Option Investor
Newsletter

Daily Newsletter, Tuesday, 12/1/2009

Table of Contents

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

Market Wrap

Dow Closes At 52-Week High

by Jim Brown

Click here to email Jim Brown

The markets rallied as tensions over Dubai eased and traders went back to work after the Thanksgiving holiday. The rally was broad based with all indexes posting nearly identical percentage gains.

Market Stats Table

Today's rally was more of a short squeeze after the Dubai drop but I will take any gains we can get. Equities were also rebounding as the dollar resumed its downward slide after a couple days of strength as a flight to quality play during the Dubai crisis.

It was strange to see equities moving strongly higher since the economics today were less than exciting, financials were being downgraded and Fed presidents were calling for a rate hike. It just goes to show you the power of a short squeeze.

The negative economic news came from the ISM Manufacturing report for November. The headline number fell to 53.6 from 55.7 in October. Analysts had expected a slight decline after October's 3.1-point spike but were caught off guard when the index gave back more than 2 points. On the positive side the new orders component rose to 60.3 from 58.5 and prices paid fell from 65.0 to 55.0. Inventories fell a whopping 5.6 points to 41.3 and suggests an uptick in the manufacturing cycle in the months to come. On the negative side the employment component fell to 50.8 from 53.1 and the production component fell to 59.9 from 63.3. The production index spiked +7.6 points in October so some decline there was expected. The prices paid component at 55.0 is proof that the Fed is right in expecting inflation to remain low for months to come. The report was negative but only slightly after you consider the big gains for October. This ISM rate suggests GDP for Q4 will be in the 3% range.

ISM Chart

Construction Spending for October came in flat but that was better than the expected 0.5% decline. Compared to the +0.8% gain in September a flat performance for October was lackluster but at least the sector held its gains. The rate of construction is still down -14.4% since October 2008. Private residential construction rose +4.4% in a revision of the September numbers. Considering the large numbers of foreclosures still depressing the housing market it was encouraging to see this component revised higher. Public construction is struggling and may have peaked for this cycle. Getting funding for new projects is very hard and many are being canceled or delayed. Office building vacancy rates are growing as businesses downsize or go out of business.

The Pending Home Sales Index was another lagging report out today covering the October period. The index rose to 114.1 from September's 110.0. This was well over the consensus estimate for a drop to 109.5. This is the ninth consecutive month of increases. The strong gains in the Sept/Oct period were people rushing to buy a house before the tax credit expired in November. That has now been extended until spring and a move up credit was added.

Pending Home Sales Chart

Lastly auto sales increased in November for everyone but Chrysler. Total sales rose to 10.9 million annualized from 10.4 million in October. The decent sales gains suggest the sell forward into the cash for clunkers program was not as bad as people thought. We did see a sharop drop off in September to a 9.2 million rate but the drop was short lived. GM saw sales rise +6.3%, Ford +8.6%, Toyota +11.5%, Nissan +27% and Hyundai +34%. Chrysler was the black sheep and saw sales drop -19%.

Auto Sales Chart

Wednesday we will get the Challenger Employment report and that is seen as a preview to Friday's Non-Farm Payrolls. The Non-Farm Payrolls is the 800-pound gorilla left on the schedule for this week. Everything that happens for the next 48 hours will be focused around the payroll report. Updated consensus estimates are for a loss of -130,000 jobs compared to -190,000 in October. Morgan Stanley is still standing by its estimate for a loss of -75,000 jobs. Actually either number would be a positive for the market with the smaller number very positive. Obviously any number much over those estimates could be very detrimental to the current rally.

Payroll Chart

It was a very light news day when the resignation of GM's CEO was the major headline. In a news conference the GM board said it "accepted" the resignation of Henderson and the current chairman of the board Ed Whitacre will become the interim CEO as the company looks for another CEO. In published reports the event was called a firing or an ouster. GM spokesman Chris Preuss said, "The board decided and Fritz agreed, that given where we are it was time to make some changes." Henderson assumed the job in April after Rick Wagoner was forced out by the administration as part of the government restructuring of GM. Henderson presided over the chapter 11 bankruptcy. Reporters said late in the day that the GM board wanted to change faster and Henderson wanted to go at a slower pace. The failure of Henderson to sell the Saturn brand to Roger Penske and the Saab brand to Koenigsegg Automotive evidently sealed his fate.

Northrop Gruman Corp (NOC) announced it was not going to bid on the $40 billion tanker contract for the Air Force. Northrop originally won the bidding with Airbus as a partner but Boeing protested the bids. After further review the Pentagon voided the bidding and drew up plans for a new bidding process. Back in 2004 Boeing was knocked out of being awarded an earlier bid because of an ethics violation. The Pentagon circulated the third draft RFP in early November and Northrop asked for revisions. The Pentagon declined to make the changes and now Northrop is declining to bid. Northrop claims the bid shows a "clear preference for a smaller plane with limited flexibility." You could insert Boeing inside those quotes and be 100% correct. The Pentagon did rewrite the bid to favor an American company as opposed to an Airbus plane. The Pentagon said both companies can make a good tanker but we can't force them to compete. Of course they can and did change the bid requirements to favor Boeing. I seriously doubt there was any political arm twisting involved. (grin)

Comcast is apparently the winner in a new round of wheeling and dealing with GE. For 23 years GE has made jet engines, locomotives, dishwashers, light bulbs, sitcoms and movies. The NBC Universal division now appears headed for the Comcast stable after Vivendi agreed to sell the 20% stake it held. On Thursday GE and Comcast are expected to announce a joint venture on NBC Universal where Comcast will own 51%. That assumes they can get the deal past regulators and that is probably why they are calling it a joint venture. If they can get past the regulators and lay low for a couple years Comcast can quietly buy out the junior partner. NBC Universal includes Universal Pictures, Universal Studios theme parks and cable channels USA, Bravo and SyFy. GE bought NBC when it took over RCA in 1986. GE paid $6 billion in 1986. GE will get $5B-$7B up front for the venture and be able to transfer up to $10 billion in debt and retain a 49% share. CEO Immelt wants to stick with the core manufacturing lines and expand the medical equipment business. NBC was profitable but it was always a distraction to the manufacturing company. GE stock was flat on the news with the real announcement not expected until Thursday.

GE Chart

Financials bucked the rally with a neutral day after JP Morgan cut estimates on Bank America, Wells Fargo and Regions Financial. JPM said banks were hoarding money and could post some major writedowns with Q4 earnings. This should not be news to readers of these pages. I have been warning that banks were hoarding money for sometime. The commercial mortgage business is in the tank and housing foreclosures are still flooding the market and driving down prices, which creates more foreclosures. The key here is whether the banks can withhold lending and hoard enough cash to take the writedowns and avoid a capital call by regulators. Banks have raised so much capital the dilution is extreme. Selling more stock into this market would probably not be easy with the Q4 earnings writedowns on everyone's mind. JPM was just the biggest name on the street to mention it. Meredith Whitney and Richard Bove have warned repeatedly that banks are not yet out of trouble.

Commercial real estate bank loan defaults hit 3.4% last month and the highest in 16 years. Analysts believe they could peak at 5.3%. Commercial Mortgage Backed Securities (CMBS) defaults hit 4.01% in October. Analysts expect that to top 8% in 2010.

Fortunately the Dubai crisis did not become another bank bomb as many people speculated. The Dubai World crisis has faded and now it is just a story of a major corporation trying to restructure its debt. The UAE has come out in support of Dubai and regional banks and conditions are back to normal. It is not over but the next set of discussions will be on what assets they will agree to sell and how are they going to complete the deleverage process.

Barrick Gold (ABX) said today it had closed all its fixed price hedges and can now fully participate in the rising price of gold. "As of today we are a fully unhedged gold producer." The stock jumped +$3 on the news. Barrick began buying back its hedges on three million ounces of gold back in September. Barrick said their positive view on the price of gold had led them to accelerate the timetable, which was originally 12 months when the buyback was announced in September.

