Option Investor
Newsletter

Daily Newsletter, Sunday, 2/26/2012

Table of Contents

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

Leaps Trader Commentary

And the Award Goes To...

by James Brown

Click here to email James Brown

It's Oscar time with the Academy Awards on Sunday. The award for the most headline-generating, market-moving, story that won't go away is Greece's soon to be default that isn't a default. A gut-wrenching tragedy about a tiny Mediterranean country with less than twelve million people captivating the global markets in a slow-motion debt meltdown fraught with political upheaval and social unrest. It's a no-win situation as Greece tries to satisfy the Troika's austerity requirements while avoiding anarchy in the streets. Will the latest 130 billion euro bailout bring peace and put this tragedy behind us? Or will Greece once again fail to live up to its budgetary obligations and spending cuts? Stay tuned for the next exciting sequel, "Greece: Living Beyond Bailouts" coming to you soon in 2012.

The Academy won't be handing any awards out to Greece or its best supporting actors the EU, IMF or ECB but the group continues to get a lot of press. After weeks and months of wrangling EU leaders finally agreed to a new 130 billion euro bailout package for Greece. Unfortunately this is a fragile victory. Greece still has to hammer out its "voluntary" haircut for private sector investors holding their bonds. Plus, Germany and other EU countries funding this bailout have to approve this action with a vote by parliament. There are still plenty of hurdles for this bailout package to jump over and we're quickly running out of time before Greece's March 20th deadline for a $19 billion debt payment.

The U.S. markets greeted the new Greek bailout news with a yawn. Stocks opened on Tuesday with gains but eventually faded into declines as investors seemed to sell the news. The Dow Industrial average struggled with overhead resistance at the 13,000 level all week long and closed Friday at 12,982. This is still the highest level for the Dow Industrials in four years. Both the NASDAQ composite and the S&P 500 index continue to levitate inside their narrow bullish channels (see charts below). The NASDAQ remains at ten-year highs and the S&P 500 is hovering just above its 2011 closing high.

It proved to be a bullish week for commodities thanks to renewed weakness in the U.S. dollar. The greenback fell to new three-month lows. Gold prices reciprocated with a rally to three-month highs. Silver is breaking out from a four-week trading range. Yet oil was the real winner. Crude oil prices surged thanks to the dollar weakness and rising tensions with Iran who cut off exports to Britain and France last week. Oil prices settled the week at $109.76 a barrel yet oil hit record highs when priced in euros. Overall the trend for stocks is still up but trading volumes continue to sink with big board volume falling to multi-year lows.

Economic news proved to be another mixed bag. There were a number of PMI manufacturing data reports released last week. Numbers above 50.0 indicate growth while numbers under 50.0 suggest contraction. Germany saw its PMI fall from 51.0 to 50.1 so it's just barely holding up in the "growth" category. France saw its PMI improve from 48.5 to 50.2. The Eurozone total PMI inched up to 48.8 to 49.0. Meanwhile China saw its PMI climb from 48.8 to 49.7. China also made news last week when the government cut the banks reserve ratio requirement again. This move is an effort to stimulate their economy and the Shanghai stock market rallied every day last week. Back in Europe the EU lowered their 2012 GDP forecast from growing +0.5% to slowing -0.3% as the region deals with the impact of so many countries focused on austerity measures.

Economic data in the U.S. generally better. Existing home sales were probably the biggest disappointing with the annual pace of existing home sales coming in at 4.57 million versus estimates at 4.63 million. New home sales showed improvement at an annual pace of 321,000, which was better than expected. January isn't a big month for home sales and the pace of sales is up +3.5% year over year. Another big positive in the report was a drop in inventory levels to 5.6 months, which is the lowest level since early 2006.

The weekly initial jobless data came in at 351,000, which was unchanged from the prior week but it brought the four-week moving average down to 359,000 and the lowest reading since March 2008. Another positive economic report was the University of Michigan Consumer Sentiment survey, which rose from the early February reading of 72.5 to end the month at 75.3. This is a 12-month high and a far cry from the August lows of 55.7. Analysts like to suggest that positive consumer sentiment translates into positive consumer spending, which fuels nearly 70% of the U.S. economy.

Major Indices:

The S&P 500 index continues to drift higher. Traders bought the dip near the bottom of its narrow rising channel and its simple 10-dma. Friday's close at 1,365 is above the 2011 closing high of 1,363 so technically the index is at new three-year highs but it has yet to conquer the 2011 intraday high near 1,370.

Is this index overbought? Absolutely! Can it grow more overbought? Yes, it can. The trend is up and with the S&P 500 near the bottom of its channel it could be a bullish entry point for very short-term traders. Odds are growing every day for a correction. I mentioned last week that in a bull market environment corrections tend to be in the -3% to -5% range. That would mean a dip into the 1,324 to 1,296 area. Personally, I would look for potential support near 1,340, at 1,320, and at 1,300.

A normal 38.2% Fibonacci retracement of the December low to current highs would mean a dip toward 1,305. If the market corrects should we expect a straight drop to these levels? Probably not but stocks do tend to move faster going down than going up.

If stocks continue to shrug off any concerted selling pressure then the next level of overhead resistance, once past the 2011 highs, is likely the 1,400 mark with a potential pause near 1,380.

Daily chart of the S&P 500 index:

Monthly chart of the S&P 500 index:

Thanks again to gains in shares of Apple (AAPL) the NASDAQ continues to drift higher. The index has been bouncing along its rising 10-dma and it violated this short-term technical resistance on Thursday morning but quickly recovered. Friday's close leaves the NASDAQ at new multi-year highs.

A normal -3% to -5% correction would mean a dip into the 2,874 to 2,815 range. I would expect the prior 2011 highs to act as short-term support, which means the 2,860-2,840 zone could slow any descent. While a normal 38.2% Fib retracement of the current rally would mean a pull back toward the 2,800 level.

Can the NASDAQ continue to climb? Of course it can but the farther it climbs the bigger the correction could be. I would not be surprised to see the 3,000 level act as overhead, round-number, psychological resistance. A -5% pull back from the 3,000 level would be 2,850.

Daily chart of the NASDAQ Composite index:

Monthly chart of the NASDAQ Composite index:

The small cap Russell 2000 index has spent the last few weeks consolidating sideways. That's not necessarily a bad thing. The longer it consolidates sideways it can work off its overbought condition. Right now if the $RUT were to breakout from the top of this roughly 810-832.50 trading range it would be a very bullish signal for stocks. Such a move would also breakthrough the trend line of lower highs on the weekly chart.

If the market does correct then the $RUT will likely underperform. Instead of looking for a -3% to -5% pullback I would expect a -5% to -10% pullback. This would mean a dip back into the 802 to 785 zone.

Daily chart of the Russell 2000 index

Weekly chart of the Russell 2000 index

Unfortunately the recent weakness in the transportation index remains a concern. Thursday's intraday bounce fuels hope that the correction in the transportation sector is over but there needs to be follow through and Friday's pullback from the intraday high was not inspiring. A rally past the $TRAN's simple 10-dma or its trend line of lower highs would be another bullish signal for stocks.

