Option Investor
Newsletter

Daily Newsletter, Tuesday, 1/17/2012

Table of Contents

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

Market Wrap

China Surprise

by Jim Brown

Click here to email Jim Brown
China reported multiple economic numbers for Q4 that were better than expected and took trader's minds off of Europe.

Market Statistics

China reported its Q4 GDP grew at +8.9% compared to estimates of +8.7%. While that was better than expected it was still the slowest growth in the last ten quarters. Industrial Production grew by +12.8% and that was also better than the expected +12.2% estimate. Retail Sales for December rose by +18.1% and over estimates of +17.2%.

While those numbers were stronger than expected they are all down from the same statistics posted over the last couple years. This gives the government plenty of leeway in restarting its stimulus programs at a moderate pace with an eye on long term growth. There was no sign of the hard landing many analysts have been worried about.

The German ZEW economic sentiment index jumped to -21.6 from -53.8 and the biggest jump on record. The historical average for the ZEW index is +24.5. Sentiment had soured because of the German contributions to bailout the euro zone. ZEW said sentiment over the next six months was likely to stabilize rather than deteriorate further and that was also a change in outlook.

The Chinese and German news was very positive for our markets at the open but before the day ended the indexes had given back much of their gains despite positive economics from the U.S. as well.

The NY Empire Manufacturing Survey spiked to 13.5 and the highest level since April. It was 8.2 in December. This was the third consecutive month of gains. All the internal components were positive with new orders doubling to 13.7 from 6.0 and employment jumping +10 points to 12.1 from 2.3. That was the improvement jump since May. More than 50% of survey respondents said they were planning to hire and one third of respondents said their employees were overworked. Backorders improved significantly to -5.5 from -15.1 but failed to return to positive territory.

Empire Survey Chart

The economic calendar for the rest of the week is pretty crowded with Thursday the most dangerous with new debt auctions for Spain and France, the Philly Fed Survey and earnings from eight high profile big caps.

Economic Calendar

With earnings misses becoming common the odds of a rocky Thursday are pretty good. Big cap tech stocks will be well represented as well as the financial sector. Wednesday's earnings could also be a challenge for the financial sector with BK, GS, PNC, SCHW, SLM, STT and USB.

Goldman earned $4 for 2011 and is expected to earn $11 in 2012. Many analysts are starting to worry those 2012 estimates will not come true and they expect Goldman to begin guiding lower in this report.

Earnings Calendar

Financial companies have not been doing well in the Q4 reports received so far. The financial sector was responsible for a lot of today's afternoon decline. Those inflated earnings estimates are beginning to implode as companies miss their street targets.

JP Morgan missed last week but at least gave a somewhat upbeat outlook for 2012. Citigroup missed estimates today with earnings that declined -11% from the comparison quarter. Citi reported a -7% decline in revenue to $17.17 billion. Earnings of 38 cents were well below estimates of 48 cents. A weak bond market was blamed for some of the decline but CEO Vikram Pandit said "clearly the macro environment has impacted the capital markets."

Citi laid off 5,000 workers late in 2011 and 25% were in the capital markets division. Costs rose +4% in 2011 and CFO John Gerspach said "the period of rising costs was now behind us." They expect to trim costs by as much as $3 billion in 2012. Citi's exposure to troubled European countries rose by +$700 million to $7.8 billion. Gerspach said they "were not walking away from the euro zone even if Europe remained the largest overhang on the market."

Citigroup shares fell -8% on the earnings news.

Citigroup Chart

The opposite of Citi's performance came from Wells Fargo (WFC). Wells Fargo reported a +17.6% rise in profits for Q4 despite a decline in revenues. They posted earnings of 73-cents compared to estimates of 72-cents. Not a big beat but certainly better than the dismal Citi earnings. Mortgage banking income rose +30% to $2.36 billion. The unclosed pipeline of loans for Q1-2012 was $72 billion. Mortgage origination revenues rose by +59% from Q3. After Bank of America quit buying mortgages from other banks late in 2011 that left Wells Fargo in the drivers seat for acquiring mortgage loans. They are able to be selective about what they buy and evidently the business is producing huge profits. WFC shares closed fractionally higher after the sector decline eroded their early gains.

