Option Investor
Newsletter

Daily Newsletter, Saturday, 9/11/2010

Table of Contents

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

Leaps Trader Commentary

September Soars

by James Brown

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September is off to a very strong start with the S&P 500 up more than +6% in the first seven trading days. I pray you realize this pace is unsustainable. The market will see some profit taking but the short-term trend is certainly up. It looks like the rally in bonds may be over, at least temporarily. Traders are taking profits in the bond market and putting the money elsewhere. Some of that money could be fueling current stock gains. I am going to keep this market commentary concise tonight since not much has changed in the last holiday-shortened week.

Daily chart of the 10-year bond yield:

This past week investors were digesting the Federal Reserve's Beige Book report, the weekly initial jobless claims on Thursday, and the Wholesale Inventory data on Friday. The Beige Book was a bit of a letdown. There are 12 Fed regions and five banks said their region saw moderate growth (not getting better) while another five banks said their regions saw a slowdown in growth (decelerating). Only two banks had positive anecdotal evidence their regions were growing. Stocks managed to rally on Wednesday but gains were pretty mild.

Thursday's initial jobless claims were better than expected. Claims fell -21,000 to 451,000. That is certainly improvement and the lowest reading since July 10th but one week doesn't make a trend. Plus that week was just ahead of the Labor Day holiday and people out of work may have been focused on their weekend plans and not filing for unemployment. The four-week moving average remains elevated. Given the sheer size of the U.S. workforce these weekly numbers are mere distractions, until we see a steady trend under 400,000.

The Wholesale Inventory data on Friday was positive. Inventories jumped +1.3%, which was much better than expected. The government revised June's data higher to +0.3%. July sales were positive, an improvement over June. There was a lot of analyst talk about how this build up in inventory was a positive sign of confidence for the future. Personally that sounds like the media is trying to put some positive spin on these numbers. The manufacturing data has been unsteady lately. I would wait for more information before getting too excited here.

In other news it was not a good week for the semiconductor sector. SLAB issued an earnings warning on Wednesday. NSM and TXN guided earnings lower on Thursday. This confirms the recent bearish trend in the semiconductor sector and all the bearish analyst comments on this group. The oversold bounce in the SOX has failed at resistance. Normally the SOX tends to lead the NASDAQ, which isn't a good sign. Currently the SOX index has a bearish trend of lower highs and lower lows.

Daily chart of the SOX semiconductor index:

I would keep an eye on the banking stocks this week. There will be plenty of headlines regarding the Basel III meetings held in Switzerland over the weekend. Many expected regulators to exit the financial summit with a load of new rules and requirements for the already weak European banking sector. While banks will have years to implement these changes they will want to look strong and implement them sooner rather than later.

This week we will see the Retail Sales for August on Tuesday. Economists are expecting retail sales for the U.S. to improve by +0.3%. On Wednesday we'll get the New York Empire State manufacturing survey. Analysts are looking for an improvement from 7.1 to 9.0. Thursday will bring the Philly Fed survey and the market wants to see a bounce from last month's reading at -7.7. On Friday we'll see the latest Consumer Sentiment numbers. That could be interesting since it will reflect attitudes during the stock market sell-off in August.

I would keep an eye on the U.S. dollar. The dollar has been churning sideways for about four weeks and a big move either way will certainly have an impact on stocks.

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

Over the weekend China released some good news with better than expected industrial output. Production rose +13.9% from a year ago, better than the +13.0% estimate. Retail sales soared +18.4%. Consumer prices rose +3.5%, the biggest gain in almost two years thanks to sharply rising food prices. Analysts are expecting China to see +9.4% GDP growth in the third quarter and +9.0% growth in Q4 2010. If the world's third largest economy can engineer a soft landing then it should spell good news for the rest of the globe. This data could spark gains for resource names on Monday. Keep an eye on the FXI Chinese ETF. The FXI is consolidating sideways and looks ready for a breaking in the next few weeks.

