Option Investor
Newsletter

Daily Newsletter, Wednesday, 10/14/2009

Table of Contents

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

Market Wrap

Earnings Look Genuine, Dow Breaks 10,000

by Judy Alster

Click here to email Judy Alster
You could just hear the cheering at Wednesday's closing bell on the floor of the New York Stock Exchange. Better-than-expected results from bellwether companies Intel Corp. (INTC) and JPMorgan Chase (JPM) helped send the Dow above 10,000 for the first time since its close of 10,325 on Oct. 3 of last year. These were results based on bona fide revenue increases, not cost-cutting. If top-line sales are in fact increasing across the board, it could go a long way toward getting everyone who has been fed up with the market for the last year and a half, mainly individual investors, back into the pool.

MARKET INDEX WRAPUP, Wednesday, Oct. 14:

(At the risk of dumping the ashtray into the punchbowl, I must report that this week brings results from only a half-dozen heavily-weighted Dow components, and that we have a loooong row to hoe before we hit the Oct. 9, 2007 high of 14,164. And that only 29 companies in the S&P500 Index report this week; next week we look for some 160 S&P announcements. And that once again, MACDs all over the place are not confirming new highs (Hey, I paint what I see). But there's enough to stay chipper about, especially if you rustled up a few dollars and went long in the last few months.

DOW JONES INDUSTRIAL AVERAGE:

Don't feel betrayed if there's a backup soon; at least one sign warns us. Note the possible reversal off the top Bollinger band. Corrections after a runup should not surprise:

DOW OUTSIDE BOLLINGER: BACKUP SIGNAL?

At 2,172, the Nasdaq also had its highest close in more than 12 months, helped by Intel:

NASDAQ:

Not to be outdone, the S&P500 capped its high of Oct. 6 of last year:

S&P500:

JPMorgan Chase was the first major bank to report third-quarter earnings and easily topped Wall Street's expectations with a profit of $3.59 billion or 82 cents a share. The bank reported rising loan losses which it warned would continue for some time, but those losses were more than offset by JP Morgan's successful investment banking operations. The first of the big banks to announce earnings for the July-September period, JP Morgan thumbed its nose at analyst forecasts of 52 cents while almost doubling the amount of money it set aside for failed home and credit card loans.

Investment bank net income came to $1.92 billion, up $1 billion from a year earlier as fixed income trading especially thrived. It was helped by investors still edgy about their long-term financial situations who are continuing to seek the comparative safety of bonds. Overall revenue came to $28.78 billion, better than the predicted $24.96 billion. The stock gapped up and stayed up, gaining 3.29%.

JPMORGAN CHASE: WILL OTHER FINANCIALS FOLLOW IT UP?

JPMorgan has been considered one of the strongest financial companies during the past year's turmoil. It has performed better than other large competitors in part because of its relatively light exposure to troubled subprime mortgages and commercial real estate. It was also, in June, among the first banks to repay government bailout money, in this case $25 billion.

The bank said the percentage of credit card loans it wrote off as not being repayable in the third quarter reached 10.3% of its total portfolio; it's expected to reach 10.5% in the first half of 2010 and could go higher depending on the unemployment rate. Loan losses were also pushed higher by weakness in the portfolios JPMorgan acquired when it purchased failed Washington Mutual last year.

However, in a glimmer of good lending news, the company said that for the second straight quarter there were signs of stabilization in delinquencies in recently-past-due consumer loans. If that continues — no guarantee, said the bank — JP Morgan's credit costs will decline and it might be able to raise its 5-cent-per-share-quarterly dividend to as much as 25 cents. Which would be some increase.

Most financial companies don't have huge stock and bond trading operations to help overcome loan losses, so let's maybe save some confetti until a few other big banks report. Citigroup (C) and Bank of America (BAC) are scheduled to report this week.

Boding well for the tech sector, Intel announced results late Tuesday and watched its stock rise Wednesday. The company announced of promising third-quarter results which could point to strong demand for personal computers and maybe better, to an improving corporate market in technology.

The world's biggest semiconductor company reported profit of $1.9 billion in the quarter or 33 cents a share, down a bit from Q308's $2 billion or 35 cents; revenue was $9.4 billion, down from $10.2 billion. Analysts were looking for 28 cents on $9 billion. For the current quarter, Intel expects revenue of $10.1 billion, beating Wall Street's expectation of $9.5 billion and kindling hopes that the tech market is truly waking up. Intel gapped up and gained over 1.5%, but closed below its open.

INTEL CORP.:

Apparently, manufacturers made pretty big bets on the next quarter. Chip companies are generally seen as good indicators of where the broader tech market is going, since chip companies must build their products ahead of any upswing in demand for end-customer goods. In fact, Intel's third quarter revenue represented an 18% jump from the previous quarter and the largest sequential third quarter revenue growth in over 30 years. One analyst called it "a sign of life in end-use demand."

Emerging markets could be partial drivers, at least, of the tech revival. Over and over again we see that when consumers get a little discretionary income, their first purchases tend to be electronic gadgets such as TVs, cell phones and PCs. Thus the tech sector, as usual, stands to be an early beneficiary of an economic upturn. Nor for the most part are tech companies burdened by nasty credit issues. Following Intel's lead, the Semiconductor Index had a similarly upbeat day:

SEMICONDUCTOR INDEX:

In the big news of the day, the report of the September 22-23 Federal Open Market Committee meeting showed the Fed boosting its outlook for the economy. Still, monetary policy is likely to remain easy for some time, due to under-utilization of resources and the expectation of low inflation. Not all members seem to be in agreement on when to tighten things up, which should prove interesting in coming months.

The projection was raised for real GDP growth through the second half of 2009 and through 2010. A bigger upturn is now expected than at the previous meeting, due to firming sales and starts of single-family homes, a slowing rate of decline in capital spending, and a mild recovery in consumer spending. The Fed, as always, was capable of simply not factoring oil prices into inflation, despite the sharp recent increase.

WEST TEXAS INTERMEDIATE CRUDE:

The report largely dovetailed with most economists' view that the recession is over but the recovery is far from strong. In all, the report didn't much affect the market.

Contradicting some of that news was this week's Mortgage Bankers' Association MBA's purchase index, which thudded 5% last week while the refinance index edged down 0.1%. Mortgage rates moved up from near-record lows with 30-year loans up 13 basis points to an average 5.02%, which is largely why refinancings made up 67.4% of all applications: homeowners were hurrying to lock in low rates.

The decline in retail sales for September was smaller than expected, which helped market gains. The Commerce Department said overall retail sales declined 1.5% percent last month after a 2.2% spike in August; the decline was due to car sales falling 10.4% after the end of the government's Cash for Clunkers program, and now we don't have to hear "Cash for Clunkers" again.

It was the biggest monthly decline this year but not nearly as depressing as the 2.1% drop analysts had expected. Without the bad auto news, retail sales actually rose 0.5%, beating forecasts, but still lagging last year's showing.

RETAIL SALES:

There have now been two months of unexpectedly rising core sales. Gains were seen, interestingly, in the furniture & home furnishings category, up 1.4%; general merchandise, up 0.9%; and health & personal care, up 0.8%. There were also gains in the categories of food & beverage stores, clothing & accessories, sporting goods & hobbies, and food services & drinking places (do drinking places ever have a bad month?). Declines came in building material & garden shops, miscellaneous stores and nonstore retailers.

Furniture-maker Stanley (STLY) reported a wider loss but, yes, still beat expectations and added almost 6% today after a week of gains. Analysts were expecting increases at general merchandise stores following reports last week from the nationwide retailers of growing same-store sales. It marked the first year-over-year rise in sales after a year of declines. Sales at department stores edged up 0.4% in August and in fact department store chains Kohl's (KSS), Nordstrom (JWN), Macy's (M, below) and Dillard's (DDS), to name just a few, have all been soaring. Still, as long as unemployment is touching 10%, we probably shouldn't expect too much slack to be taken up by the still-employed.

MACY'S:

Also on Wednesday, in what appeared to be a surfeit of good news, the Commerce Department said businesses slashed their inventories 1.5% in August, the 13th straight decline and more than the 0.9% drop analysts had expected. This cannot go on forever. Eventually, businesses must begin rebuilding depleted store shelves and back rooms. When that happens, factory production will begin to rise, employment will pick up, consumers will start consuming, and we'll see a reasonable recovery.

But it won't be a robust recovery unless our exports pick up. On the subject of exports, a colleague recently asked me (snidely, if you must know) whether I happened to know who Cato the Elder was. Being a nerd since before it was fashionable, naturally I knew: He was a Roman senator who ended every speech in the Senate for 20 years with the phrase, "Carthage must be destroyed." Time passed, and eventually Rome went and destroyed Carthage. It is my great hope that if I keep slipping "exports" into my writing, people will see the importance of manufacturing things and selling them to other countries, and eventually, even if it takes 20 years, you and I will have a recovery and a balance of trade we can be proud of.

CATO THE ELDER — my kind of guy:

Not surprisingly, a Bureau of Labor Statistics report suggests that import prices are showing the effect of the weak greenback, since inflation pressures look like they're increasing -- barely, but still increasing. Import prices excluding petroleum were up 0.4% in September after a 0.3% rise in August, and import prices for industrial supplies excluding petroleum were up 1.5% after August's 1.1% rise. Hmm. Pressures may now be starting, slowly, to find their way into finished goods. It's not the end of the world, but the report does indicate rising pressures for intermediate goods.

ALL IMPORTS EXCLUDING PETROLEUM:

Pharmaceuticals company Abbott Labs (ABT) also announced third quarter adjusted earnings up some 35% at 92 cents a share, and raised its full-year guidance. Strong sales of its rheumatoid arthritis drug Humira were to thank, along with its nutritional products; like almost everything else that happened Wednesday, it beat expectations. Abbott's results helped the pharmaceutical sector and that nudged healthcare up 1.5%.

Rail company CSX (CSX) was one of this session's best performers following its upside earnings surprise of 74 cents a share. Other rails shared in its strength and sent the industrial sector to a 2.6% gain, second only to financials. Transportation is considered by some an early and significant indicator of economic activity.

Telecom was the only sector that failed to post a gain. The loss was minor, but this session was the fifth time in the last six sessions that telecom underperformed.

Hardly anyone thinks we'll see a test of last spring's lows, but a look at the NYSE Advance/Decline Line might be in order. The NYAD is a market-breadth indicator that tells us whether bullish or bearish momentum is driving the market. It compares the number of NYSE stocks that are advancing in price with the number that are declining. When more stocks on the NYSE are increasing in value than are decreasing, the A/D Line moves higher indicating bullish momentum; when more stocks are decreasing in value, the A/D Line moves lower, indicating bearish momentum. We want to see higher highs and higher lows; until just recently, that's what we got:

NEW YORK STOCK EXCHANGE ADVANCE-DECLINE . . . .

. . . .COMPARED TO THE DOW:

A steeply rising A-D Line is usually followed by a considerable period of rising stock prices. What we don't want to see, assuming we're long, is a sharp sustained falloff in the rise of the A-D line. Obviously there can be bumps and corrections along the way, as seems to be the case here. We'd be dreamers not to expect a top of some kind after the runup of the last seven months, especially considering today's breach of psychologically-significant Dow 10,000.

On Thursday we get the Philadelphia Fed Survey, New York Manufacturing and the Consumer Price Index, which many will be watching. The earnings pace hastens with Citigroup (C), Goldman Sachs (GS), Google (GOOG) and International Business Machnes (IBM) Amphenol (APH), Baxter Intl (BAX), Cypress Semiconductor (CY) Fairchild Semiconductor (FCS), Harley Davidson (HOG), Nokia (NOK), Omniture (OMTR) and Southwest Airlines (LUV), among others.


New Option Plays

DOW Hits 10000

by Keene Little

Click here to email Keene Little

Editor's Note:

I am filling in for James tonight so if you don't like what's said tonight you can blame James (smile). Our bias remains bullish for the market (the trend is your friend) but the market is stretched to the upside and the indexes are testing resistance. This would be a logical spot for stocks to pull back after the strong rally over the past two weeks.

We're not adding any new candidates tonight.


In Play Updates and Reviews

Some Upside Targets Achieved

by Keene Little

Click here to email Keene Little

A number of stocks achieved either their first upside targets or their final targets.


CALL Play Updates

Apple Inc. - AAPL - close: 191.29 change: +1.27 stop: 184.75

AAPL got a big shove higher after the INTC earnings report but then gave most of it back right away and traded sideways for the rest of the day. It's starting to look relatively weak. Keep in mind that we plan to exit ahead of the October 19th earnings which are after the market closes. We only have three trading days left.

Our first target to take profits (I'd exit 2/3rds of our position) 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:       + 1.28
Earnings Date            10/19/09 (confirmed)
Average Daily Volume =       17.8 million  
Listed on   October 06, 2009         


Alcon Inc. - ACL - close: 147.63 change: +3.88 stop: 134.75

ACL gapped above its resistance zone of $144-145 and tagged our 2nd target at $148. We will show this as a closed play tomorrow.

Picked on September 10 at $136.75
Change since picked:       + 11.25 (at the $148 target)
                             /1st target hit @ 142.50 (+4.2%)
                             /2nd target hit @ 148.00 (+8.2%)
Earnings Date            10/27/09 (unconfirmed)
Average Daily Volume =        299 thousand 
Listed on September 10, 2009         


Amazon.com - AMZN - close: 97.46 change: +2.63 stop: 89.49

AMZN got a good boost with everyone else and is now testing the October and December 2007 highs. The ability to press higher would be very bullish.

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:       + 2.41
Earnings Date            10/22/09 (unconfirmed)
Average Daily Volume =        6.2 million  
Listed on   October 07, 2009         


Allegheny Tech. - ATI - close: 37.59 change: +1.52 stop: 33.75

We're planning to exit before October options expire. That gives us only two more days. More conservative traders may want to exit early now. I'm not suggesting new positions at this time. Our second target is $38.50 so hopefully another good day or two will get us to our target.

Picked on   August 31 at $ 30.25 *triggered         
Change since picked:      + 7.34 
                               /1st target hit @ 33.85 (+11.9%)
Earnings Date           10/21/09 (confirmed)
Average Daily Volume =       2.7 million  
Listed on August 27, 2009         


Apollo Group - APOL - close: 75.32 change: +1.85 stop: 72.70

APOL broke over resistance at 75.00 and triggered our entry at 75.25 and fortunately it did that after it dropped down this morning. We still plan to exit this trade ahead of the October 27th earnings report.

Picked on   October 14 at $ 75.25 *triggered         
Change since picked:      + 0.07 
Earnings Date           10/27/09 (confirmed)
Average Daily Volume =       2.6 million  
Listed on October 13, 2009         


AvalonBay - AVB - close: 74.58 change: -1.19 stop: 68.49

Even though AVB rallied today it's looking like it's developing a rolling top. 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 for a test of the September high. 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:       + 1.98
Earnings Date            11/04/09 (unconfirmed)
Average Daily Volume =        1.8 million  
Listed on   October 07, 2009         


Caterpillar - CAT - close: 54.51 change: +1.77 stop: 48.59

CAT is testing its September high. If you are looking for a new entry point, wait for another pullback near $50.00.

Our first target at $54.25 was achieved today. 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:       + 4.51
                               /1st target hit @ 54.25 (+8.5%)
Earnings Date            10/20/09 (confirmed)
Average Daily Volume =         10 million  
Listed on September 19, 2009         


Core Labs - CLB - close: 107.36 change: +2.05 stop: 97.95

CLB dipped down to 105.98 allowing anyone in who was waiting for a dip to 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:       + 2.11
Earnings Date            10/21/09 (confirmed)
Average Daily Volume =        175 thousand 
Listed on September 23, 2009         


Canadian Nat. Res. - CNQ - close: 75.39 change: +2.93 stop: 64.95

CNQ tagged another new 52-week high today and in so doing it was nice enough to tag our 2nd target. We will show this play closed out tomorrow.

Picked on   October 05 at $ 67.01 /gap higher entry
                                /originally listed at $65.04
Change since picked:       + 8.38
                              /1st target hit @ 71.50 (+6.7%)
                              /2nd target hit @ 74.75 (+11.6%)
Earnings Date            11/05/09 (confirmed)
Average Daily Volume =        6.4 million  
Listed on   October 05, 2009         


Consol Energy - CNX - close: 51.05 change: +1.99 stop: 43.90

CNX gapped up with the rest of the market but then went sideways for the rest of the day. It looks like it's consolidating for a continuation higher.

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:       + 7.28
                                /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: 71.65 change: +1.57 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: 69.65 change: +1.52 stop: 64.35

The stock was kind enough to tag our target price of 69.50 before options expiration on Friday. More aggressive traders can aim for the $72.50 level. The Point & Figure chart is bullish with a $77 target. We had only 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
                                /target hit @ 69.50 (+4.7%)
Change since picked:       + 3.13 (at target price
Earnings Date            10/22/09 (confirmed)
Average Daily Volume =        2.4 million  
Listed on September 05, 2009         


Diamond Offshore - DO - close: 102.55 change: +1.59 stop: 95.95

We've only got two more days left for this play as we plan to exit completely 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:       + 7.86
                               /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: 54.62 change: +1.98 stop: 47.75

The rally continues in this stock but if it dips back to support near $50 we'll use it as a new entry point. The stop loss will remain at $47.75 for now.

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:       + 6.12
                              /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: 91.44 change: +1.95 stop: 82.49

EOG is testing Monday's high but not looking like it wants to do better than that. If it pulls back toward $85.00, which as broken resistance should be new support, it could make for another nice 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:       + 6.20
                              /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: 82.94 change: +1.90 stop: 74.90

ESRX tagged our first target at $82.50. Our second target is $84.95. So far the rally continues to look constructive although like the rest of the market it could be getting a bit stretched to the upside.

Picked on   October 06 at $ 77.42 /gap down entry
                              /originally listed at $78.04
                              /1st target hit @ 82.50 (+6.6%)
Change since picked:       + 5.52
Earnings Date            10/28/09 (confirmed)
Average Daily Volume =        2.1 million  
Listed on   October 06, 2009         


Flowserve - FLS - close: 105.95 change: +4.86 stop: 95.90

FLS came bounding out of yesterday's dip and may not given many of you an opportunity to buy yesterday's dip (unless you did it yesterday). Except for a brief end-of-day dip it never looked back in today's rally. Our first target at $109.75 was achieved so take some profits off the table. You may want to close this play or use some of the house's money to capture some more upside potential. The worrisome thing, like the broader market, is the waning momentum that's visible at the new highs since August.

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

Picked on   October 12 at $102.60
Change since picked:       + 3.35
Earnings Date            10/28/09 (unconfirmed)
Average Daily Volume =        1.2 million  
Listed on September 19, 2009         


Gold ETF - GLD - close: 104.18 change: -.08 stop: 97.40

Further weakness in the dollar today did not help our gold play which dropped a few pennies. Today it looked like it's either consolidating for another push higher or else it's in a topping pattern. 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. 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:       + 1.90
Earnings Date            00/00/00
Average Daily Volume =       14.2 million  
Listed on   October 06, 2009         


Illumina Inc. - ILMN - close: 43.39 change: +1.37 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: 55.26 change: +1.69 stop: 49.49

Financials got a big boost today thanks in part to JPM's earnings report this morning. Analysts are expecting JPM to deliver a profit of 49 cents a share. The next potential land mine is which reports tomorrow. 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:       + 2.66
Earnings Date            00/00/00
Average Daily Volume =        5.1 million  
Listed on September 01, 2009         


PPG Inds. Inc. - PPG - close: 61.53 change: +0.89 stop: 57.90

PPG closed at new highs again for the year. Like the rest of the market, the stock looks short-term overbought and we're running out of time. It was suggested yesterday that readers consider exiting the play today at the closing bell and that's what we did. This was done to avoid holding over earnings on October 15th. This will show as a closed play tomorrow.

Picked on   August 28 at $ 55.65
Change since picked:      + 5.88
                             /1st target exceeded @ 60.05 (7.9%)
                  /exited at the close on 10/14 at 61.53 (10.6%)
Earnings Date           10/15/09 (confirmed)
Average Daily Volume =       1.6 million  
Listed on August 27, 2009         


Mobile Telesys - MBT - close: 53.46 change: +2.15 stop: 46.80

MBT gapped up and ran higher before consolidating sideways for most of the day, which continues to look constructive for more upside. 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:       + 3.31
Earnings Date            11/05/09 (unconfirmed)
Average Daily Volume =        1.5 million  
Listed on   October 10, 2009         


Precision Cast Parts - PCP - close: 102.99 change: +2.10 stop: 99.90

PCP continues to motor sideways but it's in a potentially bullish consolidation pattern since it tagged our breakout trigger on Monday. 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:       - 1.06
Earnings Date            10/20/09 (confirmed)
Average Daily Volume =        1.0 million  
Listed on   October 10, 2009         


Waters Corp. - WAT - close: 58.18 change: +0.81 stop: 53.25

WAT gapped up and chugged higher all day. It would be nicer to see a little more bullish enthusiasm in the rally. 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:       + 2.75
Earnings Date            10/26/09 (unconfirmed)
Average Daily Volume =        809 thousand 
Listed on September 12, 2009         


Whirlpool Corp. - WHR - close: 72.86 change: +1.03 stop: 65.90

WHR couldn't quite decide what to do today. It gapped up and tagged its September high, dropped back down to close the gap and then ran back up this afternoon to try that high again before dropping back down into the close, but still for a gain on the day. 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:       + 2.36
Earnings Date            10/23/09 (confirmed)
Average Daily Volume =        1.5 million  
Listed on   October 10, 2009         



PUT Play Updates

BIOGEN IDEC - BIIB - close: 50.04 change: +1.24 stop: 52.15

BIIB got a good sized bounce today and got back above both its 50 and 200-day moving averages. Unfortunately it's stuck in a trading range for the past six weeks and we'll have to see if today's bullishness sees some follow through or not. 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:       - 1.15
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: 29.71 change: +1.00 stop: n/a

CI appears to be in some kind of bear flag formation since its October 2nd low and theoretically should break down from it. But since we don't care which way it goes, only that it does it fast, we'll take a big move either way. We're 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:       + 0.31
Earnings Date            11/05/09 (unconfirmed)
Average Daily Volume =        3.8 million  
Listed on September 08, 2009