Option Investor
Newsletter

Daily Newsletter, Saturday, 11/27/2010

Table of Contents

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

Leaps Trader Commentary

Korea, Ireland, Black Friday, Oh My!

by James Brown

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Stocks were range bound last week. Every time the market started to rebound the rally was hammered by another negative headline. Investors were faced with the threat of war between North and South Korea as the north fired shots onto a disputed island. Meanwhile Ireland was on the verge of sinking financially and regulators across the EU have been scrambling to work up a rescue plan. Yet all in all it wasn't a bad week. The SOX semiconductor index rallied to a new relative high. The NASDAQ composite posted gains. The small cap Russell 2000 displayed some relative strength. The transportation sector is holding up. Yet financials and commodities have been suffering. Worries over a debt default in Europe have sent the euro currency plunging and the U.S. dollar has extended its rebound to three weeks in a row. That's putting pressure on commodities.

Early reports thus far are showing Black Friday was a success. Sales were better than last year but that's setting the bar pretty low. Spending has improved and in-store traffic was strong but it wasn't outstanding. Online sales might be the culprit. Many retailers started putting their Black Friday deals online and earlier than normal. Website traffic soared and "Cyber Monday" will probably be another record breaker this year! The RLX retail index rallied to new six-month highs ahead of Friday and is very close to resistance at the 500 level. I wouldn't be surprised to see some profit taking. This will fuel fears of a double top in the retail sector but as long as the RLX holds the trend of higher lows the bulls are in charge.

Weekly chart of the RLX retail index:

One of the biggest challenges for the market right now are the PIIGS countries in Europe. Earlier this year markets struggled with a potential debt default by Greece. This past week the focus was on Ireland and now the spotlight is growing hotter on Portugal. Fortunately by Saturday the press was reporting a bailout for Ireland was imminent. Finance ministers from the 16-nation eurozone were meeting in Brussels this Sunday. Authorities in the Irish government were suggesting they were close to an 85 billion euro ($115 billion) bailout for Ireland and the agreement could be reached before the markets opened on Monday. Naturally, if they can reach this agreement on an EU-IMF backed loan it would be bullish for the stock markets both in Europe and here in the states. If no agreement is reached then we're facing a lot more volatility.

I'm feeling optimistic and would like to think the action in North Korea is just saber rattling and we won't see any military action this year. At the same time EU regulators are getting quicker with their rescue packages and we should not see the multi-week torture that occurred over Greece's bailout. I'm hopeful that there will be a bailout for Ireland by Monday. That leaves U.S. economic data to move stocks. Fortunately next week's data should be positive. Tuesday will bring the Chicago PMI, the latest consumer confidence numbers, the Case-Shiller 20-city home price index. Wednesday will bring the weekly mortgage applications index, the Challenger planned layoff report, the ADP employment report, the National ISM manufacturing data, construction spending, vehicle sales, and the Fed's Beige book. Thursday will see the weekly jobless claims and pending home sales. Friday is the big day with the monthly non-farm payrolls (jobs) report. Plus, we'll see the ISM services and factory orders come out on Friday. Currently economists are expecting the jobs report to show +130,000 new jobs compared to +151,000 last month. Private employment is expected to grow +140K. There are whisper numbers that the headline job number will hit +175,000. Let's just hope the report doesn't disappoint.

Technically the S&P 500 index is bouncing around the same 1175-1200 range I outlined last week. As long as we don't get any nasty surprises then odds are pretty good that the S&P 500 will be able to breakout past the 1200 level by the end of the week.

Daily chart of the S&P 500 index:

In summary, I remain bullish on the market and expect positive numbers from most of the economic reports coming out this week. I suspect the Case-Shiller home price index will disappoint as will the pending home sales numbers. Everything else has a chance to surprise on the upside. Just cross your fingers that we don't hear any new insider-trading investigations or trading probes. The financials are already lagging the rest of the market and any more negative headlines could send them into a full-scale retreat.

- James


Portfolio

Portfolio Update

by James Brown

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Current Portfolio


Portfolio Comments:

The market's rebound attempts were thwarted with a parade of negative headlines. Yet in spite of all the bad news the overall trend is still relatively positive. Most of our candidates were content to consolidate sideways. If stocks do happen to correct lower it would be healthy longer-term but I'm optimistic that the rash of economic news this week will spark further gains.

We did see our portfolio grow significantly last week with new plays and a couple of stocks making the jump from the watch list.

New stop losses for AKAM, DO, and EMC.

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 play or option position exited or closed this week.



New Plays

Feeling Stuffed!

by James Brown

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Editor's Note:

I think we're at a new record! I'm talking about the number of plays in our LEAPStrader portfolio. When I changed the format my goal was to allow for more candidates and content in the newsletter. Thus far it is working but I want us to remain cautious when it comes to launching new positions. My market bias remains bullish but upward momentum has clearly slowed.

If you're a glass is half full kind of trader then the fact that all the negative headlines did not take the market down is a positive sign. If you're glass is half empty then all the failed rallies last week are a warning sign. I am still optimistic that stocks will move higher throughout year end. This week's coming economic data, if positive, could re-start the rally again.

