Option Investor
Newsletter

Daily Newsletter, Saturday, 3/20/2010

Table of Contents

  1. Leaps Trader Commentary
  2. Portfolio
  3. New Plays
  4. Play Updates
  5. Watch

Leaps Trader Commentary

Less Than Two Weeks Till Quarter End

by James Brown

Click here to email James Brown

Stocks continue to rally in spite of investor fears. A week ago there was new concern that China was going to tighten bank reserve requirements again. That hasn't happened yet. Instead the Greece situation is heating up again. After all the meetings and promises by EU leaders it looks like support isn't coming fast enough for Greece. The country said they may have to seek aid from the IMF as early as Easter weekend. The markets interpreted that scenario as very negative for the Euro-zone and the euro currency plunged again. This boosted the dollar and yanked the carpet out from under commodity prices.

Commodities were also hit by a surprise interest rate hike in India. Inflation hit 16-monthis highs in India and the country's reserve bank decided to raise rates. The fear is that this could be the beginning of a widespread removal of stimulus while the global recovery is still fragile. China has already started. Now we get India's first move in over a year. Investors are wondering who's next?

Here in the states what economic data we did get was relatively benign. This week we will get retail chain store sales, existing home sales, new home sales, durable goods orders, the U.S. GDP revision, consumer sentiment and the Richmond Fed and Kansas City Fed manufacturing surveys. I don't really expect any to be market movers but keep an eye on the home sales numbers.

Home values seem to be slipping fast again. Remember, we have more than three million foreclosures currently on the market and we're expecting another six million foreclosures over the next three years. Plus, the market is swamped with short-sales, where the home owner owes more than the house is worth and is trying to negotiate with the bank to sell it for less. There could end up being a spurt of activity in home sales as buyers try to close deals before the April deadline to qualify for the expiring tax credit.

The markets will also be watching the healthcare battle in Washington. There is supposed to be an "historic" vote on the current healthcare bill this Sunday. At last count the Democrats were still a few votes shy. President Obama cancelled a couple of overseas trips to stay home and twist arms as his party tries to wrangle up a few more votes. Many Democrat lawmakers are very nervous to officially vote on the bill. Some sources claim nearly 60% of the U.S. population is against this current version of reform. It was interesting to see the healthcare sector rising into the weekend as if the stocks knew the vote would not pass or not occur. Monday could be an interesting day for this group of stocks.

Overall I am still bullish on stocks but reluctant to launch new positions. The trend is up but the market really needs to see a pullback first. That may not happen until after March 31st. Money managers will be tempted to window dress their portfolios so they look good for your quarterly statements. It is the first quarter of 2010 and the chase for performance is on!

I would not be surprised to see the S&P 500 dip back toward 1150 or 1130 before moving much higher. I would expect the NASDAQ composite to find some support near 2325. If that fails then at the 2300 and 2250 levels. Looking at the Dow Industrials I'm watching the 10,500 level for short-term support. The small cap Russell 2000 is very overbought so don't be surprised to see a dip back toward 650 or lower. I will repeat, any pull back may not happen until after the quarter ends but odds are growing each day that the correction is getting nearer.

We should expect volatility to increase. China could still tighten its monetary policy and this fiasco with Greece will continue to dominate the headlines.

Chart of the S&P 500 Index:

Chart of the Russell 2000 Index:

LONGER TERM OUTLOOK

Previous Comments on my Long-Term Outlook:

My long-term outlook has not changed. I still expect the economy to see a double-dip, "W"-shaped rebound with the second dip in 2010 (some analysts are predicting it will not show up until 2011). Lousy consumer spending, rising foreclosures, and lagging job growth will be the main culprits. Several weeks ago there were some comments out of the U.S. Treasury concerning foreclosures. The Obama administration's HAMP loan modification program can only help a certain number of homeowners and one official said that even if the HAMP program was a total success we should still expect millions of new foreclosures. This only reinforces my own belief that we will see another tidal wave of foreclosed homes in 2010 and 2011. Some analysts are forecasting upwards of six million foreclosures in the next three years. What is that going to do to consumer confidence and consumer spending? It's not going to help! You can review my long-term outlook here. It's the second half our my "Two Months Left" commentary.

