Option Investor
Newsletter

Daily Newsletter, Monday, 4/18/2011

Table of Contents

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

Market Wrap

AAA May Be Slipping Away

by Todd Shriber

Click here to email Todd Shriber
The major U.S. indexes closed well of their lows of the day, but that does not cover losses of more than 1% for the S&P 500, Dow Jones Industrial Average and the Nasdaq following Standard & Poor's slapping a ''negative'' outlook on the AAA rating on U.S.-issued debt. The Russell 2000 was the worst performer among the major indexes, plunging 1.6%.

Stats Table

For those of you that enjoy reading about the odds of an event occurring, the odds are one-in-three that S&P cuts Uncle Sam's AAA rating due to ballooning budget deficits and debt within the next two years, according to Bloomberg News.

''Because the U.S. has, relative to its 'AAA' peers, what we consider to be very large budget deficits and rising government indebtedness and the path to addressing these is not clear to us, we have revised our outlook on the long-term rating,'' S&P said in a statement.

One analyst pointed out, and I tend to agree with this summation, that S&P may be trying to get ahead of the crowd with the ''negative'' outlook on U.S. debt because ratings agencies have been notoriously behind the 8 ball for far too long. Just look at the situation with the PIGS in Europe. S&P, Moody's and others were so far behind that curve that by the time they got around to cutting outlooks and ratings on sovereign debt issued by the likes of Greece and Portugal, spreads had already blown out and equity markets had already reacted.

Perhaps the silver lining in S&P's move to ''negative'' is that it is just one more catalyst to bring the budget debate front and center, making it a Main Street issue, which it is, not just a Capitol Hill/Wall Street issue. I will not get into politics, but I will point out that every year for the past 42, Congress has spent more than the revenue its takes in. Take a look at the chart below to get a sense for where some of the money goes.

Congressional Spending Chart

As you can now tell, it was a grizzly day for stocks, a fact highlighted by declines in 29 of the Dow's 30 members. Only Boeing (BA) traded higher and that is probably because of a ''Barron's bounce'' following the aerospace giant's appearance on the cover of the most recent issue of the financial magazine.

Financials were particularly ugly with Bank of America (BAC) and JPMorgan Chase (JPM) shedding 3% and 2%, respectively. Given those performances, it is almost a wonder that Citigroup (C), the third-largest U.S. bank by assets finished flat on the day after reporting that its first-quarter profit dipped 32% to $3 billion, or 10 cents per share, from $4.4 billion, or 15 cents a share, a year earlier as revenue tumbled 22% to $19.7 billion. Citi said its investment banking revenue fell 25% during the quarter.

As the previous reports from BofA and JPMorgan showed us, it is hard to find good cheer in this earnings season when it comes to bank stocks, but Citi CEO Vikram Pandit did make some slightly encouraging comments on today's conference call. Pandit said the bank wants ''to get to some sort of normalized dividend policy'' and ''With the stock trading below book value, it becomes awfully interesting to think about share repurchases as well.''

Citi has pledged to pay a dividend of a penny a share starting this quarter and the company will execute a 1-for-10 reverse split early next month to lower its enormous shares outstanding count. Only time will tell if those gambits result in meaningful returns for Citi shareholders.

Citigroup Chart

Also bucking the downward trend today was Halliburton (HAL), the world's second-largest oilfield services provider, which said its first-quarter earnings more than doubled to $511 million or 56 cents per share, compared with $206 million, or 23 cents per share, a year earlier as revenue climbed 40% to a record $5.28 billion. That is not a first-quarter revenue record for Halliburton; that is an all-time record. On an adjusted basis, Halliburton earned 61 cents a share. Analysts were expecting a profit of 58 cents on revenue of $4.87 billion.

The company said growth in land-based drilling projects is helping it cope with the mess in Libya and the federal government's slow permit approval process for new deepwater projects in the Gulf of Mexico. Halliburton President and CEO Dave Lesar was bullish in his outlook for the oil services group in 2011 and even said he is optimistic about Libya.

We will have plenty of news on oil services earnings this week at OilSlick.com, but I will just briefly say this is a critical week of earnings for the Oil Services HOLDRs (OIH), which has been under some pressure lately. Counting Halliburton, roughly 38% of the ETF's weight reports earnings this week. For more energy news and commentary, register for the free OilSlick daily newsletter (HERE).

Halliburton Chart

Check out the chart of the Semiconductor HOLDRs (SMH), which is looking less-than-impressive with big earnings reports ahead this week.

