Option Investor
Newsletter

Daily Newsletter, Tuesday, 3/6/2012

Table of Contents

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

Market Wrap

Super Tuesday

by Jim Brown

Click here to email Jim Brown
This may be Super Tuesday for Republicans but it was not a super day in the markets.

Market Statistics

The Dow was not super today with a loss of more than 200 points. This was the first triple digit loss since December 28th and the first decline of more than 200 points since November 23rd. This was the longest winning streak without a triple digit loss since 2006.

The drivers for the decline, other than just needing a rest, were worries over Greece, lower growth in Europe and China and a surprise decline in GDP for Brazil.

Greece is back in the headlines on fears the private sector debt swap is not going to be approved. That would kill the second 130 billion euro bailout scheduled for March 20th. Greece needs 75% of the private sector debt to be tendered in the debt swap in order to enact the collective action clauses to force the remainder of debt owners to take the loss.

Greek officials were blanketing the news wires with threats of default should the debt swap not be approved. This is typical of this type of situation. They are trying to scare bond holders into tendering their bonds by threatening to pay them zero if the swap is not approved. The Greek Finance Minister said "Greece does not contemplate the availability of funds to make payments to private sector creditors that decline to participate in the debt swap." In another comment "the official sector (US, ECB, IMF) will not finance Greece's economic program and Greece will need to restructure its debt on different terms to those set out in the current invitation." That was a nuclear threat for a disorderly default if Greece failed to get the second bailout because of a failed debt swap.

European banks and large U.S. banks sold off on the worries over the potential for failure in the debt swap.

The worry over Greece for the last two years and the European sovereign debt problems in general have forced austerity all across Europe. That has forced economic weakness and it is growing. We saw lower than expected numbers from the U.K. and the EU over the last several days. There is a worry Europe will fall back into recession. The EU economy contracted by 0.3% in Q4.

China warned that growth would slow to 7.5% from prior estimates of 8.0%. While that is slow for China it is still above the 7.0% level needed to continue expanding employment and keep China's economic growth surge intact. This would be the lowest growth target since 2004.

Brazil reported GDP for 2011 at 2.7% that was slightly below estimates of 2.8%. You would have thought they said GPD fell by -2.7% from the impact on the markets. Most analysts expect the central bank to cut rates on Wednesday in order to stimulate growth. That growth is expected to rise to 3.3% to as much as 4.5% before the end of 2012.

U.S. factory orders for January declined -1.0% on Monday but that was better than the consensus estimate of -1.5%. It was the first decline in three months. However, January is not normally a strong month for factory orders. It was a negative headline for the market but it was not unexpected.

This flurry weak economic news finally overwhelmed the global markets and especially those in the USA. Even with the Dow down -1.6% today this was NOT a material event, it has been expected for weeks and it will be beneficial for future gains.

Today's economic news was insignificant. The weekly chain store sales snapshot showed a +1.3% rise in sales last week. This report is normally ignored because of the high volatility from week to week. It had no bearing on today's market.

The calendar for the rest of the week is very busy with employment reports and other events like the Apple announcement and the Greek debt swap.

Economic Calendar

The Apple announcement is scheduled for 10:AM Pacific time, 1:PM ET, and everyone is still expecting it to be an iPad 3 announcement. If the new iPad does have 4G LTE technology then expectations will immediately begin to anticipate LTE to be in the next version of the iPhone. This will be a major announcement. The stock dropped sharply at the open today to trade as low as $516 before rebounding to close at $530. From Thursday's high at $548 to this morning's low of $516 there was a -$32 drop. Does this mean the normal Apple volatility associated with major announcements has now passed? If you knew the answer to that question you could be a millionaire by Wednesday's close. If the answer is no then we could see Apple at $500 before the week is out. If the answer is yes then we could easily see new highs over $550.

Apple Chart

In stock news today Consol Energy (CNX) announced it will idle the Virginia Buchanan mine until demand increases and existing supplies decline. The problem is the warm winter weather that failed to deplete the thermal coal supplies stockpiled for the winter months. The same problem exists in natural gas supplies which could reach new highs ahead of the summer usage period.