Wells Fargo Chart

TD Ameritrade (AMTD) posted profits that rose +5% but revenue was flat as trading activity slowed late in 2011. AMTD posted earnings of 27 cents compared to estimates of 26 cents. Revenue fell -1% to $653 million and analysts were expecting $671 million. The company said trading volume fell in Q4 as worries over Europe kept traders on the sidelines. Average daily trades fell to 367,479 compared to 415,739 in Q3. CEO Tomczyk said trading volume will likely improve significantly if Europe stabilizes and the market begins to move in a consistent pattern. (Good luck with that!) AMTD net customer assets rose +7% to $406.3 billion. Helping AMTD beat earnings was the purchase of 6.7 million shares of its own stock in Q4. That reduces the shares outstanding and raises the profit per share. AMTD shares fell fractionally on the earnings news.

AMTD Chart

Check Point Software (CHKP) posted earnings of 84 cents, up from 73 cents in the comparison quarter and better than analyst estimates of 82 cents. Revenue rose +12% to a record $356.8 million. The growing aggressiveness of cyber attacks and viruses has been beneficial to companies that publish antivirus software. The company said there was an increasing number of attacks by cyber-bots. Check Point is launching an anti-bot software blade in early 2012. Bots are hard to detect pieces of software that invade networks and then spy on activity and wait for future commands.

The Tel Aviv Stock Exchange, El Al Airlines and three banks were hit by a coordinated bot attack on Monday. Check Point said the attack came from thousands of computers al around the world that had been taken over by the bots. CHKP has $2.9 billion in cash and is buying back shares and looking for acquisitions. Shares rallied +8% on the news.

Check Point Software Chart

After the bell Yahoo (YHOO) spiked to a high of $16.48 from the close at $15.43 after news broke that Jerry Yang had resigned from his position at Yahoo and from his director position. Yang's official title was "Co-Founder and Chief Yahoo." He is also resigning from the boards of Yahoo Japan and Alibaba Holdings Group. He has been widely criticized as trying to orchestrate a leveraged buyout of Yahoo where he would end up as a majority owner at the expense of existing shareholders. Numerous shareholders have lobbied for his exit and threatened shareholder suits.

His abrupt exit effective as of today suggests someone is about to make an offer and one of their conditions was the elimination of Yang. He was seen as a solid opponent to multiple possible transactions that had been discussed in recent months. Without him there it could smooth a future deal and I would expect shares to begin trending higher in anticipation. Various rumored deal discussions valued Yahoo from $19 to $28 per share. Without Yang that premium could rise.

Yahoo Chart

Carnival Corp (CCL) plunged -14% after the Costa Concordia ran aground in Italy and capsized over the weekend. At least 11 people died with 24 still missing. The accident came when the captain altered course temporarily to allow the chief steward to wave to his family and friends on shore. Costa's parent is Carnival Corp. Carnival owns and operates 101 ships under several brands including Cunard, Holland America, Princess and Seabourn. Insurance claims are expected to exceed $500 million and Carnival will be responsible for $40 million in deductibles.

The capsizing of the ship comes at the start of the spring booking season and could cost them additional millions by customers suddenly deciding a cruise may no longer be a vacation option. Cruise lines will respond by slashing prices and making it an even better deal for those who believe another accident is not likely. Since 2005 there have only been 16 deaths in the cruise industry out of more than 100 million passengers. I would say the odds are definitely in the passengers favor.

Carnival Chart

The news from China boosted expectations for crude demand. Traders were worried China could see a hard landing and demand slow. Also helping crude prices was news the EU may try to fast track the embargo on Iranian crude sales with a July 1st start date or even sooner.

Iran's OPEC governor said an oil embargo would be economic suicide by Europe. Iran sells about 20% of its oil to Europe. The governor warned that rising prices would push Europe deeper into recession. He also warned that Saudi Arabia's promise to cover any shortfall was not the official position of the country and only the personal view of its oil minister Ali al-Naimi.

Obviously the Iranian official is trying to instill fear of high prices and shortages in an effort to hold off any action on an embargo.

This embargo threat should support prices through the normal seasonal lows in February and give us a higher launch point for the normal summer rally. Crude gained +2.30 for the day and is continuing to gain overnight.

Crude Oil Chart

The banking sector declined about 1.5% after an early morning rally thanks to the worries over the bank earnings due out on Wednesday. There are fears Goldman will miss earnings and guide lower and Bank America on Thursday could also disappoint. A restart of talks in Greece on the 50-75% haircut of more than 200 billion in outstanding debt is also a problem. There are an increasing number of rumors the hedge funds holding some of that debt have stiffened and will not agree to the deal without a significant sweetener. That is not likely to happen and that is increasing fears of a Greek default.

That is relative to the U.S. financial market because European banks cannot be shorted. That means anyone trying to hedge their holdings in Europe can only do so by shorting American banks, which have tens of billions at risk in Europe. The Banking Index turned down sharply mid afternoon.

Bank Index Chart

The markets have been trending slowly higher in 2012 without any serious conviction. However, a survey of 214 fund managers handling a total of $655 billion in assets showed 27% currently overweight in cash. That was down from 35% in December. Asset allocators were seen the most bullish on U.S. equities since April 2010. America has replaced emerging markets as the location of choice for investments.

Despite the recent earnings misses the official S&P earnings estimates for all of 2012 is currently just over $105. That would be a record with a +9% gain for the year. That survey came from analysis of more than 9,000 analyst projections compiled by Bloomberg. Unless that estimate begins to implode it suggests a positive year for stocks. A PE of 15 would imply a 1,575 value for the S&P.

The S&P spiked to 1,303 at the open but immediately declined to 1,300 where resistance remained rock solid for the next four hours. When the financials began to weaken at 2:PM the index collapsed to nearly 1,290 and back under the 1,295 resistance that has held for the last week.

A move below initial support at 1,280 could signal an end to this early January rally and target 1,250 for an initial pause.

S&P Chart

The Dow continues to respect uptrend resistance but it is also creeping steadily higher. The +60 point gain was far less than the +151 gain at the open but it was still a gain. Initial resistance at 12,500 came back to haunt the index at the close. JP Morgan was the biggest decliner at -1.01.

The melt up continues but there is still no conviction. That does not mean we can't continue higher as traders still overweight cash become frustrated waiting for a dip that never comes. This is going to be a pivotal week for earnings and headlines from Europe and it could change investor sentiment dramatically in either direction.

Dow Chart

The Nasdaq spiked to a dead stop at 2740 resistance at the open and held there for most of the day. At noon there was an attempt to push higher but that garnered only two additional points before sellers appeared and the Nasdaq declined with the rest of the market at 2:PM.

With super Thursday tech earnings a major worry for anyone long tech stocks I would be very surprised to see traders buying techs ahead of those earnings. The risk is huge with GOOG, INTC, IBM and MSFT all reporting on the same day. Google is known for massive swings up or down after their report and that can dramatically drive the tech sector.

Support is 2700 and resistance 2740.

Nasdaq Chart

The Russell managed a temporary spike over resistance at 770 at the open but was immediately hammered back below that level. This resistance has been rock solid and although the Russell continues to edge closer to a breakout there is no volume and no conviction. A break over 770 would be very bullish for sentiment.

Resistance 770, support 760.

Russell Chart

Volume was still mediocre at only 6.6 billion shares despite this being an expiration week and the first day back from a three day weekend with dozens of major headlines. Traders are still nibbling at the edges but there has been no material change in sentiment. They are waiting for a resolution in Europe and for guidance from the next round of earnings reports. The rest of this week will be critical. This could be a pivotal week for the quarter where traders decided to either move to the sidelines because of lower guidance and headlines or bite the bullet and take a chance on the U.S. being the flight to quality destination for the rest of the world.

There is a change in store for us over the next several days and it is anyone's guess as to the direction. A continued move higher will run into major resistance at the October highs and it will probably take far better news from Europe to push us over that level. Conversely we could easily see a flurry of earnings misses and lowered guidance create a market pause until further economic clarity is seen.

I remain cautious but long until proven wrong.