Daily chart of the Transportation Average

The economic calendar picks up speed again as we head toward the end of February and the beginning of March. The ISM manufacturing index will be a good look at business activity in the U.S. Meanwhile the Fed's Beige book report provides anecdotal evidence of conditions across the twelve districts. The second estimate for the U.S. Q4 GDP is expected to rise to +3.0% growth. Of course most of the headlines will probably be overseas. There is a G20 meeting in Mexico this weekend. Monday morning could see headlines from the G20.

There is an EU finance ministers meeting on Wednesday and another EU summit on Thursday. The big event for the week could be the ECB's second round of LTRO 1% money loan program. Previously there were estimates that the ECB could loan upwards of one trillion euros on Wednesday but estimates are now falling into the 250 to 500 billion euros. If the result is more than 500 billion euros it could be seen as a negative on the health of European banks.

- Monday, February 27 -
pending home sales

- Tuesday, February 28 -
durable goods orders
Case-Shiller 20-city Home Price index
Consumer Confidence for February

- Wednesday, February 29 -
ECB's 2nd round of LTRO 1% money
EU finance ministers meeting
Q4 GDP (second estimate)
Chicago PMI
Federal Reserve's Beige Book report

- Thursday, March 1 -
Weekly Initial Jobless Claims
EU Summit Meeting
Personal Income and Spending
ISM (manufacturing) index
vehicle sales for February

Additional key dates coming up:

Mar. 9th, non-farm payroll (jobs) report for February
Mar. 20th, Greek deadline for $19 billion debt payment

The Week Ahead:

I've got my fingers crossed that last week's announcement of a new 130 billion euro bailout for Greece will push this problem to the back burner for a while. However, there are several challenges this deal has to overcome before it's done. Germany and Finland's parliaments have to vote in favor of the rescue package. Plus, Greece still has to complete its haircut on current bondholders, which might fail and spark the credit default swap fire everyone has feared. There are just over three weeks left until Greece has to make that March 20th $19 billion debt payment. Of course if they restructure their bond debt that could change.

The last couple of weeks have seen an increased focus on rising oil and rising gasoline prices. The big worry here is that surging gasoline prices could slam the brakes on any improvement in the U.S. Analysts are expecting gas to hit $4.00 a gallon in the next few weeks and it could be as high as $5 a gallon by midsummer. At $4 a gallon it's taking money out of consumers' wallets that could have been spent elsewhere.

The situation with Iran and the West is not improving. There was a new report out this past week from the UN Atomic Energy Agency outlining concerns over the possibilities that Iran could use its nuclear program for bomb making. We can expect this situation to heat up as we approach summer. Of course gas prices normally rise into summer as well. With oil as Iran's major export and biggest percentage of the government's revenues it's in the country's best interest to fuel fears of a conflict.

In other news the Economic Cycle Research Institute made headlines. Their spokesman Lakshman Achuthan reiterated their U.S. recession call first made about five months ago. The ECRI's leading indicators index has been improving but the group still believes that slowing GDP growth, falling personal income and industrial production are all signs that point to a recession sometime this year. Achuthan claims that in the last 50 years every time we've seen a decline like this, in these indicators, it has always led to a recession.

Big picture the trend for stocks is still up but we're overbought with the market's nearly non-stop rally from its mid December lows. We don't want to fight the trend but we don't have to allocate capital at current levels either. More aggressive traders could buy a breakout past the S&P 500's 2011 intraday highs near 1,370 but the safer bet would be to wait for a significant correction and then consider new bullish positions on the bounce. If the transportation sector can rebound and the small cap Russell 2000 index can breakout from its trading range then I would feel more confident about launching new bullish trades.

- James


Portfolio

Portfolio Update

by James Brown

Click here to email James Brown


Current Portfolio


Portfolio Comments:

The U.S. market's major indices continue to levitate higher. Yet the Dow Jones Industrial Average has been unable to breakout past the 13,000 mark. Meanwhile the S&P 500 is still flirting with its 2011 highs in the 1360-1370 zone. The NASDAQ edged higher to new ten-year highs while the small cap Russell 2000 is still consolidating sideways in a trading range. The Dow Jones Transportation average continues to slip but there is a hint that the transport index could bounce soon although that probably depends on a pull back in rising oil prices.

Overall the larger trend is still up for stocks but momentum has definitely stalled. Several of our candidates have already begun to correct lower.

I have updated stop losses on: RDC.

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

Cautious, Not Bearish

by James Brown

Click here to email James Brown

Editor's Note:

Stocks continue to defy gravity with another weekly gain in the books. The S&P 500 is still on track for its best YTD performance in 25 years but it has yet to rally past its 2011 intraday high near 1370. Meanwhile the Dow Jones Industrial Average has been unable to breakout past the 13,000 mark in spite of news that the EU had voted in favor of another bailout for Greece - this time to the tune of 130 billion euros.

The trend is up but we're just one headline away from a correction. We just don't know what that headline will be yet. Don't mistake my caution for bearishness. I'm not bearish on stocks but the market is overbought and due for a pullback. A normal bull-market correction would be in the -3% to -5% range. Thus I hesitate to put new money to work in the market until the major averages alleviate their overbought status.

Of course the market doesn't have to correct lower. It could churn sideways for a time before moving higher again. We are adding three new candidates to the watch list should the market continue to march higher.


Play Updates

Losing Momentum

by James Brown

Click here to email James Brown


Closed Plays


We closed our CSX trade as planned on Tuesday morning.


Play Updates


Archer-Daniels-Midland Company - ADM - close: 31.96

Comments:
02/25/12 update: Investors bought the dip on Tuesday and ADM has been up every day since. Shares closed at new multi-month highs on Friday. The trend is certainly up but more conservative traders may want to wait for a pullback before considering new bullish positions. The $30.50 area should be support.

Earlier Comments:
The P&F chart is bullish with a $40 target. We are aiming for $37.75. We want to keep our new position size small to limit our exposure here. Start with half your normal position size or less.

- Suggested (small) Positions -
Feb 21, 2011 - entry price on ADM @ 31.31, option @ 1.74
symbol: ADM1319A35 2013 JAN $35 call - current bid/ask $ 1.84/ 1.90

02/21/12 trade opened on Tuesday @ 31.31
02/18/12 start with small positions to limit our exposure.
02/17/12 ADM meets our entry point requirements with a close over $31.25. Open positions the next day (Feb. 21st).
02/11/12 adjust entry trigger to wait for close over $31.25
FYI: 2014 calls are also available.

Current Target: $37.75
Current Stop loss: 28.40
Play Entered on: 02/21/12
Originally listed on the Watch List: 01/28/12


Allergan Inc. - AGN - close: 87.42

Comments:
02/25/12 update: AGN lost about half a point last week. Shares have been consolidating near their 50-dma. I am still concerned about the short-term bearish trend of lower highs. I suspect odds are growing we will see AGN test technical support near its 100-dma.

I am not suggesting new positions at this time.

Earlier Comments:
Option spreads are wide for these LEAPS. We want to keep our position size pretty small to limit our risk.

