Option Investor
Newsletter

Daily Newsletter, Thursday, 3/22/2012

Table of Contents

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

Market Wrap

Global Fears Weigh On Markets

by Thomas Hughes

Click here to email Thomas Hughes
Economic data raises new fears of widespread global slowdown. PMI data from China and Europe has sparked fears of increasing global slowdown. The US markets traded down despite our own positive data.


Futures weakened this morning on news from China. Preliminary data from HSBC shows that Chinese PMI fell to 48.1 in February from January's final reading of 49.6. The data shows increased slowing among Chinese manufacturers and is the fifth straight month of declines. The number is due to weakening domestic demand, according to HSBC's chief economist. Employment in China also fell to new lows and marked the weakest data since March, 2009.

Fears of increasing Chinese slowing have eclipsed those of European slowing, at least for today. China has been a key factor among some recent growth stories, especially among food and beverage companies. McDonald's, Yum! Brands, Starbucks, Coca Cola and Pepsi have all been seeing increasing growth in the region. New estimates for Chinese GDP have it in the range of 7.5%-8.5% for 2012, nearly a full point below earlier estimates.

Yum! Brands(YUM) and Starbucks(SBUX) both made new highs today.

Yum! Brands, daily

Starbucks, daily

Asia ended the day basically flat. The Nikkei average gained +0.4%, the Hang Seng index rose +0.22% and the Shanghai Composite lost -0.1%.

US data was light today and failed to inspire any confidence. Initial Jobless claims fell to a seasonally adjusted 348,000. This is the lowest number of new claims since February, 2008. Last weeks data fell 5,000 from the previous weeks revised number of 353,000 claims. Analysts had estimated that claims would hold steady at 353,000. The four week moving average of initial jobless claims fell 1,250 to 355,000.


Continuing claims for unemployment also fell. This number dropped by 9,000 claims to an adjusted 3.35 million.


The total claims for unemployment benefits fell as well to 7.28 million. This is a drop of 142,499 claims from the previous weeks data.


The recent drops in unemployment are good signs for the US economy. This trend is in line with the increases in GDP we have seen over the last three quarters. This is also in line with payroll data, which showed a strong gains in jobs in February (+227,000).


Home prices remained stable in January, according to the FHFA report released this morning. This is seen as a sign of further stabilization in the real estate market.

Conference Board's index of leading economic indicators rose 0.7% in February. This is a big gain from January's revised 0.2%. The reading shows signs of an economy gaining momentum. In the release Conference Board stated that “economic progress may could continue throughout the summer and possibly beyond”.

European markets closed down today on the discouraging news from Asia and its own poor prospects. The FTSE 100 closed down -.79%, the DAX index down -1.21% and the CAC 40 index down -1.14%.

European PMI also fell in March. The Markit Eurozone Composite PMI, which is a broad gauge of European manufacturing, fell to 48.7 in March from February's 49.3 and made a three month low. Citi (C ) Chief Economist Willem Buiter says the “worst is still to come”. Bernanke also made statements this week to the effect that the European crisis is not over.

As Greece fades into the back ground of the crisis other PIIGS countries are coming back into the spotlight. Bond yields in Spain and Italy are rising to new highs, which some have speculated signal lack of confidence in economic recovery. The problem is starting to spread into bonds issued by the more stable European nations like Germany.

Con Agra (CAG) beat earnings estimates, reaffirmed 2012 guidance and traded lower on the day to finish down 0.5%. Profit rose 26% to $0.65 per share from the previous years $0.50 per share. Net sales increased by 7%. Con Agra earned $0.47 in the previous quarter, consensus estimates were $0.49. Commercial food sales,which accounts for 37% of business, rose by 14%. Consumer foods sales rose by 4%. The gains were also helped by favorable pricing actions including adjustments for inflation and commodity increase pass throughs. During the quarter the company acquired Del Monte Canada and repurchased $7 million in shares. There is $775 million left in the company's repurchase program. Con Agra also maintained its 2012 guidance.

Con Agra, daily

Dollar General (DG) impressed investors with its release today. Following the announcement the stock gained over 3% on heavy volume to close at $45.96. Fiscal fourth quarter profits for the discount retailer grew by 31% to $0.85 per share from $0.64 in the year ago period. Total sales in the period increased by 20%. The consensus estimate was $0.82 per share. Dollar General earned $0.50 in the third quarter.

Dollar General, daily

FedEx Corporation (FDX) dropped over 2% in premarket trading and fell over 4% for the day. The stock closed down by $3.32 at $92.50. The move came on high volume, over 300% of average. The company's earnings of $1.55 per share beat analysts expectations of $1.36 per share. Lowered expectations of global economic growth and expectations of fourth quarter profits were the cause of today's decline. FedEx issued fourth quarter guidance of $1.75-$2.00 per share, below analysts expectations of $2.00 per share. In the statement the company said that it expects “solid performance” in the fourth quarter following the gains seen in the third. Analysts expectations were based on $10.6 billion in revenue. FedEx revenue was inline with expectations. Increases in profits are due to improvements in operations.

FedEx, daily

Lululemon (LULU) gained about 2.5% in today's trading after its earnings announcement. This move also came with a big spike in volume, over 300% of average. Net revenue for the fourth quarter increased over 50% with same store sales increasing 26% on an adjusted basis. Full year revenue increased to $1.0, a milestone for the company. Comp store sales rose by 20% for the year and gross profit increased by 44%. Updated guidance for 2012 includes continued expectations for growth. The company expects revenue to grow by around 30% for the year. Share were down in early trading because the guidance did not meet with some expectations. However, as the day progressed the stock traded up and closed at $75.83.

Lululemon, daily

Strategic American Oil Corp (SGCA) is a micro cap oil and gas exploration company making headlines today with its earnings statement. Revenue is up 18% in the second quarter vs the first quarter. Assets increased to $24.3 million and debt has been reduced to zero. Cash flow is up significantly, reversing from ($83,710) in the first quarter to $816,805 in the second. The oil and gas driller is in initial operational phases of its two main projects, one in the Gulf of Mexico and one in Illinois. They have begun production and sales at one site and is nearing that stage with the other. The stock dropped over 7% today.

Strategic American Oil Corp, daily

Expectations of Micron Technologies (MU) earnings release caused the stock to drop 0.34% . The company, which suffered an unexpected change in leadership earlier in the year, reported a deeper than expected loss for the quarter. The stock lost 2.5% in after market trading.

Micron Technologies, daily

Shoe and apparel giant Nike (NKE) traded relatively flat today in anticipation of its announcement after the bell. Nike earned $1.00 per share in the previous quarter and was expected to post an increase of 16%. The stock has had a nice run up, gaining over 46% in the last twelve months. Today's trading kept the stock above the 30 day moving average. The announcement, which reported earnings of $1.20 per share versus $1.08 a year ago, beat expectations and sent the stock higher by close to 1% in after market trading.

Nike, daily

The recent wave of IPO's continued this week. There were three today and two more are expected tomorrow. Today Caesar Stone (CSTE), Exact Target (ET) and Vantiv (VNTV) made their Wall Street debut.

Caesarstone (CSTE)is a California based manufacturer of engineered quartz surfaces. They are a leader in the industry of manufactured counter tops and surfaces. Caeserstone was expected to price 6.7 million shares between $14-$16 per share. Actual opening , $11, was significantly below expectations. The stock traded steady throughout the day and closed slightly up at $11.11.

Caesarstone, today

ExactTarget (ET), makes SaaS applications that deliver marketing campaigns and customer communications tools to clients. The somewhat anticipated IPO priced 8.5 million shares at $20.00, well above the expected range of $15-$17. The actual opening price, $23.40, was another big gain for the stock. Since then the stock traded up to around $25 throughout the day and closed at $25.11, a 32% gain.

ExactTarget, today

Vantiv Inc, (VNTV) is an integrated payment processor. The company has solutions for merchants and financial institutions. The stock opened today at $17.00, in the middle of its expected range of $16-$18. the stock climbed steadily up throughout the day and broke through the upper end of its expected opening range to close $2.50 higher than opening at $19.50.

Vantiv, today

Tomorrow look out for BATS Global Markets (BATS). BATS develops and operates online markets for trading securities and options. The company is expected to price 6.3 million shares between $16-$18 per share.

Also on the horizon tomorrow in IPO's is VipShop Holdings (VIPS). This is a China based online discount retailer. 11.2 million shares are expected to price between $8.50 and $10.50.

In other news Research in Motion fell from the top spot among Canada's smart phone manufacturers. This is another sign of the difficulties the Blackberry maker has been facing. Competition from Apple's iPhone and iPad lines as well as Google's Android operating system have been pressuring the stock. The stock lost 1.85% today and closed near 12 month lows.

Research in Motion, daily

McDonald's CEO Jim Skinner announced his retirement today after 41 years with the company. Current president, Don Thompson, will take over. The stock traded down today after the news and made a new four month low. The stock has been trading in a tight range over the last three months and appears to be building support between $95 and $100.

McDonald's, daily

Apple (AAPL) faces some criticism over its iPad 4. Heat issues have sparked an investigation by a consumer watchdog agency. Heat produced by the units is reported to be 116f and capable of burning users. The cost of data is being viewed by some as a trap for users. The device burns up data when streaming high quality video and costs an additional fee per gigabyte once the standard plans are used up. The stock declined by around a half percent in today's trading to close just under $600 at $599.65.


Oil traded down sharply today, as much as $2.50 a barrel at barrel at some points in the morning. Weakening global outlook in China and Europe drove prices to the low levels. Natural gas inventories rose today, which helped pressure the energy market. Oil and gas prices remain at elevated prices despite today's declines. Lingering fears of supply disruption from Iran are keeping prices up.

Gold and the other precious metals fell on the economic news as well. Gold fell as much as 1% in intra-day trading but has recovered some since then, regaining more than half the early decline. The dollar index gained on the news but ended the day basically flat. The index is up over 5% on the year and look like it is gaining strength.

Rates on the 30 year bond fell today to a close of 3.362%.

30 year bond rates, daily

Expectations for growth are diminishing even though our own economy is heating up. The global economy is performing a little worse than previously estimated. The real extent of the European crisis and China's economic slowdown wont be know for some time. Futures on all three of the major US indexes were down sharply following the news from China and Europe. The Dow opened in negative territory and traded lower throughout the day. Volume was weak and the decline was halted near the days lows but above the 30 day moving average. This is the third day of losses in the broad market and brings the Dow less than .4% away from the critical 13,000 level. The trend remains up but is losing technical momentum.

Dow Jones Index, daily with MACD

Advancing and declining stocks leaned heavily to the declining side in early trading with a ratio of 1:5.3, advancers to decliners. By late afternoon the ratio declined by nearly half to 1:2.8.

The days declines brought the S&P below the 1,400 level. A look at the index tracking stock, SPY, shows weak volume here as well. The trend in this index is also still up. Momentum is weakening but is still bullish in the long term.

S&P 500 daily with MACD

S&P 500 Index Tracking Stock SPY, daily with volume
,

The Nasdaq closed down by 12 points but found short term support at 3050. The index is down from the weeks high but still above the high of last week. The trend is still up but also shows signs of weakening.

Nasdaq, daily with MACD

Nasdaq, daily with support

Economic data will persist as a weight on the markets. It is unclear just how much slowing the world economy is going through. Earnings will also be important, as well as any forward looking statements released. It is also nearing time for the bulk of traded companies to start announcing there earnings. This will provide a lot of much needed data.

Thomas Hughes


New Option Plays

Software & Steel

by James Brown

Click here to email James Brown

Editor's Note:

In addition to tonight's new candidates, consider these stocks as possible trading ideas and watch list candidates:

WXS - the trend in WXS is bullish. I would be tempted to buy calls on a rally past $65.25.

CMP - this basic material stock is breaking down. The close under $70.00 could be a bearish entry point.

ORLY - shares are still trending higher. A rally past $91.00 can be used as a bullish entry point.

MNST - I would be tempted to open bullish positions on a rally past $61.25.

DECK - The trend in DECK is down and the pattern of lower highs is suggesting another breakdown soon. Consider bearish positions on a drop under $66.00.

FDO - most of the "dollar" stores are performing well. A rally past $58.00 should break the four-month trend line of lower highs and act as an entry point for bullish positions in FDO.


NEW DIRECTIONAL CALL PLAYS

Check Point Software - CHKP - close: 62.00 change: +0.72

Stop Loss: 59.75
Target(s): 68.50
Current Option Gain/Loss: Unopened
Time Frame: 3 to 6 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
CHKP is bouncing near prior resistance, which is acting as new support thanks to traders buying the dip. The stock has been consolidating lower the last four and a half days. The stock reversed higher today and displayed relative strength with a +1.1% gain. A rally from here could easily push CHKP to new ten-year highs.

I am suggesting a trigger to buy calls at $62.25 with a stop loss at $59.75. More conservative traders may want to use a stop under today's low at $60.77 instead. FYI: The Point & Figure chart for CHKP is bullish with an $88 target.

Trigger @ $62.25

- Suggested Positions -

buy the Apr $62.50 call (CHKP1221D62.5) current ask $1.45

- or -

buy the May $65 call (CHKP1219E65) current a$ 1.15

Annotated Chart:

Entry on March xx at $ xx.xx
Earnings Date 04/17/12 (unconfirmed)
Average Daily Volume = 1.3 million
Listed on March 22, 2012


NEW DIRECTIONAL PUT PLAYS

Schnitzer Steel Industries - SCHN - close: 40.33 change: -0.92

Stop Loss: 42.75
Target(s): 35.50
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
Basic material names and steel stocks have been underperforming. Now SCHN finds itself testing significant support at the $40.00 level. A breakdown here could signal a major move lower. I am suggesting a trigger to buy puts at $39.75 with a stop loss at $42.75. Our exit target is $35.50. More aggressive traders could aim lower but we do not want to hold over the earnings report on April 5th.

Traders should note that we do want to keep our position size small. The most recent data already list short interest at 8.1% of the very small 24.8 million-share float. Any unexpected bounces in SCHN could spark a short squeeze so we want to limit our exposure.

FYI: The Point & Figure chart for SCHN is still bullish but a breakdown under $40.00 would create a new quadruple bottom breakdown sell signal.

Trigger @ $39.75 (small positions)

- Suggested Positions -

buy the Apr $40 PUT (SCHN1221P40) current ask $1.75

Annotated Chart:

Entry on March xx at $ xx.xx
Earnings Date 04/05/12 (confirmed)
Average Daily Volume = 326 thousand
Listed on March 22, 2012



In Play Updates and Reviews

Pruning Unopened Trades

by James Brown

Click here to email James Brown

Editor's Note:

We are dropping a couple of unopened trades. Meanwhile some of our bullish candidates continue to show relative strength.

Current Portfolio:


CALL Play Updates

Allergan Inc. - AGN - close: 93.56 change: -0.01

Stop Loss: see below
Target(s): 99.50
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Comments:
03/22 update: Our AGN is still not open yet. Shares gapped down at the open but rallied off short-term support near $92.50. The stock bounced back to close almost unchanged on the session.

I am adjusting our entry point strategy. If the market really corrects then AGN could easily retest the $90.00 level of support. We will adjust our buy-the-dip trigger down to $90.50 with a stop loss at $89.40. However, if the market does not correct then I would expect AGN to breakout and rally toward $100. We will set an alternative breakout trigger to buy calls at $95.25 with a stop loss at $92.25. We will adjust our target to $99.50.

FYI: The Point & Figure chart for AGN is bullish with a $110 target.

NEW buy-the-dip trigger @ 90.50, stop loss @ 89.40

- or -

New Breakout trigger @ 95.25, stop loss @ 92.25

- Suggested Positions -

buy the Apr $92.50 call (AGN1221D92.5)

- or -

buy the Apr $95 call (AGN1221D95)

03/22/12 adjusted entry point strategy to include a buy-the-dip trigger at $90.50 and a breakout trigger at $95.25.
03/15/12 not open yet. New buy-the-dip trigger @ 92.25
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


Alexion Pharma - ALXN - close: 94.02 change: +1.22

Stop Loss: 88.75
Target(s): 98.00
Current Option Gain/Loss: Apr$90c: +75.0% & May$95c: +78.7%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
03/22 update: ALXN continues to show relative strength in spite of broader market weakness. More conservative traders may want to start taking profits as ALXN nears potential resistance at the $95.00 level. I am raising our stop loss to $88.75. I am not suggesting new positions at this time.

- Suggested Positions -

Long Apr $90 call (ALXN1221D90) Entry $3.20

- or -

Long May $95 call (ALXN1219E95) Entry $2.35

03/22/12 new stop loss @ 88.75
03/20/12 triggered at $90.25

Entry on March 20 at $90.25
Earnings Date 04/19/12 (unconfirmed)
Average Daily Volume = 1.25 million
Listed on March 19, 2012


Airgas Inc. - ARG - close: 85.32 change: -1.01

Stop Loss: 81.75
Target(s): 87.00
Current Option Gain/Loss: (Mar82.5c: +45%) & Apr$85c: +68.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
03/22 update: ARG hit some profit taking today with a gap down at the open and a -1.1% decline at the closing bell. I don't see any changes from my prior comments. More conservative traders may want to take profits now. I am not suggesting new positions at this time.

- Suggested Positions -

March position is closed.
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


Cognizant Technology - CTSH - close: 76.37 change: -0.57

Stop Loss: 74.75
Target(s): 82.00
Current Option Gain/Loss: Unopened
Time Frame: 3 to 6 weeks
New Positions: Yes, see below

Comments:
03/22 update: CTSH also gapped down at the open but was slowly drifting higher off its morning lows. We are waiting for a breakout. CTSH has short-term resistance in the $77.00-77.40 area. I am suggesting we buy calls at $77.55 with a stop loss at $74.75. Our exit target is $82.00. FYI: The Point & Figure chart for CTSH is bullish with a $97 target.

Trigger @ $77.55

- Suggested Positions -

buy the Apr $77.50 call (CTSH1221D77.5)

- or -

buy the May $80 call (CTSH1219E80)

Entry on March xx at $ xx.xx
Earnings Date 05/04/12 (unconfirmed)
Average Daily Volume = 1.8 million
Listed on March 21, 2012


Dollar Tree, Inc. - DLTR - close: 95.04 change: +0.31

Stop Loss: 92.25
Target(s): 98.50
Current Option Gain/Loss: Apr$95c: + 9.0% & May95C: + 6.6%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
03/22 update: DLTR rallied off its opening gap lower and hit a new high at $95.55 before paring its gains. Considering the market's recent weakness readers may want to wait for a dip or a bounce near the $94.00 level before considering new bullish positions in DLTR. FYI: The Point & Figure chart for DLTR is bullish with a $122 target.

- Suggested Positions -

Long Apr $95 call (DLTR1221D95) Entry $1.65

- or -

Long May $95 call (DLTR1219E95) Entry $3.00

03/21/12 DLTR hit our entry trigger at $94.55

Entry on March 21 at $94.55
Earnings Date 05/17/12 (unconfirmed)
Average Daily Volume = 1.1 million
Listed on March 20, 2012


Chart Industries - GTLS - close: 72.83 change: -1.31

Stop Loss: 69.75
Target(s): 79.75
Current Option Gain/Loss: -38.5%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
03/22 update: GTLS was not immune to the mostly market-wide profit taking today. Yet shares did find support intraday as traders bought the dip twice in the $71.25-71.50 zone (also near its rising 20-dma). I would use this as a new bullish entry point but only if both GTLS and the S&P 500 index open positive tomorrow.

Earlier Comments:
Our exit target is $79.75. More aggressive traders could aim higher. The Point & Figure chart for GTLS is bullish with an $82 target.

- Suggested Positions -

Long Apr $75 call (GTLS1221D75) Entry $3.50

03/16/12 triggered at $74.25

Entry on March 16 at $74.25
Earnings Date 05/03/12 (unconfirmed)
Average Daily Volume = 712 thousand
Listed on March 15, 2012


Herbalife Ltd. - HLF - close: 70.27 change: -0.86

Stop Loss: 67.75
Target(s): 74.75
Current Option Gain/Loss: -20.9%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
03/22 update: We have been expecting HLF to dip toward the $70.00 level. This should be round-number support but if the market starts accelerating lower I doubt $70 will hold. Technically readers could buy this dip or a bounce from this level but you may want to raise your stop loss. I still see additional support near $68.00 so we want to keep our stop under $68 for now.

Earlier Comments:
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.

- Suggested Positions -

Long Apr $70 call (HLF1221D70) Entry $3.10

Entry on March 15 at $70.50
Earnings Date 05/02/12 (unconfirmed)
Average Daily Volume = 1.6 million
Listed on March 14, 2012


NetEase.com - NTES - close: 58.37 change: +0.26

Stop Loss: 53.35
Target(s): 64.00
Current Option Gain/Loss: Apr55c: +50.0% & Apr60c: +100.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
03/22 update: NTES hit a new high this afternoon at $59.26 before paring its gains. Shares are arguably short-term overbought. We should expect some profit taking if the broader market continues to sink. The closest support for NTES is either the simple 10-dma near $55.65 or the $55.00 level. I am not suggesting new positions at this time. More conservative traders may want to take profits now!

Earlier Comments:
Our multi-week target is $64.00. FYI: The Point & Figure chart for NTES is bullish with a $68 target.

- Suggested (Small) Positions -

Long Apr $55 call (NTES1221D55) Entry $2.80

- or -

Long Apr $60 call (NTES1221D60) Entry $0.70

03/22/12 readers may want to go ahead and take profits now
Apr $55 call (+50%), Apr $60 call (+100%)

Entry on March 20 at $56.11
Earnings Date 05/16/12 (unconfirmed)
Average Daily Volume = 584 thousand
Listed on March 19, 2012


Ulta Salon, Cosmetics - ULTA - close: 93.59 change: +1.52

Stop Loss: 87.90
Target(s): 96.50
Current Option Gain/Loss: +24.2%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
03/22 update: ULTA continues to show relative strength. The stock rallied to another new high with today's +1.6% gain. I am not suggesting new positions at this time.

Earlier Comments:
Our multi-week target is $96.50. More aggressive traders could aim for the $99-100 zone. FYI: The Point & Figure chart for ULTA is bullish with a $110 target.

- Suggested Positions -

Long Apr $95 call (ULTA1221D95) Entry $1.65

03/21/12 ULTA hit our trigger at $91.25

Entry on March 21 at $91.25
Earnings Date 06/07/12 (unconfirmed)
Average Daily Volume = 759 thousand
Listed on March 20, 2012


Whole Foods Market - WFM - close: 82.95 change: -1.02

Stop Loss: 81.75
Target(s): 87.50
Current Option Gain/Loss: -46.2%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
03/22 update: The correction/consolidation in WFM is now seven days old. Today's -1.2% decline has left WFM testing the bottom of its bullish channel. More conservative traders may want to raise their stops toward the 30-dma near $82.47. I am not suggesting new positions at this time but aggressive traders could buy a bounce from current levels.

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: 64.05 change: -0.48

Stop Loss: 66.55
Target(s): 61.00
Current Option Gain/Loss: (Mar$65P: -82.1%) & Apr$60P: -25.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
03/22 update: AGP is still struggling to make progress as a bearish candidate. The stock hit new relative lows today but it bounced sharply off its intraday low. Furthermore today's low is near technical support at the simple 100-dma. The bounce may not be over yet. I am adjusting our stop loss down to $66.55. I am not suggesting new positions at this time.

- Suggested Positions -

March position is closed.
Mar $65 PUT (AGP1217o65) entry $1.40, exit $0.25 (-82.1%)

- or -

Long Apr $60 PUT (AGP1221p60) entry $1.20

03/22/12 new stop loss @ 66.55
03/19/12 readers may want to exit early now
03/17/12 new stop loss @ 67.25
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: 44.40 change: -0.30

Stop Loss: 46.25
Target(s): 40.50
Current Option Gain/Loss: + 3.1%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
03/22 update: CNC tagged a new relative low near $44.00 this morning. Shares pared their losses and ended the session down -0.6%. I am not suggesting new positions at this time.

- Suggested Positions -

Long Apr $45 PUT (CNC1221P45) Entry $1.60

03/20/12 CNC hit our entry trigger at $44.75

Entry on March 20 at $44.75
Earnings Date 04/24/12 (unconfirmed)
Average Daily Volume = 529 thousand
Listed on March 12, 2012


Joy Global, Inc. - JOY - close: 74.60 change: -1.92

Stop Loss: 78.55
Target(s): 73.00
Current Option Gain/Loss: +36.9%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
03/22 update: JOY sank to new ten-week lows this afternoon. Today's close under potential round-number support at $75.00 is a good sign for the bears. Now the challenge for the bears is the December 2011 lows with prior support near $74.00 and the $72.60 levels.

Please note that I am adjusting our exit price to $73.00 and our stop loss down to $78.55. More aggressive traders may want to aim for the $70.00 area. I am not suggesting new positions at this time.

- Suggested Positions -

Long Apr $75 PUT (JOY1221P75) Entry $2.52

03/22/12 new stop loss @ 78.55, adjust exit to $73.00
03/20/12 new stop loss @ 81.15
03/15/12 trade opened on JOY's gap down at $77.38, which is under our trigger to buy puts at $77.75.

Entry on March 15 at $77.38
Earnings Date 06/04/12 (unconfirmed)
Average Daily Volume = 2.8 million
Listed on March 12, 2012


Polypore Intl. Inc. - PPO - close: 35.65 change: +0.05

Stop Loss: 38.65
Target(s): 31.00
Current Option Gain/Loss: -11.4%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
03/22 update: It was a quiet day for PPO. The morning weakness was not that bad and shares slowly drifted higher all day long. The larger trend is down. I am not suggesting new positions at this time. If the stock does see a bounce we can look for a new lower high in the $36-37 area.

Earlier Comments:
We want to use small positions on PPO. Why small positions? We want to limit our risk because being bearish on PPO is a popular trade. The most recent data listed short interest at 34% of the 46.3 million-share float. It is this short interest that produces these brief little short squeezes higher that keep failing (at least they are failing so far). Our target is $31.00 or the dotted trend line of lower lows. FYI: The Point & Figure chart for PPO is bearish with a $16 target.

- Suggested (Small) Positions -

Long Apr $35 PUT (PPO1221P35) Entry $1.75

Entry on March 19 at $36.21
Earnings Date 05/03/12 (unconfirmed)
Average Daily Volume = 2.4 million
Listed on March 17, 2012


CLOSED BULLISH PLAYS

IPG Photonics Corp. - IPGP - close: 52.81 change: -0.97

Stop Loss: 52.49
Target(s): 60.00
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Comments:
03/22 update: IPGP continues to underperform. The stock is now under both its 50-dma and its 200-dma. The stock might find support near $50.00. Nimble trades could try buying a dip or a bounce near $50 with a tight stop loss. It is unlikely that IPGP will hit our bullish trigger to buy calls at $56.25 any time soon so I am dropping the stock as a candidate.

Trigger @ $56.25

Our Trade Never Opened.

03/22/12 our trade never opened. IPGP has been removed from the newsletter

chart:

Entry on March xx at $ xx.xx
Earnings Date 05/03/12 (unconfirmed)
Average Daily Volume = 763 thousand
Listed on March 15, 2012


Lufkin Industries - LUFK - close: 74.24 change: -2.31

Stop Loss: 76.99
Target(s): 84.85
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Comments:
03/22 update: LUFK is not cooperating either. The oil and energy sector has been sinking recently. LUFK is breaking down to new relative lows. You could argue that this stock has created a bearish head-and-shoulders pattern over the last six or seven weeks and today broke the neckline. It is very unlikely that LUFK will hit our bullish trigger to buy calls at $80.75 soon so I am removing it from the play list.

Trigger @ $80.75

Our Trade Did Not Open.

03/22/12 LUFK is removed from the newsletter

chart:

Entry on March xx at $ xx.xx
Earnings Date 04/19/12 (unconfirmed)
Average Daily Volume = 494 thousand
Listed on March 17, 2012