Option Investor
Newsletter

Daily Newsletter, Wednesday, 9/30/2009

Table of Contents

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

Market Wrap

Down Day, but an Up Month and Quarter

by Judy Alster

Click here to email Judy Alster
Blame that pesky Chicago Purchasing Managers Index (PMI) for the morning's thud. Instead of obligingly rising to an expected 52 in September, it fell to 46.1, sending stocks plummeting soon after Wednesday's open. In the first hour of trading, the Dow fell almost 116 points or 1.2%% to 9,626, the Standard & Poor's 500 Index dropped more than 12 points or 1.2% to 1,048 and not to be outdone, the Nasdaq composite also fell 1.2% to 2,097. They swiftly began to right themselves and were in positive territory by around 1:00 p.m. before changing their minds. A down day for, among others, REITs, full-line insurers, consumer financial . . . a good one for precious metals, oil futures and some tech stocks.

MARKET INDEXES:

The PMI showed a Midwestern manufacturing sector rather weaker than hoped for, in fact contracting, and down from August's reading of 50, the level that signals an overall expansion in activity; economists were expecting the index to show continued improvement, to 52. The Purchasing Managers Index is considered a harbinger of Thursday's release of the Institute for Supply Management index.

The scandalized whispers this morning concerned the fact that the S&P started its steep slide a few minutes before the PMI was released to the public. Was it leaked? No, but it was released to a certain population before the general public got hold of it, and that made a difference:

PMI REPORT: WHAT HAPPENED at 9:42 a.m.

For both subscribers and regular Joes, the news threw cold water on the vague optimism that followed the revision, before the open, of the Commerce Department's final report for second-quarter gross domestic product: The government said that GDP sank at a pace of "just" 0.7% in the spring, better than the annualized 1.1% drop economists were expecting. The upward revision was primarily due to higher estimates for business spending on software and nonresidential construction. "Equities should like today's report," one source said, and that source was correct for a couple of minutes anyway.

DOW JONES INDUSTRIAL AVERAGE:

The GDP numbers show, or rather showed in the rear-view mirror, the economy at the bottom of a recession, maybe, with increased chance of an inventory boost in the third quarter. But the Chicago PMI data is considerably newer and consequently more disturbing, reminding us, if we needed reminding, that the economy still has a few speed bumps to navigate on the road to recovery.

There was good news/bad news on the employment front: The ADP National Employment Report of private payrolls showed private sector employment falling by an 254,000 in September (the data are collected for pay periods that include the week of the 12th of each month). This was more than the 240,000 expected by economists, but on an optimistic note, It was the fewest jobs lost since July 2008.

S&P 500:

The Mortgage Bankers' Association purchase application index fell 6.2% last week, while the refinance rate slipped 0.8%. This despite fantasy loan rates like the 4.94% rate for 30-year mortgages, the lowest rate since mid-May. Refinancings are counted, perhaps confusingly, as mortgage applications; and at 65.3% are making up a larger share of total applications, with homeowners hurrying to lock in low rates and pay down higher rate loans. If it continues, the drop in the purchase index could mean a slowing for home sales. Talk about your green shoots shriveling up.

A non-key but still valuable report out Wednesday was corporate profits in the second quarter, as brought to us by the Bureau of Economic Analysis. They were revised down a bit to an annualized $1.031 trillion from the original estimate of $1.050 trillion, up in either case from the first quarter's $0.976 trillion, which itself was a terrific jump. We're using the most relevant measure here, after-tax profits, or book profits (operating profits less inventory valuation and capital consumption) after taxes. Corporate profits are still down 19.2% year over year but last quarter they were down 24.8% year-over-year. We'll take our good news where we can find it.

NASDAQ COMPOSITE:

Gasoline was much in the news today. While stocks of crude oil rose 2.8 million barrels last week to 338.4 million, our gasoline supply dropped a surprising 1.6 million barrels last week, as demand jumped 3.8% to 9.13 million barrels a day, said the Energy Information Administration in its weekly report. Analysts were expecting a buildup of 1.2 million barrels in gasoline inventories. Gasoline imports fell to 851,000 barrels a day last week, down 17% from a week ago. Crude imports also fell, down 2.7% to 9.5 million barrels a day.