~ James Brown


Portfolio

Portfolio Update

by James Brown

Click here to email James Brown


Current Portfolio


Portfolio Comments:

We are taking profits in VICR. The stock hit $13.49 on Friday and our target to exit was $13.50. Shares settled near $13 and I'm suggesting readers exit now. Coal stocks and energy stocks did not perform well. Coal issues were hit especially hard.

Overall I am still concerned that the market is overbought and way overdue for a correction but it may not happen until after month end. Readers may want to wait on launching new positions.

There are a few new stop losses tonight.

Disclaimer: At any given time the author may have positions in any or all of any companies mentioned in the Leaps Newsletter.

--Position Summary Table--
Table lists Directional CALL or PUT/LEAPS only.
Insurance puts, if applicable, are not shown.

Red symbol/name represents a dropped play this week.




New Plays

Correction or Window Dressing

by James Brown

Click here to email James Brown


(Still) Waiting For An Entry


Editor's Note:

Unfortunately nothing has changed from last week. The market is still overbought and way overdue for a correction. We do not want to chase this move and open new long-term positions. If we can exercise some patience we should get a much better entry point on a pull back. The question is will it happen now or will the correction be postponed until after the first quarter ends on March 31st?

I added three new candidates to the watch list all with a buy-the-dip entry point.



Play Updates

Taking Profits on VICR

by James Brown

Click here to email James Brown


Closed Plays


VICR has been closed early. Take profits now!


Play Updates


Arch Coal Inc. - ACI - close: 23.60 change: -0.99

Energy stocks have been getting hammered lately as the dollar rises and natural gas inventories rise. It was a volatile week for ACI with a gap down on Monday, a new relative high and blow-off top move on Wednesday followed up with a sharp Thursday-Friday decline. This is exactly what I have been worrying about. ACI has now painted what appears to be the right shoulder of a bearish head-and-shoulders pattern. It is not a guarantee that ACI is moving lower but I would expect a dip toward $22 or its 200-dma. More conservative traders will want to seriously consider an early exit right here! I'm not suggesting new bullish positions at this time. Our final target is $34.75.

May 14th, 2009 - entry price on ACI @ 16.00, option @ 2.40
symbol: OSE-AF, 2011 JAN $30 LEAP call - current bid/ask $1.55/1.65
-stop loss on ACI @ 19.85

--2nd Entry--
Feb 13th, 2010 - entry price on ACI @ 21.65, option @ 4.40
symbol: YEP1221A25 2012 JAN $25 LEAP call - current bid/ask $4.90/5.20
-stop loss on ACI @ 19.85

Chart of ACI:


Biogen IDEC - BIIB - close: 59.63 change: +0.43

The rally in the BTK biotech index has stalled. The sector still looks overbought and due for a pull back but it's possible the industry could just churn sideways. Meanwhile BIIB managed a new 52-week high last week. The stock is testing round-number resistance at $60.00 and I would expect a correction soon.

Readers may want to wait for a dip back toward the $56-55 zone or the 50-dma before considering new bullish positions. Our first target to take profits is at $64.90.

Feb 19th, 2010 - entry price on BIIB @ 56.60, option @ 4.60
symbol: OIY1122A60 2011 JAN $60 LEAP call - current bid/ask $5.70/5.90
-stop loss on BIIB @ 51.85

Chart of BIIB:


Berkshire Hathaway Inc. - BRK.B - $82.06 -0.29

Berkshire has gone absolutely nowhere the last two weeks. While it might seem disappointing to see BRK.B fail to participate in the market's rally we have to remember that the stock was out performing the last several weeks. This sideways consolidation is healthy and I would not rule our a correction lower. I'm not suggesting new positions at current levels. In the mean time more conservative traders may want to take some money off the table.

Our first target is $90.00. Our second target is $99.50

Feb 6th, 2010 - entry price on BRK.B @ 73.57, option @ 4.80
symbol: 2011 JAN $80 XPB1122A80 LEAP call - current bid/ask $7.30/7.60
-stop loss on BRK.B @ 69.00

Feb 6th, 2010 - entry price on BRK.B @ 73.57, option @ 6.50
symbol: 2012 JAN $85 WDW1221A85 LEAP call - current bid/ask $8.40/9.10
-stop loss on BRK.B @ 69.00

Chart of BRK.B:


BorgWarner Inc. - BWA - close: 36.54 change: -0.12

Unfortunately little has changed for BWA. I am still concerned that shares could see a pull back toward $34.00 or its simple 200-dma, which is rising. The path of least resistance appear to be down for the moment. I am not suggesting new bullish positions at this time.

