Option Investor
Newsletter

Daily Newsletter, Thursday, 1/13/2011

Table of Contents

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

Market Wrap

Jobs, Dollars and Inflation

by Jim Brown

Click here to email Jim Brown
The bad news bulls had a full dose of economic challenges to over come today while they waited on earnings from Intel.

Market Statistics

The weekly jobless claims spiked to 445,000 for the week ended on January 8th compared to 410,000 the prior week. This was the highest level since October. Officially the consensus estimate was 404,000 but we were not even close. Everyone expected claims to rise next week as the workers terminated after the holidays filed new claims. That suggests next week could be high as well. The rise in corporate profits should slow the pace of terminations. Those who needed to trim the workforce have had plenty of opportunity over the last year. Once the New Year spike in claims passes we should expect the new claims to decline.

Producer prices rose +1.1% in December and inline with analyst estimates. The spike in crude prices and food commodities are inflating prices in nearly all consumer products. Excluding food and energy the core rate of inflation rose only +0.2%.

75% of the rise in the headline number came from a spike in energy of +3.7% with gasoline prices up +6.4% and diesel +8.6%. Home heating oil rose +12.3%. Combined fuel prices are up +28% over December 2009. The price of fresh vegetables rose +22% and +15.4% for fresh fruit. The various weather disturbances around the globe are tightening food supplies and pushing commodity prices higher. The Fed will take these things into account when they review their rate decisions but even with those gains above the actual inflation rate is still low.

The headline number on the Manufacturers Alliance Survey declined -2% to 75% but remains well into expansion territory. The optimism for 2011 is rising with the internal components for orders and shipments ticking up slightly. The period covered in this report was Q4 so it is a lagging report and was ignored.

Economic events on Friday include the Consumer Price Index, which will show how that producer inflation from today is filtering down to the consumer level.

Economic Calendar

The big report for the day was not economic. It was the Intel earnings after the close and the elephant in the room everybody was ignoring all day. After the bell Intel reported earnings of 59-cents on $11.5 billion in revenue. That was well above estimates for 53-cents and $11.37 billion. Gross profit was 67.5% and also higher than estimates. Intel also raised estimates to $11.1-$11.9 billion from $10.74 billion for Q1.

There was a catch. Intel said the quarter beat estimates because there was an extra week in the quarter but that was not the only reason. They said the ramp in to the Sandy Bridge processors with integrated graphics was strong. Sales of server processors were "particularly strong" and there was "strong growth" in both business and consumer PCs. Intel said 2010 was the best year in the company's history and 2011 would be even better.

Intel did lower the gross margin estimate for Q1 to 64% and closer to the 63.5% analysts had been projecting for Q1. Intel expects sales to increase by 10% in 2011 compared to a 24% rise in 2009. Despite the slower growth Intel shrugged off reports that PC sales are under pressure from tablets and smartphones.

The Gartner Group reported on Wednesday that worldwide PC shipments grew less than expected in Q4 due largely to the Apple iPad. Gartner said PC sales grew by 2.7% compared to earlier forecasts of 5.5%. Intel brushed off those reports saying strength in the enterprise market led to record processor revenues.

The good news was the forecast of a relatively flat Q1 compared to the normal seasonal decline. That is the real insight into the health of the tech sector. Intel shares rose 50-cents in after hours trading.

Intel Chart

The Dow was down around 50 points intraday and driven lower by a -7% drop in Merck. The company announced it had halted clinical trials on Vorapaxar, an anticlotting pill that had the potential for $5 billion in annual sales. They also narrowed the scope in a second trial. All participants in the initial 13,000 patient study will immediately quit taking the drug. The 26,500 patient study will be stopped for those with a prior history of stroke. The change in study parameters means Merck may not be able to file for approval without initiating and completing a new study. Vorapaxar was the highest profile drug in the Merck pipeline.

Merck Chart

Whole Foods Market (WFMI) jumped +5% intraday after Jefferies raised its 12-month target price to $60 a share from $47. The analyst cited improved store traffic and their big push into healthier foods. WFMI gained +84% in 2010 and it off to a good start in 2011. The analyst said customers appear to be accepting the higher priced offerings now that the recession is over.

Whole Foods Chart

In a prime example of how not to report earnings after a new IPO SemiLEDs Corp (LEDS) reported nearly doubled revenue and reported a strong increase in earnings. All right so far but then they warned pricing pressures over the next three months would lead to lower revenues and profits. The company went public on Dec-9th at $24 and traded as high as $32 in late December. After today's earnings warning they declined -34% to $18.75. Welcome to the reality of corporate earnings.

LEDS Chart

ITT Corp reported on Wednesday it would spin off two separate companies to focus on water management and defense while the parent company would remain in aerospace, transportation, energy and industrial engineering. Shares rose +16.5% on Wednesday. On Thursday shares fell more than 3% after two brokers downgraded the company. How fast the bloom fades after a favorable announcement.

ITT Chart

Marathon Oil (MRO) also announced a plan to split itself into two companies. One will focus on exploration and one will focus on the refining business. Marathon is considered the fifth largest U.S. refiner of gasoline and other fuels. This is an old plan that has resurfaced. They originally discussed it in 2008 but shelved it during the financial crisis. Analysts at Tudor Pickering Holt felt it was the right move and would free up Marathon to become a more aggressive exploration company. The new company would be called Marathon Petroleum Corp and trade on the NYSE under the symbol MPC. The division had revenues of $45.5 billion in 2010. The tax-free spin off is planned for June 30th. Marathon shares rose +6% on the news.

Marathon Chart

After the bell today Coinstar (CSTR), operator of Redbox DVD vending machines, warned is would miss profit estimates because of delays in access to Hollywood's newest movies. The company has agreed to a 28-day delay in receiving the latest DVD releases and giving studios a four-week window to sell their latest movies before offering them for rental in a Redbox. Coinstar projected Q4 profits would be in the range of 67-cents compared to prior estimates of 82-cents. This drop came despite a 31% rise in revenues. Analysts were expecting 86 cents. Shares of Coinstar fell as low as $38 in afterhours after closing at $56.91.

Coinstar Chart

Goldman Sachs created some currency excitement today with their call to go long the euro against the dollar. Goldman believes the European debt problems will eventually be solved and the euro will rise again. The bank feels the resolution will provide the economic stability to produce an even stronger Eurozone and euro. Pledges by China and Japan to buy Eurozone debt will help reduce the risk premium on those countries. Goldman also believes the current U.S. economic policy will push the dollar lower and become an obstacle to investment inflows into the USA.

The positive debt auctions by Portugal and Spain this week have gone a long way towards proving Goldman's forecast. The dollar index dropped a full two points this week for the sharpest decline in months. A three-day, two-point decline in a currency is like an earthquake registering an eight on the Richter scale. The dollar index has returned to support at 79.0 and a break there could see another three-point decline.

Dollar Index Chart

Euro Chart

Noted bank analyst Richard Bove was out pounding the table on the financial sector today. He claims the next two years will be the new golden age of banking. He bases his views on the monstrous cash hoards held by many banks. During the crisis banks were told to raise cash. When the worry over a double dip and the financial stress test was rampant they were told to raise cash again. Now that conditions have improved significantly they have all this cash and nothing to do with it. Loan demand is still very low but improving as is credit quality. Bove claims Citigroup, Bank America, Bank of New York, State Street and Northern Trust have so much cash their shares are selling for less than their cash position. He said buying banks with that much cash is easy justification. They will eventually put that cash to work and he expects 20% to 25% earnings growth over 2011 and 2012.

Up until late November the financial sector was lackluster at best. The XLF flat lined from May through October before finally beginning to move higher in December.

XLF Chart

The markets rallied strongly on Wednesday thanks to a monster short squeeze prompted by a successful debt auction in Portugal. Despite the minor declines today they held their gains even though the economic news was bad. The falling dollar should have pushed equities higher but the fear of Intel releasing a negative surprise kept the markets in check. The bad news bulls had a full buffet of sound bites to swallow as the climbed the wall of worry and apparently they needed a siesta before continuing their journey.

A couple weeks ago I theorized if January was going to follow historical norms that the 13th would be my target for a market top. Over the last ten years the average date is the 12th, which would fit nicely with Wednesday's spike and fade, but I thought funds would want to see how Intel reported before making a buy/sell/hold decision. Tomorrow will be the day of decision. I will be proven right or wrong but that is of no consequence. The important part of that discussion is that unlike most of the bears I remain bullish. I believe any January dip will be a buying opportunity and I am looking forward to it.

The S&P rallied to 1287 on Wednesday and closed at 1283 today. That short squeeze pushed the S&P over resistance at 1278-1280 and today's failure to drop back below those levels on bad news is encouraging. There is always the possibility we will see a continued pattern of two steps forward, one step back that will frustrate the bears tremendously. Bull markets can remain overbought for a long time even when the technicals are suggesting a pause. The S&P is WELL ABOVE decent support at 1258-1260 and it would take a major change in sentiment, even temporarily, to break below those levels.

S&P-500 Chart

The Dow rallied to 11,782 on Wednesday's short squeeze and only gave back 50 points from that intraday high. With Dow component MRK down -2.46 today and responsible for all of the Dow's point decline I would say the staying power was excellent. The Dow has decent support at 10,600 that is sure to produce a bounce should we test that level again. The volatility is returning but the dip buyers are alive and well.

Resistance at the 2008 highs in the 11,700-11,750 range appears to have slowed the advance and a move over those levels would be strongly bullish. The three-day decline starting last Thursday was minimal and the intraday lows were bought. Nothing has really changed on the chart/trend other than the battle at 11,750. The outcome of that battle will likely be decided on Friday.

Dow Chart

The Nasdaq chart turned more bullish this week after it broke over the 2720 level on Wednesday. Today's -2 point decline was noise and I consider it bullish given the Intel event risk traders were facing. The Nasdaq has gone almost two months without a decent bout of profit taking so we need to keep that possibility in the back of our mind.

Decent support is 2675 and quite a ways below our current level. It will be interesting to see if the breakout line at 2720 will reverse to support on the next decline.

Nasdaq Chart

In summary the short squeeze on Wednesday changed the flavor of the market somewhat to push us over resistance that had held for a week. The lack of a significant decline on the Nasdaq today ahead of Intel's earnings is bullish for sentiment. The indexes continue to creep higher and even though the indicators are overbought this could continue if frustrated buyers fail to wait for a meaningful dip before jumping in. Every short dip that is bought increases the frustration of those waiting for a meaningful dip as a buying opportunity. I know this for a fact because I am one of them. Watch for Friday to be a pivotal day in the market. With expiration only a week away we could see some increased volume as funds exit option positions.

Jim Brown

Send Jim an email


New Option Plays

Earnings Take Center Stage

by James Brown

Click here to email James Brown

Editor's Note:

The market traded sideways on Thursday but Friday could be a much different story. Better than expected earnings from Intel (INTC) tonight could fuel gains for the technology sectors tomorrow. Meanwhile JPM is due to report earnings on Friday morning and their report will set the tone for the financials. I am somewhat concerned that the rally is looking tired but the trend remains higher.

I'm not adding any new positions tonight. We just closed six bullish candidates at or near our targets today. Readers may want to glance at some of my higher-risk, aggressive candidates currently on my watch list. NFLX, PCLN, ISRG, and CMG all look ready to move higher but buying calls on these right now could be a big gamble.

Alternative you could look for short-term trades in the semiconductor sector or the banking industry based on the earnings releases.

- James


In Play Updates and Reviews

A Harvest of Targets

by James Brown

Click here to email James Brown

Editor's Note:

Thursday turned out to be a great day for us. We had six candidates hit our bullish exit targets today. Winners were CSX, DE, ILMN, LMT, RIG, and RIMM. UNP came close enough to our final target that I am suggesting an early exit anyway. There are new stop loss for GS, RIMM, and XEC. (RIMM only hit our first target)

-James

Current Portfolio:


CALL Play Updates

Amazon.com Inc. - AMZN - close: 185.53 change: +1.45

Stop Loss: 176.45
Target(s): 189.90, 199.00
Current Option Gain/Loss: -55.7%, and -22.0%
Time Frame: 4 to 6 weeks
New Positions: See below

Comments:
01/13 update: AMZN saw a little bounce (+0.7%) thanks to some positive analyst comments and a new $200 price target. Shares did break through the very short-term bearish trend of lower highs but bigger picture nothing has changed. The positive earnings from Intel tomorrow could spur the NASDAQ composite higher and that could help AMZN gain some momentum. I would still be tempted to buy a dip near $180 I'd keep positions very small.

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: 69.83 change: -0.32

Stop Loss: 65.90
Target(s): 69.00, 72.25
Current Option Gain/Loss: +158.9%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
01/13 update: BA saw a little bit of profit taking today and settled back under the $70.00 mark. There is no change from my prior comments. More conservative traders may want to raise their stops higher. Our final target to exit is $72.25. I am not suggesting new bullish positions at this time.

- Suggested Positions - (small positions only!)

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

01/12 New stop loss @ 65.90
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: 94.14 change: +0.65

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:
01/13 update: CAT is still churning sideways. 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: 112.91 change: +1.08

Stop Loss: 108.75
Target(s): 117.50
Current Option Gain/Loss: -28.5% and + 5.7%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
01/13 update: CMI rallied from its morning lows to show some relative strength with a +0.9% gain. We don't have much time left on our January calls. I will note that our March calls have turned positive. I don't see any changes from my prior comments. I am not suggesting new bullish positions at this time.

(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


CenturyLink, Inc. - CTL - close: 44.86 change: +0.23

Stop Loss: 43.75
Target(s): 44.90, 48.00
Current Option Gain/Loss: + 50.0%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
01/13 update: CTL is still trying to bounce. I'm concerned that recent support near $46.00 will now be new resistance. We might want to exit our calls if CTL can bounce back toward $46.00 especially since we only have five trading days left before January calls expire. I am not suggesting new bullish positions.

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


Express Scripts - ESRX - close: 57.63 change: +0.88

Stop Loss: 53.75
Target(s): 53.95, 58.50
Current Option Gain/Loss: +142.8% and +53.1%
Time Frame: 5 to 6 weeks
New Positions: see below

Comments:
01/13 update: ESRX is rising to new highs with a +1.5% gain on Thursday. Our exit target is $58.50. However, if ESRX does not hit $58.50 tomorrow I want to exit our January calls anyway. Said another way, exit the January calls tomorrow, before the closing bell. We only have five trading days left before January options expire. I am not suggesting new positions at this time. 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

01/13: Plan on exiting the January calls tomorrow before the close.
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: 95.63 change: +0.63

Stop Loss: 91.75
Target(s): 99.90, 104.75
Current Option Gain/Loss: -86.2% and - 0.0%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
01/13 update: FDX is finally breaking out from its six-week trading range. The stock tested its early December high with today's rally to $96.17. This is a very encouraging move. If I was not expecting a market correction in the second half of January I would consider this move a new bullish entry point. Hopefully my bias is not getting in the way of a good trade here.

We only have five trading days left on our January calls. I have been suggesting that we should exit this calls if we can sell them for $0.40 to recoup some of our capital. The high today was 20 cents. If this trend continues these January calls could hit 40 cents tomorrow. Aggressive traders may want to let it ride since FDX could be over $100 before January calls expire.

Please note that I am removing the $96.75 profit target and adjusting our targets on the April calls to $99.90 and $104.75.

- 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

01/13: New targets for the April calls (99.90 and 104.75)
01/12: New stop loss @ 91.75
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: 171.57 change: -0.10

Stop Loss: 167.75
Target(s): 171.00, 179.50
Current Option Gain/Loss: + 38.1% and +34.7%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
01/13 update: More conservative traders may want to exit our January calls tomorrow (Friday) at the closing bell. The market is closed on Monday and GS reports earnings on Wednesday morning. I am planning on closing all of our positions on Tuesday at the closing bell to avoid holding over earnings. Please note our new stop loss at $167.75. No new positions at this time.

FYI: JPM reports earnings tomorrow morning and while not a direct competitor to GS the results tomorrow could have an influence.

- 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

01/13: New stop loss @ 167.75, plan on exiting Jan. 18th
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


International Business Machines - IBM - close: 148.82 change: -0.28

Stop Loss: 144.75
Target(s): 152.50, 159.50
Current Option Gain/Loss: +10.3%, and - 2.6%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
01/13 update: Investors have a decision to make soon. IBM is due to report earnings on January 18th after the closing bell (Tuesday). Wall Street is looking for a profit of $4.08 a share. Normally we want to exit bullish positions in front of an earnings announcement because there are too many risks to hold over the release. I am suggesting we exit our January calls on Tuesday at the closing bell. However, we will keep our April $155 calls and hold over the report with this position. No new positions at this time.

- Suggested Positions -

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

- or -

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

01/13: Exit the January calls on Tuesday before the close (& earnings)
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


Intrepid Potash, Inc. - IPI - close: 37.77 change: -0.24

Stop Loss: 34.75
Target(s): 39.90, 42.00
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see trigger

Comments:
01/13 update: Hmm... commodities extend their gains today and yet IPI fails to follow through on yesterday's big rally. That's not necessarily a bad thing for us since we want to see a pull back. I am suggesting a trigger to buy calls on the dip at $37.25. If triggered we'll use a stop loss at $34.75. Our first target is $39.90. Our second, more aggressive target is $42.00.

FYI: The Point & Figure chart for IPI is bullish with a $62 target.

Trigger @ 37.25

- Suggested Positions -

Buy the 2011 February $40 calls (IPI1119B40) current ask $1.25

Entry on January xxth at $ xx.xx
Earnings Date 03/01/11 (unconfirmed)
Average Daily Volume = 717 thousand
Listed on January 12th, 2010


Juniper Networks - JNPR - close: 38.22 change: -0.10

Stop Loss: 35.75
Target(s): 39.90, 41.75
Current Option Gain/Loss: -15.3% and +16.6%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
01/13 update: JNPR tagged another new relative high at $38.72 intraday. Intel (INTC) is in a different industry but the strong earnings from INTC tonight should boost the NASDAQ tomorrow and tech stocks like JNPR could rally. I am not suggesting new bullish positions at this time.

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


Millicom Intl. Cellular - MICC - close: 97.44 change: +0.32

Stop Loss: 92.49
Target(s): 99.90
Current Option Gain/Loss: +10.8% and +33.3%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
01/13 update: MICC rallied to a new ten-week high at $98.94 but failed to hold its gains. I wouldn't be surprised to see a little pull back toward the $96-95 zone again. I would seriously consider taking profits early and exiting on Friday (tomorrow) if you're holding the January calls. I am not suggesting new bullish positions at this time. Officially, 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


NetApp, Inc. - NTAP - close: 58.62 change: -0.31

Stop Loss: 54.90
Target(s): 62.25, 64.50
Current Option Gain/Loss: -14.0%
Time Frame: 4 to 5 weeks
New Positions: Yes, see below

Comments:
01/13 update: It was a quiet day for NTAP with the stock slipping lower as the market declined. There is no change from my prior comments. I would consider new bullish positions now or on a dip near the rising 10-dma. We wanted to keep our position size small. 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.

- Suggested Positions (small positions only) -

Long the 2011 February $60 calls (NTAP1119B60) Entry @ $2.50

Entry on January 12th at $59.04
Earnings Date 02/16/11 (unconfirmed)
Average Daily Volume = 3.8 million
Listed on January 11th, 2010


QUALCOMM Inc. - QCOM - close: 51.87 change: -0.47

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:
01/13 update: QCOM lost about -0.9% on Thursday. I don't see any changes from my prior comments. 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


Research In Motion - RIMM - close: 63.53 change: +0.64

Stop Loss: 59.90
Target(s): 64.75, 67.50
Current Option Gain/Loss: +37.6%, and +31.9%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
01/13 update: Target achieved. RIMM displayed some relative strength this morning with a rally to $66.15 in the first hour of trading. Our first target to take profits was hit at $64.75. Shares gave back most of its gains, which is a little bit worrisome. This failed rally type of move could be a short-term top. I am not suggesting new bullish positions at this time. We will raise our stop loss to $59.90. Our final target remains $67.50.

The February $62.50 call was trading near $4.00 (+61.9%) and hit $5.00 intraday. The March $65 call was trading at $3.75 (+59.5%) and hit $4.36 intraday.

- 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

01/13: New stop @ 59.90
01/13: 1st Target Hit @ 64.75. Feb. call @ $4.00 (+61.9%) Mar. call @ $3.75 (+59.5%)
01/12: New stop loss @ 58.45

chart:

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: 73.84 change: -0.65

Stop Loss: 69.90
Target(s): 77.40, 79.90
Current Option Gain/Loss: -14.3%
Time Frame: 4 to 6 weeks
New Positions: See below

Comments:
01/13 update: SPW saw some minor profit taking on Thursday. Volume was low, which is what we want to see on a pullback. There is no change from my prior comments. I would wait for a dip near $72.50 before considering new positions. 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: 67.93 change: -0.10

Stop Loss: 64.75
Target(s): 69.90, 72.45
Current Option Gain/Loss: -85.7%, and -20.6%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
01/13 update: SWK is still struggling with resistance near the $68.00 level. This is not good news for our January calls, which only have five trading days left. I am 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


Cimarex Energy Co. - XEC - close: 95.96 change: +1.40

Stop Loss: 89.90
Target(s): 94.25, 99.50
Current Option Gain/Loss: +140.0%, and +64.5%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
01/13 update: XEC extended its rally. Shares hit $97.00 intraday. The stock closed with a +1.4% gain. Shares are looking a little extended here. I am not suggesting new positions. Broken resistance near $92.00 should offer some support. I am raising our stop loss to $89.90. No new positions at this time. Our final target is $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

01/13: New stop loss @ 89.90
01/12: 1st Target Hit @ 94.25. Feb call @ $3.18 (+81.7%) Mar. call @ $4.20 (+35.4%)

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

CSX Corp. - CSX - close: 69.27 change: +0.57

Stop Loss: 64.45
Target(s): 69.25
Current Option Gain/Loss: +142.8% and +106.8%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
01/13 update: Target achieved. CSX rallied past the $69.00 level around lunch time today and hit $69.41 intraday. Our final target to exit was $69.25. The January call was closed at $4.25 (+142.8%) and the February call was closed at $5.15 (+106.8%).

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

Buy the 2011 January $65 calls (CSX1122A65) Entry @ $1.75, Exit $4.25 (+142.8%)

- or -

Buy the 2011 February $65 calls (CSX1119B65) Entry @ $2.49, Exit $5.15 (+106.8%)

01/13: Final target hit @ 69.25.
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.

chart:

Entry on December 13th at $64.39
Earnings Date 01/24/11 (confirmed)
Average Daily Volume = 5.9 million
Listed on November 23rd, 2010


Deere & Co - DE - close: 89.47 change: +2.02

Stop Loss: 82.75
Target(s): 89.75
Current Option Gain/Loss: - 5.1%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
01/13 update: Target achieved! Bullish analyst comments propelled DE to an intraday high of $89.97. Our target to exit was hit at $89.75. This play is closed. We might want to keep DE on our watch list for another dip back toward the $85 level, which should be support. Our February $90 calls were trading near $2.85 (+111%) and hit an intraday high of $3.04.

Long the 2011 February $90 calls (DE1119B90) Entry @ $1.35, exit @ 2.85 (+111%)

01/13/11 Target hit @ 89.75
01/12/11 New stop loss @ 82.75

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


Illumina Inc. - ILMN - close: 69.55 change: +2.60

Stop Loss: 63.90
Target(s): 69.50
Current Option Gain/Loss: +25.5%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
01/13 update: Target achieved. ILMN was showing lots of strength with a huge surge to $69.77 intraday. Our exit target was hit at $69.50. Our February $70 calls were trading at $2.70 (+25.5%). Shares of ILMN are nearing potential resistance at $70.00. We may want to put ILMN back on our watch list if shares retest support near $65.00 again.

- Suggested Positions -

Long the 2011 February $70.00 call (ILMN1119B70) Entry @ $2.15, exit $2.70 (+25.5%)

01/13: Target hit @ 69.50
01/12: New stop loss @ 63.90

chart:

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


Lockheed Martin Corp. - LMT - close: 73.84 change: -0.40

Stop Loss: 69.80
Target(s): 73.25, 74.90(or 200-dma)
Current Option Gain/Loss: +100.0%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
01/13 update: Bingo! Target achieved. LMT saw an intraday spike to $74.88, briefly trading past its 200-dma. Our target to exit was the simple 200-dma (at 74.70 as of yesterday). The play is closed. I would expect LMT to correct back toward support near the $71-70 zone. Our March $75 calls were trading at $2.00 at our target (+100%).

- Remaining Positions -

Buy the 2011 March $75.00 calls (LMT1119C75) Entry @ $1.00, exit $2.00 (+100%)

01/13: Target hit @ 200-dma
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


Transocean Ltd. - RIG - close: 77.32 change: +0.28

Stop Loss: 71.75
Target(s): 72.50, 78.25
Current Option Gain/Loss: +137.2% and +141.6%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
01/13 update: Target achieved. RIG got off to a slow start but midday shares rallied to $78.61. Our final target to exit was hit at $78.25. Our January $70 calls were trading at $8.30 (+181%) and the February $75 calls were at $4.80. These options went on to hit intraday highs of $8.60 and $5.10, respectively. We may want to keep RIG on our watch list as a dip near $70 and its 50-dma could be another entry point down the road.

- Current Positions -
Long the 2011 January $70.00 calls (RIG1122A70) Entry @ $2.95, exit $8.30 (+181.3%)

- Second Position -
Long the 2011 February $75.00 calls (RIG1119B75) Entry @ $1.80, exit $4.80 (+166.6%)

01/13/11 Target hit @ 78.25
01/12/11 New stop loss @ 71.75
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%)

chart:

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


Union Pacific - UNP - close: 99.02 change: +0.94

Stop Loss: 92.45
Target(s): 96.25, 99.75
Current Option Gain/Loss: +176.3% and +133.9%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
01/13 update: That's close enough for me. UNP rallied to $99.49 intraday. We have been aiming for $99.75. I am suggesting an early exit now (near $99) because UNP is looking a little overbought here. We might want to keep UNP on our watch list since broken resistance near $95 should offer some new support.

Exit early now. The January $95 calls are bidding $4.20 (+176.3%) and the February $95 calls are at $5.45 (+133.9%).

- 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

01/13/11: Exit Earl @ 99.02. Jan. call @ $4.20 (+176%), Feb. call @ $5.45 (+133%)
01/12/11: New stop loss @ 94.40
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

chart:

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