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Newsletter

Daily Newsletter, Tuesday, 4/12/2011

Table of Contents

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

Market Wrap

Commodity Prices Were Radioactive Today

by Jim Brown

Click here to email Jim Brown
Worries over Japan's nuclear escalation, a revenue shortage on Alcoa and a sharp downgrade on the energy sector by Goldman Sachs created some serious selling today.

Market Statistics

The markets opened ugly and never managed a decent rebound attempt. Japan raised its assessment of the nuclear accident from a five to a seven and the highest level on the accident scale. That is the same level as the Chernobyl disaster. The shock value of this news was significant but in reality nothing changed. Officials claim the current disaster has released less than 10% of the radiation released by Chernobyl. The type of radiation is also significantly different with the current disaster releasing mostly radioactive iodine with a very short half-life. I am not trying to make light of the current disaster but the news shock was worse than the actual damage comparisons.

The bigger issue for the market was a downgrade of the commodities sector by Goldman Sachs. Four months ago Goldman recommended investing in a basket of commodities including oil, copper, platinum and cotton. Those commodities have gained roughly 25% since the recommendation.

Goldman said, "Although we believe that one a 12-month horizon the CCCP basket still has upside potential but in the near term, risk-reward no longer favors the basket." The CCCP basket had a 40% weighting in oil, 20% copper, 20% platinum, 10% in cotton and 10% in soya beans. The commodities team has been considered long term bulls on the market but now they are warning it is time to take profits. Goldman noted "signs of demand destruction in the U.S." as a drag on prices. They also believed the possibility of a ceasefire in Libya could depress prices.

Goldman said the damage in Japan is likely to dent demand in copper and platinum and rising oil prices could cause a further decline in copper demand in China.

Goldman's call created a wave of selling across the entire commodity sector with metals, grains and crude prices going into free fall. Oil was hit the worst with WTI crude trading as low as $105.50 on Tuesday after trading at nearly $113.50 on Monday. Goldman pointed out that there were four times the number of speculative net longs in crude futures than were in June 2008. For every one million barrels under contract by speculators raises the price of crude by as much as 10-cents per barrel. The CFTC said last Tuesday there were net long contracts equivalent to a near record 267.5 million barrels. That suggests there is roughly $24 in risk premium in a barrel of oil. Investors accumulated the equivalent of 100 million barrels of oil between mid-February and late March on top of their existing positions. That alone added $10 to the risk premium according to Goldman.

The MasterCard Spending Pulse report for last week showed gasoline demand fell -1.8% and declined for the sixth consecutive week. Demand was down -3.0% over the same period in 2010. More than 70% of the nations major gas station chains said sales had fallen. The decline over the last five weeks was the sharpest since the summer of 2008 when gas prices hit $4 per gallon. Prices hit $3.77 per gallon on Monday.

Other analysts believe the end of QE2 will halt the decline in the dollar and we could see some firming ahead of fall as traders begin to anticipate some sort of policy tightening by the Fed. This is well down the road but the key today is the anticipation of the April 27th FOMC meeting and Bernanke press conference. Traders don't know what to expect and that uncertainty is causing them to take profits on those commodity positions supported by the weak dollar and QE2. With most of those commodities up +25% over the last couple months and clearly in nosebleed territory it would be hard to go wrong by taking profits now. Any future upside is limited and peppered with event risk.

Goldman predicted a decline in WTI crude to $99.50 and $105 in Brent. That would be a $14 decline in WTI and -$22 decline in Brent.

WTI Oil Chart

Brent Chart

Gold prices declined -$25 off their highs at 1478 on Monday to close at $1453 today. Silver hit $41.97 on Monday and an all time historic high over the $41.50 set back in 1980. It closed at $40.09 today. The CRB Index only declined about 2% after a +38% gain since August. If there is going to be a true correction in commodities there could be a lot more pain ahead.

CRB Index

The economic reports today were mostly ignored. The weekly chain store sales rose a miniscule +0.1% compared to a +2.3% gain in the prior week. The Import prices for March rose +2.7% and a significant increase from February's +1.4% gain. The spike in March was the highest since June 2009. Year over year prices have risen from +7.2% to +9.7% and the highest since April 2010. Imported oil rose +10.5% in March. Export prices rose +1.5%. Imported food and beverage prices rose +4.2% in March.

