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Newsletter

Daily Newsletter, Saturday, 1/21/2012

Table of Contents

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

Market Wrap

Thank You IBM

by Jim Brown

Click here to email Jim Brown

IBM's +8 point gain on Friday was responsible for a 60.56 point gain in the Dow. Microsoft and Intel contributed but to a much lesser degree.

Market Statistics

With the Dow up +96 at the close the other 29 components only contributed to 36 points of the gain or roughly only one point each on average. Conversely Google's -53 point loss was a heavy load for the Nasdaq and S&P to carry and that held the Nasdaq to a minor -2 point loss and nearly did the same for the S&P but the index managed a closing rally to end fractionally in the green.

Basically it was tech Friday with the four tech stocks reporting on Thursday night being responsible for the majority of the gains and losses on Friday. After a choppy session for the Nasdaq and S&P a strong buy program appeared at 3:30 that pushed the indexes to their highs for the day.

S&P Chart - 3 min

Earnings on Friday left a lot to be desired with the headliner, GE, spoiling the party already in progress. GE missed on revenue with a decline of -8% due mostly to businesses they sold. Earnings of 39-cents beat estimates of 38-cents but revenue of $37.98 billion was well below estimates of $40.05 billion. GE shares dropped at the open but recovered to end the day flat.

GE is watched more for global guidance than actual earnings because they always report roughly in line with estimates. The company said it expected China and Latin America continue to grow but Europe was falling rapidly into a recession. CEO Jeffrey Immelt said the last three months were good but could have been better. He is still predicting double digit growth for GE in 2012. Revenue in some divisions like energy and infrastructure grew by double digits but the home, business solutions and appliances were down sharply. Profits in those divisions declined by 41%. Infrastructure orders rose by 15% leaving GE with a record backlog of $200 billion. Equipment orders increased by +23%. However, the overall global caution comments weighed on the market.

GE Chart

Friday's economics were a mixed bag but generally positive. Existing home sales for December came in at an annualized rate of 4.61 million. That was a +5% increase in December to bring sales back to the same pace as we started 2011. It was the third consecutive month of sales gains thanks to the record low interest rates.

A major bullet point was the drop in months of supply to 6.2 months and the lowest level since 2006. Supply was at 9.5 months as recently as July after peaking at 12.5 months in July 2010. In July 2010 homes were selling at the rate of 3.84 million a year. There are 21% fewer homes on the market today than in July 2010. Inventories will likely increase in the spring as banks begin listing homes they have been holding in hopes of a better market. Sales should also increase because there is significant pent up demand. Buyers have been waiting for a bottom to appear and now that sales are starting to accelerate there could be a rush of customers into the market. You are not going to get a better interest rate or at least not materially better. This is the best rates you are likely to see for decades. Once the Fed begins to remove stimulus from the economy and trim its balance sheet we could see rates move quickly higher.

In the chart below the spike in 2009 was due to the home buyer tax credit sales. You can clearly see where sales were pulled forward from early 2011 as buyers accelerated buying plans to capture the credits.

Home Sales Chart

The only other report on Friday was the Risk of Recession. The risk of returning to recession over the next six months fell to 29% in January from 34% in December. That is down from a recent high of 45% in September. It was as low as 19% last February but worries over the budget deficit, slowdown in Europe and a sudden dip in economic activity in Q3 spiked the risk back to 45%.

We appear to be on the right track today if hiring continues to improve along with home sales. Economic activity is increasing at a snail's pace but it is increasing.

For next week the main events include the two day Fed meeting starting on Tuesday and culminating with the announcement and Bernanke quarterly press conference on Wednesday. The Q4 GDP is out on Friday. Estimates are for something in the +3% range and significantly better than the +1.81% in Q3. Along that same line the Q1 GDP was estimated at +1.4% to 2.1% just a couple weeks ago and those estimates are rising as well. Recent numbers have been in the 2.0% to 2.4% range.

There are several Fed manufacturing surveys out as well and we really need to see continued improvement to keep the markets moving higher.

Friday is the deadline for European banks to submit their recapitalization plans to regulators. Banks have to increase their capital reserves by 115 billion euros ($147 billion) by June. Banks have been selling assets and cutting back on loans to raise capital. Few have gone to the capital markets after Unicredit was crushed when it announced a new stock offering last month. This deadline may not get much play in the U.S. press but it is still a factor given the risk of a Greek default.

Economic Calendar

The biggest problem for Monday could be the Greek debt swap talks. Greece has over 350 billion euros of debt and 190 billion are held by private investors. Europe realized Greece would never be able to pay back all its debts and they launched the plan to give the private sector holders a 50% haircut. In retrospect they realize this was a flawed concept since it forced the interest rates higher on nearly all European debt. If Greece debt holders can be forced to take a 50% cut then why not Italian, Spanish, Irish, Portuguese holders as well? Suddenly investors were faced with the potential of a loss of principal from sovereign nations. It did not go over well.

Now months later and after thousands of hours of meetings and arguments, Greece and its private sector creditors are close to a deal. The 50% haircut has changed to a 70% haircut and investors have little choice but to take it. The lack of a private sector deal is a roadblock to the next 130 billion euro bailout already agreed to for Greece. No deal, no further bailouts.

The EU Finance Ministers are meeting on Monday. Greece wants to have a deal on paper to submit to the ministers for approval at that meeting. If no agreement can be reached this weekend Greece will miss that opportunity and could be forced to wait another month for resolution. That won't work for Greece because they have a 14.4 billion euro debt payment in the middle of March. Since the new bailout still needs weeks of discussions and approvals before checks will be cut, Greece cannot afford to miss the Monday ministers meeting. It could delay everything else by weeks and force Greece to default on that March payment.

Greece strongly believed it would get a haircut agreement with the private sector this weekend. It is amazing what you can get done when there is a hard deadline approaching and missing the deadline is not an option. However, news out late Saturday suggests the talks are not going to succeed in time. The top official for the Institute of International Finance (IIF), who represents 450 financial institutions, left Greece suddenly for Paris on Saturday afternoon. Greek television reported talks would continue by phone from Paris. However, analysts said an agreement by phone was not likely. Early reports said IIF head Charles Dallara "left suddenly." Later reports claim he had a "longstanding personal appointment." You have to wonder what "personal appointment" could have taken precedence over resolving the Greek debt swap agreement threatening to push Greece into a default. I fear everything is not as it seems. Hopefully the equity markets will understand his abrupt departure on personal business as acceptable.

If they get a deal done by Monday then our markets could move significantly higher at the open. It will be one more cloud removed from the market horizon. If they fail in this task it could be a bad day because all the worries about Greece leaving the euro will immediately come back to haunt us.

Another weekend event could be a reserve-ratio cut in China. The People's Bank of China injected 353 billion yuan ($55 billion) into the financial system on Friday. That increased the liquidity in the banking system ahead of the Chinese New Year next week. That was the largest injection of liquidity since Bloomberg began collecting data in 2008. That injection was done with 14-day reverse-repo contracts. The amount injected was almost exactly the amount equaling one reserve-ratio cut.

Nearly all analysts believe a cut is imminent because of the decline in inflation and the decline in economic activity. The PBOC cut the reserve ratio last month for the first time since 2008. The reserve ratio is that percentage of funds that banks are required to keep on deposit as reserves. China also said the top five banks were allowed to loan 5% more in Q1 than Q4 in a bid to stimulate the economy. China has been in tightening mode for two years. The decline in economic activity has reached a point where they need to reverse that tight policy. Analysts believe the next rate cut is imminent with quite a few expecting it this weekend. China likes to announce its actions on Saturdays and they are particularly fond of holiday weekends. As of 9:PM ET Saturday no cut had been announced.

A Chinese rate cut along with a Greek debt swap deal would be a very strong motivator for the U.S. markets on Monday. At this point I am not expecting either to occur. Keep your fingers crossed.

Seventy two S&P 500 companies have reported earnings. Some 60% have beaten on revenue and 55% on earnings according to Thompson Reuters. Bloomberg reported different statistics claiming of the 51 companies reporting since Jan 9th, only 33% have posted earnings that beat estimates. Bloomberg also updated forecasts claiming Q4 earnings will now show only 3.4% growth over Q4-2010. Thompson Reuters is predicting 5.8% growth. Estimates at the beginning of Q4 predicted 14% earnings growth.

S&P claims 18% of the S&P have reported and 55% beat estimates. The average for companies beating earnings estimates over the prior four quarters is 69%. The historical average over the last ten years is a 62% beat. According to S&P this will be the lowest quarterly earnings growth in ten years and the first quarter in more than two years with less than double digit growth.

Google (GOOG) ended the day with an -8.37% decline and a loss of -$53.58. Google has not missed estimates in six years until this report. As a result of the Google miss many others in the sector traded lower. It may have been guilty by association or just worries that other high flyers might also surprise to the downside. This weighed on the Nasdaq BUT it only produced a -12 point drop at the open and the index closed with less than a two-point loss.

It may be just my imagination but more companies are missing estimates and the market is moving higher. Some of these misses are huge. What is wrong with this picture? The bulls claim stocks are undervalued because of the declines in 2011 and the problems in Europe. Now that Europe is healing it is time to buy stocks. While it may be a couple years before we know if Europe has actually healed I do agree with that thought process once we get past the Greek debt swap. I still believe Greece will eventually default but that could be well down the road and I believe that is already priced into the market to some extent.

The bulls tell us the earnings decline is due to European worries making businesses and consumers more cautious in their spending. The currency translation problem in Q4 is also a pressure on earnings. We also had a temporary dip in the U.S. economy late in Q3 and early Q4 and that is being shown in the current earnings cycle. However, they tell us conditions are starting to improve and the economy is accelerating. Personally I think they have overdosed on the Kool-Aid and their expectations are about six months early. I will be pleasantly surprised if conditions continue to improve but I am not counting on a sudden return to strong employment and a retail boom. Of course if it does happen in mid to late summer as I expect, the market is correct in anticipating it six months in advance.

Next week has the most earnings I can ever remember in a single week. More than 125 S&P companies report plus hundreds of companies not in the S&P. I did not count them all but there could be more than 1,000 companies reporting. The number of reports is staggering.

The key reports for me (in green) will be led by Apple on Tuesday. That is probably the biggest report for the week in terms of market sentiment. Other techs report including JNPR, NFLX, SNDK, etc but Apple is the 800-pound gorilla. After Google missed so spectacularly traders are obviously worried that Apple will follow suit. Shares of AAPL fell -7.45 on Friday to initial support at $420.

On a side note Apple flirted with $400 billion in market cap last week. Only Exxon is larger at $420 billion. To put Apple's market cap in perspective consider these facts. That is more than double the cost of the Apollo space program that put people on the moon multiple times. That cost $170 billion when adjusted for inflation. $400 billion is five times the cost of all the beef consumed in the USA in 2011 at $74 billion. Apple's market cap is more than 12 times the value of all the NFL teams at a total of $33 billion. Apple's market cap is almost three times the value of the U.S. apparel industry with more than 100,000 retail stores and a value of $150 billion. Apple is worth more than all the gold stored at the NY Fed, more than 7,000 tons valued at $350 billion today. Apple is worth eight times more than all the tickets for all the Star Wars, Star Trek, Harry Potter, Stephen King and Twilight movies ever sold. Those franchises have sold $49 billion in tickets. Apple is expected to post a 45% increase in sales for Q4 and that is why they have such a steep valuation.

This is also the beginning of the reporting cycle for energy companies. COP, CVX, OXY, HES and HAL will lead the list. Exxon does not report until next week. We already know the big integrated oil companies are probably going to disappoint because of the losses in the refining sector. The smaller exploration and production companies report the following two weeks.

