Option Investor
Newsletter

Daily Newsletter, Saturday, 8/14/2010

Table of Contents

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

Leaps Trader Commentary

Upset Stomach

by James Brown

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Investors are growing more fearful over the fate of the economic rebound. The economy has clearly slowed down but is it a temporary "soft patch" or the beginning of the second dip? Throughout the week the markets digested CPI data, consumer sentiment numbers, U.S. trade figures, July retail sales, a Fed meeting, and CSCO's earnings report. As you can see the market has an upset stomach. Stocks posted their fourth loss in a row on Friday as traders ignored better than expected GDP data out of Europe. Money continued to seek safe haven securities while commodities stalled as the dollar rallied.

There was a number of economic reports out of Europe this past week. Greece said their GDP shrank for the seventh quarter in a row but that wasn't a surprise. Spain said their GDP rose +0.2% quarter over quarter but it was down -0.2% year over year. France reported Q2 GDP growth of +0.6%, which was better than the +0.5% estimate. Economists were expecting Germany's GDP to grow +1.3% but the country reported a shocking +2.2% surge in the second quarter. This was the best quarterly growth rate since 1991, when they started keeping records for a reunified Germany. Of course all of these numbers are subject to revision. The sad fact is investors were not impressed by the news and markets remained jittery.

Speaking of revisions, there is a big worry that the U.S. is going to significantly revise our Q2 GDP estimates. On Wednesday the Commerce Department issued their June trade figures. Investors were expecting a jump in the trade deficit but no one was expecting it to jump $49.9 billion. That was a +18.8% jump from May to June with American exports falling -1.3% to $150.5 billion while imports surged +3% to $200.3 billion. The Commerce Department is going to have to revise their Q2 GDP estimates from an already disappointing +2.4% growth down toward +1.5-1.0% growth. The Commerce Department will release its revised Q2 GDP estimates on Friday, August 27th. This report helped spark the widespread sell-off on Wednesday where stocks broke below support.

Weakness in the stock market and concerns over a double dip have exacerbated the flight to safety. The U.S. dollar has seen a massive rally against the euro (but hit 15-year lows against the Japanese yen). The yield on the 10-year U.S. bond is under 2.7% while the yield on the 2-year U.S. treasury hit another all-time record low under 0.5% this past week. Germany's bonds, another safe-haven security, have seen the yield on the 10-year bund fall under 2.45%. Investors are so desperate for safety the rush of money into TIPS has pushed the yield on the five-year TIPS to almost zero (0.0%).

Daily chart of the U.S. dollar ETF (UUP):

Weekly chart of the Yield on the 10-year U.S. bond:

Quickly touching on economic news for last week the Labor Department said the Consumer Price Index rose +0.3%, which broke a three-month decline, but it was all due to a rise in energy prices. The core CPI only rose +0.1%. If you average the core CPI over the last year it comes out to +1.2%, which is the slowest pace of inflation since the year 1966. Retail sales for July were slightly ahead of expectations with +0.4% improvement over the +0.3% estimate. Unfortunately, this was again due to energy prices with gasoline on the rise and a little help from auto sales. If you exclude gasoline and autos then July retail sales actually fell -0.1%.

Meanwhile the early August reading on consumer sentiment saw improvement. After a big drop last month the University of Michigan consumer sentiment figures rose +1.8 points to 69.6 although I suspect this data was collected prior to Wednesday's big drop in the stock market. The next reading may see this minor bounce evaporate. Lastly there was a fed meeting on Tuesday the 10th. There was no change in rates as expected. Unfortunately the market was looking for some sort of quantitative easing from the Fed to help spur the economy. They did announce a small form of easing by rolling over the expiring mortgage debt they own into U.S. bonds but the market wasn't very impressed.

Another downer last week was earnings from technology bellwether Cisco Systems (CSCO). The company managed to beat profit estimates by a penny but missed on the revenue side. It was still a very strong quarter and a strong year for CSCO but management reiterated the "uncertainty" worries that has been plaguing corporate guidance and circling around the U.S. and European central banks. Combine CSCO's disappointing comments and revenue miss with some downgrades for the PC industry and it was a very tough week for technology stocks.

Technically the stock market looks weak and vulnerable. I have been warning readers to expect this breakdown as stocks struggled near resistance from inside a bear-wedge consolidation pattern. The path of least resistance is down. The S&P 500 is holding near short-term support near 1080. If stocks manage a bounce from here I would expect it to fail and roll over in the 1100-1120 zone. As stocks continue lower we can look for levels of support in the 1050-1040 zone and the July lows near 1020-1010. Longer-term if the S&P 500 breaks down under the 1,000 level we are probably looking at a drop toward 950-940.

Daily chart of the S&P 500 index:

Weekly chart of the S&P 500 index:

If the market weakness continues we could see the small cap Russell 2000 index break under its July lows, which would forecast a drop toward support near 550. Another sector I would watch is the SOX semiconductor index. The SOX broke down sharply this past week and closed under significant support near the 330-325 area. This is very bearish and doesn't bode well for tech stocks and the NASDAQ. We also want to keep an eye on the transports and the financials. The market can't rally for long without either sector participating.

Daily chart of the Russell 2000 index:

Daily chart of the SOX semiconductor index:

Earnings season is effectively over but we will still hear from a handful of retail companies this week. Some of the big names reporting are Home Depot (HD), Lowes (LOW), Target (TGT), and Abercrombie and Fitch (ANF). Stocks will remain sensitive to economic data. A few reports to watch out for are the Producer Price Index (PPI) due out on Tuesday (estimates are for +0.2%). The Philly Fed report comes out on Thursday. The weekly initial jobless claims will also come out on Thursday. The last couple of weeks have been very disappointing with new claims jumping significantly above estimates. Last week there were 484,000 new claims. This week the market is expecting 475,000 initial jobless claims. Rising jobless claims only add to fears of a double dip recession. Goldman Sachs actually raised their estimates that we will see a double dip to 30% on Friday. There are plenty of analysts that put the risk at 50%.

Looking ahead not much has changed from last week aside from the breakdown in stocks. I still don't see a reason for investors to buy stocks. We are in the middle of the worst two months of the year for stocks. Investors are crossing their fingers that the back-to-school shopping season will be stronger than expected but that's just wishful thinking at this point. The debt crisis in Europe hasn't been solved. The surge in Germany's GDP numbers are encouraging the rest of the euro zone is struggling. Traders are still worried about a deft default with southern Europe CDS spreads getting wider.

I am worried that we're going to see an ugly midterm election cycle. Investors may be on the sidelines until after the November elections are over. The hail of rhetoric is only going to get worse over the next several weeks. I'm also very concerned about the consumer. The job market is not improving. That will keep consumer nervous who will continue to save more, which will impede our economic rebound. Of course it's all a vicious circle that feeds on itself. Optimistically the market will find support near its July lows, base there for a little while and then mount a year-end rally. I've got my fingers crossed.

~ James Brown


Portfolio

Portfolio Update

by James Brown

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Current Portfolio


Portfolio Comments:

The major market indices are breaking down under their trendline of higher lows. Stocks look vulnerable to more profit taking as investors continue to seek safety in bonds. NTAP made the jump from watch list to play list last week. Readers may want to consider taking some profits in MCD if you haven't done so already.

There are no adjustments to our stop losses.

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

Wait for the Next Entry

by James Brown

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Editor's Note:

We have been expecting the market to roll over. It looks like the next correction has begun. Investors should wait for a pull back toward support near 1040 or 1010 and then look for a bounce before considering new bullish positions. In the meantime I've added a few bearish candidates to the watch list tonight. If you're still looking for bullish candidates check out these stocks: CTXS is still trading near one-year highs but I would look for a correction toward $48.00 before considering new bullish positions. HANS is also trading near one-year highs. I would look for HANS to bounce from $42 again or close over $46.00. HUM is another one I would either wait for a bounce from recent support (maybe the 200-dma) or wait for a close over resistance (the 2010 high is $52.66).


Play Updates

Late Summer Volatility

by James Brown

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Closed Plays


None. No closed plays this week.


Play Updates


Baidu, Inc. (Baidu.com) - BIDU - close: 82.83 change: +0.18

Alert! Investors need to rethink their risk when it comes to BIDU. We were expecting a pull back toward $80.00 but what sent the stock lower is a little alarming. BIDU is the dominant search player in China but this past week the state-run Xinhua News Agency announced it was partnering with China Mobile Ltd. (CHL) to launch their own search engine. This could be serious competition for both BIDU and GOOG and could effectively change the landscape and influence how much the market is willing to value shares of BIDU.

This has always been an aggressive, higher-risk trade but I want to encourage more conservative traders to raise their stop loss or even consider an early exit. On a short-term basis the technicals for BIDU have turned negative and the stock has created a bearish engulfing candlestick pattern on the weekly chart but this pattern normally needs to see confirmation. Given the market's recent weakness readers may want to wait for a new bounce from $80.00 or potentially look for a dip and bounce near the rising 50-dma around the $75 area before considering new positions.

Previous Comments:
BIDU is a very volatile stock. This is an aggressive, higher-risk trade. Keep your position size small to limit your risk. Our first long-term target is $99.50.

Aug 02, 2010 - entry price on BIDU @ 83.50, option @ 8.00
symbol: BIDU1122A90 2011 JAN $90 call - current bid/ask $7.35/7.50
-stop loss on BIDU @ 73.40

- or -

Aug 02, 2010 - entry price on BIDU @ 83.50, option @ 13.00
symbol: BIDU1221A100 2012 JAN $100 call - current bid/ask $12.25/12.50
-stop loss on BIDU @ 73.40

Chart of BIDU:


BorgWarner Inc. - BWA - close: 45.31 change: -0.19

BWA was not immune to the market-wide profit taking but shares are holding up reasonably well. The highs in April near $44 acted as short-term support. Short-term technicals have naturally turned bearish with the pull back from overbought conditions. The trend is still up but the correction may not be over yet. I am not suggesting new positions at this time. We only have a very small position left.

Prior Comments:
Our second and final long-term target is $49.75.

Feb 17th, 2010 - entry price on BWA @ 37.55, option @ 3.90
symbol: BWA1122A40 2011 JAN $40 LEAP call - current bid/ask $8.20/8.50
-stop loss on BWA @ 39.75

05/29/10 Sell half of remaining position, BWA @ 37.26, option @ 3.90 (+0.00%)
04/29/10 1st Target Hit, BWA @ 44.50, option @ $7.63 (+95%)

Chart of BWA:


ConocoPhillips - COP - close: 55.02 change: -0.33

The rally in crude oil futures has rolled over and the oil stocks followed the commodity lower. After failing multiple times to breakout over the $58 level two weeks ago we were expecting a correction back to $54. Shares hit $54.60 on Thursday. Given the market's recent weakness I am starting to think COP could dip back toward the 200-dma near $52.50. More conservative traders may want to raise their stops toward $50 or $52. I am not suggesting new bullish positions at this time but a strong bounce near $52 might change that.

Prior Comments:
Our first target is $69.00.

May 20, 2010 - entry price on COP @ 51.00, option @ 3.75
symbol: COP 11A55.00 2011 JAN $55 call - current bid/ask $4.00/4.10
-stop loss on COP @ 47.99

- or -

May 20, 2010 - entry price on COP @ 51.00, option @ 4.75
symbol: COP 11A55.00 2012 JAN $60 call - current bid/ask $4.45/4.70
-stop loss on COP @ 47.99

07/17/10 COP's bounce has failed. Consider an early exit!
07/03/10 More Conservative traders may want to exit early!

Chart of COP:


Carpenter Technology - CRS - close: $32.53 change +0.86

The market sell-off on Wednesday hit the metal stocks pretty hard. ATI, NUE, and CRS all plunged. The selling continued on Thursday for shares of CRS and the stock broke down and closed under technical support at the 200-dma but it failed to break the early July low near $31.20. The markets are concerned that U.S. GDP could get revised significantly lower and cyclical stocks will remain volatile to economic data.

On a short-term basis the trend is down and CRS never broke the pattern of lower highs and lower lows. However, there is still some support in the $31.50 area. The low this past week was $31.44 on both Thursday and Friday. Nimble traders could launch new bullish positions now but if you do I would strongly consider very tight stop loss (maybe near the $30.90 area).

Previous Comments:
The plan was to initiate small positions to limit our risk. Our long-term target is $44.75.

June 29, 2010 - entry price on CRS @ 34.00, option @ 5.30*
symbol: CRS 10L35.00 2010 DEC $35 call - current bid/ask $2.20/2.35
-stop loss on CRS @ 29.90 *(entry price is an estimate)

Chart of CRS:


EMC Corp. - EMC - close: 18.76 change: +0.07

It was an ugly week for tech stocks. The worldwide decline on Wednesday was pretty rough. Then investors were disappointed with CSCO's earnings Wednesday night and tech stocks sank again on Thursday. EMC erased 7% and broke down under several layers of short-term support. I am suggesting readers wait for the stock to bounce from what should be technical support at its 200-dma before considering new bullish positions.

Previous Comments:
Our first target is $22.50. Our second, longer-term target is $24.75.

May 6, 2010 - entry price on EMC @ 18.25, option @ 1.40
symbol: EMC 11A20.00 2011 Jan $20 call - current bid/ask $0.98/1.02
-stop loss on EMC @ 17.80

- or -

May 6, 2010 - entry price on EMC @ 18.25, option @ 2.50
symbol: EMC 12A20.00 2012 Jan $20 call - current bid/ask $2.27/2.38
-stop loss on EMC @ 17.80

07/17/10 new stop @ 17.45
07/03/10 More Conservative Traders may want to exit early!

Chart of EMC:


SPDR Gold ETF - GLD - close: 118.74 change: -0.03

The U.S. dollar has been in rocket mode the last few days. Normally a strong dollar is bearish for gold but this time gold is holding up pretty well. The GLD actually posted a gain for the week. Gold, the dollar, and bonds are all considered "safe haven" investors, with bonds being the safest. This could be why gold has been able to shake off the dollar's rally. This past week saw the GLD breakout over its 50-dma but the rally has stalled under $119.00. I would expect a pull back toward $116.50 before we see further gains.

Previous Comments
Currently our stop loss is at $111.00. Our first long-term target is $140.

Aug 6, 2010 - entry price on GLD @ 118.00, option @ 7.70
symbol: GLD1119C120 2011 Mar $120 call - current bid/ask $7.45/7.65
-stop loss on GLD @ 111.00

- or -

Aug 6, 2010 - entry price on GLD @ 118.00, option @ 10.75
symbol: GLD1221A130 2012 Jan $130 call - current bid/ask $10.80/11.15
-stop loss on GLD @ 111.00

Weekly Chart of GLD:


Infosys Technologies - INFY - close: 59.05 change: -0.23

Stocks were weak across the globe, especially on Wednesday. Shares of INFY gapped open lower and closed under its 50 and 100-dma on Wednesday. The selling paused near $59.00 but I don't think the correction is over yet. Wait for INFY to test and bounce from the rising 200-dma near $57.20 or the $56.00 level before considering new bullish positions.

Previous Comments:
We have a stop loss at $54.90. Our long-term target is $79.00.

July 1, 2010 - entry price on INFY @ 59.00, option @ 7.50
symbol: INFY 11A60.00 2011 Jan $60 call - current bid/ask $4.50/ 4.80
-stop loss on INFY @ 54.90

- or -

July 1, 2010 - entry price on INFY @ 59.00, option @ 8.20
symbol: INFY 12A65.00 2012 Jan $65 call - current bid/ask $6.30/ 7.40
-stop loss on INFY @ 54.90

Chart of INFY:


McDonald's Corp. - MCD - close: 71.89 change: -0.17

Believe it or not MCD posted a gain for the week. On Monday MCD said same-store sales rose +7% and the stock popped to a new all-time high ($73.34). That proved to be the high for the week and shares slowly consolidated back toward their prior highs. If the market starts to accelerate lower it will make further gains in MCD challenging. I am expecting a correction toward $70. Nimble traders could try and buy a dip or bounce near $70. I would prefer to wait for the dip and then look for a close back above $72.00.

Prior Comments:
Keep your positions small. Our long-term target is $79.75. FYI: The Point & Figure chart forecasting an $82 (long-term) target.

June 29, 2010 - entry price on MCD @ 66.50, option @ 2.65
symbol: MCD 11A70.00 2011 Jan $70 call - current bid/ask $4.55/ 4.70
-stop loss on MCD @ 64.75

- or -

June 29, 2010 - entry price on MCD @ 66.50, option @ 2.20
symbol: MCD 12A80.00 2012 Jan $80 call - current bid/ask $3.25/ 3.45
-stop loss on MCD @ 64.75

07/17/10 Take Profits! 2011 Jan $70 call @ 4.00 (+51%), 2012 $80 call @ 3.50 (+59%)

Chart of MCD:


Millicom Intl. - MICC - close: 89.85 change: -0.32

MICC lost about five points for the week. Most of that was on Tuesday and Wednesday. Traders bought the dip at its 50 and 100-dma unfortunately the bounce doesn't look very healthy. If you look at a weekly chart the last two weeks appear to be forming a potential bearish reversal pattern. More conservative traders will want to seriously consider raising their stop loss. I am not suggesting new positions at this time. I suspect that MICC will retest the $85 level before the end of August.

Previous Comments:
Keep your positions small to limit your risk. MICC is (normally) a volatile stock. Our long-term target is $99.50 and the $109.00 levels.

May 6, 2010 - entry price on MICC @ 80.00, option @ 8.60
symbol: MICC 11A90.00 2011 Jan $90 call - current bid/ask $ 8.30/ 9.10
-stop loss on MICC @ 79.90

Chart of MICC:


NetApp, Inc. - NTAP - close: 38.14 change: +0.56

The profit taking in technology stocks accelerated the correction in shares of NTAP. The market's reaction to CSCO's earnings report on Thursday morning was enough to push NTAP under $38 and under its 100-dma. Shares hit our trigger to buy calls at $37.50 on Thursday morning. The bounce on Friday added +1.49% but shares pared their gains. I'm not convinced the profit taking is over. While this play is open readers may want to go ahead and wait before launching new positions. We might get a better entry point near $36.00 or the $35.00 area before the month ends.

Previous Comments:
We are using a stop loss at $34.75. Our long-term target is $49.00. FYI: NTAP is due to report earnings on August 18th.

Aug 12, 2010 - entry price on NTAP @ 37.50, option @ 3.00
symbol: NTAP1122A40 2011 Jan $40 call - current bid/ask $ 3.15/ 3.30
-stop loss on NTAP @ 34.75

- or -

Aug 12, 2010 - entry price on NTAP @ 37.50, option @ 4.00
symbol: NTAP1221A45 2012 Jan $45 call - current bid/ask $ 4.15/ 4.45
-stop loss on NTAP @ 34.75

Chart of NTAP:


PEPSICO Inc. - PEP - close: 65.56 change: +0.38

PEP is holding up pretty well, probably because the stock is somewhat of a safe haven play. It's a large, safe, big cap stock with a decent yield. I would still expect a correction toward $64.00 and probably toward the 200-dma closer to $63. We're not suggesting new positions at this time.

Previous Comments:
Our final target remains $72.25.

July 7th, 2009 - entry price on PEP @ 57.25, option @ $4.50(estimate)
symbol: VP-AL, 2011 $60.00 LEAP call - current bid/ask $6.75/6.90
-stop loss on PEP at $59.85

06/26/10 Repeat - More cautious traders will want to consider an exit.
06/05/10 More cautious traders may want to exit now to avoid a loss.

03/27/10 SELL HALF: PEP $ 66.59, Option @ $8.00 (+77.7%)

Chart of PEP:


Transocean Ltd. - RIG - close: 54.15 change: +0.26

After a huge rally two weeks ago RIG experienced some normal profit taking with a pull back to the 38.2% Fib retracement of the August run up. Shares of RIG will remain sensitive to big movements in the OSX oil services index and the price of oil but overall I still believe the bottom is in. Traders looking for a new entry point can wait for a dip or a bounce near the $50 level and its 50-dma. More conservative traders may want to raise their stop loss toward the July low of $44.30.

Previous Comments:
This is a very aggressive trade given the unknown risks associated with RIG's connection to the Gulf oil spill. Our long-term targets are $59 and $75. FYI: The P&F chart is forecasting an $82 target.

Jun 09, 2010 - entry price on RIG @ 43.50, option @ 6.50
symbol: RIG 11A50.00 2011 Jan $50 call - current bid/ask $ 8.75/ 8.95
-stop loss on RIG @ 41.80

- or -

Jun 09, 2010 - entry price on RIG @ 43.50, option @ 7.25
symbol: RIG 12A60.00 2012 Jan $60 call - current bid/ask $ 8.55/ 8.70
-stop loss on RIG @ 41.80

Chart of RIG:



Watch

Medical, Oil, and Coffee

by James Brown

Click here to email James Brown


New Watch List Entries

ISRG - Intuitive Surgical

OXY - Occidental Petroleum

SBUX - Starbucks Corp.


Active Watch List Candidates

BUCY - Bucyrus Intl.

BVN - Compania de Minas Buenaventura

CHRW - CH Robinson Worldwide

MA - Mastercard Inc.

TASR - TASER Intl

WLT - Walter Energy


Dropped Watch List Entries

NTAP graduated to the play list.


New Watch List Candidates:

Intuitive Surgical - ISRG - close: 315.70 change: -1.30

It appears that investors are disregarding ISRG's latest earnings report, which had pretty impressive headline numbers and strong margins. Instead traders are selling into strength and the bearish pattern of lower highs is pushing ISRG against support near $300.00. A breakdown under the $300 level could herald a significant correction lower.

ISRG is a high-dollar and volatile stock. The options are not cheap. I consider this an aggressive, higher-risk trade. I am suggesting a trigger to open bearish positions at $299. If triggered we'll use a stop loss at $321. Our target is $250 (although we might adjust that to $260). Keep your positions small.

Company Info:
Intuitive Surgical, Inc., headquartered in Sunnyvale, California, is the global technology leader in robotic-assisted, minimally invasive surgery. Intuitive Surgical develops, manufactures and markets robotic technologies designed to improve clinical outcomes and help patients return more quickly to active and productive lives. The Company's mission is to extend the benefits of minimally invasive surgery to the broadest possible base of patients. Intuitive Surgical - Taking surgery beyond the limits of the human hand(TM). (source: company press release or website)

- This is a PUT Play -

Break Down trigger: $299.00

BUY the 2011 Jan $250 put (ISRG1122M250)

I'm suggesting an option significantly out of the money. This is probably going to be a real black or white win/lose situation.

Chart of ISRG:


Occidental Petroleum - OXY - close: 75.39 change: -1.07

Shares of OXY have been trading sideways in the $74-90 zone for almost a year. The stock has developed a bearish trend of lower highs. Now that the market is breaking down and the oil sector is rolling over (and the dollar is rising, which could put some pressure on oil), it looks like OXY could finally break support.

I am suggesting a trigger at $74.00 to buy puts. If triggered we'll use a stop loss at $80.25. Our first target is $65.50. Our second target is $60.25. I prefer the 2012 puts over the 2011 puts but both should work.

Company Info:
Occidental Petroleum Corporation is an international oil and gas exploration and production company with operations in the United States, Middle East/North Africa and Latin America regions. Oxy is the fourth largest U.S. oil and gas company, based on equity market capitalization. Oxy's wholly owned subsidiary, OxyChem, manufactures and markets chlor-alkali products and vinyls. Occidental is committed to safeguarding the environment, protecting the safety and health of employees and neighboring communities and upholding high standards of social responsibility in all of the company's worldwide operations (source: company press release or website)

- This is a PUT Play -

Break Down trigger: $74.00

BUY the 2011 Jan $60 puts (OXY1122M60)

- or -

BUY the 2012 Jan $60 puts (OXY1221M60)

Chart of OXY:


Starbucks Corp. - SBUX - close: 23.99 change: -0.47

Consumers are nervous. They are worried about their jobs and their homes so they're spending less and saving more. This could have a negative impact on SBUX with their expensive coffee drinks. Shares have already formed a bearish head-and-shoulders pattern. A breakdown under $24.00 and its 200-dma could be an entry point for puts. The low in July was $23.47.

I am suggesting a trigger to buy puts at $23.30. If triggered our first target is $20.15. Our second target is $18.25.

Company Info:
Since 1971, Starbucks Coffee Company has been committed to ethically sourcing and roasting the highest quality arabica coffee in the world. Today, with stores around the globe, the company is the premier roaster and retailer of specialty coffee in the world. Through our unwavering commitment to excellence and our guiding principles, we bring the unique Starbucks Experience to life for every customer through every cup (source: company press release or website)

- This is a PUT Play -

Break Down trigger: $23.30

BUY the 2011 Jan $20 put (SBUX1122M20)

- or -

BUY the 2012 Jan $20 put (SBUX1221M20)

Chart of xxx:


Active Watch List Candidates:

Bucyrus Intl. - BUCY - close: 58.71 change: -0.64

Concerns over the economic slowdown getting worse was painful for mining-related stocks. BUCY fell toward technical support at its 200-dma last week. The low was $57.22 on Thursday. I suspect this correction has a lot further to go and while BUCY has additional support near $55 shares still have a good chance of hitting their long-term trendline (see chart below). I am lowering our trigger to buy calls down to $51.50. We'll lower our stop loss to $47.00. Our first target is $69.00. FYI: I prefer the 2012 call LEAPS but the 2011s should work.

Buy-the-Dip trigger: $51.50 *new*

BUY the 2011 Jan $60 calls (BUCY1122A60) *adjusted*

- or -

BUY the 2012 Jan $70 calls (BUCY1221A70)

Chart of BUCY:


Compania de Minas Buenaventura - BVN - close: 37.92 change: +0.21

BVN displayed some unexpected strength late last week but I suspect this bounce will fail near $38.00 and its 50-dma. We are waiting for a pull back toward the trendline of higher lows. I am adjusting our trigger to buy calls down to $32.50. We'll move the stop loss down to $29.49. Our first target is $42.25. Our second, more aggressive target is $47.50.

Buy-the-Dip trigger: $32.50 *new*

BUY the 2011 March $35 calls (BVN1119C35) *adjusted*

Chart of BVN:


CH Robinson Worldwide Inc. - CHRW - close: 64.60 change: -0.29

We have been waiting for shares of CHRW to correct. That correction has finally begun with a failed rally and bearish engulfing candlestick pattern this past week. The $62.00 level should offer some support and I'm moving our trigger to launch positions down to $62.00. More conservative traders may want to hold off and wait for a dip closer to $60.00. If triggered we will use a stop loss at $57.75. Our first long-term target is $67.50. Our second, long-term target is $72.50.

Buy-the-Dip trigger: $62.00 *adjusted*

NOTE: I prefer the 2012 calls!

BUY the 2011 January $65.00 calls (CHRW1122A65)

- or -

BUY the 2012 January $70.00 calls (CHRW1221A70)

Chart of CHRW:


Mastercard Inc. - MA - close: 210.64 change: - 1.19

Hmm.... did you notice the action in MA this past week has taken on a much more bullish tone? The rally stalled near resistance near $217 but what I find interesting is that MA did not see a huge sell-off on Wednesday. Aggressive short-term traders might want to consider bullish positions on a close over $218.00 but look for resistance near $230. Meanwhile for the rest of us, I'm still waiting for a breakdown from this three-month consolidation pattern. The plan is to use a decline at $192.00 as a bearish entry point. More conservative traders can wait for MA to actually close under $192.00. If triggered we'll use a wide stop loss at $213.00. Our first target is $161.00.

FYI: If MA closes over $218.00 we'll drop it as a bearish candidate.

- PUT PLAY -

Break Down trigger: $192.00

I prefer the 2012 PUT LEAPS but the 2011 PUTS should also work well.

Keep your positions small. MA can be a very volatile stock!

BUY the 2011 Jan $180 PUT LEAPS (MA1122M180)

- or -

BUY the 2012 Jan $160 PUT LEAPS (MA1221M160)

Chart of MA:


TASER Intl. - TASR - close: 4.06 change: +0.05

Shares of TASR continue to fade lower. At this point it looks like shares will retest their 2010 lows near $3.60. We might switch to an alternative entry point strategy and look for a bounce near the $3.60 level. However, for now the plan is unchanged. We will wait for a move higher with a trigger at $4.25 to open bullish positions.

This is an aggressive trade and TASR can see big bouts of volatility. If triggered at $4.25 we'll use a stop loss at $3.79. There is some resistance near $5.00 but our first long-term target is $6.00. (Buy the stock, not the options!)

Breakout trigger: $4.25

BUY the stock (TASR) @ 4.25

Chart of TASR:


Walter Energy - WLT - close: 72.76 change: +0.72

It was a volatile week for shares of WLT but that's been a common occurrence this year. WLT spiked toward $80 on Monday but tested its 50-dma near $72 on Thursday morning. Currently our plan is unchanged with a trigger to buy calls at $81.00. However, if we see a close under $68.50 we'll drop WLT as a bullish candidate. If we are triggered at $81 we'll use a stop loss at $74.00. Our target is $99.00.

Breakout trigger: $81.00

BUY the 2011 Jan $90 calls (WLT1122A90)

- or -

BUY the 2012 Jan $100 calls (WLT1221A100)

Chart of WLT: