Option Investor
Newsletter

Daily Newsletter, Tuesday, 4/10/2012

Table of Contents

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

Market Wrap

Losses Accelerate

by Jim Brown

Click here to email Jim Brown

The Dow lost another 213 points and the Nasdaq 55 in the worst losing streak since December.

Market Statistics

The selloff that started with the FOMC minutes last week accelerated on worries over another meltdown in Europe and a Bernanke speech with no reference to the Nonfarm Payroll report. Bond yields in Spain rose to 6% and are in danger of pushing the country into a meltdown similar to Greece where Europe would have to come to their rescue. Unfortunately Spain is too big to save. The EU rescue fund is far too small to save Spain. The Madrid stock market fell to its lowest level since 2009 crash. Spanish officials said the country had fallen back into recession with a -1.7% GDP but Citigroup said it could be much worse. Unemployment is 23.6%. Spain's budget deficit is -8.5% and the target is -3% in 2013. Spanish officials roiled the market overnight saying Spanish banks needed to raise more capital because of a deteriorating economy. This caused analysts already leery of Spain's troubles to wonder if Spain's banks can survive any further economic declines.

Italy is also falling off a cliff. The Italian FTSE MIB index fell -757 points or -5% on Tuesday. Major Italian banks lost 7-8% in today's crash. Apparently the $1 trillion ECB LTRO sugar rush has ended and EU banks are no longer supporting bond offerings from Italy and Spain in fear of a 75% haircut like investors in Greek bonds suffered.

I have repeatedly warned the EU crisis will return and Greece will eventually default. The events this week reminded investors the ECB only kicked the can further down the road. It was not the end of the road as many thought. We are rapidly approaching another can kicking crisis but the cans (Italy and Spain) are much, much larger and will be significantly harder to kick.

The ECB could issue another 500 billion euro LTRO and that might postpone the problem for a couple months but quantitative easing can only go so far when the banks/countries borrowing the money run out of collateral or the will to increase their indebtedness. The only way this problem can be fixed permanently is with the breakup of the EU. Weaker nations heavily in debt need to be able to print their own currency rather than be tied to the euro.

In the U.S. the economic reports were decent but they could not slow the market drop. The Job Openings, Labor Turnover Survey (JOLTS) for February showed a small increase in job openings to 3.498 million from 3.477 million. That was a very small increase month to month but the headline number represents a 16.1% increase over February 2011. Hiring increased from 4.2 million to 4.4 million. This is a lagging report for February so it was mostly ignored.

The Wholesale Trade report for February showed inventories rose +0.9% and nearly twice the expectations of +0.5%. That was also stronger than the +0.6% gain in January. Sales increased in seven of nine categories. Sales of furniture and electrical equipment fell. The inventory to sales ratio remained flat at 1.17. While this report was positive it was also a lagging report and was mostly ignored.

The economic calendar for the rest of the week will be highlighted by the Fed beige Book on Wednesday, Google earnings on Thursday, Bernanke speech and WFC/JPM earnings on Friday.

Bernanke gave a speech on Monday night and there was not one word about the unexpected decline in the payroll report. One commentator compared Bernanke to Abraham Lincoln and the Emancipation Proclamation. Lincoln wrote the executive order to free the slaves but stuck it in his desk drawer for two months until he felt the time was right to release it. The commentator believes Bernanke knows exactly what he is going to do but is waiting until the right time to make the announcement. If Bernanke constantly alluded to some new program at some point in the future then the market would factor in its suspicions and when the announcement finally came there would be no surprise. By waiting he can pick the ideal time to drop the bomb.

President Harry Truman gave the order to drop the atomic bomb on Hiroshma several weeks before the actual event. However, in his order he said absolutely not before August 3rd 1945. He was planning on attending the Potsdam Conference in Potsdam Germany with the leaders of the Soviet Union, the U.K. and the USA. That conference to discuss the war was scheduled to be over on August 2nd. The bomb was dropped on August 6th.

Political and financial leaders like to be able to choose the time and place for a major event. With Europe imploding again and the stock market in free fall, Bernanke may be pushed to make an announcement before he is ready. That may dilute the impact but only time will tell.

Economic Calendar

The news intensity is increasing over the coming earnings cycle. Alcoa (AA) was the first Dow component to report and there was a major surprise. Alcoa reported earnings of 10-cents compared to expectations for a loss of 4-cents. Revenue was $6.01 billion compared to estimates of $5.77 billion. The CEO said he expected overall global demand to rise by +7% in 2012 despite a worsening European economy. He pointed out there were record physical premiums paid for delivery of aluminum on top of the benchmark exchange price in the USA, Asia and Europe. He felt that reflected "Very, very strong demand." Buyers are paying about $150 per ton over the benchmark price. Premiums in the Midwest are averaging 9.0-9.5 cents per pound over the benchmark.

Alcoa shares rose 60-cents to $9.83 after the earnings.

Alcoa Chart

Supervalu (SUV) posted adjusted earnings of 38-cents compared to estimates of 35-cents. Revenue fell -5% to $8.23 billion but that still beat estimates of $8.14 billion. Rising commodity prices slowed profits but the company said it was relying on store brands to maintain profitability. Supervalu issued full year guidance for the full year of $1.27 to $1.42 and that was well above analyst estimates of $1.18 per share.

SVU Chart

The earnings for Wednesday are TITN and ADTN and not names most people would know. The tech sector will be focused on Google after the bell on Thursday and volatility always follows Google's results. The financial sector will be focused on the dual earnings of Wells Fargo and JP Morgan on Friday.

Commodity prices have been crushed this week. Copper hit a high of $3.96 on March 3rd and it traded below $3.65 today. In copper futures that is a monster move that pushed it to a two month low. China's slowing economy is a main driver of those demand worries.

Copper Futures Chart

Crude oil had a bad day thanks to the falling market and expectations for lower global demand. China said oil imports rose only 5.2% in March. That was down from the +8% in February. I am always amazed by the market reaction to numbers. China's imports still ROSE by 5.3% for the month. Yes, it was slower than 8% but it is still a big number. WTI declined by -1.35 to $101 and Brent by -2.82 to $120. This is temporary.

WTI Crude Chart

Iran cut off oil exports to Greece and Spain and said it may halt exports to Germany and Italy according to the report on Iranian TV. However, these "counter sanctions" are only a political ploy to try and make it appear Iran is in control rather than the EU and the West. Spain said it quit buying Iranian oil several months ago. Greece shifted its purchases to Saudi Arabia last month. Iran has been claiming they cutoff deliveries to countries but only after those countries actually quit buying from Iran.

Iran is scheduled to meet on Saturday with the five nations in the UN Security council plus Germany in Turkey to talk about nuclear issues. However, Iran has protested Turkey as a site since Turkey has quit buying oil from Iran. It is unknown if the meeting is still going to happen. Iran has a habit of protesting everything and agreeing to nothing. The last attempt to hold talks in 2011 ended after two days when nobody could agree on what topics to discuss. Iran refused to talk about any nuclear subject.

Iran's president said today that Iran did not need the money from oil sales. He said Iran could go for 2-3 years without selling a single barrel of oil. Since oil exports account for $80 billion a year, 80% of Iran's foreign revenue and 60% of its annual budget, those claims are clearly bogus.

The six parties to the talks in Turkey are going to demand a shutdown of the newly built and highly secret enrichment facility in Qum and the shipment of all uranium enriched to more than 3.5%, the grade required to power reactors, to a third country for safe keeping. The hardliners in Iran are not going to agree to this. President Ahmadinejad said today "whoever seeks to violate the nuclear rights of the Iranian nation will get a blow to the mouth." I hope he has figured out how to eat oil because that may be the only thing Iranians have to eat before the year is out.

Apple (AAPL) did it again. The stock rose to a new high of $644 intraday and was briefly worth more than $600 billion. GE came close to that level once but Microsoft is the only other company that has actually done it. MSFT his that level in December 1999 but is less than half of that now.

Apple Chart

Priceline (PCLN) also rallied to a new high of $774.96 at the open before losing -$23.50 for the day.

Priceline Chart

Did the afternoon selloff in the Nasdaq big caps signal the end of the rally story? These stocks have not had a really bad day since December and the flight of the momentum junkies could be a sign investor sentiment is shifting.

The Dow had its first back to back triple digit loss since November 17th. This is the longest losing streak for the Dow since last August. The S&P is on its longest losing streak since November. The Dow has lost -548 points since its closing high of 13,264 on April 2nd. That is roughly a 4% decline and the -61 point drop in the S&P is also -4%. Same on the Nasdaq with a -128 point drop.

In normal times a 4-5% decline is just a regular bout of profit taking. A 5% decline on the S&P would take it to 1348. With strong support at 1340 I would suspect that level to hold on the first test. The indexes closed on their lows on Tuesday on much stronger volume than we have seen in a long time. The 8.2 billion shares was the strongest volume we have seen since December 16th at 9.0 billion. That was option expiration Friday in December.

S&P Chart - 120 Min

Decliners beat advancers by 5:1 but that should not be a surprise given the magnitude of the decline. However, down volume was only seven times up volume. It could have been a lot worse. We need a 10 times day for a reversal in normal markets.

The break below the 50-day average is a sell signal for some hedge funds and institutional traders. The big question now is whether the strong support at 1340 will be enough to slow the drop and allow traders to reevaluate their outlook.

S&P Chart - Daily

Unfortunately the Dow has already closed below the equivalent support level to the S&P 1340. The Dow closed under 12,750 and at the lows of the day. In theory the Alcoa earnings will produce a positive impact to the Dow but in practice the $9 price on AA has no weight in the Dow. The +7.5% bounce in AA in afterhours will not even be a speed bump in the Dow's direction.

However, S&P futures are up +4 points tonight in what I would describe as a reaction bounce rather than a change in sentiment. Alcoa was very positive in their earnings comments but we don't know if this positive sentiment will last until morning or be crushed by further declines in Europe overnight.

The next material support level in the Dow is 12,600 but that is also a minor bump in the road if the pace of selling continues.

Dow Chart - 120 Min

Dow Chart - Daily

The Nasdaq declined to close on the 50-day average but the Nasdaq rarely honors the 50. The Nasdaq is more reactive to the 100 and 200 day averages. The 3000 level was initial support and the close at 2991 could be considered a break of that support but breaks of less than 10 points are close enough to be ignored until confirmed. Stronger support at 2900 is likely to be tested if there is no immediate rebound on Wednesday.

Nasdaq Chart - Daily

The Russell 2000 suggests fund managers are in flight mode. The index closed below what should have been strong support at 785 but only by a point. A failure to rebound on Wednesday suggests we could be looking at a much stronger market decline in the days ahead.

Russell 2000 Chart - 120 Min

Russell 2000 Chart - Daily

I don't have a lot of confidence in the futures holding in positive territory overnight. European markets are too fragile and the bond vigilantes are on the prowl in Italy and Spain. Investors know the ECB is powerless to prevent an actual meltdown in those countries so a lot of blustery talk from the EU finance ministers may not have any impact. They had three months to put some real changes in place and blew it. Now they are behind the curve once again and the slope ahead is growing more slippery by the week.

In the U.S. the Alcoa and Supervalu earnings were positive but those companies don't have enough clout to really halt a charging market. Google could slow the tech decline or accelerate it. WFC and JPM could reverse the trend back to positive with some blowout earnings. It remains to be seen if they can pull it off.

I believe we are due for a larger decline than the -4% over the last week. All the markets are up strongly for the year and there has not been a material bout of profit taking since December. We are due for a real dip and the expectations for lousy earnings are not likely to push us higher. There may be a bounce in our immediate future but I think it will fail.

I am reprinting the Second Chance offer from the weekend newsletter because there was a technical problem with the signup page. That has been corrected and now the link works.

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• Option Investor Newsletter
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Jim Brown

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New Option Plays

Industrials & Rental Services

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:

(bearish ideas): NFLX, IPGP, OSIS, and GMCR all look bearish.


NEW DIRECTIONAL CALL PLAYS

Caterpillar - CAT - close: 100.43 change: -3.14

Stop Loss: 99.70
Target(s): 104.50
Current Option Gain/Loss: Unopened
Time Frame: 1 to 2 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
Shares of CAT have seen a -14% correction from its late February highs. Today the stock was plunging lower and underperformed the market with a -3.0% drop. Yet traders bought the dip near round-number, psychological support at the $100 level. Now after Alcoa (AA)'s better than expected earnings report after the bell tonight we could see the industrial names, like CAT, see a bounce tomorrow.

This is an aggressive trade. The market's short-term trend and CAT's are both down. This looks like a good spot to speculate on a bounce. I am suggesting small bullish positions at the open tomorrow but only if both CAT and the S&P 500 index open positive. If that requirement is not met then no trade.

We'll use a stop loss at $99.70, just under today's low. Our short-0term target is $104.50.

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

- Suggested (small) Positions -

Buy the Apr $105 call (CAT1221D105) current ask $0.65

Annotated Chart:

Entry on April xx at $ xx.xx
Earnings Date 04/25/12 (confirmed)
Average Daily Volume = 6.3 million
Listed on April 10, 2012


NEW DIRECTIONAL PUT PLAYS

Ryder System, Inc. - R - close: 50.13 change: -1.78

Stop Loss: 52.05
Target(s): 45.50
Current Option Gain/Loss: Unopened
Time Frame: 2 to 3 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
Shares of R have been working on a bearish trend of lower highs for weeks. The stock made a lot of progress breaking support in the $51-50 zone today but shares closed at $50.13. The intraday low was $49.97.

I am suggesting a trigger to buy puts at $49.75 with a stop at $52.05. Our target is $45.50. We do not want to hold over the late April earnings report.

Trigger @ 49.75

- Suggested Positions -

buy the Apr $50 PUT (R1221P50) current ask $1.05

Annotated Chart:

Entry on April xx at $ xx.xx
Earnings Date 04/24/12 (unconfirmed)
Average Daily Volume = 567 thousand
Listed on April 10, 2012



In Play Updates and Reviews

IWM Hits Our Target. Plus, Take Profits on MOS Put Play

by James Brown

Click here to email James Brown

Editor's Note:

It was another rough day for stocks. The sell-off seemed to accelerate lower. We did see CHKP, CTSH, DGX, and DLTR get stopped out. I have also removed AMG, PNC, and VMW, none of which had opened.

Our two new puts BWA and TKR were triggered. IWM hit our target. I am suggesting an early exit on our MOS trade.

Current Portfolio:


CALL Play Updates

Allergan Inc. - AGN - close: 92.48 change: -1.46

Stop Loss: 92.25
Target(s): 99.50
Current Option Gain/Loss: Apr92.5c: -66.1% & Apr95c: -86.4%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
04/10 update: The pullback in AGN is starting to accelerate with the market's decline. Shares hit an intraday low of $92.39 today. If the market dips again tomorrow then AGN will most likely hit our stop loss at $92.25. More conservative traders may want to exit early. I am not suggesting new positions at this time.

- 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


J.B.Hunt Transport - JBHT - close: 54.30 change: -0.74

Stop Loss: 53.75
Target(s): 59.50
Current Option Gain/Loss: Apr55c: -48.1% & May$55c: -30.5%
Time Frame: exit prior to earnings on April 12th
New Positions: see below

Comments:
04/10 update: As we expected shares of JBHT have fallen to short-term support near $54.00. The question is will it bounce here or will the correction continue? We have a stop loss at $53.75. I am not suggesting new positions at this time.

Don't forget that we need to exit prior to earnings due out April 12th after the closing bell. That's this Thursday. If the trade is still open we'll exit on Thursday at the closing bell.

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

04/10/12 if the trade is still open, prepare to exit on Thursday at the close

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


NetEase.com - NTES - close: 55.58 change: -2.17

Stop Loss: 54.45
Target(s): 64.00
Current Option Gain/Loss: Apr55c: -41.0% & Apr60c: - 71.4%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
04/10 update: Yesterday NTES was outperforming but it made up for that with an underperformance today (-3.75%). The bounce has failed at the 10-dma, which is now overhead resistance. If the market drops again tomorrow we will likely see NTES hit our stop loss at $54.45. More conservative traders may want to exit early. 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


O'Reilly Automotive - ORLY - close: 91.47 change: -1.56

Stop Loss: 89.45
Target(s): 98.50
Current Option Gain/Loss: Apr90c: -16.0% & May$90c: - 3.7%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
04/10 update: Yesterday ORLY managed to ignore the market's weakness. Today the stock wasn't so lucky. Shares fell -1.6% and closed near short-term technical support at the 20-dma. If this level falls then ORLY will likely test the $90.00 mark. I am not suggesting new positions at current levels.

Earlier Comments:
We have moved our target 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

04/07/12 moved exit target to $98.50
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


Tractor Supply - TSCO - close: 90.84 change: -2.18

Stop Loss: 89.80
Target(s): 98.00
Current Option Gain/Loss: Aprl95c: -71.4% & May95c: -34.4%
Time Frame: up to the mid April earnings report
New Positions: see below

Comments:
04/10 update: Profit taking in TSCO is pulling the stock back towards round-number support at $90.00. I am not suggesting new positions at this time but nimble traders could be ready to buy a bounce off the $90.00 mark if we see one.

- Suggested Positions -

Long Apr $95 call (TSCO1221D95) Entry $1.40

- or -

Long May $95 call (TSCO1219E95) Entry $3.05

04/05/12 triggered at $93.25

Entry on April 05 at $93.25
Earnings Date 04/18/12 (unconfirmed)
Average Daily Volume = 578 thousand
Listed on April 03, 2012


Ulta Salon, Cosmetics - ULTA - close: 91.86 change: -2.51

Stop Loss: 89.95
Target(s): 98.50
Current Option Gain/Loss: -63.6%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
04/10 update: ULTA is also giving into the market-wide weakness. Shares fell -2.6% and closed under their 20-dma. There should be short-term support at $90.00 but that's not guaranteed to hold. 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


PUT Play Updates

Apache Corp. - APA - close: 93.50 change: -1.08

Stop Loss: 98.50
Target(s): 92.00
Current Option Gain/Loss: Apr95.5p: +97.9% & May95p: +63.7%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
04/10 update: APA continues to sink. Shares hit $93.02 intraday. Our exit target is $92.00. More conservative traders may want to exit now. I am adjusting our stop loss down to $98.50. I am not suggesting new positions at this time.

- Suggested Positions -

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

- or -

Long May $95 PUT (APA1219Q95) Entry $2.90

04/10/12 new stop loss @ 98.50
04/09/12 new stop loss @ 99.00
04/07/12 reduced exit targets to just one at $92.00
04/07/12 new stop loss @ 100.25

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


BorgWarner - BWA - close: 81.81 change: -2.54

Stop Loss: 84.55
Target(s): 75.50
Current Option Gain/Loss: +40.0%
Time Frame: up to the April 26th earnings report
New Positions: see below

Comments:
04/10 update: Our new trade on BWA is off to a good start. Shares hit our trigger to buy puts at $81.25 and kept falling. The close under $80.00 is bearish. I am not suggesting new positions at this time.

Earlier Comments:
We do want to keep our position size small. The most recent data listed short interest at 16% of the 107 million-share float. That does raise the risk of a short squeeze.

- Suggested (small) Positions -

Long Apr $80 PUT (BWA1221P80) Entry $1.25

04/10/12 triggered at $81.25

Entry on April 10 at $81.25
Earnings Date 04/26/12 (confirmed)
Average Daily Volume = 1.1 million
Listed on April 09, 2012


OpenTable, Inc. - OPEN - close: 39.34 change: -0.53

Stop Loss: 42.05
Target(s): 33.00
Current Option Gain/Loss: Apr40p -20.4% & May35p: - 8.8%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
04/10 update: I am growing concerned with our OPEN trade. If the stock is now going to decline now with the major indices plunging then when is OPEN doing to drop?

Shares did hit new relative lows midday and the stock closed with a -1.3% decline for the session but I am expecting bigger moves from this trade.

I am not suggesting new positions at this time. I am adjusting our stop loss down to $42.05. More conservative traders may want to exit early now to free up capital.

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

04/10/12 new stop loss @ 42.05
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


Timken Co. - TKR - close: 47.99 change: -1.52

Stop Loss: 51.55
Target(s): 45.50
Current Option Gain/Loss: +23.6%
Time Frame: up to its late April earnings report
New Positions: see below

Comments:
04/10 update: Our new TKR put play is off to a good start. Shares opened at $49.45, hit our trigger at $48.90, and kept on falling. TKR ended the session down -3.0%. I am not suggesting new positions at this time.

Earlier Comments:
Our target is $45.50 although we need to keep a careful eye on possible technical support at the 100-dma, exponential 200-dma, and the 300-dma all near the $46 area. Keep position size small.

- Suggested (small) Positions -

Long Apr $50 PUT (TKR1221P50) Entry $1.90

04/10/12 triggered at $48.90

Entry on April 10 at $48.90
Earnings Date 04/26/12 (unconfirmed)
Average Daily Volume = 846 thousand
Listed on April 09, 2012


Weight Watchers Intl. - WTW - close: 73.66 change: -0.82

Stop Loss: 78.25
Target(s): 70.50
Current Option Gain/Loss: +26.8%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
04/10 update: WTW tried to hold the $74.00 level but it finally broke down midday. Shares closed the session off -1.1%. I am adjusting our stop loss down to $78.25.

Earlier Comments:
The plan was to keep our position size small to limit our risk. I want to warn you that WTW could be prone to short squeezes with short interest at 18.5% of the small 35 million-share float.

- Suggested (small) Positions -

Long Apr $75 PUT (WTW1221P75) Entry $2.05

04/10/12 new stop loss @ 78.25.
04/09/12 WTW gapped open lower at $73.99

Entry on April 09 at $73.99
Earnings Date 05/03/12 (unconfirmed)
Average Daily Volume = 1.1 million
Listed on April 07, 2012


CLOSED BULLISH PLAYS

Affiliated Managers Group - AMG - close: 106.91 change: -3.71

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

Comments:
04/10 update: AMG has been showing relative weakness the last two days. The stock underperformed again today. Shares broke down under its 50-dma on top of its -3.3% decline.

Our trade never opened. I am removing AMG as a candidate. Nimble traders could try and scalp a drop from here toward the $101-100 area.

Trigger @ 115.50

Trade Did Not Open

04/10/12 trade did not open

chart:

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


Check Point Software - CHKP - close: 61.66 change: -0.11

Stop Loss: 61.40
Target(s): 68.50
Current Option Gain/Loss: Apr62.5c: -62.5% & May65c: -29.1%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
04/10 update: CHKP ended the day with a -0.1% decline versus a -1.8% plunge in the NASDAQ. Yet CHKP did hit our stop loss at $61.40 intraday. I'd keep an eye on CHKP for a dip toward potential support near $60.00 and its 50-dma.

- Suggested Positions -

Apr $62.50 call (CHKP1221D62.5) Entry $1.55 entry $0.58 (-62.5%)

- or -

May $65 call (CHKP1219E65) Entry $1.20 entry $0.85 (-29.1%)

04/10/12 stopped out at $61.40
03/31/12 new stop loss @ 61.40
03/23/12 CHKP hit our entry trigger @ 62.25

chart:

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


Cognizant Technology - CTSH - close: 74.82 change: -1.09

Stop Loss: 74.75
Target(s): 82.00
Current Option Gain/Loss: Apr77.5c: -78.2% & May$80c: -47.1%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
04/10 update: CTSH broke down under support near $75.00 and briefly traded under its 30-dma. Our stop loss was hit at $74.75.

- Suggested Positions -

Apr $77.50 call (CTSH1221D77.5) Entry $1.75 exit $0.38 (-78.2%)

- or -

May $80 call (CTSH1219E80) Entry $1.95 exit $1.03 (-47.1%)

04/10/12 stopped out at $74.75
03/26/12 CTSH hit our entry trigger at $77.55

chart:

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: 58.80 change: -0.83

Stop Loss: 59.45
Target(s): 66.50
Current Option Gain/Loss: Apr60c: -65.3% & May65c: -78.5%
Time Frame: exit prior to earnings on April 18th
New Positions: see below

Comments:
04/10 update: Just as we expected, DGX spiked lower at the open and quickly hit our stop loss at $59.45. Today's move confirms the breakdown under $60.00.

- Suggested Positions -

Apr $60 call (DGX1221D60) Entry $2.60 exit $0.90 (-65.3%)

- or -

May $65 call (DGX1219E65) Entry $0.70 exit $0.15 (-78.5%)

04/10/12 stopped out at $59.45
04/07/12 plan to exit prior to the April 18th earnings report
04/02/12 triggered at $61.55

chart:

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: 93.39 change: -1.93

Stop Loss: 93.40
Target(s): 98.50
Current Option Gain/Loss: Apr$95c: -63.6% & May95C: -26.6%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
04/10 update: DLTR succumbed to the market-wide selling and shares fell to a new relative low. Our stop loss was hit at $93.40. I'd keep an eye on DLTR as a dip near $90 or the 50-dma might be a new bullish entry point.

- Suggested Positions -

Apr $95 call (DLTR1221D95) Entry $1.65 exit $0.60 (-63.6%)

- or -

May $95 call (DLTR1219E95) Entry $3.00 exit $2.20 (-26.6%)

04/10/12 stopped out at $93.40
04/09/12 new stop loss @ 93.40
03/21/12 DLTR hit our entry trigger at $94.55

chart:

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


PNC Financial Services - PNC - close: 61.75 change: -0.89

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:
04/10 update: The $62.00 level didn't hold and PNC closed near its lows for the session. The stock looks like it's headed for $60.00. Our trade has not opened yet and I am removing PNC as a candidate.

Trigger @ 65.25

Trade did not open.

04/10/12 trade did not open

chart:

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


VMware, Inc. - VMW - close: 110.37 change: -2.14

Stop Loss: 107.25
Target(s): 117.50
Current Option Gain/Loss: Unopened
Time Frame: exit prior to the April 18th earnings report
New Positions: Yes, see below

Comments:
04/10 update: VMW tried to rally this morning on some positive analyst comments but traders sold into strength and shares closed down -1.9%. The stock is poised to breakdown under the $110 level soon. I am removing VMW from the play list. Our trade has not opened yet. I will place VMW on my watch list for a potential entry point if shares dip into the $108-105 area.

Buy-the-dip Trigger @ 109.25

Our trade has not opened yet.

04/10/12 choosing to remove VMW as a candidate
04/07/12 not open yet. Adjust buy-the-dip trigger down to $109.25 with a stop loss at $107.25.
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

chart:

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


CLOSED BEARISH PLAYS

iShares Russell 2000 ETF - IWM - close: 78.35 change: -1.89

Stop Loss: 84.55
Target(s): 78.50
Current Option Gain/Loss: +65.0%
Time Frame: several weeks
New Positions: see below

Comments:
04/10 update: The small caps continued to plunge and the IWM hit our exit target at $78.50. Now this ETF is nearing potential support at its 100-dma and its 300-dma.

- Suggested Positions -

Jun $82 PUT (IWM1216R82) Entry $3.12 exit $5.15 (+65.0%)

04/10/12 exit target hit at $78.50
04/09/12 new stop loss @ 84.55
03/28/12 triggered at $83.45

chart:

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


The Mosaic Co. - MOS - close: 50.12 change: -1.51

Stop Loss: 54.25
Target(s): 47.50
Current Option Gain/Loss: +200.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
04/10 update: The sell-off in MOS is accelerating lower with a -2.9% drop. Shares are down five days in a row and the stock is testing round-number support at $50.00. If there was going to be an oversold bounce then this is the spot to expect one.

I am adjusting our exit strategy. We want to exit immediately. Our put has doubled in value (+200%).

The plan was to keep our position size small to limit risk.

- Suggested (small) Positions -

April $50 PUT (MOS1221P50) Entry $0.39 exit $1.17 (+200%)

04/10/12 adjust exit. We want to exit now!
04/09/12 MOS gapped open lower at $52.20.

chart:

Entry on April 09 at $52.20
Earnings Date 03/28/12 missed by 10 cents
Average Daily Volume = 5.2 million
Listed on April 07, 2012