Option Investor
Newsletter

Daily Newsletter, Monday, 3/7/2011

Table of Contents

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

Market Wrap

Another Day At Oil's Office

by Todd Shriber

Click here to email Todd Shriber
Oil rules the roost these days and that sentiment was quite clear on Monday as rising oil prices present yet another shock to equity markets. There will be no quick resolution a la Egypt and Tunisia in Libya and on the back of that sentiment, traders are bidding up oil prices while stocks suffer. The S&P lost nearly 1%, the Dow Jones Industrial Average shed two-thirds of a percent and the Nasdaq lost 1.4% as all three wiped out last week's gains.

Stats Table

Per usual these days, rising oil prices grabbed plenty of headlines today as NYMEX-traded crude for April delivery hit another 29-month high before pulling back a bit. The close at $105.44 a barrel was the highest closing price for the most actively-traded contract since September 2008.

Of course, it is Libya that continues to stoke oil market fears. Supporters of embattled dictator Moammar Gadhafi continued to clash with opposition forces over the weekend and multiple press reports said on Monday that Gadhafi's forces began air strikes on rebel positions in Ras Lanuf, a town along the Libyan coast that is home to an export terminal and refinery.

JPMorgan noted the issue may not be so much Libya's total production, which by some estimates has been pared by as much 1 million barrels a day since the onset of the movement to dispose of Gadhafi, but Libya's ability to get the oil it is producing out of the country. ''Frankly, those prospects are not promising,'' the bank said, according to MarketWatch.

On the other hand, some countries are so desperate for oil, they will buy it from anyone. As the Financial Times noted over the weekend, China and India have remained loyal buyers of Libyan crude. Adding fuel to oil's fire was news of protests in Yemen, Iran, Iraq, Bahrain, Jordan, and Oman. For those keeping score at home, Iran, Iraq and Libya make up 25% of OPEC's membership. As Jim and I have noted multiple times over at OilSlick, the proverbial elephant in the room is Saudi Arabia,the world's largest oil exporter. This Friday is supposed to be the ''day of rage'' in the kingdom. The oil chart could make for very interesting weekend reading come Saturday.

Oil Chart

Speaking of political events, there was some interesting political news out today here in the States and it might be enough to give Senate Democrats reason to celebrate, at least internally. Sen John Ensign (R-NV) announced he will not seek re-election in 2012. Trust me, I understand that we are just a few months removed from the 2010 mid-terms, but this how politics in the U.S. works these days, particularly in relation to the financial markets: There is really no break from election news.

Ensign, who was a former chair of the National Republican Senatorial Committee, had been viewed as one of the more vulnerable Senate Republicans in 2012 following news of a marital transgression with a staffer back in 2009. While Ensign had been steadfast in saying that he would run again next year and was even raising money to do so, Republican leadership had been less than supportive of the idea.

This is why news of Ensign's decision is noteworthy: Much has been made of the Republicans' chances for taking control of the Senate in 2012, a goal they fell just short of last year and when you look at the states where vulnerable Democrats reside combined with the states where Dems will have to defends open seats due to retirements, the stars appeared to be aligning for Senate Republicans.

Not so fast. The Republicans now must defend open seats in Arizona and Nevada, two states where demographic shifts have been less than kind to the GOP. President Obama probably would have won Arizona in 2008 had he not been running against John McCain (R-AZ) and he did win Nevada. Not to mention the GOP could not boot Harry Reid (D-NV) last year in what was an otherwise bad year to be a Democrat.

For now, I would say the Republicans do hold Ensign's seat, but it will be close race and it all depends on the nominee. Nominate someone like Harry Reid's opponent and this may become an easy pickup for the Dems.

Senate Chart

In stock-specific news, shares of networking equipment maker Ciena (CIEN) plunged $2.83, or almost 10%, to $25.98 on volume that was more than triple the daily average after the company said its fiscal first-quarter loss widened to $79.1 million, or 84 cents per share, compared with $53.3 million, or 58 cents per share, a year earlier. All that despite the fact that Ciena's revenue more than doubled to $433.3 million.

On an adjusted basis, Ciena lost 14 cents a share compared with 12 cents a year earlier. Analysts were forecasting a loss of 16 cents on revenue of $422.5 million. Ciena forecast fiscal second-quarter revenue of $415-$435 million, below the consensus estimate of $439 million.

Ciena rival JDS Uniphase (JDSU) was hammered the tune of 7% on volume that was more than double the daily average while Cisco Systems (CSCO), the largest maker of networking gear, slid 1%, extending a slide that has seen the Dow component shed 16% in the past month.

