Option Investor
Newsletter

Daily Newsletter, Tuesday, 3/22/2011

Table of Contents

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

Market Wrap

Taking the Day Off

by Jim Brown

Click here to email Jim Brown
The markets took a day off on Tuesday after three days of strong gains. The declines were minimal especially after the +460 point rebound from last week's lows.

Market Statistics

Continued problems in Japan and unrest in the Middle East failed to dampen the markets spirit. At its highs today the Dow was +14 and only -33 at the lows. This 47-point range was the lowest in over a month. Volatility fell dramatically over the last four days to close at 20 on the VIX today. Has all the bad news been priced in?

On the economic front there was nothing to cheer about. The Richmond Fed Manufacturing Survey fell to 20 in March from 25 in February. That is still well into expansion territory and should not be considered a change in direction. The biggest decline came in the new orders component, which fell from 27 to 20. Back orders declined to 8 from 12. Capital expenditure plans rose from 20 to 28.

Richmond Fed Chart

The Mass Layoffs for February fell slightly to 1,421 events, down from 1,534 in January. Workers impacted fell to 130,818 from 149,799. The initial claims for layoffs in manufacturing declined to 13,129 and the lowest on record since data began in 1995. This is a strong point for the case of the rebounding economy. This is a lagging indicator but another positive data point suggesting employment will continue to increase.

Economy.com Mass Layoff Chart

The FHFA Purchase Only Home Price Index declined -0.3% from December to January and -3.9% compared to January 2010. This is a severely lagging report and was ignored by the market. Very few people are unaware home prices are falling again.

Reports left for the week include the New Home Sales and the final reading for the Q4 GDP. There are whisper numbers for Jobless Claims to decline to 375,000 and GDP is always a wildcard.

Economic Calendar

In stock news NetFlix rallied +8.55 to $21.39 after Credit Suisse raised its rating on the stock. CS raised it to an "outperform" from neutral and raised the 12-month price target from $180 to $280. NetFlix is up +500% since January 2010. The analyst said he expected NetFlix to enter one new international market every year after the successful implementation of streaming movies into Canada. He thinks they will grow to 33 million subscribers by year-end and more than double to 69 million by the end of 2016. NetFlix closed 2010 with 20 million after adding 7.7 million for the year. The worries over content costs seem to have evaporated and none of the other competitors including Time Warner and Amazon seem to be ready to take the plunge and really compete with NetFlix.

NetFlix Chart

Walgreen's (WAG) was knocked for a loss after they reported earnings of 80-cents, which was inline with estimates. Revenue rose +9% to $18.5 billion and slightly over estimates. Same store sales rose +4%. Walgreen shares declined -7% because traders were expecting an earnings beat.

Walgreen's Chart

Adobe reported earnings after the bell of 58 cents and a penny ahead of estimates. Sales rose +20% to $1.03 billion. However, Adobe said the Japan quake could knock as much as a dime off the earnings for the current quarter. Adobe is now projecting 47 to 54 cents and analysts were expecting 56-cents. Japan sales contribute about 10-15% to Adobe's overall revenue. Shares were flat in after hours trading.

Shares of Jabil Circuit (JBL) surged +10% after the close on earnings that rose +86% to 54-cents and revenue rose +31% to $3.93 billion. Earnings beat analyst estimates of 51-cents. Jabil projected current quarter earnings of 55-59 cents and analysts had been expecting 53-cents. This excludes any potential impact from Japan. Jabil said its plants in Japan were not affected but they don't yet know if suppliers were impacted.

Jabil Chart

Research in Motion said it was going to release the PlayBook tablet on April 19th. Three models will be available in over 20,000 retail outlets with prices starting at $499. Best Buy will begin accepting orders next Tuesday. RIMM announced the tablet seven months ago but took a long time to bring it to the market. This allowed Apple to completely over power the sector and competitors like Motorola's Xoom to capture attention. The initial PlayBook models will not offer a cellular connection and have to use WiFi or be tethered to the users BlackBerry.

RIMM Chart

Apple will release its iPad 2 in 25 more markets this weekend and they are already expecting an immediate sell out. Apple has been at the top of the tech news headlines this week. They sued Amazon for using the term App Store to refer to their store for selling applications for Android phones. Apple's Steve Jobs was order to appear at a two-hour deposition regarding antitrust claims against its use of the Fair Play digital rights security to prevent songs from other music services to be played on iPods. Initially there was cross platform capability but Apple turned off that capability in 2005. RealNetworks and Harmony are suing Apple over the block.

