Option Investor
Newsletter

Daily Newsletter, Saturday, 3/5/2011

Table of Contents

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

Market Wrap

Sell The News

by Jim Brown

Click here to email Jim Brown

Friday's payroll report was inline with estimates but well short of many whisper numbers and traders sold the news to capture profits and avoid the weekend event risk.

Market Statistics

The two big news items for the day were February jobs and oil prices. The Non-Farm Payroll report showed a gain for February of 192,000 jobs compared to the consensus estimate of 178,000. Unfortunately that missed the much higher whisper numbers creating a sell the news event. The market will always find an excuse to take profits.

Actually it was a good report. Private payrolls increased by +222,000 but government jobs declined by -30,000 giving us the +192,000 total. January was revised higher to 63,000 from 36,000 and December jumped to 152,000 from 121,000. That makes the net job gain in this report +250,000.

In the separate Household Employment Survey the unemployment rate (U3) declined from 9.0% to 8.9% and the lowest rate since April when Census workers were being hired. Household employment rose by another +250,000 jobs.

More than 68.2% of private sector industries either added to payrolls or kept jobs at prior levels and that was the highest percentage since the late 1990s.

Despite the technical drop in the unemployment rate to 8.9% the rate is still expected to rise to as much as 9.5% in the coming months as the workforce participation rate rises. More than two million workers are now counted as "discouraged" and not included in the unemployment rate calculation. As hiring conditions improve those workers will begin looking for work again and move back onto the rolls and into the calculation. This will force the unemployment percentage to rise until those workers find a job.

The U3 unemployment rate at 8.9% is defined as "Total unemployed" by the BLS but ignores numerous classes of people currently out of work. The U6 unemployment rate was 16.7% (not seasonally adjusted) in February. The U6 rate is defined as "Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force." Persons marginally attached to the labor force are those who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the past 12 months. Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not currently looking for work. Persons employed part time for economic reasons are those who want and are available for full-time work but have had to settle for part-time employment to pay the bills. There were 8.3 million "under employed, part time" workers and 2.7 million considered marginally attached. That is 11 million people not included in the official 8.9% unemployment rate.

According to the BLS there 238,851,000 people between the ages of 16-65 and not institutionalized. (Hospitalized, nursing homes, prison, etc) There are 153,246,000 considered to be in the work force and 139,573,000 are employed leaving 13,673,000 unemployed. 85,605,000 are not considered to be in the workforce.

It is going to take a long time before we can come close to full employment again. Full employment is normally thought to be 4.5% unemployment. Even if we were adding 300,000 jobs per month, which is considered outstanding gains, it would only dent the U6 rate. The economy requires 150,000 new jobs per month just to handle new workers from graduations and immigration. That is how many new workers enter the workforce on average each month. At +300,000 new jobs we would only be reducing the current unemployed workforce by -150,000 per month. If we assume we have to add eight million jobs to get to normal employment levels and a +150,000 monthly rate that would take 53 months or in realistic terms between five and seven years. In fact we may never be at full employment again until the boomers retire and remove 44 million people from the work force over the next decade. That will create an experience drain on the workforce and require younger workers to step up and fill the positions.

Basically even with good monthly numbers we are not going to make much progress for several years but there is light at the end of the tunnel due to the generational shift later this decade.

The jobs numbers on Friday were the highest since December 2006 (+226K) once you eliminate the temporary census jobs in Mar, Apr and May. Those were 90-day jobs and should not count in the big picture. Their terminations caused the declines in Jun, Jul and Aug. Net jobs to the economy were zero. I expanded the chart back to Jan 2005 to show what a "normal" pattern looked like. The high in that period was +305,000 in November 2005.

Payroll Chart

Despite the mathematical slight of hand by the BLS in reporting the unemployment this was a good report and the recent improvements in the regional economic reports suggest March will be even better. The market should not have been disappointed by these numbers because they were in the Goldilocks zone where the Federal Reserve will continue to keep rates low. Had they jumped into the 300,000 range as some expected it might have shocked the Fed into changing their statement when they meet on the 15th.

The jobs report may have gotten part of the blame for Friday's decline but I think its part in the scenario was vastly overstated.

Another report that should have supported the market was the Factory Orders for January. Orders rose +3.1% with durable goods orders rising +3.2%. These are very strong numbers and appears to indicate rising manufacturing with a broad base. Analysts had only expected a +1.9% gain.

The economic calendar for next week is devoid of any material events. The two reports most likely to be of interest will be Jobless Claims and Consumer Sentiment. The next really serious problem for the market will be the FOMC meeting the following Tuesday. The chatter is growing for a change in the statement and it is going to be market ugly when it finally comes. There is a good possibility the current market weakness is related to expectations for a statement change at this meeting.

Economic Calendar

The second topic of the day was high oil prices. The price of crude spiked again as violence increased in Libya and unrest grew in Bahrain, Oman and Yemen. Protests began appearing in eastern Saudi Arabia in the oil producing provinces ahead of the scheduled national Day of Rage protest next Friday. The commitment of traders report showed that hedge funds and big speculators had increased their bullish bets by 30% in the week ending on March 1st and taking their net long positions to a record high.

The tensions in the Middle East and North Africa (MENA) are not going away and every day there is some new story about a new protest with demonstrators killed. The problem is building to a point where we could begin to see production disruptions in other countries. Throughout this crisis the news about Nigeria has been very quiet. Nigeria has a presidential election in April and the MEND rebels normally attack oil pipelines and installations as a means of protest ahead of these national events. Nigeria is a big producer of light sweet crude similar to that produced by Libya. With global supplies very tight today an outage in Nigeria could be the tipping point to significantly higher oil prices.

There is plenty of "oil" available from OPEC but there is very little excess capacity in light, sweet crude. We are very close to "Peak Sweet™" and that is the commodity referenced in the Brent and WTI contracts. If Shell were to announce another force majeure next week for Nigerian light crude we could see prices spike $10 to $15 in a heartbeat.

I reported last week in the OilSlick newsletter that nearly all the oil in floating storage had disappeared. When countries don't have a specific buyer for excess crude or they over produce ahead of maintenance periods they sometimes rent tankers for floating storage. In recent years there has been as much as 90 million barrels of crude in floating storage. In the last two weeks that storage disappeared. It was snapped up by countries and refiners eager to acquire oil while they still could. That 70-90 million barrels in storage was always a cushion against a outage in a producing country. Now it is gone.