The financial sector heavyweights have already reported and we are left with a lot of local and regional banks and their earnings should be decent. They have no exposure to subprime mortgage litigation and no exposure to Europe. All reports so far suggest loan demand is picking up for business loans.

There are quite a few biotech and drug companies reporting with AMGN, BIIB, IMGN, CELG, IDXX and ABT leading the list. Based on their charts investors must believe they are all going to do well.

Earnings Calendar

In stock news for Friday Sears Holding (SHLD) rallied another 13% to $50 to qualify as the best performing stock for 2012. SHLD is up +54% for the year. Sears beat out NetFlix for the title on Friday. The gains are coming after Eddie Lampert went on a buying spree and drove up rumors he may take the company private. Lampert personally bought shares worth $159 million so far this month. This has created a monster short squeeze since Sears was heavily shorted in Q4 as it plunged from $80 to $30. Lampert personally owns 21% of Sears plus firms that he controls hold another 40%. Lampert's buying has shrunk the available pool of shares available for shorting. Demand has skyrocketed making SHLD one of the most expensive shares to borrow and short. Only about 11% of SHLD shares are available for loan and they are all loaned out according to Data Explorers. Alex Brog, an analyst at the firm, said there are no available shares to short. Lampert and his funds declined to comment on the rally.

Sears Chart

Treehouse Foods (THS) lost -11% to $56 after warning that Q4 results would be significantly below market expectations. They blamed warmer weather that cut demand for soups and hot cereals. They also said higher sales volume in discount outlets like dollar stores and club stores ate into margins. Treehouse makes generic foods like pickles, sauces, soups and salad dressings that retailers brand themselves with their own labels. The CEO said "consumer purchases of shelf stable dry groceries for Q4 showed their sharpest decline in six years." The company now expects earnings to be in the range of 85-cents and analysts were expecting $1.07 per share. The company also cut its full year estimates for the third time.

Since nobody else has reported a similar decline in sales this sounds like a company problem not an industry problem. Short the bounce?

TreeHouse Chart

Oil prices cooled to close at $98.15 for a loss of $2 on worries the Iran problem was fading. At least that is what the talking heads on TV were saying. I seriously doubt anyone suddenly decided Iran was going to cave in to western demands to halt uranium enrichment. They also said traders were worried about a decline in demand in Europe if the Greek debt swap solution did not appear this weekend. While that sounds like a reasonable excuse to the uneducated it was also bogus. Oil suddenly dropped $2 because the February futures contract expired on Friday. Anybody holding longs and hoping for a breakout over $103 was forced to close their positions. This is not rocket science. Expiration is a hard deadline and all plays have to be closed. On Monday they will start over using the new current month contract.

In reality Iran will be back in the news on Monday. The EU Finance Ministers are poised to approve the oil embargo on Monday and release some details on how it will be implemented including specific dates. If they do approve the embargo as expected you can bet Iran will be back in the headlines threatening to close the Strait of Hormuz. Any decline in the Iranian security premium from Friday could quickly return.

Oil producer Nigeria suffered a series of massive attacks from the Boko Haram Islamic group. The name means "Western education is a sin." More than 165 were killed. President Goodluck Jonathan declared a state of emergency and police and military around the country and setup a special counter terrorism unit to coordinate the response. Nigeria produces over two million barrels of light crude per day. The increased violence in Nigeria should also increase the security premium in oil.

Crude Oil Chart

Silver was the bright star on Friday. Silver rallied for a +5.46% (+$1.67) gain to close at $32.17 and a new five week high. There was no specific news on Friday but the contract broke through the resistance of the 50-day average and exploded higher. There may have been some residual impact from the Sprott Physical Silver ETF secondary offering earlier in the week. The ETF (PSLV) raised $303 million in a secondary with the proceeds used to buy additional silver. The announcement was made on Tuesday and priced on Wednesday. Apparently they put that money to work on Friday. The 50-day average had been strong resistance and it was broken on Friday. The next test will be the 100-day average at $33.

Silver Chart

Volume remains a challenge for the stock market rally. Just over 6.8 billion shares traded on Friday with the average in January being about 6.5 billion. Only three days have traded over seven billion shares in 2012 and those were just barely over 7B. There is no conviction despite the breakout to new highs.

TrimTabs.com reported that investors put $932 billion into money market, savings and checking accounts in 2011. That was eight times higher than the $117 billion that flowed into stock funds, ETFs and bond funds. Retail traders have remained bearish with only $3.3 billion flowing into stock funds so far in 2012. Typically early January sees a lot of new cash come into funds.

Reportedly the market gains have been produced by institutional buying. TrimTabs claims that institutions believe the Fed will announce another round of QE either next week or at the March 13th meeting. Their rationale is the election year and for Fed officials, who serve at the pleasure of the president, to do everything possible to keep President Obama in office and keep their jobs. An election of someone like Ron Paul would have serious consequences for Fed employees.

I think the TrimTabs position is a stretch of the imagination but then volume has been so low that anything is possible. With volume this low it does not take a lot of institutional money to push the markets around using the overnight futures and there has been a solid trend of dip buying late in the day.

The problem with this theory is the immediate crash if the Fed does not announce anything at next week's meeting, or worse, they announce there will not be any further stimulus until certain events occur. The damage to the market would be immediate and dramatic if TrimTabs is correct and the reason for the market's gains was anticipation of further Fed action.

Despite the low volume and the serious weight of Google losses the S&P was able to close at another new five month high. I know it was only 0.88 of a point higher but that was enough to avoid the negative headlines in the weekend papers.

With the close at 1315 the S&P is only about 30 points from major resistance. There are also only seven trading days left in the month and massive pothole in our immediate future. That pothole is the FOMC announcement on Wednesday. The Greek debt swap is also an issue but the Fed could be the bigger problem. With the improvement in economics and the market rally the Fed is not likely to take any action. If TrimTabs is correct about the market motivation to this point the results could be ugly.

However, if China and Greece had cooperated this weekend that could have blunted the pain from the Fed. We won't know for sure those events won't happen until the opening bell rings on Monday. Regardless of what powers the S&P to 1345-1350 that resistance is going to be a major roadblock. Since December 20th the rally has gone nearly straight up with very little deviation. It is time to rest. Unfortunately markets never behave as expected and as long as analysts keep calling for a decent dip to buy it may never appear.

S&P Chart - Daily

The Dow chart is a textbook picture of an overextended move with Friday's close at 12,720 only five points from the July closing high at 12,725. Thanks to IBM the index pulled to within striking distance of the 12,750 high from July. I visualize this resistance as an electric fence and there is a strong potential for a shock that knocks us well back into last week when it is touched. This is major resistance and the markets have been slowly moving higher on a serious lack of conviction. The line on the chart is so clear that even a beginner trader can see it and take the appropriate corrective action. With the lack of an agreement in Greece and no rate cut in China the odds of blowing through that level on Monday are extremely slim. There will not be any single Dow stock producing monster gains from a blowout earnings report.

Support is 12,600, resistance 12,750.

Dow Chart - Daily

The Nasdaq is still well below resistance at 2875 and Apple earnings are on Tuesday. If Google shares are not down double digits again on Monday the rally in techs could continue assuming the Greek debt talks failure has not soured investors. That would be a very distinct possibility. The Nasdaq is not quite as overextended as the Dow but after a month of gains with only three real down days it is still overbought.

However, considering the -58 point drop in Google only managed to knock -2 points off the Nasdaq at the close, there is considerable bullish sentiment for tech stocks. Why that is I have no idea since tech earnings have been lousy and volume very low.

Support is well back at 2700 and resistance at 2875 so plenty of room for volatility without damaging the trend.

Nasdaq Chart

In the "you can't make this stuff up" category the Nasdaq 100 with Google a full 12.5% of the index, declined only -5 points on Google's -58 point loss. Thanks to Microsoft and Intel and the positive sentiment from the non Nasdaq IBM earnings the damage to the NDX was minimal.

The Nasdaq 100 held its gains for the month and remains at a 10 year high. ANY material gains from here could trigger significant short covering and a blowout into blue sky territory. Should that happen in light of the global news I will be very shocked.

Big cap techs have been the favorite place for fund managers to store cash while they wait for the European crisis to fade. With the decent earnings by MSFT and INTC I don't see that changing unless Apple imitates Google's miss and that would really be a shock. Eventually this melt up will end with a decent bout of profit taking and those waiting patiently on the sidelines can buy in for the next move up, assuming there will be one.

Nasdaq 100 Chart

The Russell posted a minor gain on Friday but it was important because it was another five month high. Fund managers were not just throwing money at small caps but they were not running away in panic either. I believe we could be on the verge of an acceleration in small caps if we could get just a couple days of profit taking to convince managers it was safe to commit more funds. Nobody likes to buy the highs even though that is a valid strategy. It just goes against the average investor mindset. Buy the dip is learned in investor infancy.

Russell Chart

The Dow Transports faded slightly but did not give back any material gains on Friday. The rising transports are a confirmation signal for the rising Dow and despite their breakout this chart is not nearly as overbought as the Dow Industrials. The transports spent a week consolidating their gains over the red line in mid January. The move higher last week was a move out of that consolidation and a bullish signal.

Dow Transport Chart

The markets are running on hope more than reality. The worst earnings cycle in years is proof of that. We continue to see signs the U.S. economy is improving but we are not alone in the world. The global economy is slowing and it is not just Europe. There have been 61 monetary easings around the world in just the last four months. Central banks don't ease when the economy is growing. The IMF and the World Bank still believe the global economy will continue to grow at 2% to 2.5% GDP despite the weakness in Europe. Let's hope they are right. So far the evidence of the easings suggests the trend is weakening.

The Baltic Dry Index ($BDI), a way of tracking shipping activity between countries, has imploded to three year lows and levels not seen since the Great Recession. This is a very good predictor of economic activity since ordered goods have to be shipped and the index suggests global shipping has nearly come to a halt.

Baltic Dry Index Chart

The euro rallied 300 pips over the last four days after setting a new 15-month low on Jan 13th. You may remember I reported last week the short interest on the euro was at record levels. Market reporters suggested the spike last week was due to a short squeeze. In a short squeeze the shorts exit their positions. Instead the number of non-commercial speculative contracts increased from the record of 155,000 contracts short to more than 160,000 and a new record. Traders are adding to their positions on the bounce. With the Greek debt talks in disarray that could be a winning trade on Monday.

Unfortunately a decline in the euro means the dollar will rise and commodities and equities will decline. There is never an easy answer to the complex market interactions.

I have been cautiously bullish for the last couple of weeks but my caution indicators are beginning to flash from yellow to red. The lack of progress in Greece and the lack of a rate cut on Saturday in China could be a challenge for the markets on Monday. I would tighten stops on long positions and look to reevaluate if we get a decent dip.

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

"Insanity is doing the same thing over and over again expecting a different outcome."
Albert Einstein.


Index Wrap

SPX and COMP move to new highs

by Leigh Stevens

Click here to email Leigh Stevens
THE BOTTOM LINE:

I wrote last weekend that the "weekly charts remain bullish" and a study of them suggests where this recent power move came from. As seen below on the weekly S&P 500 (SPX) chart, the most recent spurt higher is simply a continuation of a very strong advance dating from the October lows. The weekly low seen on the S&P 500 chart at 1136 to above 1300; 15 weeks, + 16%!

A positive aspect of looking at longer-term charts here also comes from seeing that the 'overbought' extremes suggested on the daily charts are not so 'extreme' on a weekly chart basis. Tops are very hard to predict as to when is the 'final' peak to take on dream bear strategies. When I see a chart like the following the chance for exceeding prior highs looks good to me. A very strong second up leg, just as the first one was powerful.

Per the long-term SPX chart; I'm anticipating major resistance at 1350-1370 and strong support in the 1250 area.

The Nasdaq Composite (COMP) weekly chart gives a different feel for the up trendline of recent weeks. And, makes me wonder how I could have not been MORE steadfastly bullish on tech given strong weekly chart action since the last dip below 2500. (The perils of short-term trading and holding a position 3 weeks is a 'long' time!) The most recent upside acceleration with COMP was after its breakout move above the well-defined down trendline at 2670.

Bottom line is that SPX and COMP have 'confirmed' their dominant (up) trend by exceeding prior highs. Profits on calls have risen and so has the RISK of a shakeout. Not to say that prices won't go higher. I mostly find that bull market rallies go on far longer than is suggested by 'normal' overbought/oversold indications. I usually find that I've predicted the first 3 tops and its that third one that's often the killer!

MAJOR STOCK INDEX TECHNICAL COMMENTARIES

S&P 500 (SPX); DAILY CHART:

The S&P 500 (SPX) chart 'confirmed' the major (bull) trend by its move to decisive new highs above 1285-1292 early this past week; SPX and COMP lagged OEX and the Dow in 'confirming' new highs such as you'll see on their charts. From its 1/17 Close (and the breakout point), SPX is up 1.7% in this afterburner rally.

Technically, downside corrections in a long-term bull trend, like the down drafts of November-December, are thought over when the index exceeds prior high(s); so, welcome back BULL MARKET! The long-term bull/up trend is re-confirmed so to speak. That leaves us with what to do next. Stay with the trend and bullish strategies. Buy calls on dips to 1300? My advice is to sell down to a sleeping level if concerned about hanging on to profits. If thinking of taking on NEW positions, lie down until the feeling passes. Wait until we see what corrections look like.

I didn't like the risk of staying with call positions last week given that SPX was churning around and making no headway in the prior week at 1293-1295. Change came shown by the decisive rally above 1295/1300 setting up a possible 1325 target, perhaps 1350.

Projecting a next peak isn't made easier by the 'overbought' condition suggested by the RSI and the bullish extremes in sentiment. These say, hey, high risk here and high climbing but not "where's the top?"! I'd rather buy a good sized dip than try to pick a top now that the market's cranking.

I see key near technical support at 1295-1290, with fairly major support suggested in the 1260-1265 area.

S&P 100 (OEX) INDEX; DAILY CHART

The S&P 100 (OEX) has had a 2.7% gain if measured from the Close on the date of its last chart breakout (1/3/12) or move to new highs; this was significantly earlier than the larger SPX index's confirming move to new highs of just this past week. 580 OEX was the key resistance and is now key support; next support 570.

OEX looks headed still higher; if measured within a price channel rendered below, the index is more or less half way in a projected range or upward track. Key resistance is suggested in the 607-611 area; the OEX peak of last year (May) was at 611.

A close below the 21-day moving average is a suggested trigger to exit bullish plays or scale back. Closing below 580 very suspect for the bulls. The RSI is at a bearish overbought reading, so let it warn you to not over-trade; whipsaws occur in both directions at volatility extremes.

DOW 30 (INDU) AVERAGE; DAILY CHART:

The Dow 30 (INDU) this past week got immediately back in a bullish groove after week ago Friday's dip under INDU's up trendline; no slippage this past week, only up up and away in an accelerating advance. INDU is in a very steep climb as is seen visually so strongly given the steep slant in its up trendline. These kind of sharp moves give rise to equally sharp corrections so I always figured I was on borrowed time if I over-stayed a smooth exit in one of these steep run ups.

The Dow, old trusty technical 'bellwether', rang up a 'breakout' alert on 12/23 as the Average popped well above the prior double top. There's the champ, as the Dow Industrials is up 3.4% dating from its 12/23/11 Close to Friday 1/20/12. DJX call holders who bought in or more just since this last 'breakout' upswing can thank the good timing of this year's 'Santa Claus rally'.

I noted last week that especially bullish would be a decisive upside penetration of 12480 and an advance to 12600; with what I called an "outside chance" for a rally carrying to the 12800 area. 12800 here we come! as this forecast seems like a tame prediction and 13000 looks like a reasonable objective. My weekly Dow chart suggests tough resistance at 13200.

DOW 30 (INDU) AVERAGE; WEEKLY CHART:

An interesting take on potential Dow resistance is suggested by a return to the previously broken long-term INDU UP trendline per the highlights on my WEEKLY DOW chart seen next. This chart suggests to me that 13200 is a key technical resistance; beyond the obvious of the prior intraday high at 12876 or the big fat round 13000 target.

NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:

The Nasdaq Composite (COMP) chart is bullish. With COMP's strong move of this past week above prior highs in the 2743-2752 area, the primary bull market trend is seen as being 'confirmed' by technical types like me and text book writers, et al. Wearing my trader hat, I've enjoyed the ride higher but is it time to bail?

The continued move higher makes the index look 'extended' by conventional overbought/oversold aspects of the Relative Strength Index or the RSI. A similar dynamic is suggested by the 'overbought extreme-bullishness' peak just seen in my CPRATIO. A period of twists and turns or thrills and chills are coming; sooner OR later. I'd still rather buy a good-sized dip than bet as to when and how a tradable correction sets up.

2800 is next likely resistance, extending to 2850. By some chart measurements I've shared previously, there are longer-term COMP objectives to the 3000 area. I can more reliably predict a sizable risk for a correction, if only back to COMP's up trendline at 2725; I've suggested next COMP support as 2650. The 2600 area is support implied by COMP's major up trendline.