Gasoline demand is up 5.4% year-over-year, doubtless reflecting price declines at the pump. (I like to think I did my patriotic bit in all this, as a sick relative necessitated my making seven or eight 104-mile round trips in the last two weeks. A congratulatory phone call from the President would be nice.) Refineries are still limiting output, operating at a mild 84.6% of capacity, using only 14.59 million barrels of crude a day, down 1% from a week ago.

The EIA also reported an increase of 2.8 million barrels in crude inventories and a buildup of 300,000 in distillate stockpiles, which include diesel and heating oil, largely in line with expectations. Distillate stocks continue to build, up 0.3 million barrels in the week with total stocks far above normal. Great for the consumer, not so hot for corporate profits and some energy stock prices.

Demand for jet fuel is actually improving, down only 2.9% since this week last year, compared with recent double-digit drops. A few years ago Southwest was one of the small handful of airlines making any money due to the fact that it had locked in prices several years previously, when crude was cheap. Any airline or refinery not doing that now is positively daft.

You could look at the decline in gasoline stocks as bullish, but it was at least partly due to lower gasoline imports, due to the fact that we don't need any more gasoline right now. Crude prices rose in reaction to today's data, rising 5% and surpassing $70 a barrel. Benchmark crude for November delivery added $3.90 to settle at $70.61 a barrel on the New York Mercantile Exchange (although down a few cents after hours). Other crude futures prices were up strongly as well.

WEST TEXAS INTERMEDIATE CRUDE:

Well, after six negative quarters, the S&P500 has given us two consecutive positive quarters. On June 30 it closed just above 919; today it finished at 1057, a gain of 138 points or 15% for the quarter. Even better news was the monthly rise of 3.6% for historically cruel September. The Dow turned in 14.9% for the quarter, its best quarterly performance since 1998, and 2.27% for the month. Can this go on?

Maybe, but perhaps not at that 15% rate: Many investors are convinced this rise is begging for a profit-taking correction. In any event, tops on my Christmas list is for the Index Fairy to fill the gap between the October 2007 high and the March 2009 low. That means a 50% retracement to above 1121 for the S&P 500 and, after a likely fallback, support and a continued move up. Faltering at that level would not be good. We're already more than 40% toward our goal.

What will get us there? The fast answer is revenue growth; I'd say earnings growth but countless companies have been achieving that with cost-cutting, a very limited way to goose earnings. A better answer is increasing our exports, which might result in not just more jobs, but more and different kinds of work, which is the true foundation of economic growth. If all you want is more jobs, then just divide the labor you're already doing. Your fifth-grade teacher misinformed you when she said that division of labor is responsible for the glories of a growing economy. She misinformed you about a lot of things, but that's another story. Economies that constantly make and sell new things, and sell many of them to other countries, are the only economies that grow broadly and steadily. It's an easy fact to lose sight of.

We're not in the process of becoming a manufacturing powerhouse so in the meantime, just plain new jobs will have to suffice. Tomorrow brings three employment related reports, but in the meantime, this is a mildly encouraging chart of manufacturing hours worked:

MANUFACTURING HOURS FOR AUGUST:

A few semiconductor firms went to the head of the class today. Contract manufacturer Jabil Circuit (JBL) jumped after reporting fourth-quarter earnings that exceeded Wall Street projections despite a revenue drop, as well as a forecast that came in above estimates. Shares of other contract manufacturers were also up, including Molex Inc. (MOLX), up 60 cents to $20.88; Sanmina (SANM), up 56 cents to $8.60; and Celestica (CLS), up 56 cents to $9.48. Contract electronics manufacturing is not to be sneezed at as a leading indicator of economic activity.

