Option Investor
Newsletter

Daily Newsletter, Tuesday, 3/27/2012

Table of Contents

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

Market Wrap

Monday Hangover

by Jim Brown

Click here to email Jim Brown
Monday's short squeeze may have fun for those already long but Tuesday was definitely a hangover day where the celebration enthusiasm faded.

Market Statistics

The short squeeze from Monday had no follow through today. Volume was very low and only the large cap tech stocks managed to finish in the green. The Dow flirted with positive territory most of the day but a sell program at 3:15 ended the chance for a positive close.

Dow Chart - 4 min

Weighing on the markets were a pair of less than exciting economic reports. The March Richmond Fed Manufacturing Index fell -13 points to 7.0 from 20.0 in February. This was a three month low and the internals were not good.

New orders declined to 11.0 from 21.0 and shipments fell from 25.0 to 2.0. Employment fell to 6.0 from 13.0 and the average work week fell to 2.0 from 10.0.

The pace of growth slowed dramatically but after two months of robust growth you would expect a pause now that early 2012 capital expenditures are well underway.

Richmond Fed Manufacturing Survey Chart

Also losing some of its luster was the final reading for the March Consumer Confidence. March confidence was revised down to 70.2 from the prior March reading of 70.8 and February level of 71.6.

Rising gasoline prices, actually the talk about the potential for $4 gasoline, were credited for the slight decline in confidence. The present conditions component rose to 51.0 from 46.4 but the expectations component declined to 83.0 from 88.4. It was "expectations" of future gasoline prices that drove confidence lower.

Buying plans improved appreciably. Those planning on buying a new vehicle, probably one with better gas mileage, rose to 12.0% from 10.3% of respondents. Those planning on buying a home rose from 4.2% to 4.9% and plans for buying an appliance rose to 48.1 from 45.4. Inflation expectations also rose nearly a point to 6.3 from 5.5, also driven by the rise in fuel prices.

Consumer Confidence Chart

The economic calendar for the rest of the week is still headlined by the Kansas Fed Survey and the ISM Chicago. The final GDP revision on Thursday will be market neutral unless there is a dramatic change. Probably the most anticipated event on the calendar is the RIMM earnings on Thursday. This previously high flyer at $147 trades at only $14.70 today but there is still a lot of investor interest.

Economic Calendar

Despite the negative economic reports the dollar ended the day flat and then ticked up slightly in afterhours thanks to comments from Bernanke in a late presentation. He said the economy was improving but it was "far too early" to claim victory. Also helping the dollar were comments from Richard Fisher and William Dudley that the Fed had done all it needs to do to insure the economy moves back to sustainable growth. Those comments lessened the potential for QE3 but only barely. Fisher is not a voting member of the FOMC this year but Dudley is a voter.

St Louis Fed President James Bullard also said a third round of QE is not necessary at this time. Bullard said "unless the U.S. economy were to deteriorate further, more QE is unnecessary." He also believes the Fed should return to normal rates as soon as possible. Bullard is not a voting member of the FOMC this year.

It appears Bernanke will have a difficult task ahead if he wants to add further monetary stimulus at the April meeting. Based on his recent comments he appears ready to add some new stimulus to insure the recovery becomes self sustaining. He will need to do it at the April meeting because there is no meeting in May and Operation Twist expires in June. If he is going to make another policy change he has to do it ASAP to avoid charges it is politically motivated. The Fed normally avoids changes in the six months before a presidential election so time is running short.

Dollar Index Chart

If it is an election year and gas prices are rising we should expect a release of oil reserves from the Strategic Petroleum Reserve (SPR). In fact we should just change the name to the Strategic Political Reserve. Crude prices were flat today despite news that South Sudan oil fields were bombed by Sudan and Total (TOT) was forced to shut down some oil and gas rigs in the North Sea because of a blowout. Shell has platforms in the area and was also evacuating workers.

With multiple platforms shut down and production halted on about 180,000 boepd or 8.7% of average U.K. production, you would have expected crude prices to rise. Total shutin 130,000 boepd and Shell 50,000. The key here is the production is mostly gas and natural gas liquids. BOE means barrels of oil equivalent. Only about 60,000 bpd are actually oil but that platform is one of the largest contributors to the North Sea production.