Barrick was losing money with every tick higher on gold. They had to take a $5.7 billion charge on the hedges in Q3 and would take another $300 million charge in Q4. I believe whatever the cost the ability to own another three million unhedged ounces in today's market is a tremendous benefit. Barrick expects to produce between 7.7 and 8.1 million ounces in 2010. The problem now is what will happen to the gold market without Barrick's hedge covering trades. If they were just closing futures positions in cash then there was an upward bias to the futures that will no longer exist.

Barrick Chart

The falling dollar again pushed commodity prices higher and gold traded over $1202 intraday. The dollar index is trading under 74.50 and has broken support at the 75 level more than once. The next support should be in the 72-73 range. We saw support at 72 hold for several months back in May-July 2008. Long term I don't think it will hold this time around.

Chart of Gold

Dollar Index Chart - Daily

Dollar Index Chart - Weekly

Philly Fed President Charles Plosser said the Fed should increase rates in the future in line with market rates when those rates rise with the strengthening economy. He expects the economy to grow by about 3% in Q4 and at a similar rate through 2010. He said investors will push market rates up as the economy grows in order to compensate for the higher risks of inflation. "To conduct monetary policy we need to be forward looking and looking ahead for the next two years." He is speaking out against the Fed pledge to keep rates low for an extended period of time. Plosser rejected the argument, put forth by Fed Chairman Ben Bernanke , Vice Chairman Donald Kohn , and New York Fed Bank President Bill Dudley that the economic slack implied by high unemployment and low inflation help keep prices in check. He cited "theoretical and empirical evidence" that shows low resource utilization is difficult to measure and an unreliable predictor of inflation. He said, "making policy decisions based on measures of such slack and particularly on forecasts of slack many quarters ahead becomes problematic." Fortunately Plosser will not have a vote on the FOMC until 2011 but he can still stir up trouble in his speeches. Also fortunately, the market ignored him today.

The market pretty much ignored everything today in a relief rally that the global banking system did not implode over the Dubai mess. The Dubai markets were down -8.5% on Monday but rebounded strongly today and calming everyone's nerves over a Middle East meltdown. The Dow rebounded after two days in the tank and closed at a new 52-week high at 10470 after trading over 10500 intraday. The Dow declined to support at 10300 on Friday and held that level for two days. This support pause gave investors the confidence to go back into the market and helped produce yet another short squeeze. Uptrend resistance is now about 10550 and baring unforeseen news we could see that this week before the worry about the payroll report depresses trading on Thursday.

Dow Chart - Daily

Dow Chart - 30 Min

I wish the S&P-500 had been as bullish as the Dow but that uptrending blue line in the chart is uptrend support not resistance as in the Dow chart. The S&P is struggling and has spent more time under that support in the last three days than above it. We also have the solid resistance at 1110 and those two levels converged today and again it was a dead stop at resistance. If the S&P could produce a breakout here I think the market would take on an entirely new character. Until then the bears continue to short that resistance and the bulls are buying support. It is a battle that one side will eventually win but today there is no indication of who that might be.

SPX Chart

The Nasdaq had a nice day but the day's high was still a lower high from the resistance test at 2200 back on the 17th. The Nasdaq has not even returned to the lower resistance line from September. This is a weak index and even an outstanding +3% gain on the SOX could not power it higher. Support remains 2120 and resistance at 2180 and 2200.

Nasdaq Chart - Daily

Now for the worst chart of the night we turn to the Russell. The 50-day average has smothered the Russell like a blanket for the last three weeks and today's rally did not even come close. The Russell has to really improve its image and quickly in order to improve market sentiment. The Dow set a new high because it is a highly liquid basket of big caps. Those are safe haven plays not investments. Fund managers are still afraid of the market and are parking cash in big caps. Until they decide to invest in small caps there is still trouble ahead. I was cautiously bullish on Sunday because of the oversold nature of the market on the Dubai news. Unless the Russell finds some traction soon I may be reversing to cautiously bearish. I really hope that does not happen. I would love to see December close at the highs of the year but that decision is not up to me.

Russell Chart - Daily

For the rest of the week I am neutral but hold long positions. I want to see the rally hold but the S&P has to break over 1110 and the Russell needs to hold its gains and more closer to initial resistance at 600. If those things occur I will remain cautiously bullish.

We finally confirmed our Option Trader DVD package for the End of Year Renewal Special. These are the DVDs everyone will get with their subscription.


DVD #1 Insider Strategies for Profiting with Options
Max Ansbacher 90 min $64.95 Value

Award-winning money manager Max Ansbacher never follows the "norm" - and he's made millions in trading options. Learn solid new strategies from a seasoned pro in this 90 min. presentation, as Max shows how to pick the right options by balancing strike prices and expiration dates - in the right market by assessing indexes vs. individual stocks. This rare presentation will navigate you through uncharted territory and keep you on a course to trading success using the same techniques that have made Max a modern-day option trading legend.

DVD #2 Advanced Option Strategies
James Bittman 90 min $99. Value

James Bittman has written books, taught courses - and now he comes directly to you - with powerful advanced strategies for taking your options trading to higher levels of success. Discover winning methods for * Perfecting the 3-part forecast - a basic requirement of every options trade * Fine tuning the art of profit analysis: Is this trade worth doing? * Using straddles, time spreads, diagonal spreads, ratio trades and other intricate strategies This powerful video brings the best of Bittman right to you - in a one-on-one course that's sure to improve your trading acumen, and ultimately, your trading profits. DVD #3 Profit with Index Options
James Bittman 74 min $99. Value

Boost your trading confidence and increase your potential profits by incorporating index options into your arsenal of trading strategies. Enabling you to trade the market as opposed to a particular stock, index options are a powerful means of success. Renowned options expert James Bittman walks you step-by-step through the basics of index options, teaching you how they work, when to use them, and the best methods for putting them into practice. Take advantage of the many benefits index options offer, and enlarge your capital in no time.

I don't know about you but 2009 was so much fun I know you can't wait to see what the markets bring in 2010.
Click here for the 2009 Renewal Special Details

Jim Brown


New Option Plays

Mining Equipment and Industrial Goods

by James Brown

Click here to email James Brown

Editor's Note:

The market's recent strength has produced a lot of potential bullish candidates. A few stocks that caught my eye today are: MMM, COST, ESRX, MICC, IBM, ISRG, GOOG


NEW DIRECTIONAL CALL PLAYS

Bucyrus Intl. - BUCY - close: 54.00 change: +2.21 stop: 51.90

Why We Like It:
The commodity trade is back on with the dollar slipping toward its 2009 lows. Shares of BUCY have rallied back to the top of their trading range. I am suggesting readers buy calls if BUCY hits $55.65. If triggered our first target is $59.90. Our second target is $64.00.

Suggested Options:
I'm suggesting the 2010 January calls. My preference is the $60 strike.

BUY CALL JAN 60.00 HIK-AL open interest=1572 current ask $1.70

Annotated Chart:

Picked on  December 01 at $ xx.xx <-- TRIGGER @ 55.65
Change since picked:       + 0.00
Earnings Date            02/18/10 (unconfirmed)
Average Daily Volume =        2.8 million  
Listed on  December 01, 2009         


Caterpillar - CAT - close: 59.68 change: +1.29 stop: 58.49

Why We Like It:
CAT has been consolidating sideways under resistance in the $60-61 zone. Shares have managed to keep the bullish trend of higher lows intact. The November highs were near $60.90 and the October 20th high was $61.28. I am suggesting readers buy calls at $61.51. If triggered our first target is $64.95. Our second target is $69.00.

Suggested Options:
I am suggesting the January calls. My preference is the $65 strike.

BUY CALL JAN 65.00 CAT-AM open interest=7887 current ask $0.92

Annotated Chart:

Picked on  December 01 at $ xx.xx <-- TRIGGER @ 61.51
Change since picked:       + 0.00
Earnings Date            01/26/10 (unconfirmed)
Average Daily Volume =        7.8 million  
Listed on  December 01, 2009         



In Play Updates and Reviews

Triggered On Tuesday

by James Brown

Click here to email James Brown

We had two bullish plays triggered on Tuesday's rally higher. We've adjusted the stop loss on one candidate.