Our first target is $44.50. Our second target is $49.75. FYI: More conservative traders might want to use a stop loss closer to $34.00.

Feb 17th, 2010 - entry price on BWA @ 37.55, option @ 3.90
symbol: ZWY1122A40 2011 JAN $40 LEAP call - current bid/ask $2.75/3.40
-stop loss on BWA @ 32.49

Chart of BWA:


Celgene Corp. - CELG - close: 64.32 change: -0.70

CELG delivered another strong rally last week outperforming its peers in the biotech sector. Unfortunately Friday's move looks like a bearish reversal and short-term top! I am expecting a dip toward $62.00 and probably the $60.00 level, which should be decent support. Wait for the dip if you're interested in bullish positions.

Our target is the $74.00 level. I have been suggesting the 2011 Jan. $65 calls but readers may want to buy the 2012 calls.

FYI: Two weeks ago CELG was number 5 on Morningstar's top ten list of potential takeout (acquisition) targets.

Mar 1st, 2010 - entry price on CELG @ 60.75, option @ 5.40
symbol: VCS1122A65 2011 JAN $65 LEAP call - current bid/ask $6.60/6.80
-stop loss on CELG @ 54.75

Chart of CELG:


Chesapeake Energy Corp. - CHK - close: 24.21 change: +0.42

I am about ready to give up on CHK. Energy stocks have been suffering thanks to a rising dollar. However, natural gas has been accelerating lower thanks to rising inventory levels. Shares of CHK are beginning to breakdown and closed under their simple 200-dma for the first time in a very long time. Friday saw an intraday bounce. I suspect the bounce will continue for a few days before rolling over. I am suggesting we exit any bullish positions at $25.50. I am raising our stop loss to $22.75.

Oct 30th, 2009 - entry price on CHK @ 24.00, option @ 4.70
2nd entry Feb. 6th, 2009 - entry on CHK @ 24.52, option @ 3.80
symbol: VEC-AE, JAN 2011 $25 LEAP call - current bid/ask $2.83/2.88
-stop loss on CHK @ 22.75 *new*

Chart of CHK:


Consol Energy Inc. - CNX - close: 45.55 change: +0.40

Ouch! What a terrible week for shares of CNX. It started off with a gap down on Monday when CNX announced it would spend almost $3.5 billion in cash to buy the Appalachian exploration and (natural gas) production business from Dominion Resources. CNX said they plan to sell $4 billion in new debt and equity to help pay for the deal. Now add to this news a rising dollar and plunging natural gas prices. By the end of the week CNX had shaved off 16% of its stock price.

Further complicating matters is that now CNX has produced what appears to be the right shoulder to a bearish head-and-shoulders pattern. Coal producer ACI has a similar pattern. It's not a guarantee that CNX is going to breakdown but it's not good news. I am inching our stop loss up to $43.99. More conservative traders may want to exit immediately.

CNX hit our first target back in September. Currently the plan is to sell another portion of our position at $58.50. Our third and final target is $64.90.

Sep 1st, 2009 - entry price on CNX @ 36.50, option @ 7.80(estimate)
symbol: VTL-AH, 2011 JAN $40 LEAP call - current bid/ask $10.20/10.60
-stop loss on CNX @ 43.99 *new*

1st Target hit 09/16/09 @ 48.50, option price $15.40 (+97%)

Chart of CNX


Deluxe Corp. - DLX - close: 19.50 change: -0.41

DLX managed to hit some new 52-week highs last week over the $20.00 level. I remain somewhat cautious on the stock. The $20 level is round-number resistance and the stock failed to close above it. At this time I am still expecting a pull back toward $18.00, which as previous resistance should be new support. Our target is $24.75.

Mar 1st, 2010 - entry price on DLX @ 19.10, option @ 1.10
symbol: DLX1016J20 2010 OCT $20 call - current bid/ask $1.30/1.80
-stop loss on DLX @ 16.75

Chart of DLX:


EMR $48.62 -0.36 -- Emerson Electric Co.

EMR managed to eke out another weekly gain but upward momentum has definitely stalled. I am still expecting a pull back toward the $45.00 area. I'm not suggesting new bullish positions at current levels. Our second and final target is still $54.50. FYI: The Point & Figure chart is still very bullish with a $64 target.

Sept. 8th, 2009 - entry price on EMR @ 38.00, option @ $4.50
symbol: VHH-AH, 2011 JAN $40 call - current bid/ask $9.30/ 9.70
-stop loss on EMR @ 41.90

02/18/10 1st Target hit @ 47.50, option @ $8.80 (+95.5%)

Chart of EMR:


Fortune Brands - FO - close: 48.89 change: -0.81

Shares of FO managed to extend their gains and yet our strategy is the same. The stock is very short-term overbought with a nearly non-stop rally from $40 to $50 in a few weeks time. Now FO has spent a couple of days failing at the $50 level. It's only natural that FO would see a correction soon. I am suggesting readers wait for a dip toward the $46-44 zone before considering new bullish positions. Overall I remain very bullish on FO. We just need to wait for the right entry point. Our target is $62.00.

Mar. 12th, 2009 - entry price on FO @ 47.55, option @ $2.20
symbol: FO1018I50 SEP 2010 $50 call - current bid/ask $2.90/ 3.20
-stop loss on FO @ 39.95

Chart of FO:


Forest Oil Corp. - FST - close: 27.40 change: -0.11

It has been a rough few days for energy stocks thanks in part to a rising dollar on euro weakness. FST failed at resistance near $30.00 and slipped back to its 50-dma before bouncing. The trend is still up but I wouldn't be surprised if FST corrected further on a wider market pull back. I am not suggesting new positions at this time. Our long-term target is $37.50.

Oct 15th, 2009 - entry price on FST @ 23.85, option @ 7.40
symbol: OJG-AD, 2011 $20 LEAP call - current bid/ask $ 8.50/ 9.20
-stop loss on FST @ 23.45

Chart of FST:


Intel Corp. - INTC - close: 21.99 change: -0.21

It turned out to be a bullish week for INTC. Shares out performed the SOX as INTC broke out to new 52-week highs. While I am encouraged by this strength I would not open new bullish positions at these levels.

Our long-term target is the $24-26 zone.

FYI: Shares of Intel don't move very fast. Readers might want to consider turning this play into a calendar or diagonal spread to further maximize your gains.

June 13th, 2009 - entry price on INTC @ 16.31, option @ 1.36
symbol: VNL-AD, 2011 LEAP $20 call - current bid/ask $3.10/3.20
-stop loss on INTC @ 17.90.

Chart of INTC:


Mosaic Co. - MOS - close: $58.42 change: -1.14

The market giveth and the market taketh away. After outperforming two weeks ago last week was a rough one for MOS. Shares were in full retreat mode the last three days. The correction may not be over yet. Look for support near the 200-dma around the $54.00 level. I would wait for a bounce before considering new positions. Keep in mind that MOS is due to report earnings on March 31st and you may want to wait until after the earnings report before launching positions. Our long-term target is the $90-100 zone. (Readers might want to consider the 2012 LEAPS too).

NOTE: In 2009 MOS issued a special cash dividend of $1.30 per share payable back on December 3rd, 2009. The CBOE issued a new LEAPS symbol to account for the dividend. The old 2011 LEAPS have a root symbol of ZHX. The LEAPS we want to use are the ZXW root symbols.

Jan 28th, 2010 - entry price on MOS @ 56.00, option @ 6.10
symbol: ZXW-AM, 2011 LEAP $65 call - current bid/ask $5.90/6.15
-stop loss on MOS @ 51.90

Chart of MOS:


Manitowoc Inc. - MTW - close: 12.77 change: -0.29

MTW managed another weekly gain. Yet on a short-term basis the stock looks vulnerable. Given the market's overbought condition I would suggest waiting for another bounce near the rising 100-dma before considering new bullish positions. Our long-term target is $17.00.

Oct 30th, 2009 - entry price on MTW @ 9.10, option @ 2.61
symbol: VMT-AB, 2011 JAN $10 call - current bid/ask $3.80/4.00
-stop loss on MWT @ 9.85

01/18/10 Sell Half! MTW @ 13.70, option at $4.80 bid (+83.9%)

- or -

Oct. 30th 2009 - entry price on MTW (the stock) @ 9.10
- stop loss on MTW @ 9.85

01/18/10 Sell Half! MTW @ 13.70 (+50.5%)

Chart of MTW:


Oracle Corp. - ORCL - close: 25.19 change: -0.19

ORCL managed to build on its rally and tagged new intraday highs not seen since 2001. Shares are now trying to breakout past their 2010 highs near $25.50 resistance. The company reports earnings on March 25th after the closing bell. It's possible that ORCL churns sideways as investors wait for the earnings results. If there is a correction we can look for support in the $23 region. I am not suggesting new positions at this time. Our long-term target is $29.75.

FYI: Shares of ORCL don't move very fast. Readers might want to consider turning this play into a calendar or diagonal spread to further maximize your gains.

Dec. 18th, 2009 - entry price on ORCL @ 24.05, option @ 2.55
symbol: VOC-AE, 2011 LEAP $25 call - current bid/ask $2.45/2.49
-stop loss on ORCL @ 21.40.

Chart of ORCL:


PEPSICO Inc. - PEP - close: 66.56 change: +0.04

Our exit target for the 2011 January $60 LEAP is $69.90. If you have the 2012 LEAPS then you might want to aim higher.

Our protective put (March $55) has expired. Our cost was $0.50.

July 7th, 2009 - entry price on PEP @ 57.25, option @ $4.50(estimate)
symbol: VP-AL, 2011 $60.00 LEAP call - current bid/ask $8.05/8.15
-stop loss on PEP at $59.40 *new*

Chart of PEP:


Potash Corp. - POT - close: $121.16 change: -1.72

We were expecting some profit taking after the previous week's rally so POT's performance last week doesn't surprise me. Shares filled the gap with a dip to $120. The question is will the correction continue? It might; so I would wait for a dip toward $115 or $110 before looking for bullish entry points again.

We sold half our position near $125. Our final target is $160.00.

Jan. 28th, 2010 - entry price on POT @ 101.00, option @ 11.75
symbol: VPT-AB, 2011 LEAP $110 call - current bid/ask $23.30/23.65
-stop loss on POT @ 99.50

SELL HALF (03/13/10) option @ $26.35 bid (+124%)

Chart of ORCL:


PartnerRe Ltd. - PRE - close: 79.10 change: +0.61

PRE was showing some relative strength on Friday after traders bought the dip near $78 and its rising 30-dma. The stock looks poised to rally higher but I am concerned a widespread market decline would short-circuit any continued gains. I'm suggesting we wait for a bounce near the $76-75 zone before considering new positions.

Our first target is $84.90. Our second, longer-term target is $97.50.

Feb. 13th, 2010 - entry price on PRE @ 76.28, option @ 2.70
symbol: PRE1021H80, 2010 AUG $80 call - current bid/ask $3.20/3.60
-stop loss on PRE @ 69.75

Chart of PRE:


Reynolds American Inc. - RAI - close: 53.42 change: -0.17

Thankfully there has been no follow through on RAI's sell-off a week ago. Traders bought the dip near $52 and its rising 100-dma. Now shares are back to challenging resistance in the $54 region. I still think more conservative investors may want to take profits early. I am not suggesting new positions at this time. At the moment our final exit target is $57.50. More aggressive traders may want to aim higher.

July 24th, 2009 - entry price on RAI @ 42.50, option @ $4.50(estimate)
symbol: OWO-AH, 2011 JAN $40.00 LEAP call - current bid/ask $12.90/14.50
-stop loss on RAI at $49.75

Sold Half on 10/19 @ 49.50, option @ $8.90 (+97%)

Chart of RAI:


UltraShort 20+ Year Treasury Bond ProShares - TBT - cls: 46.89 chg: -0.14

Uh-oh! The TBT has slid back toward support in the $46.50 region. A breakdown here could portend a much larger correction. I don't see any changes from my prior comments.

Fundamentally bonds should eventually go down and yields go up as the U.S. debt gets too high but this could take months or years to really get moving. I'm suggesting readers wait for a close over $51.50 before considering new LEAPS positions.

Our first long-term target is $59.75. Our second target is $67.50.

FYI: The TBT is an exchange traded fund (ETF) that tries to deliver twice the inverse performance of the Barclays Capital 20+ Year U.S. Treasury index.

Jan. 09th, 2010 - entry price on TBT @ 50.63, option @ 4.90
symbol: XRJ-AC, JAN 2011 $55 LEAP call - current bid/ask $1.79/2.05
-stop loss on TBT @ 45.90

Jan. 09th, 2010 - entry price on TBT @ 50.63, option @ 7.90
symbol: YHT-AH, JAN 2012 $60 LEAP call - current bid/ask $4.00/4.35
-stop loss on TBT @ 45.90

Chart of TBT


Titanium Metals - TIE - close: 14.71 change: +0.48

Most of the commodity-related stocks suffered due to dollar strength or concerns that governments around the world would remove stimulus too quickly and reduce demand. Neither idea seemed to have an affect on shares of TIE, which produced another weekly gain. The stock remains overbought. I would not open new bullish positions at this time.

There is some resistance near $15.00 but our long-term target is $19.75.

Feb. 20th, 2010 - entry price on TIE @ 12.06, option @ 1.40
symbol: VWN1122A15, 2011 JAN $15 LEAP call - current bid/ask $2.35/2.50
-stop loss on TIE @ 10.45

Feb. 20th, 2010 - entry price on TIE @ 12.06, option @ 2.60
symbol: WWN1221A15, 2012 JAN $15 LEAP call - current bid/ask $3.60/3.90
-stop loss on TIE @ 10.45

Chart of TIE:


iShares 20+Yr Bond ETF - TLT - close: 91.26 change: +0.09

The consolidation in bonds continues to narrow. The TLT has bounced back toward resistance and it is still forming a trend of lower highs. I am not suggesting new positions at this time. A close under $88 might change my mind. Our first target is $81.00.

FYI: The TLT is an exchange traded fund that tries to mimic the performance of the Barclays Capital U.S. 20+Year Treasury Bond Index.

Jan. 09th, 2010 - entry price on TLT @ 89.29, option @ 6.40
symbol: VJL-MG, JAN 2011 $85 LEAP put - current bid/ask $3.25/3.45
-stop loss on TLT @ 94.15

Jan. 09th, 2010 - entry price on TLT @ 89.29, option @ 8.90
symbol: YLI-MB, JAN 2012 $80 LEAP put - current bid/ask $5.60/5.95
-stop loss on TLT @ 94.15

Chart of TLT


UnitedHealth Group Inc. - UNH - close: 34.39 change: +0.80

Healthcare stocks have been rebounding in spite of Democrats recent success in garnering more "yes" votes for the vote on healthcare reform. At last count they still didn't have enough votes but the pressure is on in Washington. No one really knows how the healthcare stocks will react to a vote, potentially this weekend, since many believe that even if it passes the battle is far from over.

Technically I am turning bullish again on UNH but it might be smarter to take a step back and see what happens this weekend and early this week before considering new positions.

The plan was to use small positions to limit our risk. Our long-term target is $42.50.

Dec 16th, 2009 - entry price on UNH @ 31.55, option @ 3.80
symbol: VUH-AG, 2011 JAN $35 LEAP call - current bid/ask $4.00/4.10
-stop loss on UNH @ 28.95

Chart of UNH:


Visa Inc. - V - close: 88.84 change: -1.29

It turned out to be an ugly week for shares of Visa. The stock rolled over and closed back under the $90.00 level, which should have been stronger support. Let us hope that V didn't just produce a huge bull-trap pattern with the breakout two weeks ago. Right now I'm expecting the stock to find support in the $88-84 zone. Wait for the pull back and then we can evaluate new positions on a bounce. Our long-term target is the $109 mark. Investors might want to consider the 2012 LEAPS instead.

Mar 9th, 2009 - entry price on V @ 91.00, option @ 4.60
symbol: VSK1122A100 JAN 2011 $100 LEAP call - current bid/ask $3.60/3.70
-stop loss on V @ 81.75

Chart of V:


Wal-Mart Stores Inc. - WMT - close: 55.34 change: -0.60

Shares of WMT displayed some relative strength early last week thanks in part of an analyst upgrade to a "buy". Now after spending three days failing to move past the $56 level WMT is beginning to correct. I would look for a dip back toward the $54.00 level. This is a long-term trade for us so you can take your time on an entry point. Right now I'd look for a bounce in the $54.00-53.50 zone as an entry.

Our long-term target is the $63.00 level. Since WMT does not move very fast readers may want to supplement their position by turning it into a calendar spread or a diagonal spread to enhance their gains.

Mar 7th, 2009 - entry price on WMT @ 54.14, option @ 4.60
symbol: WWT1221A55 JAN 2012 $55 LEAP call - current bid/ask $5.25/5.45
-stop loss on WMT @ 49.45

Chart of WMT


CLOSED Plays

VICOR Corp. - VICR - close: 12.98 change: -0.31

It's time to take profits! The rally in VICR has been amazing. Shares climbed a lot faster than I expected. We decided to take profits early and sell half on March 13th due to the big rally. Our final target was $13.50. Shares hit $13.45 on Thursday and $13.49 on Friday this past week. That's close enough for me. I'm suggesting we take the money and run.

Dec 26th, 2009 - entry price on VICR@ 9.30, option @ 1.40
symbol: VQV-GB, 2010 JUL $10 call - current bid/ask $2.95/3.40
-stop loss on VICR @ 8.80

SELL 2nd HALF (03/20/10) option @ $2.95 (+110%)
SELL HALF (03/13/10) option @ $2.10 (+50%)

--2nd Entry Point-- Feb 6th, 2009 - entry price on VICR @ 8.38, option @ 0.70
symbol: VQV-GB, 2010 JUL $10 call - current bid/ask $2.95/3.40
-stop loss on VICR @ 8.80

SELL 2nd Half (03/20/10) option @ $2.95 (+321%)
SELL HALF (03/13/10) option @ $2.10 (+200%)

- or -

Dec. 26th 2009 - entry price on VICR (the stock) @ 9.30
-stop loss on VICR @ 8.80

SELL 2nd half (03/20/10) stock @ 12.98 (+39.5%)
SELL HALF (03/13/10) stock @ $11.80 (+26.8%)

Chart of VICR:



Watch

New 52-week Highs

by James Brown

Click here to email James Brown

Editor's Note:

A number of our candidates hit new 52-week highs last week. Most of them have been showing relative strength. We want to be ready to buy the pull back.


New Watch List Entries

EMC Corp.

Imation Corp.

Trimble Navigation


Active Watch List Candidates

CRS - Carpenter Technology

RT - Ruby Tuesday, Inc.

TSCO - Tractor

XHB - S&P Homebuilder ETF


Dropped Watch List Entries

I am dropping the FXB as a watch list candidate.


New Watch List Candidates:

EMC Corp. - EMC - close: 18.61 change: -0.03 stop: 16.24

Technology stocks have been a key component of the market's advance. EMC participated with a new 52-week high after it broke out from its $16-18 trading range two weeks ago. I'm suggesting we buy LEAPS on the dip. Use a pull back to $17.75 as our entry point. If triggered our long-term target is $22.50. We'll use a tight stop at $16.24. FYI: The Point & Figure chart is bullish with a $34.50 target. (Readers may want to buy 2012 calls and aim higher)

Company Info:
EMC Corporation (NYSE: EMC) is the world's leading developer and provider of information infrastructure technology and solutions that enable organizations of all sizes to transform the way they compete and create value from their information. (source: company press release or website)

Buy-the-Dip trigger: $17.75

BUY the 2011 January $20.00 LEAP CALL (symbol: VUE1122A20)

Chart of EMC:


Imation Corp. - IMN - close: 11.17 change: +0.46 stop: 8.99

Shares of IMN have been showing relative strength for a few weeks now. The stock has pushed through resistance near $9.50, the $10.00 level, the $10.50 area and now the $11.00 mark. Each one had been resistance in the past. After building a base in the $8.00-10.00 zone for the last several months IMN should be poised for a sustained rally higher but we don't want to chase it here.

I am suggesting we buy the stock (or calls) on a dip at $10.15. If triggered our first target is $12.25. Our second target is $14.25. FYI: The Point & Figure chart is bullish with a $17.50 target.

Company Info:
Imation is a leading global developer and marketer of branded products that enable people to capture, save and enjoy digital information. Our world-class portfolio of digital storage products, audio and video electronics and accessories reaches customers through a powerful global distribution network. Our goal is a company with strong commercial and consumer businesses and continued long-term growth and profitability that creates shareholder value. Imation Corp.'s global brand portfolio, in addition to the Imation brand, includes the Memorex brand, one of the most widely recognized names in the consumer electronics industry, famous for the slogan, "Is it live or is it Memorex?" and the XtremeMac brand. Imation is also the exclusive licensee of the TDK Life on Record brand, one of the world's leading recording media brands. (source: company press release or website)

Buy-the-Dip trigger: $10.15

BUY the 2010 October $12.50 call (symbol: IMN1016J12.5)

-or-

Buy the IMN stock at $10.15

Chart of IMN:


Trimble Navigation - TRMB - close: 28.28 change: +0.33 stop: 23.95

TRMB is another technology stock that has really done well in the market's recent move higher. Friday's performance looks like a short-term top. I'm expecting a correction and we want to be ready to buy the dip. Broken resistance near $26.00 should offer new support. I'm suggesting a trigger to buy calls at $26.05. If triggered we'll use a stop loss at $23.95. Our first target is $29.95. Our second target is $32.25. FYI: The P&F chart is bullish with a $42 target.

Company Info:
Trimble provides positioning solutions enabling professionals in engineering and construction, surveying, agriculture, fleet management and field service to be more productive by revolutionizing their work processes. Trimble is transforming the way work is done through the application of innovative positioning. Trimble uses GPS, lasers, optical, and inertial technologies, as well as wireless communications and application specific software to provide complete solutions that link positioning to productivity. (source: company press release or website)

Buy-the-Dip trigger: $26.05

BUY the 2010 August $30 calls (symbol: TUH1021H30)

Chart of TRMB:


Active Watch List Candidates:


Carpenter Technology - CRS - close: $35.21 change +1.13

Shares of CRS continue to show relative strength and the stock hit new 52-week highs last week. I still don't want to chase this rally. CRS is overbought. The market will eventually see a correction. That's when we want to be ready to buy the pull back. I am raising our trigger to open bullish positions to $30.75.

CRS can be a volatile stock so a pull back toward $30.75 could be quick. If triggered we'll use a stop loss at $25.75. Our long-term target is $44.50. I would be tempted to aim higher but CRS only has September calls as the longest ones available. Currently the Point & Figure chart is very bullish with a $57 price target.

Buy-the-Dip trigger: $30.75

BUY the 2010 September $35 calls (symbol: CRS1018I35)

Chart of CRS:


Ruby Tuesday Inc. - RT - close: $10.47 change: -0.17

The rally in RT has stalled and yet there has been almost zero profit taking. Shares are drifting sideways in a very narrow range. This won't last. I don't see any changes from my prior comments. I am suggesting we use a dip to $9.50 as our entry point. We'll use a stop loss at $7.90.

I am suggesting readers buy the stock but options are available so we will list both. If triggered our first target is $12.25. Our second, longer-term target is $14.75. FYI: The Point & Figure chart is very bullish with a $19 target.

Buy-the-Dip trigger: $9.50

BUY the stock at $9.50

- or -

BUY the 2010 October $10.00 calls (symbol: RT1016J10)

Chart of RT:


Tractor Supply Co. - TSCO - close: 59.29 change: -0.30

TSCO has been able to extend its gains. The stock is up six weeks in a row and very overbought. We want to jump on board when the market corrects. I'm suggesting a trigger to buy calls on a dip at $55.25. If triggered our first target is $69.00. We'll use a stop loss at $49.75.

Buy-the-Dip trigger: $55.25

BUY the 2010 October $55 call (symbol: QTF1016J55)

Chart of TSCO:


FXB - CurrencyShares British Pound Sterling $149.64 -2.21

I am giving up on the FXB. We had the right idea about this currency ETF declining but couldn't get the right entry point. More nimble traders may want to consider short-term trades but that's a volatile bet. I am dropping FXB as a watch list candidate. Our trigger to buy puts was never hit.


Homebuilders ETF - XHB - close: 16.54 change: -0.32

XHB came close but never quite hit our trigger to buy LEAPS. The rally failed near the $17.00 level and now XHB is retreating. I am going to keep our entry point to buy LEAPS at $17.25. However, if the XHB produces a nice rebound from its 200-dma we might jump in on the bounce.

In the meantime if the XHB hits our trigger at $17.25 we'll use a stop at $14.49. Our first target is $21.00. Our second target is $23.90.

Breakout trigger: $17.25

BUY the 2011 Jan $17.50 calls (XJL1122A17.5)

-or-

BUY the 2012 Jan $20.00 calls (KHG1221A20)

Chart of XHB: