumina Inc. - ILMN - close: 41.28 change: +0.62 stop: 37.45

Biotech stocks were showing strength today. ILMN gained 1.5% but shares stalled near their September highs. Currently our plan is to buy calls on a dip at $39.10.

If we are triggered at $39.10 our first target is $42.40. Our second target is $46.75 but that's probably being optimistic given our time frame. ILMN reports earnings in less than four weeks. We'll plan to exit before earnings are announced.

Picked on September xx at $ xx.xx <-- TRIGGER @ 39.10
Change since picked:       + 0.00
Earnings Date            10/20/09 (unconfirmed)
Average Daily Volume =        1.6 million  
Listed on September 26, 2009         


iShares Financials - IYF - close: 53.25 change: +1.66 stop: 49.49

Banking stocks looked a lot stronger today and the IYF gained 3.2%. Over the weekend I suggested buying calls on a bounce and we got a bounce. Our first target is $57.00. Our second target is $60.00.

Picked on September 15 at $ 52.60 *triggered  
Change since picked:       + 0.65
Earnings Date            00/00/00
Average Daily Volume =        5.1 million  
Listed on September 01, 2009         


NYSE Euronext - NYX - close: 28.78 change: +0.76 stop: 27.75

Over the weekend I suggested readers buy calls on a bounce over $28.75 and NYX delivered. This is our new entry point. Our first target is $31.95. Our second target is $34.50.

Picked on September 22 at $ 29.82
Change since picked:       - 1.04
Earnings Date            10/30/09 (unconfirmed)
Average Daily Volume =        3.0 million  
Listed on September 22, 2009         


PPG Inds. Inc. - PPG - close: 58.76 change: +1.11 stop: 54.95

PPG posted a 1.9% gain. 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:      + 3.11
                             /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: 61.48 change: +0.03 stop: 57.75

SPW's three-cent gain looks like under performance with the S&P 500 up 1.7%. I'm sticking to the plan, which is to buy calls on a dip at $60.00. If triggered our first target is $64.95. Our second target is $68.75.

Picked on September xx at $ xx.xx <-- TRIGGER @ 60.00 *new*
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: 67.21 change: +0.31 stop: 63.75

The trading in SOHU was a little worrisome. The rally stalled early this morning and shares under performed the market. Actually I'm surprised SOHU wasn't weaker given the big losses in the Chinese markets on Monday.

Currently our plan is to buy calls on a dip into the $66.00-64.00 zone. I'm upping our stop loss to $63.75.

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

Picked on September xx at $ xx.xx <-- TRIGGER @ 66.00
Change since picked:       + 0.00
Earnings Date            10/26/09 (unconfirmed)
Average Daily Volume =        577 thousand 
Listed on September 15, 2009         


Waters Corp. - WAT - close: 55.43 change: +0.66 stop: 49.30

We're going to have to get more aggressive with WAT. I'm suggesting readers open small positions (about 1/2 to 1/4 our normal size) on today's bounce. We'll raise the stop loss to $51.90. I'm giving up on our plan to wait for a dip near $53.50.

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.

NOTE: I was suggest the November $55 calls (WAT-KK).

Chart:

Picked on September 28 at $ 55.43 *new entry
Change since picked:       + 0.00
Earnings Date            10/20/09 (unconfirmed)
Average Daily Volume =        809 thousand 
Listed on September 12, 2009         


Wells Fargo - WFC - close: 28.90 change: +0.71 stop: 27.25

I suggested looking for a new bounce over $28.50 as our next entry point and we just got it! I'd still consider bullish 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.

Picked on September 22 at $ 29.39
Change since picked:       - 0.49
Earnings Date            10/14/09 (unconfirmed)
Average Daily Volume =         42 million  
Listed on September 22, 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: 29.04 change: +0.73 stop: n/a

After a very sharp two-week plunge CI is bouncing. I'm not suggesting new positions at this time.

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:       - 0.36
Earnings Date            11/05/09 (unconfirmed)
Average Daily Volume =        3.8 million  
Listed on September 08, 2009