Option Investor
Newsletter

Daily Newsletter, Wednesday, 3/14/2012

Table of Contents

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

Market Wrap

Consolidation Day to Absorb Recent Gains

by Keene Little

Click here to email Keene Little
Following yesterday's big day we saw the indexes trade in a very narrow range, absorbing the recent gains. That's bullish price action except that the consolidation is at/near potentially important resistance levels. The bottom line is bulls are still in control.

Market Stats

The overnight trading session was relatively flat and today's market opened near the flat line and finished near the flat line. NDX was bullish, thanks again to AAPL, but the small caps (RUT) were down nearly -1%. SPX was hurt by commodities but held up by financials. The DOW was help up by the financials. All in all it was a mixed and quiet day and the consolidation following yesterday's strong rally can certainly be viewed as bullish. The bulls continue to run this show until proven otherwise.

This week's rally has done a nice job cleaning up the wave pattern and now it's very obvious we have a 5-wave move up from November and this is good for traders. Identifying the end of a run is easier when you've got a 5-wave move since you are then alerted to the fact that the run will soon be ending and you'll have an opportunity to trade the other direction (for either just a correction of the 5-wave move or something more significant if the 5-wave move is completing a larger move. That's what we'll evaluate in tonight's charts.

The question on most people's minds is what could possibly stop this rally now. Europe is quiet, the Fed has the market's back and there's very little to fear (that actually makes the market dangerous). Since there seems nothing on Earth that can stop this north-bound train, maybe the reason for the turn down will come from the stars. We have a combination of the sun's activity and planetary alignments that could thwart the bulls' efforts to drive the market higher. We have the sun's solar flares and a Bradley turn date headed our way.

We've been hearing about the stepped-up activity of the sun and its sunspots. We're entering the next 11-year period where we'll see increasing sunspot activity and it's a fact that many market turns have occurred around major solar flares with strong coronal mass ejections (CME). It can play havoc on our communications and other electronic gear and apparently it can do funny things to our brain's circuitry.

Space Weather News issued a warning today about another major flare and this one is Earth-facing: "INCOMING CME: Sunspot AR1429 unleashed another strong flare (category M7.9) on March 13th. The explosion produced a significant coronal mass ejection (CME), which forecasters say should reach Earth on March 15th. Geomagnetic storms are possible when the cloud arrives. Check http://spaceweather.com for updates." The fact that this CME is earth-facing might mean it's going to have a greater impact on earth and us human beings.

The chart below is the Bradley siderograph, which was developed in the 1940s by Donald Bradley to forecast the stock markets. He assigned numerical values to certain planetary constellations for every day, and the sum is the siderograph, which he had intended to use as a predictor of the stock market moves. Arch Crawford is probably the most well known of those who use astronomy for predicting market behavior and while I don't understand how it's done I can't argue with his success (although admittedly no one has correctly predicted a market turn since December). The next major turn date is this Friday the 16th (bold date). Note that the direction of the turn is not the prediction but only a potential turn. Since we're rallying into this date we can assume the turn would be to the downside.

Bradley Siderograph

A George Lindsay timing model (3 Peaks and a Domed House pattern) calls for a market high on Sunday, March 18th so by this we can say it will be Friday or Monday. Some Fib timing models point to a range between March 13th and 22nd. We have quadruple-witching expiration on Friday, March 16th and that could finish the current move. The Spring Equinox is Tuesday, March 20 and in the past this has often marked a change in trend in the markets (I've mentioned previously that March has been a pivotal month for the market). So there are a lot of timing models pointing to a turn this month if not this coming week. The price patterns, as I'll review, are coinciding with this turn window. Will it turn? That will be obvious in hindsight and I still have not been able to perfect my hindsight trading program but I promise you'll be the first to hear about my success with it. At the moment we've got a reason to watch for a possible turn but it doesn't mean it will happen. Proof will be in the pattern of the next pullback (that lasts more than a day).

So with that let's get to the chart patterns themselves, along with some upside targets, so that we can watch for the levels of interest.