- Suggested Positions -
OCT 17, 2011 - entry price on AGN @ 85.46, option @ 5.10
symbol: AGN1319A100 2013 JAN $100 call - current bid/ask $ 2.35/ 2.75

02/02/12 earnings in-line but guided lower for 2012
01/28/12 earnings are due on Feb. 2nd. Readers might want to raise their stop or consider some sort of hedge prior to the report.
12/24/11 new stop loss @ 81.60
12/10/11 spreads on our 2013 calls are getting wider!
11/19/11 Taking an aggressive stance on our stop loss and moving it down to $77.45
10/22/11 Earnings are coming up. Readers might want to consider raising their stop loss. We are keeping ours at $79.45.

Current Target: $99.00
Current Stop loss: 81.60
Play Entered on: 10/17/11
Originally listed on the Watch List: 09/24/11


Akamai Technologies - AKAM - close: 37.21

Comments:
02/25/12 update: We have been expecting AKAM to correct lower and fill the gap. Shares were slipping toward $36.00 by Thursday but managed a little bounce on Friday (+1.8%). The rebound just happened to occur near the middle line of AKAM's rising channel. Personally, I would wait for a dip into the $35-34 area before considering new bullish positions.

- Suggested Positions -
FEB 10, 2012 - entry price on AKAM @ 37.60, option @ 5.40
symbol:AKAM1319A40 2013 JAN $40 call - current bid/ask $ 4.65/ 4.80

02/10/12 trade is opened on Friday morning
02/09/12 AKAM gapped higher in reaction to strong earnings news. The stock closed above our trigger at $35.25.

Current Target: $44.00
Current Stop loss: 30.75
Play Entered on: 02/10/12
Originally listed on the Watch List: 02/04/12


Bank of America - BAC - close: 7.88

Comments:
02/25/12 update: After a massive move in the first few weeks of the year BAC is finally consolidating some gains. The stock has been chopping sideways the last couple of weeks. The stock is due for a decent-sized correction. Whether that correction takes the shape of a pullback lower or a prolonged move sideways is the question. The $7.50-7.00 zone could offer some support.

In the news BAC was making headlines on Thursday with a story the company, one of the biggest lenders in the U.S., would stop selling its mortgages to Fannie Mae. The government-sponsored entity (GSE) Fannie Mae owns about 40% of all the mortgages in America. It's typical for banks to originate the mortgage loan and then sell it to Fannie. Yet currently BAC and Fannie Mae are fighting over how many mortgages the bank (BAC) might have to buy back from Fannie for faulty underwriting during the housing bubble (source: NYT).

- Suggested Positions -

AUG 29, 2011 - entry price on BAC @ 8.10, option @ 1.50
symbol: BAC1319A10 2013 JAN $10 call - current bid/ask $ 0.60/ 0.61
(No stop loss on this position)

(2nd Position, bought the dip at $5.15)

NOV 23, 2011 - entry price on BAC @ 5.15, option @ 0.35
symbol: BAC1319A10 2013 JAN $10 call - current bid/ask $ 0.60/ 0.61
(no stop loss on this position)

01/28/12 financials seem a bit overbought here.
01/21/12 2012 Jan. $10 calls have expired (-100%)
01/14/12 earnings are due out on Jan. 19th
01/07/12 BAC broke out past its 50-dma and the $6.00 this past week
12/17/11 expect BAC to retest the $5.10-5.00 zone.
11/23/11 BAC hits new trigger @ 5.15 to buy calls.
11/19/11 New trigger to buy calls @ $5.15 (see 2nd position)
10/03/11 Sept. 26th position stopped out at $5.75.
2012 Jan. $7.50 call @ 0.48 (-27.2%)
2013 Jan. $10 call @ 0.74 (-26%)
10/01 raising our stop loss on the Sep. 26th position to $5.75
09/24 adding 2nd position, stop loss at $5.40
09/03 no stop loss on this trade at this time.

Current Target: $12.00-to-$15.00
Current Stop loss: see details above
Play Entered on: 08/29/11
Originally listed in the New Plays 08/27/11


Bristol Meyers Squibb - BMY - close: 32.60

Comments:
02/25/12 update: BMY's big rally a week ago Friday was almost immediately erased with a big reversal lower on Tuesday. Shares came very close to filling the gap but traders started buying the dip at BMY's 10-dma. The bounce on Thursday and Friday this past week is encouraging but readers could use the rebound as a new entry point.

- Suggested Positions -
SEP 19, 2011 - entry price on BMY @ 30.53, option @ 1.20
symbol: BMY1319A35 2013 JAN $35 call - current bid/ask $ 1.10/ 1.12

02/11/12 adjust stop loss to $30.90
01/03/12 planned exit, sell half, bid on 2013 Jan $35 call @ 2.58 (+115%)
12/31/11 new stop loss @ 31.45.
12/31/11 Prepare to lock in gains and sell half of our position on Tuesday morning (Jan 3rd, 2012). The 2013 Jan $35 call currently has a bid at $2.60 (a +116.6% gain).
12/16/11 BMY hit our previous exit target at $34.50, more conservative traders may want to take profits now and exit early.
12/10/11 adjust exit target to $37.50
12/03/11 reduce our two exit targets to just one at $34.50
10/22/11 BMY is due to report earnings this week on Oct. 27th. Readers may want to take profits now or prior to the report.
10/08/11 new stop loss @ 29.40
09/16 Friday's close at $30.53 is our trigger to buy calls. Our entry will be Monday morning.

Current Target: $37.50
Current Stop loss: 30.90
Play Entered on: 09/19/11
Originally listed on the Watch List: 09/10/11


Beazer Homes - BZH - close: 3.23

Comments:
02/25/12 update: The homebuilding stocks continue to correct lower after peaking in early February. BZH has already seen a -17.8% correction. I am not convinced it's over yet and would look for shares to dip toward the $3.00 level or its rising 50-dma.

More conservative traders may want to just exit now and lock in gains before the pullback gets any worse.

I am not suggesting new positions at this time.

- Suggested Positions -

(stock position)
OCT 28, 2011 - entry price on BZH @ $2.12

(option position)
OCT 28, 2011 - entry price on BZH @ 2.12, option @ 0.70
symbol: BZH1319A2.5 2013 JAN $2.50 call - current bid/ask $ 1.25/ 1.50

02/11/12 new stop loss @ 2.75
02/04/12 new stop loss @ 2.60
01/14/12 new stop loss @ 2.30, adjust exit target to $4.75
01/07/12 new stop loss @ 2.15
12/24/11 new stop loss @ 1.95
12/03/11 new stop loss @ 1.85
11/26/11 new stop loss at $1.75
11/15/11 BZH reports a loss of 57 cents a share, worse than expected
11/12 BZH has seen a big bounce. Cautious investors may want to take profits now before BZH reports earnings on Nov. 15th. (BZH +13.2%, option +21.4%)
10/28 trade begins: BZH opens @ $2.12
10/27 BZH meets our entry point requirement with a close over $2.05

Current Target: $4.75
Current Stop loss: 2.75
Play Entered on: 10/28/11
Originally listed on the Watch List: 10/22/11


Ciena Corp. - CIEN - close: 15.68

Comments:
02/25/12 update: CIEN is not due to report earnings until March 7th but the company issued a significant earnings warning early last week. Management now expects Q1 revenues in the $415 million range compared to prior forecasts in the $435-455 million zone. Profit margins are still expected in the low 40% range. The stock was crushed on Tuesday and Wednesday for a -11.7% drop but traders finally bought the dpi on Thursday morning. Friday's rally stalled at the simple 10-dma, which is short-term bearish.