NASDAQ 100 (NDX); DAILY CHART:

The Nasdaq 100 (NDX) index is on a bit of tear and this has been the case since NDX's bullish breakout above a 'symmetrical triangle' pattern I've usually found to be bullish; once there's a breakout above the upper trendline, there's very strong potential for a strong further push in the same direction. I'd also note that Friday's 2437 NDX close was the highest since early-2001.

The primary trend (what Dow would call it) was confirmed as UP when NDX went to new highs above 2400. 2460 looks like a potential target and possible next resistance, but with 2500 a possible next objective also.

Confirmation of the major/primary trend may have only came last week but NDX has been in very strong intermediate move since its mid-December lows; big tech got an especially good 'santa claus rally' boost and it's still going strong here a month later.

I've highlighted support around 2410 or at the current NDX up trendline, with next lower support around 2350 or at the 21-day moving average.

NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:

The Nasdaq 100 tracking stock (QQQ) has a bullish pattern, with the latest successful bullish 'test' so to speak being the move to decisive new highs above 59. Near resistance is at 60, extending to 60.4; next QQQ resistance is at 61.

First line support is now assumed to come in at what was resistance in the 59-59.2 area, with next technical support in the 58 area at the current up trendline; support is also often seen at the 21-day moving average, currently at 57.3

The risk of a pullback in QQQ is high, as with the other indices, but shorting the stock is a less leveraged way to hedge or start to hedge bullish positions; or just to put on a lower risk 'trial' Market short.

RUSSELL 2000 (RUT); DAILY CHART:

The Russell 2000 (RUT) has gone with the bullish Nasdaq in its push to new highs. I've had an 800 target in RUT for a while and the Index is now within striking distance of it. The risk of a correction is probably higher than the odds of RUT continuing pretty much in a 'straight line' to 800. Still, the Index went to new highs and that's a strong (Up) trend confirmation.

Key support is seen at the up trendline, which happens to also correspond with expected support at the prior 769 high. The trendline suggests early-week support at 770-769. Next support is 760. The chart looks most bullish with dips finding support at 760. A decline to 740 still is in support; closes below 740 would be bearish.



GOOD TRADING SUCCESS!


New Option Plays

Software, Industrials, & Shoes

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:

ANF - the midweek bounce in ANF just reversed. The stock looks poised to break below support. A drop under $44.00 or $43.50 might be a bearish entry point.

WPI - shares have been a little volatile lately but the overall trend looks bearish, especially with the oversold bounce failing at resistance near $60 on Friday.

ESRX - this stock continues to drift higher and I would be tempted to buy it here or on a bounce near the $50 level.

MLM - traders bought the dip on Friday. If MLM opens positive on Monday I would be tempted to buy calls.

SIAL - shares look poised to extend their gains after the recent breakout past the 200-dma.

UPDATE: The Greece/PSI negotiations over the weekend appear to have broken down. This is definitely a negative since so many were expecting a resolution with private sector investors (PSI) over the details of the Greek debt haircut by Monday. Monday morning could see a spike downward. We'll have to wait and see if there are any new headlines produced on Sunday.


NEW DIRECTIONAL CALL PLAYS

Cognizant Technology - CTSH - close: 70.17 change: +0.35

Stop Loss: 68.75
Target(s): 76.50
Current Option Gain/Loss: Unopened
Time Frame: exit prior to the Feb. 8th earnings
New Positions: Yes, see below

Company Description

Why We Like It:
It was a bullish week for CTSH. Traders bought the dip near $68 and its 200-ema and finally pushed the stock past technical resistance at the simple 200-dma. I still see some resistance just under $71.00 so we want to use a trigger to buy calls at $71.05. If triggered our target is $76.50. We do not want to hold over the Feb. 8th earnings report. FYI: The Point & Figure chart for CTSH is bullish with an $85 target.

Trigger @ $71.05

- Suggested Positions -

buy the Feb $75 call (CTSH1218B75) current ask $0.90

Annotated Chart:

Entry on January xx at $ xx.xx
Earnings Date 02/08/12 (confirmed)
Average Daily Volume = 2.3 million
Listed on January 21, 2012


Flowserve Corp. - FLS - close: 107.18 change: -1.11

Stop Loss: 104.75
Target(s): 114.50
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
This industrial-sector stock saw some profit taking on Friday but the overall trend is bullish. We want to take advantage of the dip and buy calls on FLS on Monday morning but only if both FLS and the S&P 500 index open positive. If the S&P 500 opens flat (unlikely) then we'll base our entry on FLS' open. More conservative traders may want to wait for FLS to rise pat $108.50 before opening new positions. We are setting our stop loss at $104.75, just under Wednesday's low. I am setting our target at $114.50 but cautious traders may want to exit at $112.00 instead. FYI: The Point & Figure chart for FLS is bullish with a $139 target.

*See Entry Details Above*

- Suggested Positions -

buy the FEB $110 call (FLS1218B110) current ask $2.25

- or -

buy the APR $115 call (FLS1221D115) current ask $3.80

Annotated Chart:

Entry on January xx at $ xx.xx
Earnings Date 02/23/12 (unconfirmed)
Average Daily Volume = 400 thousand
Listed on January 21, 2012


NEW DIRECTIONAL PUT PLAYS

Deckers Outdoor Corp. - DECK - close: 83.87 change: -1.27

Stop Loss: 85.25
Target(s): 77.00
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
Shoe company DECK has been underperforming the market the last several days. Friday saw a spike higher thanks to positive analyst coverage but the rally reversed. Aggressive traders might want to consider new put positions now. I am suggesting we wait for DECK to break below short-term support near $83.00. We will use a trigger at $82.75. If triggered I am suggesting small positions with a stop loss at $85.25. Our target is $77.00. We want to keep our position size small because any unexpected rally might spark some short covering. The most recent data listed short interest at 14% of the relatively small 37.1 million-share float.

Trigger @ 82.75 (Small Positions)

- Suggested Positions -

buy the FEB $80 PUT (DECK1218N80) current ask $2.75

Annotated Chart:

Entry on January xx at $ xx.xx
Earnings Date 02/23/12 (unconfirmed)
Average Daily Volume = 2.0 million
Listed on January 21, 2012



In Play Updates and Reviews

Three Weeks in a Row

by James Brown

Click here to email James Brown

Editor's Note:

The S&P 500 index has extended its 2012 gains to three weeks in a row.

On Friday we exited our BA trade. HUM was stopped out on a downgrade. PVH has not been opened yet.

UPDATE: The Greece/PSI negotiations over the weekend appear to have broken down. This is definitely a negative since so many were expecting a resolution with private sector investors (PSI) over the details of the Greek debt haircut by Monday. Monday morning could see a spike downward. We'll have to wait and see if there are any new headlines produced on Sunday.

Current Portfolio:


CALL Play Updates

Berkshire Hathaway Inc. - BRK.B - close: 79.91 change: +0.32

Stop Loss: 76.75
Target(s): 83.50
Current Option Gain/Loss: +26.6%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
01/21 update: BRK.B continues to rally and shares are nearing possible round-number resistance at $80.00. I would not be surprised to see a little profit taking soon. Readers can launch new positions on a pull back. Look for short-term support in the $78.50-78.00 area. Our multi-week target is $83.50. We do not want to hold over the late February earnings report.

- Suggested Positions -

Long Feb $80 call (BRKB1218B80) entry $0.90

01/18/12 triggered at $78.75
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.

chart:

Entry on January 18 at $78.75
Earnings Date 02/27/12 (unconfirmed)
Average Daily Volume = 4.4 million
Listed on January 12, 2012


Starwood Hotel & Resorts - HOT - close: 53.55 change: +0.25

Stop Loss: 49.75
Target(s): 55.75
Current Option Gain/Loss: +55.6%
Time Frame: exit prior to earnings
New Positions: see below

Comments:
01/21 update: HOT rebounded off its morning dip and climbed to new two-month highs. Shares are nearing potential resistance at its October peak near $54.00. If you're looking for a new entry point I'd wait for a dip or a bounce near $52.00 or its 10-dma. More conservative traders may want to start raising their stop loss.

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

01/18/12 new stop loss @ $49.75
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.

chart:

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


InterOil Corp. - IOC - close: 63.30 change: +1.09

Stop Loss: 58.40
Target(s): 66.00
Current Option Gain/Loss: - 3.5%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
01/21 update: IOC rallied off its Friday morning lows and closed up +1.7% on the session. I don't see any changes from my prior comments. If you're looking for a new entry point consider waiting for a dip or a bounce near support in the $60 area.

Earlier Comments:
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. Our target is $66.00. FYI: The Point & Figure chart for IOC is bullish with a long-term $91 target.

- Suggested Positions -

Long Feb $65 call (IOC1218B65) Entry $5.60*

01/18/12 new stop loss @ 58.40
* entry price is an estimate based on when IOC hit our trigger.

chart:

Entry on January 18 at $61.00
Earnings Date 03/22/12 (unconfirmed)
Average Daily Volume = 537 thousand
Listed on January 17, 2012


iShares Russell 2000 ETF - IWM - close: 78.25 change: +0.05

Stop Loss: 75.45
Target(s): 82.50
Current Option Gain/Loss: -11.4%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
01/21 update: It was option expiration Friday so I was not surprised to see the IWM trade sideways most of the session. The small cap ETF did see a small surge higher toward the closing bell, which might bode well for Monday. I would still consider new positions now or you could wait for a dip closer to the $77.00 level or its 10-dma.

Earlier Comments:
You may want to consider a stop closer to the 10-dma instead (currently 75.95). Our multi-week target is $82.50. Keep in mind the $80.00 level might offer some overhead resistance. FYI: The Point & Figure chart for IWM is bullish with a $90 target.

- Suggested Positions -

Long Feb $80 call (IWM1218B80) Entry $1.14

01/19/12 IWM gapped open higher at $78.13

chart:

Entry on January 19 at $78.13
Earnings Date --/--/--
Average Daily Volume = 40 million
Listed on January 18, 2012


iShares Transportation - IYT - close: 94.08 change: -0.44

Stop Loss: 91.40
Target(s): 94.75 or 98.50
Current Option Gain/Loss: Jan$95c: - 100% & Feb$95c: + 6.8%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
01/21 update: The transportation ETF saw a little pull back on Friday following Thursday's pop higher. Shares spent most of the day drifting sideways along the $94 level. If the market sees a pull back I would look for the IYT to find support near $93 and then near $92. We are raising the stop loss up to $91.40.

The Jan. $95 calls opened at $0.25, which means the bid would have been either $0.05 or $0.00. We're listing it as a -100% loss.

- Suggested Positions -

Jan $95 call (IYT1221A95) entry $0.20, exit $0.00 (-100%)

- or -

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

01/21/22 new stop loss @ 91.40
01/21/12 January $95 calls have expired.
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

chart:

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


Laboratory Corp. - LH - close: 88.83 change: +0.36

Stop Loss: 86.90
Target(s): 94.75
Current Option Gain/Loss: Unopened
Time Frame: up to the Feb. 10th earnings report.
New Positions: Yes, see below

Comments:
01/21 update: The Friday morning spike higher in LH failed at $88.98. Thus we're still waiting for a breakout. Traders did buy the dip again for the third day in a row at its 10-dma. I don't see any changes from my prior comments. The plan is to buy calls when LH hits $89.00 or higher. I am raising our stop loss up to $86.90. We do not want to hold positions over the Feb. 10th earnings report.

Our target is the $94.75 mark. FYI: The Point & Figure chart for LH is bullish with a $105 target.

