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Daily Newsletter, Saturday, 12/12/2009

Table of Contents

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

Market Wrap

High Volatility, No Change

by Jim Brown

Click here to email Jim Brown

A quick look at the first graphic shows that despite all the volatility for the week the major indexes, with the exception of the Dow and NYSE closed almost exactly where they ended the prior week. Less than a 1-point change on the S&P-500, S&P-100 and Nasdaq 100 should be telling us something.

Market Statistics

The Dow rallied in the afternoon to pull ahead of the pack but the gains were almost entirely due to CAT, Alcoa and 3M. The big news should be that support held and the indexes are once again taking another shot at resistance.

Given the sharp spike in the Consumer Sentiment for December you would expect more than the lackluster market sentiment we had last week. In the first reading on consumer sentiment for December the headline number spiked to 73.4 from November's reading of 67.4. This was a major uptick similar to the jump from 65.7 to 73.5 in September. The high volatility in sentiment is directly related to the publicity surrounding jobs, stock market activity and press comments about the economy.

During the end of November when consumers were surveyed for the final November reading there were several high profile market drops as well as several economic disappointments. For the first week of December when this current survey was taken the markets were setting new highs with the Dow edging over 10500. It was the "new high" headlines and the big improvement in the Non-Farm Payroll report that powered sentiment higher.

The proof that news headlines impacted sentiment is in the components. The current conditions component spiked from 68.8 to 79.1, a gain of more than 10 points. The six-month expectations component rose only 3-points from 66.5 to 69.7. The consumer sentiment headline number is back at the highs for the year and appears to be confirming consumers are expecting a better economy ahead.

Unfortunately that is not the case. Consumers are still pessimistic about the economy. In the recent CNBC Wealth Survey released on Friday there was very little positive change in consumer attitudes. Note in the table below that those feeling the economy has improved increased only slightly. 93% still believe the economy is in the fair/poor category compared to 95% in November 2008. I remember November 2008 vividly and despite the big gains in stabilizing the financial system and the housing markets since November only 2% of responders moved from the fair/poor categories to good. What this does show is once the recovery does find traction it could be explosive as consumers relax and start spending money again. I doubt that will be until late 2010 but it will eventually happen.

State of Economy Table

Consumer Sentiment Chart

The headline number for November retail sales should move a few more consumers into the positive economy category. The headline number showed a gain of +1.3% in November compared to estimates for a gain of +0.6%. That +1.3% is a really strong number, especially following a +1.4% gain in October. However, if you remove autos that lowers it from 1.3% to 1.2%. If you remove gas stations that headline number falls to +0.6%. Rising gasoline prices in November contributed more than 50% of the sales increase. That is not where economists want to see sales increases because it takes money away from consumers. The same was true to October's +1.4% gain. If you take away gas and autos the net sales number was zero.

On the bright side electronic and appliance stores showed a +2.8% gain and building materials dealers saw a +1.0% gain. Anecdotal reports claim the strong electronics sales were due to heavy discounting in an effort to unload inventory. Food and beverage stores also saw a +1.0% gain. Clothing stores and furniture stores both lost -0.7% in November. Continued sales gains for December are expected since there were sharp declines for all three Q4 months of 2008 making year over year comparisons very easy.

Retail Sales Chart

There was a real surprise in the Business Inventory report for October. I know it is a lagging report but it is worth mentioning today. Inventories increased +0.2% in October. While that is a small number it was the first month of inventory gains since August 2008. It was also the second month of a strong rebound from the cycle low in August. Inventories are still down 13.5% year over year but suddenly improving sharply. This is a strong signal that the economy is gaining traction.

The economic reports for the last couple weeks have produced a large improvement in the expectations for Q4 GDP. Some unofficial expectations are starting to move over 5%. That includes an analyst from JP Morgan. That would be a huge number and would create significant ripples in the market and at the Fed. It would force a rethinking of GDP estimates for all of 2010 and probably force the Fed to rethink their "extended period" plan for interest rates. The Q4 GDP estimates are going to be the big story over the next month because the first official Q4 release is not until Jan-29th. Expect a lot of talk about the GDP as we near that release because official estimates are only for 2.6% GDP for all of 2010.

GDP Chart

The calendar for next week is dominated by the FOMC meeting on Tue/Wed. That will be the sole focus for analysts until after the announcement on Wednesday. We know nothing is going to change because Bernanke said as much in his testimony last week. However, in light of the recent economic improvements there could be some change in the language other than the "extended period" comment that will show the Fed is setting up for a bias change. This possible change in bias is going to be the overriding worry in the markets next week.

The Producer Price Index (PPI) and Consumer Price Index (CPI) will give us a rough update on inflation although none is expected. The Philly Fed survey on Thursday is the first of the regional Fed manufacturing surveys for the month.

Economic Calendar

More important than many of the economic reports will be the Best Buy earnings on Tuesday and the FedEx, ORCL, RIMM and PALM earnings on Thursday. This is real rubber on the road details especially in the case of Best Buy. As the largest electronics retailer and without Circuit City to undercut their prices this year the BBY earnings should be decent. Of course it won't be the earnings that attract the most attention but the guidance for Q4. With only two weeks left in the shopping season Best Buy should be in a position to call the game for the rest of the year. If they say sales are good then everyone will benefit. If they whine about weaker sales and smaller margins because of the heavy discounting then everybody else will be painted with the same brush. In BBY rallies to resistance at $47 before the earnings report there could be some fireworks after the report.

Best Buy Chart

Oracle (ORCL), RIMM, Palm, FedEx (FDX) and Nike (NKE) report earnings on Thursday and could be the highlight of the week for stocks. I believe RIMM will outperform and guide higher but that is just my opinion. RIMM just announced a new initiative in China and that is a huge market. RIMM was crushed in September after their earnings and has yet to recover. A good report next week could redeem them from that error. RIMM has some serious volatility around their earnings events. If you guess right you can win big but guess wrong and it could be costly.

Research In Motion Chart

Palm is a pretender to the throne and while all the news outlets will report the earnings it probably won't have any impact because of the shadow from RIMM announcing on the same day. Palm has the potential to surprise but I wonder if anyone will be watching.

Oracle will also be closely watched but rarely followed. Oracle has such a history of lackluster stock performance that few people care what Oracle reports other than their view on the business environment.

Oracle Chart

FedEx will be another one of those critical guidance companies. While FedEx has seen package traffic drop for the year they should be seeing volumes rise again over the holiday season. Since they have a lot of international traffic they could provide guidance of a global nature. Earnings are expected to be $1.05 compared to $1.58 in the year ago quarter.