I'm not adding any new plays tonight but we did add to new watch list candidates that could easily be triggered in the next couple of days.

Readers may want to double check their stop loss placement on current positions. If jobs number disappoints or if the situation in Europe or Korea escalates the bad news could finally trip the market into a steeper correction.


Play Updates

Consolidation Week

by James Brown

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Editor's Note:

Headlines from the Korean border and a potential meltdown in Ireland was not enough to kill the rally. Overall stocks were content to consolidate sideways, although financials continued to underperform.

-James


Closed Plays


None. No closed plays this week


Play Updates


Arch Coal Inc. - ACI - close: 29.50

11/27 update: It was a quiet week for ACI. Shares consolidated sideways. The stock opened at $30.15 on Monday morning. I don't see any changes from my prior comments. We can open positions now or patient investors can wait for a dip toward $28.00 to launch positions. ACI should find decent support in the $28-27 zone. Our time frame is twelve months and we're setting our first target at $39.75.

- Current Positions -
Nov 22, 2010 - entry price on ACI @ 30.15, option @ 3.90
symbol: ACI1221A35 2012 JAN $35 call - current bid/ask $ 3.45/ 3.55

- or -

Nov 22, 2010 - entry price on ACI @ 30.15, option @ 5.15
symbol: ACI1319A35 2013 JAN $35 call - current bid/ask $ 5.25/ 5.70

11/22/10 Play opened. ACI @ $30.15

Current Target: $39.75
Current Stop loss: 26.75
Play Entered on: 11/22/10
Originally listed in the New Plays 11/20/10


Akamai Technology - AKAM - close: 51.53

11/27 update: The rebound continued for AKAM last week. Shares did breakout past short-term resistance at $50.00 and the trend here is positive. Checking the news there were a few articles this week on AKAM's potential growth in government contracts for their services, which may have helped fuel the bullish sentiment.

Please note I am raising our stop loss to $43.75. AKAM would have to see a 15% correction before we get stopped out.

Previous Comments:
We have already taken profits on our 2011 calls. That leaves the 2012 calls. Our second, longer-term target is $59.75. FYI: AKAM has seen some takeover chatter in the last several months.

- Current Positions -
Oct 06, 2010 - entry price on AKAM @ 45.50, option @ 7.50
symbol: AKAM1221A50 2012 JAN $50 call - current bid/ask $10.70/10.90

11/27/10 New stop @ 43.75
10/30/10 Sell the 2011 Jan. calls, option bid @ 5.10 (+78.9%)
10/06/10 Play triggered when AKAM hit $45.50

Current Target: $59.75
Current Stop loss: 43.75
Play Entered on: 10/06/10
Originally listed on the Watch List 10/02/10


Baidu, Inc. (Baidu.com) - BIDU - close: 109.37

11/27 update: The volatility in BIDU mellowed a little bit last week. Shares were consolidating sideways under new resistance at $110. If you look hard enough at the chart you can see that BIDU is still trading with a bullish trend of higher lows, which means traders are still willing to buy the dips. I am not suggesting new positions at this time. Readers may want to consider raising their stop loss. Currently our stop is at $94.00.

Previous Comments:
BIDU is a very volatile stock. This is an aggressive, higher-risk trade. Keep your position size small to limit your risk. We have already taken profits on the 2011 calls.

- Current Positions -
Only one position left.

Aug 02, 2010 - entry price on BIDU @ 83.50, option @ 13.00
symbol: BIDU1221A100 2012 JAN $100 call - current bid/ask $28.30/29.00

10/30/10 Adjusted exit to $129.00.
10/23/10 New stop loss @ 94.00
10/21/10 BIDU reports strong earnings.
10/02/10 Sell half of 2012 calls, BIDU @ 98.80, option @ 22.30 (+71.5%)
09/25/10 Take Profits on the 2011 calls, BIDU @ 97.83, option @ 14.75 (+84.3%)
09/25/10 New stop @ 79.00

Current Target: $129.00
Current Stop loss: 94.00
Play Entered on: 08/02/10
Originally listed on the Watch List 07/31/10


Berkshire Hathaway - BRK.B - close: 79.76

11/27 update: Hmm... things are not looking that great for our BRK.B play. The stock has been slowly sinking under a trend of lower highs and lower lows. Shares did bounce from support near $79.00 but the rebound didn't get very far. You can easily see the short-term overhead resistance at the 10-dma. Plus BRK.B is poised to breakdown under its simple 200-dma. If this trend continues readers may want to consider an early exit if BRK.B closes under $79.00 or $78.00. I am not suggesting new positions at this time. Let's wait and see if BRK.B can recover and close over $81.00 or $82.00 before considering bullish positions again. I will repeat my earlier comments that readers might want to raise their stops toward $78.00.

- Current Positions -
Oct 29, 2010 - entry price on BRK.B @ 79.00, option @ 1.25
symbol: BRKB1122A85 2011 JAN $85 call - current bid/ask $ 0.50/ 0.55

- or -

Oct 29, 2010 - entry price on BRK.B @ 79.00, option @ 5.00
symbol: BRKB1221A90 2012 JAN $90 call - current bid/ask $ 4.40/ 4.55

11/20/10 New entry point on bounce from 200-dma
11/20/10 New stop @ 75.75
10/29/10 Play triggered on dip at $79.00.