On Friday Libyan forces were battling rebels on several fronts and the oil facility at Zueitina was reportedly damaged and on fire. There were also reports of new protests inside Gaddafi's stronghold city of Tripoli. The U.S. and U.K. as well as the Arab League were reportedly seriously considering a no fly zone over the country. The IEA raised its estimate for offline oil production to one million barrels of the 1.6 mbpd Libya was previously producing.

In Yemen demonstrations swelled to hundreds of thousands after the President Ali Abdullah Saleh rejected a plan for him to transfer power. In Bahrain fighting between Sunni and Shiite Muslims injured several people and raised the sectarian hostility level. Shiites are the majority of the population and the country is ruled by Sunnis. If the sectarian violence increases it could spread to neighboring countries and further complicate the political problems.

Two weeks ago it appeared the popup demonstrations in the MENA countries had run their course after several countries announced plans to compromise with the demonstrators. The Mubarak exit in Egypt calmed tensions in the area. Then Libya exploded onto scene and it appeared another turnover might occur rapidly and then return to normal. That is no longer the outlook.

Now it appears the Libyan conflict could last for weeks or even months with a serious hit to light crude supplies. As fighting rages around control of the oil facilities we are likely to see more taken offline. If they are severely damaged by the bombing it could be months before production resumes. The highly publicized events in Libya are encouraging to protestors in other countries. Now instead of compromises they are concentrating on new leadership. We could easily see other civil wars breakout in the near future.

The elephant in the room is the Saudi Arabia Day of Rage on Friday March 11th. That could be the spark that explodes the entire region. Since Saudi has zero tolerance for political dissent and they routinely arrest people for talking negatively against the king, we could see a seriously violent event on Friday OR nothing at all may happen since Saudi has had three weeks to prepare to overpower the demonstrations. If every third person on the street is a policeman it may be hard to get the party started. Saudi officials reiterated on Saturday that it is against the law to protest and warned that security forces will use ALL means at their disposal to prevent any protests from occurring.

The problem today is the uncertainty surrounding the events in not just one but TEN countries at the same time. It is amazing that oil is not $150 already given this level of unrest. WTI oil prices have risen +22% since Feb 18th.

Brent Crude Chart

U.S. WTI Crude Chart

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The talking heads on TV blamed high oil prices for the drop in the equity markets. If that is the case we are going to have a miserable week because I don't see oil prices declining until after the Friday demonstration in Saudi Arabia. Fortunately I don't believe oil prices were the culprit. The dislocation between rising oil prices and declining prices on oil stocks suggests there were other factors at work.

I believe the primary factor for the decline is the expectation for a change in the Fed statement with a secondary factor the reluctance to be long equities over the weekend. The event risk is very high and we are in a trading environment rather than a buy and hold environment. Traders wanted to take profits and sleep easier over the weekend.

A majority of the declines were caused by two sell programs at 10:AM and 12:PM. Those sell programs knocked -16 points off the S&P. Total volume was almost identical for the last three days at 7.7 billion shares each. That shows there was no more downside conviction on Friday than there was on Thursday's big short squeeze. Don't let the market commentators sell you a scenario about market direction based on a teleprompter script written by a journalism intern.

In stock news Goldman Sachs and Citigroup were downgraded by Bank of America from buy to neutral. The BAC analyst said Q1 trading has been "uninspiring" for banks. He said client engagement remains subdued, especially in light of the Middle East unrest. That puts institutions on hold because of event risk.

BAC also cut estimates on Morgan Stanley but left the recommendation at neutral. BAC's top pick in the banking sector is JP Morgan but the analyst cut earnings estimates due to the expected decline in trading. Morgan Stanley and Citigroup shares declined the most at -3%. Citi has been declining for the last couple weeks on a potential for $15 billion in charges.

Citigroup Chart

Marvell Technology (MRVL) dropped -11% after reporting earnings and revenue on Thursday night that came in below analyst estimates. Marvel's report also suggested there was a price squeeze in the smartphone market and prices and margins were going lower. Research in Motion (RIMM) lost -3% after a negative note from Susquehanna about lower selling prices and a declining mix of products. The two events depressed the entire sector.

Marvell Chart

Juniper Networks (JNPR) announced a new optical switch with four times the speed and five times the packet processing power of today's high-end Internet switches. The new switch will be out in beta in August and will be capable of moving 3800 terabits of data per second over the network. The company said this was ten times faster than Cisco's latest high-end product. No wonder Cisco is trading at a 52-week low. Juniper shares only gained +35 cents because the switch is going to be formerly announced at the analyst meeting in San Francisco and it is not even out in beta until August. However, I think this kind of technological improvement will push them higher in the months ahead.

Juniper Chart

Credit card companies could bounce next week if a proposal to delay implementation of fee limits is considered by Congress. Companies claim they stand to lose between $12 and $48 billion in fees due to the limitations in the Dodd Frank financial reform bill. The proposal to delay the fee caps has broad support and lawmakers are expected to try and pass a two-year delay of implementation in order to "study" the impact of the fee limit. What the democrats want is to not have to vote on canceling that provision of the bill ahead of the 2012 elections. The republicans want to delay a vote to kill the provision until after the 2012 elections in hopes of gaining more support with more republicans expected to win in 2012. It sounds like a deal both can agree on since the only real change before the election is a delay. That will enable the credit card companies to continue charging the fees for the next two years and be a tremendous relief for those faced with the sharp revenue cut. One way to play this would be calls on Capital One (COF) or maybe American Express (AXP). I like the AXP chart better for a long position but COF has a large customer base of debit card accounts while AXP is strong in credit cards.

Chart of AXP

Chart of COF

The dollar fell to another three month low and that helped push oil, gold and silver higher. Gold rebounded +16 to close at 1429 and silver closed at $35.32. That is a 31-year high on silver. Analysts claim, on a parity basis with gold, silver should be trading at $100.

Silver Chart

The S&P fell -19 points intraday but came to a dead stop at Fib support at 1313. A short covering rally at the close helped to ease the pain and cut the loss in half. The dead stop at 1313 support was bullish. I am discounting the rebound at the close because I think it was just short covering ahead of the weekend.

The stop at support at 1313 produced a second higher low and that is technically bullish. I realize we are playing with fire here with five major moves in the last two weeks and Friday's close right in the middle of the range. The appearance of various sell programs we saw this week is clear evidence that funds of some sort are taking some profits off the table. If this turns from a random occurrence to a routine event we could be in trouble. It has been months since we had major sell programs on a routine basis. We need to see the S&P move over 1330 to keep the trend alive. A decline back to support 1300 would be troubling and a break of 1295 a change in the three month trend.