The weekly chart of SPX shows it's nearing some potentially important resistance and an upside target near 1408 (there's a higher target near 1450 that I'll discuss with the daily chart). The broken 2006-2008 neckline, shown in bold blue, might not be important even though the May 2011 high was just short of that trend line. SPX is now back up to the line, currently near 1402 and only 3 points above today's high. And only a few points above that, near 1408, is a projection where the 3-wave move up from June 2010 would have two equal legs (to complete a complex corrective pattern from the March 2009 low). Clearly the chart is bullish and remains so as long as price stays above the uptrend from October, a break of which would be confirmed with a drop below 1340.

S&P 500, SPX, Weekly chart

Looking at the move up from October, which should complete as an a-b-c move, the c-wave (the leg up from November) is a 5-wave move. The new high this week actually cleans up the pattern nicely and now we get to figure out where the 5th wave could finish. The first upside target is shown at 1407.02, which is where the 5th wave is 62% of the 1st wave. It would achieve equality at 1448.43. From a daily perspective, the 5th wave can now be considered complete at any time and therefore bulls have to be prepared for a reversal at any time. The bears have to recognize the bulls have done nothing wrong yet and therefore hold your fire.

S&P 500, SPX, Daily chart

Key Levels for SPX:
- bullish above 1408
- bearish below 1363

The 5th wave of the move up from November, starting from the March 6th low, is shown up close on the chart below. It will ideally form a 5-wave move and so far it's a 3-wave move up. Today's pullback fits as a 4th wave and should be followed by another push higher in a 5th wave to complete the leg up from March 6th. That in turn would complete the 5-wave move up from November which in turn would complete the a-b-c bounce off the October low which would in turn complete the complex correction off the March 2009 low. We should be down to the wire here, getting ready to put in THE high of the 2009-2012 rally.

S&P 500, SPX, 120-min chart

Yesterday's rally in the DOW had it poking above its trend line along the highs from October. Today it formed a little doji at the trend line. It would be a bearish reversal pattern with a red candle tomorrow and a break below 12900 would confirm the high is in place. In the meantime, today's consolidation should be followed by another new high, as per the EW count explained for SPX. An upside target for the 5th wave is to 13369, which is where the larger 5th wave of the move up from November would be 62% of the 1st wave.

Dow Industrials, INDU, Daily chart

Key Levels for DOW:
- bullish above 13,400
- bearish below 12,900

NDX's strength (thanks to AAPL) is in its leg up from November. Whereas the other indexes are doing a little better than equality in the two legs up from October (except the RUT which hasn't quite achieved that level yet), NDX is pressing up towards the 162% projection at 2748.76, shown on its chart below. The 5th wave of the move up from November has already achieved 62% of the 1st wave at 2694 (yesterday) and would be equal to the 1st wave at 2767.52. Near this upper target is the long-term broken uptrend line from October 1990 through the October 2002 low, which is where NDX stopped in February 2011. So the 2750-2770 area makes for a good upside target zone. Currently it's pressing against the trend line along the highs from December 5th and poked slightly above it today, potentially leaving a throw-over finish. NDX remains bullish above Monday's low near 2635.

Nasdaq-100, NDX, Daily chart

Key Levels for NDX:
- bullish above 2770
- bearish below 2635

As I've pointed out previously, the RUT's A-B-C bounce off the October low has two equal legs up at 833.91, which is shown on its chart below. The February 3rd high came the closest at 833.02. It is now attempting it again but failed a little short of the target with today's high at 831.61. If the broader market makes a new high into Friday there's additional upside potential to a Fib projection near 839 (5th wave equal to 62% of the 1st wave) and then to trendline resistance near 850. A drop below Monday's low near 811 would tell us the high is already in place.

Russell-2000, RUT, Daily chart

Key Levels for RUT:
- bullish above 834
- bearish below 811

There was a big move in Treasuries today, which now has TYX (30-year yield) testing its declining 200-dma at 3.41%. Slightly higher is its October high at 3.45%. It will look bullish if it breaks above October's high but it's hard for me to feel bullish about the very choppy climb up from December. I think we might still see a large triangle consolidation pattern from October but now it's looking like it might be an ascending triangle (flat top, rising bottom) rather than a symmetrical triangle. One other thought is an a-b-c bounce with two equal legs up at 3.54%, as shown on the chart. But the choppy bounce off the December low is still what bothers me about that one. In any case, it would clearly be more bullish above 3.54%. In the meantime I'm looking for evidence that it will turn back down inside the triangle pattern. For now, the selling in bonds (rise in yields) has been helping the stock market rally.