The February trade deficit was nearly flat at -$45.8 billion from -$46.3 billion in January. This is a lagging report and nobody was watching.

The Treasury Budget deficit in March was -$188 billion. Through the first six months of the fiscal year the deficit has risen +16%. Tax receipts were $150.9 billion and expenses $339.0 billion. The deficit for March was early triple the $65.4 billion deficit for March 2010. The total deficit through the first six months of the fiscal year, which starts in October, was $829.4 billion. The government is on track for a $1.5 trillion deficit for this fiscal year and slightly less than 9% of GDP. If you thought the battle between the administration, democrats and republicans over the 2011 budget was bad just wait until the debt limit ceiling debate begins after the Easter recess.

The biggest economic event for the rest of the week will be the Fed Beige Book on Wednesday followed by the Producer and Consumer price Indexes.

Economic Calendar

Cisco, under pressure to revitalize earnings and cut costs, announced it was killing the Flip Video. This was the most popular video camera in the U.S. just two years ago. The Flip was created four years ago and bought by Cisco for more than $500 million two years ago. Users love the camera and its ease of uploading and editing video. Considering the big following of the Flip Video it was a shock to most that Cisco would just announce a shutdown rather than try to sell the company.

Cisco also said it was dumping their Umi home video conferencing business. The service turned your high def TV into a big videophone for $24.95 per month. They recently cut prices to $99 per year. Now they are going to fold that unit into its corporate video conferencing business and stop selling the unit through retailers. Cisco needs to make some big changes and these small moves are not building confidence in the company. Earnings have produced some very traumatic moves on the chart over the last year as every quarter seemed to be worse than the one before. Does anyone even care what Cisco does today?

Cisco Chart

Alcoa was the first Dow component to report earnings and they beat the street by a penny but revenue was lighter than analysts had expected. Shares fell -6% on the news. Alcoa said raw materials costs had risen significantly. They also warned that higher oil prices would also weigh on future profits. They also took a significant hit on currency conversion with large losses converting back from the Canadian dollar, Australian dollar and the Brazilian Real. Alcoa reiterated expected sales gains of 12% for 2011 and that was considered positive. Overall, given the rally over the last month I believe it was mostly profit taking and the impact from the commodity sell off.

Alcoa Chart

Shares of Tyco rose over 7% after news broke they had held early talks with Schneider Electric about a possible acquisition. Schneider has approached bankers about financing a potential takeover that could create the world's largest maker of security systems. CNBC reported that the rumor about Schneider had prompted interest from other companies and the prospect of a bidding war is what spiked the stock. Other bidders could include Siemens AG (SI), Honeywell (HON) and United Technologies (UTX).

Tyco Chart

With oil prices dropping like a rock the Dow Transports gained ground and was the only sector to end the day in positive territory other than Healthcare. The airlines were flying high with UAL +6%, DAL +5%, AMR +2% and LCC +3%. I think it is a little early to be jumping on an airline stock because crude fell for two days. Even with oil at $106 at the close that represents a major problem for the airlines. The Air Transport Association (ATA) said the recent rise in jet fuel prices had increased the fuel bill for domestic carriers by more than $3 billion in Q1 alone. Jet fuel was $3.20 back on March 4th when oil was $105. The ATA says fuel at $3 per gallon would raise airline costs for the full year by more than $15 billion. Considering the industry only posted a $3 billion profit for all of 2010 the odds of a profit in 2011 are close to zero. Even if oil were to dip under $100 temporarily it appears fuel costs are going to stay well over $3 the rest of the year. I would be looking for any material bounce in the airlines as a new shorting opportunity. The airline industry as we know it is doomed as we approach the end of cheap oil over the next 2-3 years.

Airline Index Chart

Bulls should not be happy tonight. The S&P broke below strong support at 1320 and failed to produce any material rebound ahead of the close. Intraday dips are opportunities to watch market sentiment in action as buyers rush in to enter new positions at a discount. There was no rush today and those who did nibble at the morning lows likely failed to see any gains after the indexes slipped backwards at the close.