I had warned readers to expect CIEN to correct lower, possibly toward $15.00, but that was on the expectation of a wider market correction. This earnings warning is troubling and more conservative traders may want to abandon ship now and exit early. I am not suggesting new positions at this time.

Earlier Comments:
Our long-term target is $21.75. The Point & Figure chart is bullish with a $29 target. FYI: CIEN could benefit from a short squeeze. The most recent data listed short interest at 34% of the 75.9 million-share float.

- Suggested Positions -
Feb 09, 2012 - entry price on CIEN @ 16.66, option @ 2.89
symbol: CIEN1319A17.50 2013 JAN $17.50 call - current bid/ask $2.20/2.27

02/21/12 CIEN issues a revenue warning

Current Target: $21.75
Current Stop loss: 13.75
Play Entered on: 02/09/12
Originally listed on the Watch List: 02/04/12


Cisco Systems - CSCO - close: 20.14

Comments:
02/25/12 update: CSCO spent the week bouncing around between resistance near $20.50 and its trend of higher lows. If the market corrects I am still expecting CSCO to dip toward the 50-dma or the $19.00 area.

I am not suggesting new positions at this time.

- Suggested Positions -
OCT 28, 2011 - entry price on CSCO @ 18.28, option @ 1.68
symbol: CSCO1319A20 2013 JAN $20 call - current bid/ask $2.01/2.04

02/04/12 new stop loss @ 17.75
01/21/12 new stop loss @ 17.20
10/29/11 new stop loss @ 16.40
10/28/11 stock opens at $18.28
10/27/11 CSCO meets our entry requirement: close at $18.44
10/22/11 Added entry to buy a close over $17.75
10/15/11 We are adjusting our entry point. Wait for a dip to $16.65
10/14/11 CSCO hit our entry point requirement for a close over $17.50.

Current Target: $21.75
Current Stop loss: 17.75
Play Entered on: 10/28/11
Originally listed on the Watch List: 10/08/11


The Dow Chemical Co. - DOW - close: 33.82

Comments:
02/25/12 update: I have been warning readers for weeks that DOW looks overbought and due for a correction lower. It looks like that correction may have started. I am expecting a dip toward the rising 50-dma. On a positive note the 50-dma's cross up and over the 200-dma is normally a very bullish development.

I am not suggesting new positions at this time.

- Suggested Positions -
Jan 09, 2012 - entry price on DOW @ 30.46, option @ 2.40
symbol: DOW1319A35 2013 JAN $35 call - current bid/ask $ 3.05/ 3.20

- or -

Jan 09, 2012 - entry price on DOW @ 30.46, option @ 2.54
symbol: DOW1418A40 2014 JAN $40 call - current bid/ask $ 2.85/ 2.94

02/11/12 adjust stop loss to $29.45. Readers may want to take profits now.
02/02/12 missed earnings estimates by five cents
01/28/12 Readers will want to seriously consider taking profits right now, prior to the earnings report on Feb. 2nd.
01/28/12 new stop loss @ 29.75
01/21/12 new stop loss @ 28.40
01/14/12 new stop loss @ 27.75
01/06/12 DOW meets our entry requirement with a close over $30.25. Plan is to buy calls on Monday morning (01/09/12).

Current Target: $39.50
Current Stop loss: 29.45
Play Entered on: 01/09/12

Originally listed on the Watch List: 12/31/11


Enterprise Products Partners - EPD - close: 51.85

Comments:
02/25/12 update: The rally in EPD is also looking a little tired. Shares pulled back and found short-term support near $51.00 this past week. The correction may not be over yet. Readers can look for technical support near its rising 50-dma (near 48.25) although the $50.00 mark might offer some round-number support. I am not suggesting new positions at this time.

Earlier Comments:
Our long-term target is $59.00 but bear in mind that EPD doesn't normally move very fast.

- Suggested Positions -
Nov 21, 2011 - entry price on EPD @ 45.17, option @ 1.45
symbol: EPD1319A50 2013 JAN $50 call - current bid/ask $ 3.40/ 3.70

02/18/12 new stop loss @ 46.75
02/04/12 new stop loss @ 44.75
01/28/12 new stop loss @ 43.75
01/21/12 new stop loss @ 43.40
01/06/12 EPD (and PAA) both see sharp intraday dips (-5% or more)
12/31/11 2013 Jan $50 call spreads have improved significant.
12/24/11 spreads on the 2013 Jan $50 calls have widened significantly.
12/08/11 EPD gapped down on news of a 9 million share secondary price at $44.68.

Current Target: $59.00
Current Stop loss: 46.75
Play Entered on: 11/21/11
Originally listed in the New Plays 11/19/11


FedEx Corp. - FDX - close: 90.24

Comments:
02/25/12 update: The transportation sector spent a second week consolidating lower. FDX continues to underperform along with its peers. A week ago I warned readers that we could see shares of FDX testing round-number support near $90.00. More conservative traders may want to consider raising their stop loss. I am not suggesting new positions at this time.

- Suggested Positions -
Jan 11, 2011 - entry price on FDX @ 88.08, option @ 5.52
symbol: FDX1319A100 2013 JAN $100 call - current bid/ask $ 5.00/ 5.20

02/18/12 caution: FDX has produced a bearish reversal on the weekly chart
02/04/12 new stop loss @ 85.75
01/28/12 new stop loss @ 84.75
01/21/12 new stop loss @ 83.40

Current Target: $98.00
Current Stop loss: 85.75
Play Entered on: 01/11/12
Originally listed on the Watch List: 12/31/11


iShares China 25 Index ETF - FXI - close: 40.16

Comments:
02/25/12 update: The Chinese government lowered their bank reserve ratio requirement a week ago, which is a move to help stimulate their economy. This helped the Shanghai index surge to a four-day rally. News that Chinese PMI data was ticking higher is another positive sign. Yet shares of the FXI aren't moving. The FXI has been stuck in a sideways drift all week long. I would wait for a rally past $40.75 before considering new bullish positions.

Earlier Comments:
There is a growing expectation that the Chinese government will start to fuel growth in an effort to avoid a hard landing. The most recent data listed GDP growth at under 9%, the lowest reading in 10 quarters. Our target for the FXI is $49.50.

- Suggested Positions -
Feb 06, 2012 - entry price on FXI @ 39.80, option @ 1.81
symbol: FXI1319A45 2013 JAN $45 call - current bid/ask $ 1.77/ 1.85

02/06/12 FXI gapped open lower at $39.80.
02/04/12 FXI met our entry point requirement at the close on Friday. Open positions on Monday, Feb. 6th.

Current Target: $49.50
Current Stop loss: 35.75
Play Entered on: 02/06/12

Originally listed on the Watch List: 01/21/12


Hewlett-Packard - HPQ - close: 26.64

Comments:
02/25/12 update: HPQ reported earnings on Feb. 22nd. The company beat bottom line estimates by 5 cents but missed the revenue number and management guided the current quarter lower. The stock naturally sold off on the warning. HPQ gapped open lower on February 23rd and Friday's session saw another drop to close under its 100-dma. HPQ is now underneath all of its important moving averages and nearing what was support in early January in the $26.25-26.50 zone. Friday's drop is also significant because it's a breakdown under the trend line of higher lows off the 2011 low.

