Option Investor
Newsletter

Daily Newsletter, Tuesday, 1/11/2011

Table of Contents

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

Market Wrap

Sell The News On Apple and Verizon

by Jim Brown

Click here to email Jim Brown
The long awaited iPhone announcement for the Verizon network was met with selling in both stocks. Verizon was hit hardest on pricing for the phone.

Market Statistics

Be careful what you wish for. Verizon may be wondering if they did the right thing by taking on the iPhone. The market has punished Verizon for this marketing win. A Bloomberg analyst said after four years of waiting Verizon's win could be very expensive. They estimate Verizon could be out $3 billion to $5 billion in subsidies for customer purchases this year alone. This will cut into profits and significantly increase the load on the network.

A UBS analyst projected Verizon to sell as many as 13 million of the devices in 2011 and every customer gets the equivalent of a $400 check from Verizon because the company pays Apple that $400 for you. Barclay's projects 9 million phones because most AT&T iPhone customers are locked into a two-year agreement. Barclay's believes the subsidy would be in the $350 range because Apple needed Verizon's volume to combat the onslaught of Android products and probably discounted the phone to Verizon.

Obviously Verizon will be a winner in the long run or they would not commit to that kind of initial outlay. Barclay's believes it will add 2.1 million new subscribers to Verizon's base in 2011. AT&T is only expected to add 650,000. AT&T is expected to sell 6 million iPhones in 2011, down from 15 million in 2010. That is quite a hit for AT&T. Data plans are turning into a cash cow for the network providers. The cost for a data plan at AT&T rose by 20% in Q3 and +19% at Verizon. It takes about six months for AT&T to recover its subsidy from the customer in the form of monthly access charges. Verizon's data plan for the iPhone will be unlimited and free from the caps imposed by AT&T. That is another negative for new AT&T iPhone sales.

Verizon Chart

Apple spiked +$6 to a new high on Monday but failed to add to those gains on Tuesday. Apple has gained $20 in January. Apple will report earnings on the 18th and at least one analyst is predicting they will announce a stock split. Jefferies analyst, Peter Misek, raised his price target on Apple to $450. He sees Apple earnings at $22.06 per share in 2011 with the consensus well back at $19.27. That consensus estimate was only $17.89 three months ago. That shows how rapidly the targets are changing. Apple has a card yet to play in the CDMA iPhone. They did not do an exclusive agreement with Verizon. That means Apple can also sell the phones to China Telecom and SK Telecom for use in Asia and that is a much larger market. Also, every new iPhone customer becomes a prime candidate for an iPad. Lastly Apple is expected to launch iPhone 5 later this summer for another complete refresh cycle. JP Morgan believes Apple will ship 67.3 million iPhones in 2011. That number truly boggles the mind for a product that did not exist in any form four years ago.

The big loser here is AT&T and the company's stock is dropping like a rock. AT&T is down -10% since the mystery press conference was announced. Potential iPhone purchaser are no longer forced to endure a network with capacity limitations and now have a choice. The choice will most likely be Verizon.

AT&T Chart

On the economic front the news was mixed. The weekly Chain Store Sales dropped sharply by a whopping -3.2% compared to a +0.4% gain in the prior week. The first week of January has been posting declines for several years. The after effects of the blizzard just accentuated the decline this year. Sales should pick up in next week's report before they dive again as a result of the new blizzard moving towards the Northeast. Sales for all of January are expected to be in the 2.5% range.

The Job Openings and Labor Turnover Survey for November showed an increase in positions but only a slight increase. The headline number rose from 32.1 to 32.2 in what could only be considered growth at a snail's pace. Because this is a lagging report with no material change the market ignored it.

In another November report the Wholesale inventories declined -0.2% compared to a gain of +1.7% in October. Analysts had expected a rise of +1%. The decline suggests inventories will not contribute to a gain in GDP in Q4. The smaller rate of inventory growth could mean a stronger manufacturing sector in 2011. The inventory to sales ratio fell to 1.15 and the lowest level since June.

The reports today were just filler as we wait for the Beige Book on Wednesday and the inflation reports on Thr/Fri and Intel's earnings on Thursday. Everything else is just noise.

Economic Calendar

With all the activity in the tech sector you would think Intel would have good earnings. Unfortunately most of the new products don't have Intel chips. Intel's sales gains will come from an increased number of servers to handle those smart devices.

Qualcomm (QCOM) should benefit from the Verizon iPhone deal. That opens up an entirely new consumer product Qualcomm. They are assumed to be the supplier for the CDMA phone and will also benefit when Apple offers the phones in Asia.

Despite the expectations for a decent earnings cycle analysts are downplaying the hopes for big gains in the stock prices. Alcoa reported earnings on Monday, beat the street by 3-cents and raised guidance saying aluminum demand could rise +12% in 2011 on top of 13% growth in 2010. Prices received rose +17% per ton. Shares were up +7% for 2011 ahead of the announcement so it is no surprise the stock has been flat this week. Buy the rumor, sell the news.

That may be what we see from the majority of earnings reports. Intel may be the exception since their stock has been flat for the last two months. Any good news could revive interest but less than stellar guidance could just as easily send it lower.

Intel agreed to settle a patent suit with Nvidia by paying $1.5 billion over the next five years and cross license certain products. The deal was seen as a major win for Nvidia. It is a major win for some readers as well. I pounded the table in this column for Nvidia many months ago because of their new GPU product. That is a slide in card with 240 processors that fits into a desktop PC and elevates it to the level of supercomputer status. Most desktops that accommodate the cards can accept up to four of them for 960 processors in one PC. The technology is gradually catching on as a way for engineers to have the equivalent of a supercomputer on their desk for under $10K. I believe Nvidia will continue to rise but I would wait for some profit taking before jumping on board.

Nvidia Chart

Intel Chart

On the positive side Sears Holding (SHLD) and Tiffany (TIF) both upgraded their forecast for earnings. Sears said earnings could be twice what analysts were expecting and their shares rose +6%. Tiffany said holiday sales were brisk. On the downside Talbots said it expected a larger Q4 loss as sales trends declined. Talbots caters to women over 50 and operates 584 stores in North America. Stiff price competition and cold weather were blamed. Talbots has been trying to attract younger women without success. Talbot shares fell -17%.

Talbots Chart

The Alaska Pipeline shutdown helped push oil prices back to $91.13 at the close for a gain of $1.88. The shutdown was caused by a minor leak in a booster pump station. Only 18 barrels have been leaked so far but it is in the basement of the pump station. That is about 750 gallons of oil and I am sure that is making a significant mess plus create a fire danger.

The TAPS operator Alyeska is installing a 157-foot section of pipe to bypass the leak so the line can be restarted. Winter is the worst time for an outage because once the oil in the pipe cools it begins to turn to wax and clog the pipes and pumps. They want to get the flow restarted ASAP to lessen the danger of a larger stoppage from freezing. They estimate it will be restarted before Friday.

The pipeline carries about 600,000 bpd over the 800-mile length. In addition to the pipeline stoppage an upgrader at the Horizon oil sands project in Alberta has been offline since Thursday due to a fire and that knocked out 115,000 bpd that flows to Midwest refineries. The fire was in a coker unit where two of the four drums were damaged. Canadian Natural Resources (CNQ) said they were going to try to restart the unit at half of capacity using the two drums that were undamaged. They will try to repair the other two while the unit is in operation. This is a major expense for CNQ and it will not be a quick fix. The company said they would have to lower its production estimates for 2011 and cut back on some planned capital spending.

Brent Crude has been on a rampage lately with Brent closing at $97.54 today, +6 over the price of U.S. WTI. The problem with Brent is falling output in the North Sea due to maintenance, a new inspection program to prevent a Gulf spill type accident and accelerated depletion. The output from the North Sea has declined nearly 25% in the last three years.

Crude Oil Chart

The markets started off in positive territory but struggled to stay there until the close. The Nasdaq traded briefly in negative territory at 2:PM as the result of a sell program in the S&P futures. All the indexes took a substantial dive on the sell program and all recovered pretty quickly.

The S&P rallied once again to resistance at 1278 and that is where the futures sell program triggered. I don't want to make a big deal out of describing technicals today because nothing happened. Volume was light at a hair over 7.0 billion shares. Traders are waiting on the Beige Book report and Intel's earnings. Actually they are just waiting on Intel.

This is the week before expiration and we had a couple days of minor declines. This was just a minor snapback rally after overnight gains in Asia tickled the shorts in the U.S. and forced a cover.

Support at 1258 has not been tested in over a week and resistance at 1278-1280 is solid as a rock. Be patient, the current trend is sideways and range bound. Intel's earnings should change the trend.

S&P-500 Chart

The Dow rallied to exactly 11,700 and strong resistance on the strength in Hewlett Packard, American Express and Chevron. Most of the gains occurred on the short covering at the open but Hewlett received an upgrade that helped keep the index in the green. Chevron was up on the spike in oil prices and positive guidance and American Express on the sudden resurgence of interest in financials. Just slightly over half the Dow components were positive so there was definitely no sudden burst of bullish sentiment.

The Dow has round number resistance at 11,700 but we did move over that level for one day on the 5th and test the stronger resistance from August 2008 at 11,725. When that level held the Dow began to decline to touch support at 10,600 on Monday. Today was a pressure equalization day. Shorts were lightly squeezed and a few bulls prevented a loss by jumping on the 2:PM dip. It was a nothing day.

Dow Chart

The Nasdaq benefited from a +9 gain in ISRG and HTWR plus strong gains in APOL, SHLD, GOOG, ININ and SINA. Those are not your normal Nasdaq leaders with the exception of Google. Apple's minor decline did not help or hurt and the target upgrade to $450 will eventually be a benefit.

The Nasdaq added +9 points to 2,716 and closed at a new high. It is hard to say anything bad about a new high. The volatility is increasing as we near expiration and Intel's earnings. The Nasdaq's gains moved it out of the range for the last three days so that is mildly bullish. However, it was still a passing time day ahead if Intel. I would not read too much into today's action.

Nasdaq Chart - 15 Min

Nasdaq Chart - 90 Min

The Russell showed a little more strength and has recovered from the dip to 780 support and even closed over initial resistance. The stronger resistance at 800 is still waiting but I liked the gains today even on low volume. The A/D on the Russell was 1145 advancers, 710 decliners with 152 new highs and only 4 new lows. That is pretty favorable statistics given the earnings risk ahead.

If we did not have the Intel earnings on Thursday I would probably be more bullish because of the Russell but I am probably just seeing the glass half full.

Russell 2000 Chart - 90 min

In summary I would be careful with longs AND shorts ahead of Intel's earnings on Thursday evening. That is by far the most important event of the week. Intel could give us a blow off top or that sudden sinking feeling with poor guidance. The market is pried to perfection today and the risk level is high.

We did not hear much about the European debt sales today but those are still a worry for the days ahead. The move by the ECB and the mystery investor (China, Federal Reserve?) into Portugal's debt over the weekend has calmed those fears but they can erupt at any time.

Don't apply too much credibility to the market action today. We were just passing time ahead of Intel.

Jim Brown

Send Jim an email


New Option Plays

Cautiously Bullish

by James Brown

Click here to email James Brown


NEW DIRECTIONAL CALL PLAYS

NetApp, Inc. - NTAP - close: 58.28 change: +0.06

Stop Loss: 54.90
Target(s): 62.25, 64.50
Current Option Gain/Loss: + 0.0%
Time Frame: 4 to 5 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
I am growing more and more cautious on adding bullish candidates as we move deeper into January. If you have been reading the weekend market wraps then you know Jim is concerned we could see a market correction soon. Granted the market decline will probably be a great entry point but short-term it can be deadly for our short-term trades. I'm looking for stocks showing relative strength and NTAP is still inching higher and look poised to run. I'm suggesting bullish positions now at current levels but keep your position size very small. We might not be in this play very long. I'm starting this play with a stop loss at $54.90 but cautious traders might want to consider a stop loss closer to $56 instead. Our exit targets are $62.25 and $64.50.
The Point & Figure chart for NTAP is bullish with a $66 target.

Open Small Positions at Current Levels

- Suggested Positions -

Buy the 2011 February $60 calls (NTAP1119B60) current ask $2.15

Annotated Chart:

Entry on January 12th at $ xx.xx
Earnings Date 02/16/11 (unconfirmed)
Average Daily Volume = 3.8 million
Listed on January 11th, 2010


In Play Updates and Reviews

Industrial & Machinery Names Show Strength

by James Brown

Click here to email James Brown

Editor's Note:

Deere (DE) hit our breakout trigger to buy calls this morning. Meanwhile I have removed UPS. The stock wasn't moving for us and our trade never opened.

Current Portfolio:


CALL Play Updates

Amazon.com Inc. - AMZN - close: 184.34 change: -0.34

Stop Loss: 176.45
Target(s): 189.90, 199.00
Current Option Gain/Loss: -52.7%, and -28.3%
Time Frame: 4 to 6 weeks
New Positions: See below

Comments:
01/11 update: Stock were mostly higher on the session but AMZN lagged. The stock actually churned sideways in a relatively narrow range. I don't see any changes from my prior comments. I would prefer to buy dips in the $182.50-180.00 zone.

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: 68.96 change: -0.13

Stop Loss: 64.90
Target(s): 69.00, 72.25
Current Option Gain/Loss: +115.0%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
01/11 update: BA churned sideways under resistance at $70.00 for the third day in a row. I am expecting a pull back toward $66 or the 200-dma. I am not suggesting new bullish positions at this time. Our second target is $72.25.

- Suggested Positions - (small positions only!)

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

01/08: Exit the rest of our January calls @ $2.35 (+305%)
01/06: 1st Target Hit @ 69.00. Jan call @ $2.15 (+270%). Feb. call @ $1.80 (+146%)
01/06: New stop loss @ 64.90

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: 93.95 change: +0.56

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:
01/11 update: CAT saw a +0.59% bounce but shares remain smack dab in the middle of its $92.50-95.00 trading range. There is no change from my prior comments. Currently our plan it to buy calls on a breakout higher with a trigger at $95.15. We might want to reconsider and buy calls on a dip near $90.00 instead. 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: 111.52 change: +0.48

Stop Loss: 108.75
Target(s): 114.85 117.50
Current Option Gain/Loss: -41.9% and - 2.7%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
01/11 update: Some of the industrial names were showing relative strength today and CMI hit $113.11 intraday. The stock pared its gains to settle with a +0.4% advance. More conservative traders, holding the January calls, might want to consider an early exit now to recoup some capital and cut our losses early. We have less than two weeks on January calls. I would hesitate to open new bullish 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

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: 68.00 change: +0.02

Stop Loss: 64.45
Target(s): 69.25
Current Option Gain/Loss: +80.0% and +70.6%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
01/11 update: Some positive analyst comments this morning helped CSX spike to $68.77 this morning but the stock failed to hold those gains. Our target to exit is $69.25 so I'm not suggesting new bullish positions at this time. Broken resistance near $65.00 should be new support. I am not suggesting new positions at this time.

- 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

01/08: New stop loss @ 64.49
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: 44.41 change: -0.55

Stop Loss: 43.75
Target(s): 44.90, 48.00
Current Option Gain/Loss: + 0.0%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
01/11 update: The situation is deteriorating with our CTL play. Telecom stocks are underperforming the market and CTL is getting dragged lower with them. Shares broke very short-term support near $44.75. The stock looks headed for what should be stronger support near $44.00 and its simple 50-dma. I am not suggesting new bullish positions. Our option is back down to breakeven.

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: 85.66 change: +1.08

Stop Loss: 78.95
Target(s): 84.50, 89.75
Current Option Gain/Loss: - 5.1%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
01/11 update: DE was showing strength on Tuesday with a bullish breakout past resistance near $85.00. Shares opened at $85.19 and rallied to $86.65 intraday. We had a breakout trigger to buy calls at $85.55. Our stop loss is now at $81.49. We wanted to keep our position size small to limit our risk. Our upside target is $89.75. I would still consider new positions now or on a dip near $85.00.


FYI: The Point & Figure chart for DE is pretty bullish with a $100 target.

Long the 2011 February $90 calls (DE1119B90) Entry @ $1.35

chart:

Entry on January 11th at $ 85.55
Earnings Date 02/16/11 (unconfirmed)
Average Daily Volume = 3.4 million
Listed on December 30th, 2010


Express Scripts - ESRX - close: 56.86 change: +0.53

Stop Loss: 53.75
Target(s): 53.95, 58.50
Current Option Gain/Loss: +107.1% and +28.3%
Time Frame: 5 to 6 weeks
New Positions: see below

Comments:
01/11 update: ESRX was showing a little strength today and closed with a +0.9% gain. Volume was a little light. There is no change from my prior comments. I would hesitate to launch new bullish positions at this time. If you're holding January calls you will want to seriously consider exiting now to lock in a gain. Currently our final target is $58.50. More aggressive traders may want to aim for $60.00.

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: 93.31 change: -0.75

Stop Loss: 90.90
Target(s): 96.75, 99.75
Current Option Gain/Loss: -90.0% and -24.3%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
01/11 update: It looks like FDX was just teasing us yesterday. Positive analyst comments this morning were not enough to keep the bounce alive. FDX reversed under the $95.00 level and underperformed the broader market. I am not suggesting new positions at this time. Readers may want to raise their stops toward lat week's low of $91.80.

- 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

01/08: New exit strategy for January calls. Try to exit at 40 cents or more.
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: 169.36 change: -0.40

Stop Loss: 165.75
Target(s): 171.00, 179.50
Current Option Gain/Loss: + 8.0% and +20.4%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
01/11 update: GS was making headlines today with news it would offer more transparency with clients. The market will be extremely focused on the company's upcoming earnings report on January 19th. We do not want to hold over the earnings report so plan on exiting all of our bullish positions prior to the 19th. More conservative traders may want to exit our January positions before Friday's close this week. I am not suggesting new 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 01/19/11 (confirmed)
Average Daily Volume = 7.2 million
Listed on December 2nd, 2010


Illumina Inc. - ILMN - close: 67.34 change: +1.39

Stop Loss: 63.40
Target(s): 69.50
Current Option Gain/Loss: + 2.3%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
01/11 update: Biotech were generally positive today but ILMN outpaced its peers and the wider market with a +2.1% gain. The stock closed near its highs. I am not suggesting new positions at this time. Keep in mind that ILMN is due to report earnings in early February and we normally do not want to hold over the earnings report.

- Suggested Positions -

Long the 2011 February $70.00 call (ILMN1119B70) Entry @ $2.15

Entry on January 10th at $65.75
Earnings Date 02/03/11 (unconfirmed)
Average Daily Volume = 1.0 million
Listed on January 8th, 2010


International Business Machines - IBM - close: 147.28 change: -0.36

Stop Loss: 144.75
Target(s): 152.50, 159.50
Current Option Gain/Loss: -20.7%, and - 9.7%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
01/11 update: There is no change from my prior comments on IBM. The stock is churning sideways even though trading had a bearish tone today. Readers may want to wait for a dip closer to $146.00 before initiating new positions. I would buy February or April calls. 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

01/06: New stop loss @ 144.75
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: 37.85 change: +0.24

Stop Loss: 35.75
Target(s): 39.90, 41.75
Current Option Gain/Loss: -25.6% and +10.0%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
01/11 update: JNPR is still bouncing after yesterday's rebound from the $37 level. Most of the gains today were at the open and JNPR spent the rest of the session sliding sideways. If you buy calls now don't buy Januarys and consider a tight stop (tighter than ours).

We want to sell all of our January calls and half of our April calls at $39.90.

- 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: 73.65 change: +0.06

Stop Loss: 69.80
Target(s): 73.25, 74.90(or 200-dma)
Current Option Gain/Loss: +60.0%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
01/11 update: Once again LMT failed to breakout past the $74.00 level. We may want to consider closing our March positions now. Currently our exit target is the 200-dma (near $74.75). I am not suggesting new positions at this time.

- Remaining Positions -

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%)

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: 97.45 change: +0.48

Stop Loss: 92.49
Target(s): 99.90
Current Option Gain/Loss: +26.0% and +36.3%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
01/11 update: MICC is still inching higher. I am tempted to raise our stop loss toward the $94.00 area, which has proven to be short-term support. I am not suggesting new bullish positions at this time. Our target to exit is $99.90.

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


QUALCOMM Inc. - QCOM - close: 52.07 change: +0.38

Stop Loss: 48.75
Target(s): 54.75
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see trigger

Comments:
01/11 update: There is no change from my prior comments on QCOM. Shares are consolidating sideways near $52. Officially our trigger to buy the dip is $50.75 but traders could wait for a dip closer to $50.00. there is some support near $49.00 so we'll put our stop loss at $48.75. Our target is $54.75. However, earnings are less than three weeks away and we normally want to avoid holding over an earnings report.
FYI: The Point & Figure chart for QCOM is bullish with an $84 target.

Trigger @ 50.75

- Suggested Positions -

Buy the 2011 February $52.50 calls (QCOM1119B52.5) current ask $1.65

Entry on January xxth at $ xx.xx
Earnings Date 01/26/11 (unconfirmed)
Average Daily Volume = 12.1 million
Listed on January 8th, 2010


Transocean Ltd. - RIG - close: 76.18 change: +2.40

Stop Loss: 69.90
Target(s): 72.50, 78.25
Current Option Gain/Loss: +118.6% and +116.6%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
01/11 update: The U.S. National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling released their final report (about 300-pages) on last April's disaster. The news came out late this morning and by the action in RIG today is looks like the market was happy with the news. You can read the entire report here:
www.oilspillcommission.gov

Shares of RIG erased yesterday's losses with a strong +3.2% gain and the stock managed a close over the $76.00 level. I am raising our stop loss to $69.90. More conservative traders may want to raise their stops closer to $72.00 instead. I am not suggesting new positions at this time and readers will want to strongly consider an early exit now, especially if you're holding January calls. Our final exit is at $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

01/11/11 New stop loss @ 69.90. Oil spill commission releases final report.
01/08/11 New stop loss @ 68.49
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: 62.89 change: +0.80

Stop Loss: 57.49
Target(s): 64.75, 67.50
Current Option Gain/Loss: +17.0%, and +20.4%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
01/11 update: RIMM rallied to new three-week highs and hit $63.75 before trimming its gains. I am not suggesting new positions at this time. More conservative traders might want to consider a stop loss closer to $59.00 or $60.00. 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


SPX Corp. - SPW - close: 74.00 change: +0.69

Stop Loss: 69.90
Target(s): 77.40, 79.90
Current Option Gain/Loss: +0.0%
Time Frame: 4 to 6 weeks
New Positions: Yes

Comments:
01/11 update: SPW extended its gains from yesterday with a +0.9% gain today. Shares came close to tagging the $75.00 level, which could be short-term resistance. I wouldn't be surprised to see a dip back toward the $72.50 area, which we can use as another bullish entry point to buy calls. More conservative traders may want to use a stop closer to $71.00 instead. Our upside targets are $77.40 and $79.90.
The Point & Figure chart for SPW is bullish with a $92 target.

- Suggested Positions -

Long the 2011 February 75.00 calls (SPW1119B75) Entry @ $2.16

Entry on January 11th at $73.49
Earnings Date 02/24/11 (unconfirmed)
Average Daily Volume = 396 thousand
Listed on January 10th, 2010


Stanley Black & Decker, Inc. - SWK - close: 67.77 change: +2.02

Stop Loss: 64.75
Target(s): 69.90, 72.45
Current Option Gain/Loss: -71.4%, and -17.2%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
01/11 update: Industrial and machinery stocks were strong performers today but I couldn't find any specific news to account for SWK's +3% gain. I'm not complaining. Shares rallied back toward resistance near $68.00. I'm not suggesting new positions at this time. 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: 97.47 change: +0.11

Stop Loss: 92.45
Target(s): 96.25, 99.75
Current Option Gain/Loss: +110.5% and + 90.9%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
01/11 update: Has the railroad rally run out of steam? Positive analyst comments helped UNP spike to $98.34 this morning but the gains faded and shares spent most of the day in a tight range near $97.50. I am not suggesting new bullish positions at this time. Our final target is $99.75. More conservative traders will want to seriously consider an early exit on their January calls. We have less than two weeks left on January options.

- 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

01/10/11: Target hit. Jan. call @ 2.30 (+51%), Feb. call @ 3.60 (+54%)
01/10/11: New stop loss @ 92.45
01/08/11: New stop loss @ 91.40
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


Cimarex Energy Co. - XEC - close: 92.93 change: +1.28

Stop Loss: 87.25
Target(s): 94.25, 99.50
Current Option Gain/Loss: +60.0%, and +19.3%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
01/11 update: Oil and oil service stocks were showing relative strength on Tuesday. XEC rallied +1.3% to close at new highs over $92.00. I am not suggesting new positions at current levels. Look for a dip or bounce near $90 as an entry point. Our targets to take profits are at $94.25 and $99.50. I want to reiterate that we want to keep our position size pretty small to limit our risk.

- Suggested Positions -

Long the 2011 February $95 calls (XEC1119B95) Entry @ $1.75

- or -

Long the 2011 March $95 calls (XEC1119C95) Entry @ $3.10

Entry on January 10th at $90.49
Earnings Date 02/17/11 (unconfirmed)
Average Daily Volume = 907 thousand
Listed on December 1st, 2010


CLOSED BULLISH PLAYS

United Parcel Service - UPS - close: 71.75 change: -0.01

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:
01/11 update: I am temporarily removing UPS from our play list. We've been waiting for shares to hit our trigger for a long time. I'd rather drop it as a candidate and make room for something else. I would still keep UPS on your watch list to see if shares hold support near $70.00. We can then re-evaluate positions at that time.

(No chart) Our trade never opened.

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