The S&P has now broken the rebound trend from early March and the consolidation up around 1333 has failed. This would appear to be a setup for a further decline. However, this was a strong news day. How much the Japanese news actually affected the market is unknown but it was the lead story all day. I think the commodity news was bigger. With a broad range of energy and commodity stocks taking a serious hit it created a major drag on the indexes. Add in Alcoa's warning about higher fuel prices and the Airline Association suggesting airlines could lose $10 billion due to high fuel prices and suddenly the market has a problem. Gone is the positive earnings sentiment from last week and now we are awash in multiple headlines on topics that are weighing on the economy and on corporate earnings.

So far 29 S&P companies have given guidance about Q1 and 13 of them said Japan would have some impact on their sales or earnings. This is just the leading edge of guidance and the tsunami is just ahead with a large number of S&P companies reporting next week. What are they going to say? Is Japan an earnings problem or not? Will fuel prices weigh on the consumer? Will the FOMC change the statement on the 27th?

There are lots of questions and no answers and that produces a fertile environment for the uncertainty virus.

The S&P dropped under my buy the dip target at 1325 and I am neutral on the market until we move back over that level. If the decline continues I would probably nibble again in the 1295-1300 range but we will have to wait until that level appears and see what is making news. Until then I am in wait and see mode. Initial resistance is now 1320, support 1305.

S&P-500 Chart

The Dow fell -148 points at the open and only recovered 30 of those points before the close. This is not a positive development. We did see the index close right on a prior support level at 12,265 but I think it was gravity and not the specifically related to that particular level.

The Dow was dragged down by a -$3.60 loss in Chevron and a -$2 drop in Exxon. CAT lost -$2.50 and MMM -1.50 to round out the top four. With a combined market cap of $750 billion in those four companies and four of the top five highest weighted companies in the Dow, I am surprised the damage was not worse.

If you compare the charts of Chevron, Exxon and the Dow they are identical. That means the majority of the Dow decline was related to the drop in crude prices and the corresponding decline in energy stocks. Does this mean a rebound in energy solves the problem? Not specifically and I would not bet on a rebound in crude with expiration only a week away. Just seeing oil remain flat at $105 would mean there is no further drag on the Dow but it would still need something in the news flow to push it higher. All I see on the horizon is the potential for negative news unless Qaddafi suddenly develops a conscience, resigns and moves to Morocco.

The JP Morgan earnings will be the Dow mover on Wednesday and hopefully they are positive. If current support at 12,260 fails we could be looking at a retest of 12,000 very quickly.

Dow Chart

The Nasdaq was hard hit with big caps of all varieties taking big losses. Williams Clayton Energy (CWEI) was the biggest lower at -$7 but it was the only energy stock in the top 20. GOOG, BIDU, SINS, MELI, AMZN, FAST and ISRG all lost over $3.

The Nasdaq broke below strong support and the 50-day average. The next material support level is 2725 with today's close at 2744. This is not a good sign and it is obviously not a result of the drop in oil or commodities. I suspect traders are becoming increasingly worried over Japan's impact on earnings and the fact the Japan problem is not yet over. Another 6.3 aftershock this week was evidence there could be even more shocks ahead and the supply chain problem could extend for an even longer period.

I have no confidence in the Nasdaq to bounce and it is entirely possible it will continue to drift lower. Initial support is 2725 and resistance 2765.

Nasdaq Chart

The Russell also declined sharply and it was not specifically due to oil prices or commodities although there are more of those stocks on the Russell than the Nasdaq. The Russell declined because investor sentiment is weakening. Like the analysis I wrote about I believe it is worry over the impact of Japan and high fuel prices on earnings. Managers also have some significant profits to capture from the March bounce and once the rally failed at 850 there has been an increasing rush to the exits.

We could see support hold at 820 but I am not betting on it. The next material support is 780 and that is a long way off with a roadside park at 800 on the way down. Let's hope that trip is cancelled.