30-year Yield, TNX, Daily chart

Just as a comparison, I'm showing the possibility for a symmetrical triangle for TNX (10-year yield, assuming today's high was it for the bounce off the late-January low. A turn back down from here would target the 1.85%-1.9% area before bouncing again to finish the triangle pattern, possibly by late May or June. But if bonds continue to sell off, which would be bullish for the stock market, we should see TNX make it up to at least the 2.508% projection for equality in an a-b-c bounce off the September low. Above 2.51% would be bullish for TNX (and likely have the Fed very worried since it would be much more expensive to roll out the short-term debt and we'd start hearing comparisons to the other European countries seeing their government yields heading higher). Until I see proof that says otherwise, I continue to lean toward the deflationary scenario, which suggests lower yields, especially since the Fed will continue to do everything it can to hold rates down.

10-year Yield, TNX, Daily chart

The banking indexes ripped to the upside yesterday (a little less than +5%) and then tacked on another point today. In so doing the BIX has now achieved a Fib projection for the leg up from November, the top of a potential rising wedge pattern and the downtrend line from its April 2010 high. The 3-wave bounce off the August 2011 low has wave-c = 162% of wave-a at 153.21 (today’s high was 155.05). Its downtrend line is near 154.20. This is a bearish setup and all it has to do is reverse back down (something this market has forgotten how to do).

S&P Banks index, BIX, Weekly chart

The other banking index, BKX, is also pressing against trendline resistance but its daily chart shows it has a little more upside potential if it's to achieve equality between its 1st and 5th waves in the move up from November, which is at 48.95. I'm showing that's where it will get to before it reverses back down but keep in mind that the 5-wave move up from November can be considered complete at any time and therefore is setup for a reversal at any time.

KBW Bank index, BKX, Daily chart

The TRAN is the index that has been questioning the DOW's rally, as if to say, "yo, DOW, you realize what kind of trouble you're in up there?" As noted on the TRAN chart last week, the low on March 6th was a break below the high on December 5th, thereby negating the bullish wave count looking for a 5th wave up. Unless we've got some kind of larger corrective pattern in play, which could only be guessed at here, the TRAN has seen its high (February 3rd, along with the RUT). Yesterday's bounce up to the bottom of its broken up-channel from December was a good setup for a back test followed by a kiss goodbye. Today's selling looks like the kiss goodbye. It's possible we'll see another minor new high for the bounce if the broader market makes it higher but that's questionable from here. Note the back test of the broken uptrend line on RSI as well.

Transportation Index, TRAN, Daily chart

The dollar's pattern for the rally from its March 8th low supports a continuation higher, with an upside target near 83 before pulling back next month and then higher again into the middle of the year. The pattern will remain bullish as long as it stays above 79.

U.S. Dollar contract, DX, Weekly chart

I've been expecting to see a longer-term correction to gold's 1999-2011 rally and the 1400 area is the first downside target I think we'll see by midyear. There is the possibility that the 3-wave pullback from last year's high will lead to another push higher but that won't become the preferred wave count until gold is able to get back above Monday's high near 1717. In the daily chart below you can see how traders are using the trend lines. After being rejected, twice, at the broken uptrend line from 2008, it got a small bounce off its uptrend line from January-September 2011 on March 1st, broke that line on March 6th, back tested it on March 9th and has now dropped down to its broken downtrend line from August-November 2011. Between that trend line and the 62% retracement of the December-March rally, at 1626.58, it should be good for a bounce. The bounce could develop into something stronger but until it can get back above 1718 (negating the bearish wave count) I think bounces in gold are to be shorted.

Gold continuous contract, GC, Daily chart, log scale

The above chart is using the log price scale and the chart below is using the arithmetic price scale, which is another example of why you want to check both scales when using trend lines, especially if there's been a big price change. The longer-term uptrend line from 2008, which was resistance in early and late February, could now act as support near the 62% retracement (1626.58). Note how the broken downtrend line from August-November crosses the same level. Again, that should be good for at least a bounce (if no bounce then look for a hard selloff).

