Option Investor
Newsletter

Daily Newsletter, Thursday, 12/30/2010

Table of Contents

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

Market Wrap

One More Day in 2010

by Jim Brown

Click here to email Jim Brown
The markets weakened as the weak progressed and sellers appeared at the close. This is not a good sign for next week's markets.

Market Statistics

A sudden burst of great economic news failed to boost the markets with one day left to trade. Positively anemic volume at 3.8 billion shares failed to provide enough conviction to push the markets higher.

The weekly jobless claims came in under 400,000 for the first time since July 2008. Claims came in at 388,000 and a drop of 34,000 from the prior week. However, this is typically a volatile week since many people will wait until after the holidays to file a claim and begin looking for work.

Analysts expect claims to spike higher in January and continue over 400,000 for another month or more. California, Illinois and Georgia reported a decrease in claims of more than 1,000. New Jersey, Michigan and Missouri reported an increase of more than 1,000 new claims.

The December ISM Chicago soared to 68.6 from 62.5 in November. This was the fourth consecutive month of gains and the spike took the index to levels not seen since July 1988. The New Orders component spiked from 67.2 to 73.6 and levels not seen since 2005. Order backlogs exploded higher from 48.9 to 64.6. Production was the highest since Oct 2004 and employment the highest since 2005. This was a VERY bullish report.

The only real negative was a jump in the prices paid component to 78.2 from 70.7. This suggests inflation is slipping into the product chain. It would be hard not to expect the cost of commodities to push prices higher given their big gains in price this year.

The accelerating recovery in the Chicago area is directly related to the bullish trend in auto sales. Chrysler kept its plants open to produce Jeeps during the holidays rather than their normal shutdown because sales were so strong. The boom in the Chicago ISM bodes well for the national ISM in January but not to the extent we saw in today's report. We could see a 2-3 point increase in the national ISM.

Chicago PMI Chart

The pending home sales for November also posted an increase of 3.5% that was much better than expected. As employment continues to improve so will home sales but we still have the looming cloud of foreclosures coming in 2011.

With mortgage rates moving up almost daily that will also slow sales. However, there is a large amount of pent up buying that has not yet been felt. It will depend on the rising unemployment, rising equity market and rising consumer confidence. March will be a critical month for home sales. If the trends begins to accelerate it could signal an all clear for future buyers.

The Kansas City Manufacturing Survey is less important than the Richmond or Philly Fed or the Chicago ISM. The headline number for December was 21 and flat with November. New orders declined by a point to 24 and inventories rose +3 points to 5.

The bad news was again the rising prices. The prices paid for finished goods rose fro 3 to 18 and prices for raw materials spiked from 35 to 54. These are extremely bearish increases and suggest the deflation monster is dead but the inflation monster is waking from his slumber. The Fed still has no inflation fears so they can keep rates low but the warning signs are growing.

The EIA oil inventory report showed crude levels declines -1.3 million barrels but that was far less than the -3.2 million barrel decline analysts expected. Inventories had declined sharply for the last four weeks according to the API with a -15 million-barrel decline. Because there are accounting considerations for decreasing inventories before year-end most analysts expected a sharper decline in today's numbers. Gasoline levels declined -3.1 mb in the API report and -2.3 mb in the EIA report. This was not enough to rescue crude prices from a sharp drop. Crude declined from $91.50 yesterday to a low of $89 today. Year-end fund flows into commodities markets will probably increase the volatility over the next couple days.

Oil Chart

In stock news Anadarko Petroleum (APC) shares spiked +7% on rumors BHP Billiton (BHP) was preparing a bid. BHP failed in its acquisition attempt for Potash and they have been rumored to be looking for another oil company to increase their oil exploration division. BHP is a major player in offshore exploration and owns quite a few leases and wells in the Gulf of Mexico.

London's Daily Mail speculated BHP would offer up to $90 for APC, a 27% premium. Spokesmen for both APC and BHP declined to comment citing company policy against addressing rumors. There was a strong rumor back in September about a possible APC/BHP consolidation but nothing ever happened.

Anadarko owns 25% of the Macondo well that blew out killing 11 workers and billions in damages. APC has said it would not pay BP for the damages because it was gross negligence on BP's part. I can't imagine BHP taking a run at APC with that liability cloud over their head. BP's total including well recovery, cleanup and fines could run $40 billion and $10 billion of that would be attributable to APC. They might be able to settle for a lesser amount but it would take years of negotiating and Andarko's market cap is only $35 billion. Their cash on hand in the couple billion range and insurance was less than $1 billion. Until BP and the courts absolve APC from liability I don't see BHP paying a 27% premium.

APC Chart

Also in the energy sector the coal companies had a good day due to the positive manufacturing reports and the drop in jobless claims. This suggests economic activity is rising and the demand for coal for electricity and for steel production will continue to grow. Walter Energy (WLT) rose +3.5% and Patriot Coal (PCX) +5%. They are both big in metallurgical coal.

U.S. stock mutual funds had their first positive week for fund flows since April and they should post a positive gain for the month. The Investment Company Institute (ICI) said domestic funds took in $335 million for the week ended on 12/21. That is a drop in the bucket compared to the $100 billion in outflows since May 5 through Dec 15th. Foreign stock funds took in $3.6 billion last week.

Bond funds saw outflows of $4.37 billion as investors run from the bond bubble and move towards more risky investments for 2011. That was less than the $8.6 billion in outflows in the prior week as a result of Meredith Whitney's muni bond default warning.

The news out of Europe is very quiet but there are still some problems simmering in their debt markets. I believe the lack of news is related to the holidays and once into the New Year we should expect the worries over Spain to blossom into the next hurdle for the equity markets.

The S&P closed lower for only the fourth time in December and the month is setting up for the best December since the 1990s. However, we have seen selling at the close for the last three days. It was not a lot of selling and definitely not on heavy volume but it was still there.

Volume was very light at 3.8 billion and internals were negative but we really can't draw any conclusions over today's holiday trading. Market direction on Friday should be a coin toss.

I had a reader ask me what would happen if the market did not go down in January. Since about the middle of November the analyst community has switched to an almost unanimous expectation for the market to decline -7% to -10% in January. The expectations are now so widespread that it almost seems like the move we might see is a continued rally. When everyone moves to the same opinion the market tends to do the opposite.

Pullbacks are inevitable and they never come in the time frame investors expect. If we did get a decent continuation of the rally in January we might see a situation where bearish traders and traders waiting in cash for a dip might be forced to chase stocks higher. I know this would drive the bears crazy. They have been calling for a market top every day this week so a continued move higher would be very painful and could generate a dece4nt short squeeze.

I would not bet on market direction on Friday because shorts will be trying to establish positions for next week and fund managers will be trying to window dress into the close. All of this should be on the lowest volume day of the year.

The S&P closed at 1258, again. It seems like it has closed there every day for the last week. The markets have moved sideways with no material gains and a negative close on Friday would pretty much kill the hopes of a Santa Claus rally. In theory that predicts a bearish January. However, the Santa period also includes the first two days of January so suspicious traders can still hope.

S&P-500 Chart

The Dow, like the S&P, has gone flat. Volatility has died and the depth of the candles is almost invisible. We have stretched the string of less than triple digit days to 19 days. This spring is being compressed so tightly the odds of a triple digit explosion next week are nearly 100%.

Support remains 11,544 and resistance 11,600 but neither of those will matter next week. The numbers we will be talking about next Friday will be materially different.

Dow Chart

The Nasdaq has had a solid top at 2670 for the last week and support is 2660. Who would have thought we would be talking about a 10-point range for an entire week? Monday's gap down was immediately bought and pushed right back into the range.

The Nasdaq big caps are not performing well. Most of the charts are looking heavy and I fear we will see some selling in stocks like Apple, Google, Priceline and Netflix next week. The bulls may be waiting for the dip but hopefully they don't buy the first negative day.

Nasdaq Chart

There was no change on the Russell. This formation is very unsupported and odds are good we are going to retest support at 765. The Russell has been trading in a very narrow range for the last two weeks with no deviation at all.

Russell Chart

It is really tough writing about the markets for more than two weeks with almost no movement. How many ways can you say low volatility, managers holding positions for year-end and watch for big changes in January? It is boring for me and I am sure it is boring for readers.

Fortunately it will be January soon and there will be plenty to write about. Volatility will increase and the markets should go directional pretty quickly. It may not be the direction your hoping for but at least there will be opportunities to trade and make some money.

I still believe there will be a buying opportunity in January but I have to admit the concept of skipping a meaningful dip and just continuing higher intrigues me. It is always possible and in the 13 years I have been writing it has happened more than once. Everyone continued to predict a disaster but the market was not listening. Whichever option we are presented in January I look forward to the change.

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New Option Plays

Farm & Construction

by James Brown

Click here to email James Brown


NEW DIRECTIONAL CALL PLAYS

Deere & Co - DE - close: 83.30 change: -0.01

Stop Loss: 79.40
Target(s): 84.50, 89.00
Current Option Gain/Loss: Unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see trigger

Company Description

Why We Like It:
Investor optimism for the global economic recovery in 2011 is very evident in stocks like DE and CAT. Shares of DE rallied to new two and a half year highs in December. Now the upward momentum has slowed a little bit but the trend is still up. Broken resistance near $80 and the rising 50-dma, which is nearing $80, should offer some support. I am suggesting we buy calls on a dip at $80.50. If triggered we'll use a stop loss at $79.40.
FYI: The Point & Figure chart for DE is pretty bullish with a $100 target.

Buy-the-Dip Trigger @ 80.50

- Suggested Positions -

Buy the 2011 February $80 calls (DE1119B80)

- or -

Buy the 2011 February $85 calls (DE1119B85)

Annotated Chart:

Entry on December xxth at $ xx.xx
Earnings Date 02/16/11 (unconfirmed)
Average Daily Volume = 3.4 million
Listed on December 30th, 2010


In Play Updates and Reviews

EXPE Tags Our Target

by James Brown

Click here to email James Brown

Editor's Note:

Our put play on EXPE hit our target this morning. The rest of the market wasn't moving much.

-James

Current Portfolio:


CALL Play Updates

Amazon.com Inc. - AMZN - close: 182.75 change: -0.62

Stop Loss: 176.45
Target(s): 189.50, 199.00
Current Option Gain/Loss: -10.2%, and - 5.1%
Time Frame: 4 to 6 weeks
New Positions: See below

Comments:
12/30 update: There was no follow through on AMZN's bounce from Wednesday. Shares just drifted sideways. We might get another entry point on a dip in the $181-180 zone again.

We want to keep our position size small. AMZN can be a volatile stock. Our upside targets are $189.50 and $199.00.

- Suggested (SMALL) positions -

Long the 2011 January $190 calls (AMZN1122A190) Entry @ $2.35

- or -

Long the 2011 February $200 calls (AMZN1119B200) Entry @ $3.85

Entry on December 28th at $182.10
Earnings Date 01/27/11 (unconfirmed)
Average Daily Volume = 5.0 million
Listed on December 27th, 2010


Boeing Co. - BA - close: 65.01 change: -0.04

Stop Loss: 62.75
Target(s): 69.00, 72.25
Current Option Gain/Loss: Unopened
Time Frame: 4 to 6 weeks
New Positions: Yes, see trigger

Comments:
12/30 update: Traders bought the dip in BA again but the stock just isn't moving high enough. The high today was $65.23. There is no change from my prior comments. I'm suggesting a trigger to buy calls at $65.50. We'll use a stop loss under this past week's low at $62.75. There is additional resistance at the 200-dma near the $67 level. We should consider this a higher-risk aggressive trade. Keep your position size small. Our first target is $69.00. Our second target is $72.25.

Trigger @ 65.50

- Suggested Positions -

Buy the 2011 January 67.50 calls (BA1122a67.5) current ask $0.64

Buy the 2011 February $70.00 calls (BA1119B70) current ask $0.77

Entry on December xxth at $ xx.xx
Earnings Date 01/26/11 (unconfirmed)
Average Daily Volume = 5.3 million
Listed on December 25th, 2010


Baxter Intl. Inc. - BAX - close: 50.72 change: -0.19

Stop Loss: 49.90
Target(s): 55.50, 57.50
Current Option Gain/Loss: Unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see trigger

Comments:
12/30 update: BAX slipped lower on Thursday morning but shares managed to pare their losses by the close. There is no change from my prior comments. I am suggesting a trigger to buy calls at $52.55. If triggered our first target is $55.75. Our second target is $57.50. I would consider this a higher-risk trade. If you look at the weekly chart of BAX you can draw a trendline across the long-term highs and the trend is lower. BAX could see additional resistance near $55.00. Keep your position size small.

Trigger @ 52.55

- Suggested Positions -

Buy the 2011 February $55 calls (BAX1119B55)

Entry on December xxth at $ xx.xx
Earnings Date 01/27/11 (unconfirmed)
Average Daily Volume = 3.3 million
Listed on December 25th, 2010


Cummins Inc. - CMI - close: 110.16 change: +0.03

Stop Loss: 108.75
Target(s): 112.75 114.75
Current Option Gain/Loss: -19.6% and - 9.0%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
12/30 update: CMI is still churning sideways near $110. There is no change from my prior comments (and there was no real change in the option prices). Big picture the trend is up but I'm growing cautious on CMI. Readers may want to wait for a move over $110.50 or the $111.00 levels before initiating new positions or you could try and buy a dip near $109.00, especially since we have a tight stop at $108.75. This remains an aggressive entry point and I'm only suggesting small positions.

(small positions only to limit our risk)

- Suggested Positions -
Buy the 2011 January $115 calls (CMI1122A115) Entry @ $1.12

- or -

Buy the 2011 March $115 calls (CMI1119C115) Entry @ $4.73

12/27: CMI opens at $110.18
12/25: Buy calls now at current levels (small positions)
12/21: New entry point @ $110.25, New stop @ 108.75, New option strikes.

Entry on December 27th at $110.18
Earnings Date 02/02/11 (unconfirmed)
Average Daily Volume = 1.8 million
Listed on December 11th, 2010


CSX Corp. - CSX - close: 64.46 change: +0.10

Stop Loss: 61.75
Target(s): 67.00, 69.50
Current Option Gain/Loss: -23.4% and -10.4%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
12/30 update: CSX is still easing higher. The stock hit $64.74 at its best levels today. More aggressive traders could buy calls now. Or you could wait for CSX to hit a new relative high (over 64.80) before initiating positions. If you do open new positions I would buy the February (or longer) calls.

- Current Positions - (We only have a small position open)

Buy the 2011 January $65 calls (CSX1122A65) Entry @ $1.75

- or -

Buy the 2011 February $65 calls (CSX1119B65) Entry @ $2.49

12/25: new stop loss @ 61.75
12/13: CSX opened at $64.39
12/11: New Entry Point Strategy. Buy half now.
12/11: New targets: 67.00, 69.50
12/02: New trigger @ 62.50.
12/01: New trigger @ 62.25, New stop @ 59.90, New targets.

Entry on December 13th at $64.39
Earnings Date 01/18/11 (unconfirmed)
Average Daily Volume = 5.9 million
Listed on November 23rd, 2010


CenturyLink, Inc. - CTL - close: 46.36 change: +0.11

Stop Loss: 43.75
Target(s): 44.90, 48.00
Current Option Gain/Loss: +675.0%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
12/30 update: CTL is still moving sideways above short-term support near $46.00. On the daily chart you can start to see a short-term trend of lower highs. There is no change from my prior comments. Conservative traders could always exit now to lock in gains. I am not suggesting new positions at this time.

FYI: Investors should know that CTL is currently involved with a $10.6 billion stock-swap merger with Qwest Communications (Q). The merger isn't supposed to be completed until the first half of 2011. The trend for both stocks is up and naturally looks very similar following the M&A announcement.

Current Position:
Long the 2011 January $45.00 calls (CTL1122A45) Entry @ 0.20

12/21: Adjusted final target to $48.00
12/14: New stop loss @ 43.75
12/13: First Target Hit @ $44.90, option @ $0.85 (+325%)
12/01: Adjusted secondary target to $49.00

Entry on November 29th at $42.55
Earnings Date 02/22/11
Average Daily Volume = 3.0 million
Listed on November 27th, 2010


Cognizant Technology Solutions - CTSH - close: 73.84 change: -0.32

Stop Loss: 68.49
Target(s): 74.50, 79.00
Current Option Gain/Loss: Unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see trigger

Comments:
12/30 update: CTSH spiked toward $75 this morning and reversed. I am still looking for a little pull back. We might want to move our buy-the-dip entry point toward the $72.00 area. I'm willing to wait another couple of days and leave our trigger at $71.00 for now. Our first target is $74.50. Our longer-term target is $79.00.
FYI: The Point & Figure chart for CTSH is forecasting a $93 price target.

Trigger to buy calls on the dip @ $71.00

- Suggested Positions -

Buy the 2011 January $75.00 calls (CTSH1122A75)

- or -

Buy the 2011 April $75.00 calls (CTSH1116D75)

Entry on December xxth at $ xx.xx
Earnings Date 02/09/11 (unconfirmed)
Average Daily Volume = 2.3 million
Listed on December 18th, 2010


Express Scripts - ESRX - close: 54.08 change: -0.03

Stop Loss: 51.49
Target(s): 53.95, 58.50
Current Option Gain/Loss: + 5.7% and -31.9%
Time Frame: 5 to 6 weeks
New Positions: see below

Comments:
12/30 update: ESRX is still consolidating sideways between technical support at its 30-dma and technical resistance at its 10 and 20-dma overhead. There is no change from my prior comments. I remain cautious on ESRX here and would hesitate to open new positions. More conservative traders might want to raise their stop loss. Our final exit target is $58.50.

FYI: The point & figure chart for ESRX is forecasting a very bullish, long-term target of $80.

We currently only have half a position open.

Current Position:
Long the 2011 January $52.50 calls (ESRX1122A52.5) Entry @ $2.10

- or -

Second Position (small position):

Long the 2011 February $55.00 calls (ESRX1119B55) current ask $2.22

12/25: new stop loss @ 51.49
12/20: Suggested new positions with Feb. 55 calls.
12/18: Adjusted final exit target to $58.50
12/16: New stop loss @ 51.25
12/07: Exit the December calls. option @ $2.01 (+64.7%)
12/01: First Target Hit @ $53.95. Dec's @ $2.20 (+80.3%). Jan's @ $3.10 (+47.6%)

Entry on November 18th at $51.81
Earnings Date 02/24/11
Average Daily Volume = 4.3 million
Listed on November 17th, 2010


Fastenal Co. - FAST - close: 60.11 change: +0.13

Stop Loss: 53.75
Target(s): 59.95, 62.50
Current Option Gain/Loss: Unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see trigger

Comments:
12/30 update: FAST is showing a little relative strength here. The stock closed over resistance at $60.00. More aggressive traders will want to seriously consider buying calls right here. I'm not quite ready to chase it but the stock has spent a couple of weeks digesting its gains with a sideways move under the $60 level. I'm leaving our buy-the-dip trigger at $56.75 for now.

FYI: FAST announced a special, one-time cash dividend of 42-cents on November 18th and all of the option strikes have been adjusted for this 42-cent dividend.

Trigger @ 56.75

Suggested Positions:
Buy the 2011 January $54.58 calls (FAST1122A54.58)

- or -

Buy the 2011 February $59.58 calls (FAST1119B59.58)

12/21: Adjusted entry point trigger from 56.00 to 56.75

Entry on December xxth at $ xx.xx
Earnings Date 01/19/11 (unconfirmed)
Average Daily Volume = 880 thousand
Listed on December 8th, 2010


FedEx Corp. - FDX - close: 92.96 change: +0.16

Stop Loss: 90.90
Target(s): 96.75, 99.75
Current Option Gain/Loss: -75.0% and -22.2%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
12/30 update: As expected shares of FDX continue to move sideways in a narrow range as investors wait for the year to end before placing any new bets. Readers may want to wait for shares to break the short-term trend of lower highs before initiating new positions. A move over $93.50 or $94.00 should suffice. Or wait for a dip (or bounce) near $90 and its rising 50-dma.

- Suggested Positions (only small positions so far) -

Buy the 2011 January $100 call (FDX1122A100) Entry @ $0.80

- or

Buy the 2011 April $100 call (FDX1116D100) Entry @ $2.96

12/17: FDX opens at $94.23 - our entry point.
12/16: Adjusted Entry - initiate small positions now (@ Friday's open)

Entry on December 17th at $94.23
Earnings Date 12/16/10 (confirmed)
Average Daily Volume = 2.1 million
Listed on November 29th, 2010


Goldman Sachs - GS - close: 167.64 change: +0.01

Stop Loss: 162.95
Target(s): 171.00, 179.50
Current Option Gain/Loss: +10.9% and +18.5%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
12/30 update: For the second time this week GS had its earnings estimates cut. The stock really didn't move on the news today. While the lack of follow through on the recent failed rally near $171 is somewhat positive I'm still expecting a dip toward the $165-164 zone. Wait for that dip before you consider new positions. GS has already hit our first target at $171.00. Right now our final target is $179.50.
FYI: The Point & Figure chart for GS is forecasting a very bullish $224 long-term target.

- Suggested Positions (only small positions so far) -

Buy the 2011 January $170 calls (GS1122A170) Entry @ $2.75

- or -

Buy the 2011 April $175 calls (GS1116D175) Entry @ $5.27

12/28: 1st Target Hit @ 171.00, Jan. call @ $4.75 (+72.7%), April call @ $7.35 (+39.4%)
12/22: New stop loss @ 162.95
12/17: GS opened at $163.92
12/16: Adjusted Entry - initiate small positions now (@ Friday's open)

Entry on December 17th at $163.92
Earnings Date 01/18/11 (unconfirmed)
Average Daily Volume = 7.2 million
Listed on December 2nd, 2010


International Business Machines - IBM - close: 146.67 change: +0.15

Stop Loss: 142.99
Target(s): 149.90, 157.50
Current Option Gain/Loss: - 4.4%, and - 2.2%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
12/30 update: IBM was slowly drifting higher on Thursday. There is no change from my prior comments. Readers could open positions now or you could wait and try and jump in on a dip near $146.00-145.75. Alternatively you could wait for a move past short-term resistance at $147.50. Our first target to take profits is at $149.90. FYI: The Point & Figure chart on IBM is forecasting a long-term target of $196.

- Suggested Positions -

Long the 2011 January $150 calls (IBM1122A150) Entry @ $1.35

- or -

Long the 2011 April $155 calls (IBM1116D155) Entry @ $2.25

Entry on December 29th at $146.75
Earnings Date 01/18/11 (unconfirmed)
Average Daily Volume = 4.7 million
Listed on December 14th, 2010


Juniper Networks - JNPR - close: 37.17 change: +0.25

Stop Loss: 34.90
Target(s): 39.75
Current Option Gain/Loss: -20.5% and - 2.6%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
12/30 update: JNPR showed a little bit of strength with a +0.6% gain but shares remain inside the short-term trading range (36.75-37.35). I'm expecting a correction toward $36. Wait for the dip before considering new positions. Our first target is $39.75.

- Suggested Positions (only small positions so far) -

Buy the 2011 January $38.00 calls (JNPR1122A38) Entry @ $0.78

- or -

Buy the 2011 April $40.00 calls (JNPR1116D40) Entry @ $1.50
12/17: JNPR opens at $36.91
12/16: Adjusted Entry - initiate small positions now (@ Friday's open)

Entry on December 17th at $36.91
Earnings Date 01/25/11 (unconfirmed)
Average Daily Volume = 5.5 million
Listed on December 11th, 2010


Lockheed Martin Corp. - LMT - close: 68.69 change: -0.44

Stop Loss: 67.95
Target(s): 73.25
Current Option Gain/Loss: -71.4% and -65.0%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
12/30 update: LMT continues to underperform. Shares hit new two-week lows with a 0.63% loss. The close under $69.00 is short-term bearish. Of course LMT was already looking short-term bearish. Now we can expect a pull back toward support near $68.00. Aggressive traders might want to consider lowering their stop loss toward $67.50 since the November lows were near the $67.70 level. Conservative traders might want to exit early. I am not suggesting new positions.

- Suggested Positions -

Buy the 2011 January $70.00 calls (LMT1122A70) Entry @ $1.75

- or -

Buy the 2011 March $75.00 calls (LMT1119C75) Entry @ $1.00

Entry on December 17th at $70.28
Earnings Date 01/27/11 (unconfirmed)
Average Daily Volume = 1.7 million
Listed on December 16th, 2010


Millicom Intl. Cellular - MICC - close: 95.26 change: +1.95

Stop Loss: 89.75
Target(s): 99.50
Current Option Gain/Loss: - 4.3% and +15.1%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
12/30 update: Entry point alert! If you were waiting for MICC to breakout over resistance near its 100-dma and the $95.00 mark you got it today. MICC was showing relative strength with a +2.0% gain. Our exit target is $99.50. Aggressive traders could aim for the 2010 highs near $102.50.

FYI: It looks like MICC must have had a special dividend because several of the options have odd strike prices ending in .40.

- Suggested Positions -

Long the 2011 January 95.40 calls (MICC1122A95.4) Entry @ $2.30

- or -

Long the 2011 April $100.00 calls (MICC1116D100) Entry @ $3.30

Entry on December 23rd at $94.23
Earnings Date 02/09/11 (unconfirmed)
Average Daily Volume = 518 thousand
Listed on December 22nd, 2010


Netflix Inc. - NFLX - close: 179.80 change: -0.47

Stop Loss: 174.90
Target(s): 199.50, 219.50
Current Option Gain/Loss: -58.6% and -43.4%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
12/30 update: There was an analyst opinion out this morning that Apple Inc. (AAPL) should buy NFLX. Yet the article had no affect on shares of NFLX. Aside from a little movement this morning shares of NFLX were extremely flat. They traded in a 65-cenr range most of the day.

I would wait for a move over the trendline lower highs before initiating new positions. A rise past $183.00 or $184.50 should suffice.

Cautious traders may want to raise their stop loss. Just remember, this was a very aggressive, higher-risk play to start and we were expecting some volatility. Readers may want to wait for a new move over $185 before considering new bullish positions.

Make no mistake, this is a very aggressive, higher-risk trade. I suggest readers keep their positions pretty small to limit your risk. Our first target is $199.50. Our second target is $219.50.