Russell Chart

On the positive side volume was relatively light at only 7.4 billion shares and it was just over 2:1 in favor of down volume. This was far from a blowout or a capitulation event. It appears to have been a garden-variety bout of profit taking prompted by the failure to breakout last week and the overload of negative news this week. Wednesday will be the key with earnings from JPM. If the earnings are good it could lift the banking sector and that is the largest sector in the S&P. Sudden declines in energy stocks after an oil price shock tend to be limited in duration. Energy is still the sector to hold for the long run since even an oil price decline to $95 is still extremely profitable for oil companies. It also provides a higher starting level for the next rally.

Futures are up on Tuesday evening but still a lot of darkness before morning.

Jim Brown

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New Option Plays

Educational Services

by James Brown

Click here to email James Brown


NEW DIRECTIONAL PUT PLAYS

Apollo Group Inc. - APOL - close: 41.11 change: -0.90

Stop Loss: 44.25
Target(s): 38.15, 35.50
Current Option Gain/Loss: + 0.0%
Time Frame: 4 to 6 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
The education space has been a tough one and shares of APOL continue to fail at its trend of lower highs. The stock just peaked again on Monday and this looks like a new entry point to buy puts. I am suggesting we buy puts now with a stop loss at $44.25. More conservative traders may want to use a stop closer to $43.50 instead. Plus if you're feeling cautious then wait for APOL to close under potential support at its 100-dma. Our profit targets are $38.15 and $35.50.
The Point & Figure chart for APOL is bullish with a $31 target.

- Suggested Positions -

Buy the May $40.00 puts (APOL1121Q40) current ask $1.28

Annotated Chart:

Entry on April 13th at $ xx.xx
Earnings Date 06/30/11 (unconfirmed)
Average Daily Volume = 2.3 million
Listed on April 12th, 2011


In Play Updates and Reviews

Widespread Declines for Wall Street

by James Brown

Click here to email James Brown

Editor's Note:

The unofficial start to earnings season has not inspired any confidence. Stocks were down almost across the board. Airlines, healthcare and railroads were the few industries posting any gains today. We saw CAT, CSX, and NE get stopped out. I am also suggesting an early exit in our JLL play since we have April options.

-James

Current Portfolio:


CALL Play Updates

CH Robinson Worldwide Inc. - CHRW - close: 74.24 change: +0.33

Stop Loss: 72.75
Target(s): 79.50
Current Option Gain/Loss: -20.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
04/12 update: Transport names were trying to bounce on oil's weakness but the sector didn't get very far. CHRW eked out a +0.4% gain. Technically this bounce looks like a new bullish entry point but if the market's major indices accelerate lower I would not expect transports to be immune to the profit taking. I would keep your position size small to limit your risk.

We do not want to hold over the late April earnings report. FYI: The Point & Figure chart for CHRW is bullish with a $91 target.

- Suggested Positions -

Long the May $75.00 calls (CHRW1121E75) Entry @ $2.25

04/09 New stop loss @ 72.75

Entry on April 7th at $74.50
Earnings Date 04/26/11(confirmed)
Average Daily Volume = 1.2 million
Listed on April 2nd, 2011


Fortune Brands - FO - close: 63.00 change: -0.61

Stop Loss: 61.75
Target(s): 67.50, 69.75
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see trigger

Comments:
04/12 update: FO shed -0.9% but is still clinging to the $93 level. We're still waiting for a breakout higher. I am suggesting a trigger to buy calls at $64.00. If triggered our targets are $67.50 and $69.75. I would aim higher but we do want to exit ahead of the late April earnings report.

FYI: A move past $64.00 would create a brand new quadruple top breakout buy signal.

Trigger @ $64.00

- Suggested Positions -

Buy the May $65.00 call (FO1121E65) current ask $1.25

Entry on April xxth at $ xx.xx
Earnings Date 04/28/11 (unconfirmed)
Average Daily Volume = 973 thousand
Listed on April 5th, 2011


SPDR Gold ETF - GLD - close: 141.61 change: -1.03

Stop Loss: 137.00
Target(s): 149.50, 154.50
Current Option Gain/Loss: -28.8%, and -24.0%
2nd Option Position Gain/loss: - 0.0% and - 0.0%
Time Frame: 6 to 12 weeks
New Positions: see below

Comments:
04/12 update: The dollar produced a decline but that failed to help commodities today. Gold ticked lower and the GLD gave up -0.7%. I am suggesting readers use this pull back today as a new bullish entry point to buy calls on the GLD. I'm listing a second position below. More conservative traders can tighten their stops closer to $139 or $140. The newsletter's stop is at $137.00. Our targets are $149.50 and $154.50 within the next six to twelve weeks.