Gold continuous contract, GC, Daily chart, arithmetic scale

Silver's pattern is similar to gold's but the 3-wave moves up and down since its April 2011 high supports both the bull's and the bear's arguments. If the dollar's bullish pattern is correct then we'll see the bearish wave count in the metals win out, which is what I'm showing as the preferred count in both gold and silver. A large A-B-C pullback from April 2011 for silver points to 13.91 for a downside target, where wave (a) = wave (c), but the first downside target will be 22-23 where it will hit the bottom of a parallel down-channel and its 200-week MA. But one bullish possibility is for a drop down to 29.35 (two equal legs down from February 29th) to be followed by another rally leg. Assuming it will drop below 29, a drop to the bottom of a down-channel by midyear would have dropping down to about 20. The downside risk for the metals is that it could break much lower and much faster.

Silver continuous contract, SI, Daily chart

While the metals have been getting sold off we've seen oil more or less consolidating near its recent high. If the choppy consolidation makes it down to its uptrend line from October (as well as its 50-dma collocated near 102.50) it could launch another rally leg into early April and back to the top of its rising wedge pattern (green dashed line). From here I can argue just as strongly for that scenario as I can for a stronger selloff from here. Oil remains bullish above 102.

Oil continuous contract, CL, Daily chart

Today's quiet day for economic reports will be followed by a little busier day tomorrow, which includes the Empire Manufacturing survey and PPI numbers before the bell and then the Philly Fed survey at 10:00 AM.

Economic reports, summary and Key Trading Levels

This week's rally has done a nice job clearing up the wave pattern for the rally from October-November. The clean 5-wave move up from November now gives us some good upside targets to watch for if the rally can keep going for at least another day (to complete a shorter-term 5-wave move up from March 6th). The pattern can now be considered complete so while I've provided some upside targets to look for, we might not see them reached (and of course they could be exceeded in this market that has forgotten how to correct a rally).

I didn't get into some sentiment readings but there are several indicators, including the VIX, that have now reached extremes not seen since the October 2007 high (exceeding even the readings at the May 2011 high). In other words complacency is at an extreme. The resolution of the Greek tragedy, along with the firm belief the Fed has our back, has most participants scoffing at the idea that they need downside protection. The shorts have run for cover and the bears are in hibernation. This is when the bulls are most vulnerable to a surprise attack, when they least expect it.

Selling might not start from anything obvious either. Most people are wondering what news event could shock the market into selling off. Sometimes the selling simply starts because some want to take profits. AAPL got hit with a big sell program this afternoon just before it was able to reach $600. Why? No real reason except someone wanted to take profits. AAPL bounced back up (3-wave correction so far and could head immediately lower tomorrow) and could still head higher but the point is the market is now full of sellers-in-waiting. Give them an excuse and they'll sell and that excuse may simply be a stop getting hit.

Multiply one selling to take profits by millions more and all of a sudden the selling gets extreme. The pundits will be sitting in front of the camera and making up an excuse for the selling but in reality it may be nothing more than someone started taking profits and then soon enough more and more start taking their profits. So don't think we need some kind of "event" to shock the market into selling. It's a great spot to trim your positions unless you're OK with a downside surprise some morning and forced to get out on a big gap down.

Good luck as we finish up the quadruple-witching expiration week (the effect of which could roll over into the early part of next week) and I'll be back with you next Wednesday.

Keene H. Little, CMT

In the end everything works out and if it doesn't work out, it is not the end. Old Indian Saying


New Option Plays

Surging Supplements

by James Brown

Click here to email James Brown


NEW DIRECTIONAL CALL PLAYS

Herbalife Ltd. - HLF - close: 69.90 change: +0.03

Stop Loss: 67.75
Target(s): 74.75
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
Investors seem bullish on supplement company HLF. The stock is trading at record, all-time highs. Currently HLF is hovering under round-number resistance at $70.00. The intraday high last Friday was $70.35. I am suggesting a trigger to buy puts at $70.50 with a stop loss at $67.75. Our quick target is $74.75. More aggressive traders may want to aim higher. FYI: The Point & Figure chart for HLF is bullish with a long-term $103 target.

Trigger @ $70.50

- Suggested Positions -

buy the Apr $70 call (HLF1221D70) current ask $2.80

Annotated Chart:

Entry on March xx at $ xx.xx
Earnings Date 05/02/12 (unconfirmed)
Average Daily Volume = 1.6 million
Listed on March 14, 2012



In Play Updates and Reviews

Closing March Options

by James Brown

Click here to email James Brown

Editor's Note:

We closed some March option positions early today. Meanwhile the market was content to drift sideways on Wednesday.

