Option Investor
Newsletter

Daily Newsletter, Wednesday, 10/7/2009

Table of Contents

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

Market Wrap

Market Flat While Investors Wait for Earnings

by Judy Alster

Click here to email Judy Alster
Some companies reported earnings today, but it was mostly nap time for the market after two big up days. Investors decided to wait for more reports, not wanting to bet big while worried that revenue and earnings won't justify the stunning gains in stocks in the last seven months. For one thing, the Standard & Poor's index, the basis for a lot of mutual funds, is up 56.3% since its 12-year low in March. The Dow isn't far behind and the Nasdaq Composite is up (are you sitting down?) 66% since its March low.

INDEX WRAPUP for WEDNESDAY, OCT. 7:

NASDAQ COMPOSITE:

Even so, stocks are down during the past two weeks with recent labor and manufacturing reports coming in shy of expectations. Wednesday the Dow fell 5.67 or 0.1% to 9,725.58; the S&P 500 index rose 2.86 or 0.3% to 1,057.58 and the Nasdaq composite rose 6.76 or 0.3% to 2,110.33.

DOW JONES INDUSTRIAL AVERAGE:

Advancers narrowly outstripped decliners on the New York Stock Exchange, where consolidated volume came in at 4.3 billion shares, lower than Tuesday's 5.1 billion.

S&P500:

I'm sure you've already noted some of the muddy technicals on these indexes — the difficulty breaking through resistance, the MACD failing to reflect new highs. Fundamentally, what do we have to keep this rise going? Stay tuned for earnings.

Wells Fargo upgraded Bank of America (BAC) despite its CEO shuffle and raised estimates for J.P.Morgan/Chase (JPM) and Goldman-Sachs (GS). Banks put in a decent performance today, with banking indexes such as the KBW up slightly, although technically we are not thrilled by what the MACD looks like or the possibility of an imminent close below the 20-day moving average.

SPIDER KBW BANK INDEX:

Today's 10-year note auction went well; despite a large $20 billion auction size, demand was very high. The yield was also healthy at 3.21%. Almost half the bidders were non-dealers.

Investors have been watching the dollar, which has plummeted this year amid rock-bottom interest rates and massive government spending. A weak dollar helps companies with extensive global operations because it encourages overseas customers to buy U.S. goods. Over the long term, of course, it will trigger inflation and compel foreign buyers of our debt to buy elsewhere.

U.S. DOLLAR INDEX:

Today was the more-or-less official start of the latest earnings cycle with Alcoa's (AA) earnings coming after hours; Alcoa, the world's largest aluminum producer, was the first component of the Dow to report. They announced a surprise third-quarter profit, helped by higher aluminum prices and demand. Profit came in at $77 million or 8 cents a share, beating forecasts. Although well down from the year-ago period ($268 million or 33 cents), it ended three straight quarters of losses due to slender demand for aluminum used in cars, homes and airplanes. The company said there finally seems to be stabilizing due to distributors' low inventories.

Since last fall the company has recorded a net loss of more than $2 billion, so In the cost-cutting department, Alcoa has slashed its dividend by 14 cents a share, cut 13,500 jobs and sold $1.3 billion of new stock and debt.

Alcoa closed up 31 cents at $14.20 but rose another $1+ to about $15 in after-hour trading on another 7 million shares.

ALCOA:

Spot aluminum prices have risen nicely since June; at the end of September, Alcoa's average price per metric ton rose 18% to $1,972. (Note, however: Spot aluminum prices are some 10% off their August peak.) Demand for the metal is up, mostly led by China replenishing its stockpiles; the country now accounts for a third of global aluminum consumption.

The Federal Reserve reported Wednesday that the U.S. consumer continues to just say no to excessive debt. Seasonally adjusted consumer debt fell $11.98 billion in August to $2.46 trillion, or at a 5.8% annual rate, although about half-a-billion dollars less than analysts were expecting. (The Fed's report covers credit cards, store cards, auto and other personal loans, not mortgages or other real-estate related debt.)

Credit-card debt fell $9.91 billion or 13.1% to $899.41 billion, the record 11th straight monthly drop in credit card debt and the seventh straight monthly decline in total credit, the longest streak since 1991. Non-revolving credit, such as auto loans, personal loans and student loans fell $2.10 billion or 1.6% to $1.56 trillion. Many if not most banks have reduced credit-card borrowing limits and tightened lending standards — an automatic cut in spending whether you want it or not; a report earlier this year by FICO, the major producer of credit scores, said companies slashed limits for an estimated 58 million card holders in the 12 months ended in April.

Since its peak in July 2008, consumer credit outstanding has fallen by $119 billion as households struggle with declining (or nonexistent) income, falling home prices, clobbered portfolios, shot-to-pieces 401(k)'s and that undeniable feeling that good times are over. At the end of the second quarter, the value of household net worth had plunged by $11 trillion from its peak in the third quarter of 2007.

Interestingly, the retrenchment in August occurred even as consumer spending increased 1.3% according to a report last week from the Commerce Department, suggesting consumers are buying with cash rather than credit. Despite cautious spending, retail seems to be holding up fairly well:

RETAIL HOLDERS:

With unemployment at 9.8% last month, consumers will probably spend carefully as long as jobs are scarce. I'm not among those who bemoan the fate of the "fledgling recovery" while consumers keep a lid on big-ticket expenditures. Believe me, Americans won't keep their wallets closed forever. I hope I don't sound like your cranky maiden aunt, but learning how not to toss money around like water is a very valuable trait, strengthening for both individual households and whole economies. Its very high savings rate was a major factor in Japan's sharp economic rise after World-War II, for ne example. Japan collapsed more because it severely cut its work hours rather than from wild spending, although the spending didn't help matters.

And in fact, Americans are saving more. Maybe we'll get to a point where consumer spending powers less than the current 70% of the economy. For example, how about some more exports?

Other big companies reported earnings today. Monsanto's fourth quarter loss widened to $284 million or 43 cents a share, compared with last year's loss of $172 million, or 31 cents. Excluding hefty restructuring and other charges, profit was two cents, up from last year's loss of three cents, despite an $1.88 billion or 8.3% revenue slide. Naturally the company cut costs by 35% and plans to cut its current workforce by 8%. It also repeated a fairly glum short-term forecast.

MONSANTO CO.:

Monsanto was the pioneer in genetically-modified seeds that can boost crop yields with their inherent protection against pests and herbicides. In June the company said it would separate its herbicides, including the well-known Roundup, into a new division and concentrate on biotech research. Roundup was a cash cow for a long time but now faces generic competition and lower global farm incomes. Next year could be pivotal for the company, since it will be pushing new high-tech corn and soybean seeds and expanding internationally to offset lower earnings from its crop-protection business. Good luck convincing farmers to shell out for the more costly new offerings with grain prices snoozing and in the face of resistance from environmental groups, mainly in Europe:

POWERSHARES-DEUTSCHE BANK AGRICULTURE INDEX:

Costco Wholesale (COST) reported fourth-quarter net income of $374 million or 85 cents a share, down 6% from $398 million or 90 cents last year; revenue dropped to $22.4 billion from $23.1 billion, although handily beating expectations of 77 cents and $22.3 billion. For the year, income was $1.09 billion or $2.47 a share, down from $1.3 billion or $2.89; revenue was down as well. Last month's comparable-store sales were up an average 1% — down in the U.S. but up 6% internationally. Sales at stores open at least a year dropped here and internationally, but exclude the effect last year of a stronger dollar and lower gas prices, which hurt stores in Canada, the U.K. and Korea, and sales at stores open at least a year edged up 1%, with international same-store sales up 7%.

Costco has managed to pull in budget-conscious shoppers during the recession with deals on food and everyday items but has been hurt by a pullback in spending on big-ticket items like jewelry and furniture. For the year, net income slipped 15% to $1.09 billion or $2.47 a share, down from $1.28 billion or $2.89 per share; full-year revenue fell 2% to $71.42 billion.

COSTCO WHOLESALE:

Casual dining chain Ruby Tuesday (RT) saw its first-quarter profit soar despite lower sales, as cost saving measures (No!) kicked in and interest costs fell. Profit rose to $6.1 million or 11 cents per share, up from $285,000 or a penny a share in the quarter last year; that was with a 9% increase in the number of shares outstanding. Revenue fell 7% to $300.6 million. Analysts were expecting 9 cents a share on $296.9 million, but the company issued a downbeat forecast for the year so shares ended unchanged Wednesday. The company attributed the sales decline to operating 45 fewer restaurants this year.

RUBY TUESDAY:

Let's hope they're not gobbling too much fried dough and cotton candy over at the Mortgage Bankers' Association, because they're on a big roller coaster. Two weeks ago showed a 6.2% drop in mortgage applications; last week recorded a sharp jump, up 13.2% for purchases and up 18.2% for refinancing. The average rate for 30-year mortgages fell for a third straight week, down five basis points to 4.89%, making you want to buy a house just to take advantage of it. As in the prior week, the bulk of mortgage-application demand was refinancing, which is now making up two thirds of all applications (a case of apples and pineapples; I agree refinancing should be tracked separately). In any case, refinancing will help make household debt manageable and help somewhat to limit foreclosures.

A big buildup in the gasoline supply and another in distillate stocks more than offset a small draw in crude last week, according to the weekly report of the Energy Information Administration (EIA). Gasoline stocks rose 2.9 million barrels with distillates up 0.7 million, while crude stocks fell one million barrels. Refineries, although they increased their output of petroleum products last week, putting 14.6 million barrels of crude a day to work, are still snoozing along at a middling 85% of capacity. Gasoline demand is the good news in the report, up a strong 6.2% since this time last year and hinting, albeit lightly, at consumer strength.

Crude-oil futures edged below $70 a barrel on the buildup in gasoline inventories. On the New York Mercantile Exchange, crude for November delivery fell $1.31, or 1.8%, to $69.57 a barrel after trading as high as $71.76 earlier in the session.

WEST TEXAS INTERMEDIATE CRUDE:

During lunch I glanced casually at some shipping stocks including Diana (DSX), Eagle (EGLE) and Excel Maritime (EXM). Some big moves there prompted a look at the Baltic Dry Index, that fairly pure indicator of economic activity which measures the demand for transporting raw materials — steel, ore, coal, fertilizer, grain — which themselves are the early signs of production and consumption. A summary of prices on several routes for several sizes of carrier, the BDI is a proxy for the entire dry bulk shipping market.

Slow post-recession demand has handed two large wallops to the dry bulk sector this year, but an advance in the last week might mean a rebound, with the index on its best run since mid-July. Yesterday there was a 3% move up (see graph), and today saw was a 105-point jump to 2,546. According to carrier China Ocean Shipping, government-encouraged factory output in China could send the Index up sharply by the end of the year.

BALTIC DRY INDEX (Oct. 6, latest):

EXCEL MARITIME:

And let's see whether we can add a touch of levity to that 9.8% unemployment report:


Tomorrow look for interest rate announcements from the Bank of England and the European Central Bank, jobless claims, the EIA natural gas report, the RBC Cash Index (a measure of consumer attitudes and spending) and several debt auctions including $12 billion in 30-year bonds. Reporting earnings will be PepsiCo (PEP), Marriott International (MAR), and International Speedway (ISCA), among others.


New Option Plays

Internet, Real Estate, and Oil

by James Brown

Click here to email James Brown

Editor's Note:

Bullish candidates were easy to find today. I wanted to provide a few extra symbols as possible trading ideas. Some of these candidates need to see a pull back while others need to see more of a bounce but they all appear to have potential. Here's the list: CRK, PRE, EQIX, SLB, FTI, APOL, ESI, VMC, RIG.


NEW DIRECTIONAL CALL PLAYS

Amazon.com - AMZN - close: 93.97 change: +3.06 stop: 87.99

Why We Like It:
If you can't beat them, join them.

The bounce in AMZN has been faster than expected. Shares of this online retailer are now challenging resistance at $94.50. A breakout here should lead to a move to $100 and beyond.

I'm suggesting a trigger to buy calls at $95.05. If triggered our first target to take profits is at $99.90. Our second target would be $104.95. I'd aim higher but we want to exit in front of the late October earnings report.

Suggested Options:
I am suggesting the November calls. My preference is the $100 strike.

BUY CALL NOV 100 QZN-KT open interest=5400 current ask $3.80

Annotated Chart:

Picked on   October xx at $ xx.xx <-- TRIGGER @ 95.05
Change since picked:       + 0.00
Earnings Date            10/22/09 (unconfirmed)
Average Daily Volume =        6.2 million  
Listed on   October 07, 2009         


AvalonBay - AVB - close: 71.20 change: +0.79 stop: 68.49

Why We Like It:
It's been a while since we've played anything in real estate. Shares of AVB are bouncing from their trendline of higher lows after a painful $11 correction. I want to see a little more confirmation. I'm suggesting readers buy calls at $72.60. If triggered our first target is $77.75. More aggressive traders could aim higher but we don't want to hold over the early November earnings report.

Suggested Options:
I am suggesting the November calls. My preference is the November 75s.

BUY CALL NOV 75.00 AVB-KO open interest=328  current ask $3.30

Annotated Chart:

Picked on   October xx at $ xx.xx <-- TRIGGER @ 72.60
Change since picked:       + 0.00
Earnings Date            11/04/09 (unconfirmed)
Average Daily Volume =        1.8 million  
Listed on   October 07, 2009         


EOG Resources - EOG - close: 84.71 change: +0.13 stop: 79.49

Why We Like It:
EOG is another oil stock that's in the process of breaking out. The Point & Figure chart says it has already broken out with a quadruple top breakout buy signal and a $96 price target.

I'm suggesting bullish positions now. Our first target is $89.90. Our second target is $94.75. I'm setting a third target at $99.50.

Suggested Options:
I'm suggesting the November calls but we'll plan to exit ahead of the early November earnings report. My preference is for the November $90 strike.

BUY CALL NOV 90.00 EOG-KR open interest= 495 current ask $2.70

Annotated Chart:

Picked on   October xx at $ xx.xx <-- see TRIGGER
Change since picked:       + 0.00
Earnings Date            11/03/09 (unconfirmed)
Average Daily Volume =        2.9 million  
Listed on   October 07, 2009         



In Play Updates and Reviews

Aiming Higher

by James Brown

Click here to email James Brown


CALL Play Updates

Apple Inc. - AAPL - close: 190.25 change: +0.24 stop: 184.75

AAPL spent the day trading sideways and managed to eke out a gain before the closing bell. One analyst firm raised their price target on the stock to $325. There are no changes from my prior comments.

I'm suggesting bullish positions now or on a dip in the $187-185 zone. We'll use a stop loss at $184.75. Our first target to take profits (I'd exit 2/3rds of our position) is at $199.50. We will cautiously set a secondary target at $210. The P&F chart is currently forecasting a $231 target.

FYI: We will exit ahead of the October 19th earnings report. October options expire after Friday October 16th. Aggressive traders could play the October calls and I'd use the $190 strike. The rest of us will want to consider November calls and I'd use the $200 strike.

Picked on   October 06 at $190.01
Change since picked:       + 0.24
Earnings Date            10/19/09 (confirmed)
Average Daily Volume =       17.8 million  
Listed on   October 06, 2009         


Alcon Inc. - ACL - close: 139.12 change: +2.52 stop: 133.90

ACL is playing a little catch up after under performing the market the last couple of days. Shares are under round-number resistance at $140 but they look poised to move higher. ACL has already hit our first target. Our second target is $148.00.

Picked on September 10 at $136.75
Change since picked:       + 2.37
                             /1st target hit @ 142.50 (+4.2%)
Earnings Date            10/27/09 (unconfirmed)
Average Daily Volume =        299 thousand 
Listed on September 10, 2009         


Allegheny Tech. - ATI - close: 35.43 change: +0.19 stop: 31.70

ATI is another stock that spent the session moving sideways. Shares appear stuck between what looks like short-term support near $34.00 and resistance near $36.00. I'm not suggesting new positions at this time. ATI has exceeded our first target. We're currently aiming for $37.00.

Picked on   August 31 at $ 30.25 *triggered         
Change since picked:      + 5.18 
                               /1st target hit @ 33.85 (+11.9%)
Earnings Date           10/21/09 (unconfirmed)
Average Daily Volume =       2.7 million  
Listed on August 27, 2009         


Caterpillar - CAT - close: 51.90 change: +0.20 stop: 47.49

CAT consolidated under the $52.00 level all day long. I'm still bullish here but readers may want to wait for dips in the $51.00-50.00 zone as an entry point.

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   October 01 at $ 50.00
Change since picked:       + 1.90
Earnings Date            10/20/09 (unconfirmed)
Average Daily Volume =         10 million  
Listed on September 19, 2009         


Core Labs - CLB - close: 103.08 change: +0.45 stop: 97.95

The current 2009 high is $104.95. I am suggesting readers buy calls on a breakout at $105.25. However, keep an eye on the $99-98 zone. If CLB produces another bounce from that level we might buy the bounce instead.

Our new targets are $109.90 and $114.50.

Picked on September xx at $ xx.xx <-- TRIGGER @ 105.25
Change since picked:       + 0.00
Earnings Date            10/21/09 (unconfirmed)
Average Daily Volume =        175 thousand 
Listed on September 23, 2009         


Canadian Nat. Res. - CNQ - close: 66.69 change: -0.13 stop: 61.90

There is no change from my previous comments. We can open bullish positions now or wait for a better entry point on a dip near $65.00. Our first target is $71.50.

Picked on   October 05 at $ 67.01 /gap higher entry
                                /originally listed at $65.04
Change since picked:       - 0.32
Earnings Date            11/05/09 (confirmed)
Average Daily Volume =        6.4 million  
Listed on   October 05, 2009         


Consol Energy - CNX - close: 47.50 change: -0.05 stop: 41.90

The late day rebound in CNX was encouraging. The stock recovered from its lows near $46.30 to close almost unchanged.

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:       + 3.73
Earnings Date            10/22/09 (unconfirmed)
Average Daily Volume =        3.0 million  
Listed on September 19, 2009         


Capella Education - CPLA - close: 69.79 change: +0.15 stop: 62.90

CPLA still looks short-term overbought and we're waiting for a little correction. Our trigger to buy calls is at $65.75.

If triggered our first target is $69.90. Our secondary target is $74.00 but we'll exit ahead of the late October earnings report. FYI: The Point & Figure chart is bullish with an $82 target.

Trading note: CPLA doesn't have a lot of volume and neither do the options. I would keep positions small.

Picked on   October xx at $ xx.xx <-- TRIGGER $65.75
Change since picked:       + 0.00
Earnings Date            10/27/09 (unconfirmed)
Average Daily Volume =        145 thousand 
Listed on   October 03, 2009         


Danaher Corp. - DHR - close: 65.34 change: -0.18 stop: 63.95

DHR is still under performing. If we don't see some participation in the rally soon we'll consider an early exit. 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:       - 1.03
Earnings Date            10/22/09 (confirmed)
Average Daily Volume =        2.4 million  
Listed on September 05, 2009         


Diamond Offshore - DO - close: 98.05 change: +1.09 stop: 89.75

The oil service stocks reversed their losses and closed up as one of the strongest sectors on Wednesday. DO managed to close at new 2009 highs.

Our first target is $99.90. Our second target is $104.50. More aggressive traders can aim for $110. The P&F chart is forecasting a $114 target. The plan was to use small position sizes.

Picked on September 15 at $ 94.69 *adjusted entry point
Change since picked:       + 3.36
Earnings Date            10/22/09 (unconfirmed)
Average Daily Volume =        1.8 million  
Listed on September 12, 2009         


Dril-Quip, Inc. - DRQ - close: 51.65 change: +0.50 stop: 45.90

DRQ set another new closing high for the year.

More conservative traders may want to raise their stops toward $47.00.

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:       + 3.15
Earnings Date            11/10/09 (unconfirmed)
Average Daily Volume =        282 thousand 
Listed on September 26, 2009         


Express Scripts - ESRX - close: 78.31 change: +0.27 stop: 74.90

ESRX gapped down this morning but recovered to close in positive territory. I would still consider new positions here. Our first target is $82.50. Our second target is $84.95.

Picked on   October 06 at $ 77.42 /gap down entry
                              /originally listed at $78.04
Change since picked:       + 0.89
Earnings Date            10/28/09 (confirmed)
Average Daily Volume =        2.1 million  
Listed on   October 06, 2009         


Flowserve - FLS - close: 99.69 change: -0.93 stop: 89.40

FLS under performed the market today. I am suggesting an alternative entry point in case the stocks rallies from here. Open small positions (1/2 to 1/4 your normal size) if FLS trades at $102.60 or higher. If triggered at $102.60 we'll use a stop loss at $95.90. I would also use the Nov 105 calls instead (FLS-KA). Our first target will be $109.75. We'll keep the dip entry point at $91.00 open as well.

We will plan to exit ahead of the late October earnings report.

Picked on September xx at $ xx.xx <-- TRIGGER @ 91.00 or 102.60
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: 65.51 change: -0.03 stop: 59.85

Currently the plan is to buy calls at $62.50.

Our first target is $66.00.