Semiconductors HOLDRs Chart

There is a very good chance that the chart will look a little worse tomorrow following a disappointing first-quarter earnings report from Texas Instruments (TXN), the largest analog chip maker, today after the close. The company said it earned 55 cents a share on revenue of $3.39 billion, but analysts were expecting a profit of 58 cents on revenue of $3.4 billion.

The revenue number was at the lower end of the $3.34 billion-$3.48 billion TI forecast last month and the profit number missed the 56-60 cents a share the company was expecting. A charge of two cents a share was taken related to costs in Japan and this could be just the beginning of plenty of U.S. tech giants reporting slack results because of the tragedy in Japan.

For the second quarter, TI expects revenue of $3.41 billion to $3.69 billion and a profit of 52-60 cents. Analysts were expecting a profit of 62 cents on sales of $3.52 billion. That guidance includes Japan-related costs of a nickel a share. Investors are none too pleased as TI's shares are down 3% in the after-hours session as of this writing.

Intel (INTC), the world's largest semiconductor maker, reports its first-quarter numbers after the bell tomorrow and a disappointment there could send the Nasdaq and SMH careening lower. TI and Intel combine for more than 39% of SMH's weight.

Looking at the charts, the S&P 500 spent a good portion of the day below 1300 before a late-day rally lifted the index above that level, but there are problems here, not the least of which is that with 1300 having been violated on an intraday basis, that may give short-sellers more gumption going forward.

Below 1300, support looks to be 1285 while a move below 1275 could mean a retest of the March low around 1257. Headline risk is abundant this week and I am just talking about earnings. I will merely point out what looms on the earnings front tomorrow. High-beta names such as BTU and CSX step into the earnings confessional along with GS and Intel and several others. Thus far, earnings season has done the bulls no favors.

S&P 500 Chart

The Dow looks like it could be in trouble as Monday's action took the blue-chip index to a close below its 50-day moving average. Old support at 12,200 could turn to new resistance and that resistance could prove hard to break without the benefit of some strong earnings reports. Before the bell, JNJ announces, but this is a company littered with recall issues, so I would not expect much help there. INTC and IBM chime in after the close and those are the marquee Dow earnings for Tuesday. If the Dow cannot muster some upside from here, next support is 12,000.

Dow Chart

The Nasdaq might be in the worst shape of the major indexes at this juncture. Monday's close took the index well below its 50-day line and if the 2735 area is supposed to be support, that is where the Nasdaq came to rest when all was said and done on Monday.

AAPL and RIMM were both ended higher today, the latter because of a bullish piece in Barron's, but AMZN, GOOG and PCLN were all lower. If Intel and Apple do not step up big-time, 2700 could make an appearance this week.

Nasdaq Chart

Things were looking good for the Russell 2000 with the move above 830 on Friday, but that was all for naught as the index faltered today, closing just one point above its 50-day line. A move below 820 puts the lower end of the 800-810 range in play.

Russell 2000 Chart

I hate sounding alarm bells, but I view the next week as an important, to put it delicately, for stocks. There is no getting around that the fundamentals for most companies, particularly excluding financials, are quite strong. One can even make the argument that big tech names such as Google and RIM have been unjustly punished by one-off events in their recent reports. (I am referring to RIM's PlayBook spending and Google's hiring spree).

So maybe the market is just selling off in advance of the April 27 Federal Reserve press event. The problem is if Chairman Bernanke does not tell the bulls what they want to hear, the ''sell in May and go away'' crowd will have all the excuses they need to run the market even lower.


New Option Plays

Bounce Back Toward Resistance

by James Brown

Click here to email James Brown


NEW DIRECTIONAL PUT PLAYS

S&P 100 Index - OEX - close: 582.50 change: -6.06

Stop Loss: 592.55
Target(s): 578.00, 565.00
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see Trigger

Company Description
The S&P 100 index is a capitalization-weighted index that represents 100 of the largest stocks traded in the U.S. markets.

Why We Like It:
The OI newsletter is heavily weighted toward bullish trades at the moment. In an attempt to even things out I'm adding a put play tonight. Big picture I am surprised that the market sell-off wasn't worse on Monday following the headlines about the S&P putting the U.S. long-term debt on creditwatch negative. I suspect that stocks will see a bounce tomorrow. Yet reaction to earnings news has not been very positive and the path of least resistance might be moving from up to down. It looks like the S&P 500 and the OEX are forming a bearish double top pattern.