JABIL CIRCUIT:

Winners Wednesday included publishing, drug retailers, consumer electronics, gold, renewable energy equipment and specialty finance. Wealth-manager Ameriprise (AMP) soared on news that Bank of America (more below) will sell it parts of asset-manager Columbia Management.

AMERIPRISE:

Wearing dunce caps were REITs of almost every stripe — mortgage, retail, specialty, industrial and office — full-line insurers and consumer financial.

REAL ESTATE INVESTMENT TRUST INDEX:

And in news that I'm sure rattled a few on Wall Street, Ken Lewis, the CEO of Bank of America Corp. (BAC) is leaving the company, the country's largest bank by assets, after nearly a year of trouble and strife that followed his company's acquisition of Merrill Lynch; the announcement came after the close. The news, coming after shareholders had stripped Lewis of his chairman's title earlier this year, wasn't surprising because of the intense pressure he came under after the Merrill deal. Will we ever know whether Treasury Secretary Tim Geithner, with Ben Bernanke's blessing, strongarmed Lewis into acquiring Merrill even after Merrill's massive problems became evident and Lewis wanted to call off the deal? That would have been quite legal, by the way: there was a clause allowing the acquirer to back off in just such a contingency. Some insiders say Geithner sure did, and from what I've read . . . . anyway, apparently Lewis decided "on his own" to leave and will be gone by the end of the year. No successor has yet been named.

BANK OF AMERICA:

You know, with all that driving I've been doing, traffic patterns — the devil's very own handiwork — have been a preoccupation lately. I'm convinced that highway driving is strongly linked to lunacy. Perhaps you have had an experience like this:


Big day tomorrow for reports. Market movers should be motor vehicle sales, jobless claims, personal income and outlays, the Institute of Supply Managers Manufacturing Index, pending home sales and the EIA natural gas report. Of interest will be construction spending, job cuts, a slew of bond, bill, and note announcements, and oh yes, Ben Bernanke testifies to the House Committee on Financial Services on regulatory reform.


New Option Plays

Gold miners are starting to bounce

by James Brown

Click here to email James Brown


NEW DIRECTIONAL CALL PLAYS

Anglogold Ashanti - AU - close: 40.76 change: +0.68 stop: 38.70

Why We Like It:
Gold is starting to turn higher again. Many of the gold miners are beginning to bounce after a three-day consolidation. Thus we have a new short-term bottom to define support and limit our risk. I'm suggesting call positions now. Our first target is $44.95. Our second target is $49.00.

FYI: An alternative to a single company stock would be the GDX gold miner ETF or the GLD gold ETF.

Suggested Options:
I'm suggesting the November calls. My preference is the November 45s, which have the most open interest.

BUY CALL NOV 45.00 AU-KI open interest=6090 current ask $1.75

Annotated Chart:

Picked on September 30 at $ 40.76
Change since picked:       + 0.00
Earnings Date            11/02/09 (unconfirmed)
Average Daily Volume =        3.8 million  
Listed on September 30, 2009         



In Play Updates and Reviews

Three Entry Points

by James Brown

Click here to email James Brown

We had two plays hit our triggers and we're adjusting another for a more aggressive entry point.


CALL Play Updates

Alcon Inc. - ACL - close: 138.67 change: -1.46 stop: 133.90 *new*

ACL finally produced the dip we were expecting. Shares fell to $134.36 and then bounced back to almost $139 before the day was out. I was suggesting readers buy calls on a bounce in the $136-134 zone. I'm adjusting the stop loss to $133.90. ACL has already hit our first target. Our second target is $148.00.

Picked on September 10 at $136.75
Change since picked:       + 1.92
                             /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: 34.99 change: -0.35 stop: 31.45

ATI closed the quarter out with another sideways move. Shares have been consolidating sideways for three weeks now. There is no change from my previous comments.

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:      + 4.74
                               /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: 37.52 change: -0.34 stop: 36.45

The tug-of-war continues. The short-term trend has a bearish pattern of lower highs. Yet BBY hasn't broken the longer-term trendline of support near $37.00. More cautious trades may want to inch up their stops toward $37.00.