FYI: The Point & Figure chart for GLD is bullish with a $172 target.

- Suggested Positions -

Long the May $145 call (GLD1121E145) Entry @ $1.84

- or -

Long the June $150 call (GLD1118F150) Entry @ $1.33

- Second Entry Point, April 12th, Entry April 13th -

Buy the May $145 call (GLD1121E145) Current ask $1.36

- or -

Buy the June $150 call (GLD1118F150) Current ask $1.05

Entry on April 6th at $142.40
Earnings Date --/--/--
Average Daily Volume = 12.5 million
Listed on April 5th, 2011


Goldman Sachs - GS - close: 160.42 change: -1.05

Stop Loss: 157.00
Target(s): 169.75
Current Option Gain/Loss: - 69.0%
Time Frame: about two weeks
New Positions: see below

Comments:
04/12 update: GS managed a bounce intraday off its three-week trendline of higher lows. The major banking indices closed lower but their losses weren't that bad today. That could change tomorrow. J.P.Morgan Chase (JPM) reports earnings tomorrow morning. JPM's results could have a very big impact on the rest of the financial sector. If investors are happy with the report then GS and the rest of the group should rally. I am suggesting that we exit our April GS calls tomorrow at the closing bell.

- Suggested Positions -

Long the April $165.00 call (GS1116D165) Entry @ $1.10

04/12 Plan on exiting Wednesday, April 13th at the close.

Entry on April 7th at $162.50
Earnings Date 04/19/11 (confirmed)
Average Daily Volume = 4.3 million
Listed on April 6th, 2011


Honeywell Intl. Inc. - HON - close: 57.53 change: -0.73

Stop Loss: 56.99
Target(s): 62.75
Current Option Gain/Loss: -39.0%
Time Frame: less than two weeks
New Positions: see below

Comments:
04/12 update: It's not looking good for our new call plan on HON. Shares broke down under support at the $58.00 level. Traders did buy the dip near technical support near its 50-dma but if the market continues lower tomorrow then odds are pretty good that HON could hit our stop loss at $56.99. I am not suggesting new positions at this time. Our upside target is $62.75 but we will plan on exiting ahead of the April 21st earnings report.

- Suggested Positions -

Long the May $60.00 call (HON1121E60) Entry @ $1.10

Entry on April 11th at $58.35
Earnings Date 04/21/11 (confirmed)
Average Daily Volume = 4.0 million
Listed on April 9th, 2011


Norfolk Southern - NSC - close: 67.77 change: +0.11

Stop Loss: 65.70
Target(s): 72.00, 74.90
Current Option Gain/Loss: -100.0%, and -28.5%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
04/12 update: Transports were trying to rally on the weakness in oil but NSC only managed a +0.16% gain. I remain cautious here. Readers may want to wait for a dip closer to $66 before considering new positions. Our targets are $72.00 and $74.90. We do not want to hold past NSC's late April earnings report.

- Suggested Positions -

Long the April $70 calls (NSC1116D70) Entry @ $0.50

- or -

Long the May $70 calls (NSC1121E70) Entry @ $1.40

04/09 New stop loss @ 65.70

Entry on March 25th at $67.84
Earnings Date 04/27/11 (unconfirmed)
Average Daily Volume = 3.0 million
Listed on March 24th, 2011


Panera Bread Co. - PNRA - close: 120.48 change: -0.02

Stop Loss: 119.00
Target(s): 129.50, 134.50
Current Option Gain/Loss: - 95.1%, and -43.2%
Time Frame: 3 to 5 weeks
New Positions: see below

Comments:
04/12 update: Your quote provider is probably listing PNRA's low today at $119.83 but this morning there appears to have been a bad tick with a gap down at $119.07. With a stop loss at $119.00 our trade is still open but readers may want to abandon ship anyway, especially with the widespread weakness across the market today. I am not suggesting new bullish positions at this time.

Our second and final target is $134.50. We do not want to hold over the April 26th earnings report.