A Sanford Bernstein analyst said Apple's new datacenter should go live this spring and it covers 500,000 square feet and could be the largest in the world. That is five times the size of its current data center and suggests Apple has massive plans for remote computing in the near future. Apple spent $1.7 billion in 2010 on upgrading its IT assets and that is expected to rise to $2.6 billion in 2011. Bernstein believes the computing power will be used for serving up iAds and a digital "file locker" in the cloud to share content between other Apple users. Also a music streaming service on a subscription basis and a video subscription service for streaming video like NetFlix and YouTube.

A New York court rejected a class action settlement between Google and publishers that would allow Google to scan millions of books and sell them online. Google was flat on the news.

MolyCorp (MCP) a rare earth miner rallied +17.7% today after a Reuters report on falling export volumes from China. Prices paid per ton for China's rare earths broke through the $100,000 mark for the first time. Last July they were selling for $14,405 per ton on average. In February that rose to $109,036 and that was nearly double the price in January. China exported 750 tonnes in February and only slightly over the 647 tonnes in January which was the lowest volume in more than two years. The catalyst for this has been the drop in Chinese exports. China has been the only material rare earth supplier for the last six years and their internal usage is exploding. The CEO of MolyCorp believes China will become a net importer by 2015.

Jim Cramer just reiterated his strong sell on MolyCorp on Monday calling it significantly over valued. At $14,000 a ton maybe, at $109,000 a ton I seriously doubt it. MolyCorp is in the process of reopening the biggest rare earth mine outside of China. They were going to be very profitable at $15,000 a tone so this news is a major improvement in their future profitability.

MolyCorp is a current long-term play in the OilSlick Newsletter.

MolyCorp Chart

Silver prices rallied to close at a 31-year high at $36.37 on news the manufacturing sector in Japan may not be as hard hit as many had thought. Many companies are announcing that plants have already begun restarting or will resume full production by the end of the month. Add in the plunging dollar and the poor mans gold continues to ramp higher.

Silver Chart

The dollar hit a new 15 month low intraday at 75.24 as currencies from other growth countries like New Zealand, Australia and South Africa surged. The Euro ended the day slightly negative but very close to a five month high. The U.S. dollar is falling on the money printing component of QE2 and that falling dollar is pushing commodities and stocks higher over the longer term. The currency market has shrugged off Japan and Libya and returned to the prior trends.

Dollar Index Chart

Fed governor Richard Fisher warned on "speculative excess" in a speech he gave on Tuesday. Fisher said the U.S. "needs no more stimulus after QE2 ends in June." He said the economy does not need an extension of QE2 where the Fed tapers off on its bond purchases. "Doing so would only prolong the injustice that we have inflicted on savers through inflation."

This is the first major dissention speech since the March 15th FOMC meeting where everyone voted to continue QE2 through its planned completion in June. Fisher was not a voting member when QE2 was initiated and he claims he would have voted against it if he had been able to vote. He said the flow of money into the stock market was a sign of speculative excess. "We have done a bit too much."

"There’s lots of liquidity sloshing around the U.S. financial system," Fisher said. "We are seeing signs of all the intoxication that typically takes place when we have the ambrosia of cheap and readily available capital." He said Bernanke has purposely embraced speculative excess and will not back off a date once set. He has not stopped a single program before its termination date. This means the Fed will continue buying US. Treasuries until June come "hell of high water." Fisher was a voting member in 2008 and then rotated off the committee for two years. He dissented five times in favor of a tighter money policy. He is one of the four Fed presidents that rotated back into the voting lineup for 2011.

Sandra Pianalto, president of the Cleveland Fed was also speaking on Tuesday. She said the U.S. recovery should continue at a modest pace, with rising commodity and energy prices only temporarily putting pressure on broader consumer prices. Pianalto is a centrist on the committee rather than being an inflation hawk or a policy dove. She did say energy prices as a result of the Middle East problems are a "key risk" to the economy. "If prices are sustained it will slow the pace of GDP growth. Even if the impact is low it will increase inflation worries." Pianalto is not a voting member of the FOMC this year.