I will repeat my prior comments. 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:       - 0.93
Earnings Date            12/16/09 (unconfirmed)
Average Daily Volume =        8.7 million  
Listed on September 21, 2009         


Caterpillar - CAT - close: 51.33 change: -0.27 stop: 47.49

Hmm... we just moved the trigger from $50.50 to $50.00 and CAT dips to $50.37 this morning before bouncing. The short-term trend is still down so I'm not too worry about missing an entry point in CAT just yet. More cautious traders may want to wait for a dip near $49.00 instead.

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: 86.23 change: +0.39 stop: 83.65

CF avoid the market's morning drop and rallied toward the 10-dma instead. The rebound reversed at this short-term technical level and we might see CF retest the $84 level soon.

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.

September 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:       + 0.30
Earnings Date            10/27/09 (unconfirmed)
Average Daily Volume =        653 thousand 
Listed on September 05, 2009         


Core Labs - CLB - close: 103.09 change: +0.40 stop: 92.25

CLB quickly rallied from its morning dip near $101 but shares stalled near $104 again.

Our plan with CLB is unchanged. We're waiting for a dip to $96.00 to buy calls. If triggered our first target is $104. Our second target is $109.50.

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: 61.62 chg: +0.10 stop: 55.95

CMP continues to show relative strength and hit another new six-month high.

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:       + 6.07
                               /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: 45.11 change: -0.21 stop: 39.45

CNX has been trading sideways the last few days. I still think it might dip toward $42.00. Wait for a bounce there as our next entry point.

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:       + 1.34
Earnings Date            10/22/09 (unconfirmed)
Average Daily Volume =        3.0 million  
Listed on September 19, 2009         


Danaher Corp. - DHR - close: 67.32 change: -0.06 stop: 63.95

DHR rallied from the $66.00 level again. This may be stronger support than I thought. A new move over $68.00 might signal the beginning of its next leg higher. 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:       + 0.95
Earnings Date            10/22/09 (confirmed)
Average Daily Volume =        2.4 million  
Listed on September 05, 2009         


Diamond Offshore - DO - close: 95.52 change: -0.80 stop: 88.49

DO bounced sharply from its morning lows but eventually pared its gains and rolled over. I'm not suggesting new positions at these levels. We had plenty of entry opportunities on the dip near $90. 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:       + 0.83
Earnings Date            10/22/09 (unconfirmed)
Average Daily Volume =        1.8 million  
Listed on September 12, 2009         


Dril-Quip, Inc. - DRQ - close: 49.64 change: -0.13 stop: 45.90

DRQ tagged another new high intraday but failed to close over $50.00. I'm expecting another dip back toward $48.00, which can be used as a new entry point. Our first target is $53.00. Our second target is $57.50. The Point & Figure chart is bullish with a $65.00 target.

Picked on September 28 at $ 48.50
Change since picked:       + 1.14
Earnings Date            11/10/09 (unconfirmed)
Average Daily Volume =        282 thousand 
Listed on September 26, 2009         


Flowserve - FLS - close: 98.54 change: +0.69 stop: 87.45

FLS bounced from short-term support near $96.00 again but failed to close over $100. I'm still suggesting readers wait for a dip. Right now our trigger is at $91.00. If triggered at $91.00 our first target is $99.50.

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 @ 91.00
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: 38.05 chg: +1.27 stop: 34.99

After days of consolidating sideways FMX has finally broken higher. Shares hit our trigger to buy calls at $37.55. Our estimated cost on the November $40 calls (FMX-KH) is about $0.95.

Our first target to take profits is at $40.00. Our second target is $42.50. The Point & Figure chart is much more bullish with a $66 target.

Chart:

Picked on September 30 at $ 37.55
Change since picked:       + 0.50
Earnings Date            10/26/09 (unconfirmed)
Average Daily Volume =        1.0 million  
Listed on September 24, 2009         


General Dynamic - GD - close: 64.60 change: +0.13 stop: 57.85

I'm still expecting a dip in GD. The plan is to buy calls in the $61.00-60.00 zone.