Consol will reduce production by 295,000 tons per month as it reduces continuous mining operations to five days a week. Last month Consol said it would idle another unit in northern West Virginia.

Consol Chart

Online streaming music provider Pandora Media (P) said it experienced a surge in listeners but will continue posting losses the rest of the year. Earnings for the current quarter are expected to be a loss of 18 to 21-cents. Analysts were expecting a loss of only 2-cents. For the full year Pandora expects to lose 11 to 16-cents.

Pandora said Q4 revenue rose +71% and estimated revenue for all of 2012 at $410 to $420 million. That was in line with estimates of $418 million. Pandora shares fell about -15% after the news.

Pandora Chart

Cypress Semiconductor (CY) warned on Q1 earnings saying it now expects revenue of $180-$190 million, down from the $200-$210 million estimate in January. It now expects earnings of 8-11 cents compared to analyst estimates of 16 cents and $205.6 million. Despite the warning Cypress said bookings stabilized in January and improved over the last six months. "We continue to believe the current quarter will be the bottom for revenue and bookings." Shares dipped to $15 in afterhours trading but rebounded to unchanged.

Cypress Chart

Monster Worldwide (MWW) extended its gains another +11% after it confirmed it was hiring financial advisers to help it improve operations. On Monday Monster said it hired Stone Key Partners LLC and BofA Merrill Lynch to explore strategic alternatives. In plain language that means to hunt for a buyer. Monster missed earnings estimates for Q4 and said it was laying off 400 people.

Monster Chart

The dollar spiked again on the GDP announcement from Brazil and the worries over Greece. The dollar is always the safe port in a storm but once the Greek bailout is behind us I expect the Euro to recover. The strong spike in the dollar depressed commodities again.

Dollar Index Chart - 30 Min

Crude oil declined on the lower growth worries and the spike in the dollar. Lower growth equals lower demand. However, despite some heavy selling the bears were unable to push it much below the $105 support level. Overnight tonight it is holding right at $105.

Also pushing oil prices lower was news Iran has agreed to let IAEA inspectors visit the Parchin military complex, which was denied on the last visit. Iran is suspected of conducting tests on creating a housing and trigger for a nuclear weapon at Parchin. Conspiracy theorists would say Iran has now had time to clean up any evidence of those tests. Will the IAEA be allowed unrestricted access or only be allowed to see what Iran wants to show them in order to win a public relations victory? It will be interesting to see what the IAEA reports after it visits Parchin.

Gasoline prices declined for the first time in a month. Prices declined a penny to $3.76 per gallon. Enjoy it while it lasts. The EIA expects gas prices to average $3.92 this summer and they are normally low because they don't want to become a political pawn.

WTI Crude Chart

Brent Crude Chart

Gold also declined on the spike in the dollar and the expectations for industrial demand to decline thanks to the slowing global economy. This is temporary and it came to rest on the 200-day average. In theory it could return to the 300-day at $1600 and still retain its longer term uptrend.

Gold Chart

Silver Chart

In the weekend commentary I showed a Russell 2000 chart with the tag line, "Turn out the lights, the party is over." The Russell breakdown from the month long consolidation pattern was clearly a signal that fund manager sentiment had changed. It was the leading indicator for a potential decline in the broader markets. Obviously traders did not have the news events of this week but that just illustrates another point. "The market will always find an excuse when it is time to take profits."

I have said that many times. When the market can no longer make upward progress it will sometimes linger at lofty levels until traders find an excuse to sell. Those excuses this week were Greece, Europe, China, Brazil, payrolls, etc. All of those existed as problems the prior week but once the market began to decline the market reporters played pin the tail on the excuse and those were the ones that popped up.

Now that a long awaited decline has appeared the national pastime will be picking a bottom. The technicians were out in force today calling for a decline in the S&P to 1300, 1285, 1200 and even 1160. Get a life!

The market is down for two days and every bearish analyst is trying to make a name for themselves by guessing a bottom. Everyone has been saying for weeks we needed a -3% to -5% decline to equalize pressures and allow new buyers into the market for the next leg higher. The S&P declines -2.3% from the March 1st highs and suddenly we should expect a new bear market? Talk about jumping to conclusions.