Darden Restaurants (DRI) will also be viewed as a consumer indicator. Are people staying away from $20 a plate fish at Red Lobster in favor of $12 pasta at Olive Garden? Hopefully Darden will give us some details.

Nike will be watched more closely for what they say about Tiger Woods than how their shoes are selling. As one of Tiger's top endorsement deals what are they going to do with their star taking an "indefinite leave" from the game of golf? The mistress count is up to 12 now and that is a lot to overcome for somebody who was making millions out of being the squeaky clean king of golf. Several advertisers have already dropped him but Nike has stood by him so far.

National Semi reported earnings on Thursday and lost ground on Friday due to worries about their guidance. Earnings beat estimates and guidance was higher than analysts had expected. However, profits came from higher margins rather than increasing sales. Analysts worried that Texas Instruments was taking market share from NSM but strong demand in the sector was masking that market share loss. A Broadpoint AmTech analyst countered that some of that market share loss was deliberate as NSM exited some less profitable segments. Investors were not convinced and NSM lost ground and investors took profits in the sector.

The SEMI Association will report its November Book-to-Bill ratio on Thursday. The ratio in October was 1.1 meaning they got $110 in new orders for every $100 of orders shipped.

NSM Chart

Semiconductor Index Chart

After the close on Friday S&P announced it was replacing Ciena (CIEN) with Visa (V) in the S&P-500. Visa immediately spiked over $3 in after hours. Mead Johnson (MJN) will replace MBIA Corp (MBI). Both replacements will take place after the close of business on Dec-18th. Since Ciena has a market cap of $1 billion and Visa has a market cap of $38 billion that means index fund managers will have to buy a lot more of Visa and sell some of the other 499 stocks on the 18th. This should be good for a strong rally in Visa over the next week.

Mead Johnson is a little different with a market cap of $9 billion and ten times MBIA. Mead Johnson is 83% owned by Bristol Myers Squibb (BMY) and they are splitting off that 83% around the 18th. That means the float on MJN is a lot smaller with average volume of only three million shares. How arbitragers will play this move around the 17% of stock in public hands is unknown. It could either be a giant short squeeze or completely ignored because of details surrounding the 83% owned by BMY. My play would be on Visa, which is already at a 52-week high.

Chart of Visa

China revved up the U.S. market on Friday by reporting the strongest industrial production since June 2007 at 19.2% in November. Expectations were for a gain of 18%, up from 16.1% in October. China's economy is rebounding faster than most expected and that suggests the global economy is also improving. Since China produces goods for the rest of the world the jump in growth suggests somebody is buying those goods. Obviously not all that growth is goods going outside China so the report was also a positive signal for the Chinese economy.

After weeks of incredible volatility where every uptick in the dollar produced losses in equities and commodities a strange thing happened on Friday. The dollar broke out to a six-week high and commodities did not tank. Equities rallied as well. There was normally a direct inverse relationship in the past and that changed on Friday. The reason for the change was the jump in consumer sentiment, retail sales and the first rise in business inventories in 13 months. For analysts that means the U.S. economy is improving better than expected and that produces a stronger dollar. We had the best of both worlds with the dollar and equities both rising.

Just because commodities did not tank does not mean they did not lose ground. It was just a minor loss compared to the sharp declines of the recent past. Gold was off $6 to $1,119 but metals and miners were up on hopes for increased demand. Oil was down but for a different reason.

Crude oil is finally moving back to where prices should be, given the current demand. Consumption in the U.S. is at the lowest level in a decade. The average consumption over the last four-weeks was 18.5 million barrels per day. That was down -563,000 bpd from last year and -2.1 mbpd below the five-year average. Inventory levels of crude are 7.6% above the five-year average and gasoline stocks are near decade highs and 5.4% above the five-year average.

Production is rising in the U.S. thanks to new production in the Gulf of Mexico and new drilling in existing fields onshore. Current inventory levels would support a complete lack of imports for 117 days should something happen on a global scale to impact deliveries. That rises to more than 200 days if the SPR was tapped. Our dependency on imported oil has fallen from 62% to 51% of our current consumption.

Basically, for the immediate future there is a lot more oil in the U.S. than we need. Cheating on OPEC quotas is growing with compliance falling to 58% in November from 60% in October. OPEC production hit a post quota high of 29.1 mbpd in November. With an extra 2 mbpd over quotas now coming out of OPEC and global demand still refusing to rebound the price of crude is finally returning to realistic levels.

I have mentioned in these pages several times that the CEO of Exxon claims there was $20-$25 of dollar weakness in oil prices. That means for every decline of the dollar the price of oil rose as a dollar hedge. With the dollar suddenly finding strength to breakout to a six-week high the price of oil reversed downward.

There is one other factor. Storage at Cushing Oklahoma where the light crude futures are delivered is nearly full because of the over supply. Cushing storage has recently been expanded to about 51.1 million barrels. However, for safety reasons tanks normally are filled only to about 80% capacity for an expected max capacity of somewhere in the 40 million barrel range. Since oil is constantly being added and subtracted from the tank farms rather than just sitting stagnant there is always some portion of the farm in transition. That lowers the actual useable rate to about 36 million barrels. Back in Nov/Dec 2008 that level was reached and oil prices fell dramatically because there was nowhere to deliver new oil.

If Wal-Mart ordering screwed up and a single store received 1,000 bushels of ripe tomatoes instead of 100 bushels guess what would happen to the price of ripe tomatoes at that store? If Cushing is full guess what happens to the price of crude to be delivered to Cushing? Correct, the price must go down to offset a higher storage rate elsewhere until Cushing storage frees up. The EIA reported on Wednesday that oil in storage at Cushing rose to 33.4 million barrels last week. With the January futures expiring on December 21st anyone in actual possession of oil with the intent to deliver to Cushing is going to be slashing the price in an effort to pass that problem to someone else.

Expiring January light crude futures for Cushing delivery closed at $69.87 on Friday. Brent Light Crude, which does not have the Cushing storage problem closed at $71.70. February crude futures, which is still five weeks away from the expiration/storage problem closed at $71.95. That spread between the January and February futures prices, called contango, widened to more than $8 between current expiring contract and the next months contract back in December 2008. I am not saying we are going there next week but seeing an increase in contango (a wider spread) is definitely a possibility.