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         


Helmerich & Payne - HP - close: 39.53 chg: -0.11 stop: 36.65

Thankfully we didn't have to wait long for HP to pull back and hit our trigger. This morning's decline in the market was enough to push HP down to $38.50. Our trigger to buy calls was $38.50. The play is open and our first target is $43.50. I suggested the November $40 call (HP-KH), which hit $2.05 on the dip. FYI: The P&F chart is bullish with a $52 target.

Chart:

Picked on September 30 at $ 38.50
Change since picked:       + 1.03
Earnings Date            11/19/09 (unconfirmed)
Average Daily Volume =        1.2 million  
Listed on September 29, 2009         


Illumina Inc. - ILMN - close: 42.50 change: +0.40 stop: 37.45

ILMN continues to show relative strength. The bounce has now reached five days in a row without a dip. 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: 52.67 change: -0.34 stop: 49.49

Financial stocks under performed today. It may have been the potential bankruptcy of CIT that kept traders on the defensive. Wait for another bounce 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:       + 0.07
Earnings Date            00/00/00
Average Daily Volume =        5.1 million  
Listed on September 01, 2009         


NYSE Euronext - NYX - close: 28.89 change: +0.15 stop: 27.75

I'm still bullish on NYX but traders may want to wait for another bounce from the $28.00 level or a new move over $29.50 before launching new positions. Our first target is $31.95. Our second target is $34.50.

Picked on September 22 at $ 29.82
Change since picked:       - 0.93
Earnings Date            10/30/09 (unconfirmed)
Average Daily Volume =        3.0 million  
Listed on September 22, 2009         


Oil Service Holders - OIH - close: 117.43 chg: -0.46 stop: 112.99

A sharp rally in oil was not enough to save the oil service stocks from a little profit taking. I'd buy calls here or consider waiting for another bounce from the $115 level. 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.

Picked on September 28 at $117.40
Change since picked:       + 0.03
Earnings Date            00/00/00
Average Daily Volume =        6.6 million  
Listed on September 28, 2009         


PPG Inds. Inc. - PPG - close: 58.21 change: -0.53 stop: 54.95

The short-term trend in PPG continues to weaken. I'm still expecting a dip towards $56.00.

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:      + 2.56
                             /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: 61.27 change: -0.67 stop: 57.45

SPW is also correcting and the next move looks like it will be lower into the $60-58 zone. Our plan is to buy calls at $60.00. More cautious traders may want to wait for a dip near $58.00 instead. If triggered our first target is $64.95. Our second target is $68.75.

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

I'm turning more aggressive on SOHU. Let's open small positions (about 1/2 to 1/4 our normal size) on today's bounce. If shares do end up dipping toward $66.00 we can decide then if we want to double down. I was suggesting the November or December calls. My preference was the December 70s (TKZ-LN).

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

Chart:

Picked on September 30 at $ 68.78  (small positions 1/2 to 1/4)
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: 55.86 change: +0.46 stop: 49.30

WAT is bouncing from its recent trading range and looks poised to move higher. I would still consider new positions here but readers may do better to wait for a move over the $56.20 level. Our plan is to use small position sizes (1/2 to 1/4 our normal size).

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 28 at $ 55.43 *new entry
Change since picked:       + 0.43
Earnings Date            10/20/09 (unconfirmed)
Average Daily Volume =        809 thousand 
Listed on September 12, 2009         


Wells Fargo - WFC - close: 28.18 change: -0.17 stop: 27.25

WFC has provided another dip to $28.00. Now all we need is a bounce from here and I would use it as a new entry point to buy calls.

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:       - 1.21
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: 28.09 change: -0.51 stop: n/a

CI sank to another new relative low at $27.45 this morning. 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:       - 1.31
Earnings Date            11/05/09 (unconfirmed)
Average Daily Volume =        3.8 million  
Listed on September 08, 2009