More conservative traders will want to seriously consider an early exit immediately. I am not suggesting new positions at this time. We will keep our stop loss at $25.75.

- Suggested (SMALL) Positions -
Longer-term Trade
Sep 26, 2011 - entry price on HPQ @ 22.59, option @ 3.75
symbol: HPQ1319A25 2013 JAN $25 call - current bid/ask $ 3.85/ 3.95
Stop Loss @ 25.75

02/22/12 HPQ reported earnings with a revenue miss and warned for the second quarter.
02/18/12 adjusted exit target to $33.75.
02/04/12 new stop loss @ 25.75
12/03/11 new stop loss @ 24.75
11/19/11 Readers need to decide: Take profits now (+76%) or hold on and expect some volatility following HPQ's earnings report on Nov. 21st
10/31/11 scheduled exit for the remainder of our 2012 calls @ the open. Options opened at $5.40 (+100%), plus we sold half of our 2013 $25 calls, which opened at $5.70 (+52%).
10/29/11 new stop loss on 2013 calls at $23.90
10/29/11 prepare to exit remainder of 2012 position on Monday @ open
prepare to sell 1/2 (half) of 2013 position on Monday at open
10/17/11 Planned exit, sell 1/2 of 2012 position, bid @ 4.10 (+52.4%)
10/15/11 new stop loss for the 2012 position @ 22.85
10/15/11 Plan to sell 1/2 of 2012 calls on Monday
10/08/11 new stop loss (both positions) at $21.40

Current Target: 2013 call target: 33.75
Play Entered on: 09/26/11
Originally listed in New Plays: 09/24/11


Intel Corp. - INTC - close: 26.70

Comments:
02/25/12 update: Intel's performance this past week was underwhelming. Shares fell back below what should have been support at $27.00. Now the stock is testing support at the bottom of its prior trading range near $26.50. If the stock market decided to correct lower we could see INTC fall toward the $25.00 area.

At this point investors may want to wait for INTC to close over $27.50 before considering new bullish positions again. We will leave our stop loss at $24.75 for now. Our long-term target is $34.00. The P&F chart is bullish with a $31.50 target. We want to keep our initial position size small to limit our risk (start with half your normal trade size or smaller).

- Suggested (small, half-sized) Positions -
Feb 21, 2011 - entry price on INTC @ 27.34, option @ 1.30
symbol: INTC1319A30 2013 JAN $30 call - current bid/ask $ 0.98/ 1.02

- or -

Feb 21, 2011 - entry price on INTC @ 27.34, option @ 2.11
symbol: INTC1418a30 2014 JAN $30 call - current bid/ask $ 1.95/ 2.00

02/21/12 INTC opened at $27.34.
02/18/12 start with small positions to limit our exposure.

Current Target: $34.00
Current Stop loss: 24.75
Play Entered on: 02/21/12

Originally listed on the Watch List: 02/11/12


Kraft Foods Inc. - KFT - close: 37.88

Comments:
02/25/12 update: On February 21st KFT reported profits and revenues that were in-line with estimates. Shares popped higher on the report but the rally ran out of steam near $38.80. KFT is now testing technical support at its 50-dma. Should the stock market correct lower we could see KFT drop toward its 100-dma near $36.50 or prior resistance near $36.00. More conservative traders may want to lock in gains now. I am not suggesting new positions at this time.

Earlier Comments:
The Point & Figure chart is forecasting a long-term target at $49.50. KFT is normally a very slow moving stock. It will take months to make any progress. Once a position is open readers may want to turn these into calendar spreads (a.k.a. vertical spreads).

- Suggested (SMALL) Positions -
Sep 22, 2011 - entry price on KFT @ 32.71, option @ 2.35
symbol: KFT1319A35 2013 JAN $35 call - current bid/ask $ 3.95/ 4.10

02/04/12 new stop loss @ 35.90
01/21/12 new stop loss @ 35.40
Readers may want to exit now with the call +102%
12/31/11 Investors may want to take profits now.
12/28/11 begins trading ex-dividend
12/24/11 new stop loss @ 34.25
12/03/11 new stop loss @ 33.85, adjusted exit target to $40.00
11/12/11 new stop loss @ 32.40

Current Target: $40.00
Current Stop loss: 35.90
Play Entered on: 09/22/11
Originally listed on the Watch List: 09/17/11


Kimberly-Clark Corp. - KMB - close: 71.81

Comments:
02/25/12 update: KMB just spent a second week consolidating sideways in the $71-72 zone. If the market cooperates we could see this stock breakout back above the $72 level soon but I am not suggesting new positions at this time.

Earlier Comments:
KMB does have long-term resistance in the $73.00-73.50 area. Therefore we will only start with small (half-sized) positions. When KMB closes above $74.00 we'll reconsider adding new positions to this play. Our long-term target is $79.75 but we'll readjust it as the play progresses. The Point & Figure chart is currently suggesting a long-term target of $109.

- Suggested Positions -
(half sized position)
Nov 07, 2011 - entry price on KMB @ 69.50, option @ 2.05
symbol: KMB1319A75 2013 JAN $75 call - current bid/ask $ 1.65/ 1.80

12/24/11 New stops loss @ 68.25. KMB has broken out to all-time highs.

Current Target: $79.75
Current Stop loss: 68.25
Play Entered on: 11/07/11
Originally listed in the New Plays 11/05/11


LDK Solar Co. Ltd. - LDK - close: 5.93

Comments:
02/25/12 update: LDK only lost four cents for the week but that doesn't illustrate the volatility solar stocks were seeing the last few days. The industry has been worried that the country of Germany would cut its subsidies for the solar industry this year. A few days ago Germany did announce a 29% reduction. Shares of LDK held up reasonably well. The stock gapped open higher last Tuesday and was slowly fading lower the rest of the week. The larger trend is up but I am not suggesting new positions at this time.

- Suggested Positions -
(buy LDK stock)
Dec 23, 2011 - entry price on LDK @ 5.31

- or -

Dec 23, 2011 - entry price on LDK @ 5.31, option @ 0.89
symbol: LDK1319A5 2013 JAN $5 call - current bid/ask $ 1.23/ 1.41

02/11/12 new stop loss @ 4.75
02/04/12 new stop loss @ 4.35
01/14/12 new stop loss @ 3.90
01/07/12 new stop loss @ 3.60

Current Target: $ 9.00
Current Stop loss: 4.75
Play Entered on: 12/23/11

Originally listed on the Watch List: 12/17/11


Eli Lilly - LLY - close: 39.05

Comments:
02/25/12 update: LLY's big bounce on Friday a week ago was erased with an even bigger decline on Tuesday. Shares recovered and only lost 21 cents for the week. The intermediate, five-week trend is down. I suspect we could still see LLY test support near $38.00 and its simple 200-dma. I am not suggesting new positions at this time.

- Suggested (SMALL) Positions -
Jan 05, 2012 - entry price on LLY @ 39.50, option @ 1.19
symbol: LLY1319A45 2013 JAN $45 call - current bid/ask $ 1.11/ 1.13

- or -

Jan 05, 2012 - entry price on LLY @ 39.50, option @ 2.75
symbol: LLY1418A45 2014 JAN $45 call - current bid/ask $ 1.60/ 1.70

01/28/12 new stop loss @ 37.75

Current Target: $44.75 & 48.00
Current Stop loss: 37.75
Play Entered on: 01/05/12

Originally listed on the Watch List: 12/17/11


Las Vegas Sands - LVS - close: 53.35

Comments:
02/25/12 update: LVS managed a gain for the week. Shares popped higher on Tuesday and spent the rest of the week drifting sideways. The stock remains overbought given its big bounce from the January lows. I would prefer to see a dip or a bounce near the $50.00 level before considering new bullish positions.

Earlier Comments:
The Point & Figure chart is bullish and has seen its target rise from $69 to $72. Our long-term target is $69.00.

- Suggested Positions -
Feb 06, 2012 - entry price on LVS @ 51.35, option @ 4.40
symbol: LVS1319A60 2013 JAN $60 call - current bid/ask $ 4.60/ 4.75

02/06/12 LVS gapped open lower at $51.35
02/04/12 LVS met our entry point requirement at the close on Friday. Open positions on Monday, Feb. 6th.

Current Target: $69.00
Current Stop loss: 47.45
Play Entered on: 02/06/12

Originally listed on the Watch List: 01/28/12


Lexmark Intl. Inc. - LXK - close: 37.25

Comments:
02/25/12 update: LXK's upward momentum definitely slowed last week. Actually the weekly chart just produced a bearish engulfing candlestick reversal pattern but these signals need to see confirmation. If LXK does break support near the $36.75 area then I would expect a dip toward the rising 50-dma (currently near 35.15). I am not suggesting new positions at this time.

NOTE: The bid on the 2013 Jan $40 call looks like a typo. Shares didn't move that much and the call shouldn't see the bid drop from $3.80 to $2.80.

Earlier Comments:
There is some resistance near $40 but our long-term target is $44.00. FYI: The Point & Figure chart on LXK is bullish with a $51 target.

- Suggested Positions -
Jan 19, 2012 - entry price on LXK @ 35.46, option @ 3.40
symbol: LXK1319A40 2013 JAN $40 call - current bid/ask $ 2.80/ 4.20

02/18/12 new stop loss @ 33.75
02/04/12 new stop loss @ 32.75

Current Target: $44.00
Current Stop loss: 33.75
Play Entered on: 01/19/12
Originally listed on the Watch List: 01/07/12


3M Co. - MMM - close: 88.20

Comments:
02/25/12 update: MMM has been on the fast track to nowhere. Shares are stuck in the $86.50-88.50 zone. Although on Friday MMM's performance offered some hope of a bullish breakout higher soon. I am not suggesting new positions at this time. More conservative traders might want to raise their stop loss.

- Suggested Positions -
Jan 19, 2012 - entry price on MMM @ 85.10, option @ 3.30
symbol: MMM1319A95 2013 JAN $95 call - current bid/ask $ 3.65/ 3.75

02/04/12 new stop loss @ 81.75

Current Target: $97.00
Current Stop loss: 81.75
Play Entered on: 01/19/12
Originally listed on the Watch List: 12/03/11


Marvell Technology - MRVL - close: 15.46

Comments:
02/25/12 update: Uh-oh! Trading in MRVL has taken a turn for the worse after the company reported earnings on Feb. 23rd. MRVL beat estimates by 3 cents and revenues also came in better than expected. Management even provided generally bullish guidance but the stock sold off anyway. I would look for support near its 50-dma or the $15.00 level. More aggressive traders may want to put their stop under $14.50 and its 200-dma. We currently have a stop loss at $14.75.

I am not suggesting new positions at this time.

- Suggested Positions -
Feb 03, 2012 - entry price on MRVL @ 16.74, option @ 2.14
symbol:MRVL1319A17.5 2013 JAN $17.50 call - current bid/ask $ 1.38/ 1.45

02/23/12 MRVL reported earnings
02/11/12 adjust stop loss down to $14.75

Current Target: $21.75
Current Stop loss: 14.75
Play Entered on: 02/03/12

Originally listed on the Watch List: 01/28/12


Motorola Solutions, Inc. - MSI - close: 49.43

Comments:
02/25/12 update: MSI has been consolidating lower, digesting gains from the prior three weeks. A week ago I cautioned readers to look for a dip near $49-48 as a new bullish entry point and MSI is almost there. Broken resistance near $48.00 should be new support.

- Suggested Positions -
Feb 17, 2012 - entry price on MSI @ 49.35, option @ 2.27
symbol: MSI1319A55 2013 JAN $55 call - current bid/ask $ 2.08/ 2.20

02/18/12 new stop loss @ 45.75
02/17/12 trades opens on Friday morning at $49.35
02/16/12 MSI meets our requirement to open positions
02/04/12 if triggered, use a stop loss at $43.95
01/28/12 MSI underperformed as investors sold the stock following its earnings report. If MSI doesn't improve this week we'll drop it as a candidate.

Current Target: $64.50
Current Stop loss: 45.75
Play Entered on: 02/17/12

Originally listed on the Watch List: 12/10/11


Nike Inc. - NKE - close: 106.29

Comments:
02/25/12 update: NKE hit some profit taking on Tuesday and spent the rest of the week drifting higher. Short-term the upward momentum looks tired. NKE could easily correct lower toward the 50-dma or the $100 level while maintaining the larger up trend. I am not suggesting new positions at this time.

Earlier Comments:
FYI: The Point & Figure chart for NKE is bullish with a $115 target.

- Suggested Positions -
Jan 13, 2012 - entry price on NKE @ 98.39, option @ 4.95
symbol: NKE1319A110 2013 JAN $110 call - current bid/ask $ 7.60/ 7.80

02/18/12 new stop loss @ 96.75
02/04/12 new stop loss @ 94.75

Current Target: $119.00
Current Stop loss: 96.75
Play Entered on: 01/13/12
Originally listed on the Watch List: 12/24/11


ON Semiconductor Corp. - ONNN - close: 8.96

Comments:
02/25/12 update: The correction in ONNN has begun. Shares broke the seven-week up trend. I am expecting a pullback toward the $8.50 area, which should be new support. Wait for the dip or a bounce near $8.50 before considering new bullish positions.

- Suggested (small) Positions -
Jan 19, 2012 - entry price on ONNN @ 8.96, option @ 1.00
symbol:ONNN1319A10 2013 JAN $10 call - current bid/ask $ 0.85/ 1.00

02/11/12 new stop loss @ 8.35
02/04/12 new stop loss @ 7.90

Current Target: $11.45
Current Stop loss: 8.35
Play Entered on: 01/19/12
Originally listed on the Watch List: 12/10/11


QUALCOMM Inc. - QCOM - close: 63.44

Comments:
02/25/12 update: QCOM continues to climb. Shares are up ten weeks in a row and trading at multi-year highs. I would not chase it here. The relative strength is great but QCOM is overbought. Broken resistance in the $59-60 zone should be new support.

I am not suggesting new positions at this time.

- Suggested (SMALL) Positions -
NOV 23, 2011 - entry price on QCOM @ 52.50, option @ 4.90
symbol: QCOM1319A60 2013 JAN $60 call - current bid/ask $ 8.00/ 8.15

02/18/12 new stop loss @ 55.75
02/11/12 new stop loss @ 54.75
02/04/12 new stop loss @ 53.75
01/07/12 new stop loss @ 51.45. Investors may want to exit early. The worry of potential accounting risks have cast a shadow over QCOM.
11/23/11 QCOM hits our trigger @ 52.50

Current Target: $74.50
Current Stop loss: 54.75
Play Entered on: 11/23/11
Originally listed on the Watch List: 11/05/11


Reynolds American Inc. - RAI - close: 41.28

Comments:
02/25/12 update: RAI continues to show a little volatility as traders bought the dip midweek and shares rebounded to close near the prior week's highs. The bounce near $40.00 is bullish but I would not launch new positions here. RAI still has overhead resistance near the $42.00 level.

- Suggested Positions -
Nov 18, 2011 - entry price on RAI @ 40.02, option @ 2.00
symbol: RAI1319A42.5 2013 JAN $42.50 call - current bid/ask $ 1.35/ 1.50

01/28/12 RAI and the rest of the tobacco stocks are underperforming. Readers might want to exit early now given RAI's relative weakness.

Current Target: $49.00
Current Stop loss: 37.85
Play Entered on: 11/18/11
Originally listed on the Watch List: 10/22/11


Rowan Companies - RDC - close: 38.78

Comments:
02/25/12 update: RDC continues to show relative strength as well thanks to a big rally in crude oil that's fueling gains for the energy sector. This stock is now up six weeks in a row. I am not suggesting new positions at this time. RDC could see some profit taking on its earnings report. The company will announce on February 28th, before the opening bell. Wall Street expects a profit of 31 cents a share.

I am raising our stop loss up to $34.75.

- Suggested Positions -
Feb 03, 2012 - entry price on RDC @ 37.54, option @ 4.30
symbol: RDC1319A40 2013 JAN $40 call - current bid/ask $ 4.50/ 4.80

02/25/12 new stop loss @ 34.75

Current Target: $44.50
Current Stop loss: 34.75
Play Entered on: 02/03/12
Originally listed on the Watch List: 01/28/12


Starbucks Corp. - SBUX - close: 48.30

Comments:
02/25/12 update: SBUX is little changed with a 15-cent loss for the week. Shares are hovering near $48.00 and its 30-dma. If the stock market does see a correction I would expect SBUX to pull back toward the $46.00-45.00 zone. The big picture for SBUX is still bullish but the stock remains overbought and due for a correction. I'm not suggesting new positions at this time.

FYI: The Point & Figure chart for PEP is bullish with a long-term $75 target.

- Suggested (SMALL) Positions -
Dec 27, 2011 - entry price on SBUX @ 45.40, option @ 4.00
symbol: SBUX1319A50 2013 JAN $50 call - current bid/ask $ 4.10/ 4.20

01/28/12 new stop loss at $42.40
12/27/11 launch positions at the open on Tuesday

Current Target: $55.00
Current Stop loss: 42.40
Play Entered on: 12/27/11
Originally listed on the Watch List: 12/10/11


Teva Pharmaceuticals - TEVA - close: 44.59

Comments:
02/25/12 update: It proved to be a quiet week for TEVA with shares only losing six cents. The stock continues to trade under the short-term bearish trend of lower highs. It's also respecting technical support at the rising 50-dma. One of these trends is going to break soon. If the stock market breaks down then I would look for TEVA to test the $42 area.

I am not suggesting new positions at this time.

- Suggested Positions -
Jan 19, 2012 - entry price on TEVA @ 45.40, option @ 2.49
symbol: TEVA1319A50 2013 JAN $50 call - current bid/ask $ 1.80/ 1.87

- or -

Jan 19, 2012 - entry price on TEVA @ 45.40, option @ 4.40
symbol: TEVA1418A50 2014 JAN $50 call - current bid/ask $ 3.75/ 4.00

02/04/12 new stop loss @ 41.40

Current Target: $54.00
Current Stop loss: 41.40
Play Entered on: 01/19/12

Originally listed on the Watch List: 01/14/12


UnitedHealth Group - UNH - close: 55.65

Comments:
02/25/12 update: UNH continues to show relative strength with shares climbing to new three-year highs. If the market does pull back we could see UNH dip toward the $53.00-52.00 area. A bounce near $53-52 be used as a new bullish entry point. FYI: The Point & Figure chart is bullish with a $62 target.

- Suggested Positions -
Feb 15, 2012 - entry price on UNH @ 54.53, option @ 3.25
symbol: UNH1319A60 2013 JAN $60 call - current bid/ask $ 3.25/ 3.40

- or -

Feb 15, 2012 - entry price on UNH @ 54.53, option @ 5.00
symbol: UNH1418A60 2014 JAN $60 call - current bid/ask $ 5.60/ 6.00

Chart of UNH:
%IMG4%

Current Target: $63.00
Current Stop loss: 49.45
Play Entered on: 02/15/12

Originally listed on the Watch List: 02/11/12


Verizon Communications - VZ - close: 38.14

Comments:
02/25/12 update: VZ saw some minor profit taking with traders buying the dip near its 20-dma. I remain concerned that this three-week consolidation of higher lows and higher highs could be a bear-flag pattern. I am not suggesting new positions at this time.

- Suggested Positions -
Dec 23, 2011 - entry price on VZ @ 39.42, option @ 2.17
symbol: VZ1319A40 2013 JAN $40 call - current bid/ask $ 1.17/ 1.21

- or -

Dec 23, 2011 - entry price on VZ @ 39.42, option @ 2.87
symbol: VZ1418A40 2014 JAN $40 call - current bid/ask $ 2.01/ 2.14

01/28/12 readers may want to consider an early exit immediately
01/24/12 VZ reported earnings and missed by a penny. Shares broke down on this news.

Current Target: $45.00
Current Stop loss: 36.75
Play Entered on: 12/23/11

Originally listed on the Watch List: 12/17/11


U.S. Steel Corp. - X - close: 28.13

Comments:
02/25/12 update: Hmm... another week has gone by and X's oversold bounce from support didn't make it very far. Shares have faded lower back toward the key trend line of higher lows that started from the October 2011 low (shown on last week's chart). A breakdown here would be bearish and probably see shares fall toward $26.00 or worse. We currently have a stop loss at $26.40. I am not suggesting new positions at this time.

Earlier Comments:
This is an aggressive trade because X can be volatile and we have a wide stop loss. That's why we're using small positions to limit our risk.

- Suggested (SMALL) Positions -
Nov 09, 2011 - entry price on X @ 25.50, option @ 5.00
symbol: X1319A30 2013 JAN $30 call - current bid/ask $ 3.95/ 4.05

02/04/12 new stop loss @ 26.40
01/28/12 new stop loss @ 24.75
01/14/12 new stop loss @ 23.60
12/03/11 new stop loss at $21.90
11/09/11 Trade opened at $25.50 (small positions)

Current Target: $37.50
Current Stop loss: 26.40
Play Entered on: 11/09/11
Originally listed on the Watch List: 11/05/11


Exxon Mobil - XOM - close: 87.34

Comments:
02/25/12 update: A couple of weeks ago we were worried that XOM had formed a bearish head-and-shoulders top. Yet a rally in crude oil has fueled widespread gains for the energy sector. XOM has managed to bounce off technical support at its 50-dma. Now shares are nearing major resistance at the $88 area. A breakout past $88.00 could signal a run toward all-time highs near the $95 area.

Currently oil looks short-term overbought and due for a dip. I am not suggesting new positions on XOM at this time.

- Suggested Positions -
Dec 22, 2011 - entry price on XOM @ 83.56, option @ 4.63
symbol: XOM1319A90 2013 JAN $90 call - current bid/ask $ 4.80/ 4.90

- or -

Dec 22, 2011 - entry price on XOM @ 83.56, option @ 6.25
symbol: XOM1418A95 2014 JAN $95 call - current bid/ask $ 5.70/ 5.85

02/11/12 recent action looks like a bearish H&S pattern with an $80 target.
01/28/12 readers may want to raise their stop prior to earnings
01/21/12 new stop loss at $79.40
01/07/12 new stop loss @ 77.90

Current Target: $94.00
Current Stop loss: 79.40
Play Entered on: 12/22/11

Originally listed on the Watch List: 12/03/11


CLOSED Plays


CSX Corp. - CSX - close: 21.66

Comments:
02/25/12 update: Murphy's Law continues to strike. A week ago we were worried with the relative weakness and breakdown in shares of CSX. I suggested that we cut our losses and exit early on Tuesday morning at the open. What does CSX do? The stock gaps open lower near support at $21.00 and then rallied toward its 50-dma by Friday morning.

Our play was closed on Tuesday's gap down at $21.21.

- Suggested Positions -
NOV 14, 2011 - entry price on CSX @ 22.59, option @ 2.24
symbol: CSX1319A25 2013 JAN $25 call - exit $0.88 (-60.7%)

- or -

NOV 14, 2011 - entry price on CSX @ 22.59, option @ 3.30
symbol: CSX1418A25 2014 JAN $25 call - exit $1.80 (-45.4%)

02/21/12 exit on Tuesday's gap down
02/18/12 prepare to exit. Close positions at the open on Tues. Feb. 21st
02/04/12 new stop loss @ 20.75
01/28/12 adjust stop loss to $19.95
12/17/11 CSX is starting to bounce from support near $20. This can be used as a new entry point
11/26/11 I had cautioned readers to expect a potential dip to $20.00. CSX hit this level on Friday.

Chart of CSX:

Current Target: $29.75
Current Stop loss: 20.75
Play Entered on: 11/14/11
Originally listed in the New Plays 11/12/11



Watch

Mining, Oil, and Internet

by James Brown

Click here to email James Brown


New Watch List Entries

CDE - Coeur d'Alene Mines Corp

CVX - Chevron Corp

NTES - NetEase.com, Inc.


Active Watch List Candidates

MCD - McDonald's Corp

NVDA - NVIDIA Corp


Dropped Watch List Entries



New Watch List Candidates:


Coeur d'Alene Mines Corp. - CDE - close: 28.39

Company Info

CDE is in the mining industry. They are best known for their silver mining but also generate gold, lead and zinc. The stock has been trading under resistance near $30.00 for several months. You could argue that CDE has built a huge, inverse head-and-shoulders (bullish) pattern. A breakout across the neckline could signal a run towards the $38-40 zone.

I am suggesting we wait for CDE to close over $30.25 and then buy calls the next day. More aggressive traders may want to buy an intraday rally past $30.25 since CDE could see some short covering on a breakout past resistance.

If our trade is opened we'll start with a stop loss at $26.75. Our long-term target is $37.00.

Breakout trigger: Wait for a close over $30.25 and buy calls the next day.

BUY the 2013 Jan $35 call (CDE1319A35)

Chart of CDE:

Originally listed on the Watch List: 02/25/12


Chevron Corp. - CVX - close: 109.08

Company Info

Crude oil is in breakout mode. The falling U.S. dollar and rising escalation with Iran are fueling gains for oil. We're also facing the summer driving season ahead when oil prices tend to see a seasonal rise. If this trend continues we could see CVX breakout past major resistance in the $110 area.

The early 2012 high was $110.99. I am suggesting we wait for CVX to close over $111.00 and then buy calls the next day with a stop loss at $105.75 (under the 50-dma). Our long-term target is $125.00. FYI: the Point & Figure chart for CVX is bullish with a $133 target.

Breakout trigger: Wait for CVX to close over $111.00 and buy calls the next day.

BUY the 2013 Jan $120 call (CVX1319A120)

- or -

BUY the 2014 Jan $120 call (CVX1418A120

Chart of CVX:

Originally listed on the Watch List: 02/25/12


NetEase.com - NTES - close: 49.99

Company Info

NTES is a Chinese Internet company. Shares have been pretty volatile the last several months but the larger trend is a bullish one. The recent consolidation over the last five weeks looks like a springboard for NTES to surge higher.

The February high so far is $51.04. I am suggesting we wait for NTES to close over $51.50 and then buy calls the next day with a stop loss at $46.50, which is just under the February low. If triggered our long-term target is $64.00. Currently the Point & Figure chart is bullish with a $68 target.

I want to remind readers that NTES can be volatile so we want to start with small positions (at least half your normal trade or smaller).

Breakout trigger: Wait for NTES to close over $51.50, then buy calls the next day (SMALL POSITIONS)

BUY the Jan $60 call (NTES1319A60)

Chart of NTES:

Originally listed on the Watch List: 02/25/12


Active Watch List Candidates:



McDonald's Corp. - MCD - close: 100.32

Comments:
02/25/12 update: MCD spent the week drifting higher but shares have yet to break the new trend of lower highs. We're still holding out for a correction lower. Right now the plan is to buy calls on a dip at $95.50. Nimble traders may want to focus on the simple 100-dma instead.

Our long-term target is $108.00.

Buy-the-Dip trigger: $95.50, stop 89.50

BUY the 2013 Jan $100 call (MCD1319A100)

12/24/11 adjusted entry point to $95.50, stop loss to $89.50
12/17/11 adjusted entry point to $91.50, stop loss to $87.25
11/26/11 adjusted stop loss to $86.45

Originally listed on the Watch List: 11/05/11


NVIDIA Corp. - NVDA - close: 15.79

Comments:
02/25/12 update: NVDA spent most of last week consolidating sideways in the $16.00-15.50 zone. Aggressive traders might want to consider buying calls on a dip or a bounce near short-term support at $15.00 and its 200-dma. I am suggesting we wait for a breakout.

Wait for NVDA to close over $17.05 before we initiate positions the next day with a stop loss at $15.40. Our long-term target is $21.75.

FYI: The Point & Figure chart is bullish with a long-term $23 target.

Wait for a close over: $17.05, buy calls the next day.
stop loss @ 15.40.

BUY the 2013 Jan $20 call (NVDA1319A20)

Originally listed on the Watch List: 02/18/12