Option Investor
Newsletter

Daily Newsletter, Tuesday, 4/3/2012

Table of Contents

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

Market Wrap

Fed Spoils the Party

by Jim Brown

Click here to email Jim Brown
The FOMC minutes revealed the Fed was done spiking the punch and partygoers needed to sober up.

Market Statistics

The FOMC minutes delivered an electric shock to the market that knocked the Dow down about -130 points at the lows before cooler heads prevailed. The minutes showed the FOMC was moving away from additional stimulus in the form of QE3 and possibly even closer to a rate hike than previously expected. The market was not happy.

The minutes offered plenty of conflicting opinions but it appeared the doves, those in favor of further stimulus, were in the minority. The Fed is adopting a wait and see attitude but emphasized the "no change in rates until 2014" commitment was dependent on the economy and could be changed at any time. It was never a commitment but a forecast but of course the market took it as etched in stone.

The Fed believed the gains in the job market could be temporary. They discussed the recent job gains as spurred by the warmer winter weather that pulled hiring forward and future months would suffer. They were concerned growth in jobs was faster than the growth in GDP and was unsustainable. This makes the payroll reports this week even more critical.

The Fed did revise its GDP estimates slightly higher and suggested there could be further upward revisions. They based that on higher equity prices and the resulting wealth effect and better growth overseas. They were pleased with the policy changes implemented overseas and the resulting decline in financial stress.

They were concerned about the higher oil prices but felt the impact was temporary and priecs would decline in the second half of the year. Higher oil prices did force the Fed to raise their inflation expectations slightly.

Their risks to slower growth were ironically the potential for fiscal tightening in the U.S., weak housing market and further household deleveraging.

The comments causing the markets to tumble were change in the tone of the FOMC. Instead of "several" members wanting to add further stimulus it changed to "two" members. Implementing a new QE3 program would need more than two members.

It appeared that those in favor of moving towards a tighter monetary policy had grown. Now it appears operation Twist will be allowed to expire in June. That was the selling of $400 billion in short term treasuries and buying a like amount of longer term treasuries.

The FOMC seems to have fractured into three groups. A minority is in favor of continued stimulus to stimulate job growth and insure the recovery continues. A few believe there is no need for additional stimulus and want to wait and watch future economic conditions before making any decisions. These few are not specifically opposed to more stimulus but ONLY if the economy begins to falter. The last group is adamantly opposed to further stimulus, believes the current monetary policy is too lax and favors taking action to begin the process to higher rates in the 2% range.

With the FOMC fractured into these three components it appears additional monetary stimulus is dead in the water unless economic growth slows. Similarly the hawks don't have enough support to change the current policy other than allowing Twist to expire.

The market did not like the balance of the FOMC shifting away from QE3 even though there is no sign of any tightening. Most Fed watchers plus Bernanke and SF Fed president John Williams, believe letting Twist expire would be the equivalent of policy tightening. Williams said today "the Fed must continue to act vigorously to boost the economy and sustain labor market gains. We are far below maximum employment and are likely to remain there for some time," Williams said in the text of remarks given today in San Diego. "Under these circumstances, it’s essential that we keep strong monetary stimulus in place."

With the next FOMC meeting a two day event starting April 24th, and the last meeting the FOMC can take action before the election without it appearing blatantly political, we can expect all the Fed presidents and FOMC members to ratchet up their policy arguments in speeches and op-ed articles. There will be a serious headline battle over the next two weeks ahead of the meeting.

The FOMC minutes had multiple impacts on the market. Treasuries were sold off hard, the dollar rocketed higher, commodities collapsed and equities declined sharply.

With operation Twist apparently expiring in June the treasury market collapsed. Without the Fed buying $50-$60 billion of treasuries every month the price of treasuries will decline and yields rise. The Fed has been artificial support for the treasury market for the last three years. If they quit buying the market will be left to fluctuate and find its own level. The yield on the ten-year note shot up +4% on the news. If this continues it will harm the housing market that has been improving on the strength of record low mortgage rates.

Ten Year Yield Chart

The dollar also rocketed higher on expectations for higher interest rates and a stronger economy as represented by the Fed's upward revision in the GDP. The sharply stronger dollar immediately crushed any dollar denominated commodity such as gold.

Dollar Index Chart

Crude oil was caught in the middle between the stronger dollar and the upward revisions to the GDP forecast. Growth vs dollar and stronger dollar won to push prices lower. However, support on WTI held. Brent crude was less impacted because of recent events in the North Sea that have cut production significantly over the last two weeks. BP shut down a rig for maintenance and Shell has a group of rigs offline for a gas leak. Other companies are also in maintenance mode and that has cut 4-6 tanker loadings from the expected output over the next four weeks.

The API crude inventory report out after the close showed a gain of +7.8 million barrels over the last week. That was roughly in line with the gain reported by the EIA in their last report. The two inventory surveys have different cutoffs and methodologies. Gasoline inventories declined -4.5 million barrels.

WTI Crude Chart

Brent Crude Oil Chart

Gold prices were the hardest hit of the commodities with a -$32 drop to $1648. Gold has been struggling to rebound from the support at the $1640 level for several weeks. The major brokers like Merrill Lynch and Morgan Stanley are still expecting gold prices at $2000 over the next 12 months so this is a commodity waiting for a catalyst to appear.

Gold Chart

Silver Chart

The market was already weak before the FOMC minutes were released. The vehicle sales for March came in lower than expected at 14.4 million compared to a pace of 15.1 million in February. The Q1 average was 14.5 million units and the best quarter in four years but the sharp decline in March was unsettling. With the warmer weather there should have been more sales although there were 1.4 million units sold in March.

Sales are being driven by pent up demand after several years of frugal budgets and worry over jobs and the economy. GM did say they sold more than 100,000 fuel efficient cars with mileage over 30 MPG in March and suggesting there is a definite switch in progress away from the SUV consumer. Ford sales rose +5%, GM +11.8% and Chrysler +34%. Chrysler is debuting the new Viper this week. The production of the 10-cyclinder sports car was halted in 2010 as a result of the recession and the Chrysler bankruptcy. The Viper is what is referred to in the industry as a "halo" car. People flock to see the Viper and end up buying some other Chrysler product.

The average vehicle age in the U.S. is now 10.8 years and that should shrink as the economy picks up speed. Subprime loans in the auto sector have increased from 24% during the recession to 30% today. Tax refunds are expected to increase vehicle purchases in April and probably had a decent impact on March sales.

Moody's Vehicle Sales Chart

Offsetting the lower vehicle sales was a positive Factory Orders report for February. Orders rose +1.3% compared to a -1.0% drop in January. Expectations were for a gain of +1.5%. Durable goods rebounded strongly from -3.5% in January to +2.4% in February. Nondefense capital goods jumped from -3.4% to +1.7%.

The ISM for New York rose sharply to 551.8 from 543.1 and the largest monthly increase since February 2011. The current conditions component rose from 63.1 to 67.4. The six month outlook rose from 77.3 to 79.5.

More than 20% of survey respondents said a lack of qualified applicants was keeping them from hiring more workers and expanding their business. That is up from 17% in February and 16% in January. More than 58% of all businesses surveyed are in hiring mode. Less than 20% are still in a hiring freeze and the lowest percentage in four years. Employment in New York City hit an all time high in January that exceeded the pre-recession peak and the prior high in 1969.

Tomorrow starts the payroll reporting cycle for March with the ADP report. Analysts expect the ADP report to show a gain of +220,000 jobs compared to +216,000 in February. The Nonfarm Payrolls on Friday are expected to show job gains of +201,000.

Also on Wednesday is the ISM services report. Analysts are expecting a slight decline to 57.0 from 57.3. The ISM Manufacturing report on Monday showed a decent gain to 53.4 from 52.40.

ISM Manufacturing Chart

Economic Calendar

In stock news Apple (AAPL) received new target prices by two analysts at $1,000. Piper Jaffray analyst Gene Munster raised his price target to $1,000. Topeka Capital analyst Brian White garnered headlines by putting a $1,001 price target on the stock. White expects to see that price in 2013 while Munster thinks it will be there by 2014. Munster has a $910 target for 2012. Both analysts believe Apple will continue to gain market share with its products in the global market. Apple also has a new TV product coming out later this year. Apple shares hit $632 intraday.

Are we in bubble territory on Apple. When analysts are racing each other to but significantly higher price targets on the stock like $1,001 in order to get the most attention does that qualify as signs of a bubble?

In a note to investors Munster said a recent survey found that 40% of students plan on buying an iPhone in the next six months while 19% of non-tablet owners plan on purchasing a tablet in the same period. In the same survey the 34% of students that already owned a tablet, 70% had iPads, 19% Android and 11% Kindle Fires. Of the 19% who wanted to buy a tablet, 80% wanted an iPad. The survey polled 5,600 students.

A different survey by ComScore found that Blackberry market share of the smartphone market had declined to 13% while Apple had 30% and Google's Android had more than 50.1%. The Android share gained +3.2% in survey period. Microsoft's share declined -1.3% to 3.9%. ComScore said 104 million people in the U.S. owned a smartphone.

Apple Chart

Research in Motion shares fell -9% after Gene Munster said they would eventually go to zero in an on air interview. The company was also hit with a patent suit by NXP Semiconductors.

RIMM Chart

Amazon (AMZN) announced a video streaming service will be available on Sony's Playstation 3 gaming console beginning on Tuesday. The streaming video can be accessed from an app on the PS3 as part of an agreement that involves the service being "prominently" featured on all consoles in the USA. Amazon instant video offers more than 120,000 movies and TV shows to buy or rent. They compete with Netflix. Amazon's streaming has not been available on game consoles until today while NetFlix has been available for some time.

Amazon Chart

The markets dropped sharply after the FOMC minutes were released but there was a buy the dip rebound. The S&P declined to 1404 but rebounded to close at 1413 and a loss of only -6 points. The 1405 level is initial support and it held. The next support level is 1390. So far the decline was just noise although the initial dip was pretty dramatic.

The first week of April is "normally" positive as retirement funds flow into the market. April has also posted an average of +4.5% gains over the last five years despite the market topping in the middle of the month over the last two years.

There is no material reason for the market to decline on the Fed news. Saying the GDP could be stronger than expected is not a bad thing. This is a knee jerk reaction to the news rather than a real change in the outlook. There was only a 50:50 chance of QE3 before the minutes and according to analysts that has not changed although the direction of the estimates will definitely begin to decrease.

The market will be telling us there is trouble when the 1390 support level breaks. Futures are down -2.50 after the close but there is a lot of darkness before morning. The ADP payroll report on Wednesday will be the next focal point and a strong number could erase the confusion over the FOMC minutes. A weak number would mean the FOMC might be more likely to move back towards accommodation mode. That means the payroll numbers are important.

S&P Chart

The Dow declined to a low of -130 points on the FOMC news but regained +65 of those points. The critical Dow support at 13,000 is still 200 points below the close so there was no damage done. The Dow closed at the upper end of its three week range and there is no change in the trend.

Dow Chart

Nasdaq Composite declined for 5th time in the last six days. The declines have been minimal and the close today was only -20 points from the recent high. Tech stocks continue to be the winners and like the other indexes the trend has not changed. Strong support at 3050 is well below the close at 3113 so there is plenty of room to chop around while we wait for earnings.

Nasdaq Chart

The Russell 2000 sentiment indicator is showing no signs of fund manager flight. The Russell is holding at the high end of its recent range. Until the Russell begins to breakdown the big cap market should remain stable. Watch the Russell for signs of trouble.

Russell 2000 Chart

We all knew there would come a day when the news from the Fed would force investors into a choice. This was not the day. This was simply a warning the day may be closer than previously thought. Once the Fed does tell us they are halting operation Twist the yields on treasuries will rise and value of those investments decline. That will force the fixed income investors to make a decision. Continue holding those bonds while the value declines or move into the equity markets to benefit from the economic recovery. The Fed can't justify allowing rates to rise unless the economy is improving. With the economy improving the place to be is in equities. When that day comes there is likely to be some initial panic but the long term outlook will be better.

That still does not prevent the normal seasonal market cycles like the sell in May and go away trade. Earnings are still expected to be weak so there will be plenty of people willing to take their profits and avoid the summer doldrums. The road ahead may be bumpy for the rest of the year but we can't wait patiently on the sidelines for 2013 to arrive. We need to be nimble and always keep an eye on the horizon for approaching storm clouds.

One down day does not make a trend.

Jim Brown

Send Jim an email


New Option Plays

Asset Manager and Specialty Retail

by James Brown

Click here to email James Brown

Editor's Note:

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

(bullish ideas) TDC, LO, V, WBC, ASH, TPX, MHK, BKE, VAL, MCD, RE, GPRO, ANSS, HIBB, HSIC, SHW, PRGO, DVA, CTXS, and ZMH


NEW DIRECTIONAL CALL PLAYS

Affiliated Managers Group - AMG - close: 115.19 change: +1.66

Stop Loss: 111.45
Target(s): 119.50
Current Option Gain/Loss: Unopened
Time Frame: up to the late April earnings report.
New Positions: Yes, see below

Company Description

Why We Like It:
AMG is an asset management company. The stock has been slowly channeling higher for months. Today is a bullish breakout from the $110-114 trading range. It's also a new multi-year high.

I am suggesting a trigger to buy calls at $115.50 with a stop loss at $111.45. Our target is $119.50. FYI: The Point & Figure chart for AMG is bullish with a $134 target.

Trigger @ 115.50

- Suggested Positions -

buy the Apr $115 call (AMG1221D115) current ask $2.10

- or -

buy the May $120 call (AMG1219E120) current ask $2.10

Annotated Chart:

Entry on April xx at $ xx.xx
Earnings Date 04/24/12 (unconfirmed)
Average Daily Volume = 310 thousand
Listed on April 03, 2012


Tractor Supply - TSCO - close: 92.89 change: +1.03

Stop Loss: 89.80
Target(s): 98.00
Current Option Gain/Loss: Unopened
Time Frame: up to the mid April earnings report
New Positions: Yes, see below

Company Description

Why We Like It:
Retail names continue to show strength. TSCO is breaking out to new record highs. Shares just spent the last few days testing the $90.00 level as new support. I am suggesting a trigger to buy calls at $93.25. We'll use a stop at $89.80, under Monday's low. Our target is $98.00. We do not want to hold over the mid April earnings report so we may only have two or three weeks. FYI: The Point & Figure chart for TSCO is bullish with a $109 target.

Trigger @ 93.25

- Suggested Positions -

buy the Apr $95 call (TSCO1221D95) current ask $1.35

- or -

buy the May $95 call (TSCO1219E95) current ask $2.90

Annotated Chart:

Entry on April xx at $ xx.xx
Earnings Date 04/18/12 (unconfirmed)
Average Daily Volume = 578 thousand
Listed on April 03, 2012



In Play Updates and Reviews

A Late Day Bounce

by James Brown

Click here to email James Brown

Editor's Note:

Stocks managed to rebound off their afternoon lows to pare their losses.

Our new IBB trade has been triggered. We want to exit our SCHN trade at the close tomorrow.

Current Portfolio:


CALL Play Updates

Allergan Inc. - AGN - close: 95.27 change: +0.10

Stop Loss: 92.25
Target(s): 99.50
Current Option Gain/Loss: Apr92.5c: -12.6% & Apr95c: -24.3%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
04/03 update: AGN managed to eke out a small gain and outperform the major indices thanks to a late day rebound. I am not suggesting new positions at this time. We have a stop loss at $92.25. More conservative traders may want to up their stop closer to the $93.00 or even $94.00 level.

There was no change in our option values today (at the closing bell).

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


Check Point Software - CHKP - close: 64.49 change: -0.03

Stop Loss: 61.40
Target(s): 68.50
Current Option Gain/Loss: Apr62.5c: +70.9% & May65c: +58.3%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
04/03 update: It was a quiet day for CHKP with shares bouncing around the $64.00-64.75 area. I don't see any changes from my weekend comments. More aggressive traders may want to leave their stop under $60.00, which should be significant support. I am not suggesting new positions at this time. More conservative trades may want to take profits now. 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

03/31/12 new stop loss @ 61.40
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


Cognizant Technology - CTSH - close: 76.31 change: -0.70

Stop Loss: 74.75
Target(s): 82.00
Current Option Gain/Loss: Apr77.5c: -54.2% & May$80c: -35.8%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
04/03 update: CTSH underperformed with a -0.9% decline. Shares could be headed for last week's low near $75.40. More conservative traders might want to tighten their stop loss. I am not suggesting new positions at this time.

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


Quest Diagnostics Inc. - DGX - close: 61.78 change: -0.22

Stop Loss: 59.45
Target(s): 66.50
Current Option Gain/Loss: Apr60c: - 9.6% & May65c: - 7.1%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
04/03 update: Tuesday was relatively calm for DGX with shares slowly drifting lower. Readers can use a dip near $61.00 or the simple 10-dma as a new bullish entry point.

Earlier Comments:
I do want to point out that the 2006 high near $64.70 could be overhead resistance but we are aiming for $66.50. FYI: The Point & Figure chart for DGX is bullish with an $85 target.

- Suggested Positions -

Long Apr $60 call (DGX1221D60) Entry $2.60

- or -

Long May $65 call (DGX1219E65) Entry $0.70

04/02/12 triggered at $61.55

Entry on April 02 at $61.55
Earnings Date 04/18/12 (unconfirmed)
Average Daily Volume = 821 thousand
Listed on March 29, 2012


Dollar Tree, Inc. - DLTR - close: 95.75 change: +0.79

Stop Loss: 92.25
Target(s): 98.50
Current Option Gain/Loss: Apr$95c: +12.1% & May95C: +13.3%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
04/03 update: DLTR spiked higher this morning and briefly traded at a new record high. The stock outperformed the broader market with a +0.8% gain. I am not suggesting new positions at this time but nimble traders could buy a breakout past $96.25 and up their stop loss. We are targeting $98.50. More aggressive traders could target the $100 level. 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: 74.10 change: +1.11

Stop Loss: 70.90
Target(s): 79.75
Current Option Gain/Loss: -47.1%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
04/03 update: We have been worried with GTLS' recent lack of performance. Shares were holding above support at $72.00. Today the stock shot higher this morning, possibly on last night's news about the company raising prices. The relative strength today is encouraging and GTLS is on the verge of breaking out from this neutral, sideways consolidation over the last couple of weeks.

I would be tempted to buy calls again on a rally past $75.00 or maybe the $75.30 level.

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


J.B.Hunt Transport - JBHT - close: 55.73 change: +0.61

Stop Loss: 53.75
Target(s): 59.50
Current Option Gain/Loss: Apr55c: + 3.7% & May$55c: + 0.0%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
04/03 update: JBHT continues to look bullish. Broken resistance near $55.00 acted as new short-term support when traders bought the dip this morning. JBHT rallied to a new relative high.

FYI: The Point & Figure chart for JBHT is bullish with a $69 target.

- Suggested Positions -

Long Apr $55 call (JBHT1221D55) Entry $1.35

- or -

Long May $55 call (JBHT1219E55) Entry $2.00

Entry on March xx at $ xx.xx
Earnings Date 04/12/12 (unconfirmed)
Average Daily Volume = 729 thousand
Listed on March 28, 2012


iShares Biotech ETF - IBB - close: 124.48 change: +1.18

Stop Loss: 121.75
Target(s): 129.75
Current Option Gain/Loss: Apr125c: - 5.4% & May125c: - 6.2%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
04/03 update: Our new play on the IBB biotech ETF has been triggered. Shares rallied to all-time highs and hit our trigger at $125.25. I would still consider new positions now at current levels. Our multi-week target is $129.75. FYI: The Point & Figure chart for IBB is bullish with a $181 target.

- Suggested Positions -

Long Apr $125 call (IBB1221D125) Entry $1.85

- or -

Long May $125 call (IBB1219E125) Entry $3.20

04/03/12 triggered at $125.25

Entry on April 03 at $125.25
Earnings Date --/--/--
Average Daily Volume = 403 thousand
Listed on April 02, 2012


NetEase.com - NTES - close: 59.05 change: -0.86

Stop Loss: 54.45
Target(s): 64.00
Current Option Gain/Loss: Apr55c: +53.5% & Apr60c: + 85.7%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
04/03 update: Hmm... NTES tried to rally this morning but shares were hit with profit taking. The stock gave back almost half of yesterday's gains. The $60.00 level continues to be overhead resistance. I don't see any changes from my prior comments.

Aggressive traders could use a rally past $60.50 as a new bullish entry point (but you'll need to adjust your stop loss higher).

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


O'Reilly Automotive - ORLY - close: 93.65 change: +0.79

Stop Loss: 89.45
Target(s): 98.50
Current Option Gain/Loss: Apr90c: +52.0% & May$90c: +31.6%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
04/03 update: ORLY was showing some relative strength on Tuesday with a +0.8% gain and a new high. I am raising our stop loss up to $89.45. We are targeting a move to $98.50 but more conservative traders may want to take profits near $95.00 instead. 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

04/03/12 new stop loss @ 89.45
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


PNC Financial Services - PNC - close: 64.70 change: -0.02

Stop Loss: 62.75
Target(s): 69.50
Current Option Gain/Loss: Unopened
Time Frame: up to its April 18th earnings report
New Positions: Yes, see below

Comments:
04/03 update: PNC traded sideways in a narrow range. The stock bounced off the $64 level this afternoon but has yet to breakout past resistance near $65.00. I am suggesting a trigger to buy calls at $65.25 with a stop loss at $62.75. Our target is $69.50. However, we will plan to exit prior to the April 18th earnings report. FYI: The Point & Figure chart for PNC is bullish with a $79 target.

Trigger @ 65.25

- Suggested Positions -

buy the May $65 call (PNC1219E65)

Entry on April xx at $ xx.xx
Earnings Date 04/18/12 (confirmed)
Average Daily Volume = 3.7 million
Listed on March 31, 2012


Ulta Salon, Cosmetics - ULTA - close: 95.01 change: +1.09

Stop Loss: 89.95
Target(s): 98.50
Current Option Gain/Loss: + 9.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
04/03 update: ULTA rallied to another new high and then spent the rest of the day consolidating sideways. I am adjusting our target to $98.50 but more aggressive traders may want to aim for the $99.50-100.00 zone instead. I am not suggesting new positions at this time.

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

- Suggested Positions -

Long Apr $95 call (ULTA1221D95) Entry $1.65

04/03/12 adjusted target to $98.50
03/28/12 new stop loss @ 89.95
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


VMware, Inc. - VMW - close: 114.53 change: +0.13

Stop Loss: 109.75
Target(s): 117.50
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Comments:
04/03 update: Traders started buying the dip in VMW near $113 this afternoon. If the market rallies tomorrow we could see VMW breakout past the $115.00 level. Aggressive traders might want to consider a trigger to buy calls at $115.25 and target a move toward $120. For the moment, we are going to keep our trigger to buy calls at $111.50. We still want to keep our position size small to limit our risk. Our exit target is $117.50. More aggressive traders could aim higher but we do not want to hold over the mid-April earnings report.

Buy-the-dip Trigger @ 111.50

- Suggested Positions -

buy the Apr $115 call (VMW1221D115)

04/02/12 not open yet. VMW did not hit our entry point requirement. We're adjusting our entry strategy to use a buy-the-dip trigger at $111.50

Entry on March xx at $ xx.xx
Earnings Date 04/17/12 (unconfirmed)
Average Daily Volume = 1.2 million
Listed on March 31, 2012


PUT Play Updates

Apache Corp. - APA - close: 99.23 change: -1.74

Stop Loss: 102.25
Target(s): 95.25 or 92.00
Current Option Gain/Loss: Apr95.5p: -35.8% & May95p: -24.1%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
04/03 update: As we expected shares of APA have continued to retreat after testing overhead resistance. The stock underperformed today with a -1.7% decline.

Earlier Comments:
I am setting two different targets. You can choose to aim for $95.25 or $92.00.

- Suggested Positions -

Long Apr $97.50 PUT (APA1221P97.5) Entry $2.40

- or -

Long May $95 PUT (APA1219Q95) Entry $2.90

Entry on March 29 at $98.32
Earnings Date 04/26/12 (unconfirmed)
Average Daily Volume = 2.7 million
Listed on March 28, 2012


iShares Russell 2000 ETF - IWM - close: 83.27 change: -0.56

Stop Loss: 87.51
Target(s): 78.50
Current Option Gain/Loss: + 7.5%
Time Frame: several weeks
New Positions: see below

Comments:
04/03 update: The IWM struggled with the $84.00 level this morning and slowly faded to a -0.6% decline. More conservative traders may want to tighten their stop loss. I am not suggesting new positions at this time.

Our exit target is $78.50 near the early March lows.

- Suggested Positions -

Long Jun $82 PUT (IWM1216R82) Entry $3.12

03/28/12 triggered at $83.45

Entry on March 28 at $83.45
Earnings Date --/--/--
Average Daily Volume = 54.8 million
Listed on March 27, 2012


OpenTable, Inc. - OPEN - close: 40.51 change: +0.77

Stop Loss: 42.55
Target(s): 33.00
Current Option Gain/Loss: Apr40p -31.8% & May35p: -17.6%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
04/03 update: Hmm... it looks like OPEN may have seen a little bit of a short squeeze this morning with the spike higher. The rally stalled at $42.00 and OPEN drifted lower the rest of the day. More conservative traders may want to lower their stop loss closer to the $42.00 level. Wait for a new drop under $39.50 before considering new bearish positions.

Earlier Comments:
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.

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.

(small positions) - Suggested Positions -

Long Apr $40 put (OPEN1221P40) Entry $2.20

- or -

Long May $35 PUT (OPEN1219Q35) Entry $1.70

04/02/12 triggered at $39.65

Entry on April 02 at $39.65
Earnings Date 05/01/12 (unconfirmed)
Average Daily Volume = 1.0 million
Listed on March 24, 2012


Polypore Intl. Inc. - PPO - close: 35.50 change: -0.17

Stop Loss: 38.05
Target(s): 31.00
Current Option Gain/Loss: -28.5%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
04/03 update: PPO tried to rally this morning and failed but there was little follow through for the bears. The stock has been trading sideways the last few days. I am not suggesting new positions at this time.

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

03/28/12 new stop loss @ 38.05

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: 39.17 change: -0.77

Stop Loss: 40.75
Target(s): 35.50
Current Option Gain/Loss: + 7.5%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
04/03 update: SCHN fell to a new relative low. The trend is down. Unfortunately we are almost out of time. We need to exit this position at the closing bell tomorrow (April 4th) to avoid holding over the earnings report. I am adjusting our stop loss down to $40.75.

Exit at the close tomorrow.

Earlier Comments:
Traders should note that we want to use small positions. 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.

(small positions) - Suggested Positions -

Long Apr $40 PUT (SCHN1221P40) Entry $1.58

04/03/12 new stop loss @ 40.75, prepare to exit at the close tomorrow
03/29/12 new stop loss @ 42.25
03/29/12 triggered at $39.75

Entry on March 29 at $39.75
Earnings Date 04/05/12 (confirmed)
Average Daily Volume = 326 thousand
Listed on March 22, 2012