I am suggesting we buy puts on the OEX when the index hits 587.50. As an alternative readers could wait for another failed rally near 590 instead. If triggered at 587.50 we'll use a stop loss at 592.55. More conservative traders could use a stop closer to 591 or 590.50ish. Our targets are $578 and $565. I would keep our position size small. Trading OEX options can be volatile.

FYI: As an alternative, you could trade puts on the SPY (S&P 500 ETF) for a lot less money.

Trigger @ 587.50

- Suggested Positions -

Buy the May $570 PUT (OEX1121Q570) current ask $7.20

Annotated Chart:

Entry on April xxth at $ xx.xx
Earnings Date --/--/--
Average Daily Volume =
Listed on April 18th, 2011


In Play Updates and Reviews

It Could Have Been Worse!

by James Brown

Click here to email James Brown

Editor's Note:

News that Standard & Poor's had put U.S. long-term debt on creditwatch negative was completely unexpected. Stocks were already looking weak due to headlines in Europe regarding possible debt defaults from Greece or Portugal. The headline from S&P only exacerbated the weakness. Overall the situation could have been a lot worse. The S&P 500 recovered off its lows to close above the 1300 level. Traders should stay on the defensive!

-James

Current Portfolio:


CALL Play Updates

Church & Dwight Co. Inc. - CHD - close: 79.60 change: -1.26

Stop Loss: 79.45
Target(s): 84.75, 89.00
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see Trigger

Comments:
04/18 update: The market's widespread weakness on Monday sent CHD sliding toward the bottom of its trading range. We are looking for a breakout to new highs.

I do consider an aggressive trade because CHD doesn't have a lot of option volume and the spreads on its options are relatively wide. Keep your position size small to limit your risk.

I am suggesting a trigger to buy calls at $81.35. If triggered we'll use a stop loss at $79.45.

Trigger @ $81.35 (Small Positions Only!)

- Suggested Positions -

Buy the May $85 call (CHD1121E85) current ask $0.35

Entry on April xxth at $ xx.xx
Earnings Date 05/10/11 (unconfirmed)
Average Daily Volume = 390 thousand
Listed on April 16th, 2011


CH Robinson Worldwide Inc. - CHRW - close: 75.88 change: -0.76

Stop Loss: 73.25
Target(s): 79.50
Current Option Gain/Loss: +11.1%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
04/18 update: CHRW actually held up pretty well on Monday. A decline in oil prices may have helped with that. Traders were buying the dip most of the day near $75.00 and the afternoon bounce looks like a new bullish entry point.

Keep in mind our time frame. CHRW is due to report earnings on April 26th and we do not want to hold over the announcement. I would keep your position size small to limit your risk.

- Suggested Positions -

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

04/16 new stop loss @ 73.25
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: 62.62 change: -0.69

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:
04/18 update: FO saw a dip toward short-term support near $621 this morning. aggressive traders may want to consider buying dips here with a tight stop loss. The newsletter is still waiting for a breakout higher. Currently our plan is to buy calls when FO hits $64.00. Now that we know earnings are in early May it gives us about three weeks for this trade to work.

If triggered at $64.00 our targets are $67.50 and $69.75. I would keep our position size small to limit our risk.

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

Trigger @ $64.00 (Small Positions)

- Suggested Positions -

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

Entry on April xxth at $ xx.xx
Earnings Date 05/05/11 (confirmed)
Average Daily Volume = 973 thousand
Listed on April 5th, 2011


Fossil Inc. - FOSL - close: 91.84 change: -2.64

Stop Loss: 91.95
Target(s): 99.75, 104.75
Current Option Gain/Loss: Unopened
Time Frame: 4 to 8 weeks
New Positions: Yes, see trigger

Comments:
04/18 update: The drop in FOSL might be interpreted as a breakdown from the recent trading range but traders did buy the dip near $90.00 a couple of times. Currently our plan is to buy calls at $95.60. However, we may want to consider buying a dip near the $85.00 level, which should be support that will soon be underpinned by the 50-dma.

Keep positions small. If triggered our first target is $99.75. The $100.00 mark is probably round-number, psychological resistance. We'll set a secondary target at $104.75 but that might be wishful thinking.

Trigger @ 95.60 (small positions only)

- Suggested Positions -

Buy the May $100 call (FOSL1121E100) current ask $2.65

- or -

Buy the June $100 call (FOSL1118F100) current ask $3.70

Entry on April xxth at $ xx.xx
Earnings Date 05/10/11 (unconfirmed)
Average Daily Volume = 858 thousand
Listed on April 13th, 2011


SPDR Gold ETF - GLD - close: 145.93 change: +0.88

Stop Loss: 137.00
Target(s): 149.50, 154.50
Current Option Gain/Loss: +61.4%, and +54.1%
2nd Option Position Gain/loss: +100.6% and +84.5%
Time Frame: 6 to 12 weeks
New Positions: see below

Comments:
04/18 update: Gold and silver continued to climb in spite of a bounce in the U.S. dollar today. Gold prices hit a new all-time high of $1,498.60 an ounce on an intraday basis. The GLD is hovering under the $146.00 level. I am not suggesting new positions at this time. We'll wait to evaluate the next dip.

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 -

Long the May $145 call (GLD1121E145) Entry @ $1.48

- or -

Long the June $150 call (GLD1118F150) Entry @ $1.10

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


Intuit - INTU - close: 54.15 change: -0.31

Stop Loss: 53.45
Target(s): 57.50, 59.75
Current Option Gain/Loss: Unopened
Time Frame: 4 to 6 weeks
New Positions: Yes, see trigger

Comments:
04/18 update: INTU held up pretty well today with a -0.5% decline. Shares recouped most of their morning losses. There is no change from my prior comments. INTU has resistance in the $54.00-55.00 zone. Our plan is to buy calls when shares hit $55.25.

If triggered we'll use a stop at $53.45. I would keep our position size small to limit our risk (1/2 or less than your normal trade size).

Trigger @ 55.25

- Suggested Positions -

Buy the May $55.00 call (INTU1121E55) current ask $1.75

Entry on April xxth at $ xx.xx
Earnings Date 05/19/11 (unconfirmed)
Average Daily Volume = 2.4 million
Listed on April 14th, 2011


Norfolk Southern - NSC - close: 66.90 change: -0.84

Stop Loss: 65.90
Target(s): 72.00, 74.90
Current Option Gain/Loss: -57.1%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
04/18 update: Shares of NSC were upgraded to a "buy" this morning but that didn't stop shares from following the market lower. Fortunately, traders bought the dip near last week's low. Aggressive traders may want to consider new positions here. I would prefer to see a new rally past $68.50 before launching new positions.

Don't forget that earnings are April 27th and we do not want to hold over the announcement. Our targets are $72.00 and $74.90.

- Suggested Positions -

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

04/16 New stop loss @ 65.90
04/16 April $70 calls have expired (-100%)
04/09 New stop loss @ 65.70

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


Panera Bread Co. - PNRA - close: 121.93 change: -2.72

Stop Loss: 119.00
Target(s): 129.50, 134.50
Current Option Gain/Loss: -41.7%
Time Frame: 3 to 5 weeks
New Positions: see below

Comments:
04/18 update: The market's sharp move lower this morning pushed PNRA toward the $120.50 level. Shares did not see much of a rebound. We can buy this dip since shares held support above $120 but readers might want to tighten their stops closer to the $120.00 mark. Bear in mind that we will plan to exit ahead of the April 26th earnings report. Our final target for the May calls is $134.50.

- Suggested Positions -

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

04/16 April calls have expired @ -100%
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: 102.90 change: -0.25

Stop Loss: 98.90
Target(s): 104.75, 109.00
Current Option Gain/Loss: + 5.1%, and - 7.1%
2nd Position Gain/Loss: +24.2%
Time Frame: 4 to 5 weeks
New Positions: see below

Comments:
04/18 update: Considering the widespread losses in the market I would consider PX's 25-cent loss a show of strength. Traders bought the dip at $101.60. I would not launch new bullish positions at this time.

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 April 27th 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 -

Long the May $100 call (PX1121E100) Entry @ $3.30

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 (confirmed)
Average Daily Volume = 1.4 million
Listed on March 29th, 2011


Rockwell Automation - ROK - close: 91.16 change: -1.89

Stop Loss: 90.45
Target(s): 99.50
Current Option Gain/Loss: Unopened
Time Frame: six trading days
New Positions: Yes, see Trigger

Comments:
04/18 update: ROK sold off this morning but shares held support near $90.00 and its 40 and 50-dma. Aggressive traders may want to consider buying calls right now with a tight stop close to $90.00. The newsletter will stick to our original plan. I'm suggesting we buy calls with a trigger at $93.75. If triggered our exit target is $99.50. More conservative traders could exit around $97.50 instead since the current high is just under $98.00.