FYI: PNRA is currently trading over the $120 area. The last time the company had a stock split it was back in June 2005 with shares in the $120s. You never know when they might announce a split although if they do it would probably be with their earnings report.

- Suggested Positions -

Long the April $125 call (PNRA1116D125) Entry @ $2.05

- or -

Long the May $130 call (PNRA1121E130) Entry @ $3.35

04/04 1st Target Hit @ 129.50. The April option was at $4.82 (+135.1%) and the May option was at $5.25 (+56.7%)

Entry on March 29th at $123.55
Earnings Date 04/26/11 (confirmed)
Average Daily Volume = 363 thousand
Listed on March 26th, 2011


Praxair Inc. - PX - close: 100.53 change: -0.84

Stop Loss: 98.90
Target(s): 104.75, 109.00
Current Option Gain/Loss: -25.6%, and -39.2%
2nd Position Gain/Loss: - 0.0%
Time Frame: 4 to 5 weeks
New Positions: see below

Comments:
04/12 update: Bingo! We have been looking for PX to dip toward $100 as a new entry point. Shares hit $100.20 late this afternoon. I am listing this as a new entry point below (second position) but I am also raising our stop loss to $98.90. More conservative traders may want to wait for a bounce from current levels before considering new positions. Keep your position size small.

Our first target to take profits is at $104.75. Our second and final target is $109.00. We will plan to exit ahead of the late April earnings report.

- Suggested Positions -

Long the May $100 call (PX1121E100) entry @ $3.90

- or -

Long the May $105 call (PX1121E105) entry @ $1.40

- Second Entry Point, April 12th, Entry April 13th -
- Keep Positions Small -

Buy the May $100 call (PX1121E100) Current ask $3.10

04/12 New stop loss at $98.90
04/12 Second position on dip near $100
04/09 new stop loss @ 97.90

Entry on March 30th at $101.54
Earnings Date 04/27/11 (unconfirmed)
Average Daily Volume = 1.4 million
Listed on March 29th, 2011


Sohu.com - SOHU - close: 93.21 change: -1.53

Stop Loss: 87.40
Target(s): 99.90, 107.50
Current Option Gain/Loss: -20.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
04/12 update: The strength in Chinese Internet stocks faded on Tuesday. Global markets, including China, were down across the board for the second day in a row. SOHU fell -1.6% and closed under its 10-dma. I would expect another dip near $90.00. Depending on your trading style we can use a dip near $90.00 as an entry point to buy calls or wait for another bounce from the $90 area.

We will plan to exit before the earnings report in late April. I want to reiterate that this is an aggressive, higher-risk trade. I'm suggesting we keep our position size small to limit our risk. FYI: The Point & Figure chart for SOHU is bullish with a $120 target.

Triggered

- Suggested Positions -

Long the May $100 call (SOHU1121E100) Entry @ $4.25

04/11 Adjusted first exit target to $99.90

Entry on April 4th at $92.50
Earnings Date 04/25/11 (unconfirmed)
Average Daily Volume = 1.1 million
Listed on April 2nd, 2011


Stericycle Inc. - SRCL - close: 90.43 change: +0.08

Stop Loss: 86.75
Target(s): 93.50, 98.50
Current Option Gain/Loss: +28.0%
Time Frame: 4 to 5 weeks
New Positions: see below

Comments:
04/12 update: SRCL is still showing a little relative strength by posting a gain but the gains today were pretty minor. Shares are hovering near the $90 level. Given the short-term bullish trend of higher lows I would be tempted to buy calls here but the overall weakness in the major indices would suggest this is not a good time to launch new call positions. Readers might want to adjust their stop losses closer to the $88.00 level. Our targets are $93.50 and $98.50.

We will plan to exit ahead of the late April earnings report.

- Suggested Positions -

Long the May $90 calls (SRCL1121E90) Entry @ $2.50

04/04 New stop loss @ 86.75
04/02 New stop loss @ 85.75

Entry on March 30th at $88.93
Earnings Date 04/27/11 (confirmed)
Average Daily Volume = 479 thousand
Listed on March 29th, 2011


Vertex Pharmaceuticals - VRTX - close: 47.97 change: -0.25

Stop Loss: 45.95
Target(s): 51.85, 58.50
Current Option Gain/Loss: + 4.0%
Time Frame: about 2, maybe 3 weeks
New Positions: see below

Comments:
04/12 update: VRTX recovered from its initial declines this morning but shares spent the day consolidating sideways. If you are looking for an entry point I'd wait for another bounce from $47.00 or a breakout past $49.00. Keep in mind that this is a very aggressive trade.

