Option Investor
Newsletter

Daily Newsletter, Wednesday, 12/26/2012

Table of Contents

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

Market Wrap

Santa Drank Too Much Eggnog

by Keene Little

Click here to email Keene Little
So far this week Santa has been a no-show for the Santa Claus rally. He perhaps had too much eggnog instead of milk and cookies and he's sleeping it off, leaving the bulls wondering where he is.

Market Stats

With Monday's half-day session being weak, with all indexes closing in the red, bulls were hoping for at least some signs of life today but even after starting with a small gap up this morning the market was unable to hold on and sold off in the morning. The afternoon bounce erased most of the losses before dropping back down into the close. Even Obama is not happy with what Santa has left for investors -- a lump of coal.

Maybe we'll get some "good" political news on Thursday when Congress and the President make it back to D.C to try one more time for a compromise in order to avoid driving over the fiscal cliff. I'm not holding my breath, especially since avoiding an agreement before January 1st works for both sides -- they'll then be able to work on a tax reduction plan and sound like heroes.

Not surprisingly, the day was fairly quiet and trading volume was extremely light (less than half the normal). There wasn't much in the news other than some worrisome reports about retail spending being lower than expected for this holiday season and lower than last year's. Retail stocks were weak today and a decline in consumer spending is of course worrying since it accounts for such a large portion of GDP. November and December sales rose +0.7% as compared to last year but last year's increase over the previous year was +2.0%.

The uncertainty around the fiscal cliff issues is getting the blame since many consumers are reluctant to pile on more debt since they don't know how much their take-home pay will change. All we're hearing is more taxes, especially when you include the Obamacare taxes that start on January 1st. Investor worry over all this can be seen in the climb in the VIX, especially in the past week. It was up another 9% today. There are a lot more investors/traders looking to add put protection for their portfolio as well as speculators betting on a decline in the market. Tomorrow's Consumer Confidence report is also expected to show deterioration in sentiment, another factor that could be troublesome for the market, although I do see bounce potential into next week (and then trouble after that).

There will be very few economic reports this week, adding to the quietness and low volume we can expect this week. Some good news came from this morning's report showing the Case-Shiller 20-city home prices index was up +4.3% for October, vs. the 3.9% expected and better than September's +3.0%. It's old news and it didn't help the home builders index today, which was one of the weaker sectors, but maybe they'll get some help if tomorrow's report on new-home sales improves as expected (but Friday's report on existing home sales is expected to shows a slowdown).

The price pattern for the home construction index looks like it could use another leg up to 500 area to complete a 5-wave move up from October 2011, as shown on the chart below. A 38% retracement of its 2005-2008 decline is near 508 and the c-wave of an a-b-c bounce off the 2008 low would be 162% of the a-wave near 495. For the 5-wave move up from October 2011 the 5th wave would 62% of the 1st wave near 504 (the 5th wave is expected to be short because the 3rd wave was shorter than the 1st wave). These Fibs and projections lining up near 500 makes for a good upside target for the index. But if the index drops below the November low, near 389, it will indicate the top is already in place (a drop below the December 6th low, near 412, would be a sign of trouble for the index).

DJ Home Construction index, DJUSHB, Weekly chart

Last week's high for SPX was another back test of the broken uptrend line from October 2011, as can be seen on the weekly chart below. It has been struggling near the price-level resistance at 1425 and closed below it today. On a weekly basis I could argue for a new high into January from here but the pattern of the bounce up from November 16th has me leaning with the bears here. If the bearish wave count is correct we're due a strong 3rd wave down into the end of January, one that could take SPX down for a test of its June low near 1266 before the next larger consolidation/bounce into February/March.

S&P 500, SPX, Weekly chart

Because of the overlapping highs and lows within the bounce pattern off the November 16th low it looks more like a correction to the October-November decline. So while there remains the potential for another leg up for its bounce I think that's the riskier trade from here. Today's break below the up-channel from November 28th is another bearish sign. A drop below 1412, even if followed by a bounce back up to the bottom of the up-channel, as shown on the daily chart below, would indicate the top is in place. The decline from December 18th now looks like a 5-wave move down, which tells us the trend has turned back down and to look for the next bounce correction of the leg down as another shorting opportunity.

S&P 500, SPX, Daily chart

Key Levels for SPX:
- bullish above 1448
- bearish below 1412

The daily chart above is using the log price scale and you can see the broken uptrend line from October 2011 was resistance on the back test on December 18th. The closer view, with the 60-min chart below, is using the arithmetic price scale and the broken uptrend line from October 2011 is the green uptrend line, which price has been cycling around since November 23rd. The break below its up-channel from November 23rd is also a break back below the uptrend line, both of which cross near 1430 on December 31st. I show a bounce up to those two trend lines as well as its downtrend line from December 18th, all near 1433 on Wednesday, January 2nd, before turning back down into a stronger selloff in the first half of January.

S&P 500, SPX, 60-min chart

The interesting about the January 2nd timeframe is that it is an important date on the Gann Square of Nine chart -- it's 180 degrees from the vector through the October 2002 low (768) and the October 2007 high (1576) and April 2012 high (1422). I've recently mentioned the 1430 price level as important on the Sof9 chart because it's on the same vector as the March 2009 low (666). So we've got an interesting time/price relationship around 1430 and January 2nd.

Another reason why January 2nd could be important is because it's an important cycle turn date. A trading buddy subscribes to reports from Parallax Financial Research (pfr.com), a research firm that uses Chaos Theory and a bunch of mathematical analysis of the financial markets and has determined that the two key turn dates in 2013 are January 2-3 and August 29. The system that PFR uses is based on a cycle detection signal called 'Precision Turn' and it generates cycle turn dates for individual markets. For the stock market it identifies 'Turn Clusters' (many stocks giving the same turn date) and the last such cluster occurred on September 14th. The next Turn Cluster will be Jan 2-3. If the market is going up into that date then it will be a downside reversal and just the opposite if the market is dropping into the turn date. So if a bounce into January 2nd occurs, as depicted on my chart above, it will be a very good setup to short since the leg down in January should be a good money maker.

It's the same pattern for the DOW -- the rejection at its broken uptrend line from October 2011 left a bearish kiss goodbye from the December 18th high. We've got an impulsive decline from that high and that means the next bounce will be one you'll want to short. Today the DOW broke its 20-dma at 13139 but found support at its 50-dma at 13083. A little lower, at 13015, is its 200-dma. A drop below 13K would confirm that the top is in place but back above its December 18th high at 13365 would open the door for at least a retest of its October high at 13662.

Dow Industrials, INDU, Daily chart

Key Levels for DOW:
- bullish above 13,365
- bearish below 13,000

NDX has been chopping sideways since the end of November while the other indexes pressed higher. A test of its December 14th low at 2620 should lead to a bounce into next week and I'm showing a bounce back up into the January 2-3 turn date for a back test of its broken uptrend line from November, maybe up to about 2693 to close its December 21st gap down.

Nasdaq-100, NDX, Daily chart

Key Levels for NDX:
- bullish above 2714
- bearish below 2620

Along with NDX, the RUT was the weaker index today but it's simply a little more volatile than the rest. But if fund managers were piling into the small cap index in hopes of achieving outsized gains into the end of the year they could end up bailing in a hurry if there's no bounce. But at the moment I see bullish potential for the RUT since it broke above its uptrend line from October 2011 and today pulled back to it. A successful back test could lead to another push higher. Above 854 would be bullish (although I'd trail stops on long positions closely) and below 837 would be bearish (although we could see an intraday break and then a recovery for a bigger bounce into early next week).

Russell-2000, RUT, Daily chart

Key Levels for RUT:
- bullish above 854
- bearish below 837

The big index, the Wilshire 5000, has dropped back below its broken uptrend line from October 2011, which it's been cycling around since November 23rd. This trend line, when viewed with the log price scale, is where the rally stopped on December 18th. The chart below shows the trend line when using the arithmetic prices scale. The index has also dropped out of its up-channel from November 28th. The bottom of the up-channel crossed the uptrend line from October 2011 today near 14980. The overlapping highs and lows in the climb from the end of November, along with the 3-drives-to-a-high pattern (December 3, 12 and 18), has it looking like a high was made and it has now started back down.

Wilshire 5000 index, W5000, Daily chart

I typically show the 10-year yield (TNX) since I can get a better read on the long-term pattern (from the 1980s) but we've got an interesting pattern on the futures contract for the 10-year Note (ZN is the emini contract) that gives us a clear setup for a bounce, and bearish if it fails to hold its December 18th low. That low is price-level support near 131'240 as well as its broken downtrend line from July, which it back tested successfully so far. The bond bulls have some work to do -- the 20-, 50- and 200-dmas are about to join near 133. If that resistance level is broken we'll see much higher and that would drive yields much lower (and probably scare the stock market).

10-year Treasury Note emini futures contract, ZN, Daily chart

The U.S. dollar bounced off support last week, near 79 and made it up to its broken uptrend line from October 2011. The dollar and stock indexes are messing with this trend line and it's likely they'll head separate ways once that direction is confirmed. If the dollar drops back below 79 it would be a bearish signal but if it consolidates near the uptrend line and then breaks up through it, currently approaching its 20-dma at 79.86, we'd have a bullish move confirmed.

U.S. Dollar contract, DX, Daily chart

I continue to lean long the dollar and short gold (and silver and other commodities). As shown on gold's chart below, we should get another leg down and it will likely find support in the 1600-1630 area to consolidate for a few weeks before heading lower again. I see gold working its way to 1525 support in February before setting a bigger bounce to correct the decline from October.

Gold continuous contract, GC, Daily chart

Silver's pattern is the same as gold's. Currently it's finding support at 29.63, which is where the move down from October has two equal legs and it's at the bottom of a parallel down-channel for the pullback. I'm watching the bounce carefully to see if it's going to consolidate sideways before dropping lower (which is what it appears to be doing since last week's low) or start something more impulsive to the upside. If it plays out as expected I see a drop to price-level support near 28, a multi-week consolidation and then lower into February.

Silver continuous contract, SI, Daily chart

Oil was strong today, up about +2.8%, which makes it a little surprising that the stock market wasn't stronger as well. Today's rally took oil up to the top of its shallow up-channel from early November, near 91.20, which looks like a bear flag because of the choppy price action within the up-channel. Today's high may have been the conclusion to the correction to its September-November decline but if the bulls can break oil above its 200-dma at 92.11 it would turn more bullish. Otherwise I see the potential for the start of the next leg of its decline.

Oil continuous contract, CL, Daily chart

The remainder of the week will be relatively quiet for economic reports. Unemployment claims, new home sales and consumer confidence are the one to watch the market reaction Thursday morning. And then Chicago PMI and pending home sales on Friday.

Economic reports and Summary

Santa only has a couple more days to get out of bed and replace the lump of coal in each investor's stocking with something a little nicer, like a rally. If we get a new low Thursday morning that is then reversed I think it would be a good signal for a higher bounce into next Tuesday/Wednesday, which should be a good trade although I'd keep it on a very tight leash and I wouldn't want to be long into Tuesday (because of the price pattern and turn-date combination). A bumpy bounce into early next week is one I'll be looking to short. But if the market continues to work its way lower into early next week then I'll be looking for a buying opportunity for another rally leg.

We'll see how it looks by next Wednesday when we should theoretically already have triggered a reversal trade. Trade carefully in the coming week as volumes are low and any sound bite from politicians could spike the market. Good luck and I'll be back with you next Wednesday. Have a Happy New Year's celebration and stay safe.

Keene H. Little, CMT

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

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New Option Plays

Internet & Retail

by James Brown

Click here to email James Brown


NEW DIRECTIONAL CALL PLAYS

Sohu.com - SOHU - close: 44.62 change: +1.15

Stop Loss: 42.95
Target(s): 49.75
Current Option Gain/Loss: Unopened
Time Frame: 3 to 6 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
The Chinese market has been showing strength in recent weeks. This has helped shares of Chinese Internet stock SOHU break through a number of resistance levels. Now after about a week of consolidating sideways and digesting gains SOHU is showing strength again.

SOHU can be a volatile stock so we want to limit our position size to reduce our risk. Today's high was $45.10. I am suggesting a trigger to buy calls at $45.20. If triggered our target is $49.75. More aggressive traders may want to aim higher since SOHU seems to have built a decent bottom over the last several months. With enough time you could aim for the $55-60 zone. FYI: The Point & Figure chart for SOHU is bullish with a $66 target.

Trigger @ 45.20

- Suggested Positions -

buy the Feb $47.50 call (SOHU1316b47.5) current ask $1.85

Annotated Chart:

Weekly Chart:

Entry on December xx at $ xx.xx
Average Daily Volume = 606 thousand
Listed on December 26, 2012


NEW DIRECTIONAL PUT PLAYS

Tiffany & Co - TIF - close: 56.68 change: -1.64

Stop Loss: 58.75
Target(s): 52.00
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
Alarm bells were going off in the retail sector after MasterCard said their SpendingPulse report only showed retail sales rising +0.7% over last year compared to estimates of +3% to +4%. That immediately sent retail stocks lower and TIF plunged to a -2.8% loss and a new relative low. The stock was already in a bearish trend of lower highs and lower lows. We think momentum continues lower.

I am suggesting new bearish positions now with a stop loss at $58.75. Our target is $52.00.

- Suggested Positions -

buy the 2013Jan $55 PUT (TIF1319m55) current ask $1.08

Annotated Chart:

Entry on December xx at $ xx.xx
Average Daily Volume = 2.4 million
Listed on December 26, 2012



In Play Updates and Reviews

Stocks Look Vulnerable

by James Brown

Click here to email James Brown

Editor's Note:

The U.S. market looks vulnerable. Equities gave back their morning gains. Traders are nervous we're about to go over the fiscal cliff.

Our ANF, LULU, and NFLX trades have been stopped out. I am suggesting we close our ENR trade at the open tomorrow.

Current Portfolio:


CALL Play Updates

Akamai Tech. - AKAM - close: 41.25 change: -0.14

Stop Loss: 39.95
Target(s): 44.90
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Comments:
12/26/12: AKAM was little changed on the session with a tight, narrow range today. I don't see any changes from my prior comments.

Currently I am suggesting we buy calls when AKAM hits $42.05. Nimble traders may want to consider buying a dip near $40.00 instead. If triggered our target is $44.90. More aggressive traders could aim higher. FYI: The Point & Figure chart for AKAM is bullish with a $54 target.

Trigger @ 42.05

- Suggested Positions -

buy the 2013 Jan $45 call (AKAM1319a45) current ask $0.23

Entry on December xx at $ xx.xx
Average Daily Volume = 3.1 million
Listed on December 22, 2012


Affiliated Managers Group - AMG - close: 129.66 change: -1.44

Stop Loss: 128.95
Target(s): 139.00
Current Option Gain/Loss: +40.4%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
12/26/12: AMG underperformed the market today with a -1.0% decline. The close beneath its 10-dma and the $130.00 level is short-term bearish. If there is any follow through lower tomorrow AMG will likely hit our stop loss at $128.95. FYI: The Point & Figure chart for AMG is bullish with a $147 target.

- Suggested *SMALL* Positions -

Long March $135 call (AMG1316c135) entry $2.10

12/22/12 adjust stop loss to $128.95
12/21/12 trade opened on gap down at $130.54

Entry on December 21 at $13.54
Average Daily Volume = 271 thousand
Listed on December 20, 2012


American Tower Corp. - AMT - close: 76.29 change: -0.71

Stop Loss: 75.40
Target(s): 79.85 & 82.00
Current Option Gain/Loss: -46.1%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/26/12: Shares of AMT continue to churn sideways in the $76-77 range. If the stocks breaks down under support at $76.00 odds are pretty high we'll see AMT hit our stop loss at $75.40. More aggressive traders may want to adjust their stop so it's beneath potential round-number support at $75.00 instead.

We have two targets. Our first target to take profits is at $79.85. Our second, more aggressive target is $82.00 but AMT will have to rally past potential resistance at $80.00 first. FYI: The Point & Figure chart for AMT is bullish with a triple-top breakout buy signal and an $88 target.

- Suggested Positions -

Long 2013 Jan $77.50 call (AMT1319a77.5) entry $1.30*

*option entry price is an estimate since the option did not trade at the time our play was closed.

Entry on December 18 at $77.05
Average Daily Volume = 1.7 million
Listed on December 15, 2012


Canadian Pacific Railway - CP - close: 101.18 change: -0.31

Stop Loss: 99.40
Target(s): 109.00
Current Option Gain/Loss: - 48.0%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/26/12: Aside from a little volatility this morning, CP spent the session churning sideways in a narrow range. It looks like traders did buy the dip near its 10-dma.

Our plan was to use small positions to limit our risk.

NOTE: CP will begin trading ex-dividend on Dec. 26, 2012. The quarterly cash dividend should be about 35.5 cents.

- Suggested *SMALL* Positions -

Long Jan $105 call (CP1319a105) entry $1.25

12/21/12 trade opened on gap down at $101.46

Entry on December 21 at $101.46
Average Daily Volume = 961 thousand
Listed on December 20, 2012


3D Systems - DDD - close: 51.85 change: -0.05

Stop Loss: 48.95
Target(s): 58.50
Current Option Gain/Loss: -18.1%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/26/12: Our new trade on DDD was triggered on Monday at $52.25. Unfortunately there has been no follow through higher. DDD has failed three times now at the $53.00 level. Readers may want to wait for a rally past $53.10 before considering new bullish positions. FYI: The Point & Figure chart for DDD is bullish with a $74 target.

- Suggested Positions -

Long FEB $55 call (DDD1316b55) entry $2.75*

12/24/12 triggered @ 52.25
*option entry price is an estimate since the option did not trade at the time our play was opened.

Entry on December xx at $ xx.xx
Average Daily Volume = 1.9 million
Listed on December 22, 2012


Energizer Holdings - ENR - close: 79.58 change: -0.41

Stop Loss: 79.40
Target(s): 84.50
Current Option Gain/Loss: -83.3%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/26/12: The action in ENR doesn't bode well for the bulls. After trying to hug support at the $80.00 level all day shares have started to slip lower. In the last two weeks ENR has bounced twice at support near $79.50. This time I don't think it will hold. ENR could have been reaction to the disappointing holiday sales estimates. If consumers aren't buying toys and electronics for their kids then that could mean fewer batteries purchased.

I am suggesting an immediate exit tomorrow morning.

- Suggested Positions -

Long 2013 Jan $85 call (ENR1319a85) entry $0.90

12/26/12 ENR is not working, prepare to exit tomorrow morning
12/15/12 new stop loss @ 79.40

Entry on December 07 at $80.76
Average Daily Volume = 784 thousand
Listed on December 06, 2012


Flowserve Corp. - FLS - close: 143.96 change: -0.50

Stop Loss: 141.85
Target(s): 148.50
Current Option Gain/Loss: -12.9%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/26/12: Profit taking in FLS was pretty mild and traders bought the dip near its 10-dma midday. I am not suggesting new positions at current levels. FYI: The Point & Figure chart for FLS is bullish with a $153 target.

NOTE: FLS should begin trading ex-dividend on Dec. 27th. The quarterly cash dividend should be about 36 cents.

- Suggested Positions -

Long 2013 Jan $145 call (FLS1319a145) Entry $2.70

12/20/12 new stop loss @ 141.85
12/18/12 new stop loss @ 139.95

Entry on December 05 at $141.50
Average Daily Volume = 518 thousand
Listed on December 04, 2012


Green Mountain Coffee Roasters - GMCR - close: 41.68 change: -0.19

Stop Loss: 39.20
Target(s): 47.50
Current Option Gain/Loss: -32.2%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/26/12: GMCR held up relatively well today with only minor profit taking. I don't see any changes from my prior comments. Readers may want to wait for a bounce before considering new bullish positions.

Earlier Comments:
GMCR could see a short squeeze. The most recent data listed short interest at 43% of GMCR's 120 million share float. The $45.00 could be round-number resistance but we will target a move to $47.50. GMCR can be a very volatile stock. I do consider this a more aggressive, higher-risk trade. Let's keep our position size small to limit our risk.

(small positions) - Suggested Positions -

Long 2013 Jan $45 call (GMCR1319a45) entry $1.18

Entry on December 19 at $41.35
Average Daily Volume = 8.3 million
Listed on December 18, 2012


iShares Russell 2000 - IWM - close: 84.19 change: -0.35

Stop Loss: 81.95
Target(s): 86.00
Current Option Gain/Loss: - 3.4%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/26/12: Lack of progress in the small caps is not helping our trade. The current sideways churn in the IWM is letting our option fade. Today's market-wide dip didn't help either. Yet I am not suggesting new positions at this time.

- Suggested Positions -

buy the 2013 Jan $84 call (IWM1319a84) entry $1.17

12/18/12 new stop loss @ 81.95
12/11/12 triggered on the gap open higher at $83.11 (trigger was 82.85)

Entry on December 11 at $83.11
Average Daily Volume = 38 million
Listed on December 10, 2012


Linkedin Corp. - LNKD - close: 114.96 change: -1.06

Stop Loss: 111.40
Target(s): 119.00
Current Option Gain/Loss: +22.5%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/26/12: LNKD was up on Monday and spiked to a new relative high above $117 this morning. Yet shares gave back their Wednesday gains and more with a -0.9% pullback. I am not suggesting new positions at current levels.

Earlier Comments:
LNKD can be volatile so I would use small positions to limit our risk.

*Small Positions* - Suggested Positions -

Long Jan $115 call (LNKD1319a115) Entry $3.10

12/18/12 new stop loss @ 111.40
12/17/12 adjust exit target to $119.00
12/15/12 new stop loss @ $109.00

Entry on December 10 at $110.25
Average Daily Volume = 1.8 million
Listed on December 08, 2012


Monsanto Co. - MON - close: 94.10 change: +1.30

Stop Loss: 89.95
Target(s): 99.50
Current Option Gain/Loss: + 28.0%
Time Frame: exit prior to Jan 8th.
New Positions: see below

Comments:
12/26/12: The rally continues for shares of MON. The stock bounced off its 10-dma on Monday and hit our trigger to buy calls at $93.05 with Monday's gain. MON opened higher this morning and surged to a new high with a +1.4% gain.

Our plan was to keep our position size small. NOTE: This is a short-term trade. We do not want to hold over the January 8th earnings report.

*Small Positions*

- Suggested Positions -

Long 2013 Jan $95 call (MON1319a95) entry $1.25

12/24/12 triggered @ 93.05

Entry on December 24 at $93.05
Average Daily Volume = 2.2 million
Listed on December 19, 2012


Vulcan Materials - VMC - close: 52.81 change: -0.16

Stop Loss: 50.85
Target(s): 58.50
Current Option Gain/Loss: -47.8%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/26/12: The sideways consolidation in VMC seems to be narrowing somewhat. That might suggest a breakout soon, one way or the other. I am not suggesting new positions at current levels.

Earlier Comments:
Our target is $58.50. The $60.00 level looks like resistance. FYI: The Point & Figure chart for VMC is bullish with a long-term $70 target.

- Suggested Positions -

Long 2013 Jan $55 call (VMC1319a55) entry $1.15

Entry on December 18 at $53.00
Average Daily Volume = 870 thousand
Listed on December 17, 2012


Watson Pharma. - WPI - close: 89.49 change: -0.87

Stop Loss: 88.20
Target(s): 94.85
Current Option Gain/Loss: -37.5%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/26/12: WPI gave up about -0.9% today. The close back beneath the $90.00 level is a bit disappointing but WPI remains above short-term technical support at its 10-dma and 20-dma. I am not suggesting new positions at the moment.

- Suggested Positions -

Long 2013 Jan $90 call (WPI1319a90) entry $2.00*
*option entry price is an estimate since the option did not trade at the time our play was opened.

Entry on December 19 at $90.50
Average Daily Volume = 730 thousand
Listed on December 18, 2012


PUT Play Updates

Currently we do not have any active put trades.


CLOSED BULLISH PLAYS

Abercombie & Fitch - ANF - close: 45.44 change: -1.66

Stop Loss: 45.85
Target(s): 49.85
Current Option Gain/Loss: -62.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/26/12: Many of the retail stocks were weak today on worries that holiday sales may have been less than expected. Shares of ANF plunged -3.5% and hit our stop loss at $45.85.

- Suggested Positions -

Long 2013 Jan $50 call (ANF1319a50) entry $1.58 exit $0.60 (-62.0%)

12/26/12 stopped out
12/18/12 new stop loss @ 45.85

chart:

Entry on December 10 at $47.48
Average Daily Volume = 5.4 million
Listed on December 08, 2012


Lululemon Athletica - LULU - close: 73.38 change: -2.38

Stop Loss: 73.75
Target(s): 79.85
Current Option Gain/Loss: -25.7%
Time Frame: 3 to 5 weeks
New Positions: see below

Comments:
12/26/12: Sudden worries that this year's holiday spending may not have been as strong as expected sank a number of retail stocks today, including shares of LULU. LULU plunged to a -3.1% decline and hit our stop loss at $73.75.

- Suggested Positions -

Long 2013 Jan $75 call (LULU1319a75) entry $3.30 exit $2.45 (-25.7%)

12/26/12 stopped out at $73.75
12/20/12 new stop loss @ 73.75
12/17/12 new stop loss @ 72.95, adjust exit to $79.85

chart:

Entry on December 12 at $74.25
Average Daily Volume = 2.1 million
Listed on December 11, 2012


Netflix, Inc. - NFLX - close: 90.65 change: +0.42

Stop Loss: 89.45
Target(s): 99.75
Current Option Gain/Loss: -62.6%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/26/12: Our NFLX trade was stopped out on Monday, Dec. 24th when the stock dipped under support at $90.00 and hit our stop loss at $89.45. Shares tried to bounce back today but failed at its 10-dma.

Earlier Comments:
NFLX can be a volatile stock so I do consider this a more aggressive, higher-risk trade and we will want to keep our position size small. Target is $99.75.

- Suggested Positions - *Small Positions*

2013 Jan $100 call (NFLX1319a100) entry $3.88 exit $1.45 (-62.6%)

12/24/12 stopped out at 89.45

chart:

Entry on December 14 at $92.67
Average Daily Volume = 1.1 million
Listed on December 13, 2012