S&P 500 Chart - 60 min

S&P 500 Chart - Daily

The Dow found support at 12,100 and has formed a new channel after the higher low on Friday. There is nothing new or dramatic here but the multiple days of triple digit moves is the type of volatility normally reserved for market tops and bottoms. We went for weeks back in the winter where the Dow did not have a triple digit range. Over the last two weeks we have seen quite a few. This volatility is normally attributed to a market top but also appears in a typical correction. As long as the pattern of higher lows and higher highs continues the bullish sentiment will eventually return. At this point a decline back to 12,000 would be a pivotal event and suggest a further decline ahead.

Dow Chart - 60 Min

Dow Chart - Daily

The Nasdaq performed better than the other big cap indexes and gave back only a small portion of Thursday's +50 point gain. This is an even nicer series of higher highs and higher lows than the S&P. Resistance is 2800 but the Friday close puts it within striking distance for a breakout on even a mildly positive day.

Nasdaq Chart - 90 Min

Nasdaq Chart - Daily

The Russell is again the most bullish chart and that suggests market sentiment is improving. Despite the multiple sell programs the Russell gave back only four points from Thursday's gain and appears poised to break out over resistance at 830. This chart confirms my bullish bias.

Russell Chart - Daily

Next week is the two-year anniversary of the 2009 market lows. This will be repeated over and over on stock TV and reporters will question, "Is it time for the monster rally to end?" That depends on how badly they scare traders with the interviews of analysts suggesting they take some money off the table.

Actually that may not be a bad idea. We have been riding a bullish market for months now and there is never a good reason for not taking profits. I am not suggesting we sell everything on Monday morning but it would be a good idea to tighten up your stop losses to make sure you exit with a profit just in case the market takes another dive.

The next ten days have some serious event risk and that uncertainty can produce further market volatility. Specific risk factors would be the FOMC meeting and the market chatter leading up to that event. Another would be the Day of Rage on Friday in Saudi Arabia. The continuing problem in Libya is also a challenge. I heard late today that another 50 opposition fighters had been killed and a couple hundred more wounded. This is escalating to the point where outside nations may decide to intervene.

Those risks and others suggest a cautionary posture for traders. I am not advocating an exit, only tighter stops and smaller positions until after the FOMC meeting on the 15th.

Until then, enter passively and exit aggressively. Pick your entry points carefully and protect your profits by using tight stops.

Jim Brown

Send Jim an email

"Memories make us what we are. Dreams make us what we will be" - Fortune Cookie


Index Wrap

WHIPPY

by Leigh Stevens

Click here to email Leigh Stevens
THE BOTTOM LINE:

Prices were whipping back and forth this past week (although staying within uptrend price channels), making for almost no upside gain for the week. A likely reason for the inability to make further gains is that the major indexes haven't completed their downside corrections.

The pattern being traced out on the charts looks to me like 'completion' of the current correction will come with another shot down. I don't currently anticipate a MAJOR pullback ahead, but one that could carry the S&P 500 (SPX) back to the 1280-1260 zone and the Nasdaq Composite (COMP) back to around 2650.

One 'problem' for the bulls on a technical basis is the market has gotten quite overbought on a longer-term chart basis. Moreover, there's a potential double top that's formed in the broad Nasdaq index. Both aspects are seen in my first chart, that of the weekly Nas Composite.

We don't see this same potential double top pattern in the other major indexes, so I wouldn't generalize too much here. Still, given the overbought extreme seen with the weekly Moving Average Convergence Divergence (MACD) indicator, it may take a further pullback or sideways move before COMP would be in a position to challenge and pierce its prior highs just over 2800.

As to the MACD overbought extreme seen above, it's also quite common in a strong uptrend when this weekly indicator hits such extremes as you see for, # 1, for MACD to stay high for a prolonged, but not indefinite, period. #2 is there might only be minor short-lived pullbacks in such overbought situations, followed yet another rally that takes MACD to extremes again or into 'overbought' territory. After a 2nd or 3rd MACD extreme, then the big tradable corrections tend to come. Seasonally, the market tends to advance or stay steady price wise through March-April.

No doubt the oil futures market is over-reacting to the Libya situation and the media is playing up economic recovery 'derailment'. Much of the run up is also driven by speculative buying of oil futures. We pay a lot more at the pump that partly lines the pockets of big hedge fund speculators. Libya is far from being a Saudi Arabia type producer in terms of its daily oil exports. A characteristic of an overbought stock market is that potential bearish developments start getting blown out of proportion.

MAJOR STOCK INDEX TECHNICAL COMMENTARIES

S&P 500 (SPX); DAILY CHART:

The S&P 500 (SPX) index chart remains within its bullish uptrend channel but the pattern being traced out can either suggest a consolidation before a push higher or could suggest a minor top has formed ahead of a further decline that would suggest completion of a typical down-up-down correction. The fact that SPX is having trouble staying above its 21-day moving average is another sign of flagging momentum.

If there's a decisive upside penetration of the prior high in the 1344 area, then a new up leg would look to be underway. Conversely, a break below the 1306-1294 area would set up a possible retest of prior downswing lows in the 1275 area. I indicate potential support in the area of the 1275 prior low but SPX could see 1260 again; I don't have downside objectives lower than this currently. A further decline could 'set up' an oversold RSI reading again, which hasn't happened since late-August. Another oversold RSI reading could 'signal' an opportunity for new bullish positions.

Bullish sentiment was moderate this past week, but my CPRATIO indicator is still far from showing a bearish extreme implied by a LOW reading on a single day, or on a 5-day moving average, basis.

S&P 100 (OEX) INDEX; DAILY CHART

The S&P 100 (OEX) index is either consolidating for a renewed push higher or building a minor top. OEX remains within its uptrend channel so I can't say that there's any breakdown of the existing up trend. It's more that the pattern is one suggesting a possible further downswing to complete the common a-b-c correction where a final 'c' down leg carries to a price lower than the first downswing.

In a way there's no need speculating on how this will unfold now, since a move above 602 suggests a renewed advance whereas a decline that carries to below 582 would suggest a retest of the 575 low. 564-563 is a next support.

I noted last week that: (I'd) "get very cautious ... if there's a breakdown below the 21-day average; e.g., a Close below this key average that is followed by further weakness the next day." We did see this happen on Tues-Wed but prices rebounded the next day, but that didn't last for more than a day.

