Option Investor
Newsletter

Daily Newsletter, Tuesday, 10/13/2009

Table of Contents

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

Market Wrap

Financials, Healthcare Lead Market Lower

by Todd Shriber

Click here to email Todd Shriber
Stocks pulled back on Tuesday from the one-year highs set just a day earlier as financials and healthcare issues dragged the market down. The S&P 500 retreated 0.3% to close at 1073.19, ending its winning streak at six consecutive days. The Dow Jones Industrial Average shed 14.7 points to finish the day at 9871.06. In a reversal of Monday's trade, the Nasdaq was the lone gainer among the three major U.S. indexes, adding 0.1% to 2139.89 as investors cheered news of another multi-billion dollar acquisition from Cisco Systems (CSCO).

Stats Table

The Dow and S&P 500 rose on Monday as speculation swirled that third-quarter earnings reports would be at least as positive as the market seemed to be pricing in and that speculation seemed to be well-founded after the bullish numbers from aluminum giant and Dow component Alcoa (AA) and a rosy update from Black & Decker (BDK) yesterday.

Then came the third-quarter earnings report from Dow member Johnson & Johnson (JNJ). The world's largest health products maker reported profits of $1.20 a share, a fair bit above the average analyst estimate of $1.13 a share, but 5 cents of that is attributable to a lower tax rate and the rest to cost-cutting. The company raised its 2009 earnings guidance to $4.54 to $4.59 a share from a range of $4.45 to $4.55, but none of that good news was enough to lift J&J shares on the day.

Proving that investors are going to demand a lot more out of third-quarter earnings than they demanded in the second quarter, J&J shares slumped on the day because the company's revenue tumbled by 5% from the year-earlier period. In other words, cost-cutting, lower tax rates, favorable foreign currency exchange rates and other such catalysts will not be enough to prop up stocks this time around. It is all about the top line in the third quarter and companies that disappoint on that front will not be greeted warmly by the Street.

One can pick and choose why healthcare issues were down today. Either blame Johnson & Johnson or blame the Senate Finance Committee for finally passing a healthcare reform package. That news broke late in the trading day, but it was still enough to weigh on health insurers like Aetna (AET) and Unitedhealth Group (UNH), both of which finished down on the day.

The White House is still a long way from getting a bill that can be signed into law as there is something along the lines of five different bills that need to be melded into one comprehensive package, but the reality is, and President Obama noted as much, that we are closer to healthcare reform than at any point in the past. That is not good news for healthcare-related stocks as the sector has been held hostage by the healthcare reform legislation over the past several months.

As the healthcare legislation advances, it might pay to keep an eye on the Pharmaceutical HOLDRs ETF (PPH), which holds the likes of J&J, Abbott Laboratories (ABT) and Pfizer (PFE). The ETF was down day, but again it is hard to discern if that was because of J&J's earnings report, the news out of Capitol Hill or both.

PPH Chart

As I mentioned earlier, financials also weighed on stocks today and that may not a good sign on the eve of J.P. Morgan Chase's (JPM) earnings report. Oh yeah, Citigroup (C) and Goldman Sachs (GS) report on Thursday and Bank of America (BAC) chimes in on Friday. And with an avalanche of bank earnings slated for next week, investors might get nervous about the financials if bad news comes out in advance of their earnings updates.

Speaking of Goldman, as it was the primary driver behind the down day in its home sector, the stock was, wait for it, DOWNGRADED to ''neutral'' from ''buy'' by highly-regarded banking analyst Meredith Whitney. For those of you that actively follow the financials, and who does not, a downgrade for Goldman might represent something along the lines of heresy and Whitney's downgrade might be troublesome as she gained plenty of acclaim for being well ahead of the curve by making some bearish calls on financials before many of her colleagues.

A downgrade for Goldman is a rare event to be sure. I ran a quick scan for the last time this happened and according to Yahoo Finance, JP Morgan lowered its rating on Goldman in April. Since then, the last six analyst actions prior to Whitney's call have been five upgrades and an initiation of coverage. It should be noted that in addition to Goldman trading fairly close to its 52-week high, Whitney's third-quarter earnings estimate of $4.46 a share for Goldman is still well above the consensus estimate of $3.70 a share.

Goldman is a best of breed stock and the chart below illustrates its rapid run higher, so a little breather would not be such a bad thing for the shares. Then again, if Thursday's earnings report blows estimates away, the breather may have occurred today and Goldman is likely to resume a run to $200 a share.

Goldman Sachs Chart

With an eye towards technology (and this is going to serve as a segue for what you really want to hear about) Cisco was back to its acquisitive ways, snatching up Starent Networks (STAR), which makes equipment used to speed the transmission of data to Blackberries and iPhones. Cisco is paying $2.9 billion for Starent and today's purchase will likely bolster hopes for renewed mergers and acquisitions activity both inside and outside of Silicon Valley.

And speaking of technology, a little company by the name of Intel (INTC) reported third-quarter results after the close today and the rosy report is sure to lead the Dow and Nasdaq to higher opens on Wednesday morning. The world's largest maker of microprocessors said that both profit and sales slid 8% in the third quarter, but the numbers came in ahead of analyst estimates.

Intel earned $1.9 billion, or 33 cents on sales of $9.4 billion. Analysts had been calling for a profit of 28 cents a share on sales of $9.4 billion. While the profit beat is nice, the better-than-expected revenue figure is the real story. As I have been saying (and others have been saying as well), the companies that report top-line growth are going to be rewarded.

I am not in the business of making predictions as to exactly where a stock is going to open at tomorrow, or any other day for that matter, but Intel touched a new 52-week high of $20.60 today before closing at $20.49. After the earnings report, the shares were up nearly 5% in after hours trading to $21.45, a level not seen since September 2008. So it is fair to say that Intel could make a real run to $22 and beyond as early as tomorrow.

The real story here is Intel's gross profit margin, which was 57.6% of sales. The previous forecast was 51%-55% of revenue. Gross margin is a vital metric for a manufacturing-intensive company like Intel because it tells investors how well Intel is controlling costs. Apparently quite well, thank-you very much. Intel also guided higher on fourth-quarter sales, saying the figure would come in around $10.1 billion, give or take $400 million. Using the ''take'' scenario, Intel would still have fourth-quarter revenue of $9.7 billion and that is better than the consensus estimate of $9.5 billion.

Looking back to the second quarter, it was Intel's bullish earnings report that helped fan the flames of the market rally and that very well may be the case this time around as Intel is the first major technology company to report and the stock is indeed a bellwether. Intel's off to a good start, but its 2009 fortunes will likely be decided by the holiday shopping season and sales of the new edition of Windows, which start on October 22nd. Intel cautioned that consumer demand for personal computers has been robust, but that corporate spending has been tepid and that a pick-up in the latter category is not expected until 2010.

Intel Chart

As I mentioned on Monday, another earnings report that will be closely watched going into Wednesday is that of CSX (CSX), the third-largest U.S. railroad operator. CSX said third-quarter earnings tumbled by 23%, but that shipping demand was not as weak in the third quarter as it was in the second quarter and the worst of the recession is probably over.

CSX earned 74 cents on revenue of $2.29 billion. Analysts expected a profit of 71 cents a share on $2.32 billion in revenue. Since CSX gets a fair bit of its revenue from moving automobiles from the factory to the dealers, ''Cash for Clunkers'' probably provided a boon to the profit and revenue figures that will not be seen in the fourth quarter and that makes it hard to predict what lies ahead for the stock.

With an eye toward tomorrow, there are two significant earnings reports before the bell that could join Intel in shaping Wednesday's trade. Pharmaceuticals giant Abbott Laboratories (ABT) is expected to earn of 90 cents a share on sales of $7.76 billion. It will be interesting to see if Abbott can do what J&J could not and that is beat on the top-line.

Not to knock Abbott, but J.P. Morgan Chase will probably the more important of the before-the-bell reports on Wednesday. The second-largest U.S. bank is also a Dow component and despite the fact that the company is obviously in a completely different industry than Intel, J.P. Morgan joined the chipmaker in reporting better-than-expected second-quarter results and those bullish results lifted the market higher.

An encore performance from J.P. Morgan Chase tomorrow combined with the bullish report from Intel could set the Dow ablaze (in a good way) for Wednesday's trade. Analysts are expecting the bank to earn 49 cents a share on revenue of $24.8 billion and as the first major bank to report results, this report promises to be closely scrutinized.

With the stock currently trading near its 52-week high, tomorrow's earnings report could send J.P. Morgan's share closer to resistance at $47, a price not seen in over a year. Support can probably be found at the 50-day moving average of $43.23.

JP Morgan Chart

Looking at the charts, not a lot has changed since I visited with you on Monday. The Dow gave back some of Monday's gains, but the reality is the index is little changed through the first two trading days of this week. That promises to change tomorrow as Intel and J.P. Morgan Chase will give traders plenty of opportunity to drive the Dow higher.

We already know the good news from Intel. If J.P. Morgan joins the party, the Dow should easily traverse 9900, if not 9925 tomorrow. Who knows? Maybe the index will move even higher. Either way, if Dow 10000 is truly in the cards, Wednesday's trade will go a long way toward legitimizing that possibility.

Dow Chart

It is kind of the same song regarding the S&P 500. Today's scant losses have the index resting at just about even through the first two days of the week, but that is sure to change tomorrow. I do not want to overemphasize one trading day over another, but tomorrow would be an ideal day for the S&P 500 to shed its lethargic ways and get back above 1080.

Frankly, asking for 1080, assuming that Abbott and J.P. Morgan join Intel with positive reports, is not asking for a lot. A move above 1085 would certainly be preferred and helpful in getting the index to the all-important 1100 level. The catalysts could be there and that means investors will not be in the mood for excuses.

S&P 500 Chart

The Nasdaq was the lone gainer on Tuesday, but again, this is an Intel story as far as Wednesday's trade is concerned. Frankly, it will be nice to see a stock not named Apple (AAPL)or Google (GOOG) chip in on the Nasdaq and Intel should do just that tomorrow. It is doubtful that Intel alone could lift the Nasdaq to 2200 tomorrow, but move into the 2150 area would be a nice starting point. Save for some surprise catalysts, Intel will be the Nasdaq's big driver on Wednesday and that should have the index pointing up.

Nasdaq Chart

There has been plenty of chatter over the past few weeks that stocks have become overvalued and that the market rally is losing steam, but even with the P/E ratio for the S&P 500 resting at 20.4, its highest level since 2004, Goldman Sachs is saying plenty of stocks still look cheap. If the market sees more Intel-esque earnings reports, that may pare the number of ''cheap'' stocks, but it is not likely to derail the rally.


New Option Plays

Education Services

by James Brown

Click here to email James Brown


NEW DIRECTIONAL CALL PLAYS

Apollo Group - APOL - close: 73.47 change: -0.03 stop: 72.70

Why We Like It:
APOL is an education stock with a bullish pattern of higher lows. Shares are building up steam for a breakout over resistance at $75.00. I'm suggesting a trigger to buy calls at $75.25. If triggered our first target is $79.90. This should be a short-term play as we plan to exit ahead of the October 27th earnings report. FYI: The Point & Figure chart is bullish with a $95 target.

Suggested Options:
I am suggesting the November calls but we'll exit ahead of the late October earnings. My preference is the November $80 strike.

BUY CALL NOV 80.00 OAQ-KP open interest=3334 current ask $1.90

Annotated Chart:

Picked on   October xx at $ xx.xx <--  TRIGGER @ 75.25
Change since picked:       + 0.00
Earnings Date            10/27/09 (unconfirmed)
Average Daily Volume =        2.6 million  
Listed on   October 13, 2009         



In Play Updates and Reviews

A Handful of Stops

by James Brown

Click here to email James Brown

We're updating a few stop losses on the play list and dropping one candidate.


CALL Play Updates

Apple Inc. - AAPL - close: 190.02 change: -0.79 stop: 184.75

AAPL continues to trade sideways in spite of another bullish analyst upgrade and raised price target this morning. I suspect the better than expected Intel earnings news will finally spark some movement in AAPL. Keep in mind that we plan to exit ahead of the October 19th, after the market, earnings release from AAPL. We only have four trading days left.

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:       + 0.01
Earnings Date            10/19/09 (confirmed)
Average Daily Volume =       17.8 million  
Listed on   October 06, 2009         


Alcon Inc. - ACL - close: 143.75 change: +1.33 stop: 134.75

ACL displayed some relative strength with a 0.9% gain but shares are nearing resistance in the $144-145 zone. I'm not suggesting new positions at this time. ACL has already hit our first target. Our second target is $148.00.

Picked on September 10 at $136.75
Change since picked:       + 7.00
                             /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: 94.83 change: +1.23 stop: 89.49

Lack of follow through on yesterday's bearish reversal pattern is a good sign but doesn't mean we're out of danger here. Fortunately, I would expect the INTC news tonight to help power a rally in technology stocks. A new move over $95 could be used as a entry point in AMZN.

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:       - 0.22
Earnings Date            10/22/09 (unconfirmed)
Average Daily Volume =        6.2 million  
Listed on   October 07, 2009         


Allegheny Tech. - ATI - close: 36.07 change: +0.25 stop: 33.75

We're planning to exit before October options expire. That gives us three days left. More conservative traders may want to exit early now. I'm not suggesting new positions at this time. Our second target is $38.50.

Picked on   August 31 at $ 30.25 *triggered         
Change since picked:      + 5.82 
                               /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: 72.71 change: -1.19 stop: 68.49

AVB looks like it's rolling over a little. I would expect a dip toward the $70.00 region, which can be used as a new entry point.

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:       + 0.11
Earnings Date            11/04/09 (unconfirmed)
Average Daily Volume =        1.8 million  
Listed on   October 07, 2009         


Caterpillar - CAT - close: 52.74 change: -0.31 stop: 48.59

As expected CAT is contracting a bit. 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:       + 2.74
Earnings Date            10/20/09 (confirmed)
Average Daily Volume =         10 million  
Listed on September 19, 2009         


Core Labs - CLB - close: 105.31 change: -0.66 stop: 97.95

CLB is still consolidating sideways. I would still consider new positions in the $104-106 zone.

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:       + 0.06
Earnings Date            10/21/09 (confirmed)
Average Daily Volume =        175 thousand 
Listed on September 23, 2009         


Canadian Nat. Res. - CNQ - close: 72.46 change: +0.06 stop: 64.95

CNQ tagged another new 52-week high this afternoon. Nothing has changed from my prior comments. CNQ looks very short-term overbought here. I'm not suggesting new positions. Our second and final target is $74.75.

Picked on   October 05 at $ 67.01 /gap higher entry
                                /originally listed at $65.04
Change since picked:       + 5.45
                              /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: 50.05 change: +0.33 stop: 43.90

Traders bought the dip near $48.25 this morning. The rebound today may have canceled out yesterday's bearish reversal performance.

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:       + 6.28
                                /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: 70.08 change: +0.04 stop: 62.90

CPLA is still clinging to the $70.00 level. 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 $94 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: 68.13 change: +0.30 stop: 64.35 *new*

Time is running out for us. The plan is to exit before October option expiration. Right now the goal is to exit at $69.50. More aggressive traders can aim for the $72.50 level. Please note that we're raising the stop loss to $64.35. 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:       + 1.76
Earnings Date            10/22/09 (confirmed)
Average Daily Volume =        2.4 million  
Listed on September 05, 2009         


Diamond Offshore - DO - close: 100.96 change: -0.85 stop: 95.95 *new*

DO encountered some profit taking but traders bought the dip near $99 this morning. We've got three days left. We plan to exit completely before October expiration. Please note that I'm raising the stop loss to $95.95.

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:       + 6.27
                               /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: 52.64 change: -0.40 stop: 47.75 *new*

If you look at the intraday chart I suspect that DRQ is forecasting a move toward $50 soon. We can use a dip or bounce near $50 as a new entry point. I'm raising our stop loss to $47.75.

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:       + 4.14
                              /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: 89.63 change: -0.95 stop: 82.49

EOG also acts like it's about to dip lower. I would look for a pull back toward $85.00, which as broken resistance should be new support. A bounce near $85 could be used as a new entry point.

EOG has exceeded our first target at $89.90. Our second target is $94.75. We actually have a third target a $99.50 but that might be too optimistic given our time frame. We do not want to hold over the early November earnings report.

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: 81.04 change: +0.12 stop: 74.90

ESRX managed to hold its gains above $80 in spite of a little market weakness. Shares actually tested $80 this morning and bounced, which is a good sign. 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:       + 3.62
Earnings Date            10/28/09 (confirmed)
Average Daily Volume =        2.1 million  
Listed on   October 06, 2009         


Flowserve - FLS - close: 101.09 change: -1.65 stop: 95.90

This move looks like an entry point. FLS dipped toward $100 and bounced. Shares actually hit $99.71. More conservative traders may want to adjust their stops based on today's low. I'd jump in with new positions here. Our first target is $109.75.

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

Picked on   October 12 at $102.60
Change since picked:       - 1.51
Earnings Date            10/28/09 (unconfirmed)
Average Daily Volume =        1.2 million  
Listed on September 19, 2009         


Gold ETF - GLD - close: 104.26 change: +0.70 stop: 97.40

Weakness in the dollar fueled another new high for gold futures and the GLD gained 0.6%. The move is looking a little overbought here but it can always get more overbought. I'd prefer to open new positions on a dip or a bounce near $100. Be sure to give yourself enough time for the move to play out. 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:       + 1.98
Earnings Date            00/00/00
Average Daily Volume =       14.2 million  
Listed on   October 06, 2009         


Illumina Inc. - ILMN - close: 42.02 change: +0.06 stop: 37.75

ILMN is still consolidating and the stock looks ready to drop toward $40. 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 can't find a confirmed earnings date yet for ILMN. Right now it looks like the company could announce around the October 20th-21st time frame. That doesn't give us a lot of time for ILMN to hit our trigger and bounce. I'm suggesting readers only use small positions (1/2 to 1/4 your normal size) to limit risk.

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: 53.56 change: -0.48 stop: 49.49

Financials struggled a bit today after influential analyst Meredith Whitney downgraded Goldman Sachs (GS) from a "buy" to a "neutral". Direction for this sector is going to depend on earnings results. JPM reports tomorrow morning. Analysts are expecting JPM to deliver a profit of 49 cents a share. Their results could re-ignite or derail the bank rally. If we get past JPM then GS is the next land mine to get past on Thursday. We had October options to Friday is our last day to exit.

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

Picked on September 15 at $ 52.60 *triggered  
Change since picked:       + 0.96
Earnings Date            00/00/00
Average Daily Volume =        5.1 million  
Listed on September 01, 2009         


PPG Inds. Inc. - PPG - close: 60.64 change: +0.53 stop: 57.90 *new*

PPG closed at new highs for the year. While that's good news the stock looks short-term overbought and we're running out of time. I'm suggesting readers consider an exit immediately. The newsletter plans to exit tomorrow (October 14th) at the closing bell to avoid holding over earnings on October 15th. Given our time frame I'm raising our stop loss to $57.90.

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:      + 4.99
                             /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: 51.31 change: +0.05 stop: 46.80

If you missed the entry point yesterday MBT gave you another shot today. Shares dipped to $49.10 and quickly bounced back above resistance at $50.00. More conservative traders may want to consider inching up their stops a bit. 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.

Picked on   October 12 at $ 50.15
Change since picked:       + 1.16
Earnings Date            11/05/09 (unconfirmed)
Average Daily Volume =        1.5 million  
Listed on   October 10, 2009         


Precision Cast Parts - PCP - cls: 100.89 change: -1.01 stop: 99.90

Our PCP play is not off to a great start. Shares tagged our breakout trigger yesterday. Now it's dipping toward $100. Fortunately shares found support near $100.50 most of the session and look ready to bounce again. Aggressive traders could buy calls on a bounce from here. I'd prefer to see a move over $104.20 first. Our target is $109.90. PCP has earnings on October 20th and we don't want to hold over the report.

Picked on   October 12 at $104.05
Change since picked:       - 3.16
Earnings Date            10/20/09 (confirmed)
Average Daily Volume =        1.0 million  
Listed on   October 10, 2009         


Waters Corp. - WAT - close: 57.37 change: -0.25 stop: 53.25

WAT still acts like it wants to dip to the $56.50-56.00 zone. More conservative traders may want to raise their stops closer to $55.00. 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:       + 1.94
Earnings Date            10/26/09 (unconfirmed)
Average Daily Volume =        809 thousand 
Listed on September 12, 2009         


Whirlpool Corp. - WHR - close: 71.83 change: +0.45 stop: 65.90

WHR displayed a little relative strength with a 0.6% gain. The stock looks like it's coiling for a move over $72 soon. 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:       + 1.33
Earnings Date            10/23/09 (confirmed)
Average Daily Volume =        1.5 million  
Listed on   October 10, 2009         


PUT Play Updates

BIOGEN IDEC - BIIB - close: 48.80 change: +0.11 stop: 52.15

The action in BIIB continues to look bearish. The stock appears to be coiling for a breakdown under the $48.25 region soon. 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:       - 0.09
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: 28.71 change: -0.93 stop: n/a

Healthcare stocks started the morning off weak and then plunged again on news that republican senator Olympia Snowe would vote for the Baucus-version of the senate's healthcare reform bill. Shares of CI ended the day down 3.1%. We're still running out of time and CI needs to see a big move in the next couple of days or our strangle will expire worthless.

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:       - 0.69
Earnings Date            11/05/09 (unconfirmed)
Average Daily Volume =        3.8 million  
Listed on September 08, 2009         


CLOSED BULLISH PLAYS

General Dynamic - GD - close: 65.59 change: -0.02 stop: 61.75

I'm running out of patience for GD. I'd still keep it on your watch list for a correction. The $60-61 zone should offer some support. I'm a little concerned that GD Might be forming a bear-wedge like pattern. I'm dropping GD as a candidate with the play unopened.

Chart:

Picked on September xx at $ xx.xx <-- TRIGGER 
Change since picked:       + 0.00        *never opened*
Earnings Date            10/28/09 (unconfirmed)
Average Daily Volume =        2.3 million  
Listed on September 09, 2009