Trigger @ 89.00

- Suggested Positions -

buy the Feb $90 call (LH1218B90)

01/21/12 new stop loss at $86.90. Still waiting for LH to hit our entry point at $89.00.

chart:

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


Mohawk Industries - MHK - close: 63.30 change: -1.88

Stop Loss: 59.90
Target(s): 67.50
Current Option Gain/Loss: -39.5%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
01/21 update: Friday was a disappointing session for MHK. Real estate related stocks were showing relative weakness. I am concerned that last week's performance on MHK's weekly chart looks like a potential top. I'm not suggesting new positions at this time. More conservative traders might want to raise their stops closer to the $61.00 level.

Earlier Comments:
Our target is $67.50 but we do not want to hold over the February earnings report. More aggressive traders could aim higher.

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

chart:

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


Northrop Gruman - NOC - close: 61.39 change: +0.08

Stop Loss: 58.75
Target(s): 64.00
Current Option Gain/Loss: +26.4%
Time Frame: up to NOC's early February earnings report.
New Positions: see below

Comments:
01/21 update: After a strong Wednesday-Thursday rally shares of NOC took a day off to rest on Friday. If the market dips I would look for NOC to retest the $60 area. Please note our new stop loss at $58.75.

We plan to exit prior to NOC's earnings report in early February. FYI: The Point & Figure chart for NOC is bullish with a $71 target.

- Suggested Positions -

Long Feb $60 call (NOC1218B60) Entry $1.70

01/21/12 new stop loss @ 58.75

chart:

Entry on January 19 at $60.34
Earnings Date 02/01/12 (unconfirmed)
Average Daily Volume = 1.5 million
Listed on January 18, 2012


Omnicom Group - OMC - close: 46.71 change: -0.98

Stop Loss: 45.45
Target(s): 49.00
Current Option Gain/Loss: +22.2%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
01/21 update: OMC's rally seemed to run out of gas on Friday. The stock reversed course with a -2.0% decline. OMC could easily drop toward its 10-dma near $46 without seriously damaging its multi-week up trend but I will point out that last week's performance looks like a potential top on the weekly chart.

I am not suggesting new bullish positions at this time.

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

01/19/12 new stop loss @ 45.45, readers may want to take profits now (+66%)
01/18/12 new stop loss @ 44.75

chart:

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


PVH Corp. - PVH - close: 76.64 change: -0.31

Stop Loss: 73.90
Target(s): 83.50
Current Option Gain/Loss: Unopened
Time Frame: 4 to 6 weeks
New Positions: Yes, see below

Comments:
01/21 update: Our new PVH trade is not open yet. Shares of PVH opened higher on Friday but the S&P 500 did not (although it was only down a very small margin at the open). That's okay since neither the index or PVH moved very much. I am suggesting we try again. I am suggesting small bullish positions at the open on Monday but only if both PVH and the S&P 500 index open positive. Nimble traders might consider buying a dip near $75.00 if the market sees a pull back. FYI: The Point & Figure chart for PVH is bullish with a $92 target.

*See Entry Details Above*

- Suggested Positions -

buy the Feb $77.50 call (PVH1218B77.5)

- or -

buy the Mar $80 call (PVH1217C80)

01/21/12 trade not open yet. try again.

chart:

Entry on January xx at $ xx.xx
Earnings Date 03/28/12 (unconfirmed)
Average Daily Volume = 867 million
Listed on January 19, 2012


Teva Pharmaceuticals - TEVA - close: 45.83 change: +0.04

Stop Loss: 43.75
Target(s): 49.50
Current Option Gain/Loss: +12.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
01/21 update: TEVA managed to trade over $46 on Friday before paring its gains. I would expect a dip toward $45.00 or its simple 10-dma soon.

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

01/18/12 TEVA has rebounded. Use it as a new entry point.
01/17/12 Be careful. TEVA hit our trigger and reversed to close back under $45.00

chart:

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: 66.58 change: -0.34

Stop Loss: 64.75
Target(s): 68.50
Current Option Gain/Loss:(Jan$65c: +85.0%) & Feb$65c: +34.2%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
01/21 update: TJX spiked to a new record high and almost hit $67.50 before reversing lower and closing in the red. If recent history is any guide then we might look for a dip back toward the $65.50 area soon. I am not suggesting new positions at this time.

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

- Suggested Positions -

Long Feb $65 call (TJX1218B65) Entry $1.75

01/18/12 adjusted exit target to $68.50
01/18/12 closed Jan $65 calls @ $1.85 (+85.0%)
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

chart:

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

Currently we do not have any active put trades.


CLOSED BULLISH PLAYS

Boeing Co. - BA - close: 75.52 change: -0.04

Stop Loss: 73.65
Target(s): 76.00
Current Option Gain/Loss: -44.4%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
01/21 update: We have run out of time on our January calls for BA. We adjusted our plan to exit at the opening bell on Friday. BA opened at $75.68. The bid on our January $75 calls opened at $0.60 (-44.4).

- Suggested Positions -

Long 2012Jan $75 call (BA1221A75) entry $1.08 exit $0.60 (-44.4%)

01/20/12 exited at the open.
01/19/12 prepare to exit at the open tomorrow
01/18/12 adjust exit target to $76.00, only 2 days left
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.

chart:

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


Humana Inc. - HUM - close: 92.15 change: -2.79

Stop Loss: 92.95
Target(s): 99.75
Current Option Gain/Loss: -61.5%
Time Frame: 2 to 3 weeks
New Positions: see below

Comments:
01/21 update: HUM was a significant underperformer on Friday thanks to a downgrade by Wells Fargo. The stock spiked lower and fell to $90.95 intraday. Our stop loss was hit at $92.95.

The overall trend is still up. Traders may want to consider buying dips or a bounce near $90 or its rising 50-dma. 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 -

Feb $100 call (HUM1218B100) entry $1.30, exit $0.50 (-61.5%)

01/20/12 stopped out at $92.95, drop on analyst downgrade
01/17/12 HUM gapped open higher at $95.75, above our trigger at $95.25

chart:

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