Total said it could take six months to control the gas leak on the North Sea Elgin platform. Gas and NGL are bubbling up under the platform like a shaken 2 liter bottle of pop. One spark and you would have another roman candle similar to the Horizon disaster only without the five million barrels of spilled oil.

South Sudan said Sudan bombed their oil installations and that called into question the scheduled meetings by country leaders to resolve border disputes. South Sudan has daily oil production of 350,000 bpd but it has been shutdown until the border dispute is settled. South Sudan has the oil but the pipeline goes through Sudan and South Sudan halted pipeline shipments because Sudan was stealing the oil. (Their claim) South Sudan recently seceded from Sudan.

The halt in production from South Sudan and declines in Nigeria, Yemen and Syria plus the Iranian oil embargo has forced oil prices higher although Saudi Arabia continues to claim the market is oversupplied by more than one million barrels per day.

Gasoline prices rose to $3.90. Against this backdrop it should be no surprise in an election year that the White House is floating the weekly trial balloon of a release of supplies from the SPR. Today it was a Bloomberg report quoting Charles McConnell, assistant secretary for fossil energy for the DOE as saying a SPR release is being considered. He said the administration is looking at all alternatives to lower the price of fuel. That suggests a surprise announcement ahead and that kept oil prices from rising.

WTI Crude Chart

Brent Crude Chart

Natural gas producers wish somebody would bomb their fields and put them out of their misery. Natural gas prices declined to $2.17 intraday and are trading at $2.19 overnight. Prices have not been this low since February 2006. The gas in storage is more than 50% above the five year average at this time of year and it is expected to reach much higher levels before the summer generation cycle begins. Later this year it is expected to reach maximum capacity and require pipelines to shutdown or restrict the amount of gas they accept. Almost everyone expects to see gas under $2 soon.

This is impacting the entire energy sector because most investors don't really know which companies have a material exposure to gas other than the majors like Chesapeake (CHK), Encana (ECA), EOG (EOG), Chevron (CVX), etc. The S&P Energy sector is down -12% for the quarter and the only sector in negative territory.

Natural Gas Futures Chart

The best economic report today was not an economic report. It was the earnings report from Lennar Corp (LEN). The homebuilder reported a better than expected 8-cent profit in earnings for Q4 compared to a loss of 5-cents a year ago. Revenue rose +30% to $721 million. Lennar said new deliveries were up +29% and new orders were up +33%. The CEO said the market had stabilized driven by a combination of low home prices and low interest rates. Shares of LEN rose +5% on the news.

This was a breath of fresh air after the ugly earnings from KB Homes (KBH) on Friday. That earnings report depressed the entire sector but the Lennar news today recovered all that loss for everyone except KBH.

Lennar Chart

Homebuilder ETF Chart

Annie's Inc (BNNY) priced its IPO tonight. The company makes organic foods but it best known for the white and purple boxes of mac and cheese with the bunny on the label. The company is selling five million shares and the initial price range was $14-$16 but they changed it on Monday to $16-$18 because of high demand. It priced tonight at $19 so demand must have been good. You can thank the success in Whole Foods Market (WFM) for the demand for Annie's. The bunny has grown so popular it was a natural for Annie's to use BNNY for their stock symbol. There are 10 additional IPOs expected to price this week and roughly 400 more this year.

Annie's

Nasdaq big caps continued to drive the overall market higher and Apple was the leader today. Tradition Equity raised their price target from $600 to $700 and that is not the high targets on the street. Apple continues to be the most recommended high dollar stock on the planet. Apple shares accounted for 33% of the YTD gain in the Nasdaq 100.

Apple Chart

The S&P 500 does not have the good fortune of being only large cap techs. Declines in the tech and energy sectors caused the S&P to lose some of its gains from Monday. The 1426 level and the May 2008 closing high is the current target and it may be a struggle. The big cap techs are helping but with 500 stocks in the index that means there is a lot of dead weight to drag.

I still believe there will not be a lot of gains for the rest of the week and the indexes will chop around on low volume as fund managers try to keep their windows dressed. Volume today was barely 6.01 billion shares. This is on the low side and about what we have been seeing lately. Volatility has been minimal so fund managers are having a relatively calm week ahead of quarter end. The only worry today is over hedge funds trigging large shorting programs ahead of month end. Fund managers would rather they wait until April.

S&P-500 Chart - Daily

The Dow was lackluster today after gaining +161 points on Monday. The sell program at the close knocked off -40 points but otherwise the Dow held its gains and that was bullish. Unfortunately over the last two days it has failed to make a new high and that is slightly bearish since the S&P and Nasdaq have accomplished that feat.

Dow Chart - Daily

The Nasdaq big cap rally continues. That is all I really need to say.

The Nasdaq composite was held up by the big caps and the Nasdaq 100 was the only index to close in positive territory thanks to a $10 gain in Apple to a new high. When this rally eventually fails it could be really ugly. We need the Q1 tech earnings to be very strong if we have any hope of avoiding a summer bloodbath. Analysts have been raising estimates for techs but there is very little conviction.

Nasdaq Chart - Daily

Nasdaq 100 Chart - Daily

The Russell 2000 gave back the most of any index on a percentage basis at -0.7%. It was also a strong gainer on Monday as the short squeeze pushed it above resistance and to a new 52-week high. If the Russell can use that prior resistance at 832 as support and then move higher I will have to rethink the potential for an April swoon.

Russell Chart - Daily

I expect further window dressing for quarter end but the majority of the moves should be over. Managers will try to keep the indexes pinned at the highs but I doubt they have a significant amount of uncommitted funds left. The markets "should" move sideways for the rest of the week. Obviously unexpected headlines could change that EOQ pattern.

Jim Brown

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New Option Plays

Navigation Technology & Small Cap ETF

by James Brown

Click here to email James Brown


NEW DIRECTIONAL CALL PLAYS

Trimble Navigation - TRMB - close: 55.43 change: +0.57

Stop Loss: 51.90
Target(s): 59.75
Current Option Gain/Loss: Unopened
Time Frame: 3 to 6 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
TRMB is a key player in the GPS navigation industry and all the myriad forms this technology takes. The stock's breakout past resistance near $52.00 was a significant buy signal. Now after several days of digesting its gains the stock is on the rise again.

I am suggesting bullish positions tomorrow morning but only if both TRMB and the S&P 500 index open positive. We will start with a stop loss under support at the $52.00 level. More conservative traders may want to use a tighter stop loss. Our multi-week target is $59.75. FYI: The Point & Figure chart for TRMB is bullish with a $63 target.

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

- Suggested Positions -

buy the Apr $55 call (TRMB1221D55) current ask $1.75

- or -

buy the May $60 call (TRMB1219E60) current ask $0.80

Annotated Chart:

Entry on March xx at $ xx.xx
Earnings Date 04/26/12 (unconfirmed)
Average Daily Volume = 522 thousand
Listed on March 27, 2012


NEW DIRECTIONAL PUT PLAYS

iShares Russell 2000 ETF - IWM - close: 83.81 change: -0.59

Stop Loss: 87.51
Target(s): 78.50
Current Option Gain/Loss: Unopened
Time Frame: several weeks
New Positions: Yes, see below

Company Description

Why We Like It:
The small cap index and ETF is struggling to build on its recent breakout attempt. The small caps could struggle even further once the end of the quarter passes and fund managers stop window dressing. Nimble traders should be able to scalp a few points on a correction lower.

We are suggesting a trigger to open small bearish put positions at $83.45 with a stop loss at $87.51. Our exit target is $78.50 near the early March lows.

Or as an alternative entry point you could wait for the IWM to break the trend line of higher lows (on the second chart below) and use a trigger to buy puts at $80.75 and target a drop toward the $76.00 area or its simple 200-dma instead. We're not going to track this alternative trade set up and will focus on the first one.

Trigger @ $83.45

- Suggested Positions -

buy the Jun $82 PUT (IWM1216R82) current ask $2.88

Trade Set Up IWM 90-minute chart:

Alternative Trade Set Up IWM chart:

Entry on March xx at $ xx.xx
Earnings Date --/--/--
Average Daily Volume = 54.8 million
Listed on March 27, 2012



In Play Updates and Reviews

Quiet Market Still Hits Triggers

by James Brown

Click here to email James Brown

Editor's Note:

The U.S. markets were relatively quiet on Tuesday with stocks fading from their morning highs. We did see both AGN and COST hit our entry triggers.

Current Portfolio:


CALL Play Updates

Allergan Inc. - AGN - close: 94.31 change: -0.43

Stop Loss: see below
Target(s): 99.50
Current Option Gain/Loss: Apr92.5c: -18.3% & Apr95c: -13.5%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
03/27 update: AGN spiked higher this morning and rallied past resistance near $95.00 but the rally didn't last. Shares reversed and closed down -0.4%. Unfortunately our bullish trigger was hit at $95.25 so the play is open. Readers may want to wait for a bounce off the $94.00 level before considering new bullish positions. Our exit target is $99.50.

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

- Suggested Positions -

Long Apr $92.50 call (AGN1221D92.5) Entry $3.55

- or -

Long Apr $95 call (AGN1221D95) Entry $1.85

03/27/12 AGN hit our breakout trigger at $95.25
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 27 at $95.25
Earnings Date 05/03/12 (unconfirmed)
Average Daily Volume = 1.5 million
Listed on March 13, 2012


Alexion Pharma - ALXN - close: 93.28 change: -1.03

Stop Loss: 89.40
Target(s): 98.00
Current Option Gain/Loss: Apr$90c: +50.0% & May$95c: +48.9%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
03/27 update: ALXN hit some profit taking today with a -1.0% decline versus a -0.07% drop in the NASDAQ and a -0.5% pullback in the biotech index. Readers can look for likely short-term support near $92.00 and its 10-dma. 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

03/26/12 sold half to lock in a gain.
bid on Apr $90 call @ $4.40 (+37.5%)
bid on May $95 call @ $3.50 (+48.9%)
03/24/12 new stop loss @ 89.40, prepare to sell at least half of our call positions at the open on Monday to lock in a gain.
Apr $90 bid is currently $5.40 (+68.7%)
May $95 bid is currently $4.00 (+70.2%)
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


Check Point Software - CHKP - close: 63.47 change: -0.48

Stop Loss: 59.75
Target(s): 68.50
Current Option Gain/Loss: Apr62.5c: +35.4% & May65c: +29.1%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
03/27 update: CHKP spiked to a new relative high this morning at $64.46 and then reversed. I would not be surprised to see a dip toward $63.00 or the $62.00 level if the market slips again tomorrow. I am not suggesting new positions at this time.

More conservative traders may want to use a stop under last Thursday's low at $60.77 instead. FYI: The Point & Figure chart for CHKP is bullish with an $88 target.

- Suggested Positions -

Long Apr $62.50 call (CHKP1221D62.5) Entry $1.55

- or -

Long May $65 call (CHKP1219E65) Entry $1.20

03/23/12 CHKP hit our entry trigger @ 62.25

Entry on March 23 at $62.25
Earnings Date 04/17/12 (unconfirmed)
Average Daily Volume = 1.3 million
Listed on March 22, 2012


Costco Wholesale - COST - close: 91.28 change: -0.24

Stop Loss: 89.75
Target(s): 97.50
Current Option Gain/Loss: Apr90c: -11.4% & May$95c: -23.9%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
03/27 update: Hmm.... it was not very convincing but shares of COST did hit new highs this morning at $91.78. That was just enough to hit our trigger to buy calls at $91.75. The stock immediately reversed lower and spent the rest of the day churning sideways in a narrow range. At this time, given today's failed rally, I would wait for a rise pat $92.00 before initiating new positions or you could buy a dip near $90.00 instead. FYI: The Point & Figure chart for COST is bullish with a $116 target.

- Suggested Positions -

Long Apr $90 call (COST1221D90) Entry $2.28

- or -

Long May $95 call (COST1221E95) Entry $0.71

03/27/12 triggered at $91.75

Entry on March 27 at $91.75
Earnings Date 05/24/12 (unconfirmed)
Average Daily Volume = 2.2 million
Listed on March 26, 2012


Cognizant Technology - CTSH - close: 77.41 change: -0.26

Stop Loss: 74.75
Target(s): 82.00
Current Option Gain/Loss: Apr77.5c: -11.4% & May$80c: -10.2%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
03/27 update: CTSH tagged $78.00 for the first time in months and then spent the rest of the day drifting sideways in a narrow range. If both CTSH and the S&P 500 index open positive tomorrow then I would consider new bullish positions.

FYI: The Point & Figure chart for CTSH is bullish with a $97 target.

- Suggested Positions -

Long Apr $77.50 call (CTSH1221D77.5) Entry $1.75

- or -

Long May $80 call (CTSH1219E80) Entry $1.95

03/26/12 CTSH hit our entry trigger at $77.55

Entry on March 26 at $77.55
Earnings Date 05/04/12 (unconfirmed)
Average Daily Volume = 1.8 million
Listed on March 21, 2012


Dollar Tree, Inc. - DLTR - close: 95.65 change: -0.17

Stop Loss: 92.25
Target(s): 98.50
Current Option Gain/Loss: Apr$95c: +15.1% & May95C: +13.3%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
03/27 update: DLTR spent another day drifting sideways along the $95.00 level. Nimble traders could buy calls on a dip near $94.00. Our exit target is $98.50 but more aggressive traders may want to aim higher. 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: 74.63 change: -0.17

Stop Loss: 70.90
Target(s): 79.75
Current Option Gain/Loss: -25.7%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
03/27 update: Tuesday proved to be a very quiet day for GTLS with the stock trading in a narrow range. I don't see any changes from my prior comments.

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

03/26/12 new stop loss @ 70.90
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: 71.40 change: +0.19

Stop Loss: 67.75
Target(s): 74.75
Current Option Gain/Loss: -12.9%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
03/27 update: HLF continues to churn sideways under resistance at the $72.00 level. Traders could use a breakout past $72.00 as a new entry point but you may want to aim past our target of $74.75. More conservative traders may want to raise their stops.

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: 59.42 change: -0.50

Stop Loss: 54.45
Target(s): 64.00
Current Option Gain/Loss: Apr55c: +75.0% & Apr60c: +142.8%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
03/27 update: A downgrade before the opening bell pushed NTES to gap lower at the open but the stock immediately bounced. Unfortunately NTES can't seem to get past resistance near $60.00. Given this struggle at the $60 level more conservative traders may want to exit immediately. If NTES corrects it could easily drop toward the $56-55 area. I am not suggesting new positions at this time.

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

03/26/12 sold half at the open.
exit bid on Apr. $55 call @ $0.00 (+67.8%)
exit bid on Apr. $60 call @ $1.95 (+178.5%)
03/24/12 new stop loss @ 54.45.
03/24/12 Prepare to sell half of our positions on Monday to lock in a gain.
Apr $55 call bid currently @ $5.20 (+85.7%)
Apr $60 call bid currently @ $1.95 (+178.5%)
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


Nu Skin Enterprises - NUS - close: 60.76 change: -0.74

Stop Loss: 58.45
Target(s): 64.50
Current Option Gain/Loss: Apr60c: -21.7% & May65: -28.0%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
03/27 update: The action in NUS today was not encouraging. Not only did shares fail at the $62.00 level for the third time in two days but today's performance also created a bearish engulfing candlestick reversal pattern. Now I am still expecting short-term support at $60.00 but more conservative traders may want to tighten their stop loss. At this point I'd wait for a bounce off $60 before considering new positions.

- Suggested Positions -

Long Apr $60 call (NUS1221D60) Entry $2.30

- or -

Long May $65 call (NUS1219E65) Entry $1.25

03/27/12 NUS created a bearish reversal candlestick. Let's see if there is any confirmation.

Entry on March 26 at $60.94
Earnings Date 05/03/12 (unconfirmed)
Average Daily Volume = 601 thousand
Listed on March 24, 2012


O'Reilly Automotive - ORLY - close: 91.27 change: -0.24

Stop Loss: 88.45
Target(s): 98.50
Current Option Gain/Loss: Apr90c: - 8.0% & May$90c: - 6.3%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
03/27 update: It was a quiet day for ORLY but shares did provide us another entry point with the dip to $90.63 intraday. FYI: The Point & Figure chart for ORLY is bullish with a $103 target.

- Suggested Positions -

Long Apr $90 call (ORLY1221D90) Entry $2.50

- or -

Long May $90 call (ORLY1219E95) Entry $3.95

03/26/12 triggered at $91.25

Entry on March 26 at $91.25
Earnings Date 04/25/12 (unconfirmed)
Average Daily Volume = 887 thousand
Listed on March 24, 2012


Under Armour, Inc. - UA - close: 97.60 change: -1.36

Stop Loss: 94.90
Target(s): 104.75
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Comments:
03/27 update: UA hit some profit taking and gave up -1.3%. Nimble traders might want to consider buying calls on a dip or a bounce near the $96.00-95.00 area. I am suggesting readers wait for a breakout with a trigger to buy calls at $100.25. We are starting this trade with a wide stop loss so readers may want to keep their position size small.

Trigger @ $100.25

- Suggested Positions -

buy the Apr $100 call (UA1221D100)

- or -

buy the May $105 call (UA1219E105)

Entry on March xx at $ xx.xx
Earnings Date 04/24/12 (unconfirmed)
Average Daily Volume = 1.0 million
Listed on March 26, 2012


Ulta Salon, Cosmetics - ULTA - close: 93.97 change: -0.54

Stop Loss: 89.45
Target(s): 97.50
Current Option Gain/Loss: +12.1%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
03/27 update: ULTA also delivered a quiet session with shares drifting sideways. I am not suggesting new positions at this time.

Earlier Comments:
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

03/26/12 new stop loss @ 89.45
03/24/12 adjusted exit target to $97.50
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: 84.14 change: -0.52

Stop Loss: 81.75
Target(s): 87.50
Current Option Gain/Loss: -36.7%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
03/27 update: WFM gave up about half of yesterday's gains but the stock is trying to find support near $84.00 again.

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

Joy Global, Inc. - JOY - close: 73.87 change: -1.76

Stop Loss: 77.55
Target(s): 73.00
Current Option Gain/Loss: +30.9%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
03/27 update: JOY continues to underperform the market and shares lost -2.3% today closing at new relative lows. Currently our exit target is $73.00. More aggressive trades may want to aim for the $70.50-70.00 zone instead. We will lower our stop loss to $77.55. I am not suggesting new positions at this time.

- Suggested Positions -

Long Apr $75 PUT (JOY1221P75) Entry $2.52

03/27/12 new stop loss @ 77.55
03/26/12 market continues to climb. readers may want to exit JOY early
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


OpenTable, Inc. - OPEN - close: 42.09 change: +0.33

Stop Loss: 42.55
Target(s): 33.00
Current Option Gain/Loss: Unopened
Time Frame: 3 to 6 weeks
New Positions: Yes, see below

Comments:
03/27 update: OPEN was showing some relative strength this morning but gains faded late this afternoon. Currently we're waiting for a breakdown.

Remember, this is a higher-risk trade. Short interest on OPEN is already at 51% of the small 18.3 million share float. The stock could be prone to short squeezes. Plus, there was some speculation last week that OPEN could be a buy-out target for someone looking for exposure to the online restaurant reservation market. Rumors that OPEN could be a takeover target could always spark a short squeeze.

I am suggesting we open small bearish put positions if OPEN trades at $39.65, which would be a new relative low. Our target is $33.00 although readers may want to exit near possible support at the $35.00 level instead. FYI: The Point & Figure chart for OPEN is bearish with a $35 target.

Trigger @ $39.65 (small positions)

- Suggested Positions -

buy the Apr $40 put (OPEN1221P40)

- or -

buy the May $35 PUT (OPEN1219Q35)

Entry on March xx at $ xx.xx
Earnings Date 05/01/12 (unconfirmed)
Average Daily Volume = 1.0 million
Listed on March 24, 2012


Polypore Intl. Inc. - PPO - close: 36.85 change: -0.64

Stop Loss: 38.65
Target(s): 31.00
Current Option Gain/Loss: -45.7%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
03/27 update: The latest oversold bounce in PPO might be over. Shares erased yesterday's gains. Aggressive traders could buy puts now and use stop near the $38.00 level.

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


Schnitzer Steel Industries - SCHN - close: 40.58 change: -0.40

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

Comments:
03/27 update: The oversold bounce in SCHN is also fading. Shares are headed for support near $40.00 again. 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)

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