Our first target is $51.85. Our second, much more aggressive target is $58.50 but again, we don't have a lot of time so we may have to exit early. I am listing our stop at $45.95, under last week's lows.

- Very Small Bullish Positions -

Long the May $50.00 calls (VRTX1121E50) Entry @ $2.50

Entry on April 10th at $48.28
Earnings Date 04/21/11 (unconfirmed)
Average Daily Volume = 2.1 million
Listed on April 9th, 2011


Whole Foods Market Inc. - WFMI - close: 62.90 change: -0.26

Stop Loss: 59.90
Target(s): 64.75, 69.00
Current Option Gain/Loss: - 89.2%, and - 1.3%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
04/12 update: WFMI's decline today erased yesterday's minor bounce. Yet traders did buy the dip near $62.00 this morning. This move looks like a new bullish entry point to buy calls but I'm hesitant to launch new positions with the S&P 500 and the NASDAQ looking poised for more declines. Readers might want to raise their stop loss closer to the $62 area. Our final target is the $69.00 level. 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

04/02/11 new stop loss @ 59.90
03/30/11 1st Target Hit @ 64.75, April $65 call @ 1.25 (+92.3%)
May $65 call @ 3.50 (+55.5%)
03/29/11 new stop loss @ 59.49
03/26/11 New stop loss @ 58.49

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


Whiting Petroleum Corp - WLL - close: 68.16 change: -3.27

Stop Loss: 64.40
Target(s): 69.75, 74.00
Current Option Gain/Loss: Unopened
Time Frame: 2 to 3 weeks maybe
New Positions: Yes, see trigger

Comments:
04/12 update: Just as expected shares of WLL continued to correct lower. The stock lost -4.5% and appears to have found some support near $68.00. I am adjusting our buy-the-dip entry point from $66.50 to $66.00. More aggressive traders may want to consider buying a dip near the rising 50-dma.

More conservative traders could wait for a dip closer to the $65.00 mark. If triggered our targets are $69.75 and $74.00. We do not want to hold over the late April earnings report but so far the date is unconfirmed.

Trigger @ $66.00

- Suggested Positions -

Buy the May $70 call (WLL1121E70) current ask $2.70

Entry on April xxth at $ xx.xx
Earnings Date 04/28/11 (unconfirmed)
Average Daily Volume = 1.6 million
Listed on April 11th, 2011


Wellpoint Inc. - WLP - close: 69.74 change: +0.49

Stop Loss: 67.45
Target(s): 72.25, 74.75
Current Option Gain/Loss: -70.3%, and -27.5%
Time Frame: 3 to 5 weeks
New Positions: see below

Comments:
04/12 update: Healthcare stocks were one of the few sectors showing any strength today. WLP is bouncing toward the top of its trading range with resistance at $70.00. I would prefer to see a rally past the $70.00 mark before considering new bullish positions. We do not want to hold over the late April earnings report.

FYI: Readers may want to keep their position size small.

- Suggested Positions -

Long the April $70 call (WLP1116D70) Entry @ $1.55

- or -

Long the May $70 call (WLP1121E70) Entry @ $2.80

04/09 New stop loss @ 67.45
04/02 new stop loss @ 66.75

Entry on April 1st at $70.25
Earnings Date 04/27/11 (unconfirmed)
Average Daily Volume = 3.4 million
Listed on March 26th, 2011


CLOSED BULLISH PLAYS

Caterpillar Inc. - CAT - close: 106.57 change: -2.50

Stop Loss: 107.40
Target(s): 109.00, above $112 for Aprils, $114.90 for Mays
Current Option Gain/Loss: - 10.2%, and -12.6%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
04/12 update: News that CAT was upgraded to a "buy" this morning was no help for the stock price. Widespread declines helped push CAT under the $108 level. Shares hit our stop loss at $107.40 closing this trade. Volume was strong on the sell-off, which doesn't bode well for CAT. The long-term trend is still up so nimble traders can watch for potential support near the 50-dma.

The April $105 calls were trading with a bid near $3.05 and the May $110s had a bid near $2.75 when CAT hit our stop loss.

- Suggested Positions -

April $105 calls (CAT1116D105) Entry @ $3.40, Exit $3.05 (-10.2%)

- or -

May $110 calls (CAT1121E110) Entry @ $3.15, Exit $2.75 (-12.6%)

04/12/11 Stopped out @ 107.40, Options @ -10.2% and -12.6%
04/04/11 New stop loss @ 107.40.
04/02/11 New stop loss @ 104.75, Consider an early exit now
03/26/11 New stop loss @ 103.75
03/25/11 1st Target Hit @ 109.00, Options @ +58.8%, +37.7%

chart:

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


CSX Corp. - CSX - close: 75.37 change: -0.84

Stop Loss: 74.90
Target(s): 79.90, 83.75
Current Option Gain/Loss: -98.1%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
04/12 update: The DJUSRR railroad index managed a bounce today but that wasn't enough to save CSX. Shares were downgraded this morning and CSX reacted with a gap open lower at $74.76. Our stop loss to exit was $74.90 so the play was closed immediately. Our new position in the May $80 calls should never have opened this morning with CSX's gap down under our stop loss.

Our plan was to keep our position size small to limit our risk.

- Small Bullish Positions -

April $80 calls (CSX1116D80) Entry @ $1.06, Exit $0.02 (-98.1%)

May $80 calls (CSX1121E80) - aborted before entry on CSX's gap down.

04/12 Stopped out/gap down. April call @ -98%
04/11 Entry point to buy calls near $76.00.
04/11 New stop loss @ 74.90
04/05 New stop loss @ 74.45
03/28 1st Target Hit @ 79.90, Option @ $1.90 (+79.2%)

chart:

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


Jones Lang Lasalle Inc. - JLL - close: 102.76 change: -0.40

Stop Loss: 97.90
Target(s): 102.50, 109.00
Current Option Gain/Loss: +29.4%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
04/12 update: I am suggesting an early exit in JLL. Yesterday I wrote that we may want to exit on any bounce back into the $104.50-105.00 zone. Well JLL rallied to $104.80 today thanks to an analyst upgrade this morning. While it looks like JLL wants to breakout from this sideways consolidation I am suggesting we go ahead and exit now since we are holding April calls (current bid $4.40). More aggressive traders may want to risk it and hold on for a couple of more days but these options will expire after Friday.

Prior Comments:
We wanted to keep our position size small to limit our risk.

- Suggested Positions - (Small Positions)

April $100 calls (JLL1116D100) Entry @ $3.40, Exit $4.40 (+29.4%)

04/12 Exit Early. JLL @ 104.25. Option +29.4%
04/02 New stop loss @ 97.90
04/01 1st Target hit @ 102.50, Option @ +2.9%
03/30 new stop loss @ 96.40
03/24 New stop loss @ 95.40
03/17 Exited March calls @ open, Estimated exit @ 0.10 (-94.2%)
03/10 New stop loss @ 93.85

chart:

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


Noble Corp. - NE - close: 43.23 change: -1.98

Stop Loss: 43.95
Target(s): 49.75, 53.50
Current Option Gain/Loss: -53.9%, and -70.8%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
04/12 update: Oil and energy stocks were hammered lower today with the energy sector as the market's worst performer on Tuesday. NE gapped open lower at $44.56 and quickly plunged through the $44.00 level, hitting our stop loss at $43.95. Shares eventually dipped toward their 50-dma near $43.

- Suggested Positions -

May $46.00 calls (NE1121E46) Entry @ $2.17, Exit $1.00 (-53.9%)

- or -

May $48.00 calls (NE1121E48) Entry @ $1.37, Exit $0.40 (-70.8%)

04/12 Stopped out @ 43.95, Options @ -53.9% & -70.8%

chart:

Entry on March 31st at $46.25
Earnings Date 04/20/11 (confirmed)
Average Daily Volume = 4.5 million
Listed on March 30th, 2011