Current Target: $ 99.00
Current Stop loss: 75.75
Play Entered on: 10/29/10
Originally listed on the Watch List 09/11/10


ConocoPhillips - COP - close: 60.81

11/27 update: The energy sector spent its second week consolidating after its impressive September through early November run up. COP's performance is very similar to the OIX oil index. Shares of COP are nearing round-number support at $60.00. If this level breaks I would look for a drop toward the $58.00-57.50 zone. The 100-dma might offer some additional support. I am not suggesting new bullish positions at this time.

Prior Comments:
We have already taken profits on the 2011 calls. That leaves the 2012 call position and our long-term target is $69.00.

- Current Positions -
May 20, 2010 - entry price on COP @ 51.00, option @ 4.75
symbol: COP 11A55.00 2012 JAN $60 call - current bid/ask $6.50/6.65

10/23/10 Exit the 2011 Jan. $55 calls @ 7.05 (+88%)
10/23/10 New stop loss @ 54.85
10/11/10 New stop loss @ 51.90
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!

Current Target: $ 69.00
Current Stop loss: 54.85
Play Entered on: 05/20/10
Originally listed on the Watch List 05/08/10


Deere & Co - DE - close: 76.00

11/27 update: We have had our eye on DE for a couple of months. Shares dipped toward technical support near $75.00 and its rising 50-dma on Friday, November 26th and managed to hit our trigger ($75.50) opening this trade. The stock does look a little overbought here and the plan was to use very small positions to limit our risk. Currently we have a stop loss at $73.45. More conservative traders could tighten theirs even further toward $75.00. If you're looking for a new entry point you may want to wait for a close over $77.50, which would confirm the up trend. I'm setting our first target at $88.00 and our final target at $94.00 near DE's all-time highs.

- Current (very small) Positions -
Nov 26, 2010 - entry price on DE @ 75.50, option @ 4.75
symbol: DE1221A90 2012 JAN $90 call - current bid/ask $4.65/4.80

11/26/10 DE hit our trigger @ 75.50

Chart of DE:

Current Target: $ 88.00, 94.00
Current Stop loss: 73.45
Play Entered on: 11/26/10
Originally listed on the Watch List --/--/--


Walt Disney Co. - DIS - close: 36.70

11/27 update: On a short-term basis DIS looks vulnerable. The stock has been struggling with new resistance near $37.00. Of course a little profit taking would be okay. We could use a dip toward $35.50-35.00 as a new entry point to buy call LEAPS. Although we may not see the pull back. I suspect that stocks like DIS could rally as we get good news on the amount of Black Friday traffic at the malls.

- Current Positions -
Oct 27, 2010 - entry price on DIS @ 35.60, option @ 2.23
symbol: DIS1221A40 2012 JAN $40 call - current bid/ask $ 2.65/ 2.72

- or -

Oct 27, 2010 - entry price on DIS @ 35.60, option @ 3.63
symbol: DIS1319A40 2013 JAN $40 call - current bid/ask $ 4.05/ 4.25

10/27/10 Play opened, DIS opened @ $35.60

Current Target(s): $42.00
Current Stop loss: 32.75
Play Entered on: 10/27/10
Originally listed on the Watch List 10/24/10


Diamond Offshore - DO - $65.24

11/27 update: Warning! I think we need to worry about DO. The OSX oil service index hasn't even begun to correct lower yet but shares of DO broke down to new multi-week lows this past week. Support near $65.00 held up but I wouldn't count on it holding. More conservative traders will want to seriously consider an early exit right here! I am not suggesting new bullish positions at this time.
Please note our new stop loss at $63.90.

NOTE - it looks like the option strikes have changed to reflect the recent dividend announced by DO. The 2011 March $80s are no the $79.25s. The 2012 Jan. $86s are now $85.25s.

- Current Positions -
Oct 21, 2010 - entry price on DO @ 67.50, option @ 1.90
symbol: DO1119C80 2011 Mar $79.25 call - current bid/ask $0.92/0.97

- or -

Oct 21, 2010 - entry price on DO @ 67.50, option @ 4.79
symbol: DO1221A86 2012 Jan $85.25 call - current bid/ask $3.00/3.25

11/27/10 New stop loss @ 63.90
11/20/10 New Entry point on bounce from 50-dma. Use small positions
10/21/10 Play triggered on a dip at $67.50

Current Target(s): $79.00 & 89.00
Current Stop loss: 63.90
Play Entered on: 10/21/10
Originally listed on the Watch List 10/16/10


EMC Corp. - EMC - close: 21.70

11/27 update: Thanksgiving week was a quiet one for EMC. The stock is still consolidating sideways but with a bullish trend of higher lows. I don't see any changes from my previous comments except that I'm raising our stop loss to $18.95. Our first target is $22.50 so we will want to sell the rest of our 2011 calls when EMC hits this level.

- Current Positions -
May 6, 2010 - entry price on EMC @ 18.25, option @ 1.40
symbol: EMC 11A20.00 2011 Jan $20 call - current bid/ask $2.01/2.06

- or -

May 6, 2010 - entry price on EMC @ 18.25, option @ 2.50
symbol: EMC 12A20.00 2012 Jan $20 call - current bid/ask $3.70/3.85

10/23/10 Sell Half of the 2011 calls, bid @ 2.06 (+47%)
10/23/10 New stop loss @ 18.40
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!

Current Target(s): $22.50 & 24.75
Current Stop loss: 18.95
Play Entered on: 05/06/10
Originally listed on the Watch List 03/20/10


Express Scipts - ESRX - close: 52.51

11/27 update: ESRX spent the week drifting sideways in a narrow range. I would not be surprised to see this stock retest the $51-50 zone but we could use the dip as a new entry point. FYI: The P&F chart is bullish with a $74 target.

- Current Positions -
Oct 25, 2010 - entry price on ESRX @ 49.30, option @ 4.85
symbol: ESRX1221A55 2012 Jan $55 call - current bid/ask $5.75/5.90

- or -

Oct 25, 2010 - entry price on ESRX @ 49.30, option @ 7.10
symbol: ESRX1319A55 2013 Jan $55 call - current bid/ask $8.80/ 9.35

11/06/10 New stop @ 46.90
10/25/10 Trade is opened. ESRX opens @ $49.30

Current Target(s): $59.50
Current Stop loss: 46.90
Play Entered on: 10/25/10
Originally listed on the Watch List 10/16/10


SPDR Gold ETF - GLD - close: 133.11

11/27 update: The sovereign debt fears in Europe are wreaking havoc with the euro and that's driving strength in the dollar. Meanwhile this dollar strength has a negative impact on commodities, including gold. At least that is normally how it works. Gold saw some safe haven buying during the flare up between North and South Korea last week. As long as the Korean peninsula is quiet the focus will be on Ireland, Portugal and the Eurozone. If the EU and the IMF can come together on a rescue then the euro will bounce and the dollar should decline. At the same time we have to keep in mind the Federal Reserve will resume their QE2 purchases this week, which should also push the dollar lower (and thus make gold more attractive).

The GLD has support near $130.00 and near its 50-dma. If we see the GLD breakdown under $130 it's probably a signal we'll see this ETF correct back toward $125-123. I'm not suggesting new bullish positions at this time.

FYI: The Point & Figure chart is still bullish and currently points to a $188 target.

Currently we only have one position left (2012 calls) and I'm not suggesting new bullish positions at this time.

Our long-term target for the 2012 calls is at $149.00.

- Current Positions -
Aug 6, 2010 - entry price on GLD @ 118.00, option @ 10.75
symbol: GLD1221A130 2012 Jan $130 call - current bid/ask $15.35/15.80

11/09/10 Target hit - GLD opened at $138.70, 2011 Mar. Call opened @ $20.00 (+159%)
11/06/10 new stop @ 123.40
10/30/10 New stop @ 121.00. Readers may want to exit ahead of FOMC meeting
10/02/10 Sell half of the 2011 March calls, option @ 12.70 (+64.9%)
10/02/10 New stop $ 118.49
09/25/10 New stop @ 116.45, new target 138.50

Current Target(s): $149.00
Current Stop loss: 123.40
Play Entered on: 08/06/10
Originally listed on the Watch List 06/05/10


Goldman Sachs - GS - close: 158.22

11/27 update: GS is a watch list candidate that has made its way to our play list a little faster than anticipated. We were expecting a correction on GS but we were not expecting the sudden spike lower on Monday morning. Last weekend, the Wall Street Journal published an article about the Feds launching a new trading probe into a couple of hedgefunds over insider trading. Fingers started pointing to bankers at Goldman as possibly leaking this insider information. There is nothing concrete yet but naturally the market shot first and asked questions later. Shares of GS fell to $158.45 on Monday, Nov. 22nd. Our trigger to buy calls was hit at $160.75. The stock has continued to slip sideways, inching lower and lower toward its 50-dma.

Currently, if authorities do find GS connected to the wrong doing the amounts being mentioned (tens of millions) is not fatal to GS but more bad news could certainly push the stock lower. I am not suggesting new bullish positions at this time. We might get a better entry point on a dip near the stock's 200-dma around $153.00. I am going to raise our risk on this play but adjusting our stop loss to $149.75. This way GS would have to breakdown through several more layers of support before we finally get stopped out.

Our plan was to start with small positions to limit our risk. This will allow us to add to positions if we do see a better entry point down the road. I'm setting our first target at $179.75.

- Current Positions -
Nov 22, 2010 - entry price on GS @ 160.75, option @ 4.25
symbol: GS1116D180 2011 Apr $180 call - current bid/ask $ 3.55/ 3.65

- or -

Nov 22, 2010 - entry price on GS @ 160.75, option @ 9.40
symbol: GS1221D190 2012 Jan $190 call - current bid/ask $ 8.95/ 9.25

11/22/10 GS hit our trigger @ $160.75

Chart of DE:

Current Target(s): $179.75, 199.50
Current Stop loss: 149.75
Play Entered on: 11/22/10
Originally listed on the Watch List 10/24/10


Humana Inc. - HUM - close: 56.79

11/27 update: HUM managed to eke out a gain for the week but shares essentially drifted sideways in a narrow range. I don't see any changes from my prior comments. Look for a dip near the rising 50-dma as our next entry point. Although if you do launch new positions you'll want to consider a tighter stop loss.

Previous Comments:
We have already sold (exited) our 2011 calls for a profit.

- Current Positions -
Sep 17, 2010 - entry price on HUM @ 50.50, option @ 6.40
symbol: HUM1221A55 2012 Jan $55 call - current bid/ask $ 8.10/ 9.10

11/20/10 Entry point on the dip.
10/23/10 Exit (sell) the 2011 Jan. $55 calls, bid @ 4.40 (+137%)
10/23/10 New stop loss $ 48.75
10/16/10 New stop loss @ 47.40
10/11/10 New Entry point - HUM is breaking out past $51.00.

Current Target(s): $69.00
Current Stop loss: 48.75
Play Entered on: 09/17/10
Originally listed on the Watch List 09/04/10


Intl.Business Machines - IBM - close: 143.90

11/27 update: IBM has continued to consolidate sideways in a neutral pattern of higher lows and lower highs. Optimistically the prevailing trend normally continues and for IBM that would be higher but I wouldn't be surprised to see a correction. I am not suggesting new bullish positions at this time. Look for support near $140 and $135.

Prior Comments:
We have already exited the 2011 calls for a gain.

- Current Positions -
Sep 30, 2010 - entry price on IBM @ 136.00, option @ 7.80
symbol: IBM1221A150 2012 Jan $150 call - current bid/ask $10.20/10.45

10/29/10 IBM hit $144, our target to exit the 2011 calls (+71.8%)
10/18/10 IBM reported earnings
10/16/10 Short-term target for 2011 calls set at $144.00.
09/30/10 Play triggered $136.00, stop $129.50

Current Target(s): $159.00
Current Stop loss: 129.50
Play Entered on: 09/30/10
Originally listed on the Watch List 09/25/10


Infosys Technologies - INFY - close: 66.96

11/27 update: INFY spent the week bouncing around the $65-67 zone. Unfortunately, shares were unable to breakout past $67 and now the 50-dma is overhead and bolstering resistance. I am not convinced the correction is over. That means we will probably see INFY pull back toward the $64-62 zone. I am not suggesting new bullish positions at this time. Keep in mind our stop loss is at $61.75.

Previous Comments:
We have already sold the 2011 calls for a profit. Our remaining positions are any 2012 calls. Our long-term target is $79.00.

- Current Positions -
July 1, 2010 - entry price on INFY @ 59.00, option @ 8.20
symbol: INFY 12A65.00 2012 Jan $65 call - current bid/ask $ 9.60/11.20

10/15/10 INFY reports earnings.
10/02/10 Sell the 2011 Calls, INFY @ 70.52, option @ 11.20 (+49.3%)
10/02/10 New stop @ 61.75
09/25/10 New stop @ 58.75

Current Target(s): $79.00
Current Stop loss: 61.75
Play Entered on: 07/01/10
Originally listed on the Watch List 06/26/10


L-3 Communications - LLL - close: 71.38

11/27 update: LLL's consolidation continues. The stock managed a bounce from the $70.00 level and is now back above its 50 and 100-dma, all positive signs. I would be tempted to buy new call LEAPS here but I still can't shake the worry that LLL is forming a huge bear-flag pattern. More conservative traders may want to tighten their stops.

- Current Positions -
Nov 11, 2010 - entry price on LLL @ 71.87, option @ 5.80
symbol: LLL1221A75 2012 Jan $75 call - current bid/ask $ 5.30/ 5.60

11/11/10 Play triggered with LLL's gap open @ 71.87

Current Target(s): $79.50, 89.00
Current Stop loss: 67.75
Play Entered on: 11/11/10
Originally listed on the Watch List 11/06/10


McDonald's Corp. - MCD - close: 75.54

11/27 update: MCD lost just over a dollar for the week but shares have essentially drifted sideways. MCD is still struggling with resistance in the $79.50-80.00 zone. Upward momentum is beginning to fade. Maybe MCD is getting closer to a long, overdue correction. If MCD does correct I would look for a pull back toward the $74.00 area. We do not want to launch new positions at this time.
FYI: One of these days MCD might announce another stock split. The stock's last split was 2:1 back in March 1999 around the $80 zone.

Previous Comments:
We have already sold the 2011 calls for a gain. Our long-term target for the 2012 calls is $89.00.

- Current Positions -
June 29, 2010 - entry price on MCD @ 66.50, option @ 2.20
symbol: MCD 12A80.00 2012 Jan $80 call - current bid/ask $4.85/ 5.00

11/06/10 New stop @ 71.90
10/23/10 New stop @ 69.75
10/16/10 Sell the remaining 2011 calls, bid @ $8.00 (+201%)
10/16/10 New target for 2012 positions @ $89.00
10/02/10 New stop @ 67.90
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%)

Current Target(s): $89.00
Current Stop loss: 71.90
Play Entered on: 06/29/10
Originally listed on the Watch List 06/12/10


Microsoft Corp. - MSFT - close: 25.25

11/27 update: The correction in MSFT has now lasted three weeks in a row. The breakdown under the 50-dma is bearish but it looks like investors have been buying the dip near $25.00. I would launch new positions here in the $25.00 region but more conservative traders may want to wait for MSFT to finally break its trend of lower highs. A close over $25.75 or over $26.00 would work.

Previous Comments:
The $28.00 level could be significant resistance as would the 2010 highs near $31.50. Long-term my upside target is $31.00. Our time frame is nine to twelve months. Stop loss at $23.25.

- Current Positions -
Oct 18, 2010 - entry price on MSFT @ 25.59, option @ 3.30
symbol: MSFT1221A25 2012 Jan $25 call - current bid/ask $2.88/ 2.94

- or -

Oct 18, 2010 - entry price on MSFT @ 25.59, option @ 2.30
symbol: MSFT1319A30 2013 Jan $30 call - current bid/ask $2.02/ 2.15

11/20/10 Another Entry Point on the dip toward the 50-dma
10/28/10 MSFT delivers stronger than expected earnings.

Current Target(s): $31.00
Current Stop loss: 23.25
Play Entered on: 10/18/10
Originally listed in New Plays on 10/16/10


Nike Inc. - NKE - close: 85.96

11/27 update: NKE hit new highs last week with a pre-holiday rally to $87.00. Shares look a little bit overbought. Look for a pull back toward the $84-83 zone as our next potential entry point. Remember, we want to keep our position size small. Readers may want to wait on initiating positions until after we see NKE's December 21st earnings report.

Previous Comments:
We wanted to keep our initial position size small to limit our risk.

- Current Positions -
Nov 15, 2010 - entry price on NKE @ 82.91, option @ 5.40
symbol: NKE1221A90 2012 Jan $90 call - current bid/ask $6.90/ 7.05

11/15/10 Play opened on Monday morning, NKE @ 82.91

Current Target(s): $95-100
Current Stop loss: 79.75
Play Entered on: 11/15/10
Originally listed in New Plays on 11/13/10


Nokia Corp. - NOK - close: 9.55

11/27 update: Watch out! NOK continues to underperform. I strongly suspect that NOK's weakness recently is merely a reaction to the big declines in the European stock markets as they struggle with rescues for Ireland, Portugal, etc. Unfortunately, NOK has broken support near $10, support near its 100-dma, and is now testing support near $9.50. If there is any follow through lower we will get stopped out since our stop is at $9.49. I am not suggesting new positions at this time. Right now our biggest risk is NOK gapping open lower on us.

- Current Positions -
Nov 12, 2010 - entry price on NOK @ 10.25, option @ 1.75
symbol: NOK1221A10 2012 Jan $10 call - current bid/ask $ 1.17/ 1.22

11/12/10 Play triggered @ $10.25

Current Target(s): $12.45, 14.40
Current Stop loss: 9.49
Play Entered on: 11/12/10
Originally listed on the Watch List 11/06/10


NVIDIA Corp. - NVDA - close: 13.60

11/27 update: On an intraday basis NVDA tagged new six months highs but shares are struggling with resistance near $13.80. While the trend for NVDA is bullish it wouldn't surprise me to see a correction toward the $13.00-12.50 zone. I am not suggesting new positions at this time.

Previous Comments:
We took profits on the 2011 calls in late September. All we have left are the 2012 calls. Overall 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.

- Current Positions -
Sep 13, 2010 - entry price on NVDA @ 10.75, option @ 1.69
symbol: NVDA1221A12.5 2012 Jan $12.50 call - current bid/ask $3.10/ 3.20

11/20/10 New target at $15.75
11/20/10 new stop @ 11.40
11/13/10 New stop @ 10.89
11/06/10 New stop @ 10.40
11/04/10 Target hit @ 12.50, take profits: 2012 calls @ $2.40 (+42.0%)
09/25/10 Sell the 2011 calls, NVDA @ 12.26, option @ 2.70 (+70.8%)
09/25/10 new stop 9.95
09/13/10 Play Triggered @ $10.75

Current Target(s): $12.50 & 15.75
Current Stop loss: 11.40
Play Entered on: 09/13/10
Originally listed in New Plays on 08/28/10


Old Dominion Freight Line Inc. - ODFL - close: 29.37

11/27 update: ODFL is a new play we added last week and it's off to a good start. The stock opened at $28.42 on Monday and managed to breakout past $29.00 on a new "buy" rating midweek. If you're looking for a new entry point wait for a pull back into the $29.00-27.00 zone. Keep an eye on the rising 30-dma and 50-dma for technical support.

- Current Positions -
Nov 22, 2010 - entry price on ODFL @ 28.42, option @ 1.95
symbol: ODFL1116D30 2011 APR $30 call - current bid/ask $ 1.10/ 2.45

11/22/10 ODFL opens at $28.42

Current Target: $34.75
Current Stop loss: 25.45
Play Entered on: 11/22/10
Originally listed in the New Plays 11/20/10


Transocean Ltd. - RIG - close: 66.51

11/27 update: RIG was underperforming last week with a slow fade lower towards support near $65 and its converging 50-dma and 200-dma. Normally when the 50-dma crosses up and above the 200-dma it is considered a very bullish signal and we should see that happen in the next few days. However, I am not suggesting new bullish positions at this time.

Previous Comments:
We have taken profits twice, once at $59.00, and then we exited the 2011 calls at $67.00. We still have the 2012 calls and we're aiming for $78.50.

- Current Positions -
Jun 09, 2010 - entry price on RIG @ 43.50, option @ 7.25
symbol: RIG 12A60.00 2012 Jan $60 call - current bid/ask $13.70/14.05

11/13/10 new target @ 78.50
10/23/10 New stop @ 54.85
10/13/10 Target hit at $67.00 to exit the 2011 call option @ 17.40 (+167.6%)
10/02/10 New stop @ 53.90
09/10/10 Target Hit @ 59.00 (take some money off the table), 2011 Jan $50 call @ $11.45 (+76.1%), the 2012 Jan $60 call @ $10.35 (+42.7%)

Current Target(s): $78.50
Current Stop loss: 54.85
Play Entered on: 06/09/10
Originally listed on the Watch List 06/05/10


TASER Intl. - TASR - close: 4.16

11/27 update: TASR retested support near $4.00 and trades were quick to buy the dip. The stock looks poised to rally higher. I would be tempted to buy this bounce but if you do I suggest you consider a tighter stop loss closer to $4.00.

- Current Positions -
Buy TASR stock (entry $3.69), stop loss $3.75

10/23/10 Sell at least Half of our position: TASR @ 4.53 (+22.7%)
10/23/10 New Stop @ 3.75
08/30/10 TASR opens Monday at $3.69 (entry point)
08/28/10 TASR listed as a new play

Current Target(s): $ 4.90
Current Stop loss: 3.75
Play Entered on: 08/30/10
Originally listed in New Plays on 08/28/10


WellPoint Inc. - WLP - close: 57.10

11/27 update: WLP surged on Monday following reports that the new rules from the Department of Health and Human Services on how much insurers spend on healthcare and taxes turned out better than expected. Unfortunately, Monday's high was the peak for the week and it was all downhill from there. I would look for a bounce in the $56-57 zone before considering new bullish positions.

- Current Positions -
Oct 14th, 2010 - entry price on WLP @ 57.75, option @ $5.25
symbol: WLP1221A65 2012 Jan $65 call - current bid/ask $ 4.70/ 4.90

11/20/10 Another entry point on the bounce from the 200-dma
10/14/10 Play Triggered when WLP hit $57.75, option @ $5.25

Current Target(s): $69.75
Current Stop loss: 52.75
Play Entered on: 10/14/10
Originally listed on the Watch List 10/11/10


Wynn Resorts - WYNN - close: 102.09

11/27 update: WYNN lost less than a dollar for the week but I'm worried. The stock has not been able to shake off the short-term bearish trend of lower highs. Currently WYNN is hovering over support near $100. A breakdown here would probably see a quick drop toward $95.00. If you're looking for a new entry point I'd rather look for some strength (like a close over $106) or wait for the drop and then buy a dip near $95 (or buy a rebound near $95). keep in mind our stop loss is at $94.75.

Previous Comments:
Keep your positions small. This is an aggressive trade.

OPTION STRIKES: Note, given the $8.00 dividend the option strikes have been adjusted. The $110 calls are now the $102 calls. The $120 calls are now $112 calls.

- Current Positions -
Nov 19th, 2010 - entry price on WYNN @ 101.33, option @ $10.50
symbol: WYNN1119C102 2011 MAR $102 call - current bid/ask $10.20/10.40

- or -

Nov 19th, 2010 - entry price on WYNN @ 101.33, option @ $16.05
symbol: WYNN1221A112 2012 JAN $112 call - current bid/ask $15.85/16.25

11/19/10 Play opened on gap down at $101.33

Current Target(s): $119.00
Current Stop loss: 94.75
Play Entered on: 11/19/10
Originally listed on the Watch List 05/15/10


Watch

Retail & Airlines

by James Brown

Click here to email James Brown

Editor's Note:

Our watch list is doing a good job of triggering new positions. We are adding two new candidates tonight.

-James


New Watch List Entries

JAS - Jo-Ann Stores

LCC - US Airways


Active Watch List Candidates

BVN - Compania de Minas Buenaventura

F - Ford Motor Co.

NFX - Newfield Exploration

SBUX - Starbucks Corp.

WLL - Whiting Petroleum


Dropped Watch List Entries

DE and GS graduated to the play list. HD and JCG have been removed.


New Watch List Candidates:

Jo-Ann Stores, Inc. - JAS - close: 46.56

JAS has spent the last seven months consolidating sideways under resistance in the $47.50 area. Now shares look ready to breakout past this level in the next few weeks. Aggressive traders may want to consider bullish positions now. I would rather open positions on a dip and I'm suggesting a trigger at $44.50. Investors should note that JAS is due to report earnings on December 1st, after the closing bell. Wall Street expects a profit of $1.07 a share. JAS has a decent string of beating the earnings estimates so traders are probably expecting another strong quarter. Odds are we could get triggered on any post-earnings reaction. If JAS rallies instead more nimble traders could buy a breakout past $47.50.

If we are triggered at $44.50 I'm suggesting a stop loss at $41.45. The 200-dma should offer some support at $42.00.
FYI: July calls were the longest ones available.

Company Info:
Jo-Ann Fabric and Craft Stores the nation's largest fabric and craft retailer with locations in 48 states, was founded in 1943 as a single retail store. Today, more than 750 Jo-Ann stores across the country provide consumers with creative inspiration (source: company press release or website)

Buy-the-Dip trigger: $44.50

BUY the 2011 July $50 calls (JAS1116G50)

Chart of JAS:

Originally listed on the Watch List: 11/27/10


US Airways Group, Inc. - LCC - close: 11.70

Airlines stocks have been soaring on expectations for an improvement in the economy. I like LCC because shares actually saw a correction in November and don't look so overbought. Yet the long-term trend looks very bullish with the breakout past the $10.50 area. Aggressive traders could go ahead and launch positions now. I am suggesting a buy-the-dip trigger at $11.00. If triggered we'll use a stop loss at $9.49. Our long-term first long-term target is $14.90.

Company Info:
US Airways, along with US Airways Shuttle and US Airways Express, operates more than 3,100 flights per day and serves more than 200 communities in the U.S., Canada, Mexico, Europe, the Middle East, the Caribbean, Central and South America. The airline employs more than 31,000 aviation professionals worldwide and is a member of the Star Alliance network, which offers its customers 21,000 daily flights to 1,160 airports in 181 countries. Together with its US Airways Express partners, the airline serves approximately 80 million passengers each year and operates hubs in Charlotte, N.C., Philadelphia and Phoenix, and a focus city in Washington, D.C. at Ronald Reagan Washington National Airport. US Airways was the only airline included as one of the 50 best companies to work for in the U.S. by LATINA Style magazine’s 50 Report for 2010. For the sixth year in a row, the airline also earned a 100 percent rating on the Human Rights Campaign Corporate Equality index, a leading indicator of companies’ attitudes and policies toward lesbian, gay, bisexual and transgender employees and customers (source: company press release or website)

Buy-the-Dip trigger: $11.00

BUY the 2012 January $12.50 calls (LCC1221A12.5)

Chart of LCC:

Originally listed on the Watch List: 11/27/10


Active Watch List Candidates:

Compania de Minas Buenaventura - BVN - close: 53.74

BVN's rally failed near resistance at $56 last week. The stock appears to have produced a bearish double top pattern. I am expecting the correction to pull BVN down into the $48-47 zone. Right now the plan is to buy call LEAPS on a dip at $48.00 but keep your position size small.

Buy-the-Dip trigger: $48.00 (half a position)

BUY the 2011 JUNE $50 calls (BVN1119F50)


Ford Moto Co. - F - close: 16.10

GM's IPO has come and gone and we didn't see quite the sell-off in Ford as I expected. I still don't want to chase it and will keep our trigger to buy the dip at $14.50. If we do get triggered I would start with a small position and slowly build a position over time. If triggered we want to use a stop loss at $12.95.

Buy-the-Dip trigger: $14.50

BUY the stock - or -
BUY the 2012 January $15.00 calls (F1221A15) - or -
BUY the 2012 January $17.50 calls (F1319A17.5)


Home Depot - HD - close: 31.00

I am giving up on HD. The stock has been unable to recover following the Nov. 16th reversal and the big decline in the 17th. Shares have been stuck under their 50 and 200-dma the last few days. We will drop HD as a watch list candidate.


J. Crew Group, Inc. - JCG - close: 43.75

JCG was a new watch list candidate a week ago. Unfortunately, the stock did not hit our trigger to buy calls on Monday. Tuesday morning there was an announcement that JCG was being taken private and shares gapped open near $44 a share. I am dropping it as a candidate.


Newfield Exploration - NFX - close: 66.79

NFX managed to hit new two-year highs intraday last week. I still don't want to chase it here. The energy sector looks like it could correct soon. I'm suggesting a trigger at $61.50. If triggered I'm listing our stop loss at $55.75. We'll set our first target at $69.00.

Buy-the-Dip trigger: $61.50

BUY the 2011 June $65 calls (NFX1118F65)

- or -

BUY the 2012 January $65 calls (NFX1221A65)


Starbucks Corp. - SBUX - close: 31.14

It sounds like this year's Black Friday was a big one for retailers. I know the parking lots were overflowing in my part of town. That should mean SBUX had a banner weekend. Shares of SBUX displayed some strength with a new relative high. While I'm bullish on this stock I don't want to chase it. I'm suggesting we stick with the plan and wait for a dip to $28.50. We'll use a stop loss at $25.90. Our long-term target is $34.75 and $38.75.

Buy-the-Dip trigger: $28.50

BUY the 2012 January $30.00 calls (symbol: SBUX1221A30)


Whiting Petroleum Corp. - WLL - close: 108.75

WLL is another energy stock that has been able to maintain its bullish trend. The stock looks stronger than many of its peers but I still don't want to chase it. Currently the 50-dma has risen to $102. I have listed a trigger to launch bullish positions at $102.50. If triggered use a stop at $95.90.

Buy-the-Dip trigger: $102.50

BUY the 2011 March $100 calls (WLL1119C100)

- or -

BUY the 2012 January $110 calls (WLL1221A110)