Ciena Chart

It was bad day for tech from the onset as Wells Fargo pared its rating on the semiconductor sector to ''market weight'' from ''overweight'' due mainly to the fact that the Philadelphia Semiconductor Index has more than doubled off its 2009 lows. Parsing through the bank's comments on the sector, it can be said a cautiously optimistic, not bearish, view is in place, but that was not enough to save the group from a 3% slide day, the worst performance in the S&P 500. Intel (INTC), the world's largest semiconductor maker, finished the day lower by more 1.6%.

Intel Chart

Again, it was not a big ''Merger Monday'' but there are are almost $5 billion in deals to note and in both cases, the acquiring companies were among Wall Street's top performers today. Looking at the bigger of the two deals and perhaps the one that is the example of two wrongs trying to make a right, hard-drive maker Western Digital (WDC) shot up almost 16% after announcing it will acquire Hitachi's hard-drive unit for $4.3 billion in cash and stock.

Western Digital is already the largest hard-drive maker in the world while Hitachi is number three, so this deal adds some bulk to Western Digital and the California-based company said it expects the transaction to immediately add to its per share earnings.

That's the good news, but the problem is hard-drive sales are expected to fall because tablet devices such as the iPad have become a real problem for drive makers. Tablets do not use hard-drives, but laptops do and the more customers, business and consumers alike, that opt to replace laptops with iPads and equivalent devices, the more pain will be felt by companies like Western Digital.

Western Digital Chart

In my humble opinion, the smaller of the two deals I am going to highlight could actually prove to be more important going forward. If you are wondering why James River Coal (JRCC) surged almost 16% today, I will argue that is NOT because of the coal miner's fourth-quarter earnings report that consisted of a profit $25.9 million, or 93 cents per share, compared with a net loss of $3.2 million, or 12 cents per share, a year earlier.

Revenue jumped 8% to $162.1 million. Excluding one-time items, James River earned 14 cents a share, but analysts were expecting a profit of 30 cents on revenue of $169.4 million. So how does a company miss estimates by such a wide margin and still manage a 16% intraday jump? In the coal sector, it is actually pretty easy to do. Just say you are boosting exposure to metallurgical coal and the market is apt to reward your firm.

James River is doing just with its $475 million acquisition of privately held International Resource Partners. International Resource reported 2010 consolidated revenue of $490.3 million, Bloomberg News reported. In a statement issued by James River, the company called the deal “transformative” and said it will boost its exposure to metallurgical coal, the stuff that's in high demand by emerging market steelmakers. James River said the transaction should close in the first half of this year.

James River Coal Chart

Looking at the charts, none of the previous support for the S&P 500 in the 1313-1320 area worked today, but the intraday low at the 1303.99 may have been enough to scare buyers to act. I still think 1300 is psychological support and a break of the 50-day moving average at 1297 would be the really alarming event and perhaps a reversal in trend.

S&P 500 Chart

If 12,100 was support for the Dow, it broke today, though not by much. I have been dying to make a Charlie Sheen analogy in today's wrap and I think the Dow is the place for that as the Index is showing signs of volatility that would make even Mr. Sheen blush. In terms of closing prices, the Dow saw two triple digit moves last week, but Friday and Monday were darn close. Only four Dow stocks closed higher today and two of those were 3M (MMM) and McDonald's (MCD) and that probably saved the Dow from a 90-100 point loss.

Dow Chart

The Nasdaq could be a concern for the bulls. A close at 2745 and support at 2775 and 2755 did not hold. One day does not make a trend, but Monday was painful for the big boys of the Nasdaq 100. Forget Ciena, Cisco, and Intel for a minute. AAPL, AMZN, FFIV, FSLR, GOOG and WYNN were all taken to the woodshed today. NFLX and PCLN did little to inspire either.

Nasdaq Chart

Usually, I am not a big fan of overreacting one way or the other on the back of one day of market action. That said, there were two ugly days last week and Monday was not pretty either. Yes, markets like to have excuses to sell off, but sometimes they need reasons to go higher as well. Right now, Libya and oil, and maybe Saudi Arabia later this week are the excuses to sell. I would like to see at least a few more points shaved off the S&P 500 to test the strength of the bulls before I say buy anything and everything.


New Option Plays

Sometimes the Best Trade

by James Brown

Click here to email James Brown

Editor's Note:

The market's attention remains hostage to the price of oil and crude is fluctuating with each headline out of Libya, the Mideast and especially Saudi Arabia. The civil war in Libya could end up cutting oil production from that country for several months. Meanwhile analysts are starting to worry about what happens if the upcoming elections in Nigeria turn violent. Nigeria is a crucial producer of light, sweet crude oil. Of course the big event this week, outside of open warfare in Libya, is the upcoming "day of rage" protests on Friday in Saudi. Oil will likely remain elevated (or at least volatile) until this event passes.

Thus far the market's trend is still up with the S&P 500 bouncing off its intraday low but this is a crucial test (again) for the index. If the S&P 500 breaks the up trend the sell-off could be brutally fast and sharp. The best scenario might be a sideways consolidation until after Friday passes. We should expect stocks to see a lot of volatility up and down. With so much indecision in the market sometimes the best trade is no trade at all. I am not adding any new candidates tonight. If you feel compelled to buy something I might consider some puts on the major market indices as a hedge against your bullish trades.

Be careful and double check your stop losses and position size. Make sure you are comfortable with the level of risk you are taking.

- James


In Play Updates and Reviews

Stocks Contract on Oil Fears

by James Brown

Click here to email James Brown

Editor's Note:

Weakness in tech, thanks to a downgrade for semiconductors, and worries over oil supply disruptions fueled profit taking across the market on Monday. If the sell-off continues tomorrow we could see several stocks break down under support and hit our stop losses.

Today we had FOSL hit our first target to take profits and FFIV hit our stop loss.

-James

Current Portfolio:


CALL Play Updates

Baker Hughes Inc. - BHI - close: 69.46 change: -0.27

Stop Loss: 67.90
Target(s): 74.75, 79.00
Current Option Gain/Loss: -74.5% and -47.4%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
03/07 update: Crude oil oscillated at two-year highs but energy stocks sank lower with the rest of the market. Shares of BHI continue to bounce around the $68-72 zone. Nothing has changed. I would still buy April calls on a dip near $68.00. We have a stop loss at $67.90.

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

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: 68.28 change: -1.07

Stop Loss: 64.75
Target(s): 69.75, 74.00
Current Option Gain/Loss: - 7.4%, and +26.3%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
03/07 update: BTU tagged a new multi-year high this morning with a spike to $70.74. The gains didn't last and shares ended the session with a bearish engulfing candlestick pattern, which is normally viewed as a bearish reversal. These patterns normally need to see confirmation. I wouldn't be surprised to see a correction toward the $66 area.

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

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: 75.63 change: -2.12

Stop Loss: 73.75
Target(s): 79.75, 84.50
Current Option Gain/Loss: -68.8%, and -43.3%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
03/07 update: Warning! BWA could be reversing lower on us. The stock briefly traded above resistance near $78.00 but failed near the $78.50 area and quickly reversed. The stock broke its short-term bullish trend of higher lows and underperformed the broader market with a -2.7% loss. I did not see any specific news behind the relative weakness in BWA today. I am not suggesting new positions at this time.

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

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: 102.13 change: -0.91

Stop Loss: 97.90
Target(s): 104.75, 107.50
Current Option Gain/Loss: -32.5%
2nd Option Gain/Loss: - 6.4%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
03/07 update: CAT followed the market lower and closed with a -0.88% loss. Shares look poised for another dip toward the $100 level and its rising 30-dma. Traders can use a dip near $100.00 as a new entry point. More conservative traders might want to edge up their stop loss closer to $100.

- 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.

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: 102.62 change: -1.67

Stop Loss: 97.75
Target(s): 104.85, 109.00
Current Option Gain/Loss: -20.3%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
03/07 update: Weakness in the tech sector took a heavy toll on CERN. Shares failed at resistance near $105 again and fell to $101 intraday. CERN bounced off its lows and we're right back where we started this play at $102.62. This intraday bounce from $101 looks like a new bullish entry point but readers may want to raise their stop loss closer to the $100 level. 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%)

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: 48.33 change: -1.17

Stop Loss: 47.90
Target(s): 54.50
Current Option Gain/Loss: -73.0%, and -52.9%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
03/07 update: CHKP failed at the top of its trading range near $50.50 and then plunged toward the bottom of its trading range (and support) near $48.00. Technically we can use this dip to $48 as a bullish entry point for April calls but readers may want to wait for a bounce first.

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

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


Citrix Systems Inc. - CTXS - close: 71.20 change: -0.68

Stop Loss: 67.40
Target(s): 77.00, 79.90
Current Option Gain/Loss: -15.9%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
03/07 update: Considering all the weakness in technology stocks on Monday, shares of CTXS held up pretty well. The stock opened at $71.89 and hit $72.59 intraday but eventually settled with a -0.9% loss. I would still consider new bullish positions now or on a dip anywhere in the $70-68 zone.

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.

- Small Bullish Positions -

Long the April $75 calls (CTXS1116D75) Entry @ $2.20

Entry on March 7th at $71.89
Earnings Date 04/21/11 (unconfirmed)
Average Daily Volume = 2.3 million
Listed on March 5th, 2010


Devon Energy - DVN - close: 90.53 change: -0.59

Stop Loss: 87.75
Target(s): 94.85, 99.00
Current Option Gain/Loss: -15.6%, and -10.4%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
03/07 update: Crude oil prices hovered near two-year highs while energy stocks were left to trade lower with the rest of the stock market. Shares of DVN opened at $91.35 and spiked toward short-term resistance near $92 before reversing lower. Traders bought the dip near $89.65 and its rising 10-dma. I remain bullish and would still consider new positions now or you could wait for a dip toward the $89-88 zone. Alternatively you could wait for a breakout past $92. 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 -

Long the April $95 calls (DVN1116D95) Entry @ $1.60

- or -

Long the July $95 calls (DVN1116G95) Entry @ $4.30

Entry on March 7th at $91.35
Earnings Date 05/04/11 (unconfirmed)
Average Daily Volume = 3.3 million
Listed on March 5th, 2010


Fastenal Co. - FAST - close: 61.26 change: -0.59

Stop Loss: 59.90
Target(s): 67.25
Current Option Gain/Loss: -88.2%, and -40.0%
2nd Position Option Gain/Loss: -50.0%, and -19.9%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
03/07 update: FAST tested both the up end of its trading range near $62.50 and technical support at the 50-dma. The lower end of the range, which is probably where FAST is headed next, would be the $60.00 level. I'd wait for a dip closer to $60 before initiating new positions. I'd buy April or May calls when that happens.

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

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: 102.93 change: -1.11

Stop Loss: 99.95
Target(s): 109.50
Current Option Gain/Loss: -44.1%
Time Frame: 2 to 3 weeks
New Positions: see below

Comments:
03/07 update: FDS is still bouncing around its neutral trading range. I would suggest new positions now however there is a good chance we might get a better entry point on a dip in the $101-100 zone so you might want to wait.

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

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


Fossil, Inc. - FOSL - close: 83.05 change: +2.22

Stop Loss: 76.75
Target(s): 82.00, 88.00
Current Option Gain/Loss: +192.8%, and +119.2%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
03/07 update: Target achieved. FOSL displayed relative strength on Monday with a +2.7% rally and a move past the $82.00 level. Our first target to take profit was the $82.00 mark, which shares hit this afternoon. Now FOSL is nearing potential resistance at its February highs in the $83.60 area. I would not be surprised to see some profit taking here but the $80-78 zone should offer some support. I am raising our stop loss to $76.75. I would not open new positions at this time. Our final target is $88.00.

The March $80s were trading (bid) near $3.40 (+142%) and the April $80s were bid near $5.00 (+92.3%) when FOSL hit our target.

- Suggested Positions -

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

- or -

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

03/05 New stop loss @ 76.75
03/05 1st Target Hit @ $82.00, Options @ +142% and +92.3%
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: 84.36 change: +0.12

Stop Loss: 81.60
Target(s): 92.25, 98.50
Current Option Gain/Loss: -38.0%, and -31.0%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
03/07 update: HES churned sideways on Monday as investors worried about the high cost of oil and its impact on the economy. I don't see any changes from my weekend comments. 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

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: 134.72 chg: +4.47

Stop Loss: 125.75
Target(s): 138.00, 148.00
Current Option Gain/Loss: +78.1%, and +47.0%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
03/07 update: Shares of ICE are in breakout mode. The stock surged +3.4% on renewed interest that the exchange industry would see further merger and acquisitions. The ICE's breakout past resistance near $130 is very bullish and this level should now be new short-term support. Nimble traders could try and buy calls on dips near $130. I am raising our stop loss to $125.75. Our first target to take profits is at $138.00.

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

03/07 New stop loss @ 125.75

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: 95.40 change: -1.64

Stop Loss: 93.30
Target(s): 102.50, 109.00
Current Option Gain/Loss: -71.4%, and -42.6%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
03/07 update: Caution! JLL has broken down under short-term support at its 30-dma. Traders did buy the dip near $94 and its 40-dma but I am concerned here. More conservative traders may want to hit the eject button now to cut their losses. I am not suggesting new bullish positions at this time.

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

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: 92.40 change: +0.21

Stop Loss: 88.75
Target(s): 94.50, 99.00
Current Option Gain/Loss: +68.5%, and +64.1%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
03/07 update: MMM was showing some relative strength this morning but the rally failed at recent resistance. I would prefer to launch new positions on a dip near $90 or its 30-dma. 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

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: 88.92 change: -0.96

Stop Loss: 84.80
Target(s): 88.00, 91.50
Current Option Gain/Loss: +117.7%, and +148.9%
2nd Position Gain/Loss: + 42.1%, and + 25.8%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
03/07 update: NKE tried to rally this morning and shares did hit a new two-month high at $91.12. Sadly that wasn't enough with our final exit target at $91.50. The stock fell with the broader market. If the major indices breakdown odds are NKE will follow them lower. More conservative traders will want to consider an early exit now. I am not suggesting new positions. NKE is due to report earnings on March 17th.

- 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%)

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: 103.53 change: +0.38

Stop Loss: 97.90
Target(s): 106.75, 109.75
Current Option Gain/Loss: -27.2%, and +11.5%
2nd Positions Gain/Loss: +33.3%, and +22.0%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
03/07 update: OXY initially rallied higher this morning and hit $105.82 before paring its gains. Shares still closed in positive territory, which is better than most of the energy sector. I would look for dips in the $102-100 zone as a bullish entry point.

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!

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: 79.89 change: -1.64

Stop Loss: 77.90
Target(s): 87.25, 94.50
Current Option Gain/Loss: -40.7%, and -23.5%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
03/07 update: A pull back toward $80 is normal considering the market's weakness. The close under $80 is a little concerning. Readers may want to wait for a bounce back above $80.50 or $81.00 before initiating new positions. Cautious traders could inch up their stop losses. If the market can rally again 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

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: 83.75 change: -1.20

Stop Loss: 79.75
Target(s): 89.50, 94.00
Current Option Gain/Loss: -31.7%, and -11.1%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
03/07 update: RIG gave up -1.4% but volume was pretty light. I would still consider bullish positions here or you could wait and see if shares dip into the $82-80 zone, which would be a more attractive entry point to buy April calls. 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

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: 70.67 change: -1.24

Stop Loss: 69.75
Target(s): 74.90, 77.75
Current Option Gain/Loss: -43.7%
Time Frame: 2 to 4 weeks
New Positions: see below

Comments:
03/07 update: Investors should turn cautious here. ROST broke down under short-term technical support at its 10 and 20-dma today. Yet ROST should still have potential support at the $70.00 mark. Wait for a bounce from the $70 level as our next bullish entry point. 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

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: 85.25 change: -0.94

Stop Loss: 80.90
Target(s): 84.00, 89.00
Current Option Gain/Loss: +285.1%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
03/07 update: The banking sector indices were down today and TD followed suit with some profit taking after last week's gains. Look for support in the $83-82 zone. 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

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: 45.66 change: -1.57

Stop Loss: 43.49
Target(s): 49.75, 54.00
Current Option Gain/Loss: -36.3%, and -12.0%
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

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: 81.09 change: -1.35

Stop Loss: 79.20
Target(s): 84.95, 87.25
Current Option Gain/Loss: -40.6%, and -13.1%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
03/07 update: The UWM and IWM pulled back toward rising technical support at their 40 and 50-dma. If history is any help then a dip like this can be used as a bullish entry point. We want to keep our position size small to limit our risk.

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

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: 86.01 change: -0.99

Stop Loss: 81.80
Target(s): 86.00, 89.90
Current Option Gain/Loss: + 94.4%, and + 65.7%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
03/07 update: After last week's big gains it was only natural that WAT would see some profit taking. I would expect a dip back toward what should be support near $84.00. 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.

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

F5 Networks Inc. - FFIV - close: 108.70 change: -5.12

Stop Loss: 109.90
Target(s): ---.--
Current Option Gain/Loss: -83.3%, and -66.9%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
03/07 update: We have been cautious on FFIV for days. I am not surprised that given the weakness in technology stocks today that FFIV underperformed. The stock broke through support near $110 and closed with a -4.4% loss. Our stop loss was hit at $109.90. Our aggressive bet on an oversold bounce did not pay off. The plan was to use small positions to limit our risk.

SMALL bullish positions

March $120 calls (FFIV1119C120) Entry @ $5.40, Exit @ 0.90 (-83.3%)

- or -

April $125 calls (FFIV1116D125) Entry @ $6.80, Exit @ $2.25 (-66.9%)

03/07 Stopped out @ $109.90. Options @ -83.3% and -66.9%
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