The EOY special is over but we have a few packets left. First come, first served. When they are gone they are gone. 2011 Special

Jim Brown

Send Jim an email


New Option Plays

Oil & Software

by James Brown

Click here to email James Brown

Editor's Note:

In addition to tonight's new candidate, consider these stocks as possible trading ideas:

YHOO - Yahoo!'s Jerry Yang has resigned from the company and the stock is trading higher after hours. With Yang out of the way it opens the door for YHOO as a potential takeover target. Aggressive traders might want to let the initial spike higher tomorrow settle down and then consider a speculative out of the money call play. The challenge is your time frame. We do not know how soon an acquisition could be announced. It could be months away.

Below are a few bullish candidates worth noting. They're not buys yet but I'd keep them on your radar screen.

OXY - possibly above $100.50.

ITW - look for a dip or a bounce near $50.00.

WLL - above the simple 200-dma.

N - above $40.25.

TDW - above its simple 200-dma.

WHR - above the simple 100-dma.

ULTA - above $75.75.


NEW DIRECTIONAL CALL PLAYS

InterOil Corp. - IOC - close: 60.11 change: +0.36

Stop Loss: 57.90
Target(s): 66.00
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
Shares of this oil stock are consolidating sideways under resistance in the $60.50-61.00 zone. If it breaks out higher it could see a big move. That's because IOC could see a possible short squeeze. The most recent data listed short interest at more than 22% of the 33.4 million share float.

I am suggesting a trigger to buy calls at $61.00 with a stop loss at $57.90. Our target is $66.00. FYI: The Point & Figure chart for IOC is bullish with a long-term $91 target.

Trigger @ 61.00

- Suggested Positions -

buy the Feb $65 call (IOC1218B65) current ask $4.85

Annotated Chart:

Entry on January xx at $ xx.xx
Earnings Date 03/22/12 (unconfirmed)
Average Daily Volume = 537 thousand
Listed on January 17, 2012


NEW DIRECTIONAL PUT PLAYS

OPNET Technologies - OPNT - close: 33.26 change: -1.06

Stop Loss: 33.85
Target(s): 30.00
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
OPNT is in the application software industry. Shares have not had a good year so far (2012). The stock looks like it's about to breakdown from its current sideways consolidation. I am suggesting a trigger to buy puts at $32.70 with a stop loss at $33.85. Our target is $30.00. More aggressive traders may want to aim lower but I am concerned the 2011 summer lows could be support.

We want to keep our position size small because OPNT has above average short interest at 11.7% of the 14.8 million share float. That raises the risk of a short squeeze should the stock reverse higher. FYI: The Point & Figure chart for OPNT is bearish with a $20 target.

The spreads are a little wide as well, which is another reason to keep our position size small.

Trigger @ 32.70 (small positions)

- Suggested Positions -

buy the Feb $30 PUT (OPNT1218B30) current ask $1.00

Annotated Chart:

Entry on January xx at $ xx.xx
Earnings Date 02/07/12 (confirmed)
Average Daily Volume = 252 thousand
Listed on January 17, 2012



In Play Updates and Reviews

Whole Foods (WFM) Hits Target on Breakout

by James Brown

Click here to email James Brown

Editor's Note:

Whole Foods Market (WFM) broke out to new highs on Tuesday, hitting our exit target in the process. We also saw our HUM, MHK, and TEVA plays all opened.

CSH could see some movement tomorrow on lowered guidance.

-James

Current Portfolio:


CALL Play Updates

Boeing Co. - BA - close: 75.24 change: +0.64

Stop Loss: 73.65
Target(s): 77.00
Current Option Gain/Loss: -30.5%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
01/17 update: BA rallied with stocks this morning and shares hit new relative highs near $76.00 before paring its gains. The trend is a slow melt up higher but we're rapidly running out of time. Our January options have three days left. Readers may want to exit early.

- Suggested Positions -

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

01/17/12 only three trading days left
01/12/12 new stop loss @ 73.65
01/07/12 new stop loss @ 72.65
01/05/12 new stop loss @ 72.25
12/31/11 new stop loss @ 71.75
12/28/11 new stop loss @ 71.40
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


Berkshire Hathaway Inc. - BRK.B - close: 77.77 change: -0.73

Stop Loss: 76.75
Target(s): 83.50
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Comments:
01/17 update: BRK.B also saw an early morning pop with the market's broad advance at the open. Shares managed to hit a new relative high and then faded. The intraday high was $78.62. Currently our plan is to buy calls at $78.75 with a stop at $76.76. More conservative traders may want to wait for BRK.B to actually close over $78.75 before initiating positions instead of using an intraday move to open positions. Our multi-week target is $83.50. We do not want to hold over the late February earnings report.

Trigger @ 78.75

- Suggested Positions -

buy the Feb $80 call (BRKB1218B80)

01/14/12 adjusted entry point strategy to use a trigger @ 78.75
01/13/12 BRK.B gapped lower, negating our entry point. Trade did not open.

Entry on January xx at $ xx.xx
Earnings Date 02/27/12 (unconfirmed)
Average Daily Volume = 4.4 million
Listed on January 12, 2012


Starwood Hotel & Resorts - HOT - close: 50.63 change: -0.68

Stop Loss: 48.75
Target(s): 55.75
Current Option Gain/Loss: -16.1%
Time Frame: exit prior to earnings
New Positions: see below

Comments:
01/17 update: Today's action in HOT doesn't bode well. A dip toward support near the 200-dma or the $50 level isn't that troubling but shares did underperform the broader market. I would wait for a bounce near $50.00 before considering new positions. More conservative traders may want to use a stop loss closer to the $50.00 level instead. FYI: The Point & Figure chart for HOT is bullish with a $64 target.

Don't forget that we plan to exit prior to the Feb. 2nd earnings.

- Suggested Positions -

Long Feb $52.50 call (HOT1218B52.5) entry: 1.67

01/13/12 Triggered on a dip at $51.00
01/10/12 initial entry point did not work. New strategy: buy a dip at $51.00.

Entry on January 13 at $51.00
Earnings Date 02/02/12 (confirmed)
Average Daily Volume = 2.4 million
Listed on January 09, 2012


Humana Inc. - HUM - close: 95.50 change: +0.79

Stop Loss: 92.95
Target(s): 99.75
Current Option Gain/Loss: -15.3%
Time Frame: 2 to 3 weeks
New Positions: see below

Comments:
01/17 update: Our new HUM play is open. The stock gapped higher at $95.75 and almost made it to $96.50 before trimming its gains. Our plan was to use a trigger at $95.25 so the opening pop launched our trade.

Our target is $99.75 since the $100 level might be round-number, psychological resistance. We do not want to hold over the early February earnings report. FYI: The Point & Figure chart for HUM is bullish with a $109 target.

- Suggested Positions -

Long Feb $100 call (HUM1218B100) entry $1.30

01/17/12 HUM gapped open higher at $95.75, above our trigger at $95.25

Entry on January 17 at $95.75
Earnings Date 02/06/12 (confirmed)
Average Daily Volume = 1.2 million
Listed on January 14, 2012


iShares Transportation - IYT - close: 92.06 change: -0.18

Stop Loss: 89.45
Target(s): 94.75 or 98.50
Current Option Gain/Loss: Jan$95c: - 100% & Feb$95c: -24.1%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
01/17 update: The early morning spike higher in the IYT failed to hit new relative highs and the ETF spent the rest of the day consolidating sideways. We only have three days left on January options.

- Suggested Positions -

Long Jan $95 call (IYT1221A95) entry $0.20
target 94.75

- or -

Long Feb $95 call (IYT1218B95) entry $1.45
target 98.50

01/12/12 new stop loss @ 89.45
01/07/12 new stop loss @ 88.75
01/03/12 IYT gapped open higher at $91.20, above our trigger at $90.75

Entry on January 03 at $91.20
Earnings Date --/--/--
Average Daily Volume = 582 thousand
Listed on December 22, 2011


Laboratory Corp. - LH - close: 88.54 change: +1.60

Stop Loss: 85.95
Target(s): 94.75
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Comments:
01/17 update: LH displayed relative strength on Tuesday with a +1.8% gain. Yet shares are still trading under technical resistance at the simple 200-dma. The high today was $88.66.

I am suggesting a trigger to buy calls at $89.00. We'll aim for the $94.75 mark. More aggressive traders could aim for the $97-100 zone instead. FYI: The Point & Figure chart for LH is bullish with a $105 target.

NOTE: We do not want to hold over the earnings report around Feb. 9th (still an unconfirmed date).

Trigger @ 89.00

- Suggested Positions -

buy the Feb $90 call (LH1218B90)

Entry on January xx at $ xx.xx
Earnings Date 02/09/12 (unconfirmed)
Average Daily Volume = 564 thousand
Listed on January 10, 2012


Mohawk Industries - MHK - close: 64.29 change: +1.77

Stop Loss: 59.90
Target(s): 67.50
Current Option Gain/Loss: -24.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
01/17 update: Our new play on MHK is open. The stock gapped higher with the market and shares rallied to 466.07 before paring its gains. There is a chance that MHK will fill the gap so readers may want to wait for a dip back toward the $62.50 area before entering new positions.

Our target is $67.50 but we do not want to hold over the February earnings report.

Investors will be interested to note that the most recent data listed short interest at 5% of the 57 million share float. That's not excessive but it's a bit high and could boost any new gains as bears cover their shorts. FYI: The Point & Figure chart for MHK is bullish with a $90 target.

- Suggested Positions -

Long Feb $65 call (MHK1218B65) Entry $2.48

01/17/12 MHK gapped open higher at $63.99

Entry on January 17 at $63.99
Earnings Date 02/21/12 (unconfirmed)
Average Daily Volume = 621 thousand
Listed on January 14, 2012


Omnicom Group - OMC - close: 46.59 change: +0.13

Stop Loss: 44.25
Target(s): 49.00
Current Option Gain/Loss: +25.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
01/17 update: The stock market's opening pop this morning pushed OMC to $47.15 intraday. Unfortunately OMC spent the rest of the session consolidating lower. I am not suggesting new positions at this time. Look for support in the $46.00-45.00 zone. More conservative traders might want to inch up their stop loss.

Our target is $49.00. We do not want to hold over the mid February earnings report. FYI: The Point & Figure chart for OMC is bullish with a $64 target.

- Suggested Positions -

Long Feb $45 call (OMC1218B45) entry $1.80

Entry on January 12 at $45.75
Earnings Date 02/14/12 (unconfirmed)
Average Daily Volume = 1.6 million
Listed on January 11, 2012


Teva Pharmaceuticals - TEVA - close: 44.87 change: +0.32

Stop Loss: 43.75
Target(s): 49.50
Current Option Gain/Loss: -14.6%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
01/17 update: I am urging caution on our TEVA trade. The plan was to buy calls on a breakout with a trigger at $45.25. Shares did hit our trigger today but the rally reversed and shares closed back under the $45.00 level. I find this action a warning signal. We may have just witnessed a bull trap pattern. I would wait for a new rally past $45.50 before considering new bullish positions now.

Our target is $49.50 but we'll plan to exit prior to the earnings report in early February. FYI: The Point & Figure chart for TEVA is bullish with a $57 target.

(Small Positions)- Suggested Positions -

Long Feb $45 call (TEVA1218B45) entry $1.50

01/17/12 Be careful. TEVA hit our trigger and reversed to close back under $45.00

Entry on January 17 at $45.25
Earnings Date 02/08/12 (unconfirmed)
Average Daily Volume = 5.9 million
Listed on January 14, 2012


TJX Companies - TJX - close: 65.98 change: +0.83

Stop Loss: 64.75
Target(s): 68.00
Current Option Gain/Loss: Jan$65c: +20.0% & Feb$65c: +22.8%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
01/17 update: TJX displayed relative strength with a +1.2% gain. Our January call position has turned positive (+20%) and readers will want to seriously consider an early exit now with only three trading days left before January options expire.

I am suggesting we exit our January $65 calls at the closing bell tomorrow (assuming TJX doesn't hit our stop loss). Speaking of stops I am raising our stop loss to $64.75.

Earlier Comments:
On January 5th, management announced a 2-for-1 stock split payable on February 2nd, 2012.

- Suggested Positions -

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

- or -

Long Feb $65 call (TJX1218B65) Entry $1.75

01/17/12 prepare to exit January calls at close tomorrow
01/17/12 new stop loss @ 64.75
01/12/12 new stop loss @ 63.75
01/07/12 readers may want to take profits now (Jan$65call +90%, Feb$65call +57%)
01/05/12 new stop loss @ 63.25, TJX announced strong same-store sales and a 2:1 split.
12/31/11 new stop loss @ 62.75

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


PUT Play Updates

Accenture Plc, - ACN - close: 53.49 change: +0.24

Stop Loss: 54.15
Target(s): 48.50
Current Option Gain/Loss: -77.7%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
01/17 update: The stock market's widespread rally this morning gave ACN a boost but shares failed to breakthrough resistance near $54.00. Readers may want to exit early. I am not suggesting new positions at this time.

NOTE: We only have three trading days left before January options expire.

(small positions) - Suggested Positions -

Long 2012Jan $52.50 PUT (ACN1221M52.5) Entry $1.35

01/14/12 resistance at $54.00 is holding so far but readers may want to consider an early exit anyway.

Entry on January 06 at $51.91
Earnings Date 03/26/12 (unconfirmed)
Average Daily Volume = 4.6 million
Listed on January 05, 2012


Cash America Intl. - CSH - close: 44.10 change: -0.47

Stop Loss: 46.10
Target(s): 40.50
Current Option Gain/Loss: Jan $45 put: - 9.5% & Feb$45put: - 6.2%
Time Frame: up to the earnings report.
New Positions: see below

Comments:
01/17 update: Tomorrow could be interesting for CSH. The stock was an underperformer today with shares down -1.0% and hitting new relative lows. After the closing bell tonight the company updated its earnings guidance. CSH expects FY2011 earnings to come in at $4.25 a share, which is a +16% jump from 2010 but it's also less than Wall Street was anticipating. This earnings warning could spark some selling pressure tomorrow. It's probably too late to initiate new positions now. We will lower our stop loss down to $46.10.

NOTE: I am suggesting we exit our January $45 puts at the closing bell tomorrow.

Earlier Comments:
Our target is $40.50. FYI: The Point & Figure chart for CSH is bearish with a $33 target.

- Suggested Positions -

Long Jan $45 PUT (CSH1221M45) Entry $1.05

- or -

Long Feb $45PUT (CSH1218N45) Entry $2.40

01/17/12 prepare to exit Jan. $45 puts at the close tomorrow.
01/17/12 new stop loss @ 46.10
01/17/12 CSH issued lowered guidance after the closing bell.

Entry on January 11 at $44.75
Earnings Date 01/26/12 (confirmed)
Average Daily Volume = 292 thousand
Listed on January 05, 2012


CLOSED BULLISH PLAYS

Whole Foods Market, Inc. - WFM - close: 76.73 change: +3.04

Stop Loss: 71.45
Target(s): 74.25
Current Option Gain/Loss: +126.3%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
01/17 update: Target achieved. WFM outperformed the markets today. Shares opened at $74.06 and surged to new highs, hitting $77.33 intraday. The stock settled with a +4% gain. Our target was hit at $74.25. The bid on our call option was $4.30 (+126.3%).

Broken resistance near $74.00 should offer new support. Nimble traders might want to consider buying calls again on a bounce off the $74.00 area.

- Suggested Positions -

2012Jan $70 call (WFM1221A70) entry $1.90, exit $4.30 (+126.3%)

01/17/12 target hit at $74.25
01/14/12 new stop loss @ 71.45, adjusted exit target to $74.25. Cautious traders may want to exit immediately with only four days left on January options. Current bid is at $3.70 (+94.7%)
01/12/12 new stop loss @ 69.75
01/10/12 WFM begins trading ex-dividend tomorrow morning
01/07/12 new stop loss @ 69.25
01/05/12 new stop loss @ 68.75
01/03/12 WFM gapped open higher at $70.55, above our trigger (70.25)

chart:

Entry on January 03 at $70.55
Earnings Date 02/08/12 (unconfirmed)
Average Daily Volume = 1.3 million
Listed on December 28, 2011