Oil prices continued to rise as scenes of riots and demonstrations in multiple MENA nations combined with the war in Libya to provide support. The April WTI crude contract expired at the close today at $104 and Brent closed just under $116. The May WTI contract was over $105. Neither are showing any weakness or suggesting the prices will decline soon. Demand in Japan has risen rather than declined and the democracy virus is producing potential problems all over the Middle East and Northern Africa (MENA).

Remember the "oil is fairly priced at $85" comment from OPEC and Saudi Arabia not too many months ago? Forget it. An OPEC official said this week that oil at $120 is fairly priced and would not harm the global economy. However, if crude moved over $120 they would "consider" holding an emergency meeting to discuss increasing production. The comments came from Iraqi Oil Minister Abdul-Kareem Luaibi. "Global prices are moving towards $120 a barrel. We consider this an acceptable price that will not harm global growth. We think prices will not exceed $120 per barrel."

I hope you have a lot of oil stocks in your portfolio!

Register for my OilSlick.com newsletter and receive free daily updates and commentary on the energy sector. Register here

U.S. WTI Chart

Brent Chart

Today was certanily lackluster after the three days of +100 point gains. Volume today was only 6.3 billion shares and the lowest volume day in 2011. Decliners of 3,780 beat advancers of 2,504 and down volume was twice up volume. However, the markets held their gains from the prior three days.They did this in spite of various negative headlines including a warning from ECB president Jean Claude Trichet that the bank was ready to act quickly to guard against inflation. In banker speak that means raise interest rates.

The market appeared to take a wait and see attitude today ahead of more action in Libya and still unknown supply chain issues from Japan. While I think it may be too early to claim the bad news bulls have returned, I do think Tuesday was mildly bullish. We have seen traders take any excuse to sell over the last couple weeks and Tuesday was a perfect opportunity to take profits on the +460 point rebound. When selling did not appear that is a bullish sign. However, futures are moving slightly lower in after hours.

The S&P traded in only a 7 point range from 1292 to 1299 with support at 1295. Since it did not vascillate to far from that level it suggests buyers are waiting just under that 1295 support. The complete lack of any volatility makes it hard to call. However, there were no sell programs. Fund managers were suspuciously silent in their trading activity. I looked twice at tomorrow's economic calendar just to make sure there was not something I was missing.

The lack of volume on a day when sellers should have been pounding the tape suggests they may have exhausted their supply of stock or they are weak from having their shorts blow up in their face for three consecutive days. However, the buyers were no better with support holding but showing a complete lack of conviction.

If we do move lower the next material support would be in the 1275 range. Moving higher finds decent resistance between 1300-1305.

S&P-500 Chart

With a very narrow 47-point intraday range the Dow managed to cling to the high ground and close for the second day over prior resistance at 12,000. No Dow stock gained or lost over a dollar. Caterpillar was the biggest loser at -80 cents and Boeing the biggest winner at +65 cents. Nineteen Dow stocks moved less than 25 cents for the day.

The Dow has closed right at the 50-day average for two days and while that is not normally a material resistance point for the Dow it appears to be respecting it on this rebound. If we break below 12,000 we should fine initial support at 11900 but a break there would probably retest the lows. We need to move over 12,060 to signal a return to a positive trend but resistance at 12,235 should be strong.

Dow Chart

The Nasdaq 100 cannot seem to break through resistance at 2270 and the Nasdaq Composite has the same problem with 2700. However, after a week of seeing relative strength weakness from the tech sector I thought the minor decline on Tuesday was slightly bullish. It would have only taken one big cap tech to push the Nasdaq into a decline but all appeared to hold their gains from the rebound.

I think the Nasdaq has gone from the leader on the downside to neutral and waiting for news out of Japan for market direction. The fear factor over the broken supply chain appears to be evaporating.

Nasdaq Chart

Nasdaq 100 Index

The Russell has rebounded higher than the big cap indexes and I see that as slightly bullish. It is still a long way from strong resistance at 830 but it is trading over the 50-day that has held the other indexes back.

Russell 2000 Chart

Tuesday was a wait and see day. Triple witching expiration is now behind us and the settlement volatility normally seen on post expiration Monday's has passed. The news stories seem to have less impact. Even the Richard Fisher speech saying the Fed would "buy treasuries come hell or high water" failed to move the markets. Obviously that was confirmation of sorts there would not be an early end to QE2 and that should have been positive for the market. We had a day where negative news and positive news failed to produce any activity and there were no buy/sell programs of note. This is the kind of day that drives market analysts crazy. Plenty of news but no activity and no indication of direction. However, given the gains of the prior three days I see this lack of selling to be slightly bullish. Time will tell.

Jim Brown

Send Jim an email


New Option Plays

Retail and Insurance

by James Brown

Click here to email James Brown

Editor's Note:

In addition to tonight's new plays these stocks caught my eye and might offer an opportunity. Check them out:

UTHR - After three months of consolidating in the $65-70 zone this drug stocks looks poised to breakdown under support at $65 and its 100-dma. I would consider buying puts on a move under $64.60 and targeting the $60 area or the 200-dma.

ADS - This stock is surging to new relative highs. Instead of chasing it here consider buying calls on a dip in the $82-80 zone.

WSO - Shares just broke out past resistance. It might be a bullish entry point but keep in mind that WSO doesn't move very fast.

XEC - Aggressive traders may want to buy calls on XEC now and target a move toward the highs near $118.

FFIV - Shares of FFIV have been plunging lower. The sell-off has been harsh. I am not suggesting any trades here but aggressive traders might want to watch for a bounce soon. FFIV is nearing what should be significant support near $90.00.

- James


NEW DIRECTIONAL CALL PLAYS

Fossil, Inc. - FOSL - close: 83.04 change: +1.24

Stop Loss: 78.75
Target(s): 84.90, 89.75
Current Option Gain/Loss: Unopened
Time Frame: 4 to 6 weeks
New Positions: Yes, see Trigger

Company Description:
Fossil Inc. is known for its Fossil branded business and for its multi-brand watch and jewelry business. The Fossil brand consists of watches and accessories as well as clothing and is distributed globally through retail partners and through its 364 Fossil stores. (source: company press release or website)

Why We Like It:
We are going to take another shot at FOSL. The stock has been pretty resilient lately. Traders bought the dip more than once above the $79.00 level in the last two weeks. Investors do not seem very worried about the impact of higher gasoline prices on consumer spending, at least for FOSL's business, not with the stock trading near all-time highs and poised to breakout higher.

Aggressive traders may want to go ahead and buy calls now. I am suggesting we buy calls on a dip at $81.75. An alternative entry point would be to wait for a new breakout past short-term resistance at the $85.00 level. If we are triggered at $81.75 we'll use a stop at $78.75 and our first target is $84.90. Our second and final target is $89.75. More aggressive traders might want to aim higher. The Point & Figure chart for FOSL is bullish with a $106 target.

Buy-the-Dip Trigger at $81.75

- Suggested Positions -

Buy the April $85 calls (FOSL1116D85) current ask $2.25

- or -

Buy the May $85 calls (FOSL1121E85) current ask $4.70

Annotated Chart:

Entry on March xxth at $ xx.xx
Earnings Date 05/10/11 (unconfirmed)
Average Daily Volume = 1.0 million
Listed on March 22nd, 2011


NEW DIRECTIONAL PUT PLAYS

Everest Re Group Ltd. - RE - close: 81.68 change: -1.30

Stop Loss: 84.25
Target(s): 76.00, 71.00
Current Option Gain/Loss: - 0.0%
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
It seems like it has been a rough year to be an international insurance company. The world has seen "biblical" floods in Australia. There were major earthquakes in New Zealand. Now Japan has suffered the combination of earthquake and tsunami. RE's management admitted that they expect losses from Japan to be significant but it's way too early to start making estimates. Given all the bad news I suspect the path of least resistance for RE could be down.

The stock is struggling to hold on to support near $82 and its 200-dma. Tuesday's action looks like another failed rally pattern and entry point to buy puts. Granted the bulls could argue that all the bad news is baked into the stock but that proposal doesn't hold water since we don't know what the liabilities for Japan might be.

I am suggesting bearish positions now with a stop loss at $84.25. Our targets are $76.00 and $71.00. I would keep our position size small to limit our exposure.

- Open Small Bearish Positions Now -

Buy the April $80 PUTs (RE1116P80) current ask $1.30

- or -

Buy the May $80 PUTs (RE1121Q80) current ask $2.50

Annotated Chart:

Entry on March 23rd at $ xx.xx
Earnings Date 04/28/11 (unconfirmed)
Average Daily Volume = 381 thousand
Listed on March 22nd, 2011


In Play Updates and Reviews

At Resistance

by James Brown

Click here to email James Brown

Editor's Note:

The S&P 500 and the NASDAQ Composite are hovering under resistance after their recent oversold bounce. This is an important test and bulls need to see the market power past these levels. Overall it was a quiet day in the market but BIDU, our new call play, was showing relative strength and hit our trigger to buy calls.

-James

Current Portfolio:


CALL Play Updates

Baidu, Inc. - BIDU - close: 127.09 change: +3.09

Stop Loss: 119.95
Target(s): 139.00, 147.50
Current Option Gain/Loss: Unopened
Time Frame: 4 to 5 weeks
New Positions: Yes, see Trigger

Comments:
03/22 update: Our new play in BIDU is already open. The stock displayed relative strength on Tuesday. Shares rallied past resistance in the $125.00-126.00-127.00 area and hit our trigger to buy calls at $127.00 this afternoon. I would still consider new positions now at current levels. There is potential resistance at $130.00 but I'm setting our targets at $139.00 and $147.50. We will plan to exit ahead of BIDU's late April earnings report.

BIDU can be a volatile stock so I would consider this a more aggressive, higher-risk trade.

- Suggested Positions -

Long the April $130 calls (BIDU1116D130) entry @ $3.20

- or -

Long the May $135 calls (BIDU1121E135) entry @ $5.10

Entry on March 22 at $127.00
Earnings Date 04/28/11 (unconfirmed)
Average Daily Volume = 6.0 million
Listed on March 21st, 2010


Caterpillar Inc. - CAT - close: 106.79 change: -0.80

Stop Loss: 99.00
Target(s): 109.00, 114.00
Current Option Gain/Loss: +16.1%, and + 1.5%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
03/22 update: After three days of gains CAT hit a little profit taking today (-0.7%). I would still consider new positions on dips in the $106-105 area. Be advised that CAT might see some movement tomorrow. The company is holding an analyst meeting on March 23rd.

Our targets are $109.00 and $114.00.

- Suggested Positions -

Long the April $105 calls (CAT1116D105) Entry @ $3.40

- or -

Long the May $110 calls (CAT1121E110) Entry @ $3.15

Entry on March 18th at $104.99 (gap higher)
Earnings Date 04/29/11 (unconfirmed)
Average Daily Volume = 7.4 million
Listed on March 17th, 2010


Cerner Corp. - CERN - close: 107.80 change: +1.79

Stop Loss: 101.90
Target(s): 104.85, 109.50
Current Option Gain/Loss: +44.4%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
03/22 update: Shares of CERN continue to rally. The stock added +1.6% and spiked to $108.81 intraday. Our final exit target is $109.50. More aggressive traders may want to aim higher (maybe the 112-115 zone). I am raising our stop loss to $101.90. No new positions at this time.

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

03/22 New stop loss @ 101.90
03/21 Adjusted final target to $109.50
03/12 New stop loss @ 99.45
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


Capital One Financial - COF - close: 50.56 change: -0.68

Stop Loss: 47.75
Target(s): 54.75, 59.00
Current Option Gain/Loss: -28.5% and -64.6%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
03/22 update: Banking stocks were drifting lower on Tuesday. COF underperformed the banking indices, which is a little bit worrisome. I would still consider new call positions on dips near $50.00 or the 50-dma (near $49.50) but more conservative traders may want to raise their stop loss. Our targets are $54.75 and $59.00.

- Suggested Positions -

Long the April $50 call (COF1116D50) Entry @ $2.63

- or -

Long the April $55 call (COF1116D55) Entry @ $0.65

Entry on March 16th at $51.08
Earnings Date 04/21/11 (unconfirmed)
Average Daily Volume = 4.4 million
Listed on March 15th, 2010


CSX Corp. - CSX - close: 78.37 change: +0.28

Stop Loss: 73.45
Target(s): 79.90, 83.75
Current Option Gain/Loss: +28.3%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
03/22 update: Shares of CSX received an upgrade today and the stock hit another new high but gains were mild. CSX could be ready for a little pull back toward the $77-75 zone. Wait for that dip before initiating new bullish positions.

Our plan was to keep our position size small to limit our risk. FYI: The Point & Figure chart for CSX is bullish with a $98 target.

- Small Bullish Positions -

Long the April $80 calls (CSX111680) Entry @ $1.06

Entry on March 21 at $77.25
Earnings Date 04/13/11 (unconfirmed)
Average Daily Volume = 3.4 million
Listed on March 19th, 2010


Jones Lang Lasalle Inc. - JLL - close: 98.92 change: -1.45

Stop Loss: 93.85
Target(s): 102.50, 109.00
Current Option Gain/Loss: -17.6%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
03/22 update: JLL reversed course and gave up -1.4% after three days of gains. Looks like yesterday's move over $100 wasn't the breakout we wanted it to be. The stock looks like it could hit the $98-97 level soon. If JLL sees a bounce in that area I would reconsider new bullish positions. More conservative traders may want to inch up their stop loss.

Prior Comments:
We wanted to keep our position size small to limit our risk. Our targets are $102.50 and $109.00.

- Suggested Positions - (Small Positions)

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

03/17 Exited March calls @ open, Estimated exit @ 0.10 (-94.2%)
03/10 New stop loss @ 93.85

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


Polaris Industries, Inc. - PII - close: 81.96 change: -2.32

Stop Loss: 78.49
Target(s): 84.95, 89.00
Current Option Gain/Loss: -40.0%
Time Frame: 4 to 7 weeks
New Positions: see trigger

Comments:
03/22 update: Ouch! What happened to PII? The stock had been showing so much strength lately. I could not find any company specific news to account for the -2.75% decline today. The move looks like a failed rally under $85 and a bearish engulfing candlestick pattern, which is normally a reversal signal. PII should have some support near $82 and $80 but I am not suggesting new positions at this time. Let's see if there is any follow through tomorrow.

Our plan was to keep our position size small. FYI: The Point & Figure chart for PII is bullish with a $98 target.

- Small Positions -

Long the April $85 calls (PII1116D85) Entry @ 2.00

Entry on March 18th at $82.25
Earnings Date 04/21/11 (unconfirmed)
Average Daily Volume = 396 thousand
Listed on March 14th, 2010


Quality Systems Inc. - QSII - close: 80.51 change: +0.40

Stop Loss: 77.90
Target(s): 87.25, 94.50
Current Option Gain/Loss: -66.6%, and -38.2%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
03/22 update: It was a volatile session for QSII. The stock briefly traded down to last week's low near $78.70 but immediately bounced and eventually closed in positive territory. This almost looks like a rebound from technical support at the 50-dma. However, I remain cautious and will repeat my prior comments that readers may want to wait for a rally past $81.25 before launching new positions.

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


Whole Foods Market Inc. - WFMI - close: 61.37 change: -0.36

Stop Loss: 57.95
Target(s): 64.75, 69.00
Current Option Gain/Loss: -23.0%, and - 8.4%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
03/22 update: WFMI spent the session drifting sideways and eventually closed lower. It looks like the stock might retest the $60.00 level, which is where I would consider new bullish positions.

Our upside targets are $64.75 and $69.00. FYI: The Point & Figure chart for WFMI is bullish with an $86 target.

- Suggested Positions -

Long the April $65 calls (WFMI1116D65) Entry @ $0.65

- or -

Long the May $65 calls (WFMI1121E65) Entry @ $2.25

Entry on March 21 at $61.55
Earnings Date 05/11/11 (unconfirmed)
Average Daily Volume = 1.9 million
Listed on March 19th, 2010


PUT Play Updates

Infosys Technologies - INFY - close: 64.52 change: -0.68

Stop Loss: 68.15
Target(s): 60.25, 57.50
Current Option Gain/Loss: -15.3%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
03/22 update: INFY still looks weak. The rally attempt this morning failed and shares closed on their lows and near last week's lows. INFY is poised to breakdown and I'm expecting a run towards the $60 area. Personally I would still consider new bearish positions now but you could wait for a breakdown under the $64.00 mark as your entry point.

Our targets are $60.25 and $57.50. INFY looks like it might have support near $60.00 and the $57.00 levels.

- Small Bearish Positions -

Long the April $65 PUT (INFY1116P65) Entry @ $2.48

Entry on March 18th at $65.30
Earnings Date 04/15/11 (unconfirmed)
Average Daily Volume = 1.3 million
Listed on March 17th, 2010