Daily chart of the FXI (Chinese ETF):

Overall not much has changed from last week. Investors are still cautious over the fragile U.S. economy. Perceived weakness in Europe could cause things to roll over. Meanwhile the strength in China could produce the opposite move and inspire more buying pressure. I remain hesitant to launch new positions with volumes so low in the market. Many are expecting volumes to pick up this week with the first full week of fall for Wall Street. Stocks will remain volatile ahead of the election but I am expecting a fourth quarter rally. The challenge will be choosing our entry point.

- James


Portfolio

Portfolio Update

by James Brown

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Current Portfolio


Portfolio Comments:

We are taking money off the table again! This time in NTAP and RIG. I'm suggesting an early exit for the 2011 NTAP calls. Meanwhile RIG hit our first target at $59.00 on Friday. The short-term trend in stocks is up but don't get lulled to sleep here. The lack of volume in the market is a warning!

New stop losses for RIG @ $47.45.

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

On A Correction

by James Brown

Click here to email James Brown

Editor's Note:

The S&P 500 is up more than +6% in the last seven trading days. September is definitely bucking the historical norms for now. It would be tempting to consider launching new bullish positions here but the lack of volume worries me. Big rallies on low volume are a warning signal. Maybe this is the "new normal" as investors adjust to the post-flash crash environment. Or maybe investors are just waiting to see how the midterm elections shakeout.

I am not adding any new positions today. I strongly considered promoting HUM from our watch list to an active trade. I also considered adding Visa (V) as a new bearish candidate given the stocks' recent breakdown. However. the short-term market trend is up and I'd rather look to open positions on a correction. We are adding two new candidates to the watch list tonight (BRK.B and SRCL).


Play Updates

We Continue to Take Profits

by James Brown

Click here to email James Brown


Closed Plays


None. No closed plays this week.


Play Updates


Baidu, Inc. (Baidu.com) - BIDU - close: 84.33 change: +0.50

CNBC continues to cheer the market's September rally but I'm not seeing it in BIDU - at least not last week. The stock gained an impressive three cents. That's it! Traders bought the dip near $82 early in the week but the sold BIDU on the spike toward $86. The bounce looks a little tired. I would expect another pull back toward $80.00. The $87-88 zone is the next level of significant resistance.

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 $6.65/6.80
-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 $11.85/12.10
-stop loss on BIDU @ 73.40

Chart of BIDU:


Bucyrus Intl. - BUCY - close: 66.87 change: +0.32

The rally in BUCY continued last week but shares ran into trouble near $68.00. The stock stalled near $68 on Wednesday and Thursday. Shares do look a little overbought with a rally from $53.50 to $68 in the last three weeks. We can look for a dip or a bounce in the $60.00-62.00 zone as a new entry point to consider call LEAPS.

Previous Comments:
Our first long-term target is $72.50. We're using a stop loss at $52.99. I prefer the 2012 call LEAPS but the 2011s should work.

Sep 01, 2010 - entry price on BUCY @ 61.00, option @ 8.50
symbol: BUCY1122A60 2011 JAN $60 call - current bid/ask $11.70/11.90
-stop loss on BUCY @ 52.99

- or -

Sep 01, 2010 - entry price on BUCY @ 61.00, option @ 13.00
symbol: BUCY1221A70 2012 JAN $70 call - current bid/ask $14.35/14.90
-stop loss on BUCY @ 52.99

Chart of BUCY:


ConocoPhillips - COP - close: 54.75 change: +0.02

Crude oil saw a nice rally on Friday but that didn't stop COP from posting a small loss for the week. The stock has been struggling with the $55.25 area. I would expect a pull back toward the $53-52 area. I'm not suggesting new bullish positions at this time.

Prior Comments:
Our first target is $69.00. FYI: The Point & Figure chart is suggesting a long-term $79 target. We are using a stop loss at $47.99.

May 20, 2010 - entry price on COP @ 51.00, option @ 3.75
symbol: COP 11A55.00 2011 JAN $55 call - current bid/ask $3.05/3.15
-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 $4.00/4.15
-stop loss on COP @ 47.99

09/04/10 COP gave us a new entry with the move over $54.00
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:


EMC Corp. - EMC - close: 19.98 change: +0.06

Caution! This past week in EMC looks like a short-term top thanks to Thursday's failed rally. I would expect a pull back toward support near $19.00. If you are looking at launching new positions I would use the 2012 call LEAPS if EMC provides a new entry point (like a new bounce from $19.00).

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 $1.36/1.39
-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 $2.71/2.82
-stop loss on EMC @ 17.80

09/04/10 EMC has provided a new entry point with the move over $19
07/03/10 More Conservative Traders may want to exit early!

Chart of EMC:


SPDR Gold ETF - GLD - close: 121.73 change: +0.17

Warning! We have been expecting gold to see some profit taking for a couple of weeks now but it just wouldn't go down. Well the shiny metal rallied toward its 2010 highs and appears to have finally created a failed rally pattern. I am expecting the GLD to correct back toward $118.50 and its rising 50 and 100-dma. More conservative traders may want to use a stop closer to $116.00 instead.

Previous Comments
Currently our stop loss is at $112.90. 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 $8.60/8.80
-stop loss on GLD @ 112.90

- or -

Aug 6, 2010 - entry price on GLD @ 118.00, option @ 10.75
symbol: GLD1221A130 2012 Jan $130 call - current bid/ask $11.85/12.10
-stop loss on GLD @ 112.90

Weekly Chart of GLD:


Infosys Technologies - INFY - close: 62.33 change: +0.49

Shares of INFY are up about seven days in a row and the stock is nearing resistance in the $63.50 region. Odds are pretty good INFY will see a pull back soon. Look for short-term support near $60.00. I don't see any changes from my previous comments. We are leaving our stop at $54.90 for now but more conservative traders may want to move their stop toward last week's low (56.73).

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 $5.60/ 5.80
-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 $7.60/ 8.20
-stop loss on INFY @ 54.90

Chart of INFY:


Intuitive Surgical - ISRG - close: 280.03 change: - 2.83

Shares of ISRG are not participating in the market's rally. That's a good sign for us but don't get complacent. There is still a decent chance that the oversold bounce could carry ISRG toward resistance near $300 before it finally rolls over again. I'm not suggesting new positions at this time. Wait for a new failed rally near $300.

Previous Comments:
When we started this play I suggested options significantly out of the money. This was probably going to be a real black or white win/lose situation. However, we did take profits early on 8/28/10 given the sharp sell-off but our long-term target is $250.00. The plan was to use small positions to limit our risk. We have a stop loss at $311.00.

This is a PUT play.

Aug 20, 2010 - entry price on ISRG @ 299.00, option @ 14.00
symbol: ISRG 11m250 2011 Jan $250 PUT - current bid/ask $15.20/15.90
-stop loss on ISRG @ 311.00

08/28/10 Take Profits, sell half @ $18.30 (+30.7%)

Chart of ISRG:


McDonald's Corp. - MCD - close: 75.01 change: +0.64

On Wednesday MCD tagged another new 52-week high, this time at $76.26. Shares gapped down on Thursday morning as investors reacted to news. The company said global same-store sales were +4.9% in August. That's pretty strong and traders bought the dip near $74.00. I still think MCD looks overbought. I would prefer to consider new bullish positions on a dip or a bounce near $72-70.

Prior Comments:
Keep your positions small. Our long-term target is $79.75. FYI: The Point & Figure chart forecasting an $96 (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 $6.50/ 6.65
-stop loss on MCD @ 66.75

- or -

June 29, 2010 - entry price on MCD @ 66.50, option @ 2.20
symbol: MCD 12A80.00 2012 Jan $80 call - current bid/ask $3.85/ 4.05
-stop loss on MCD @ 66.75

08/28/10 New stop @ 66.75
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: 98.25 change: -0.27

The stock was downgraded on Sept. 7th but the news didn't have much affect on the stock price. MICC has been struggling with the $99.00 level lately. The stock spiked to $99.23 on Thursday and quickly reversed. We've already taken profits once, don't wait for MICC to hit $99.50 (originally our first target) to take some money off the table. Our second and final target is $109.00 but that will take awhile to reach and we're not suggesting new bullish positions at this time. Look for support near $94 and $92.00.

Previous Comments:
Keep your positions small to limit your risk. MICC is (normally) a volatile stock. Our second, long-term target is the $109.00 levels. Our stop loss is at $86.40.

May 6, 2010 - entry price on MICC @ 80.00, option @ 8.60
symbol: MICC 11A90.00 2011 Jan $90 call - current bid/ask $12.50/13.50
-stop loss on MICC @ 86.40

09/04/10 Take Profits Early, MICC @ 98.79, option @ $12.90 (+50%)
plus new stop at $86.40

Chart of MICC:


NetApp, Inc. - NTAP - close: 44.05 change: +0.98

Sell now - if you have the 2011 Jan. $40 calls. NTAP continues to show relative strength and the stock hit new highs this week at $47.89 on Thursday. Our long-term target has been $49.00. NTAP is up huge in the past four weeks. I'm suggesting we sell the 2011 calls now. We'll keep the 2012 calls but we will raise our exit target to $54.00. Update
We have sold the 2011 call position. All we have left are the 2012 calls. Our new long-term target is $54.00. More conservative traders may want to raise their stops.

Aug 12, 2010 - entry price on NTAP @ 37.50, option @ 3.00
symbol: NTAP1122A40 2011 Jan $40 call - sell it - bid @ $8.30
-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 $ 8.70/ 8.95
-stop loss on NTAP @ 34.75

09/11/10 Sell the rest of the 2011 calls, NTAP @ 46.33, call @ 8.30 (+176%)
09/04/10 Take Profits Early, NTAP @ 44.05, 2011 $40 call @ 6.45 (+115%)
The 2012 $45 call @ $7.05 (+76%)

Chart of NTAP:


Occidental Petroleum - OXY - close: 78.20 change: +0.63

OXY continues to fail at resistance near $79.00 and its exponential 200-dma but the action is growing more bullish. The strength in crude oil this past week certainly didn't hurt the bulls. I am growing more cautious on this put play. More conservative traders may want to scale back their positions. I am not suggesting new bearish positions at this time.

Previous Comments:
No new positions at this time!
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.

- This is a PUT Play -

Aug 16, 2010 - entry price on OXY @ 74.00, option @ 2.17
symbol: OXY1122M60 2011 Jan $60 put - current bid/ask $ 1.26/ 1.31
-stop loss on OXY @ 80.25

- or -

Aug 16, 2010 - entry price on OXY @ 74.00, option @ 6.58
symbol: OXY1221M60 2012 Jan $60 put - current bid/ask $ 5.20/ 5.40
-stop loss on OXY @ 80.25

Chart of OXY:


PEPSICO Inc. - PEP - close: 66.41 change: +0.31

The market seems to be trending higher but investors are still cautious and safe defensive names are gaining attention. PEP has rallied toward its August highs. It would appear that PEP has created a bullish pattern over the last several months and the stock is poised to breakout but I doubt it will happen unless the major market indices lead the way higher. I am less enthusiastic about bullish positions in PEP at this time. FYI: There was a recent article on Forbes.com discussing KO and PEP's vulnerability to a tax on sodas and other sugary drinks to help pay for Obama's healthcare reform. FYI: PEP is due to report earnings on Oct. 7th.

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 $7.30/7.40
-stop loss on PEP at $59.85

09/04/10 may want to consider new positions with 2012 calls
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:


Panera Bread - PNRA - close: 86.14 change: +0.59

The rally in PNRA has stalled. The stock has been struggling with resistance near the $87.00 level for a week! Odds are very good shares will see a correction soon. I don't see any changes from my prior comments. I am expecting a dip back toward $83.00 (possibly lower) before PNRA tries to rally again.

Previous Comments:
We have already taken profits once on Sept. 4th. We have a stop loss at $78.45. Our final target is $88.00.

Aug 30th, 2010 - entry price on PNRA @ 80.75, option @ $4.20
symbol: PNRA1122A85 2011 $85.00 LEAP call - current bid/ask $7.00/7.70
-stop loss on PNRA at $78.45

09/04/10 Take profits early. Sell half. PNRA @ 85.02, option @ 6.20 (+47.6%)
08/30/10 Triggered at $80.75

Chart of PNRA:


Transocean Ltd. - RIG - close: 58.82 change: +3.52

Target achieved! RIG hit our first target at $59.00 on Friday. The stock spiked to $60.10 intraday. Oil service stocks were relative strength leaders with a +2.7% gain in the OSX index. RIG posted a +6.3% rally on Friday. The $60 level could be resistance so I would expect some profit taking with a dip back toward $55.00. Please note I'm raising our stop loss to $47.45. More conservative traders may want to use a stop closer to $50.00. Our second, long-term target remains $75.00.

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.

Jun 09, 2010 - entry price on RIG @ 43.50, option @ 6.50
symbol: RIG 11A50.00 2011 Jan $50 call - current bid/ask $11.45/11.65
-stop loss on RIG @ 47.45

- or -

Jun 09, 2010 - entry price on RIG @ 43.50, option @ 7.25
symbol: RIG 12A60.00 2012 Jan $60 call - current bid/ask $10.35/10.75
-stop loss on RIG @ 47.45

09/10/10 Target Hit @ 59.00, 2011 Jan $50 call @ $11.45 (+76.1%), the 2012 Jan $60 call @ $10.35 (+42.7%)

Chart of RIG:


TASER Intl. - TASR - close: 3.90 change: -0.05

TASR has been stuck under resistance at the $4.00 level for a week. If you squint at the chart it almost looks like the stock is forming a bull-flag pattern but that could be wishful thinking. I would expect a dip back toward $3.80, which as broken resistance should offer some new support.

Previous Comments:
Our stop loss is at $3.45. Our long-term target is $4.90.

STRATEGY: Buy TASR stock (entry $3.69), stop loss $3.45

08/30/10 TASR opens Monday at $3.69 (entry point)
08/28/10 TASR listed as a new play

Chart of TASR:


Watch

A Conglomerate and Medical Waste Removal

by James Brown

Click here to email James Brown


New Watch List Entries

BRK.B - Berkshire Hathaway

SRCL - Stericycle Inc.


Active Watch List Candidates

BVN - Compania de Minas Buenaventura

GILD - Gilead Sciences

HD - Home Depot

HUM - Humana Inc.

NVDA - NVIDIA Corp.

VMED - Virgin Media

WYNN - Wynn Resorts Ltd.


Dropped Watch List Entries

CHRW was removed.


New Watch List Candidates:

Berkshire Hathaway - BRK.B - close: 82.72 change: +0.41

Last week I listed BRK.B as a stock to watch in the new plays section. Shares have continued to show relative strength and the stock is up four weeks in a row. The breakout to new relative highs is encouraging but we don't want to chase it here. Wait for a little correction and then jump in. I'm suggesting a trigger to buy calls on BRK.B at $80.50. More patient traders could try waiting for another dip back toward the 50-dma near $79.00 instead. If triggered at $80.50 I'm suggesting a stop loss at $74.95. Our long-term target is $92.50 and $99.00. I prefer the 2012 calls.

Company Info:
Berkshire Hathaway and its subsidiaries engage in diverse business activities including property and casualty insurance and reinsurance, utilities and energy, freight rail transportation, finance, manufacturing, retailing and services. Common stock of the company is listed on the New York Stock Exchange, trading symbols BRK.A and BRK.B. (source: company press release or website)

Buy-the-Dip trigger: $80.50

BUY the 2011 Jan. $85 calls (BRKB1122A85)

- or -

BUY the 2012 Jan $90 calls (BRKB1221A90)

Chart of BRK.B:


Stericycle - SRCL - close: 69.00 change: +0.87

Investors appear to be interested in medical waste disposal if shares of SRCL are any indication. The company does a lot more than waste removal unfortunately, paying a dividend is not one of those things. That hasn't stopped the stock from setting new all-time highs. After more than two months of consolidating near the $65 area it looks like SRCL is poised to move. We do not want to chase it here. Look for a dip back toward $66.00. We'll use a stop loss at $63.40. If triggered our long-term target is $79.00. However, we will have to adjust our exit point as SRCL does not have LEAPS. The longest dated options are 2011 Februarys.

Company Info:
We are a business services company that specializes in protecting people and reducing risk. We work with companies in a wide array of industries -- such as healthcare, manufacturing, and retail -- to improve employee and customer safety, ensure regulatory compliance, safely dispose of regulated materials, and manage corporate and personal risk. Our services include medical waste disposal and sharps disposal management, product recalls and retrievals, OSHA compliance training, pharmaceutical recalls and medical device returns, hazardous waste disposal, healthcare integrated waste stream management, pharmaceutical waste disposal, medical safety product sales, and high volume notification services. (source: company press release or website)

Buy-the-Dip trigger: $66.00

BUY the 2011 February $70 calls (SRCL1119B70)

Chart of SRCL:


Active Watch List Candidates:

Compania de Minas Buenaventura - BVN - close: 40.48 change: -0.09

I remain bullish on BVN we're just waiting for the right entry point. The stock's breakout in late August sparked a new buy signal but I didn't want to chase it. So far BVN is consolidating as expected with some round-number support at $40.00. I am suggesting we buy calls with a dip at $38.50. I'm crossing my fingers the stock doesn't rally from current levels without hitting our trigger first. There was some news late this weekend regarding China's economy that suggest the country's economy is still humming along and will probably see a soft landing. That should be a bullish development for the miners like BVN.

If we are triggered at $38.50 we want to use a stop loss at $34.75. Our target is $47.50 but we might adjust it higher.

Buy-the-Dip trigger: $38.50

BUY the 2011 March $40 calls (BVN1119C40)

Chart of BVN:


CH Robinson Worldwide Inc. - CHRW - close: 67.50 change: -0.19

I am temporarily dropping CHRW as a watch list candidate. I remain long-term bullish on the stock but we've been waiting for an entry point for a long time and I don't want to chase it. I would keep it on your private watch list. A bounce from the $62.00 area could be our next entry point.


Gilead Sciences - GILD - close: 34.02 change: +0.87

Almost! GILD almost hit our trigger on September 7th but managed to bounce at $33.13. We have a trigger to buy calls at $33.00. Shares do look short-term bullish with the close over resistance near $34.00 and its 50-dma. However, I'm still expecting a market pull back so we'll keep our trigger at $33.00. GILD has been under performing its peers in the biotech sector but when biotechs rally I'm expecting GILD to try and "catch up" with its peers. FYI: I prefer the 2012 Calls.

Previous Comments:
Bear in mind this is an aggressive play. GILD is underperforming for a reason with a slowdown in sales growth and worries about how the new health reform will affect its business. The current set up seems to offer a relatively low risk entry point. There is clear support at $31.75. I'm suggesting we buy calls (small positions only) on a dip at $33.00. We'll use a stop loss at $31.49. If triggered our long-term target is $41.75.

Buy-the-Dip trigger: $33.00

BUY the 2011 Jan $35 calls (GILD1122A35)
- or
BUY the 2012 Jan $35 calls (GILD1221A35)

Chart of GILD:


Home Depot - HD - close: 29.68 change: +0.27

Shares of HD have been consolidating sideways in a tight range. We can expect a break one way or the other pretty soon. I am still expecting a pull back toward $29.00 before HD moves higher. If triggered at $29.00 we'll use a stop loss at $26.90. More conservative traders may want to consider a trigger to launch bullish positions at $28.50 instead. If triggered our long-term target is $33.90 and $36.00. We can expect to find resistance near $32.00. I prefer the 2012 calls over the 2011 calls.

Buy-the-Dip trigger: $29.00

BUY the 2011 Jan $30.00 calls (HD1122A30)
- or
BUY the 2012 Jan $30.00 calls (HD1221A30)

Chart of HD:


Humana Inc. - HUM - close: 52.78 change: +0.94

If you are an aggressive trader then HUM hit my alternative entry point to buy calls at $52.50 this past week. The stock certainly looks bullish with a breakout to new multi-year highs. I remain very positive on the stock but I don't want to chase it. Please note we are adjusting our entry point to buy calls from $49.00 to $50.50. If triggered at $50.50 we'll use a stop loss at $44.90. Our first long-term bullish target is $59.50. I'm listing the 2011 January calls but I prefer the 2012 Jan. calls.

Buy-the-Dip trigger: $50.50 *new*

BUY the 2011 Jan. $55 calls (HUM1122A55)

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BUY the 2012 Jan. $55.00 calls (HUM1221A55)

Chart of HUM:


NVIDIA Corp. - NVDA - close: 10.07 change: -0.11

Almost triggered! NVDA rallied to $10.46 on Thursday but not quite enough to hit our trigger at $10.55. I considered dropping NVDA as a bullish candidate due to the relative weakness in the SOX semiconductor index. I do think the SOX is headed lower. However, NVDA has not been trading in line with the rest of the semiconductor group in a long time. I'm willing to keep NVDA as a candidate but we'll move the trigger to $10.75. More nimble traders could try and jump in on a dip or a bounce near $9.50 instead. If triggered we'll use a stop loss at $9.45.

Previous Comments:
This remains an aggressive, higher-risk trade. NVDA has been struggling and sales growth has been slowing down but we are betting the worse has already been priced in for this stock. Keep your positions very small to limit our risk. Our first target is $12.50. Our second, longer-term target is $14.00.

Breakout trigger: $10.75

BUY the 2011 Jan $10.00 calls (NVDA1122A10)

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BUY the 2012 Jan $12.50 calls (NVDA1221A12.5)

Chart of NVDA:


Virgin Media - VMED - close: 21.73 change: +0.29

We raised our entry trigger to $20.50 last week but it wasn't enough. Traders bought the dip near $21.00. I am still hesitant to chase VMED here. We will keep our trigger at $20.50 and more conservative traders may want to use a trigger near the rising 50-dma instead. If triggered we'll start with a stop loss at $18.90. Our first long-term target is $24.00. I prefer the 2012 LEAPS over the 2011s. FYI: The Point & Figure chart is forecasting a long-term target of $36.

FYI: Keep your position size smaller!

Buy-the-Dip trigger: $20.50

BUY the 2011 Jan $22.50 call (VMED1122A22.5)

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BUY the 2012 Jan $25.00 call (VMED1221A25)

Chart of VMED:


Wynn Resorts - WYNN - close: 89.55 change: +0.71

The rally continues in WYNN. The stock traded over $90.00 this past week. Shares look short-term overbought and I'm expecting a correction back toward support near $85.00 and the 50-dma. I am suggesting we open small positions on a dip at $85.00. If triggered we'll use a stop loss at $79.00. Our first target to take profits is $99.00. Longer-term we'll consider a target at $109. I prefer the 2012 calls over the 2011s but if you're just aiming for $99 the 2011s can work. Remember, small positions to limit your risk. This is an aggressive trade. WYNN can be a volatile stock.

Buy-the-Dip trigger: $85.00

BUY the 2011 Jan $90 calls (WYNN1122A90)
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BUY the 2012 Jan $100 calls (WYNN1221A100)

Chart of WYNN: