Option Investor
Newsletter

Daily Newsletter, Thursday, 1/6/2011

Table of Contents

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

Market Wrap

Waiting On Payrolls

by Jim Brown

Click here to email Jim Brown
The markets stagnated on Thursday as traders waited on the Non-Farm Payroll report on Friday.

Market Statistics

Even though the ADP report on Wednesday was very positive it was really weighing on the markets today. The +297,000 jobs it said were created in December really upped the ante on expectations for the Non-Farm Payrolls on Friday. Last week the expectations for the payroll report were for a gain of 125,000 jobs. Since the ADP report some analysts are now expecting upwards of 200,000 jobs on Friday.

That is a big jump when analysts were expecting such a mediocre report just a month ago. It would mean employment has turned the corner and a real recovery is beginning. Unfortunately the increased expectations bring with them increased concerns that the ADP report was the result of a some body data and reality could be much lower on Friday.

This worry along with a negative surprise in retail sales kept the lid on the market on Tuesday. The Chain Store Sales for December came in at +3.1% and a sharp decline from the 5.8% in November and the 5+% analysts were expecting. The big decline came as a result of the blizzard that shutdown sales in the important after Christmas week. Analysts estimate up to $1.5 billion in sales were missed because consumers were snowbound. Many of those sales will occur in January as those gift cards begin burning a hole in consumer pockets.

Despite the lower than expected sales it was still the best holiday season since 2006. Department stores saw a 4.6% increase and luxury stores saw an 8.1% increase in sales. Wholesale clubs rose +5.7%. The ICSC is predicting slower growth in January of +2.5% but that is still a decent gain. The sector that lagged was electronic sales but there were no specific details in the report.

Retailers were pummeled by the drop in sales with Abercrombie & Fitch (ANF) losing -2.05 and Gap (GPS) dropping $1.57. Target (TGT) lost -7% or -$4 and Kohls (KSS) -$1.67. Even the luxury retailers that posted strong sales lost ground but the selling was less intense on stores like Tiffany (TIF).

Weekly Jobless Claims rose by 18,000 to 409,000 but this week's data is full of noise and is not followed closely. This data was for the week ended on December-25th. Many people hold off filing claims until after the holidays and there will be a large number of seasonal temporary workers going back into the unemployment lines so the number two weeks from now is the one that matters.

The big mover today was the dollar and the Euro. The dollar rallied over the last two days to six-week highs. Pushing the dollar higher was better than expected economic news on Wednesday and growing worries over European debt. Even with out $14 trillion of recognized debt on the books the dollar is still seen as a safe haven currency.

The Euro plunged -1$ to $1.301 after Portuguese and Spanish bonds declined over auction fears. The European nations will hold debt auctions next week and analysts believe investors will demand higher yields to purchase the risky debt. The yield on Portuguese rose 26 basis points to 7.17% ahead of the auctions to the highest level in a month. Portugal plans on selling 20 billion euros in bonds in 2011 to finance its deficit. Spain will attempt to sell debt on Jan 13th, the same day Italy auctions debt for 2015 and 2026 maturities. Belgian bonds sold off after the nation's political leaders failed to restart seven party negotiations to form a government.

The massive amounts of sovereign European debt coming to market is weighing on the Euro and pushing the dollar higher by default.

The sharply rising dollar crushed commodity prices with corn dropping -3%, wheat -3% and sugar -6%. Oil lost -2.3% and copper -2%. Anyone who hoped the commodity rally would continue into 2011 has been seriously mistaken. However, we know this is temporary. The dollar is basically back to where it was three weeks ago and metals like gold and silver are back to levels they were in the same period. This is the buying opportunity many investors were waiting for. The only challenge is waiting for a bottom to appear. Remember, the Fed is still in QE2 mode and over the long term that will force the dollar lower and lift commodities. The counter balance to that is the improving economy. That will push the dollar higher. It is going to be a battle and the economy and strong dollar will eventually win but the near term could see the dollar strength ebb once the European debt auctions are over.

Dollar Index Chart

Euro Chart

Another reason for the weakness in commodities is the Commodity Futures Trading Commission (CFTC) meeting next week. At that meeting they will again discuss position limits in commodities to prevent large funds and investors from pushing prices around with large positions. This is a very thorny topic and there are many advocates and opponents to the various types of limits they are proposing. Once they agree on a plan they still have to go out for public comment so changes are not imminent but they are coming. They are going to try once again to get a position limit of 10% in any commodity. They have tried to pass this in recent meetings and could not get enough votes. They will vote again next Thursday.

In stock news Goldman Announced it was being sued by ACA over the Abacus synthetic CDO. This is the same one the SEC sued Goldman for and reaped millions in fines. ACA is claiming now that Goldman did not disclose Paulson's true role in selecting the mortgages that went into the product. They are suing for $120 million for "unjust enrichment" in the joint venture. ACA is claiming it was misled by Goldman. Goldman shares fell -1.79 to close at $172.

Borders (BGP) rallied +21% in after hours after news broke they were in talks about refinancing their debt and staying out of bankruptcy.

Borders Chart

After hitting a new high this morning Apple ended with a minor loss after Motorola and Verizon officially announced the XOOM tablet at CES. I included a link last week for the innovative video ad for the XOOM and it appears to deliver on all accounts. The tablet has HD video at 1080P on a 10.1 inch screen, HDMI output, dual core 1Ghz processor, front and rear cameras that shoot HD video in 720P, flash is supported as is a gyroscope, barometer, compass, accelerometer, adaptive lighting and Verizon's high speed network. The XOOM has the new Honeycomb OS from Google specifically designed for the tablet. It is not a smartphone OS running on a tablet.

The sheer quantity of products being released is tough for Apple lovers to overcome. Sony released 60 products at the CES show. So far there has been over 200 new product announcements. None of those products were from Apple since Apple does not participate in CES. Since many of those products have some component from Google it was a good day for Google shares with a $4.43 gain while Apple shares ended fractionally lower.

In an online survey connected to a news story about the XOOM tablet it appears Apple will still be the favored tablet supplier in 2011 but the year is still young.

Tablet survey:
Which tablet will you buy in 2011?

Intel released a picture of its new 2nd generation Core processor with one billion transistors and highly enhanced video capabilities for laptop PC users. Shrinking processor sizes is a big deal because the signals don't have as far to travel, power consumption is lower and they can pack more components into the limited space. The picture below shows a Core processor, Reese's Peanut Butter Cup and a dime. That is pretty dang small for a one billion transistor chip.

Intel 2nd Generation Core Processor

Other than CES news and retail sales there was not much happening in the market today. As I said earlier everyone was just passing time until the Payroll report on Friday. The S&P declined slightly to 1273 but you would be hard pressed to draw any material conclusions about market direction from today's action. Volume was decent at 8.2 billion shares with decliners about 2:1 over advancers. If I had to put a label on today's market I would call it distribution rather than consolidation. Just wanting a profit taking dip does not make it happen. We can't "hope" the market into a buying opportunity any more than we can wish it higher when we are long. The market will do whatever it wants and we have to follow the trend not fight it.

The support on the S&P is 1258, a level we grew very accustomed to seeing in late December. That would be a 15-point decline from todays close and without some event to trigger profit taking we could just continue to melt up. Resistance is 1275-1280 followed by 1290.

S&P-500 Chart

The Dow is following the same trend higher and despite the minor loss there was no change in direction. The trend since December 1st has been slowly higher and for investors this is a perfect environment once they are long. For those not long it is very frustrating as they wait for an entry point.

Current resistance is 11,700 dating back to August 2008. This could be a tough level to cross without a major news event. That event could be the Payroll Report on Friday if the numbers come in much better than initial estimates. Support is 11,600 followed by 11,445.

Dow Chart - Daily

The Nasdaq broke above the early resistance at 2700 and closed at a new high. What else can I say? Strong gains in Google, Priceline and First Solar overcame minor weakness in Apple and the Nasdaq moved over its consolidation range from early in the week. This is a bullish chart. Of course the CES show in Vegas is normally positive for tech stocks.

Support is well back at 2660 and resistance continues to evaporate as the index marches steadily higher. I don't know what it is going to take to produce profit taking in the Nasdaq with major tech earnings only two weeks away.

Nasdaq Chart

The Russell is not giving any clues to direction other than it did NOT make a new high on a day when the Nasdaq was positive. The Russell seems to be either consolidating or distributing at the 790 level where it has held since Dec 22nd. We had the two days of deviation but the price quickly came back to neutral. Relative strength is getting weaker so I continue to warn this is the canary in the coalmine. If the Russell retests 780 support and fails we could be in for a decent dip. My guess is that 780 will hold on the first test assuming there is not a major news event providing directional force.

Russell Chart

In summary I believe the markets are just passing time while we wait for the Payroll Report on Friday. Assuming the report passes muster and shows enough job gains to avoid a sell off then we could continue this holding pattern until earnings begin the following week. However, options expiration is only two weeks away so next week is normally our volatility week ahead of expiration. Funds move out of option positions the week before expiration. Are they net long or net short in their option positions? If we knew that we could pick a market direction a little more accurately.

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Jim Brown

Send Jim an email


New Option Plays

Up Next is the Jobs Report

by James Brown

Click here to email James Brown

Editor's Note:

Investors are crossing their fingers that Friday's jobs report is strong following the better than expected ADP number on Wednesday. If we do see a better than expected job number then the rally should resume. If we don't, well, stocks could see some profit taking. Friday morning could be volatile.

I am not adding any new candidates tonight. We need to wait and see what the jobs number is and how the market chooses to interpret the data.

- James


In Play Updates and Reviews

Target Achieved

by James Brown

Click here to email James Brown

Editor's Note:

We had two bullish candidates hit exit targets today. Stocks were mixed with widespread profit taking. BA and LMT were our two winners tonight. I am removing KSS with the play unopened. There are new stop losses for BA, IBM, JNPR, LMT and SWK.

-James

Current Portfolio:


CALL Play Updates

Amazon.com Inc. - AMZN - close: 185.86 change: -1.56

Stop Loss: 176.45
Target(s): 189.90, 199.00
Current Option Gain/Loss: + 7.2%, and + 7.7%
Time Frame: 4 to 6 weeks
New Positions: See below

Comments:
01/06 update: Retail names suffered thanks to disappointing December same-store sales growth. AMZN only lost 0.8% as the company was probably unaffected by the big snow storms that brought a chilly end to the holiday shopping season. There is no change from my prior comments. Our first target to take profits is at $189.90. I'd look for a dip in the $183-182 zone as a new entry point. More conservative traders might want to raise their stops closer to $180.

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: 68.80 change: +1.32

Stop Loss: 64.90
Target(s): 69.00, 72.25
Current Option Gain/Loss: +248.2%, and +136.9%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
01/06 update: Target achieved. It was a strong session for BA with the stock outperforming the broader market. BA said 2010 was a solid year with the company selling three times as many planes as it did in 2009. Improving air-traffic demand pushed sales to a final tally of 530 planes. The stock continued to rally after yesterday's breakout above the 200-dma.

Our first target to take profits was hit at $69.00 as BA hit $69.35 intraday. The January $67.50 call was near $2.15 (+270%) and the February $70 call was trading near $1.80 (+146%). I am raising our stop loss to $64.90. I am not suggesting new positions at this time. We should consider this a higher-risk aggressive trade. Our first target is $69.00. Our second target is $72.25.

- Suggested Positions - (small positions only!)

Long the 2011 January 67.50 calls (BA1122a67.5) Entry @ $0.58

Long the 2011 February $70.00 calls (BA1119B70) Entry @ $0.73

01/06: 1st Target Hit @ 69.00. Jan call @ $2.15 (+270%). Feb. call @ $1.80 (+146%)
01/06: New stop loss @ 64.90

Chart:

Entry on January 3rd at $66.15
Earnings Date 01/26/11 (unconfirmed)
Average Daily Volume = 5.3 million
Listed on December 25th, 2010


Caterpillar - CAT - close: 93.54 change: -0.98

Stop Loss: 92.25
Target(s): 99.80
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see trigger

Comments:
01/06 update: CAT spent the session consolidating sideways in it trading range. I am suggesting a trigger to buy calls at $95.15. If triggered our exit target is $99.80. More aggressive traders could try the January calls instead.
The Point & Figure chart for CAT is bullish with a $118 target.

Trigger @ 95.15

- Suggested Positions -

Buy the 2011 February $100 calls (CAT1119B100) current ask $1.31

Entry on January xxth at $ xx.xx
Earnings Date 01/27/11 (unconfirmed)
Average Daily Volume = 4.2 million
Listed on January 5th, 2010


Cummins Inc. - CMI - close: 110.16 change: -2.83

Stop Loss: 108.75
Target(s): 114.85 117.50
Current Option Gain/Loss: -37.5% and -11.2%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
01/06 update: Warning! It was an ugly day for CMI on Thursday. I couldn't find any news to account for this relative weakness. Shares have produced a bearish engulfing (reversal) candlestick pattern with today's decline but these patterns normally need to see follow through lower. Even so more conservative traders may want to exit now or raise their stop loss. CMI has been pretty consistent with support near $109.00 so I'm keeping our stop loss at $108.75. I'm not suggesting new positions here but aggressive traders could buy calls.

(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

01/04: New entry point on afternoon bounce.
01/01: Adjusted targets to $114.50, 117.50
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: 66.23 change: +0.34

Stop Loss: 62.75
Target(s): 69.25
Current Option Gain/Loss: + 9.7% and +24.4%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
01/06 update: The railroad index closed the day virtually unchanged and CSX managed to deliver a small gain (+0.5%). I don't see any changes from my prior comments. Broken resistance near $65.00 should be new support. If you are looking for an entry point wait for a dip near $65.

- 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

01/05: Adjusted targets to just one at $69.25.
01/04: New stop loss @ 62.75
01/04: New entry point on afternoon bounce near $65
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: 45.44 change: -0.95

Stop Loss: 43.75
Target(s): 44.90, 48.00
Current Option Gain/Loss: +325.0%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
01/06 update: Ouch! Telecom stocks as a group got hit hard with some profit taking on Thursday. I didn't see any specific news behind the sell-off. CTL broke down under support near $46.00 and dipped to $44.70 at its intraday lows. I've been suggesting readers take profits for several days. Now we have to see if CTL will rebound from its trend of higher lows. I am not suggesting new bullish 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


Deere & Co - DE - close: 84.25 change: +0.01

Stop Loss: 78.95
Target(s): 84.50, 89.00
Current Option Gain/Loss: Unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see trigger

Comments:
01/06 update: Shares of DE were virtually unchanged on the session. There is no change from my prior comments. I'm starting to think if we should consider buying calls on a breakout past resistance near $85.00. Right now the $80.50 entry point is obviously much more attractive so we'll leave our trigger there for the moment. If triggered we'll use a stop loss at $78.95, just under the 50-dma.
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)

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


Express Scripts - ESRX - close: 57.01 change: +1.13

Stop Loss: 53.75
Target(s): 53.95, 58.50
Current Option Gain/Loss: +119.0% and +39.6%
Time Frame: 5 to 6 weeks
New Positions: see below

Comments:
01/06 update: ESRX was showing some relative strength with a +2% rally to a new high. I am raising our stop loss to $53.75. calls you might want to consider aiming for $60.

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

01/06: New stop loss @ 53.75
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


FedEx Corp. - FDX - close: 93.10 change: -0.77

Stop Loss: 90.90
Target(s): 96.75, 99.75
Current Option Gain/Loss: -83.7% and -25.0%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
01/06 update: Transportation stocks did not see any follow through on yesterday's intraday bounce. Shares of FDX actually rolled over a little bit. There is no change from my prior comments. I'd rather wait for a move over $94.50 or even the $95.00 mark before considering new positions. If you do launch positions I would buy February or April calls.

- 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: 172.21 change: -1.79

Stop Loss: 165.75
Target(s): 171.00, 179.50
Current Option Gain/Loss: + 83.6% and +54.6%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
01/06 update: GS succumbed to some profit taking with a drop to new short-term support near $172. I wouldn't be surprised to see a dip toward the new trend of higher lows closer to the $170-168 zone. I am not suggesting new bullish positions at this time.

- 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

01/03: New stop loss @ 165.75
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: 148.66 change: +1.61

Stop Loss: 142.99
Target(s): 152.50, 159.50
Current Option Gain/Loss: +26.6%, and +10.2%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
01/06 update: We are finally starting to see some movement in shares of IBM. It's about time! The stock rally past resistance near $147.50 and closed at new multi-year highs. I am raising our stop loss to $144.75. Keep in mind that IBM is due to report earnings on January 18th and we do not normally want to hold over an earnings announcement. 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

01/03: New targets @ $152.50, and $159.50

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


Juniper Networks - JNPR - close: 38.21 change: +0.33

Stop Loss: 35.75
Target(s): 39.75
Current Option Gain/Loss: + 1.2% and +15.3%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
01/06 update: Some positive analyst comments helped push JNPR to a new relative high past resistance near $38.00. I am raising our stop loss to $35.75. Please note that I am adjusting our first target to $39.90. I'm setting a second target for our April calls at $41.75.

- 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
01/06: New stop loss @ 35.75, new 1st target @ 39.90.
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: 73.18 change: +1.26

Stop Loss: 69.80
Target(s): 73.25, 74.90(or 200-dma)
Current Option Gain/Loss: +88.0% and +65.0%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
01/06 update: Target achieved. News that LMT had been removed from Goldman Sach's conviction sell list helped buoy the stock. Shares rallied to $73.96 intraday. Our first target to take profits was hit at $73.25. The January $70 calls were trading near $3.35 (+91.4%) and hit an intraday high of $4.10. The March $75 calls were trading near $1.65 (+65%) and hit $1.90 intraday.

I am suggesting we go ahead and exit the rest of our January $70 calls now (currently at $3.30). We'll keep the remainder of our March calls as we aim for the secondary target at $74.90 or the 200-dma. I am not suggesting new positions at this time. I am raising our stop loss to $69.80.

- Suggested Positions -

Buy the 2011 January $70.00 calls (LMT1122A70) Entry @ $1.75 , exit now.

- or -

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

01/06: New stop loss @ 69.80
01/06: Sell the rest of our January $70 calls now @ $3.30 (+88%)
01/06: Target Hit @ 73.25. Jan. $70 call @ 3.35 (+91%). March $75 call @ 1.65 (+65%)

Chart:

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: 97.06 change: +0.41

Stop Loss: 92.49
Target(s): 99.90
Current Option Gain/Loss: +30.4% and +33.3%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
01/06 update: Traders continue to buy the dips at MICC's short-term trend of higher lows. I am raising our stop loss to $92.49. More conservative traders might want to raise their stops closer to $94 or even $95. I am not suggesting new positions at this time. 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

01/06: New stop loss @ 92.49
01/03: New stop loss @ 91.75, New target at $99.90

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


Transocean Ltd. - RIG - close: 73.04 change: -0.21

Stop Loss: 67.85
Target(s): 72.50, 78.25
Current Option Gain/Loss: +30.5% and +42.2%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
01/06 update: RIG spiked to a new relative high over resistance near $74.00 but couldn't hold it. Shares eventually closed with some mild profit taking. There is no change from my prior comments. If you're looking for a bullish entry point I would wait for a dip near $71.00. Our final target is $78.25 but I'm considering an adjustment toward $79.75 instead.

- 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

01/05/11 New stop loss @ 67.85
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


Research In Motion - RIMM - close: 61.37 change: -0.55

Stop Loss: 57.49
Target(s): 64.75, 67.50
Current Option Gain/Loss: - 3.6%, and + 0.8%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
01/06 update: Our new play in RIMM has been opened. As expected shares saw some profit taking today. The stock gapped open lower at $61.02, dipped to $59.80 and rebounded. We had a trigger to buy calls at $61.00. If you missed the entry point this morning I would still consider new positions now. RIMM was a strong outperformer today with a bullish breakout over resistance at the $60.00 mark. The stock has been consolidating the last few days near its rising 50-dma. Speaking of the 50-dma, its cross up and over above the 200-dma is normally a bullish signal. I don't want to chase today's move in RIMM. Wait for a dip. I am suggesting a trigger at $61.00. We'll use a stop loss at $57.49. More conservative traders could use a stop closer to $59.00 instead. There is some short-term resistance at $64.00 but I'm setting our first target at $64.75.

- Suggested Positions -

Long the 2011 February $62.50 calls (RIMM1119B62.5) Entry @ $2.47

- or -

Long the 2011 March $65.00 calls (RIMM1119C65) Entry @ $2.35

Entry on January 6th at $61.00
Earnings Date 03/31/11 (unconfirmed)
Average Daily Volume = 9.9 million
Listed on January 5th, 2010


Stanley Black & Decker, Inc. - SWK - close: 66.53 change: -0.73

Stop Loss: 64.75
Target(s): 69.90, 72.45
Current Option Gain/Loss: -78.5%, and -37.9%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
01/06 update: Attention! I am raising our risk on this trade. Our stop loss has been at $65.75. I am lowering our stop loss to $64.75 to give SWK a little bit more room to maneuver. Shares should find additional support near $65.00. I would wait for a dip or bounce near the $65 level before initiating new bullish positions (when you do, buy the February calls). Keep your position size small to limit your risk.

- Suggested Positions -

Long the 2011 January $70 calls (SWK1122A70) Entry @ $0.70

- or -


01/06: New stop loss @ 64.75

Entry on January 4th at $68.15
Earnings Date 01/27/11 (confirmed)
Average Daily Volume = 1.6 million
Listed on January xxth, 2010


Union Pacific - UNP - close: 92.55 change: -0.41

Stop Loss: 89.75
Target(s): 96.25, 99.75
Current Option Gain/Loss: -51.9% and -18.8%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
01/06 update: UNP dipped toward short-term support near $92.00 again. This move could be used as a new bullish entry point to buy February calls. Cautious traders could raise their stop loss closer to the 50-dma (near $91.30).

- 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

01/04/11: New entry point on afternoon bounce.
01/01/11: UNP is giving us another entry point.
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: 72.49 change: -0.41

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:
01/06 update: UPS is still consolidating sideways. There is no change from my prior comments. An alternative entry point would be to wait for a breakout over resistance near $74.00. Currently, I'm suggesting a trigger to buy calls at $70.25. More aggressive traders could consider a move over $74.00 as a potential entry point. I'm considering raising our buy-the-dip trigger toward $72.25.

Trigger @ 70.25

Suggested Position:
Buy the 2011 February$70.00 call (UPS1119B70)

- 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


Cimarex Energy Co. - XEC - close: 89.21 change: -0.96

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:
01/06 update: XEC spiked to a new high this morning over $92 thanks to an analyst upgrade. XEC could not hold on to its gains and faded to a loss. Currently we're waiting for a dip to buy calls at $86.50. More conservative traders could wait for a dip closer to $85.00. 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: 25.10 change: -0.33

Stop Loss: 26.05
Target(s): 25.10, 23.25
Current Option Gain/Loss: + 0.0%
Time Frame: 2 to 3 weeks
New Positions: No

Comments:
01/06 update: There was no follow through higher on yesterday's oversold bounce. I remain very cautious and we're not suggesting new bearish positions at this time. Our first target has already been hit. We're currently aiming for $23.25.

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

01/03/11 New stop loss @ $26.05
12/30/10 Target hit @ 25.10, option @ 0.80 (+25%)
12/30/10 new stop loss at $26.51

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


CLOSED BULLISH PLAYS

Kohl's Corp. - KSS - close: 52.23 change: -1.67

Stop Loss: 53.75
Target(s): 57.90, 59.95
Current Option Gain/Loss: Unopened
Time Frame: 4 to 8 weeks
New Positions:

Comments:
01/06 update: Investor expectations for December same-store sales were pretty high considering all the hype about how well the holiday season was. The results were disappointing. KSS only reported +3.9% sales growth versus estimates for +4.3% and the company issued mixed earnings guidance. The stock collapsed toward technical support at its 200-dma. I am removing KSS as a bullish candidate. The stock did not hit our trigger to buy calls at $55.05.

(No chart, play never opened)

Entry on January xxth at $ xx.xx
Earnings Date 02/24/11 (unconfirmed)
Average Daily Volume = 4.1 million
Listed on January 4th, 2010