Option Investor
Newsletter

Daily Newsletter, Sunday, 8/14/2011

Table of Contents

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

Leaps Trader Commentary

Flirting with a Bear Market

by James Brown

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No is the answer. One of the questions a week ago was, "has a downgrade of the U.S. credit rating already been factored into the market?" Monday saw a horrendous drop across the global markets as investors reacted to news that Standard & Poor's had downgraded the U.S. rating from AAA to AA+. The S&P 500 index plunged from 1200 to 1119 for a -6.7% drop. It was the worst one-day decline since December 2008.

Tuesday saw the drop continue with the S&P500 index falling to 1101.54. I had warned readers a week ago that if the 1150 level fell then we'd see a drop toward the 1100 level. Stocks finally started to see an oversold bounce that quickly accelerated higher after the FOMC announcement. Ben Bernanke and friends promised to keep rates exceptionally low through the middle of 2013. The markets were shocked to hear that time frame and stocks surged. It was a typical short-covering fueled rocket ride higher. After a -6.7% drop on Monday the market saw a +6% rebound off its intraday lows. The S&P500's end of day gain of +4.7% was the best one-day rally in over two years.

Unfortunately the global markets were (are) still hostage to the situation in Europe. After the U.S. credit downgrade a week ago there were new worries on Wednesday that France might lose its AAA rating. French banks were hammered lower and the U.S. markets plunged again. Gold traded over $1,800 an ounce for the first time in history.

Stocks whipsawed higher on Thursday. In the U.S. the weekly initial jobless claims came in under the 400,000 mark for the first time in months. Meanwhile overseas in Europe several countries started a ban on short selling. These tactics rarely work but they can produce a short-term knee-jerk bounce.

Economic data on Friday was mixed. The market could have sold off again on a disastrous consumer sentiment number but it didn't. Stocks managed to rally again producing the first back to back gains for the first time in three weeks. The July retail sales numbers were released Friday morning and came in at +0.5% while June's numbers were revised higher. Yet this was in stark contrast to the University of Michigan preliminary consumer sentiment survey for August, which dropped from 63.7 in July to 54.9 in August - a new 30-year low.

Economists watch the sentiment numbers because it's supposed to help predict consumer spending, which accounts for nearly 70% of the U.S. economy. Yet obviously the relationship isn't work since retail sales are relatively healthy given the slow economic growth while sentiment is crashing.

Overall it was an historic week. The Dow Industrials experienced huge moves of more than 400 points for four days in a row, which is a first! The venerable Dow also rallied more than +860 points off its lows and yet still closed down for the week. It was definitely a volatile week and speaking of volatility the volatility index (VIX) surged to 48.00, its highest level since May 2010.

The VIX has seen six significant spikes in the last 20 years and last week was one of them. Usually, when the VIX is this high it's a huge sign of panic selling (well actually put option buying) and tends to mark a significant market bottom. Historically the VIX does not stay this elevated for very long but there is nothing to prevent it from hovering at above normal levels for a few weeks. The good news is we should closer to a market bottom now than a week ago.

Looking at the S&P500 index we see clear obstacles overhead. There is round number resistance at 1200 and 1250. Using a Fibonacci retracement tool on the three-week sell-off from 1350 down to 1100 there is potential resistance at the 38.2% retracement near 1195, the 50% retracement near 1220-1225 and the 61.8% retracement near 1250ish. On the downside I would look for short-term support near 1150 and 1120 and of course 1100. A few market pundits are suggesting we might see the market retest its lows. If stocks do roll over again I would look for a dip into the 1120-1100 area.

Daily chart of the S&P 500 index:

Weekly chart of the S&P 500 index:

Applying the same tools to the NASDAQ composite we see potential resistance at 2533, 2600 and 2660. I'd focus on the 2600 area as likely resistance. On the downside the 2450 and 2400 levels are probably short-term support. The low last week tested the horizontal trendline evident on the weekly chart.

Weekly chart of the NASDAQ Composite index:

Daily chart of the NASDAQ-100 index:

The small caps tend to be more volatile than the large cap stocks so it's no surprise to see the Russell 2000 index over doing it to the downside. The $RUT actually fell into bear market territory with a -25% drop from its highs. The intraday low was 639 but the $RUT seemed to be trying to hold 650.

The big bounce off its lows left the $RUT hovering near round-number resistance at 700. There is potential resistance at 720 but I'd focus on probably resistance near the 740 area and then the June lows if the $RUT can bounce that high. If stocks roll over then look for potential support in the 660-640 zone.

Daily chart of the Russell 2000

Weekly chart of the Russell 2000

The Dow Transportation index also hit bear market territory with its drop this past week. The bounce has reduced that correction to -17.5%. I suspect the 4900 area could prove to be tough resistance. Plus the 200-dma overhead is additional resistance.

Weekly chart of the Transportation index:

We have a busy week of economic data. The market will have plenty of headlines it can trade around. The big events are probably the NY Empire survey on Monday, the PPI on Wednesday, and the CPI and Philly Fed on Thursday. The unusual event for the week is a meeting between France's Sarkosy and Germany's Merkel as the two biggest EU members try to work on saving the union from the periphery's debt burden.

- Monday, August 15 -
New York Empire Manufacturing

- Tuesday, August 16 -
Housing Starts for July
Building Permits for July
Meeting between Merkel and Sarkosy

- Wednesday, August 17 -
Import/Export prices
Industrial Production
Capacity Utilization
Producer Price Index (PPI) for July

- Thursday, August 18 -
Weekly Initial Jobless Claims
Consumer Price Index (CPI) for July
Existing Home Sales
Philly-Fed for August

Looking ahead we could see the market churn higher in a two steps forward, one step backward type of action for the next couple of weeks. Even though we've seen a big bounce from the intraday lows the market is still oversold. I suspect the path of least resistance is probably higher, at least short-term. Unfortunately all the broken levels of support are now new levels of resistance. This week's economic news could be used as a spark to move the market either direction. While the volatility has contracted it remains elevated and we could see still some big movement.

As I mentioned earlier there are those who believe the market will retest its lows before finally forming a bottom. Retesting a low is more art than science. It could be a new higher low or a new lower low before stocks see a significant rebound again. The problem with a lower low is that it fuels new fears that the low may not be in yet but as long as it's relatively close to last week's low it could work.

The wild card remains Europe. If Europe can't get its act together then who knows where we'll be by the end of August. One thing is certain. The reaction to the U.S. credit downgrade and the announcement from the FOMC has pushed the bond market to new relative highs. As bonds rally the yields drop. The yield on the 10-year bond has plunged from 3.0% to 2.2% in days. The low this past week was 2.09%. These are massive moves for the bond market. While U.S. bonds may be considered "safe" they're not going to generate any returns at these levels. Money managers will feel a great temptation to put money to work in the equity markets generate any significant returns for the year. As long as the economic data does not support a double-dip recession scenario then the bottom might be in for the stock market.

I realize you don't want to hear "might" or "could" when we're talking market direction but there is still a lot of uncertainty regarding the U.S. and global economies, and the EU's attempts to stave off a debt contagion. Traditionally August and September are bearish months for the U.S. market so the calendar is against us at the moment. On the positive side the huge spike in the VIX this past week is definitely a signal that stocks may have bottom, at least short-term.

Aggressive trades will want to consider taking advantage of the sell-off and putting money to work. My suggestion is to keep your position size very small to limit your risk. Cautious traders may want to wait and see if the market does retest the lows over the next week or two and then consider whether or not you want to buy the dip or wait for the bounce.

- James


Portfolio

Portfolio Update

by James Brown

Click here to email James Brown


Current Portfolio


Portfolio Comments:

After three weeks of sharp market declines and extreme volatility we find ourselves without any active long-term LEAPS trades. This painful sell-off has brought with it a certain amount of opportunity. We are adding several new trades in the new plays section and we are reloading the watch list with new candidates.

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

Taking Advantage of the Sell-off

by James Brown

Click here to email James Brown

Editor's Note:

It looks like volatility may have peaked. The S&P500 has tried to put in a bottom in the 1120-1100 zone. Yet just because we've seen two days of back to back gains does not mean the sell-off is necessarily over. We need to stay defensive here.

I am listing some new bullish LEAPS trades but we do want to keep our position size small to limit our risk.

Pick the stock (or stocks) that best suits you. You don't have to trade them all.

-James


- New Trades -


McDonalds Corp. - MCD - close: 86.50

Company Info

Why We Like It:
When the market started to collapse MCD was at new all-time highs. Shares reluctantly trended lower and eventually near the $82 level before rebounding this past week. Investors see MCD as a defensive trade for a weak economy. Consumers are likely to frequent MCD's business thanks to the "value" meal approach.

I am suggesting we start small bullish positions now. Keep our position size one half of your normal trade. There is still a chance the market and MCD might retest last week's lows. We want to keep some cash in reserve so we can add to positions. More conservative traders could wait for a dip near the 50-dma or the $84 level as your entry point instead.

Our long-term target is $99.00. We'll use a stop under last week's low.

- Suggested Positions -
Aug 15, 2011 - entry price on MCD @ --.--, option @ -.--
symbol: MCD1221A90 2012 JAN $90 call - current bid/ask $ 2.58/ 2.65

- or -

Aug 15, 2011 - entry price on MCD @ --.--, option @ -.--
symbol: MCD1319A95 2013 JAN $95 call - current bid/ask $ 3.95/ 4.25

Chart of MCD:

Current Target: $99.00
Current Stop loss: 81.75
Play Entered on: 08/15/11
Originally listed in the New Plays 08/13/11


McDermott Int. Inc. - MDR - close: 14.46

Company Info

Why We Like It:
This is more of an oil services play than a bet on construction since MDR focuses on off shore oil and gas projects. Shares were hit very hard during the market drop with a plunge from almost $22 to just under $12. MDR has been rebounding since the Aug. 8th low.

I am suggesting we take advantage of this weakness and buy call LEAPS now. Readers may want to only launch half a position now and keep some money in reserve just in case the market and MDR retests the recent lows. That way we could double down on a dip. The low on Aug. 8th was $11.82. I am setting our stop loss at $11.75. Our long-term targets are $19.50 and $23.50 but the $18 level and $22 level could prove to be tough resistance.

- Suggested Positions -
Aug 15, 2011 - entry price on MDR @ --.--, option @ -.--
symbol: MDR1221A15 2012 JAN $15 call - current bid/ask $ 1.80/ 1.95

- or -

Aug 15, 2011 - entry price on MDR @ --.--, option @ -.--
symbol: MDR1221A17.5 2012 JAN $17.50 call - current bid/ask $ 2.10/ 2.65

Chart of MDR:

Current Target: $19.50, and $23.50
Current Stop loss: 11.75
Play Entered on: 08/15/11
Originally listed in the New Plays 08/13/11


SPX Corp. - SPW - close: 56.50

Company Info

Why We Like It:
Wow! Talk about moving too far too fast. SPW was crushed from nearly $84 down to $52.50 in about two weeks. The company reported earnings during this time and the results were not bad but shares were murdered on the news anyway. The recent sell-off has erased almost a year's worth of trading. I doubt SPW's business suddenly dropped -35% in the last three weeks. We want to take advantage of this over reaction and buy call LEAPS now.

If you think the market might retest its lows then wait. SPW bounced twice in the 52.50 area last week. You could look for another dip into the $53.50-52.50 area as an alternative entry point. I'll set our initial stop loss at $51.90. Our upside targets are $64.75 and $72.50.

NOTE: SPW does not have LEAPS so we're playing the March $60 and $65 calls.

- Suggested Positions -
Aug 15, 2011 - entry price on SPW @ --.--, option @ -.--
symbol: SPW1217C60 2012 MAR $60 call - current bid/ask $ 5.50/ 6.00

- or -

Aug 15, 2011 - entry price on SPW @ --.--, option @ -.--
symbol: SPW1217C65 2012 MAR $65 call - current bid/ask $ 3.80/ 4.20

Chart of SPW:

Current Target: $64.75, and 72.50
Current Stop loss: 51.90
Play Entered on: 08/15/11
Originally listed in the New Plays 08/13/11


Terex Corp. - TEX - close: 16.89

Company Info

Why We Like It:
TEX makes construction machinery and the stock has been pummeled lower for months. Shares may have finally hit a bottom this past week after the stock was cut in half from its early July high near $30.00. Now if you think the U.S. is going to see a double dip recession then you may want to avoid this stock. Although bulls might be able to argue that a recession has already been factored in at these levels.

I do consider an aggressive trade so we want to keep our position size small to start off. I am suggesting we buy the bounce now. If you think the market will retest its lows then you may want to wait for TEX to pull back into the $15.50-15.00 zone as your entry point instead. The low on Aug. 9th was $14.88. I am setting our stop loss at $14.45. Our first upside target is $24.75.

- Suggested Positions -
Aug 15, 2011 - entry price on TEX @ --.--, option @ -.--
symbol: TEX1221A20 2012 JAN $20 call - current bid/ask $ 1.35/ 1.45

- or -

Aug 15, 2011 - entry price on TEX @ --.--, option @ -.--
symbol: TEX1319A20 2012 JAN $20 call - current bid/ask $ 2.95/ 3.40

Chart of TEX:

Current Target: $24.75
Current Stop loss: 14.45
Play Entered on: 08/15/11
Originally listed in the New Plays 08/13/11


Walter Energy Inc. - WLT - close: 81.49

Company Info

Why We Like It:
The first week of August saw coal stocks get murdered with a massive drop in the market. Part of the problem was WLT. The company reported earnings on August 3rd and missed the estimate by a mile! Revenues rose +88% but still missed Wall Street's estimates. The stock dropped from $110.50 to close under $78 on the earnings news. Yet shares found support at the $70.00 level several times the past few days. It looks like WLT has found a new bottom. That's not too surprising since $70 is a 50% haircut from its highs near $140 this past year.

WLT can be a volatile stock so I do consider this an aggressive, higher-risk trade. We have a wide stop loss and the option we're using is very out of the money. We definitely want to keep our position size small, especially to start. I am suggesting we buy the bounce now but cautious traders may want to wait. A dip back to $75.00 would be a better looking entry point and the newsletter might add to positions if we do see a dip or bounce from $75.00. We'll start this trade with a stop loss at $69.00. Our upside targets are $97.75 and $129.00 (a very long-term target).

- Suggested Positions -
Aug 15, 2011 - entry price on WLT @ --.--, option @ -.--
symbol: WLT1221A100 2012 JAN $100 call - current bid/ask $ 5.65/ 5.95

- or -

Aug 15, 2011 - entry price on WLT @ --.--, option @ -.--
symbol: WLT1319A100 2013 JAN $100 call - current bid/ask $11.75/14.20

Chart of WLT:

Current Target: $97.75 and $129.00
Current Stop loss: 69.00
Play Entered on: 08/15/11
Originally listed in the New Plays 08/13/11



Play Updates

A Clean Slate

by James Brown

Click here to email James Brown

Editor's Note:

I believe this is a record. This is the first time ever there are no LEAPS trades to update. The volatility over the past couple of weeks has been astonishing. The remainder of our call LEAPS trades were stopped out during last week's roller coaster ride in the market.

-James


Closed Plays


AXP and KO were both stopped out.


Play Updates


None.

There are no active trades to update.

Please see the New Plays section for several new trades tonight. Plus, we have a number of new Watch List candidates.


CLOSED Plays


American Express Co. - AXP - close: 44.89

08/13 update: Just as I feared, the market sold off hard on the U.S. credit downgrade and AXP followed. Monday saw AXP gap open lower under support at $46 and its 200-dma. Shares then plunged to an low of $42.78 on Monday. Reversed that with a bounce back to $46 on Tuesday, etc. I warned readers that a breakdown under $46 probably meant a drop into the $44-42 zone. The oversold bounce on Friday stalled at resistance near the 200-dma.

Our stop loss was hit at $44.75 on Monday. Readers may want to keep AXP on their watch list for a new close over the $47 or $48 levels as a potential bullish entry point to buy call LEAPS again.

- Suggested Positions -
Aug 04, 2011 - entry price on AXP @ 47.00, option @ 2.60
symbol: AXP1221A50 2012 JAN $50 call - Exit $2.00 (-23.0%)

- or -

Aug 04, 2011 - entry price on AXP @ 47.00, option @ 3.50
symbol: AXP1319A55 2013 JAN $55 call - Exit $3.00 (-14.2%)

08/08/11 stopped out @ 44.75
08/04/11 play opened at $47.00

Chart of AXP:

Current Target: $59.00, 64.00
Current Stop loss: 44.75
Play Entered on: 08/04/11
Originally listed on the Watch List: 05/21/11


The Coca-Cola Co. - KO - close: 67.14

08/13 update: Record volatility last week and panicked selling across the market was enough to push KO past its 200-dma and under the $65 and $64 levels. Our stop loss was hit at $63.95 on Tuesday, Aug. 9th. Since then KO has rebounded and actually closed up on the week. I am putting KO back on the watch list tonight.

Earlier Comments:
Our plan was to keep our opening positions small, 1/4 to 1/2 your normal trade size.

- Suggested (SMALL) Positions -
Jul 25, 2011 - entry price on KO @ 69.12, option @ 2.25
symbol: KO1221A70 2012 JAN $70 call - Exit $1.20 (-46.6%)

- or -

Jul 25, 2011 - entry price on KO @ 69.12, option @ 2.40
symbol: KO1319A75 2013 JAN $75 call - Exit $1.68 (-30.0%)

08/09/11 stopped out @ 63.95
08/06/11 adjust stop loss to $63.95 to give KO more room. We do not know how the market will react to the U.S. downgrade news on Monday.

Chart of KO:

Current Target: $79.00 & 84.00
Current Stop loss: 63.95
Play Entered on: 07/25/11
Originally listed in the New Plays 07/23/11


Watch

Reloading the Watch List

by James Brown

Click here to email James Brown

Editor's Note:

In addition to tonight's new Watch List candidates I'm providing a list of stocks on our radar screen:

ATI, FLR, PH, TIE, FWLT, BHI, EXXI, HP, SUN, SWN, WLL, XOP, DRI, KFT, RRC, BMC, JOYG, FAST, AGN, PM, HNZ, EW, and XLE.

Plus, here are a few stocks that caught my eye but they don't have LEAPS:
CMP, XES, DRC, CRK, DRQ, BCR, AN, and HFC.

- James



New Watch List Entries

CLF - Cliffs Natural Resources

CRS - Carpenter Technology

EMN - Eastman Chemical Co

KO - Coca-Cola Co.

V - Visa Inc.


Active Watch List Candidates

EMC - EMC Corp

ESV - Ensco Plc.

MMR - McMoRan Exploration


Dropped Watch List Entries

None.



New Watch List Candidates:


Cliffs Natural Resources - CLF - close: 77.20

Company Info

The sell-off in CLF pushed shares from its highs near $100 toward its long-term trendline of higher lows near $70.00. The stock is already up more than +10% on the oversold bounce. We do not want to chase it here.

I am suggesting a buy-the-dip trigger at $74.00 to initiate long-term call option positions. If triggered we'll use a stop loss at $66.50. Our targets are $89.00 and $99.00.

Buy-the-Dip trigger: $74.00

BUY the 2012 Jan. $85 call (CLF1221A85)

- or -

BUY the 2013 Jan. $90 call (CLF1319A90)

Chart of CLF:

Originally listed on the Watch List: 08/13/11


Carpenter Technology - CRS - close: 48.98

Company Info

Many of the steel and iron stocks have suffered a lot but CRS has managed to maintain its long-term bullish up trend. The recent market sell-off pushed CRS to technical support at its 200-dma and price support near $45.00. The actual low last week was $43.64.

I am suggesting we buy calls on a dip at $46.00. If triggered we'll use a stop loss at $43.40. Our upside targets are $54.00 and $59.00.

NOTE: CRS does not have long-term LEAPS. We will have to use the 2012 March calls.

Buy-the-Dip trigger: $46.00

BUY the 2012 Mar. $50 call (CRS1217C50)

Chart of CRS:

Originally listed on the Watch List: 08/13/11


Eastman Chemical Co. - EMN - close: 84.95

Company Info

EMN is another industrial name that saw its stock plunge toward the long-term trendline of lower highs. The stock was downgraded to a "sell" on Friday but shares managed to rally anyway. I don't want to chase it after an $8 bounce. I am suggesting we buy calls on a dip at $81.00. If triggered we'll use a stop loss at $76.00 since the low last week was $76.88. Our upside target is $92.00 and $97.50. We may choose to exit ahead of EMN's stock split. NOTE: EMN is due for a 2-for-1 split on October 4, 2011.

Buy-the-Dip trigger: $81.00

BUY the 2012 Jan. $90 call (EMN1221A90)

Chart of EMN:

Originally listed on the Watch List: 08/13/11


Coca-Cola Co - KO - close: 67.14

Company Info

KO was on our play list last week but the market volatility pushed it under support and hit our stop loss. I still think KO works as a strong defensive name in an uncertain market. Instead of buying calls now I think we'll get a chance to buy it a little bit cheaper. I am suggesting a buy-the-dip entry point at $65.00 with a stop loss at $63.40. The low last week was $63.59.

Buy-the-Dip trigger: $65.00

BUY the 2012 Jan. $70 call (KO1221A70)

- or -

BUY the 2013 Jan. $70 call (KO1319A70)

Chart of KO:

Originally listed on the Watch List: 08/13/11


Visa Inc. - V - close: 83.83

Company Info

Shares of Visa (V) and Mastercard (MA) have held up pretty well as Wall Street adjusts to a new future with the Durbin amendment. You can see the big spike in both V and MA in late June. The feds released their final rule on the Durbin amendment that day. Not only was the news better than expected but it removed a big cloud of uncertainty regarding the future for these two stocks. Both V and MA should benefit from a global trend of consumers using debit and credit cards as their primary form of payment.

Aggressive traders could buy calls on Visa right now. I suspect we may get a lower entry point. I am suggesting a buy-the-dip entry at $80.00. Cautious traders could look for another dip to the 200-dma instead. The long-term trend of lower highs that goes back to early 2009 should be support near the $75.00 area. If triggered at $80.00 we'll use a stop loss at $74.90. Our upside targets are $94.00 and $99.00.

Buy-the-Dip trigger: $80.00

BUY the 2012 Jan $90 call (V1221A90)

- or -

BUY the 2013 Jan $100 call (V1319A100)

Chart of V:

Originally listed on the Watch List: 08/13/11


Active Watch List Candidates:



EMC Corp. - EMC - close: 23.14

08/13 update: EMC fell to new ten-month lows last week with shares hitting $21.40 intraday on Tuesday. The oversold bounce stalled at its 10-dma. on Friday morning. I am concerned that shares have broken below their long-term trendline of higher lows. Aggressive traders might want to buy long-term calls now. If shares can hold above the $22 level for a couple of weeks then we might consider new positions in this area. I'm concerned the sell-off may not be done yet. Nimble traders could try launching positions on another dip near $21.50ish. I am setting our buy-the-dip entry point at $20.25 since the $20.00 level should be significant support. If triggered at $20.25 we'll use a stop loss at $18.90.

The option strikes have been updated below.

buy the dip at $20.25

BUY the 2012 Jan $20 call (EMC1221A20)

- or -

BUY the 2013 Jan $25 call (EMC1319A25)

Originally listed on the Watch List: 07/23/11


Ensco Plc. - ESV - close: 46.79

08/13 update: Last Monday was an ugly, ugly day with a drop from $45.58 the previous Friday to an intraday low of $39.51. ESV closed at $40.42 on Aug. 8th. The $40 level proved to be support and ESV was rebounding higher the rest of the week. Now the bounce has stalled at its 10-dma, the first level of technical resistance. Coincidentally the rebound has also stalled at the 50% retracement of the $54-40 sell-off. The $40 level has been significant support and resistance for ESV over the last few years. There are some analysts expecting that the market might retest its lows. If that occurs we want to be ready to take advantage of the weakness in ESV.

I am suggesting a buy-the-dip entry point at $41.50. If triggered we'll use a stop loss at $38.95. We do want to keep our position size small to limit our risk.

I have updated our option strikes below.

buy-the-dip at $41.50

BUY the 2012 Jan $45 call (ESV1221A45)

- or -

BUY the 2013 Jan $50 call (ESV1319A50)

Originally listed on the Watch List: 07/30/11


McMoRan Exploration Co. - MMR - close: 13.39

08/13 update: MMR hit a new multi-month low of $11.45 on Tuesday. It seemed like the stock was trying to hold support near $12.00 most of the week. Unfortunately the oversold bounce has stalled near new overhead resistance at old support near $14.00 and its 10-dma. I am not convinced the correction is over. Looking at the long-term chart for MMR the $10.00 level has been significant support and resistance in the past. I am setting our buy-the-dip entry point at $10.50 with a stop loss at $9.40. If we do not see MMR breakdown to new lows then we'll reconsider buying calls near the $12 area if it proves to hold up as support.

The option strikes have been updated below.

Buy the dip at $10.50

BUY the 2012 Feb $12 call (MMR1218B12) -Februarys-

- or -

BUY the 2013 Jan $15 call (MMR1319A15)

Originally listed on the Watch List: 07/23/11