Option Investor
Newsletter

Daily Newsletter, Monday, 10/12/2009

Table of Contents

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

Market Wrap

Earnings Optimism Lifts Stocks To One-Year High

by Todd Shriber

Click here to email Todd Shriber
Stocks got a boost on Monday as market participants continue to remain optimistic about the latest round of earnings reports, sending the S&P 500 higher by 0.4% to a one-year high of 1076.19. The Dow Jones Industrial Average added 20.86 points to close at 9885.8 while the Nasdaq was the laggard of the major U.S. indexes, shedding less than a point to close 2139.14. Trading was light due to the Columbus Day holiday with just 6.6 billion shares changing hands across all U.S. exchanges, the lowest total since the first trading day of 2009.

Market Stats Table

As I always say, an up day, at least for two of the three major indexes, is better than a down day, but in no way was Monday's trade a sequel to Columbus Day 2008, which delivered a 1000 point gain for the Dow. Familiar themes continued to play out, helping bolster stocks, namely a plummeting U.S. dollar and rising crude oil and gold prices. Simply put, the U.S. dollar is weak and there appears to be little dollar bulls can do to right the ship as Uncle Sam continues to issue debt at a prodigious pace and investors renew their favor for stocks that derive a bulk of their sales from international markets.

With earnings season set to kick into high gear this week, it is reasonable to expect that more than a few bellwether names will report higher profits due to favorable currency exchanges. So there is some benefit to a weak dollar, at least in small doses, prolonged dollar weakness, which the market appears to be factoring, is not the best news in the world. The chart of the U.S. Dollar Index below shows just how ugly things have been for the greenback over the past few months.

The S&P 500 and the dollar are as uncorrelated as they have been at any point in the last 40 years, according to Bloomberg data. While the S&P 500 is up 59% from its March 9 lows, the Dollar Index is down 14% in the same period.

Dollar Index

Of a course a weak dollar usually buoys the fortunes of oil bulls and that was the case on Monday as crude rose for a third day, gaining 2.1% to $73.27. Yeah, oil is certainly approaching ''been there, done that'' territory with this latest move toward $75 a barrel, where it has faltered several times in previous months. The latest commitment of traders report shows that oil traders are leaning bullish with 50,000 more long positions than short in the latest report, but that is also significantly less bullish than when oil made a similar move to $75.

Crude has not trade above $75 a barrel since August and that figure has firmly established itself as the next resistance point for black gold. Demand statistics and inventory data do not help crude's cause, so oil bulls will likely continue to rely on a faltering dollar to lift crude higher.

Crude Chart

Oil stocks benefited from the rally in the underlying commodity as oil and gas producers led the gains among the 10 industry groups tracked within the S&P 500. ExxonMobil (XOM) gained 1.2% to $70.13, good for a sixth consecutive up day for America's largest energy producer. Chevron, the second-largest U.S. oil explorer, added 91 cents to close at $73.67 as gains in both ExxonMobil and Chevron helped lift the Dow higher.

Oil services names also got a jolt today, not surprising given that they are actually more intimately correlated to the price of crude than the likes of Chevron and ExxonMobil. Halliburton (HAL) and Schlumberger (SLB) were both up more than 2% today while Diamond Offshore (DO) and National Oilwell Varco (NOV) barely missed joining the 2% gainer club. That means it was a bullish day for the Oil Services HOLDRs ETF (OIH), which I mention frequently. OIH touched a new 52-week high of $125.36 before dropping back a bit to close at $123.91.

With crude hovering near a critical resistance area, a strong move beyond $75 a barrel could lift OIH a few points and a move beyond $80 a barrel could take OIH toward the $135 area. The chart is below.

OIH Chart

But allow me to be honest. The market is in throws of a new earnings season and those numbers are going to be the catalyst that moves stocks over the next several weeks and that means all eyes are going to be turned toward the quality of the reports and any guidance that is delivered. Some strategists are advocating a cautious approach because stocks have already priced in better-than-expected earnings and with so many stocks resting at or near their 52-week highs, a little caution is probably warranted.

S&P 500 members are expected to report a ninth consecutive quarter of declining earnings, the longest streak since the Great Depression, according to Bloomberg. Earnings will decline in the third quarter by roughly 22% from the third quarter of 2008 before growth resumes in the fourth quarter.

S&P 500 Earnings

One stock that got earnings season off to a good start was Black & Decker (BDK), which soared $3.58, or 7.6%, to $50.82 on Monday. The maker of Delta and Dewalt tools raised its third-quarter outlook due to some help from, what else, cost-cutting. In all fairness to Black & Decker, the company did say its third-quarter results would be helped by lower tool prices and a lower tax rate.

The company said it expects to earn 91 cents a share, well above previous guidance of 35 cents to 45 cents. Sure, 1,200 job cuts probably made that lofty new number attainable and the new tax rate is chipping in 14 cents a share, but beating previous guidance and analyst estimates by more than double, regardless of the circumstances, is a move that the Street will applaud and did so with Black & Decker today. A Sterne Agee analyst raised his price target on Black & Decker to $56 from $41.

While Black & Decker does not have ''bellwether'' status, the news from the company might serve to increase investor optimism that this earnings season will be chocked full of positive surprises. More clarity on that theory should be delivered as early as tomorrow when Dow component and drug giant Johnson & Johnson (JNJ) reports third-quarter results.

Analysts are expecting J&J to earn $1.13 a share, though it is probably a fair to expect that number to come in around $1.14 or $1.15 a share given what the company has done its previous four earnings reports. The stock is relatively cheap at less than 14 times trailing earnings and is within earshot of its 52-week high. J&J has cleared some resistance below $62 and has some room to run to $67 and perhaps beyond.

J&J Chart

And if you are looking for bellwethers, the after market action on Tuesday will be worth watching with two significant reports. I will start with the ''minor'' one of the pair before getting into the more popular one.

Truthfully, it is not fair to underestimate the earnings from a major railroad operator like CSX (CSX), which reports after the close tomorrow. Transportation stocks like CSX are usually good barometers for the overall health of the economy and that means the CSX report is worth watching. If you find yourself in the Dow Theory camp, you probably believe that the Dow Jones Transportation Average portends moves in the Industrials and as CSX is a member of the Transportation index, it does have some bellwether-like status.

CSX is expected to post earnings of 71 cents a share and the stock has nearly doubled the returns offered by the S&P 500 over the past three months, but still has some room to run to its 52-week high of $53.84.

While the CSX report will be worth watching, it is very well could be overshadowed by Intel's third-quarter report, which is also released after the close Tuesday. Intel's report is sure to drive Wednesday's trade, but before I jump that far ahead, it is worth remembering that a bullish second-quarter report from Intel was one of the primary catalysts that drove stocks higher during the previous earnings season.

Intel is a Dow component, one of the largest members of the Nasdaq 100 and the largest chipmaker in the world, so to say Intel's earnings report is ''important'' is somewhat of an understatement. The stock touched a 52-week high of $20.65 on Monday before peeling back a bit and that may indicate some investors were gobbling up shares ahead of the earnings report.

Intel is a bellwether and good earnings there might portend good earnings for a majority of blue chip firms. If nothing else, a bullish report from Intel should bolster the fortunes of the technology sector and perhaps rejuvenate Nasdaq bulls. Analysts are expecting Intel to post a profit of 27 cents a share and an upside surprise means we should see a higher open for stocks on Wednesday morning.

Supported by its 50-day moving average, a strong earnings report could bring Intel to not only a fresh 52-week high, but close to resistance in the $22.50 area as well.

Intel Chart

Looking at the charts, it was disappointing to see the Dow tease 9900 and not close there, but that may have been more the product of anemic volume than anything. With two Dow components, J&J and Intel, reporting earnings tomorrow, the index will have ample ammunition with which to traverse 9900 and establish another run toward 10000.

A worst case scenario would be that J&J disappoints and Intel follows that up with its own dour news and that could lead to open in the 9750-9775 area on Wednesday. From there, 9600 could become an issue, but positive earnings announcements might 9600 unthinkable in the near-term.

Dow Chart

With Monday's close at 1076.19, the S&P 500 is residing comfortably near the September peak of 1080.15, indicating investors may truly be expecting some cheery earnings report. Once 1080 is cleared, 1100 becomes the number everyone will focus on, if they are not doing so already. After 1100, the index should bump into resistance around 1120-1125. If earnings disappoint and 1050 is violated on the downside, a tumble to 1025 could be in the offing and from there the picture gets a lot less attractive with 975 becoming a possibility.

S&P 500 Chart

It would not be surprising to see some lethargic trade on the Nasdaq tomorrow as tech investors wait for the Intel numbers to be released. Another scenario to consider is that investors just will not be able to contain themselves and will buy up Intel shares during Tuesday's session and that could drive the Nasdaq higher.

Clearing the September peak of 2167.70 would be a good starting point and that needs to happen before resistance around 2180 can be dealt with. Earnings season should be the deciding factor in the Nasdaq's chances to conquer 2200 or fall back to 2050 or worse.

Nasdaq Chart

Earnings season is here and, believe it or not, that actually makes things pretty simple. Can companies across a healthy spectrum of sectors quench investors' thirst for top line AND profit growth? Or will the third quarter provide a sequel to the second quarter where companies could only beat meager estimates on the back of cost-cutting? The answers to those questions will play a heavy hand not only in the near-term, but for the rest of 2009 as well. I am filling in for Jim tomorrow, so I look forward to seeing again in 24 yours.


New Option Plays

S&P 500 at 2009 highs

by James Brown

Click here to email James Brown

Editor's Note:

Our bias is bullish for the market but the S&P 500 index is testing resistance near 1,080. This would be a logical spot for stocks to pull back just a bit after last week's impressive rally.

I'm not adding any new candidates tonight.


In Play Updates and Reviews

Three Plays Triggered

by James Brown

Click here to email James Brown

The market strength this morning fueled some breakouts and three of our plays were opened.


CALL Play Updates

Apple Inc. - AAPL - close: 190.81 change: +0.34 stop: 184.75

AAPL didn't move much on Monday. The stock has been trading sideways near $190 for about four days now. I would still consider new positions here but we might get a better entry point on a dip near $186-185.

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.

Picked on   October 06 at $190.01
Change since picked:       + 0.80
Earnings Date            10/19/09 (confirmed)
Average Daily Volume =       17.8 million  
Listed on   October 06, 2009         


Alcon Inc. - ACL - close: 142.42 change: +0.22 stop: 134.75

ACL rallied toward the $144 level but couldn't quite make it. Shares could be due for a dip but look for short-term support at $140 and then near $138. ACL has already hit our first target. Our second target is $148.00.

Picked on September 10 at $136.75
Change since picked:       + 5.67
                             /1st target hit @ 142.50 (+4.2%)
Earnings Date            10/27/09 (unconfirmed)
Average Daily Volume =        299 thousand 
Listed on September 10, 2009         


Amazon.com - AMZN - close: 93.60 change: -2.11 stop: 89.49

Warning! AMZN has produced a bearish reversal pattern today. I would still expect some support near $90 but at this time I'd watch for a bounce before launching new positions.

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.

Picked on   October 08 at $ 95.05
Change since picked:       - 1.45
Earnings Date            10/22/09 (unconfirmed)
Average Daily Volume =        6.2 million  
Listed on   October 07, 2009         


Allegheny Tech. - ATI - close: 35.82 change: -0.32 stop: 33.75

Hmm... over the weekend I raised our second target from $37.00 to $38.50. What does ATI do today? It rallies to $37.00 and then reverses. More conservative traders may want to exit early now. I'm not suggesting new positions at this time.

Picked on   August 31 at $ 30.25 *triggered         
Change since picked:      + 5.57 
                               /1st target hit @ 33.85 (+11.9%)
Earnings Date           10/21/09 (confirmed)
Average Daily Volume =       2.7 million  
Listed on August 27, 2009         


AvalonBay - AVB - close: 73.90 change: +0.34 stop: 68.49

AVB is still moving higher but the action today almost looks like a short-term top. Readers may want to wait for another dip near the $72-70 zone before opening new positions.

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.

Picked on   October 08 at $ 72.60
Change since picked:       + 1.30
Earnings Date            11/04/09 (unconfirmed)
Average Daily Volume =        1.8 million  
Listed on   October 07, 2009         


Caterpillar - CAT - close: 53.05 change: -0.59 stop: 48.59

The rally in CAT might be a little tired. Shares hit $54.00 this morning then faded lower.

If you are looking for a new entry point wait for another bounce near $50.00.

Our first target is $54.25. Our second target is $59.00 but that may be too optimistic as we plan to exit ahead of the October 20th earnings report. If you bought October options you need to exit before they expire after Friday, October 16th. FYI: The P&F chart is bullish with an $85 target.

Picked on   October 01 at $ 50.00
Change since picked:       + 3.05
Earnings Date            10/20/09 (confirmed)
Average Daily Volume =         10 million  
Listed on September 19, 2009         


Core Labs - CLB - close: 105.97 change: +1.05 stop: 97.95

Another gain for crude oil fueled relative strength for the energy stocks. CLB gained another 1%.

Our first target to take profit is at $109.90. Our second target is $114.50.

Entered on  October 08 at $105.25
Change since picked:       + 0.72
Earnings Date            10/21/09 (confirmed)
Average Daily Volume =        175 thousand 
Listed on September 23, 2009         


Canadian Nat. Res. - CNQ - close: 72.40 change: +2.45 stop: 64.95 *new*

Target achieved! CNQ gapped open at $71.15 and then rallied to the $72.50 level and hovered there the rest of the session. Our first target to take profits was at $71.50. The plan was to exit between 50% and 75% of our position there. I am raising our stop loss to $64.95.

CNQ looks very short-term overbought here. I'm not suggesting new positions. Our second and final target is $74.75.

Chart:

Picked on   October 05 at $ 67.01 /gap higher entry
                                /originally listed at $65.04
Change since picked:       + 5.39
                              /1st target hit @ 71.50 (+6.7%)
Earnings Date            11/05/09 (confirmed)
Average Daily Volume =        6.4 million  
Listed on   October 05, 2009         


Consol Energy - CNX - close: 49.72 change: +0.57 stop: 43.90

CNX hit new 2009 highs this morning but the rally reversed and the action today looks like a short-term top. Watch for support near $46.00 or $44.00.

CNX has already hit our first target at $48.50. Our second and final target is $54.50. We'll plan to exit ahead of the late October earnings report.

Picked on September 25 at $ 43.77 /gap down entry
Change since picked:       + 5.95
                                /1st target hit @ 48.50 (+10.8%)
Earnings Date            10/22/09 (unconfirmed)
Average Daily Volume =        3.0 million  
Listed on September 19, 2009         


Capella Education - CPLA - close: 70.04 change: -1.04 stop: 62.90

CPLA has produced an "inside day". Tomorrow's performance could be pivotal. We don't want to chase the stock here. Currently the plan is to buy calls on a dip at $65.75. More aggressive traders may want to raise their trigger.

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: 67.83 change: -0.01 stop: 63.95

DHR managed to close the day almost unchanged on the session. I'm not suggesting new positions at this time but my comments from the weekend still stand. We need to exit before October options expire this Friday.

Our first target is $69.50. The $70.00 level looks like significant resistance but we're going to set a secondary target at $72.50. 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:       + 1.46
Earnings Date            10/22/09 (confirmed)
Average Daily Volume =        2.4 million  
Listed on September 05, 2009         


Diamond Offshore - DO - close: 101.81 change: +1.70 stop: 91.95

A nice gain in crude oil fueled some strength in the oil service stocks. DO hit new 2009 highs at $103 this morning. Remember, we plan to exit before October expiration.

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

Picked on September 15 at $ 94.69 *adjusted entry point
Change since picked:       + 7.12
                               /1st target hit @ 99.90 (+5.5%)
Earnings Date            10/22/09 (unconfirmed)
Average Daily Volume =        1.8 million  
Listed on September 12, 2009         


Dril-Quip, Inc. - DRQ - close: 53.04 change: +0.44 stop: 46.95

DRQ also hit a new high for the year but pared its gains by the close. I would wait for a dip back toward the $50 or $48 levels before considering new positions.

DRQ has already hit our first target at $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:       + 4.54
                              /1st target hit @ 53.00 (+9.2%)
Earnings Date            11/10/09 (unconfirmed)
Average Daily Volume =        282 thousand 
Listed on September 26, 2009         


EOG Resources - EOG - close: 90.58 change: +0.98 stop: 82.49

EOG is still inching higher even though shares are already short-term overbought. I'm not suggesting new positions at these levels.

EOG has exceeded our first target at $89.90. Our second target is $94.75. We actually have a third target a $99.50.

Picked on   October 07 at $ 85.24 /gap higher entry
                               /originally listed at $84.71
Change since picked:       + 5.34
                              /1st target hit @ 89.90 (+5.4%)
Earnings Date            11/03/09 (unconfirmed)
Average Daily Volume =        2.9 million  
Listed on   October 07, 2009         


Express Scripts - ESRX - close: 80.92 change: +1.48 stop: 74.90

ESRX has produced a bullish breakout over resistance at $80.00. This is a new all-time high for the stock. 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:       + 3.50
Earnings Date            10/28/09 (confirmed)
Average Daily Volume =        2.1 million  
Listed on   October 06, 2009         


Flowserve - FLS - close: 102.74 change: +1.97 stop: 95.90

FLS has hit our trigger to buy calls at $102.60. Shares have broken out and closed at new 2009 highs. Our first target is $109.75.

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

Chart:

Picked on   October 12 at $102.60
Change since picked:       + 0.14
Earnings Date            10/28/09 (unconfirmed)
Average Daily Volume =        1.2 million  
Listed on September 19, 2009         


General Dynamic - GD - close: 65.61 change: -0.55 stop: 61.75

We are still waiting for a pull back. The plan is to buy calls at $64.25. If triggered our first target is $69.90. We will plan to exit ahead of the late October earnings report.

Picked on September xx at $ xx.xx <-- TRIGGER @ 64.25
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: 103.56 change: +0.72 stop: 97.40

A drop in the dollar powered another gain for gold. The GLD gained 0.7%.

If we can get a dip near $100.00 I'd jump on it as a new entry point to buy calls. Our plan calls for small positions to limit risk.

I'm hearing more analysts call for a rally to $1,300 in gold. This lines up with what I said last week. The weekly chart has an inverse head-and-shoulders pattern that is forecasting a huge upward target around $130ish (for the GLD, or $1,300 for gold) but that could take several months to be achieved. Our shorter-term (several weeks) target is a rally to $109.90. We are still contemplating a second target.

Picked on   October 06 at $102.28
Change since picked:       + 1.28
Earnings Date            00/00/00
Average Daily Volume =       14.2 million  
Listed on   October 06, 2009         


Illumina Inc. - ILMN - close: 41.96 change: -1.13 stop: 37.75

The correction in ILMN continues. Our plan is to buy calls on a dip at $40.10. More conservative traders may want to wait for a bounce first. Our biggest challenge right now is timing. We have just over a week before ILMN reports earnings and we don't want to hold over the announcement.

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: 54.05 change: +0.33 stop: 49.49

The IYF is nearing potential resistance at its 2009 highs. It's probably time for a dip after last week's huge bounce. Yet direction will be set by this week's earnings in the financial sector.

JPM reports on Wednesday, GS on Thursday, and BAC on Friday. Results or management comments from any of these companies could have a major impact on the financials.

Our first target is $57.00. Our second target is $60.00.

Picked on September 15 at $ 52.60 *triggered  
Change since picked:       + 1.45
Earnings Date            00/00/00
Average Daily Volume =        5.1 million  
Listed on September 01, 2009         


PPG Inds. Inc. - PPG - close: 60.11 change: +0.36 stop: 55.95

PPG continues to rally but shares are now testing resistance at the September and 2009 highs. I am suggesting that more conservative traders exit here. This is a logical spot to expect a pull back and we only have two days left.

The company announces on October 15th before the opening bell. We will plan to close this play on Oct. 14th at the close. If PPG reverses again under $60.50 we'll want to exit early.

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:      + 4.46
                             /1st target exceeded @ 60.05 (7.9%)
Earnings Date           10/15/09 (confirmed)
Average Daily Volume =       1.6 million  
Listed on August 27, 2009         


Mobile Telesys - MBT - close: 51.26 change: +2.19 stop: 46.80

Our new play in MBT is now open. The stock broke out over key resistance at $50.00 and hit our trigger at $50.15. Our first target is $54.50. Our second target is $59.00. We do not want to hold positions over the early November earnings report.

Chart:

Picked on   October 12 at $ 50.15
Change since picked:       + 1.11
Earnings Date            11/05/09 (unconfirmed)
Average Daily Volume =        1.5 million  
Listed on   October 10, 2009         


Precision Cast Parts - PCP - cls: 101.90 change: -1.42 stop: 99.90

PCP also hit our trigger to buy calls but the action wasn't so bullish. Shares rallied to $104.14 and reversed. We were triggered at $104.05. I would be tempted to buy calls on a bounce near $100 but for now I'm suggesting readers wait for a new high of $104.20 before launching positions. Our target is $109.90. More aggressive traders may want to aim higher but PCP has earnings on October 20th and we don't want to hold over the report.

Chart:

Picked on   October xx at $ xx.xx <-- TRIGGER @ 104.05
Change since picked:       + 0.00
Earnings Date            10/20/09 (confirmed)
Average Daily Volume =        1.0 million  
Listed on   October 10, 2009         


Waters Corp. - WAT - close: 57.62 change: -0.13 stop: 53.25

It looks like WAT is struggling with the $58.00 level. Don't be surprised if shares pull back and retest $56.00 as support. The plan is to use small position sizes (1/2 to 1/4 our normal size) to minimize risk.

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:       + 2.19
Earnings Date            10/20/09 (unconfirmed)
Average Daily Volume =        809 thousand 
Listed on September 12, 2009         


Whirlpool Corp. - WHR - close: 71.38 change: +0.88 stop: 65.90

If you were waiting for a move over $71.00 we just got it! My only complaint today would be the very low volume. Our first target to take profits is at $73.90. Our second target is $78.50. We will plan to exit ahead of the October 23rd earnings report.

Picked on   October 10 at $ 70.50
Change since picked:       + 0.88
Earnings Date            10/23/09 (confirmed)
Average Daily Volume =        1.5 million  
Listed on   October 10, 2009         


PUT Play Updates

BIOGEN IDEC - BIIB - close: 48.69 change: -0.32 stop: 52.15

BIIB is still under performing. While I'm bearish on the stock this is a tough environment for bearish plays.

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:       - 0.20
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: 29.64 change: +0.12 stop: n/a

Time has almost run out for the CI strangle and odds are very much against us with only four days left before October options expire. I'm starting to wonder if CI is going to be pinned to the $30.00 level for option expiration.

We have adjusted our exit target to $0.75 in hopes of recovering some of our capital on a spike up or down.

The options I suggested were the October $35 calls (CI-JG) and the October $25 puts (CI-VE). Our estimated cost was $1.20.

Picked on September 08 at $ 29.40
Change since picked:       + 0.24
Earnings Date            11/05/09 (unconfirmed)
Average Daily Volume =        3.8 million  
Listed on September 08, 2009