DOW 30 (INDU) AVERAGE; DAILY CHART:

The Dow 30 (INDU) average is also now in a sideways trend, although this is unfolding as INDU holds above its up trendline. This pattern would break down on a decline below 11955, the current intersection of the bullish up trendline. The prior recent intraday low is another potential support, so I'd call key near support as 11983-11955, with next support in the 11800 area. A Close below 11803, not reversed (back to the upside) would suggest a reversal in the short to intermediate-term trend from up to down.

In terms of technical resistance, the key area is around 12400. A close above 12391-12400 would indicate renewed upward momentum.

In the 30 Dow stocks, only PFE and oil companies CVX and XOM continue to have strong bullish charts, as opposed to all that are in sideways trends; except those in a decline like HPQ, MSFT, PG and WMT.

NASDAQ COMPOSITE (COMP) INDEX, DAILY CHART:

The Nasdaq Composite (COMP) chart, while holding within its bullish uptrend channel is struggling to climb further and break out of its congestion zone. This isn't unusual given the downside break that occurred recently (2/22). It's hard to predict the next move however. Unlike the S&P, COMP's pattern looks a bit like it has traced out a Head & Shoulder's top formation, so without further upside progress above 2800 I lean to a chart interpretation suggesting a further downswing ahead. The key is whether there's a move up through resistance or to below technical support and I don't believe we'll have long to wait to see how this unfolds.

Near resistance is at 2808, extending to 2823, the low and high end respectively of the downside price gap. Next key resistance is at 2840, our last rally peak in COMP. A close above 2840 would be bullish provided there was some (upside) follow through in the days following this. Major resistance comes in at 3000. Conversely, a decline to below 2740-2705 support and especially to below prior lows at 2677, would suggest a possible retest of pivotal support around 2600-2590.

NASDAQ 100 (NDX) DAILY CHART:

The Nasdaq 100 (NDX) remains within its bullish uptrend channel, but with the downside price gap of late-Feb there's key resistance at the low end of that gap at 2366 which extends to 2382, the top end. Next resistance is at 2400-2403. If NDX clears 2400, especially on a Closing basis, further upside progress should develop. Major resistance begins around 2550.

Like the Composite, NDX looks like it could have traced out a Head & Shoulder's top, which suggests a bearish down leg to come. Key near support is at 2315-2285, then at 2258, a prior downswing low. I don't currently have an objective to below the 2225 to 2200 area. I'd want to see NDX get 'fully' oversold in terms of the 13-day RSI before suggesting renewed bullish strategies.

NASDAQ 100 TRACKING STOCK (QQQQ); DAILY CHART:

The Nasdaq 100 tracking stock (QQQQ) has resistance in the 58.5 to 58.9 (downside) gap area, then at 59.0, the Q's most recent rally high. The sideways trend after the late-Feb. technical 'break' and the struggle to sustain rally attempts, suggest a possible further down leg could lie ahead; one that could take the stock to lower lows than seen recently.

Key support begins at the up trendline, currently intersecting at 56.8, with support extending to 56.1, the most recent swing low. Next support is implied by the previous (down) swing low at 55.4. If there is another substantial decline, my lowest current downside expectation for QQQQ is to around 54.0.

RUSSELL 2000 (RUT) DAILY CHART:

The Russell 2000 (RUT) chart looks like the other major indexes, in that the recent rally has so far been unable to climb back above resistance implied by the downside chart gap at 830-832 or to above the prior recent 838 top that preceded that the break that came post-President's Day, our last exchange holiday. A close above 838 would be bullish.

Key support is at 806, extending to 795. Next support and a key one is in the 770 area. If there is going to be this further downswing that the unfolding chart pattern is suggesting to me, my downside objective to not lower than around 760. I think this market is just too overbought to not have a correction at this juncture with oil prices skyrocketing in terms of the fundamentals here. However, I don't see an end to the uptrend and the major trend always reasserts itself. We could have an intermediate correction here however.



GOOD TRADING SUCCESS!


New Option Plays

Software and Energy

by James Brown

Click here to email James Brown

Editor's Note:

In spite the recent volatility in stocks the market's trend remains higher. I am cautiously bullish but readers will want to seriously consider keeping their position size small to limit your risk. Normally the market gets frothy (more volatile) at tops and bottoms.

In addition to tonight's new candidates readers may want to consider these stocks as potential plays but I have to caution you, some of these are look like high-risk/reward bets.

AMZN - Aggressive traders could buy the bounce from $170 with a tight stop but I would only aim for a rebound toward resistance near $180 and its 50-dma.

CRM - Aggressive traders could buy the dip now with a tight stop or wait for a rally past $133-134 as their entry point. Look for a rally toward the $142-145 zone.

CSX - There is no fear of higher oil prices in this railroad stock's chart. I would be tempted to buy calls now or you could wait for a dip near $72.50-73.00. Target the $80 area.

- James


NEW DIRECTIONAL CALL PLAYS

Citrix Systems Inc. - CTXS - close: 71.88 change: +1.38

Stop Loss: 67.40
Target(s): 77.00, 79.90
Current Option Gain/Loss: + 0.0%
Time Frame: 4 to 6 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
CTXS appears to be breaking out from a consolidation of higher lows and lower highs. Shares were showing relative strength on Friday with a +1.9% gain. I am suggesting small bullish positions now. We want to keep our positions small to limit our risk. The recent highs near $73.00 could be resistance so more conservative traders might want to wait for a breakout to new highs. The intraday high was $73.62.

I do consider this a slightly more aggressive trade. We'll put our stop loss under last week's low and under its 50-dma. Our targets are $77.00 and $79.90. The Point & Figure chart for CTXS is bullish with a $94 target.

- Open Small Bullish Positions -

Buy the April $75 calls (CTXS1116D75) current ask $2.20

Annotated Chart:

Entry on March 7th at $ xx.xx
Earnings Date 04/21/11 (unconfirmed)
Average Daily Volume = 2.3 million
Listed on March 5th, 2010


Devon Energy - DVN - close: 91.12 change: +0.96

Stop Loss: 87.75
Target(s): 94.85, 99.00
Current Option Gain/Loss: + 0.0%
Time Frame: 4 to 8 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
This is a simple momentum trade. There was no follow through on DVN's bearish reversal on March 1st. Traders quickly bought the dip. Now DVN is poised to breakout to new relative highs. Shares have a consistent trend of higher lows so we can place our stop loss near the 30-dma at $87.75. Our exit targets are $94.85 and $99.00. Let's keep our position size small since the market has been a little bit volatile lately.

- Small Bullish Positions -

Buy the April $95 calls (DVN1116D95) current ask $1.63

- or -

Buy the July $95 calls (DVN1116G95) current ask $4.25

Annotated Chart:

Entry on March 7th at $ xx.xx
Earnings Date 05/04/11 (unconfirmed)
Average Daily Volume = 3.3 million
Listed on March 5th, 2010


In Play Updates and Reviews

Targets Hit

by James Brown

Click here to email James Brown

Editor's Note:

We had three bullish candidates hit our exit targets on Friday. Meanwhile traders were still in buy-the-dip mode ahead of the weekend. Stocks were bouncing off their lows in the last hour of trading.

-James

Current Portfolio:


CALL Play Updates

Baker Hughes Inc. - BHI - close: 69.73 change: -0.48

Stop Loss: 67.90
Target(s): 74.75, 79.00
Current Option Gain/Loss: -67.6% and -42.7%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
03/05 update: Strength in oil weighed on equities including the energy sector on Friday. Yet BHI remains inside its $68-72 trading range. I would be inclined to buy April calls on this dip.

Our targets are $74.75 and $79.00.

- Suggested Positions -

Long the March $75 calls (BHI1119C75) Entry @ $1.02

- or -

Long the April $75 calls (BHI1116D75) Entry @ $2.13

chart:

Entry on February 28th at $71.74
Earnings Date 05/04/11 (unconfirmed)
Average Daily Volume = 5.3 million
Listed on February 26th, 2010


Peabody Energy Corp. - BTU - close: 69.35 change: +0.03

Stop Loss: 64.75
Target(s): 69.75, 74.00
Current Option Gain/Loss: +25.2%, and +25.0%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
03/05 update: BTU has hit our first profit target at $69.75. Shares bounced around Friday morning but saw an intraday rally to $69.86 before paring its gains. Our March $70 call was trading (bid) near $1.60 (+49.5%) and the June $70 call was (bid) near $5.10 (+41.6%).

The $70 level could be round-number resistance so don't be surprised to see a dip back toward the $66 area. I would wait for that dip before considering new positions. Our final target is the $74.00 level but we may have to exit the March calls before BTU hits that level. If we do see a new entry point I would consider the April or June options. <--

Our second target is $74.00. The Point & Figure chart for BTU is bullish with an $80 target. -->

- Suggested Positions -

Long the March $70 calls (BTU1119C70) Entry @ $1.07

- or -

Long the June $70 calls (BTU1118F70) Entry @ $3.60

03/04 1st Target Hit @ 69.75. Options @ +49.5% and +41.6%
03/03 New stop loss @ 64.75

chart:

Entry on February 17th at $66.30
Earnings Date 04/21/11 (unconfirmed)
Average Daily Volume = 4.6 million
Listed on February 16th, 2010


BorgWarner - BWA - close: 77.75 change: +0.13

Stop Loss: 73.75
Target(s): 79.75, 84.50
Current Option Gain/Loss: -22.7%, and -25.1%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
03/05 update: BWA's Friday looked a lot like Thursday. Shares failed near short-term resistance at $78 on Friday morning but did not see much profit taking. The stock appears to be coiling for a breakout higher. I would open new positions here although I would buy April calls since March options expire in two weeks.

Our targets are $79.75 and $84.50. Our plan was to use small positions to limit our risk.

SMALL bullish positions

Long the March $80 calls (BWA1119C80) Entry @ $1.10

- or -

Long the April $80 calls (BWA1116D80) Entry @ $2.47

chart:

Entry on February 25th at $76.06
Earnings Date 04/28/11 (unconfirmed)
Average Daily Volume = 2.3 million
Listed on February 24th, 2010


Caterpillar Inc. - CAT - close: 103.04 change: -1.21

Stop Loss: 97.90
Target(s): 104.75, 107.50
Current Option Gain/Loss: -48.1%
2nd Option Gain/Loss: + 6.4%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
03/05 update: Profit taking pushed CAT down toward its 20-dma but traders bought the dip near the $102 level. On Thursday I suggested that readers could wait for a dip near $102 as our next entry point. I would still consider new (April) positions now at current levels. More conservative traders may want to raise their stops toward the $100 level.

- Suggested Positions -

Long the March $105 calls (CAT1119C105) Entry @ $1.35

- or -

Long the April $105 calls (CAT1116D105) Entry @ $2.78

03/03 2nd position (April $105 calls) opened at $2.78
03/02 Buy calls on the bounce.
02/23 Triggered @ $101.00. Option @ $1.35
02/22 Still waiting for a dip to $101.00
02/12 Adjusted our trigger, targets, stop loss and strike price.

chart:

Entry on February 23 at $101.00
Earnings Date 04/21/11 (unconfirmed)
Average Daily Volume = 6.2 million
Listed on February 5th, 2010


Cerner Corp. - CERN - close: 104.29 change: -0.25

Stop Loss: 97.75
Target(s): 104.85, 109.00
Current Option Gain/Loss: +14.8%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
03/05 update: CERN hit our first target at $104.85 on Friday. Shares challenged resistance at $105.00 before paring its gains and closing lower. The bid on our option was trading around $3.15 (+16.6%). If you're looking for a new entry point I would prefer to launch positions in the $102-100 area. Considering the market's bullish trend, a dip near $102 may be all we get. Our second and final target is $109.00.

FYI: I want to point out that the most recent data (as of Feb. 15th) listed short interest at 13.9% of CERN's 70-million share float. That definitely seems like a high amount of shorts and fuel for a short squeeze. Plus, the Point & Figure chart for CERN is bullish with a $115 target and what appears to be a relatively fresh quadruple top breakout buy signal.

- Suggested Positions -

Long the April $105 calls (CERN1116D105) Entry @ $2.70

03/04 1st Target Hit @ $104.85, Option @ $3.15 (+16.6%)

chart:

Entry on March 3rd at $102.62
Earnings Date 04/28/11 (unconfirmed)
Average Daily Volume = 600 thousand
Listed on March 2nd, 2010


Check Point Software - CHKP - close: 49.50 change: -0.94

Stop Loss: 47.90
Target(s): 54.50
Current Option Gain/Loss: -42.3%, and -23.5%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
03/05 update: Ouch! CHKP underperformed the major indices on Friday with a -1.8% loss. I didn't see any specific headlines behind this decline. CHKP is an Israeli company and it looks like the Israeli market was closed on Friday. Naturally the increase in violence across the Mideast on Friday could have had investors selling ahead of the weekend afraid of what headlines might surface before Monday.

I would look for a dip or bounce near $48 before launching new positions and then only April options. Our target is $54.50.

- Suggested Positions -

Long the March $50 calls (CHKP1119C50) Entry @ $1.30

- or -

Long the April $52.50 calls (CHKP1116D52.5) Entry @ $0.85

chart:

Entry on February 28th at $50.28
Earnings Date 04/26/11 (unconfirmed)
Average Daily Volume = 3.0 million
Listed on February 26th, 2010


Fastenal Co. - FAST - close: 61.85 change: -0.50

Stop Loss: 59.90
Target(s): 67.25
Current Option Gain/Loss: -88.2%, and -33.3%
2nd Position Option Gain/Loss: -50.0%, and - 9.0%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
03/05 update: A little profit taking on Friday is not a surprise after Thursday's strong gains. I would be tempted to buy calls now or you could wait and see if shares retest support near $60 (April or May options only).

Readers may want to keep in mind that the most recent data listed short interest at 13.6% of the 132 million-share float.

- Suggested Positions -

Long the March $65 calls (FAST1119C65) Entry @ $0.85

- or -

Long the May $65 calls (FAST1121E65) Entry @ $2.25

-2nd Entry as of listed 2/24, Entered 2/25-

Long the March $65 calls (FAST1119C65) Entry @ $0.20

- or -

Long the APRIL $65 calls (FAST1121D65) Entry @ $0.99

02/24 Buy the dip. New Entry (2nd position).
02/23 New entry point @ 60.96. March $65 call @ 0.25, May $65 call @ $1.45
02/22 Entry @ 62.99, NEW STOP @ $59.90
02/19 Adjusted entry point. Buy calls now. Very small positions
02/12 New trigger @ 61.55, new stop loss @ 59.40

chart:

Entry on February 22nd at $62.99
Earnings Date 04/12/11 (unconfirmed)
Average Daily Volume = 1.0 million
Listed on February 8th, 2010


FactSet Research Systems - FDS - close: 104.04 change: -1.07

Stop Loss: 99.95
Target(s): 109.50
Current Option Gain/Loss: -18.6%
Time Frame: 2 to 3 weeks
New Positions: see below

Comments:
03/05 update: We have six trading days left on this trade. The plan is to exit ahead of the March 15th earnings report. Thus far FDS is still working on a bullish trend of higher lows so we can buy calls on this dip or hope for a pull back near the $102-100 zone. I would keep our positions size small. This is a volatile stock and we're playing March options so expect a lot of volatility in the option price. We'll plan on exiting March 14th at the close to avoid holding over the report.

small positions - Suggested Positions -

Long the March $105 calls (FDS1119C105) Entry @ $2.15

chart:

Entry on March 1st at $105.01
Earnings Date 03/15/11 (confirmed)
Average Daily Volume = 213 thousand
Listed on February 26th, 2010


F5 Networks Inc. - FFIV - close: 113.82 change: -0.53

Stop Loss: 109.90
Target(s): ---.--
Current Option Gain/Loss: -87.9%, and -57.3%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
03/05 update: There is no change from my prior comments. I am very wary of FFIV at this point. I am suggesting we start looking for an exit. The long-term up trend is not broken yet but traders keep selling into strength. I'm planning to exit on a bounce near the $120 level assuming we don't get stopped out at $109.90 first. I am not suggesting new bullish positions at this time.

The plan was to use small positions to limit our risk.

SMALL bullish positions

Long the March $120 calls (FFIV1119C120) Entry @ $5.40

- or -

Long the April $125 calls (FFIV1116D125) Entry @ $6.80

03/05 Looking for an exit near $120ish
03/03 Turn defensive. Start looking for an early exit.
02/28 Buy the dip, New Entry point.
02/25 FFIV gapped open higher on an upgrade.

chart:

Entry on February 25th at $121.00
Earnings Date 04/20/11 (unconfirmed)
Average Daily Volume = 3.7 million
Listed on February 24th, 2010


Fossil, Inc. - FOSL - close: 80.83 change: +0.50

Stop Loss: 74.75
Target(s): 82.00, 88.00
Current Option Gain/Loss: +85.7%, and +65.3%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
03/05 update: FOSL is still showing relative strength. Traders bought the dip twice near $79 on Friday morning and the stock hovered near $80 the rest of the day. Shares are poised to rally higher from here. Aggressive traders may want to buy calls now (but adjust your stop losses higher and plan on exiting near $88).

Our exit targets are $82.00 and $88.00.

- Suggested Positions -

Long the March $80 calls (FOSL1119C80) Entry @ $1.40

- or -

Long the April $80 calls (FOSL1116D80) Entry @ $2.60

03/03 new stop loss @ 74.75

chart:

Entry on February 28th at $76.75
Earnings Date 05/11/11 (unconfirmed)
Average Daily Volume = 1.0 million
Listed on February 26th, 2010


Hess Corp - HES - close: 84.24 change: -0.96

Stop Loss: 81.60
Target(s): 92.25, 98.50
Current Option Gain/Loss: -37.6%, and -31.3%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
03/05 update: Another day of gains for crude oil did not translate into strength for energy stocks. Big picture the trend is HES is up, bears could argue that this past week might be a bearish reversal or failed rally pattern. I am suggesting readers look for a dip into the $83.00-82.00 zone as our next entry point. HES should find support near $82 and its rising 40-dma. Alternatively, readers could wait for a breakout over $86.00 as an entry point.

<-- The Point & Figure chart for HES is bullish with a $107 target. -->

- Suggested Positions -

Long the April $90 calls (HES1116D90) Entry @ $2.60

- or -

Long the May $90 calls (HES1121E90) Entry @ $4.15

03/02 Adjusted stop loss to $81.60

chart:

Entry on March 1st at $87.17
Earnings Date 04/27/11 (unconfirmed)
Average Daily Volume = 2.9 million
Listed on February 28th, 2010


IntercontinentalExchange, Inc. - ICE - cls: 130.25 chg: +0.77

Stop Loss: 119.90
Target(s): 138.00, 148.00
Current Option Gain/Loss: -15.6%, and -13.2%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
03/05 update: Shares of ICE are still drifting higher and managed to close over the $130.00 mark. The path of least resistance seems to be up but this remains a higher-risk trade. If you're launching positions now you'll want to consider a higher stop loss. Otherwise, I would wait for a dip into the $125 area.

Prior comments:
Bear in mind that this is an aggressive trade. The stock is volatile and there is a chance that ICE makes an acquisition bid for another exchange. If Wall Street thinks ICE is paying too much the stock will decline on the news. Our targets are $138.00 and $148.00. I want to warn you that the March options will probably be extremely volatile.

- Suggested Positions - (Small Positions Only)

Long the March $130 calls (ICE1119C130) Entry @ $3.20

- or -

Long the April $135 calls (ICE1116D135) Entry @ $3.40

chart:

Entry on February 28th at $127.46
Earnings Date 05/04/11 (unconfirmed)
Average Daily Volume = 938 thousand
Listed on February 26th, 2010


Jones Lang Lasalle Inc. - JLL - close: 97.04 change: -1.81

Stop Loss: 93.30
Target(s): 102.50, 109.00
Current Option Gain/Loss: -51.4%, and -25.0%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
03/05 update: Friday's -1.8% decline overshadowed the big gains on Thursday. Traders did buy the dip near $96 and technical support at the rising 30-dma. Aggressive traders may want to buy the dip but consider raising your stop loss.

JLL has see a lot more volatility in the last month so let's keep our position size small to reduce our risk. Our targets are $102.50 and $109.00.

FYI: March options are likely to be very volatile.

- Suggested Positions - (Small Positions)

Long the March $100 calls (JLL1119C100) Entry @ $1.75

- or -

Long the April $100 calls (JLL1116D100) Entry @ $3.40

chart:

Entry on February 28th at $97.96
Earnings Date 04/27/11 (unconfirmed)
Average Daily Volume = 386 thousand
Listed on February 26th, 2010


3M Co. - MMM - close: 92.19 change: -0.62

Stop Loss: 88.75
Target(s): 94.50, 99.00
Current Option Gain/Loss: +57.7%, and +52.5%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
03/05 update: MMM is hovering under resistance and three-year highs near $93. I would be inclined to buy calls right now but readers can wait for a breakout higher or look to buy calls on a dip near $90. I would buy April calls.

- Suggested Positions -

Long the March $90 calls (MMM1119C90) Entry @ $1.75

- or -

Long the April $95 calls (MMM1116D95) Entry @ $0.78

chart:

Entry on February 25th at $89.75
Earnings Date 04/27/11 (unconfirmed)
Average Daily Volume = 3.5 million
Listed on February 24th, 2010


Nike Inc. - NKE - close: 89.88 change: +0.04

Stop Loss: 84.80
Target(s): 88.00, 91.50
Current Option Gain/Loss: +158.3%, and +195.7%
2nd Position Gain/Loss: + 68.7%, and + 50.5%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
03/05 update: NKE did not show a lot of weakness on Friday, which bodes well for next week. Unless the market really breaks down this stock looks poised to breakout past resistance at $90.00 and make a run at its recent highs. Officially our final exit target is $91.50 but a lot of traders believe that once a stock breaks the $90 level it tends to make a run at $100. More aggressive traders could aim higher. I want to warn you that we don't have a lot of time. NKE is due to report earnings on March 17th.

I am not suggesting new positions at this time.

- Suggested Positions - (Small Positions Only!)

Long the March $85 calls (NKE1119C85) Entry @ $2.09

- or -

Long the April $90 calls (NKE1116D90) Entry @ $0.94

2nd position, buy the bounce from $85.50

Long the March $85 calls (NKE1119C85) Entry @ $3.20

- or -

Long the April $90 calls (NKE1116D90) Entry @ $1.86

02/25 New stop loss @ 84.80
02/24 New entry point, buy the bounce from $85.50, Add 2nd position
02/19 Adjusted final target to $91.50
02/18 1st Target Hit @ 88.00. March $85 call @ 3.75 (+79.4%)
02/18 1st Target Hit @ 88.00. April $90 call @ 1.80 (+91.4%)

chart:

Entry on February 15th at $85.25
Earnings Date 03/17/11 (confirmed)
Average Daily Volume = 2.2 million
Listed on February 9th, 2010


Occidental Petrol. - OXY - close: 103.15 change: -0.26

Stop Loss: 97.90
Target(s): 106.75, 109.75
Current Option Gain/Loss: -32.6%, and + 6.4%
2nd Positions Gain/Loss: +23.5%, and +16.5%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
03/05 update: Profit taking was limited in OXY on Friday and the stock was rebounding sharply into the closing bell. I would use this dip on Friday as a bullish entry point to buy calls.

Our plan was to use small positions to limit our risk. Don't forget that March calls expire in a couple of week.

Small Bullish Positions - Suggested Positions -

Long the March $105 calls (OXY1119C105) Entry @ $1.87

- or -

Long the April $105 calls (OXY1116D105) Entry @ $2.78

-2nd Position on bounce at $100 - Entry March 3rd -

Long the March $105 calls (OXY1119C105) Entry @ $1.02

- or -

Long the April $105 calls (OXY1116D105) Entry @ $2.54

03/03 OXY gapped open higher at $101.71, affecting our new entry
03/02 Buy calls on this bounce near $100 (2nd positions listed)
03/02 New stop loss at $97.90
02/28 Adjusted entry strategy. Buy calls now!

chart:

Entry on March 1st at $104.12
Earnings Date 04/28/11 (unconfirmed)
Average Daily Volume = 4.9 million
Listed on February 22nd, 2010


Quality Systems Inc. - QSII - close: 81.53 change: -0.24

Stop Loss: 77.90
Target(s): 87.25, 94.50
Current Option Gain/Loss: + 0.0%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
03/05 update: QSII did not see a lot of change on Friday. Considering the market's weakness that means QSII was showing some strength. I don't see any changes from my Thursday night comments and would still buy calls now at current levels. There is still a good chance that QSII will see additional short covering.

Prior Comments:
FYI: Readers will be interested to note that the most recent data listed short interest in QSII at almost 28% of the very small 17.5 million-share float. That's definitely a recipe for a short squeeze. Plus, the Point & Figure chart for QSII is bullish with a $119 target.

- Suggested Positions -

Long the April $85 calls (QSII1116D85) Entry @ $1.35

- or -

Long the June $85 calls (QSII1118F85) Entry @ $3.40

chart:

Entry on March 4th at $81.44
Earnings Date 05/31/11 (unconfirmed)
Average Daily Volume = 154 thousand
Listed on March 3rd, 2010


Transocean Ltd. - RIG - close: 84.95 change: -0.40

Stop Loss: 79.75
Target(s): 89.50, 94.00
Current Option Gain/Loss: + 0.0%, and + 5.5%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
03/05 update: Friday proved to be a quiet day for RIG with the stock consolidating sideways. There is no change from my prior comments and I would still buy calls now at current levels. Our profit targets are $89.50 and $94.00.

Please note that the March calls will likely be very volatile.

- Suggested Positions -

Long the March $85 calls (RIG1119C85) Entry @ $2.05

- or -

Long the April $85 calls (RIG1116D85) Entry @ $3.60

02/28 RIG hit our trigger @ 84.25

chart:

Entry on February 28th at $84.25
Earnings Date 05/05/11 (unconfirmed)
Average Daily Volume = 5.3 million
Listed on February 26th, 2010


Ross Stores Inc. - ROST - close: 71.91 change: -0.50

Stop Loss: 69.75
Target(s): 74.90, 77.75
Current Option Gain/Loss: -25.0%
Time Frame: 2 to 4 weeks
New Positions: see below

Comments:
03/05 update: Retail-related stocks are holding up reasonably well considering the huge gains in oil. Normally you would think that rising oil and thus gasoline prices would be bad for retailers since it means less money to spend on other items. Yet it seems investors are willing to overlook a temporary rise in oil as long as we continue to get favorable economic data. The healthy jobs report means more people have jobs and thus more consumers with money in their pockets.

On a short-term basis ROST has been trading sideways in the $71.00-73.00 zone. Readers may want to wait for a breakout past $73.00 before initiating positions. Don't forget that we will plan to exit ahead of the mid March earnings report. The Point & Figure chart for ROST is bullish with a $97 target.

- Suggested Positions -

Long the April $75 calls (ROST1116D75) Entry @ $1.60

03/03 New stop loss @ 69.75

chart:

Entry on March 1st at $72.55
Earnings Date 03/17/11 (unconfirmed)
Average Daily Volume = 1.1 million
Listed on February 28th, 2010


The Toronoto-Dominion Bank - TD - close: 86.19 change: +0.07

Stop Loss: 80.90
Target(s): 84.00, 89.00
Current Option Gain/Loss: +359.2%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
03/05 update: TD continues to show strength in the fact that shares did not see much profit taking in spite of the market's weakness on Friday. The stock remains short-term overbought and due for a pull back. I am not suggesting new bullish positions at this time. Our final target remains $89.00.

More conservative traders may want to exit anyway just to lock in a gain!

- Suggested Positions -

Long the March $80.00 call (TD1119C80) Entry @ $1.35

03/03 new stop loss @ 80.90
03/03 Target exceeded. Gap higher at $84.73 vs. target $84.00
03/03 March $80 call opened @ $6.00 (+344.4%)
02/28 New stop loss @ 78.40
02/26 New stop loss @ 77.90
02/16 New stop loss @ 76.90

chart:

Entry on February 11th at $78.89
Earnings Date 03/03/11
Average Daily Volume = 583 thousand
Listed on February 10th, 2010


Proshares Ultra(long) Russell 2000 - UWM - close: 47.23 change: -0.32

Stop Loss: 43.49
Target(s): 49.75, 54.00
Current Option Gain/Loss: -12.7%, and +14.0%
Time Frame: 6 to 8 weeks
New Positions: see below

Small Positions - UWM Position -

Long the April $48 calls (UWM1116D48) Entry @ $2.75

-2nd position (entry 2/25)-

Long the April $47 calls (UWM1116D46) Entry @ $2.50

chart:

02/26 New stop loss @ 43.49
02/25 April $47 call opened at $2.50
02/24 Add another position, April $47 calls
02/14 UWM opened at $46.90. Option opened @ $2.75

iShares Russell 2000 - IWM - close: 82.44 change: -0.36

Stop Loss: 79.20
Target(s): 84.95, 87.25
Current Option Gain/Loss: -11.9%, and +17.0%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
03/05 update: Traders were still buying the dips in small caps and these ETFs were rebounding higher into the final minutes of trading. While I would prefer to launch new positions on a dip or bounce near the rising 50-dma we may not see a dip that low for a while. Nimble traders may want to initiate positions now.

Small Positions - IWM Position -

Long the April $84 calls (IWM1116D84) Entry @ $1.92

-2nd position (entry 2/25)-

Long the April $82 calls (IWM1116D82) current ask @ $2.35

02/26 New stop loss @ 79.20
02/25 April $82 call opened at $2.35
02/24 Add another position (April $82 calls)
02/14 IWM opened @ 82.11. Option opened @ 1.92

chart:

UWM Entry on February 14th at $46.90
IWM Entry on February 14th at $82.11
Listed on February 12th, 2010


Waters Corp. - WAT - close: 87.00 change: +2.35

Stop Loss: 81.80
Target(s): 86.00, 89.90
Current Option Gain/Loss: +177.7%, and +100.0%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
03/05 update: Target achieved. WAT displayed some impressive relative strength on Friday with a +2.7% gain on rising volume. The stock surged past potential resistance at $85 and hit our first target to take profits at $86.00. I am raising our stop loss to $81.80. I am not suggesting new bullish positions at this time. Our final target is $89.90.

FYI: The March calls will likely be very volatile.

- Suggested Positions -

Long the March $85 calls (WAT1119C85) Entry @ $0.90

- or -

Long the April $85 calls (WAT1116D85) Entry @ $1.75

03/05 New stop loss @ 81.80
03/04 1st Target Hit @ $86.00. Options @ +100%, and +57.1%
The March $85 was bid near $1.80, the April $85s near $2.75.

chart:

Entry on February 28th at $82.61
Earnings Date 04/27/11 (unconfirmed)
Average Daily Volume = 876 thousand
Listed on February 26th, 2010


CLOSED BULLISH PLAYS

CBOE Market Volatility Index - VIX - close: 19.06 change: +0.46

Stop Loss: N/A
Target(s): 22.50, 28.00
Current Option Gain/Loss: -59.3%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
03/05 update: Continued violence in Libya and worries about the global oil supply sent crude oil higher and stocks lower throughout most of the day. The bulls finally stepped in before the closing bell to buy the dip. The bounce in stocks sucked the wind out of the rally in the VIX.

On Thursday I proposed that we exit our bullish positions early on Friday. Our play is closed.

- Suggested Positions -

2011 March $22.50 calls (VIX1116C22.5) Entry @ $1.60

03/04 Exit at the close. Option @ $0.65 (-59.3%)
03/03 Plan to exit tomorrow at the closing bell
02/28 Consider an early exit now.
02/23 1st Target Hit @ 22.50, Option @ 2.35 (+46.8%)

chart:

Entry on January 26th at $17.00
Earnings Date --/--/--
Average Daily Volume =
Listed on January 25th, 2010