Trigger @ $93.75 (Small Positions)

- Suggested Positions -

Buy the May $95 calls (ROK1121E95) current ask $2.50

Entry on April xxth at $ xx.xx
Earnings Date 04/27/11 (confirmed)
Average Daily Volume = 1.1 million
Listed on April 16th, 2011


Sohu.com - SOHU - close: 96.07 change: +0.69

Stop Loss: 89.75
Target(s): 99.90, 107.50
Current Option Gain/Loss: - 1.1%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
04/18 update: SOHU managed a gain today but shares are still lagging their peers in the Chinese Internet space. The stock did rebound off the bottom of its trading range near the $91.50 area. We do not want to hold positions over the April 25th earnings report.

Our first target to take profits is at $99.90.

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.

- Suggested Positions -

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

04/13 New stop loss @ 89.75
04/11 Adjusted first exit target to $99.90

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


Stericycle Inc. - SRCL - close: 90.44 change: -1.49

Stop Loss: 87.75
Target(s): 93.50, 98.50
Current Option Gain/Loss: +20.0%
Time Frame: 4 to 5 weeks
New Positions: see below

Comments:
04/18 update: The market sell-off this morning pull SRCL back down toward its recent lows in the $89.00-90.00 area. The fact that SRCL did not break down harder is a positive sign. We plan to exit ahead of the April 27th earnings report. Our targets are $93.50 and $98.50.

- Suggested Positions -

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

04/16 new stop loss @ 87.75
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: 46.99 change: -1.03

Stop Loss: 45.95
Target(s): 51.85, 58.50
Current Option Gain/Loss: -26.0%
Time Frame: about 2, maybe 3 weeks
New Positions: see below

Comments:
04/18 update: VRTX fell toward support near $46.00 before trimming its losses. If there is any follow through lower tomorrow we will likely see VRTX hit our stop loss. Readers can still choose to buy this intraday bounce or wait for a rally past $49.00.

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: 63.35 change: -1.36

Stop Loss: 61.70
Target(s): 64.75, 69.00
Current Option Gain/Loss: - 2.2%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
04/18 update: WFMI slipped to its rising 30-dma this morning. Readers can use this dip as a new entry point or wait for another bounce from $62.00. We do not want to hold positions over the early May earnings report.

- Suggested Positions -

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

04/16/11 April calls have expired @ -100%
04/13/11 New stop loss @ 61.70
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 05/04/11 (confirmed)
Average Daily Volume = 1.9 million
Listed on March 19th, 2010


Whiting Petroleum Corp - WLL - close: 69.73 change: -0.88

Stop Loss: 64.45
Target(s): 69.75, 74.00
Current Option Gain/Loss: Unopened
Time Frame: 2 to 3 weeks maybe
New Positions: Yes, see trigger

Comments:
04/18 update: Oil prices stumbled lower on Monday. Meanwhile the OIX oil index lost -1.9% but the OSX oil services only fell -0.8%. Normally the services stocks are more volatile. Aggressive traders may want to buy dips near $68.00 or the 50-dma. Our plan is to buy calls on a dip at $66.00. 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


PUT Play Updates

Apollo Group Inc. - APOL - close: 40.04 change: -0.06

Stop Loss: 44.25
Target(s): 38.15, 35.50
Current Option Gain/Loss: +11.2%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
04/18 update: Hmm... we may need to rethink our APOL trade. Shares failed to move much on Monday. Why did shares fail to drop with the rest of the market? The overall trend remains bearish but I'm less enthusiastic about initiating new positions. More conservative traders may want to use a stop closer to $43.50 instead. Our profit targets are $38.15 and $35.50.
The Point & Figure chart for APOL is bullish with a $31 target.

- Suggested Positions -

Long the May $40.00 puts (APOL1121Q40) Entry @ $1.24

Entry on April 13th at $41.21
Earnings Date 06/30/11 (unconfirmed)
Average Daily Volume = 2.3 million
Listed on April 12th, 2011


CLOSED BULLISH PLAYS

Wellpoint Inc. - WLP - close: 68.06 change: -1.35

Stop Loss: 67.45
Target(s): 72.25, 74.75
Current Option Gain/Loss: -65.7%
Time Frame: 3 to 5 weeks
New Positions: see below

Comments:
04/18 update: Healthcare stocks were not very defensive today. Quite the opposite. The HMO healthcare index fell -3.0%. Shares of WLP gave up -1.9% but slipped to $67.34 intraday. Our stop loss was hit at $67.45.

- Suggested Positions -

May $70 call (WLP1121E70) Entry @ $2.80, Exit @ 0.96 (-65.7%)

04/18 Stopped out @ 67.45, Option @ -65.7%
04/16 April calls have expired @ -100%
04/09 New stop loss @ 67.45
04/02 new stop loss @ 66.75

chart:

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