Exiting our March calls ended in profits for both ARG and COF. We also closed a losing March put position in AGP. Plus, we have dropped AAPL from the newsletter. WLP was stopped out.

Current Portfolio:


CALL Play Updates

Allergan Inc. - AGN - close: 93.36 change: +1.24

Stop Loss: 89.75
Target(s): 98.00
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Comments:
03/14 update: Our trade in AGN is not open yet. Both AGN and the S&P 500 index opened flat. Eventually both drifted sideways. More conservative traders may want to wait and try and buy calls on a dip (maybe near $92.00). I am suggesting we go ahead and buy calls at current levels but only if both AGN and the S&P 500 index open positive tomorrow. We will start with a stop at $89.75. Our multi-week target is $98.00. FYI: The Point & Figure chart for AGN is bullish with a $110 target.

Do not enter position unless AGN and the S&P 500 are both positive at the open

- Suggested Positions -

buy the Apr $95 call (AGN1221D95)

03/14/12 not open yet. try again.

Entry on March xx at $ xx.xx
Earnings Date 05/03/12 (unconfirmed)
Average Daily Volume = 1.5 million
Listed on March 13, 2012


Airgas Inc. - ARG - close: 83.97 change: +0.20

Stop Loss: 81.75
Target(s): 87.00
Current Option Gain/Loss: (Mar82.5c: +45%) & Apr$85c: - 8.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
03/14 update: ARG continued to drift higher. We closed our March $82.50 calls and the bid settled at $1.45 (+45%). Our new play to buy the April $85 calls was triggered when ARG hit $84.05.

- Suggested Positions -

Mar $82.50 call (ARG1217C82.5) Entry $1.00, exit $1.45 (+45%)

- or -

Long Apr $85.00 call (ARG1221D85) Entry $1.25

03/14/12 April $85 call play opened
Exited March $82.50 calls at the close (bid $1.45, +45%)
03/13/12 new stop loss @ 81.75
Buy April calls (see 2nd position) if ARG hits $84.05
Plan to sell our March calls at the closing bell tomorrow.
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: 56.15 change: +1.90

Stop Loss: 52.40
Target(s): 57.00
Current Option Gain/Loss: +64.5%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
03/14 update: Bullish analyst comments helped propel shares of AXP higher today. The stock outperformed with a +3.5% gain. Shares have now broken out to new multi-year highs. The stock has not traded above $55 since December 2007.

I am not suggesting new positions at this time. Please note that I am adjusting our exit target to $57.00. We will raise our stop loss up to $52.40.

Earlier Comments:
The plan was to keep our position size small.

- Suggested Positions - (Small Positions)

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

03/14/12 new stop loss @ 52.40, adjust exit to $57.00
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


Clean Harbors, Inc. - CLH - close: 68.98 change: -1.02

Stop Loss: 66.75
Target(s): 71.50
Current Option Gain/Loss: +19.2%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
03/14 update: Warning! The action in CLH today is short-term bearish. The rally attempt over resistance at $70.00 failed. CLH underperformed with a -1.4% decline. Shares look poised to dip back toward support near $66-65. We have a stop loss at $66.75. More conservative traders may want to exit early right now. I am not suggesting new positions at this time.

Earlier Comments:
Our target is $71.50 but more conservative traders may want to exit near $70.00. Aggressive trades could aim higher.

- Suggested Positions -

Long Apr $70 call (CLH1221D70) Entry $1.30

03/13/12 new stop loss @ 66.75
03/10/12 CLH is testing the $70.00 level. Readers may want to take profits now.

Entry on March 08 at $67.77
Earnings Date 05/02/12 (unconfirmed)
Average Daily Volume = 344 thousand
Listed on March 07, 2012


Capital One Financial - COF - close: 52.33 change: +1.38

Stop Loss: 47.95
Target(s): 54.75
Current Option Gain/Loss:(Mar$50c: +83.8%) & Apr$50c: +41.3%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
03/14 update: Many of the financial stocks continued to perform well on top of yesterday's big gains. COF was one of them with a +2.7% rally today. Shares have broken out to new eight-month highs.

It was our plan to exit our March calls at the closing bell tonight. The March $50 call settled with a bid of $2.39 (+83.8%). Please note that I am raising the stop loss to $48.60. I am not suggesting new positions at this time.

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

(small positions)

- Suggested Positions -

Mar $50 call (COF1217C50) entry $1.30, exit $2.39 (+83.8%)

- or -

Long Apr $50 call (COF1221D50) entry $2.30

03/14/12 new stop loss @ 48.60
03/14/12 as planned, closed Mar $50 call, bid @ $2.39 (+83.8%)
03/13/12 prepare to exit March calls at the close tomorrow
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


FedEx Corp. - FDX - close: 92.20 change: -0.68

Stop Loss: 89.75
Target(s): 96.75
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Comments:
03/14 update: Our FDX trade is not open yet. Shares of FDX opened higher but the S&P 500 did not. There was no follow through on FDX's open and shares fell back to bounce near the $91.50 level twice. I do not see any changes from my prior comments and suggest we try and buy calls again tomorrow.

We want to open bullish positions in FDX at the open tomorrow but only if both FDX and the S&P 500 index open positive. We'll use a stop loss at $89.75. Our short-term target is $96.75.

Do not enter position unless FDX and the S&P 500 are both positive at the open

- Suggested Positions -

buy the Apr $95 call (FDX1221D95)

03/14/12 not open yet. try again.

Entry on March xx at $ xx.xx
Earnings Date 03/22/12 (unconfirmed)
Average Daily Volume = 2.1 million
Listed on March 13, 2012


Tractor Supply Co. - TSCO - close: 87.63 change: -0.66

Stop Loss: 85.75
Target(s): 94.00
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Comments:
03/14 update: TSCO remains stuck under resistance near $88.25. It's worth noting that the consolidation appears to be coiling more tightly, which would suggest a breakout is getting closer. I am somewhat concerned that TSCO has not been able to breakout yet. We are adjusting our trigger to buy calls from $88.50 to $88.75.

Earlier Comments:
We want to keep our position size small. Our exit target is $94.00. More aggressive traders could aim higher. If you have enough patience you could aim for the $99-100 area instead. The Point & Figure chart for TSCO is bullish with a $109 target.

Trigger @ $88.75 (small positions)

- Suggested Positions -

buy the Apr $90 call (TSCO1221D90)

03/14/12 adjust trigger to $88.75
03/13/12 if triggered at $88.50, only use small positions, move stop loss to $85.75

Entry on March xx at $ xx.xx
Earnings Date 04/19/12 (unconfirmed)
Average Daily Volume = 566 thousand
Listed on March 10, 2012


Whole Foods Market - WFM - close: 85.13 change: -0.84

Stop Loss: 81.75
Target(s): 87.50
Current Option Gain/Loss: +27.6%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
03/14 update: After yesterday's big gain WFM hit some profit taking today. The stock gave up -0.9%. Readers can look for broken resistance near $82.00 to offer new support. I am not suggesting new positions at this time.

Currently our exit target is $87.50. More aggressive traders may want to aim for the $89.50-90.00 zone instead.

- Suggested Positions -

Long Apr $85 call (WFM1221D85) Entry $1.88

03/13/12 new stop loss @ 81.75

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

AMERIGROUP Corp. - AGP - close: 65.53 change: -0.01

Stop Loss: 68.05
Target(s): 61.00
Current Option Gain/Loss: (Mar$65P: -82.1%) & Apr$60P: -20.8%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
03/14 update: AGP is not making any progress. The bounce attempt this morning stalled under $66 and its 10-dma. The trend remains bearish but I am not suggesting new positions.

Our plan was to exit the March puts at the opening bell this morning. The bid was at $0.00 (-00.0%). We still have the April puts.

- Suggested Positions -

Mar $65 PUT (AGP1217o65) entry $1.40, exit $0.25 (-82.1%)

- or -

Long Apr $60 PUT (AGP1221p60) entry $1.20 <-- 0.95/1.15 -->

03/14/12 planned exit for the Mar.$65 put, bid @ 0.25 (-82.1%)
03/13/12 new stop loss at $68.05
prepare to exit the March $65 puts at the open tomorrow,
we will keep the April $60 puts active.
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


Centene Corp. - CNC - close: 45.48 change: -0.17

Stop Loss: 46.25
Target(s): 40.50
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Comments:
03/14 update: CNC continues to underperform. The stock is clearly under its 50-dma now and CNC is nearing support at $45.00. I don't see any changes from my prior comments.