CALL Play Updates

Capella Education - CPLA - close: 71.34 change: +0.06 stop: 69.65

The action in CPLA today was pretty disappointing. Shares barely moved while the market rallied higher. I see this as a warning sign and urge caution. No new positions at this time.

I do consider this an aggressive, higher-risk trade. Currently the Point & Figure chart is bullish with an $85 target. The target for our earlier position is $79.50.

Picked on  November 24 at $ 72.55
Change since picked:       - 1.21
Earnings Date            02/11/10 (unconfirmed)
Average Daily Volume =        126 thousand 
Listed on  November 24, 2009         


Fedex Corp. - FDX - close: 85.88 change: +1.43 stop: 80.75

FDX continued to march higher. The stock hit $86.57 intraday. We had a trigger to buy small call positions at $85.75 so the trade is now open. Our first target to take profits is at $89.95. Our second target is $94.00. The Point & Figure chart is bullish with a $112 target.

FYI: Readers should note that I'm listing December options, which expire in three weeks. I would prefer to buy January calls but FDX is going to report earnings before December option expiration and we'll exit ahead of the earnings report so there is no need to pay for January's premium.

Chart:

Picked on  December 01 at $ 85.75 
Change since picked:       + 0.13
Earnings Date            12/17/09 (confirmed)
Average Daily Volume =        2.6 million  
Listed on  November 30, 2009         


Gold ETF - GLD - close: 117.38 change: +1.74 stop: 112.45 *new*

Another drop in the dollar helped push gold to another new all-time high. This time gold traded to $1,201 an ounce. This pushed the GLD to a new high of $117.93. Our target to exit is at $118.50. More conservative traders may want to exit early now. I'm raising our stop loss to $112.45. FYI: The January $110 calls are currently trading around $8.70.

Picked on   October 06 at $102.28
Change since picked:       +15.10
                               /1st target hit @ 109.50 (+7.0%)
Earnings Date            00/00/00
Average Daily Volume =       14.2 million  
Listed on   October 06, 2009         


MSC Industrial Direct - MSM - close: 45.88 change: -0.02 stop: 44.90

MSM also delivered a very disappointing performance. The stock closed in negative territory while the rest of the market rallied. This is very worrisome and more conservative traders may want to exit early immediately. I'm not suggesting new positions at this time. Our first target is $49.75. Our second target is $52.50.

Picked on  November 17 at $ 46.62
Change since picked:       - 0.74
Earnings Date            01/07/10 (unconfirmed)
Average Daily Volume =        513 thousand 
Listed on  November 17, 2009         


Norfolk Southern - NSC - close: 52.35 change: +0.95 stop: 49.75

NSC has rallied toward resistance near its November highs. The stock looks poised to breakout higher. Readers may want to launch new positions over $53.00 (and aim for $58.50).

Our first target to take profits is at $54.90. Our second target is $58.50. Our time frame is several weeks. FYI: The Point & Figure chart is bullish with a $65 target.

Picked on  November 21 at $ 51.84 (small positions)/gap higher entry
Change since picked:       + 0.51 
Earnings Date            01/27/10 (unconfirmed)
Average Daily Volume =        5.4 million  
Listed on  November 21, 2009         


Precision Castparts - PCP - close: 107.07 change: +3.39 stop: 103.49

Yesterday I was worried with PCP's under performance. The stock bounced back ferociously with a 3.2% rally. Shares are now back to testing resistance near their November highs. The high today was $107.38 in the last hour of trading. Our trigger to buy calls was at $107.35. Our play has been triggered. If you're still looking for an entry point wait for a move over $107.50.

Our first target to take profits is at $112.45. Our second target is $118.75. The Point & Figure chart is bullish with a $131 target.

Chart:

Picked on  December 01 at $107.35
Change since picked:       - 0.28
Earnings Date            01/20/10 (unconfirmed)
Average Daily Volume =        817 thousand 
Listed on  November 28, 2009         


Vertex Pharma - VRTX - close: 39.86 change: +1.04 stop: 38.49

VRTX delivered a strong session and appears to have broken out from its recent trading range. Yet the stock failed to close over round-number resistance at $40.00. The intraday high was $40.20. We're still on the sidelines. Our trigger to buy calls is at $40.25. We'll use a stop under last week's low. Our target to exit is at $44.25. My time frame is several weeks.

Picked on  November xx at $ xx.xx <-- TRIGGER @ 40.25
Change since picked:       + 0.00
Earnings Date            02/09/10 (unconfirmed)
Average Daily Volume =        3.2 million  
Listed on  November 23, 2009         


PUT Play Updates

FISERV Inc. - FISV - close: 47.48 change: +1.24 stop: 48.55

FISV is bouncing toward resistance just as expected. The trick now will be the $47.50-48.00 zone and whether or not shares roll over in this range. Look for the failed rally to show up before launching positions. However, I would suggest traders avoid new bearish positions if the S&P 500 breaks out past the 1113-1115 zone. Currently our bearish target o FISV is $42.25.

Picked on  November 28 at $ 46.29
Change since picked:       + 1.19
Earnings Date            02/02/10 (unconfirmed)
Average Daily Volume =        1.4 million  
Listed on  November 28, 2009         


Green Mountain Coffee Roasters - GMCR - cls: 62.04 chg: -0.94 stop: 71.05

GMCR continues to under perform the market. The bounce failed near $64.00 this morning and the stock closed with a 1.5% loss compared to a 1.2% gain for the S&P 500. I don't see any changes from my prior comments.

This is a higher-risk trade. GMCR has extremely high short interest. Our first target is $60.25. Our second target is $55.50.

Picked on  November 19 at $ 64.75
Change since picked:       - 2.71
Earnings Date            01/28/10 (unconfirmed)
Average Daily Volume =        1.5 million  
Listed on  November 18, 2009         


Goldman Sachs - GS - close: 167.63 change: -2.03 stop: 176.05

I find it very interesting that GS, a bellwether in this market, is under performing so badly. Shares rallied to $171.33 and immediately reversed lower this morning. This looks like a new bearish entry point but I'd almost hesitate to launch new put positions if the S&P 500 breaks out to new highs. Our first target is $155.50. More aggressive traders could aim for the $150 area or the simple 200-dma.

Picked on  November 25 at $168.75
Change since picked:       - 1.12
Earnings Date            12/15/09 (unconfirmed, could be in January)
Average Daily Volume =        9.5 million  
Listed on  November 21, 2009         


iShares Biotech - IBB - close: 79.56 change: +1.15 stop: 80.05

More conservative traders will want to consider an early exit right here. IBB has broken above its trendline of lower highs. The only reason I'm keeping IBB on the play list is that shares should still have some resistance at the $80.00 level and if the S&P 500 fails to breakout over current resistance then the IBB might fail as well.

I am not suggesting new bearish positions at this time. We may want to consider switching directions and buy calls if the IBB can close over resistance at $80.00.

The biotech stocks can be a volatile group so I'm suggesting small positions. Our target is near the November lows at $73.50.

Picked on  November 19 at $ 77.18 /gap down entry point
                             /originally listed at $77.86
Change since picked:       + 2.38
Earnings Date            --/--/--
Average Daily Volume =        4.9 million  
Listed on  November 19, 2009         


Northern Trust - NTRS - close: 49.38 change: -0.11 stop: 50.26

There was not a lot of follow through for the banking sectors today. Banks did well in Europe but the rally sort of fizzled a bit in the U.S. NTRS, a regional bank in the U.S., struggled under the $50.00 level but the very short-term trend is bullish. Both the BIX and BKX banking indices are nearing four-week old resistance. If these breakout then NTRS will probably breakout past $50.00 and close our play.

I'm not suggesting new positions at this time. Our first target is $45.85. Our second target is $41.00. The Point & Figure chart is bearish and its target has fallen from $39 down to $35 in just the last few days.

Picked on  November 12 at $ 49.18
Change since picked:       + 0.20 
Earnings Date            01/21/10 (unconfirmed)
Average Daily Volume =        3.0 million  
Listed on  November 12, 2009         


Research In Motion - RIMM - close: 59.73 change: +1.84 stop: 62.75

RIMM delivered a strong bounce (+3.1%) but failed to close over round-number resistance at the $60.00 level. The larger trend for RIMM is down but if the S&P 500 can breakout to new highs RIMM will probably follow it higher. More conservative traders may want to lower their stops toward $61.00 or $60.50. I'm not suggesting new bearish positions at this time.

Our first target is $55.25. Our second target is $50.50. RIMM can be a volatile stock so I'm suggesting smaller position sizes.

Picked on  November 16 at $ 61.80
Change since picked:       - 2.07
Earnings Date            12/17/09 (unconfirmed)
Average Daily Volume =       18.9 million  
Listed on  November 12, 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.)

Apple Inc. - AAPL - close: 196.97 change: -2.94 stop: n/a

AAPL has been a leader in this market during the rally off the March lows. Yet the stock has been under performing lately and today shares displayed real relative weakness with a late-day spike lower. I couldn't find any news to account for the sudden weakness in the last few minutes of trading.

More nimble traders might want to consider put options if AAPL breaks the 50-dma. I am no longer suggesting strangle positions. We would prefer to launch new strangle positions in the $198-202 zone.

We have an aggressive December strangle and a less aggressive January strangle. The options in the December strangle were the December $210 calls (AJL-LV) and the December $190 puts (APV-XR). Our estimated cost is $3.83. We want to sell if either option hits $8.00 or more.

The options in the January strangle were January $220 calls (AJL-LV) and the January $180 puts (APV-XR). Our estimated cost is $5.60. We want to sell if either option hits $10.00 or more.

Picked on  November 30 at $199.91
Change since picked:       - 2.94
Earnings Date            01/21/10 (unconfirmed)
Average Daily Volume =       15.1 million  
Listed on  November 30, 2009         


Goldman Sachs - GS - close: 167.63 change: -2.03 stop: n/a

The early morning rally in GS failed. We've got about three weeks left before December options expire. I am no longer suggesting new strangle positions on the stock.

The options suggested were the December $180 calls (GPY-LP) and the December $160 puts (GPY-XL). Our estimated cost is about $4.61. We want to sell if either option hits $9.00 or higher.

Picked on  November 21 at $171.67 /gap open entry
Change since picked:       - 4.04
Earnings Date            12/15/09 (unconfirmed, could be January)
Average Daily Volume =        9.5 million  
Listed on  November 21, 2009         


Ultra(Long)-S&P500 - SSO - close: 37.74 change: +0.84 stop: n/a

The S&P 500 and the SSO are poised to breakout past their November resistance. I'm not suggesting new strangle positions at this time.

The options suggested for this strangle were the December $40 calls (SUC-LN) and the December $34 puts (SOJ-XH). Our estimated cost was $1.70. We want to sell if either option hits $3.00 or higher.

Picked on  November 11 at $ 37.08
Change since picked:       + 0.66
Earnings Date            --/--/--
Average Daily Volume =         32 million  
Listed on  November 11, 2009         


United Parcel Service - UPS - close: 57.88 change: +0.41 stop: n/a

UPS continues to churn sideways in a narrow range. If the market breaks out UPS will most likely follow it higher. I'd limit new positions to the $58.00-56.00 zone.

The options suggested for this trade were the December $60 calls (UPS-LL) and the December $55 puts (UPS-XK). Our estimated cost is $1.05. We want to sell if either option hits $3.00 or more.

Picked on  November 21 at $ 57.99 /gap open entry
Change since picked:       - 0.11
Earnings Date            02/02/10 (unconfirmed)
Average Daily Volume =        4.7 million  
Listed on  November 21, 2009