Picked on September xx at $ xx.xx <-- TRIGGER @ 62.50
Change since picked:       + 0.00
Earnings Date            10/28/09 (unconfirmed)
Average Daily Volume =        2.3 million  
Listed on September 09, 2009         


Gold ETF - GLD - close: 102.36 change: +0.08 stop: 97.40

Gold and the GLD inched to another new high in spite of a bounce in the dollar. I don't see any changes from my prior comments.

I would prefer to buy call son a dip near $100.00 but we may not get that opportunity so I'm suggesting small positions now (1/2 to 1/4 your normal size).

The weekly chart has an inverse head-and-shoulders pattern that is forecasting a huge upward target around $130ish but that could take several months to be achieved. Short-term (several weeks) I'm looking for a move to $109.90 as our first target. We'll set a second target soon.

Picked on   October 06 at $102.28
Change since picked:       + 0.08
Earnings Date            00/00/00
Average Daily Volume =       14.2 million  
Listed on   October 06, 2009         


Illumina Inc. - ILMN - close: 42.45 change: -0.69 stop: 37.75

The failed rally at $44.00 on Tuesday and today's under performing in ILMN is starting to look like a bearish reversal. I'm expecting support near $40.00. The plan is to buy calls at $40.10.

If we are triggered at $40.10 our first target is $44.00. We plan to exit before the October earnings report.

Picked on September xx at $ xx.xx <-- TRIGGER @ 40.10
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: 53.04 change: +0.48 stop: 49.49

An upgrade and some positive analyst comments for the banks this morning helped the sector perform well. Our first target is $57.00. Our second target is $60.00.

Picked on September 15 at $ 52.60 *triggered  
Change since picked:       + 0.44
Earnings Date            00/00/00
Average Daily Volume =        5.1 million  
Listed on September 01, 2009         


PPG Inds. Inc. - PPG - close: 57.87 change: -0.16 stop: 54.95

PPG followed the market sideways. We have a week left before the company reports earnings.

PPG has already exceeded our first target and we're currently aiming for $63.00.

Picked on   August 28 at $ 55.65
Change since picked:      + 2.22
                             /1st target exceeded @ 60.05 (7.9%)
Earnings Date           10/15/09 (confirmed)
Average Daily Volume =       1.6 million  
Listed on August 27, 2009         


SOHU.com Inc. - SOHU - close: 67.78 change: +0.72 stop: 63.75

SOHU is still bouncing and more of the short-term technical indicators are improving.

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

Picked on   October 01 at $ 68.24 /gap open entry
                                 (small positions 1/2 to 1/4)
Change since picked:       - 0.46
Earnings Date            10/26/09 (unconfirmed)
Average Daily Volume =        577 thousand 
Listed on September 15, 2009         


Waters Corp. - WAT - close: 56.61 change: +0.40 stop: 53.25

WAT out performed the S&P 500 with a 0.7% gain on Wednesday. I would still open new positions now. Our plan is to use small position sizes (1/2 to 1/4 our normal size).

Our first target is $59.50. We do not want to hold over the mid October earnings report.

Picked on September 28 at $ 55.43 *new entry
Change since picked:       + 1.18
Earnings Date            10/20/09 (unconfirmed)
Average Daily Volume =        809 thousand 
Listed on September 12, 2009         


PUT Play Updates

BIOGEN IDEC - BIIB - close: 49.17 change: +0.15 stop: 52.15

There is no change from my previous comments. A failed rally near $50.00 could be used as a new bearish entry point.

Don't forget - this is a higher-risk play because we're choosing to hold over the earnings report!

Our first target to take profits is at $44.50. Our second target is $40.50. FYI: The P&F chart is bearish with a $36 target.

Picked on   October 03 at $ 48.89
Change since picked:       + 0.28
Earnings Date            10/15/09 (unconfirmed)
Average Daily Volume =        2.6 million  
Listed on   October 03, 2009         


Strangle & Spread Play Updates

(What is a strangle? It's when a trader buys an out-of-the-money (OTM) call and an OTM put on the same stock. The strategy is neutral. You do not care what direction the stock moves as long as the move is big enough to make your investment profitable.)

Cigna Corp. - CI - close: 29.56 change: +0.88 stop: n/a

CI is beginning to rebound from its two-week consolidation in the $27-29 zone. Shares are nearing significant resistance at $30.00 and a small cloud of moving averages. 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:       + 0.16
Earnings Date            11/05/09 (unconfirmed)
Average Daily Volume =        3.8 million  
Listed on September 08, 2009