Option Investor
Newsletter

Daily Newsletter, Thursday, 12/22/2011

Table of Contents

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

Market Wrap

Economics Continue to Improve

by Jim Brown

Click here to email Jim Brown
Economic improvement is pushing the market higher on hopes the U.S. recovery is finally beginning to accelerate.

Market Statistics

Thursday saw a flurry of mixed economic reports but investors and traders seemed to focus on those with a positive spin. The weekly jobless claims declined to 264,000 and the lowest level since June 2008. While I would be thrilled if these numbers were accurate and represented a new trend I continue to believe this is a seasonal disruption. Anyone who was just laid off and has a final paycheck in their pocket is not likely to file for unemployment until after the holidays. I suspect we will see a strong pickup in claims in the first two weeks in January.

If by some quirk of fate the claims did not spike up in January this would be very bullish for market sentiment. If employers are cutting the number of layoffs then the next step would be to add new workers. Some analysts have already started raising their estimates for the nonfarm payrolls to a gain of 250,000 jobs. I suspect they will see a negative surprise. December is not normally a big hiring month.

Jobless Claims Chart

University of Michigan Consumer Sentiment rose to 69.9 for the final reading for December. That was up from 67.7 in the initial release. This is a significant gain from the 64.1 in November.

The expectations component carried all the weight with a jump from 55.4 to 63.6. The current conditions component was only slightly higher at 79.6, up from 77.6. Sentiment rose more strongly in the second half of the month and again suggesting the recovery is accelerating. However, I view this as a seasonal disruption. Sentiment normally improves ahead of the holidays and then declines in January when the bills come due.

If the sentiment continues to improve and begins to move over the 75 level I think it would be contagious for the market. A move over 77.5 would be a new post recession high.

Consumer Sentiment Chart

Mass layoffs declined slightly to 1,331 from 1,353 but the number of workers impacted rose to 129,887 from 118,689. This was for the November period. December is a big month for layoffs as more than 100,000 seasonal workers are terminated. I expect this number to increase over the next two months.

The final GDP revision for Q3 declined to +1.81% growth from +2.0%. The decline came from a lower estimate of consumer spending and a higher revision to inventory accumulation. The economy grew by +1.3% in Q2 and +0.36% in Q1. The market ignored this report because recent GDP estimates for Q4 have been rising sharply.

A month ago the consensus was for something in the 2.5% to 3.0% range. That rose to 3.25% a couple weeks ago and now we are starting to hear estimates as high as 4.0%.

I think we are being setup for failure again with the rapid escalation of estimates. They are using the sudden increase in consumer spending, strong pace of auto sales, which could be at the high of the year for December and the declining jobless claims as justification. I am not holding my breath and I will be thrilled with any number starting with a +3.n

GDP Chart

On the flip side the Chicago Fed National Activity Index (CFNAI) for November fell to a three month low at -0.37 from -0.13 in October. Estimates had been for a minor gain. The CFNAI was hurt by a big drop in industrial production in November. This was due in part to a slowdown in components from Thailand that weighed on electronics and auto production. This report was ignored because the Thailand flood was a onetime event and not a reason for concern in future quarters.

The Conference Board Leading Indicators rose by +0.5% for November. Even though this was lower than the +0.9% in October they continue to show expansion and a declining chance of another recession. Estimates were for a gain of +0.3%. Seven of the ten components posted gains. This report was also ignored although it got a positive mention in several headlines.

The calendar for tomorrow has four reports but there will be nobody around to care. New home sales will probably be the only headline worth noting and the headline number is expected to rise to 316,000 from 307,000.

Economic Calendar

Thursday was almost as bad for traders as Friday will be. Volume was only 5.8 billion shares and Friday will likely be under five billion shares. The stock news was almost nonexistent but there were a few winners and sinners.

Micron (MU) rallied +16% despite missing earnings and revenue estimates. Micron posted a loss of 19-cents compared to estimates of 9-cents. Revenue was $2.09 billion compared to estimates of $2.12 billion. Gross margins held at 15% thanks to improvements in NAND Flash margins, which were offset by declines in DRAM margins. The company said the flooding in Thailand had cut demand for basic chips as much as 15%.

Micron shares rallied after analysts raised their ratings on the company saying the worst was behind them and chip prices would likely firm from here. Wedbush Morgan upgraded Micron from neutral to outperform and Raymond James reiterated a strong buy. Both analysts said the product mix was shifting to the higher margin chips and demand should increase in 2012 as the flood impact dissipated.

Micron Chart

Bed Bath and Beyond (BBBY) reported better than expected earnings but revenues disappointed. Earnings were 95-cents and beat estimates of 88-cents. Revenue rose +6.8% to $2.34 billion but that was less than the $2.359 billion estimate. One negative was a decline in same store sales growth to +4.1% from +7.0% in the year ago quarter. Management guided to sales growth of only 2% to 4% in the current quarter. The cautious guidance and lower sale growth caused traders to toss BBBY into the dirty linen hamper. Shares declined -6%.

BBBY Chart

Akamai Technology (AKAM) rallied +19% on news it was acquiring privately held Contendo, a company that specializes in software and services that improve content delivery on the web and on mobile devices. The company is a small 100-person firm with most employees working in Israel. Analysts were very positive on the acquisition saying Contendo's applications were a perfect fit for Akamai. They must have really liked it because you almost never see a major spike in the acquiring company.

Akamai Chart

The NYSE Euronext (NYX) rose slightly after the Justice Dept approved the company's merger with the Deutsche Boerse contingent on a sale of some assets. NYX must sell ISE's minority stake in Direct Edge Holdings. They have two years to complete the sale.

The Dow has now closed positive for three consecutive days. The positive economics, lack of any negative news from Europe and the normal holiday sentiment has pushed the indexes back to their early December highs.

It would be very hard to make anything out of today's move given the lack of volume. This is the normal pre holiday melt up because the major funds and institutions are not in the market. They can't trigger buy/sell programs in a market this thin without inducing severe volatility.

This minor rally ahead of the holidays is normal. A week ago I was very skeptical it would happen and I am definitely not complaining. The indexes have closed with resistance and a major news headline could push us over and cause further short covering and price chasing into year end.

The market for Friday is an afterthought. The only way we could produce less volume is if they closed it. You can't draw any meaningful conclusions about market direction from today's action or Friday's. I am not going to spend a lot of effort diagramming the charts because other than the overhead resistance they don't matter for Friday.

The S&P rallied +10 points to close at 1,254 and just under strong resistance at 1,255, the 200-day at 1,259 and prior resistance at 1,265. Without a major news event I can't imagine breaking through those levels on Friday. However, news the House was going to approve the two month extension of the payroll tax cut did spike the S&P futures by +7 points late Thursday evening.

S&P Chart

The Dow came to a stop just under strong resistance at 12,200. Should a big news headline power the Dow over that level we could see new short covering and a possible breakout to a new five month high. That would be a great way to finish the year but a breakout could produce enough market buzz going into yearend we could conceivably push over the high close for the year at 12,810. That would be an amazing feat to close at the high for the year after months of extreme volatility.

I am not predicting it but we are close enough that the possibility exists.

Dow Chart

The Nasdaq is the fly in our year end soup. The Nasdaq is stuck at resistance at 2,600 with the 200-day at 2,661 and well under the highs for the year. The Nasdaq can move fast when techs are on fire but I would be very surprised to see a major move over 2,700.

The Nasdaq would have to pull an Akamai like move of better than +10% over the next six days to equal the high for the year at 2,872. It is technically possible but like the possibility of a permanent solution in Europe the odds are slim.

Nasdaq Chart

Russell 2000 Chart

The wild card for Friday and for next week is the Dow Transports. They are very close to a breakout and a new five month high. A breakout here would energize the Dow and S&P and could be the spark we are looking for to create a yearend rally.

Dow Transports Chart

If you have to buy something on Friday make sure it is in the mall and not the market. My only qualification to that would be to buy calls on the Dow Transport ETF, the IYT.

Dow Transports ETF Chart (IYT)

Friday will be extremely low volume and almost assuredly extremely headline driven. However, with the majority of the world in the mall and not the market it may take a dramatic headline to create any movement. The qualification to that is of course the low volume. Any material headline would be capable of generating a sizeable market move. Rarely do these happen on the last trading day before Christmas but it is always possible.

The futures are up +7 on the agreement between the Democrats and Republicans to accept the two month extension on the tax cuts with some added language to force a conference committee on extending it for the rest of 2012 in January. In a truly show of political avoidance the vote on extending the cut for two months will not be recorded. That way nobody will know who voted for it. Only in Washington!

 

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Jim Brown

Send Jim an email


New Option Plays

Positioned to Move!

by James Brown

Click here to email James Brown


NEW DIRECTIONAL CALL PLAYS

Trimble Navigation Ltd. - TRMB - close: 44.72 change: +0.72

Stop Loss: 42.70
Target(s): 49.50
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
TRMB is in the global positioning industry focused on government and commercial users. The stock has been consolidating sideways under resistance near $45.00 the last couple of weeks. Now it's on the verge of a bullish breakout.

I am suggesting a trigger to buy calls at $45.25 with a stop loss at $42.70. Our target is $49.50. FYI: The Point & Figure chart for TRMB is bullish with a $63 target.

Trigger @ 45.25

- Suggested Positions -

buy the Jan $45 call (TRMB1221A45) ask $1.50

Annotated Chart:

Entry on December xx at $ xx.xx
Earnings Date 02/02/12 (unconfirmed)
Average Daily Volume = 544 thousand
Listed on December 22, 2011


iShares Transportation - IYT - close: 89.69 change: +0.40

Stop Loss: 87.45
Target(s): 94.75 or 98.50
Current Option Gain/Loss: Unopened
Time Frame: 3 to 6 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
The transportation sector has been showing some relative strength. The index and the IYT ETF is poised for a breakout past resistance near $90.00 and its simple 200-dma.

I am suggesting a trigger to buy calls at $90.75 with a stop loss at $87.45. I have listed individual targets depending on which month you choose to play.

Trigger @ 90.75

- Suggested Positions -

buy the Jan $95 call (IYT1221A95) ask $0.50
target 94.75

- or -

buy the Feb $95 call (IYT1218B95) ask $1.40
target 98.50

Annotated Chart:

Entry on December xx at $ xx.xx
Earnings Date --/--/--
Average Daily Volume = 582 thousand
Listed on December 22, 2011



In Play Updates and Reviews

Three-Day Bounce Hits Stops

by James Brown

Click here to email James Brown

Editor's Note:

The market's three-day oversold bounce is hitting some stops on our bearish trades.

On a more positive note SAM hit our exit target. We also had JPM, TJX and WAT all get triggered.

-James

Current Portfolio:


CALL Play Updates

The Andersons, Inc. - ANDE - close: 44.89 change: +0.18

Stop Loss: 42.45
Target(s): 49.75
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Comments:
12/22 update: ANDE spent the session consolidating sideways in a very narrow range near resistance at $45.00. The high today was $45.13. There is no change from my prior comments.

I am suggesting we open small bullish positions with a trigger at $45.25 and a stop at $42.45. If triggered our target is $49.75. FYI: The Point & Figure chart for ANDE is bullish with a $74 target.

Trigger @ 45.25 (small positions)

- Suggested Positions -

buy the Jan $45 call (ANDE1221A45)
(readers might want to consider buying February calls instead)

Entry on December xx at $ xx.xx
Earnings Date 02/01/12 (unconfirmed)
Average Daily Volume = 211 thousand
Listed on December 21, 2011


Boeing Co. - BA - close: 74.29 change: +0.70

Stop Loss: 69.85
Target(s): 77.00
Current Option Gain/Loss: +37.9%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/22 update: BA continues to rally after yesterday's bullish breakout through the top of its trading range. Shares are nearing potential round-number resistance at $75.00. We can look for prior resistance in the $72.50 area to act as new support. We will raise our stop loss to $69.85. More conservative traders may want to raise theirs toward the $71.50 area instead.

Earlier Comments:
There is potential resistance at $75.00 and more conservative traders may want to exit there. I am aiming for $77.00. FYI: The Point & Figure chart for BA is bullish with a $79 target.

- Suggested Positions -

Long 2012Jan $75 call (BA1221A75) entry $1.08

12/22/11 new stop loss @ 69.85
12/13/11 trade opened
12/12/11 adjusted stop loss to $69.25
12/12/11 trade did not open, try again.

Entry on December 13 at $71.67
Earnings Date 02/01/12 (unconfirmed)
Average Daily Volume = 6.2 million
Listed on December 10, 2011


Hi Tech Pharmacal Co. - HITK - close: 38.41 change: -1.15

Stop Loss: 36.70
Target(s): 44.50
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/22 update: Our HITK is still not open. HITK opened higher and reversed but the S&P 500 did not open higher (it was flat). Shares of HITK have been underperforming the market the last two days. That is troubling. However, bigger picture traders have been consistently buying dips near the stock's rising 40 and 50-dma. I am adjusting our entry point to buy a dip near this technical support.

We'll use a new entry point to open small bullish positions at $37.25 and a stop loss at $36.70.

Earlier Comments:
The most recent data listed short interest at more than 13% of the very small 10 million share float. Our target is $44.50. Readers might want to aim higher. The Point & Figure chart for HITK is bullish with a $58 target.

New Trigger, buy the dip: 37.25, stop loss @ 36.70 (small positions)

- Suggested Positions -

buy the 2012Jan $40 call (HITK1221A40)

12/22/11 not open yet. New Trigger @ 37.25, stop 36.70
12/21/11 trade not open yet. (SP500 opened lower) Try again. New stop loss @ 37.90

Entry on December xx at $ xx.xx
Earnings Date 03/12/12 (unconfirmed)
Average Daily Volume = 298 thousand
Listed on December 20, 2011


JPMorgan Chase & Co - JPM - close: 33.45 change: +1.13

Stop Loss: 30.35
Target(s): 37.50
Current Option Gain/Loss: Jan$33c: +46.6% & Feb$35c: +31.1%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/22 update: Banks were showing some relative strength today and JPM was leading the pack with a +3.4% gain. The stock gapped higher at $32.69 and managed to breakout past technical resistance at its 100-dma before the close. Our trigger was hit at $32.75.

Our multi-week target is $37.50.

- Suggested Positions -

Long 2012Jan $33 call (JPM1221A33) entry $1.05

- or -

Long February $35 call (JPM1218B35) entry $0.90

Entry on December 22 at $32.75
Earnings Date 01/13/12 (unconfirmed)
Average Daily Volume = 45.3 million
Listed on December 20, 2011


OpenTable, Inc. - OPEN - close: 41.58 change: -1.16

Stop Loss: 39.45
Target(s): 48.50
Current Option Gain/Loss: - 3.3%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/22 update: OPEN pulled back again. Shares actually underperformed the market with a -2.7% loss. Prior resistance should be support at OPEN's 50-dma. Thus this dip should be a new entry point for bullish positions.

Earlier Comments:
The most recent data listed short interest at 53% of the very small 16.2 million-share float. This can be a volatile stock. Our target is the simple 100-dma but we'll tentatively put our exit target at $48.50. We want to keep our position size small to limit our risk.

(small positions) - Suggested Positions -

Long 2012Jan $45 call (OPEN1221A45) entry $1.50

12/20/11 new stop loss @ 39.40

Entry on December 20 at $41.55
Earnings Date 02/07/12 (unconfirmed)
Average Daily Volume = 1.0 million
Listed on December 17, 2011


Phillip Morris Intl. - PM - close: 77.85 change: -0.33

Stop Loss: 74.90
Target(s): 79.75
Current Option Gain/Loss: +199.1%
Time Frame: 6 to 9 weeks
New Positions: see below

Comments:
12/22 update: PM hit a new high at $78.55 this morning before shares succumbed to some minor profit taking. There is no change from my prior comments. Readers may want to take profits now. The newsletter's exit target is $79.75.

Earlier Comments:
FYI: The Point & Figure chart for PM is bullish with a $95 target.

- Suggested Positions -

Long 2012 Jan $75 call (PM1221A75) Entry $1.12

12/21 new stop loss @ 74.90, readers may want to take profits now (+225%)
12/17 new stop loss @ 74.25
12/05 Call is up +100%, readers may want to exit now!
12/03 new stop loss @ 73.75
11/30 new stop loss @ 71.40
11/23 adjusted stop loss to $69.49
11/22 trade opened. PM opened at $72.11

Entry on November 22 at $72.11
Earnings Date 02/09/12 (unconfirmed)
Average Daily Volume = 7.3 million
Listed on November 19, 2011


TJX Companies - TJX - close: 64.24 change: +0.74

Stop Loss: 61.90
Target(s): 68.00
Current Option Gain/Loss: Jan$65c: - 5.0% & Feb$65c: - 2.8%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/22 update: We didn't have to wait very long for TJX to hit our trigger at $64.10. The stock rallied +1.1% and broke out to new highs past the $64.00 level. I would still consider new positions now.

Earlier Comments:
TJX doesn't move super fast so we'll need some patience. Our target is $68.00. FYI: The Point & Figure chart for TJX is bullish with a $78 target.

- Suggested Positions -

Long 2012Jan $65 call (TJX1221A65) Entry $1.00

- or -

Long Feb $65 call (TJX1218B65) Entry $1.75

Entry on December 22 at $64.10
Earnings Date 02/23/12 (unconfirmed)
Average Daily Volume = 2.7 million
Listed on December 21, 2011


Varian Medical Sys. - VAR - close: 65.59 change: +0.38

Stop Loss: 62.49
Target(s): 69.75
Current Option Gain/Loss: -16.9%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/22 update: VAR pushed to a new relative high but shares struggled with the $66 level this morning. I remain cautiously optimistic here and the close over $65.50 could be used as a new entry point.

- Suggested Positions -

Long JAN $65 call (VAR1221A65) entry $2.65

12/14/11 adjust stop loss to $62.49

Entry on December 13 at $65.25
Earnings Date 01/25/12 (unconfirmed)
Average Daily Volume = 1.1 million
Listed on December 12, 2011


Waters Corp. - WAT - close: 74.52 change: +0.79

Stop Loss: 70.75
Target(s): 79.50
Current Option Gain/Loss: - 8.8%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/22 update: The rally has resumed in shares of WAT and the stock hit an intraday high of $75.02. Our trigger to buy calls was hit at $74.55. I would still consider new positions now.

- Suggested Positions -

Long Jan $75 call (WAT1221A75) entry $2.25

Entry on December 22 at $74.55
Earnings Date 01/24/12 (unconfirmed)
Average Daily Volume = 787 thousand
Listed on December 20, 2011


PUT Play Updates

BMC Software Inc. - BMC - close: 32.99 change: -0.01

Stop Loss: 35.05
Target(s): 30.05
Current Option Gain/Loss: -19.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/22 update: BMC spent the session hovering near the $33.00 level and closed virtually unchanged on the day. Yet the bid on our January puts lost 5 cents. Readers may want to wait for a new relative low, under $32.70, before initiating new positions.

- Suggested Positions -

Long 2012Jan $32.50 PUT (BMC1221M32.5) entry $1.05

12/21/11 trigger hit at $32.75

Entry on December 21 at $32.75
Earnings Date 02/01/12 (unconfirmed)
Average Daily Volume = 1.7 million
Listed on December 14, 2011


Thermo Fisher Scientific - TMO - close: 45.61 change: +0.95

Stop Loss: 46.15
Target(s): 42.75
Current Option Gain/Loss: Dec$45p: +111.1% & Jan$45P: -35.7%
Time Frame: 2 to 4 weeks
New Positions: see below

Comments:
12/22 update: TMO outperformed the market today with a +2.1% gain. The stock's close over $45.00 is arguably short-term bullish yet TMO has not yet broken the bearish trend of lower highs. Readers may want to exit early anyway. I am not suggesting new positions at this time.

- Suggested Positions -

(December position closed 12/15/11)
DEC $45 put (TMO1117X45) Entry $0.45 exit $0.95 (+111.1%)

- or -

Long JAN $45 put (TMO1221M45) Entry $1.40

12/22/11 readers may want to exit early
12/15/11 planned exit for Dec. $45 put. bid @ 0.95 (+111.1%)
12/14/11 Prepare to exit Dec. $45 puts at the open tomorrow, current bid on these puts is $1.20 (+166.6%)
12/14/11 new stop loss @ 46.15
12/05/11 TMO gapped open higher at $47.10

Entry on December 05 at $47.10
Earnings Date 02/01/12 (unconfirmed)
Average Daily Volume = 3.5 million
Listed on December 03, 2011


Watson Pharmaceuticals - WPI - close: 62.06 change: +0.38

Stop Loss: 63.05
Target(s): 56.00
Current Option Gain/Loss: Dec$60p: -12.5% & Jan$60p: -55.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/22 update: WPI has extended its gains to three days in a row. Shares are testing short-term resistance near $62.00. We can look for additional resistance near the exponential 200-dma near $62.75. I'm not suggesting new positions at this time.

- Suggested Positions -

(December position closed 12/15/11)
DEC $60 PUT (WPI1117X60) Entry $0.80 exit $0.70 (-12.5%)

- or -

Long JAN $60 PUT (WPI1221M60) Entry $2.00

12/19/11 new stop loss @ 63.05
12/15/11 planned exit for Dec. $60 puts, bid $0.70 (-12.5%)
12/14/11 Prepare to exit Dec. $60 puts at the open tomorrow, current bid on these puts is $0.65

Entry on December 07 at $61.75
Earnings Date 02/14/12 (unconfirmed)
Average Daily Volume = 1.5 million
Listed on December 03, 2011


CLOSED BULLISH PLAYS

Boston Beer Co. Inc. - SAM - close: 109.21 change: +2.72

Stop Loss: 98.75
Target(s): 109.50
Current Option Gain/Loss: +119.5%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/22 update: Target achieved. SAM continues to rally. Shares surged to $110.42 before paring its gains. Our exit target was hit at $109.50.

(small positions) - Suggested Positions -

JAN $105 call (SAM1221A105) Entry $2.05 exit $4.50 (+119.5%)

12/22/11 target hit at $109.50
12/20/11 new stop loss @ 99.75
12/03/11 new stop loss @ 98.75
12/02/11 trade triggered at $102.00

chart:

Entry on December 02 at $102.00
Earnings Date 03/08/12 (unconfirmed)
Average Daily Volume = 72.3 thousand
Listed on December 01, 2011


CLOSED BEARISH PLAYS

AGCO Corp. - AGCO - close: 42.16 change: +0.64

Stop Loss: 42.55
Target(s): 35.25
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/22 update: The market seems to be developing a bullish tone for the holidays. We are dropping AGCO with the play unopened. Shares are starting to bounce. The stock could see a rebound toward resistance near $45 and its 200-dma.

Trigger @ 39.75 (small positions)

Trade did not open.

12/22/11 Removing AGCO as an active trade candidate
12/21/11 adjust trigger to $39.75, stop to $42.55

chart:

Entry on December xx at $ xx.xx
Earnings Date 02/07/12 (unconfirmed)
Average Daily Volume = 1.5 million
Listed on December 15, 2011


Check Point Software - CHKP - close: 53.65 change: +1.51

Stop Loss: 55.05
Target(s): 48.00
Current Option Gain/Loss: -52.5%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/22 update: I could not find any news to account for the unusual trading in CHKP. The stock has been very volatile the last couple of days. This morning shares opened higher and then spiked from $52.41 to $56.70 in just a few minutes only to reverse just as fast. CHKP spent the rest of the day churning sideways on either side of $53.50. Is CHKP a victim of low-volume holiday markets? I can't say but the move today did hit our stop loss at $55.05.

(Small Positions) - Suggested Positions -

Jan $50 PUT (CHKP1221M50) Entry $1.20 exit $0.57 (-52.5%)

12/22/11 Stopped out @ 55.05. there was no news to explain the volatility
12/13/11 new stop loss @ 55.05

chart:

Entry on December 09 at $53.29
Earnings Date 01/30/12 (unconfirmed)
Average Daily Volume = 1.7 million
Listed on December 08, 2011


Coach, Inc. - COH - close: 59.87 change: +1.23

Stop Loss: 60.10
Target(s): 51.00
Current Option Gain/Loss: -65.5%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/22 update: Stocks extended their gains today and COH managed to rally to $60.30 before fading back under the $60.00 level. That was enough to stop us out at $60.10. COH still has a bearish trend of lower highs and lower lows over the last couple of months but the bounce may not be over yet.

- Suggested Positions -

2012Jan $55 PUT (COH1221M55) Entry $1.45 exit 0.50 (-65.5%)

12/22/11 stopped out at $60.10

chart:

Entry on December 19 at $58.08
Earnings Date 01/25/12 (unconfirmed)
Average Daily Volume = 2.9 million
Listed on December 17, 2011


ITT Educational Services - ESI - close: 52.52 change: +0.92

Stop Loss: 52.60
Target(s): 45.25
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/22 update: The oversold bounce in ESI is picking up steam. We are dropping ESI as a bearish candidate. Our trigger to buy puts has not been hit at $49.75.

Trigger @ 49.75 (small positions)

Trade Did Not Open

12/22/11 removed from the newsletter as an active trade candidate

chart:

Entry on December xx at $ xx.xx
Earnings Date 01/19/12 (unconfirmed)
Average Daily Volume = 363 thousand
Listed on December 19, 2011


Fluor Corp. - FLR - close: 50.46 change: +1.26

Stop Loss: 50.65
Target(s): 45.15
Current Option Gain/Loss: -79.1%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/22 update: FLR rallied just enough today to hit our stop loss at $50.65. Shares broke through round-number resistance at $50.00 and hit $50.69 before settling with a +2.5% gain. The larger trend is still bearish but readers may want to wait for a move toward the 100-dma or its trendline of lower highs before considering new bearish positions.

- Suggested Positions - (Small Positions)

2012Jan $45 PUT (FLR1221M45) entry $1.20 exit $0.25 (-79.1%)

12/22/11 stopped out at $50.65
12/19/11 new stop loss @ 50.65

chart:

Entry on December 14 at $49.35
Earnings Date 02/23/12 (unconfirmed)
Average Daily Volume = 2.0 million
Listed on December 13, 2011


Juniper Networks - JNPR - close: 20.75 change: +1.30

Stop Loss: 20.55
Target(s): 16.75
Current Option Gain/Loss: - 68.4%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/22 update: The WSJ had an interesting headline today. Akamai (AKAM) purchased its rival Cotendo for $268 million. Yet shares of AKAM soared more than +18%, bumping the company's market cap by +$1 billion. Talk about a great deal for AKAM. Normally shares of the acquiring company go down. JNPR was linked to these headlines because many thought JNPR was a potential buyer for Cotendo, especially since JNPR is already an investor in the company.

Shares of JNPR were also upgraded this morning, which helped account for the stock's gap higher at $20.10. JNPR ended the day up +6.6% and hit our stop loss at $20.55.

(small positions) - Suggested Positions -

2012Jan $17.50 PUT (JNPR1221M17.5) entry $0.57 exit 0.18 (-68.4%)

12/22/11 stopped out at $20.55
12/17/11 readers may want to take profits now. JNPR looks short-term oversold
12/14/11 new stop loss @ 20.55
12/12/11 JNPR gapped open lower at $19.58, opening our trade. Stop loss at $20.75

chart:

Entry on December 12 at $19.58
Earnings Date 01/24/12 (unconfirmed)
Average Daily Volume = 8.8 million
Listed on December 10, 2011


Monsanto Co - MON - close: 70.63 change: -0.09

Stop Loss: 71.05
Target(s): 60.50
Current Option Gain/Loss: -71.2%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/22 update: It was an unlucky day for our bearish position in MON. The stock saw a very brief spike above $71.00 this morning. Shares hit $71.06 and immediately reversed to spent the rest of the day hovering under $71.00. Our stop loss was hit at $71.05.

(small positions) - Suggested Positions -

2012Jan $65 PUT (MON1221M65) entry $2.05 exit $0.59 (-71.2%)

12/22/11 stopped out at $71.05
12/21/11 readers may want to exit early now

chart:

Entry on December 14 at $67.35
Earnings Date 01/05/12 (unconfirmed)
Average Daily Volume = 3.7 million
Listed on December 13, 2011


WellPoint Inc. - WLP - close: 66.78 change: +1.10

Stop Loss: 65.75
Target(s): 58.00
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: , see below

Comments:
12/22 update: The market continues to drift higher and WLP rallied to resistance at its 50-dma before settling with a +1.6% gain. Our trade has not opened yet and we're dropping WLP as a bearish candidate.

Trigger @ 63.25

Trade Has Not Opened

12/22/11 trade did not open. We are removing WLP as an active candidate

chart:

Entry on December xx at $ xx.xx
Earnings Date 01/25/12 (unconfirmed)
Average Daily Volume = 2.9 million
Listed on December 19, 2011