The S&P came to a stop at 1340, which just happens to be decent support. Depending on the ADP Employment report Wednesday morning and the Apple news it could easily be a rebound point.

If the decline does continue I don't think we will see a move below 1300. That would be a -5.7% decline from the 1375 high and well within the realm of reason for a normal bout of profit taking. Personally I don't think we will see a decline that low. It may happen over the next month simply because of the lack of news to overcome the normally slow March period. I believe we will find a bottom well before that simply because so many people have been waiting on the sidelines for a buying opportunity. Most retail traders and quite a few money managers missed the dip in December or they were expecting to buy the normal January dip that never occurred.

Volume was 7.5 billion shares and a decent increase over the last week. More importantly down volume of 6.7 billion shares was roughly 10:1 over advancing volume of 669 million. Decliners beat advancers 5764 to 876. Those numbers normally signify a capitulation day but capitulation normally comes after a string of losing sessions not after only three sessions.

The volume imbalance is a key point. Decliners have been higher than advancers for three sessions and rising. It is possible today was a reversal day but I think there will be a watch and see attitude depending on the ADP report. If Apple's announcement is seen as bullish and the stock rockets higher the Nasdaq will follow and that could drag all the indexes back into the green. We just don't know if that will be enough to drag hesitant buyers off the sidelines before the Nonfarm Payrolls on Friday.

Major support at 1340 and 1310.

S&P Chart

The Dow may have posted its first 200 point loss since November 23rd and first triple digit loss in 2012 but came to a screeching halt at support at 12,750. This is exactly where you would have expected it to stop on a half-hearted bout of profit taking. If traders are not enticed to buy the dip we could easily see a drop to 12,600. I think it would take some additional bad news to break below that support level but the market always seems to over react to every situation. Fortunately the next two support levels are very easy to see and even a novice chart reader should have no trouble picking entry points for a bounce.

Support at 12,750, 12,600, 12,350.

Dow Chart

I jinxed the Nasdaq over the weekend when I pointed out the long unbroken uptrend since December. Fortunately the breakdown had a clear support target at 2900 and that is exactly where the drop stalled at 2900.58.

The Nasdaq direction is up to Apple. Whatever happens to Apple shares after their 1:PM announcement is going to determine the direction of the Nasdaq. This is not going to be a fundamental or technical move. It will be an Apple move as the only $500 billion market cap stock in the index.

Should 2900 break the next target would be 2795.

Nasdaq Chart

The Russell 2000 may have telegraphed the broader market decline but I am not sure it is going to do us the same favor to the upside. I suspect fund managers are going to be nervous about moving back into the small cap sector until they feel the broader market has finished taking profits. A spike by Apple is not likely to suddenly rebuild confidence in the market or the small caps.

The Russell has support at every 20 point level within reach. That is 780, 760 and 740. I would love to see 780 hold but I am not making any predictions. The Russell is already down over -5% from the 830 high on Feb-28th. The Russell is known for overreactions so a continued decline to 780 or lower is entirely possible.

We need to watch the Russell for signs of fund managers returning but I doubt it will be immediately obvious.

Russell 2000 Chart

Tuesday was a solid session of profit taking with a 10:1 volume imbalance. It is too bad there were not a couple more down days in the prior week so we could call it a capitulation day. That is still possible and I would be thrilled to see a solid rebound begin. I think it would be far too easy for a three day dip to erase three months of bullish imbalances but it is possible.

ADP and Apple will be the market movers for Wednesday so grab a cup of coffee and buckle your seatbelt. It could be a wild ride.

Have you tried my new Ultimate Investor newsletter? This publication focuses on "investing" not "trading." The goal is to enter lower volatility positions with strong fundamentals and sleep comfortably at night. Click here for the newsletter description

Jim Brown

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New Option Plays

Healthcare Weakness

by James Brown

Click here to email James Brown


NEW DIRECTIONAL PUT PLAYS

Edwards Lifesciences - EW - close: 68.81 change: -1.99

Stop Loss: 72.25
Target(s): 63.00
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
The sell-off in EW is picking up speed. Shares just broke down under the $70.00 level. There might be some short-term support near $68.00 but the next level of major support looks like the $65.00 and $62.00 levels. The Point & Figure chart has turned bearish with a $61.00 target.

I am suggesting small bearish positions at the open tomorrow with a stop loss at $72.25. Our target is $63.00. More conservative traders may want to wait for a failed rally near $70.00 before considering new positions.

- Suggested (Small) Positions -

buy the Apr $65 PUT (EW1221p65) current ask $1.80

Annotated Chart:

Entry on March xx at $ xx.xx
Earnings Date 04/19/12 (unconfirmed)
Average Daily Volume = 1.1 million
Listed on March 06, 2012


WellPoint, Inc. - WLP - close: 64.34 change: -0.85

Stop Loss: 65.25
Target(s): 60.25
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
WLP is consolidating above support in the $63.50 area. The trend of lower highs would suggest the stock will see a breakdown. If that happens the next level of support is $60.00 or the summer 2011 lows near $57.00.

I am suggesting a trigger to open small bearish positions at $63.40 with a stop loss at $65.25. Our target is $60.25.

NOTE: WLP is due to begin trading ex-dividend tomorrow. Expect a gap down at the open by 29 cents to account for the dividend.

Trigger @ 63.40 (small positions)

- Suggested Positions -

buy the Apr $62.50 PUT (WLP1221p62.5)

Annotated Chart:

Entry on March xx at $ xx.xx
Earnings Date 04/26/12 (unconfirmed)
Average Daily Volume = 2.5 million
Listed on March 06, 2012



In Play Updates and Reviews

Stocks Break Down

by James Brown

Click here to email James Brown

Editor's Note:

The market posts a widespread loss, marking the worst day for 2012 thus far. We saw several trades get stopped out. Plus, I am removing our untriggered plays in GTLS and HLF.

Current Portfolio:


CALL Play Updates

Alexion Pharma. - ALXN - close: 83.28 change: -0.92

Stop Loss: 82.45
Target(s): 89.50
Current Option Gain/Loss: Apri$85c: -28.9% & Aprl$90c: -35.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
03/06 update: ALXN slowly traded lower with shares falling toward their 20-dma. ALXN ended the session with a -1.0% decline after hitting an intraday low of $82.70. More aggressive traders may want to place their stop under $82.00, which could be short-term support. At the current pace ALXN could hit our stop loss at $82.45 if the market declines again tomorrow.

Earlier Comments:
We want to keep our position size small to limit our risk.

- Suggested (SMALL) Positions -

Long Apr $85 call (ALXN1221D85) Entry $4.15

- or -

Long Apr $90 call (AXLN1221D90) Entry $2.00

03/05/12 triggered at $85.55, adjust stop to $82.45
03/03/12 adjust entry strategy: buy calls at $85.55, stop loss @ 82.75
03/01/12 adjust entry strategy. buy calls if both ALXN and S&P 500 open positive tomorrow
02/29/12 trade not open yet. Adjust entry to use a buy the dip trigger at $82.50 with a stop loss at $81.45

Entry on March 05 at $85.55
Earnings Date 04/23/12 (unconfirmed)
Average Daily Volume = 1.3 million
Listed on February 28, 2012


Airgas Inc. - ARG - close: 80.42 change: -1.13

Stop Loss: 79.90
Target(s): 87.00
Current Option Gain/Loss: -85.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
03/06 update: ARG spiked lower at the open, following the major averages lower. Shares spent the rest of the day drifting sideways in a narrow range. ARG should have support near $80.00 but if the market declines again tomorrow we could see shares hit our stop loss at $79.90 on an intraday move lower. I am not suggesting new positions at this time.

- Suggested Positions -

Long Mar $82.50 call (ARG1217C82.5) Entry $1.00

03/03/12 new stop loss @ 79.90
02/28/12 trade opened @ 82.21
02/27/12 not open yet, buy calls at the open tomorrow
02/24/12 not open yet, try again.

Entry on February 28 at $82.21
Earnings Date 05/07/12 (unconfirmed)
Average Daily Volume = 528 thousand
Listed on February 23, 2012


American Express Co - AXP - close: 51.77 change: -1.23

Stop Loss: 51.40
Target(s): 57.50
Current Option Gain/Loss: -47.9%
Time Frame: 4 to 8 weeks
New Positions: Yes, see below

Comments:
03/06 update: Financial stocks were hit hard today. AXP underperformed with a -2.3% decline. The breakdown under $52.00 and its 30-dma is certainly short-term bearish. Any further declines tomorrow could hit or stop at $51.40. I am not suggesting new positions at this time.

Earlier Comments:
The plan was to keep our position size small. Our multi-week target is $56.50. Keep in mind that AXP doesn't move super fast. FYI: The Point & Figure chart for AXP is bullish with a $75 target.

- Suggested Positions - (Small Positions)

Long Apr 52.50 call (AXP1221D52.5) Entry $2.40

03/03/12 new stop loss @ 51.40
02/29/12 AXP gapped down at $53.46
02/28/12 not open yet. buy calls at the open tomorrow.
02/27/12 not open yet, try again.

Entry on February 29 at $53.46
Earnings Date 04/19/12 (unconfirmed)
Average Daily Volume = 5.7 million
Listed on February 25, 2012


Capital One Financial - COF - close: 48.27 change: -1.11

Stop Loss: 47.75
Target(s): 54.75
Current Option Gain/Loss: Mar$50c: -80.0% & Apr$50c: -45.6%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
03/06 update: Profit taking was widespread in the financial stocks and COF lost -2.2% (versus -2.4% in the XLF). Shares are now testing short-term support near $48.00. Any further declines and COF could hit our stop loss at $47.75. I am not suggesting new positions at this time.

Earlier Comments:
We want to keep our position size small to limit our risk. Our multi-week exit target is $54.75.

(small positions)

- Suggested Positions -

Long Mar $50 call (COF1217C50) entry $1.30

- or -

Long Apr $50 call (COF1221D50) entry $2.30

03/03/12 new stop loss at $47.95
02/28/12 triggered at $50.25

Entry on February 28 at $50.25
Earnings Date 04/23/12 (unconfirmed)
Average Daily Volume = 6.4 million
Listed on February 15, 2012


Sherwin-Williams - SHW - close: 103.10 change: +0.41

Stop Loss: 99.80
Target(s): 104.75
Current Option Gain/Loss: +57.1%
Time Frame: 3 to 5 weeks
New Positions: see below

Comments:
03/06 update: SHW continues to show relative strength. Shares bounced off the morning lows to rally +0.4%. I am suggesting we go ahead and sell half of our current position tomorrow morning at the open. I am also raising our stop loss to $99.80.

- Suggested Positions -

Long Mar $100 call (SHW1217C100) Entry $2.10

03/06/12 new stop loss @ 99.80, plan to sell half of our call position at the open tomorrow morning. current bid is $3.30 (+57.1%)
02/28/12 new stop loss @ 99.40
02/27/12 readers may want to take profits now (@ +80.9%)
02/25/12 new stop loss @ 98.90
02/22/12 new stop loss @ 98.25

Entry on February 17 at $100.25
Earnings Date 04/23/12 (unconfirmed)
Average Daily Volume = 1.0 million
Listed on February 14, 2012


Whole Foods Market - WFM - close: 80.94 change: -1.69

Stop Loss: 79.95
Target(s): 87.50
Current Option Gain/Loss: -37.7%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
03/06 update: Suddenly Friday's breakout to new highs looks like a bull trap. WFM gave up -2.0% in profit taking today. If the market continues lower tomorrow then we'll likely see WFM test the $80.00 level. We have a stop loss at $79.95.

- Suggested Positions -

Long Apr $85 call (WFM1221D85) Entry $1.88

Entry on March 02 at $82.55
Earnings Date 05/03/12 (unconfirmed)
Average Daily Volume = 1.9 million
Listed on March 01, 2012


PUT Play Updates

Apple Inc. - AAPL - close: 530.26 change: - 2.90

Stop Loss: n/a
Target(s): see below.
Current Option Gain/Loss: Mar$520P: -25.7% & weekly Mar$525p: -43.9%
Time Frame: 1 to 2 weeks
New Positions: see below

Comments:
03/06 update: It was a rough morning for AAPL as well. Shares gapped open lower at $523.66 and dipped to $516.22 before bouncing back. The rebound failed to break back above its simple 10-dma, which is now short-term resistance.

Tomorrow is the big day for AAPL's announcement. Will it be the iPad 3 or what some are suspecting AAPL will call the iPad HD? Frankly, it doesn't matter. Shares could see an initial spike on the news but we're expecting a sell-the-news reaction.

Sadly, the -$10 gap down this morning, killed our entry point on these short-term puts. The March $520 puts gapped open more than $3.00 to $9.90. The March $525 puts that expire in three days gapped open at $9.05 (almost +4.00), which really crushed our entry point on that particular position. I have adjusted our exit target prices below. I am not suggesting new positions at this time.

- Suggested (Small) Positions -

Long Mar $520 PUT (AAPL1217o520) Entry $9.90
Exit target: when the option bid hits $14.50

- or -

Very Aggressive - these expire in 3 days
Long Mar $525 PUT (AAPL1209o525) Entry $9.05
Exit target: when the option bid hits $12.50

03/06/12 AAPL gapped down -$10, which hurt our entry point on these short-term puts. I've adjusted our exit targets!

Entry on March 06 at $523.66
Earnings Date 04/24/12 (unconfirmed)
Average Daily Volume = 22.1 million
Listed on March 05, 2012


AMERIGROUP Corp. - AGP - close: 64.75 change: -1.77

Stop Loss: 68.75
Target(s): 61.00
Current Option Gain/Loss: Mar$65P: +25.0% & Apr$60P: +12.5%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
03/06 update: AGP gapped open lower at $66.00 and then fell to a -2.6% decline. The breakdown to new six-week lows is a good sign for our bearish trade. Our target is $61.00.

NOTE: March puts expire in less than two weeks. April puts have much wider spreads.

- Suggested Positions -

Long Mar $65 PUT (AGP1217o65) entry $1.40

- or -

Long Apr $60 PUT (AGP1221p60) entry $1.20 <-- 1.35/1.90 -->

03/06/12 AGP gapped open lower at $66.00

Entry on March 06 at $66.00
Earnings Date 05/02/12 (unconfirmed)
Average Daily Volume = 950 thousand
Listed on March 05, 2012


Cliffs Natural Resources - CLF - close: 60.35 change: -1.57

Stop Loss: 66.25
Target(s): 57.50
Current Option Gain/Loss: Mar$65p: +77.1% & Apr$60p: +65.8%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
03/06 update: Material names continue to underperform. CLF gapped open lower and then hovered near round-number support at $60.00. Shares settled with a -2.5% decline. I warned readers that this level could be support and CLF could see an oversold bounce here. I'm not suggesting new positions at this time.

- Suggested (Small) Positions -

Long Mar $65 put (CLF1217o65) Entry $2.85

- or -

Long Apr $60 put (CLF1221p60) Entry $2.02

Entry on March 05 at $63.57
Earnings Date 04/30/12 (unconfirmed)
Average Daily Volume = 3.4 million
Listed on March 03, 2012


Polaris Industries Inc. - PII - close: 64.21 change: -1.30

Stop Loss: 68.05
Target(s): 60.25
Current Option Gain/Loss: Mar65P: +32.1% & Apr65P: +14.2%
Time Frame: 3 to 4 weeks
New Positions: , see below

Comments:
03/06 update: PII dipped to its 50-dma and bounced. Shares still closed with a -1.9% decline. I am not suggesting new positions at this time. Our exit target is $60.25.

- Suggested Positions -

Long Mar $65 PUT (PII1217o65) Entry $1.40

- or -

Long Apr $65 PUT (PII1221P65) Entry $3.15

Entry on March 05 at $65.45
Earnings Date 04/19/12 (unconfirmed)
Average Daily Volume = 580 thousand
Listed on March 03, 2012


CLOSED BULLISH PLAYS

BorgWarner Inc. - BWA - close: 79.55 change: -3.36

Stop Loss: 81.25
Target(s): 89.00
Current Option Gain/Loss: -87.0%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
03/06 update: BWA has seen a rough two days of profit taking after Friday's intraday pull back from new highs. Shares gapped open lower this morning at $81.55 and quickly hit our stop loss at $81.25. The sell-off continued and BWA has closed under what should have been support near $80.00.

- Suggested Positions -

Mar $85 call (BWA1217C85) Entry $1.55 exit $0.20 (-87.0%)

03/06/12 stopped out at $81.25
03/03/12 new stop loss @ 81.25
02/25/12 new stop loss @ 79.25
02/17/12 trade opened on BWA's gap open higher at $82.49

chart:

Entry on February 17 at $82.49
Earnings Date 04/30/12 (unconfirmed)
Average Daily Volume = 1.3 million
Listed on February 16, 2012


Coach, Inc. - COH - close: $73.12 change: -3.05

Stop Loss: 73.75
Target(s): 82.50
Current Option Gain/Loss: Mar$75c: -67.3% & Apr$77.50c: -43.7%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
03/06 update: Ouch! After holding up reasonably well the last couple of days COH was hammered for a -4.0% decline. I could not find any news to account for the relative weakness. It's probably just traders rushing to lock in gains on a stock that was hitting record highs three days ago. The breakdown under $74.00 is definitely short-term bearish. Our stop loss was hit at $73.75.

- Suggested Positions -

Mar $75 call (COH1217c75) entry $2.45 exit $0.80 (-67.3%)

- or -

Apr $77.50 call (COH1221D77.5) entry $2.40 exit $1.35 (-43.7%)

03/06/12 stopped out at $73.75
03/01/12 COH hit our trigger at $76.75

chart:

Entry on March 01 at $76.75
Earnings Date 04/26/12 (unconfirmed)
Average Daily Volume = 2.7 million
Listed on February 27, 2012


Goldman Sachs - GS - close: 113.67 change: -4.96

Stop Loss: 116.40
Target(s): 125.00
Current Option Gain/Loss: -55.2%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
03/06 update: GS was showing so much promise on its breakout four days ago. Unfortunately the rally has been crushed. Financials were hit hard today and GS underperformed with a -4.1% decline. The stock gapped open lower at $116.12, which is underneath our stop loss of $116.40. The play was closed immediately. Last week's breakout now looks like a bull trap pattern.

Earlier Comments:
GS can be a volatile stock at times so we want to keep our position size small.

(small positions) - Suggested Positions -

Mar $120 call (GS1217C120) Entry $2.10 exit $0.94 (-55.2%)

03/06/12 stopped out at $116.12 (gap down exit)
03/03/12 new stop loss @ 116.40
02/28/12 GS disclosed it has received a Wells Notice from the SEC
02/28/12 triggered at $118.25

chart:

Entry on February 28 at $118.25
Earnings Date 04/19/12 (unconfirmed)
Average Daily Volume = 6.2 million
Listed on February 21, 2012


Chart Industries - GTLS - close: 66.37 change: -2.45

Stop Loss: 66.40
Target(s): 78.50
Current Option Gain/Loss: Unopened
Time Frame: 3 to 6 weeks
New Positions: Yes, see below

Comments:
03/06 update: I am removing GTLS as a bullish candidate. Nimble traders may want to watch it for a dip or a bounce in the $65.00-64.00 zone, which could be support (since it was prior resistance). If you do buy a dip I'd keep your stop loss tight.

Trigger to buy calls @ 70.75

Our Trade Did Not Open

03/06/12 removed GTLS from the newsletter
03/02/12 trade did not open. Use a trigger at $70.75

chart:

Entry on March xx at $ xx.xx
Earnings Date 05/03/12 (unconfirmed)
Average Daily Volume = 665 thousand
Listed on March 01, 2012


Herbalife Ltd. - HLF - close: 65.51 change: -1.46

Stop Loss: 65.45
Target(s): 72.50
Current Option Gain/Loss: Unopened
Time Frame: 3 to 6 weeks
New Positions: Yes, see below

Comments:
03/06 update: HLF continues to pull back from its recent high near $68.00. Shares now look like they could see a deeper correction toward the $63-62 zone. I am removing HLF from the newsletter as an active candidate but I would keep it on your watch list for a dip in the $62.50 area.

Trigger to buy calls @ $68.25 (small positions)

Our Trade Did Not Open

03/06/12 removed HLF from the newsletter
03/02/12 trade did not open. Adjust strategy to buy calls at $68.25 with a stop at $65.45.

chart:

Entry on March xx at $ xx.xx
Earnings Date 05/02/12 (unconfirmed)
Average Daily Volume = 1.5 million
Listed on March 01, 2012


Noble Corp. - NE - close: 38.20 change: -1.22

Stop Loss: 38.45
Target(s): 44.75
Current Option Gain/Loss: -49.7%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
03/06 update: Oil and energy stocks were hit hard today. Profit taking in NE pushed the stock to a -3.0% decline. Shares actually gapped open lower at $38.57 and quickly hit our stop loss at $38.45. NE might have some support near the $36.00 level so I'd keep it on your watch list.

- Suggested Positions -

Apr $40 call (NE1221D40) Entry $1.89 exit $0.95 (-49.7%)

03/06/12 stopped out at $38.45

chart:

Entry on March 01 at $40.24
Earnings Date 04/19/12 (unconfirmed)
Average Daily Volume = 4.4 million
Listed on February 29, 2012


Weight Waters Intl. - WTW - close: 77.50 change: -0.65

Stop Loss: 77.45
Target(s): 86.50
Current Option Gain/Loss: -89.2%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
03/06 update: We have been cautious on WTW for days now and today's widespread market decline was strong enough to push WTW to our stop loss at $77.45.

- Suggested Positions -

Mar $80 call (WTW1217C80) Entry $1.40 exit $0.15 (-89.2%)

03/06/12 stopped out at $77.45
02/24/12 WTW gapped open higher at $80.26, which was above our trigger at $80.25.

chart:

Entry on February 24 at $80.26
Earnings Date 05/07/12 (unconfirmed)
Average Daily Volume = 1.8 million
Listed on February 23, 2012


S&P Oil ETF - XES - close: 36.83 change: -1.08

Stop Loss: 36.90
Target(s): 43.00
Current Option Gain/Loss:(Feb37c: -48.1%) & Mar36c: -55.1%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
03/06 update: Oil and energy-related stocks were hammered lower and the XES ETF gapped down at $37.07. The sell-off pushed XES to an intraday low of $36.60. Our stop was hit at $36.90.

Earlier Comments:
The option spreads on the XES a bit wide, which makes this a higher-risk trade. I am suggesting we keep our position size small to limit our risk.

(small positions) - Suggested Positions -

Mar $36 call (XES1217C36) Entry $2.45 exit $1.10 (-55.1%)

03/06/12 stopped out at $36.90
02/18/12 new stop loss @ $36.90
02/14/12 exited Feb. calls at the close: bid @ $0.70 (-48.1%)
02/13/12 prepare to exit our Feb. $37 calls at the closing bell tomorrow.

chart:

Entry on February 06 at $37.75
Earnings Date --/--/--
Average Daily Volume = 177 thousand
Listed on February 04, 2012


Oil & Gas Exploration ETF - XOP - close: 57.14 change: -1.10

Stop Loss: 57.45
Target(s): 63.00
Current Option Gain/Loss: Mar$60c: -67.0% & Jun$60c: -23.1%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
03/06 update: The XOP is another example of the profit taking in oil and energy stocks. This ETF gapped open lower at $57.34, which was below our stop loss at $57.45. I would keep this ETF on your watch list should it bounce near the rising 50-dma.

- Suggested Positions -

Mar $60 call (XOP1217C60) Entry $1.70 exit $0.41 (-75.8%)

- or -

Jun $60 call (XOP1216F60) Entry $4.10 exit $2.60 (-36.5%)

03/06/12 stopped out at $57.34, a gap down under our stop
02/29/12 adjusting stop loss to $57.45
02/23/12 new stop loss @ 57.85

chart:

Entry on February 14 at $58.75
Earnings Date --/--/--
Average Daily Volume = 3.8 million
Listed on February 13, 2012