I am suggesting a trigger to open bearish put positions at $44.75. This will require CNC to trade under its 50-dma and potential support at the $45.00 mark. If triggered we'll use a stop loss at $46.25. Our target is $40.50.

Trigger to buy PUTS @ $44.75

- Suggested Positions -

buy the Apr $45 PUT (CNC1221P45)

Entry on March xx at $ xx.xx
Earnings Date 04/24/12 (unconfirmed)
Average Daily Volume = 529 thousand
Listed on March 12, 2012


Edwards Lifesciences - EW - close: 69.69 change: +0.39

Stop Loss: 72.25
Target(s): 63.00
Current Option Gain/Loss: -36.3%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
03/14 update: EW is still trying to bounce and shares managed a +0.3% gain today. The stock did trade over short-term resistance near $70.00 and at its 10-dma today. You could argue the current four-day bounce in EW looks like a bear-flag pattern. I am not suggesting new positions at this time. More conservative traders may want to lower their stop loss.

- Suggested (Small) Positions -

Long Apr $65 PUT (EW1221p65) Entry $1.65

Entry on March 07 at $68.76
Earnings Date 04/19/12 (unconfirmed)
Average Daily Volume = 1.1 million
Listed on March 06, 2012


Joy Global, Inc. - JOY - close: 78.64 change: -3.37

Stop Loss: 81.65
Target(s): 72.50
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Comments:
03/14 update: JOY has produced a rather dramatic reversal lower today. Wednesday's -4.1% decline has completely erased yesterday's big bounce. The move is most likely a reflection of the big drop in gold prices today, which prompted investors to sell anything related to mining. JOY still has support near $78.00. We have a trigger to buy puts at $77.75.

Earlier Comments:
Our target is $72.50. More aggressive traders could aim lower. The Point & Figure chart for JOY is bearish with a $70 target.

Trigger to buy PUTS @ $77.75

- Suggested Positions -

buy the Apr $75 PUT (JOY1221P75)

Entry on March xx at $ xx.xx
Earnings Date 06/04/12 (unconfirmed)
Average Daily Volume = 2.8 million
Listed on March 12, 2012


CLOSED BEARISH PLAYS

Apple Inc. - AAPL - close: 589.58 change: +21.48

Stop Loss: n/a
Target(s): see below.
Current Option Gain/Loss: Mar$520P: -100%
& (expired weekly Mar$525p: -100%)
Time Frame: 1 to 2 weeks
New Positions: see below

Comments:
03/14 update: Our very aggressive, sell-the-news put play in AAPL was a failure. The rocket thrust higher in shares of AAPL continues. Shares soared another +3.7% and are quickly approaching the $600 mark. AAPL's market cap hit $550 billion (another record). The stock is up +62% from its November 2011 lows. AAPL is up +636% from its January 2009 lows near $80. The stock might see some profit taking when it tags $600 but there is almost zero chance AAPL will see a big enough drop to help our out of the money March puts, which expire in two days. I am dropping AAPL from the newsletter tonight.

- Suggested (Small) Positions -

Mar $520 PUT (AAPL1217o520) Entry $9.90, exit $0.00 (-100%)

03/14/12 Dropping AAPL from the newsletter. Puts will expire (-100%)
03/10/12 our very aggressive weekly March $525 puts have expired
03/06/12 AAPL gapped down -$10, which hurt our entry point on these short-term puts. I've adjusted our exit targets!

chart:

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


WellPoint, Inc. - WLP - close: 67.22 change: +2.17

Stop Loss: 65.25
Target(s): 60.25
Current Option Gain/Loss: -52.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
03/14 update: Murphy's law is alive and well. Yesterday WLP dipped just low enough to hit our trigger to buy puts at $63.40. The stock immediately reversed higher on Tuesday. Shares accelerated higher today with a +3.3% gain and a rally past a horde of short-term resistance. Our trade was stopped out moments after WLP opened higher at $65.22.

(small positions)- Suggested Positions -

Apr $62.50 PUT (WLP1221p62.5) Entry $1.25 exit $0.60 (-52.0%)

03/14/12 stopped out at $65.25.
03/13/12 triggered at $63.40

chart:

Entry on March 13 at $63.40
Earnings Date 04/26/12 (unconfirmed)
Average Daily Volume = 2.5 million
Listed on March 06, 2012