I warned several times back in late October, early November when oil was over $80 that I expected to see $70 before we saw $85. That prediction has now come to pass. I will be honest, I wanted to buy $70 oil all last week because I thought that was decent support but the numbers out on Friday suggest we could be going lower. That would especially be true if the dollar continues to rise.

In the third chart below the February crude futures have the same converging support lines at $70. A dip to $70 on the Feb futures would be a buy signal for a trade in the energy sector.

Crude Oil Futures Comparison

January Crude Oil Futures Chart

February Crude Oil Futures Chart

The Dollar index has broken out of its downtrend channel and is testing resistance at 76.6. If this resistance fails the resulting rally could be violent because of the heavy short interest. The economic reports from Friday gave those bullish on the dollar added confidence and added a half point gain to the index. The fall in gold prices has been directly related to the breakout of the dollar. Gold appears to be headed for support at $1,100 but its fate rests on the dollar's strength.

Dollar Index Chart

Gold Chart

The FDIC closed three more banks on Friday bringing the total for the year to 133. The failed banks were Republic Federal in Florida, Solutions Bank in Kansas and Valley Capital Bank in Arizona. The total cost to the FDIC for all three closures was $252 million. The FDIC fund now has a negative balance due to the escalating pace of failures. The FDIC is replenishing the fund by having banks prepay three years of fees to the FDIC. FDIC Chief Shelia Blair told lawmakers on Friday that toxic assets were still a problem for banks, especially small banks. However, she also said that conditions were starting to improve in the banking industry but the pace of failures would remain elevated for 2010.

This week is the one-year anniversary of the Bernie Madoff scandal. How fast time flies! Bernie may be serving out his 150-year sentence in North Carolina but the prosecutor is still on the hunt. Money manager Stanley Chais and the funds he ran are under criminal investigation as a possible conspirator. Chais is also being sued in a civil lawsuit for return of funds.

The SEC also sued him saying he continued to place investor money with Madoff despite having "clear indications" that Madoff was engaged in fraudulent behavior. The government believes Chais committed conspiracy, mail fraud, wire fraud and money laundering for his part in the scheme. The SEC claimed Chais placed $900 million with Madoff and collected some $770 million in fees. Chais reportedly provided his own investors with false account statements and asked Madoff never to report losses on the statements regarding accounts placed by Chais. Chais claims he was duped by Madoff.

As I mentioned earlier, with the exception of the Dow, the markets traded flat for the week. Unfortunately that does not mean there was no volatility. The Dow and S&P returned to critical support then rebounded again as they have done each week since November 16th. The market is very range bound and lacked a catalyst to push it higher.

At least it lacked a catalyst until Friday's economic reports. If investors actually believe the various reports then the markets could be primed to move higher in 2010 and ppossibly even move higher next week. I would not bet on it today. There is a reason why the markets are range bound. Actually there are several reasons. One is the lack of a catalyst. I would be surprised if the business inventories report was the catalyst or the bogus retail sales report or consumer sentiment but the dollar and the Dow/S&P did rally together on the news and that is encouraging.

I believe China's factory production hitting 19% in November was also part of the reason to rally. However, that is now old news and there is a Fed meeting in our immediate future. Stocks are not likely to rally much ahead of the Fed. Once past the Fed meeting we will be hitting the holiday vacations and volume will slow to a crawl. While late December has shown some nice rallies in the past there is a cause for worry.

Many funds and institutions are sitting on monster gains from the rebound since March. The Dow is up +61% from its lows and the S&P +66%. That is a good decade of gains and it came in only nine months. There are many funds, institutions and money managers just counting the days until January so they can close those positions and take those gains. If they sell them now in 2009 they have to pay taxes almost immediately. If they wait three weeks and sell them in January they can postpone those taxes for a year.

This means quite a few managers are going to be sitting on their hands for the next couple of weeks and praying that the market does not tank. I am sure there will be some additional window dressing in hopes of keeping the market at its highs into year-end. That window dressing could keep us inching slowly higher until January 4th. I would be surprised to see a huge gain for the rest of December.

The wildcard here is professional traders trying to front run any potential January dip. Do they sell into any Santa Claus rally or do they tag along for the ride into January? It will be interesting to find out. Meanwhile we need to keep our stops tight and try not to be married to our positions.

The Dow closed at 10,471 and just a few points from current resistance at 10500. Assuming Asia does not tank Sunday night we should see another test of that 10,500 level on Monday. If we did actually move over 10500 the Dow would then target 10,650 as the next resistance level. I would be extremely surprised if we made it to or through that level by year-end but stranger things have happened. A breakout over 10,500 could cause some short covering and put us into a new range. However, we have been in the 10,250-10,500 range for over 4-weeks and nothing has been able to break the deadlock.

Dow Chart

The S&P-500 declined to exactly 1085 once again on Wednesday and then returned to 1110 as though stuck in a time warp. The S&P returned to 1085 four times over the last four weeks and each time rebounding to 1100. Only this week it missed the upper mark by a hair. Is it just a rounding error to a high of 1108.50 or a preview of things to come? The S&P has not been as strong as the Dow's repeated attempts at new highs. That 1110 level seems to hold bad memories and the return appears tentative. It could be traders just jumping the gun on their next short at resistance that kept it from hitting the market on Friday. If it were me that is where I would be pulling the trigger rather than wait for an exact touch of 1100.

You may remember my S&P charts from the last several weeks where it had fallen below the uptrend support line. It has been range bound for so long that if finally moved far enough outside the channel that the original line lost relevance. I redrew it this week to show the new trend. That uptrend line crossed right through 1085 on Wednesday and that is when the S&P began to rebound. The problem is that a new decline to 1085 will be outside the uptrend support again, and suggest another failure. This range bound pattern of the last four weeks will eventually end. I have heard various technical ideas that it is either a bullish consolidation that will break to the upside OR it is a topping process that will eventually breakdown. I believe we will find out the answer to that quiz the first week of January.

S&P-500 Chart

The Nasdaq could not cling to green on Friday and finished with a loss of -4 points for the week. It was a respectable showing despite the loss because it returned to only 10 points below resistance. The midweek decline totaled -40 points but it recovered nearly all of that loss.

That resistance at 2200 has been rock solid since Nov-16th. However, we do have a pattern of higher lows and the Nasdaq is wedging nicely into a breakout pattern. Techs are expected to lead the way in 2010 so investors are continuing to buy the dip. Support is 2160.

Nasdaq Composite Chart

The Nasdaq 100 (NDX) stubbed its toe on Friday and gave back -7 points to end the week with only a .15 gain after moving in a 50-point range. I was asking James on Friday if he knew what tanked the NDX. The first six charts we pulled up included AAPL, RIMM, BRCM, AMZN, QCOM and INTC were all negative for the day. Apple, RIMM and Broadcom accounted for 5 of the -7 points in the NDX drop.
Excellent link here for flash quotes on all 100 NDX stocks

I understand BRCM, INTC and even QCOM being down on the sell off in chips but Apple is just getting pummeled for no apparent reason. The rebound to $200 on Thursday is a distant memory with a $194 close on Friday. If the big tech stocks can't post gains then the composite is going to continue to struggle to get over resistance at 2200.

Nasdaq 100 Chart

I am bringing back an old chart today because I think it is relative to our challenge for the next two weeks. The NYSE Composite ($NYA) is an index of all 2000+ stocks on the NYSE. This ranges from the very large like Exxon Mobil to the very small with pocket change for a market cap. Over 360 are foreign stocks and ADRs. It is a broad view of the market similar to the Wilshire 5000 but not so broad as to be immune from all but the biggest events. The NYSE has been trading in a 200-point range from 7,050 to 7,250 for the same 4-week period.

The NYSE is relative because the pattern is different. As opposed to the Dow & SPX and Nasdaq where they closed at the high end of their range on Friday the NYSE Composite closed nearer to the bottom of its range. The NYSE appears weaker than the other major indexes. I believe this is because it has a full spectrum of stock sizes. Small caps are being under appreciated and the large caps that are acting as safe deposit boxes for excess cash are diffused because of their numbers.

The NYSE Composite has posted a lower low on each of the last two dips. Friday's high was a lower high. I believe we should watch the NYSE next week for additional signs of broad market weakness. By combining it with the Russell-2000 we should be able to get advance warning of any coming change in the market.

NOTE on the opening index graphic that the NYSE lost -57 points for the week while all the other losing indexes were in single digits.

NYSE Composite Chart

The Russell was very disappointing last week. It only lost -2 points for the week but more than once it was negative while the other indexes were in the green. The range was very narrow from 592 to 606 but the amount of movement became progressively smaller as the week progressed. There was definitely no buying support and no signs of bullishness. The Russell was a negative indicator for me last week. When coupled with the NYSE Composite I think they are telegraphing future weakness. I would run to the sidelines if the Russell trades under 592.

Russell Chart

In summary, there are some catalysts suggesting the U.S. economy as well as China's is gaining traction. These reports are putting upward pressure on the dollar and making some investors more comfortable with the outlook for 2010. However, the range bound market is also telling us that the bullish sentiment from the +60% rally from March may be fading.

There are signs that some money managers may be just biding time until January to dump stocks for tax reasons. That could also lead to some additional window dressing into year-end.

The big caps are leading again and that also suggests managers are just using them as safe deposit boxes for cash until New Years Eve. Watch the Russell-2000 and the NYSE Composite ($NYA) as leading indicators of market direction. Be prepared for volatility on Wednesday around the Fed announcement. If they change it to a more hawkish stance be prepared for extreme volatility.

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Jim Brown


Index Wrap

Sideway moves tell us something

by Leigh Stevens

Click here to email Leigh Stevens
THE BOTTOM LINE:

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INDEX WRAP:

I'm sure the continued lateral trend seems like more of the same and not showing future direction, but this pattern is telling us something. The longer the current sideways move goes on, the more upside, or downside, potential I would envision. However, I don't see the same odds for decline as for further upside and I rate it much more likely that there will be another up leg.

WD Gann used to talk about 'price' and 'time' being equal or that measurements horizontally on the time scale would often be equal to vertical movement on the price scale. A more exact measuring process would have me using specialized (e.g., Gann Trader) software such that the time and price scales have equal measurements; i.e., 1 'unit' of time is the same distance as 1 'unit' of price.

CHART OF THE WEEK:

While an exact projection, using a grid overlay on the S&P 500 (SPX) chart below is a useful exercise and to simply count the number of squares that prices have gone sideways and project the same number of squares to the upside and downside for when an upside or downside breakout occurs. I rate an eventual move to 1200 or higher as having a significantly greater probability for SPX than a corresponding downside move, such as to the 1000 area.

A reason to rate the upside potential as greater is simply that the prior trend has been strongly UP and a sideways consolidation after a prior advance favors an eventual further upside move. The assumption is that a breakout will be to the upside, in the same direction of the dominant trend. Moreover, it is often th e case that the LONGER the sideways consolidation, the greater is the upside (or downside) potential once there's a move above or below any such narrow sideways trading range.

Whatever the 'odds' suggest, follow the direction of the breakout, up or down, is the rule of thumb. I don't see the market breaking to the downside much, but if there was a decisive downside penetration of the low end of the rectangle seen below (at 1083), I wouldn't disregard its bearish implications.

MAJOR STOCK INDEX TECHNICAL COMMENTARIES

S&P 500 (SPX); DAILY CHART:

I covered some S&P 500 (SPX) index targets in my initial 'bottom line' comments involving either an upside or downside breakout above/below its recent multiweek narrow trading range.

This index like the overall market looks most like it is marking time before a next move higher. The same leveling off of prices could be viewed as a sign of a top formation. I think it's a pause in the major trend, not the formation of a top before an eventual downside reversal. Stay tuned for when the S&P moves out of this non-trending period; not untypical of December.

SENTIMENT

Bullish sentiment has moderated some over the past 2 weeks, as the 5-day average of my CPRATIO has been traveling just below the 'high' bullish level of 1.7. There's substantial bullishness, but it isn't what I would consider 'excessive' or extreme. A more or less neutral reading for where the market is currently which is in a consolidation mode as in 'consolidating' after the last up swing.

S&P 100 (OEX) INDEX; DAILY CHART

518-520 remains the key resistance, with the pivotal near support still at 504-505. I see more upside possibilities than downside. The chart pattern doesn't look like an index that wants to come down.

What would change this picture of still-bullish expectations? A close below the 50-day moving average (502.6 currently) or below 500 would, assuming this was more than a 1-day affair. A next key support area then lies at 487, extending to the prior 479 low.

Resuming the bullish outlook and bullish chart would be a close over 520 and some further upside follow through. Given such a breakout above resistance, there's upside potential to the 540 to 550 area in my estimation.

Support has been coming in around 505 and defines the low end of the current trading range. 500 is a key benchmark level and if pierced, next support looks like 483 to 479.

DOW 30 (INDU) AVERAGE; DAILY CHART:

The Dow 30 (INDU) Average 'breakout' point is at 10500 and the low end of its recent price range in the 10225 area is the 'breakdown' point so to speak. (Next support is in the 10100 area.) Upside or downside, a breakout of the recent trading range should see follow through. Prices still seem more 'buoyant' on the upside but it's been a lot of back and forth too. That the recent 'correction' is more sideways than down is, I predominately take as bullish.

The pattern of a strong advance, followed by a strictly sideways move, especially over a few week period, yields a chart that has the appearance of a pause in a bullish trend and that higher prices lie ahead. A decisive upside penetration of 10500 could be good for a further couple hundred point gain, or up to the upper end of the bullish price channel again.

The recent sideways trend is of course lousy for those holding Index calls or those who bought puts thinking that INDU was at a significant top. For those who strategized a range bound market, the outcome is good. A big help is to rely on those 'overbought' Relative Strength Index readings. In a strong advance, corrections from an overbought condition tend to be either shallow or the corrective move is more sideways than significantly lower.

NASDAQ COMPOSITE (COMP) INDEX, DAILY CHART:

More of the same sideways drift for the Composite but it keeps popping back up to challenge prior highs, which is bullish. There more of tendency to go UP, than down. Near support comes in around 2150, extending to the 2120 to 2114 area. Resistance/selling interest has been coming in on moves to and just over 2200. A close above 2200 that builds from there (after which support/buying interest is seen on pullbacks TO this area) would resume the bullish chart pattern. There's upside potential to the 2350-2400 over time; 'Santa Claus rally' to the rescue later this month?

This recent 4 week 'stall' wasn't or isn't surprising given that the market has come a long way and was registering 'overbought' on momentum-type indicators; e.g., the RSI. Stocks got to be 'fairly' valued according to current perceptions of earnings potential ahead. More evidence of business and individual tech purchases looks needed to kick off a next leg up.

NASDAQ 100 (NDX) DAILY CHART:

The Nasdaq 100 (NDX) pattern is no longer that of a potential double top, rather it's resolved into a line of resistance or selling interest defining the top end of a narrow trading range. This chart formation looks to be a consolidation (of the prior advance) and that after this pause, which also should 'throw off' NDX's overbought condition, I anticipate a resumption of the major (up) trend.

If there's a move that takes out recent highs in the low-1800 area with support found in the same area on pullback, I see potential for a move toward or to the upper end of the highlighted uptrend channel; e.g., to 1950 or perhaps to 2000.

Assuming prices fall more than recent trade and there's a break below near support in the 1755-1755 area, there's no prior apparent support before the previous 1652 low. It's possible that 1600 could be seen again but it's a less likely outcome than an upside surprise. Watch 1750 as a pivotal support.

NASDAQ 100 TRACKING STOCK (QQQQ); DAILY CHART:

A narrow trading range, a continued sideways drift on low volume doesn't give the bulls much to crow, ah, moo about. The key resistance remains at the 'line' of prior highs coming in around 44.8. The pivotal downside support is in the 43 area.

Given an upside breakout, there is potential for an eventual move to the 47.5-48.0 area.

If prices fell below 43 on some volume, there's potential for a decline back to the low to mid-40 dollar area. The prior 40.6 low would be an important benchmark in that case.

Based on this past week's lackluster volume trend, it looks like those bullish on the Nas 100 are cautious and are waiting for some spark that would or could get buyers back in. Technically, a decisive upside penetration of 44.8 would help the cause.

RUSSELL 2000 (RUT) DAILY CHART:

The Russell 2000 (RUT) is in a sideways drift and narrow 580-605 trading range. A first breakout point is a move above 605 and the bulls should hope for a CLOSE above this level and some follow through the following day.

A corresponding 'breakdown' point on a closing basis looks like 580, but intraday, a move below the prior 568 low. Next lower support is at the early-November low of 553. Like the other indexes, I assess more potential for an eventual upside breakout than for another down leg, assuming Nasdaq can lead the way.

There is some technical resistance at 605, but even more pivotal resistance at the 625 double top. If there is a strong move in the Nasdaq and S&P ahead, the Russell has the potential to break out above 625 with a possible objective to the 680 area, perhaps to 700 over time.

The worst downside case that I see is to the low-500 area, but I don't look for that so much as the prior 553 should be supported if prices get into that area again.

GOOD TRADING SUCCESS!



NOTES ON MY TRADING GUIDELINES AND SUGGESTIONS

CHART MARKINGS:

1. Technical support or areas of likely buying interest and highlighted with green up arrows.

2. Resistance or areas of likely selling interest and notated by the use of red down arrows.

I WRITE ABOUT:

3. Index price areas where I have a bullish bias or interest in buying index calls, selling puts or other bullish strategies.

4. Price levels where I suggest buying index puts or adopting other bearish option strategies.

5. Bullish or Bearish trader sentiment and display the graph of a CBOE daily call to put volume ratio for equities only (CPRATIO) with the S&P 100 (OEX) chart. However, this indicator pertains to the market as a whole, not just OEX. I divide calls BY puts rather than the reverse (i.e., the put/call ratio). In my indicator a LOW reading is bullish and a HIGH reading bearish, consistent with other overbought/oversold indicators.

Trading suggestions are based on Index levels, not a specific option (month and strike price) and entry price for that option. My outlook often focuses on the intermediate-term trend (next few weeks) rather than the next several days of the short-term trend.

Having at least 3-4 weeks to expiration tends to be my guideline for trade entry choice. I attempt to pick only what I consider to be 'high-potential' trades; e.g., a defined risk point would equal in points only 1/3 or less of the index price target.

I tend to favor At The Money (ATM), In The Money (ITM) or only slightly Out of The Money (OTM) strike prices so that premium levels are not as cheap as would otherwise be the case, which helps in not overtrading an account. Exit or stop points, as well as projected profitable index price targets, are based on my technical analysis of the underlying indexes.


New Option Plays

Industrials and Mining

by James Brown

Click here to email James Brown

Tonight's newsletter has a trade for the bulls and the bears. Plus a few stocks for your watch list.

Editor's Note:

I hesitate to load up on new bullish trades right now with the S&P 500 stuck in its trading range. If the index can breakout it should herald a new leg higher. I am listing a few stocks that caught my eye and made it to my watch list as possible bullish candidates if the market improves.

Stocks to watch: IBM, SWM, USTR, LLL, GD, and ETR.


NEW DIRECTIONAL CALL PLAYS

United Tech. - UTX - close: 69.40 change: +1.47 stop: 67.45

Why We Like It:
Shares of UTX are rallying toward resistance near $70.00. After four weeks of consolidating sideways the stock should be rested and ready for another run. Technicals are improving. The Point & Figure chart is bullish with a $95.00 target.

I'm suggesting traders use a trigger to buy calls at $70.25. If triggered our first target is $74.75.

Suggested Options:
I'm suggesting the January calls. My preference is the $70 strike.

BUY CALL JAN 70.00 UTX-AN open interest=13234 current ask $1.65

Annotated Chart:

Entry  on  December xx at $ xx.xx <-- TRIGGER @ 70.25
Change since picked:       + 0.00
Earnings Date            01/21/10 (unconfirmed)
Average Daily Volume =        4.0 million  
Listed on  December 12, 2009         


NEW DIRECTIONAL PUT PLAYS

Freeport McMoran - FCX - close: 76.81 change: -0.93 stop: 80.55

Why We Like It:
FCX is one of the largest mining companies on the planet. They mine for copper, gold, silver and more. The decline in the dollar has been bullish for commodities, which has powered a big move in FCX. Yet now the dollar has reversed higher and broken its bearish downtrend. If the dollar continues to rally commodities should correct and FCX with them.

You could argue that the correction has already happened with gold off $100 from its highs and FDX down more than $10 from its November highs. Yet the move up was so strong there could be further profit taking to go. Something to keep in mind with FCX, if the dollar rallies it should push both gold and copper lower. Yet if the economy improves then demand for copper should rise, which might temper FCX's decline.

Technically FCX has broken multiple levels of support at $80.00, at its 50-dma, and its trendline of higher lows. I consider this an aggressive, higher-risk trade because the dollar, commodities, and shares of FCX can be somewhat volatile. Use very small positions to help limit risk. Our first target is $72.50.

Suggested Options:
I'm suggesting the January puts. Stocks tend to fall faster than they climb. My preference is the $75 strike.

BUY PUT JAN 75.00 FHZ-MO open interest=10124 current ask $3.35

Annotated Chart:

Entry  on  December 12 at $ 76.81 
Change since picked:       + 0.00
Earnings Date            01/26/10 (unconfirmed)
Average Daily Volume =       12.6 million  
Listed on  December 12, 2009         



In Play Updates and Reviews

Expiration Week

by James Brown

Click here to email James Brown

We have five days left before December options expire. There are only 13 trading days left for the year.


CALL Play Updates

Bucyrus Intl. - BUCY - close: 50.98 change: +0.68 stop: 48.99

The fact that BUCY managed a rebound in the face of dollar strength is encouraging but if the dollar continues to rise this trade could be in jeopardy. I am not suggesting new positions at this time. More conservative traders may want to up their stops closer to $50.00. We'll plan to take profits at $54.90. I'm keeping the trigger to buy puts at $48.95 active in case BUCY rolls over.

Suggested Options:
No new positions at this time.

Annotated Chart:
loss.

Entry  on  December 09 at $ 50.72 
Change since picked:       + 0.26
Earnings Date            02/18/10 (unconfirmed)
Average Daily Volume =        2.8 million  
Listed on  December 01, 2009         


Capella Education - CPLA - close: 72.45 change: +0.57 stop: 69.65

We are seriously running out of time. December options expire in five days. If we don't see CPLA trade over $75.00 soon it's game over. I'm not suggesting new positions. Traders may want to adjust their targets to some fraction of our initial investment just to recoup some capital.

Suggested Options:
No new positions at this time.

Annotated Chart:

Picked on  November 24 at $ 72.55
Change since picked:       - 0.10
Earnings Date            02/11/10 (unconfirmed)
Average Daily Volume =        126 thousand 
Listed on  November 24, 2009         


EQUINIX Inc. - EQIX - close: 101.63 change: -0.05 stop: 97.45

EQIX hit new 52-week highs last week but the momentum has stalled the last couple of sessions. I don't see any changes from my prior comments. Broken resistance near $100.00 should be the first line of support. If that breaks then the $98.00-97.50 zone should be support. Look for a dip or a bounce near $100 as our next entry point. Our target is $109.50. The plan was to use small position sizes.

Suggested Options:
If EQIX provides a new entry point I'm suggesting the January calls. My preference is the $105 strike.

Annotated Chart:

Entry  on  December 09 at $103.02
Change since picked:       - 1.39
Earnings Date            02/10/10 (unconfirmed)
Average Daily Volume =        501 thousand 
Listed on  December 09, 2009         


Fedex Corp. - FDX - close: 87.94 change: -0.10 stop: 83.90

The profit taking in FDX continues for the third day in a row but it's definitely slowing down. I don't see any changes from my prior comments. The stock is still out performing its peers. Look for support in the $86-85 zone. More conservative traders may want to raise their stops closer to $85.00. The stock has already hit our first target near $90.00. We're currently aiming for $94.90.

Suggested Options:
If FDX provides a new entry point near $85-86 I'd use the January calls. If you own December calls you have to exit before this Friday's closing bell.

Annotated Chart:

Picked on  December 01 at $ 85.75 
Change since picked:       + 2.19
Earnings Date            12/17/09 (confirmed)
Average Daily Volume =        2.6 million  
Listed on  November 30, 2009         


F5 Networks - FFIV - close: 50.05 change: -2.51 stop: 47.99

Shares of FFIV under performed the market with a 4.7% decline thanks to a broker's downgrade on Friday morning. The stock held support at the $50.00 level. I see this pull back as an entry point to buy calls. More conservative traders can wait to buy calls on a bounce. Watch the 30-dma (near 48.50) for technical support. Our stop loss is a little wide so keep your position size small. Our first target to take profits is at $54.90. Our second target is $57.45.

Suggested Options:
Use the January calls. My preference is the $50 or $55 strike.

Annotated Chart:

Entry  on  December 09 at $ 52.08
Change since picked:       - 2.03
Earnings Date            01/20/10 (unconfirmed)
Average Daily Volume =        1.2 million  
Listed on  December 09, 2009         


Infosys Tech. - INFY - close: 52.48 change: -0.13 stop: 49.90

Nothing has changed for us with INFY. The stock's sideways consolidation is narrowing and suggest a breakout is imminent. Odds are INFY will breakout higher but it's not guaranteed. More conservative traders can wait for a move over $53.00 or the 2009 high of $53.13 to open bullish positions. Our first target to take profits is at $55.75. Our second and final target is $59.50. We will plan to exit ahead of the January 12th earnings report.

Suggested Options:
I'm suggesting the January calls. My preference is the $55 strike.

Annotated Chart:

Entry  on  December 05 at $ 51.88 /gap down entry point
                           /originally listed at $52.46
Change since picked:       + 0.60
Earnings Date            01/12/10 (confirmed)
Average Daily Volume =        1.4 million  
Listed on  December 05, 2009         


Ishares Financial - IYF - close: 51.44 change: +0.37 stop: 49.99

The banking stocks have continued to under perform the rest of the market. However, the IYF just spent four days hovering near technical support at its rising 100-dma. A bounce from here could be used as a new bullish entry point. More conservative traders may want to wait for a new rise over $53.00 before launching positions. Our multi-week target is $59.00. I would use small positions.

Suggested Options:
I would hesitate to launch positions right here. If the IYF closes under $50.70 I'd probably close this trade early. If you open positions use the February calls. My preference is the $55 strike.

Annotated Chart:

Entry  on  December 03 at $ 52.60
Change since picked:       - 1.16
Earnings Date            --/--/--
Average Daily Volume =        3.1 million  
Listed on  December 02, 2009         


MSC Industrial Direct - MSM - close: 46.95 change: +0.53 stop: 44.90

MSM displayed some relative strength but it may be too little too late. We only have five trading days left before December options expire. Traders may want to dial back their target expectations to some fraction of our original trade just to recoup some capital. A close over $47.50 might be a new entry point but you'll need to buy options with more time. I'd consider buying the January calls but keep in mind we'll exit ahead of the early January earnings report.

Suggested Options:
Consider buying the January calls on a new entry point over $47.50.

Annotated Chart:

Picked on  November 17 at $ 46.62
Change since picked:       + 0.33
Earnings Date            01/07/10 (unconfirmed)
Average Daily Volume =        513 thousand 
Listed on  November 17, 2009         


Norfolk Southern - NSC - close: 52.22 change: -0.02 stop: 49.75

Shares of NSC have now spent five weeks in the $50-53 trading range. The stock will breakout eventually. Odds favor a breakout higher but it's not guaranteed. At this point if you're nimble enough consider buying dips or bounces near $50.00 or wait for a breakout over $53.00. I am adjusting our exit strategy. Our first target is now $56.50. Our second and final target is $59.50. Our time frame is several weeks. FYI: The Point & Figure chart is bullish with a $65 target.

Suggested Options:
If NSC provides a new entry point I'd buy the January or March calls. My preference is the $55 strike.

Annotated Chart:

Picked on  November 21 at $ 51.84 (small positions)/gap higher entry
Change since picked:       + 0.38
Earnings Date            01/27/10 (unconfirmed)
Average Daily Volume =        5.4 million  
Listed on  November 21, 2009         


Precision Castparts - PCP - close: 111.97 change: +2.27 stop: 104.95

Target hit. Momentum continues for PCP. The stock rallied to new 2009 highs on Friday hitting $112.74 intraday. Our first target to take profits was at $112.45. Our second target is $118.75. The Point & Figure chart is bullish with a $131 target.

Suggested Options:
If you choose to open new positions here you'll need to raise your stop loss.

Annotated Chart:

Picked on  December 01 at $107.35
Change since picked:       + 4.62
                            /1st target hit $112.45 (+4.7%)
Earnings Date            01/20/10 (unconfirmed)
Average Daily Volume =        817 thousand 
Listed on  November 28, 2009         


UnitedHealth Group - UNH - close: 30.48 change: +0.17 stop: 26.99

UNH hit a new 52-week high this morning at $31.04. I don't see any changes from my Thursday night comments so I'm reposting them here:

It looks like the only sector really moving [Thursday] was healthcare. These stocks were up on expectations that the latest version of the Senate's healthcare reform bill will have a lot less reform in it. Until this bill eventually gets passed and signed into law the healthcare stocks could have a cloud over them. Yet once the big details are known and investors can make decisions without so much uncertainty this group could really move. UNH appears to be out performing its peers. [Thursday's] close over significant resistance at the $30.00 mark is bullish.

I'm suggesting small call positions on [Thursday's] move. Consider this a lottery ticket play. We're either going to win big or lose it all. Options are probably a little expensive given today's volatile move. If you can wait consider waiting a day for the premiums to come in a little bit. Our first target is $34.00. Our longer-term target is $36.00. Our time frame is several weeks. If you buy March calls you might want to think about holding over the late January earnings report.

Suggested Options:
I'm going to list January calls and March calls. Depending on your risk tolerance pick the month that suits you best.

BUY CALL JAN 32.00 UNH-AL open interest=2859 current ask $0.80
-or-
BUY CALL MAR 33.00 UNH-CM open interest=5582 current ask $1.57

Annotated Chart:

Entry  on  December 10 at $ 30.31 
Change since picked:       + 0.17
Earnings Date            01/21/10 (unconfirmed)
Average Daily Volume =        819 thousand 
Listed on  December 10, 2009         


Valmont Industries - VMI - close: 80.83 change: +0.66 stop: 77.65

There was no follow through on Thursday's failed rally pattern. That's good news. VMI is still trading above resistance near $80.00 and its 100-dma. That's also good news. Technically traders are probably okay buying calls with VMI above $80.00 but I'd prefer to launch positions on a new move over $81.00. Our first target to take profits is at $84.90. Our second target is $88.75. FYI: The most recent data list short interest at 9% of the very small 20.1 million-share float.

Suggested Options:
I'm suggesting the January calls. My preference is the $85 strike.

Annotated Chart:

Entry  on  December 10 at $ 81.00
Change since picked:       - 0.17
Earnings Date            02/10/10 (unconfirmed)
Average Daily Volume =        238 thousand 
Listed on  December 05, 2009         


Vertex Pharma - VRTX - close: 39.90 change: -0.39 stop: 38.35

If you look at the intraday chart on VRTX shares are bouncing from their lows of the session and look poised to move higher. I'd be tempted to buy calls now but readers might be better off waiting for new rise over $40.60 to initiate positions. Our target to exit is at $44.25. My time frame is several weeks.

Suggested Options:
See above for entry points. If you buy calls I'd use the January options. My preference is the $40 strike.

Annotated Chart:

Entry  on  December 03 at $ 40.25
Change since picked:       - 0.35
Earnings Date            02/09/10 (unconfirmed)
Average Daily Volume =        3.2 million  
Listed on  November 23, 2009         


PUT Play Updates

Bucyrus Intl. - BUCY - close: 50.98 change: +0.68 stop: 51.90

If the U.S. dollar continues to rally the recent bounce in some of the commodity-related names like BUCY may not last very long. Currently BUCY is an active call play but if it reverses we want to be ready. The plan is to buy puts if BUCY hits $48.95. Use small positions. If triggered I'm suggesting the January puts. My preference is the $50 or $45 strike. Our first target is $45.50 (just above the 50-dma). Our second target is $40.50.

Suggested Options:
I'm suggesting the January puts. My preference is the $50 or $45 strikes.

Annotated Chart:

Picked on  December 01 at $ xx.xx <-- TRIGGER @ 48.95, small positions
Change since picked:       + 0.00
Earnings Date            02/18/10 (unconfirmed)
Average Daily Volume =        2.8 million  
Listed on  December 01, 2009         


Goldman Sachs - GS - close: 166.00 change: -0.73 stop: 171.05

The early morning bounce in GS didn't get very far. Shares reversed under $168.00, which happened to be resistance on Thursday as well. This doesn't mean the oversold bounce is over but the lack of follow through is positive for the bears. I'm not suggesting new positions at this time. Our target is $155.50. More aggressive traders could aim for the $150 area or the simple 200-dma.

Suggested Options:
No new positions at this time.

Annotated Chart:

Picked on  November 25 at $168.75
Change since picked:       - 2.75
Earnings Date            12/15/09 (unconfirmed, could be in January)
Average Daily Volume =        9.5 million  
Listed on  November 21, 2009         


Sears Holding - SHLD - close: 73.35 change: +2.03 stop: 73.26

The improvement in consumer sentiment and the better than expected retail sales numbers from the Commerce Department this morning is bullish for retailers. The RLX gained 1.2% on the session. SHLD has been bouncing from support near $70.00 and its long-term trendline of higher lows. If the stock can close over $75.00 I'll drop SHLD as a bearish candidate and we may want to consider switching sides and buying calls. For now the plan is to buy puts if SHLD breaks $70.00 and hits our trigger at $69.50. I'm suggesting small position sizes. If triggered our first target is $65.25. Our second target is $60.50.

Suggested Options:
If SHLD hits our trigger I'm suggesting January puts. My preference is the $65 strike.

Annotated Chart:

Entry  on  December xx at $ xx.xx <-- TRIGGER @ 69.50 (small pos)
Change since picked:       + 0.00
Earnings Date            02/25/10 (unconfirmed)
Average Daily Volume =        1.6 million  
Listed on  December 08, 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: 194.67 change: -1.76 stop: n/a

Thursday's failed rally at $200 and Friday's under performance by AAPL looks like a bearish entry point. Fortunately stocks tend to fall faster than they climb but we're running out of time for the December trade. December options expire in five days. I am not suggesting new strangle positions at this time.

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.

Suggested Options:
No new positions at this time.

Annotated Chart:

Picked on  November 30 at $199.91
Change since picked:       - 5.24
Earnings Date            01/21/10 (unconfirmed)
Average Daily Volume =       15.1 million  
Listed on  November 30, 2009         


Goldman Sachs - GS - close: 166.00 change: -0.73 stop: n/a

We're down to our last five days for December options. We need to see GS under $160 or above $180 soon. At this point I'd consider exiting if either option traded high enough to recoup some capital. 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.

Suggested Options:
No new positions at this time.

Annotated Chart:

Picked on  November 21 at $171.67 /gap open entry
Change since picked:       - 5.67
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: 37.68 change: +0.35 stop: n/a

We're almost out of time for this SSO strangle. December options expire in five days. 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.

Suggested Options:
No new positions.

Annotated Chart:

Picked on  November 11 at $ 37.08
Change since picked:       + 0.60
Earnings Date            --/--/--
Average Daily Volume =         32 million  
Listed on  November 11, 2009         


United Parcel Service - UPS - close: 58.01 change: +0.38 stop: n/a

The sideways churning continues. Can UPS extend this narrow range for another week? We have five days left for December options. I'd still consider January strangles in the $58-56 zone.

December Strangle
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 $1.95 or more.

January Strangle
The options suggested for the January strangle were the January $60.00 calls (UPS-AL) and the January $55.00 puts (UPS-MK). Our estimated cost was $1.35. I would plan to sell if either option hit $3.50 or more.

Suggested Options:
I'd consider January positions.

Annotated Chart:

Picked on  November 21 at $ 57.99 /gap open entry
Change since picked:       + 0.02 
Earnings Date            02/02/10 (unconfirmed)
Average Daily Volume =        4.7 million  
Listed on  November 21, 2009         


CLOSED BULLISH PLAYS

Adobe Systems - ADBE - close: 35.38 change: -0.42 stop: 35.79

ADBE has continued to under perform the market. Our trigger to buy calls was never hit at $37.25. I'm dropping ADBE as a bullish candidate. The company is due to report earnings on Tuesday, December 15th and we don't want to hold over the report.

Chart:

Entry  on  December xx at $ xx.xx <-- TRIGGER @ 37.25
Change since picked:       + 0.00          *never opened*
Earnings Date            12/15/09 (confirmed)
Average Daily Volume =        4.8 million  
Listed on  December 05, 2009         


CLOSED BEARISH PLAYS

FISERV Inc. - FISV - close: 47.04 change: +0.35 stop: 48.05

I am giving up on FISV. The overall trend looks like the stock is poised to move lower but I'd rather see a breakdown under $45.00 or its 200-dma before initiating positions. I couldn't find any news to account for the spike higher this morning. Shares hit $47.86 and reversed lower. We're closing this trade early.

Chart:

Picked on  November 28 at $ 46.29
Change since picked:       + 0.75 <-- early exit @ 47.04 (+1.6%)
Earnings Date            02/02/10 (unconfirmed)
Average Daily Volume =        1.4 million  
Listed on  November 28, 2009         


Green Mountain Coffee Roasters - GMCR - cls: 65.47 chg: +2.00 stop: 64.51

GMCR spiked higher this morning on some positive analyst comments. The stock gapped open at $64.44 and quickly hit our new stop loss at $64.51 closing the play. Shares eventually rallied to their 100-dma before trimming their gains.

Annotated Chart:

Picked on  November 19 at $ 64.75
Change since picked:       - 0.34 <-- stopped @ 64.51 (-0.05%)
                                /1st target hit @ 60.25 (-6.9%)
Earnings Date            01/28/10 (unconfirmed)
Average Daily Volume =        1.5 million  
Listed on  November 18, 2009