- Suggested Positions (small positions only) -

Long the 2011 January $200 calls (NFLX1122A200) Entry @ $4.35

- or -

Long the 2011 February $220 calls (NFLX1119b220) Entry @ $5.75

Entry on December 22nd at $187.12
Earnings Date 01/26/11 (unconfirmed)
Average Daily Volume = 7.5 million
Listed on December 21st, 2010


Oceaneering International - OII - close: 73.77 change: -0.16

Stop Loss: 69.95
Target(s): 78.00, 79.95
Current Option Gain/Loss: -35.0%, -41.1%, and -19.6%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
12/30 update: There was no follow through higher on yesterday's relative strength in the oil service industry. A drop in oil prices didn't help matters. I remain cautious on OII. I am not suggesting new positions at this time. Our first target is $78.00.

- Suggested Positions -

Buy the 2011 January $75 calls (OII1122A75) Entry @ $2.77

- or -

Buy the 2011 January $80 calls (OII1122A80) Entry @ 0.85

- or -

Buy the 2011 April $80 calls (OII1116D80) Entry @ 3.86

Entry on December 23rd at $75.28
Earnings Date 02/17/11 (unconfirmed)
Average Daily Volume = 584 thousand
Listed on December 4th, 2010


Panera Break Co. - PNRA - close: 103.64 change: +1.53

Stop Loss: 103.90
Target(s): 109.95, 114.00
Current Option Gain/Loss: Unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see trigger

Comments:
12/30 update: PNRA displayed a little volatility on Thursday. The stock managed to pare its losses but it still closed with a -1.3% loss. We've been waiting for a breakout over $107.00. We might want to change our strategy and buy a dip near $100.00 instead. I'm thinking about moving our trigger from $107.15 to $100.50 and moving our stop loss to $98.45 near the 50-dma. However, we'll leave things unchanged until we see how PNRA finishes the last day of 2010 tomorrow.

This is an aggressive trade so we want to keep our position size small. FYI: The Point & Figure chart is very bullish with a $131 target.

Breakout Trigger @ $107.15

- Suggested Positions - (small positions) -

Buy the 2011 January $110 (PNRA1122A110)

- or -

Buy the 2011 February $115 (PNRA1119B115)

Entry on December xxth at $ xx.xx
Earnings Date 02/10/11 (unconfirmed)
Average Daily Volume = 389 thousand
Listed on December 20th, 2010


Transocean Ltd. - RIG - close: 69.13 change: -0.15

Stop Loss: 66.25
Target(s): 72.50, 78.25
Current Option Gain/Loss: -47.4% and -37.2%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
12/30 update: There is nothing new to report on for RIG today. Shares are churning sideways in the $68-70 zone. I remain somewhat cautious here. I am not suggesting new bullish positions at this time. Our final target is $78.25.

- Current Positions -
Long the 2011 January $70.00 calls (RIG1122A70) Entry @ $2.95

- Second Position -
Long the 2011 February $75.00 calls (RIG1119B75) Entry @ $1.80

12/17/10 Entry on Feb. calls @ $1.80
12/16/10 New Entry Point (buy February calls) - buy the dip.
12/11/10 New target 78.25, new stop loss $66.25
12/03/10 Target hit @ $72.50, option @ $4.95 (+67.7%)

Entry on November 30th at $68.18
Earnings Date 02/24/11 (unconfirmed)
Average Daily Volume = 6.3 million
Listed on November 29th, 2010


Stericycle Inc. - SRCL - close: 81.42 chane: -0.36

Stop Loss: 79.40
Target(s): 84.75, 89.00
Current Option Gain/Loss: Unopened
Time Frame: 4 to 6 weeks
New Positions: Yes, see below

Comments:
12/30 update: We were expecting SRCL to pull back today but shares didn't pull back enough. I am suggesting we wait for a dip and buy calls at $80.75. If triggered we'll use a stop loss at $79.40. Our targets are $84.75 and $89.00.

Trigger @ 80.75

- Suggested Position -

Buy the 2011 February $85 calls (SRCL1119B85) current ask $1.25

Entry on December xxth at $ xx.xx
Earnings Date 02/03/11 (unconfirmed)
Average Daily Volume = 543 thousand
Listed on December 29th, 2010


Union Pacific - UNP - close: 92.06 change: -0.09

Stop Loss: 89.75
Target(s): 96.25, 99.75
Current Option Gain/Loss: -47.3% and -16.3%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
12/30 update: Thursday delivered another quiet session for UNP. There is no change from my prior comments. Readers might want to wait for a move over $92.50 before considering new bullish positions.

- Current position -
Suggested Position:
Buy the 2011 January $95 calls (UNP1122A95) Entry @ $1.52

Second Position
Buy the 2011 February $95 calls (UNP1119B95) Entry @ $2.33

12/21/10: UNP provides another entry point.
12/17/10: Entry on Feb. calls @ $2.33
12/16/10: New Entry point: buy February calls
12/16/10: New stop loss @ 89.75

Entry on November 30th at $89.83
Earnings Date 01/20/11
Average Daily Volume = 2.9 million
Listed on November 20th, 2010


United Parcel Service - UPS - close: 72.68 change: -0.00

Stop Loss: 66.85
Target(s): 74.75, 78.50
Current Option Gain/Loss: Unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see below

Comments:
12/30 update: UPS closed unchanged on the session. There is no change from my previous comments on UPS. We are waiting for a pull back toward support near $70.00. Our trigger to buy calls is at $70.25 but I'm looking at raising our buy-the-dip trigger toward $72.25.

Trigger @ 70.25

Suggested Position:
Buy the 2011 January $70.00 call (UPS1122A70)

- or -

Buy the 2011 April $75.00 call (UPS1116D75)

Entry on December xxth at $ xx.xx
Earnings Date 02/01/10 (unconfirmed)
Average Daily Volume = 3.9 million
Listed on December 6th, 2010


United Technology Corp. - UTX - close: 78.85 change: -0.25

Stop Loss: 73.90
Target(s): 81.50, 84.75
Current Option Gain/Loss: Unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see trigger

Comments:
12/30 update: It looks like UTX is starting to correct lower. Our plan is to launch bullish positions on a dip at $77.10.
FYI: The Point & Figure chart is bullish with a $91 target for UTX.

Trigger to buy calls @ $77.10

Suggested Position: Buy the 2011 January $80 calls (UTX1122A80)

- or -

Suggested Position: Buy the 2011 February $80 calls (UTX1119B80)

Entry on December xxth at $ xx.xx
Earnings Date 01/26/11 (unconfirmed)
Average Daily Volume = 3.2 million
Listed on December 4th, 2010


Vulcan Materials Co. - VMC - close: 44.83 change: -0.34

Stop Loss: 43.75
Target(s): 47.50, 49.75
Current Option Gain/Loss: -11.5%, and - 2.2%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
12/30 update: The lack of follow through on Wednesday's rebound has provided us a slightly better entry point than expected. I would still consider new positions today at current levels on a dip closer to $44.00. Our first target to take profits is at $47.50. Our second target is $49.75.

(small positions only!)- Suggested Positions -

Buy the 2011 January $45 calls (VMC1122A45) Entry @ $1.30

- or -

Buy the 2011 February $45 calls (VMC1119B45) Entry @ $2.20

Entry on December 30th at $45.02
Earnings Date 02/07/11 (unconfirmed)
Average Daily Volume = 1.5 million
Listed on December 13th, 2010


Cimarex Energy Co. - XEC - close: 89.55 change: +0.50

Stop Loss: 84.75
Target(s): 89.90, 94.25
Current Option Gain/Loss: Unopened
Time Frame: 4 to 6 weeks
New Positions: Yes, see below

Comments:
12/30 update: XEC briefly spiked over resistance at $90.00 but the gains didn't last. Currently our plan is to buy calls on a dip at $86.50. We want to keep our position size pretty small to limit our risk.

Trigger @ 86.50

- Suggested Positions -
Buy the 2011 January $90 calls (XEC1122A90)

- or - Buy the 2011 February $90 calls (XEC1119B90)

Entry on December xxth at $ xx.xx
Earnings Date 02/17/11 (unconfirmed)
Average Daily Volume = 907 thousand
Listed on December 1st, 2010


PUT Play Updates

Expedia Inc. - EXPE - close: 25.28 change: -0.30

Stop Loss: 26.51
Target(s): 25.10, 23.25
Current Option Gain/Loss: + 8.3%
Time Frame: 2 to 3 weeks
New Positions: No

Comments:
12/30 update: Target achieved. EXPE displayed some relative weakness today with a spike down to $24.84. The stock found some support near its exponential 200-dma. However, our first target to take profits was hit at $25.10. The option was trading near $0.80 and hit a high of $0.90.

Please note that we are moving our stop loss down to $26.51 and more conservative traders will want to exit completely since the $25.00 level looks like it could be support! I am not suggesting new positions. I am moving our final target down to $23.25.

Current Position: Buy the 2011 January $25 Put (EXPE1122M25) Entry @ $0.60

12/30/10 Target hit @ 25.10, option @ 0.80 (+25%)
12/30/10 new stop loss at $26.51

Chart:

Entry on December 8th at $26.88
Earnings Date 02/10/11 (unconfirmed)
Average Daily Volume = 2.5 million
Listed on December 7th, 2010