Option Investor
Newsletter

Daily Newsletter, Sunday, 3/4/2012

Table of Contents

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

Leaps Trader Commentary

Small Cap Warning

by James Brown

Click here to email James Brown

Funder managers would probably be happy if the year ended right here ten months early. The S&P 500 index was up near +10% for the year midweek. The slow drift higher continued with the Dow Industrials and the S&P 500 hitting levels not seen since the first half of 2008. The NASDAQ composite tagged the 3,000 mark, a level it has not seen since December 2000. Yet this is hardly the picture of a roaring bull market. Trading volume was low all week. WTI crude oil rallied to $110 a barrel midweek before a bounce in the U.S. dollar sparked some profit taking. Precious metals experienced volatile trading thanks to the dollar and comments from the Federal Reserve chairman. Gold futures were trading near $1,788 an ounce on Tuesday and fell more than -4% to $1,710 on Wednesday. Meanwhile, Apple Inc. (AAPL) saw its market cap hit half a trillion dollars, the largest of any company on earth.

Last week was a busy one for economic data. Some of the highlights were pending home sales for January jumped +2.0% versus expectations for +1.0% gains. The Conference Board's Consumer Confidence Index rallied from 61.5 in January to 70.8 in February, well past expectations for a small rise into the 62-63 zone. The U.S. Q4 GDP estimate was revised higher from +2.8% to +3.0% growth. Chicago PMI came in better than expected at 64.0 for February versus estimates for a mild drop to 60.0. Readings over 50.0 indicate growth. The Fed's Beige Book report was generally positive suggesting the U.S. economy continues to grow at a modest pace for the first quarter this year. Thursday saw relatively strong same-store sales numbers from many of the major retailers that still report this data. The weekly initial jobless claims were essentially unchanged for the week at 351,000.

In the not so great category we saw durable goods orders for January plunge -4.0% when economists were only expecting a -1.4% decline. The ISM manufacturing data fell from 54.1 in January to 52.4 in February. Economists had been expecting a rise toward the high 54s. Then there was Ben Bernanke, in his semiannual appearance before the House Financial Services Committee, making headlines. The FOMC chairman's comments failed to reassure the market that the Fed was planning any further quantitative easing (i.e. there was no hint of QE3 in his remarks). The U.S. dollar rallied following these comments and helped spark the sell-off in gold and silver.

One of the biggest events last week was the ECB's second round of three-year LTRO 1% money offerings. A week ago the general consensus was too much borrowing by European banks in this second LTRO offering would be seen as weakness and a troubling sign. Yet by Wednesday the view had changed and the "market" wanted to see banks taking advantage of this cheap money. Back in December the ECB loaned almost 490 billion euros to 523 banks. This past week that number jumped to almost 530 billion euros (about $713 billion) to over 800 banks, which was considered a success. The question is what will these banks do with the cash? The original concept was the ECB would loan money at 1% and banks would then turnaround and buy short-term bonds from struggling nations (like the PIIGS countries) at higher yields. New demand for this debt would bring down interest rates for these nations and help defuse the toxic debt time bomb (or at least delay it) while also lowering the borrowing costs for these countries struggling with dangerously high debt levels. It would be a win-win for everyone and it seemed to work back in December. The jury is still out on this latest effort.

Major Indices:

The S&P 500 index has spent more than two months rising in a narrow, bullish channel. The action this past week threatens a potential breakdown from this channel. The S&P 500 did hit new highs not seen since 2008 but they were never very convincing. Yet in spite of all the warnings that the market is tired and due for a pullback the S&P 50 is still trading above its rising 10-dma, a level traders have been using to buy the dip.

Is this rally tired? According to most of the momentum indicators the answer is yes. They have been stuck at overbought levels for weeks. At this point every dip lower seems to threaten the long-overdue correction. You already know that a typical bull-market correction is in the -3% to -5% range. Yet this market is so overbought we face a greater risk of a -5% to -10% drop. On a short-term basis I would still look for support near 1340, 1320 and the 1300 level.

If traders continue to buy the dip then a breakout past 1380 puts round-number resistance at 1400 as the next major target.

Daily chart of the S&P 500 index:

90 minute chart of the S&P 500 index:

The rally in the tech-heavy NASDAQ composite is also slowing down. If it had not been for another very strong +4.4% gain in shares of AAPL last week the NASDAQ may have posted a loss. I cautioned readers a week ago that the 3,000 level would probably act as round-number, psychological resistance. The NASDAQ is still in danger of a reversal.

The index is trading just outside its narrow bullish channel that began back in December. Furthermore Wednesday's intraday reversal at the 3,000 level is still looming. The index created a bearish engulfing candlestick reversal pattern. These normally need to see confirmation. Yet the last two days have seen the NASDAQ trade inside Wednesday's range. We could still see the NASDAQ breakdown, confirm the reversal pattern, and start a long overdue correction.

Sometimes the market is like a rubber band; the farther you stretch it one direction the bigger and faster it snaps back. That's my concern with the market's current rally off the December 2011 lows. On a short-term basis, if the market does correct, I would look for potential support near 2930 and then the 2900 level. If these levels fail then look for support near 2860, which is almost a -5% pullback from the 3,000 level.

While stocks tend to move faster going down than they go up the correction may not happen all at once. It took several weeks for the current rally to get this far. It could take a few weeks for any correction to run its course.

The second chart below is the NASDAQ-100 index ($NDX), which remains inside its narrow bullish channel (for now). That could change after AAPL's announcement on Wednesday since AAPL is such a large component of the $NDX.

Daily chart of the NASDAQ Composite index:

Intraday chart of the NASDAQ-100 index:

One of the most troubling events of the week is the performance of the small cap Russell 2000 index. The $RUT has been consolidating sideways for most of February. It appeared to breakdown on Wednesday and then Friday's drop only confirmed the breakdown. The 800 level could offer some round-number support but the path of least resistance, at least short-term, is now lower. This weakness in the $RUT is a good example of how we are losing leadership in the market rally. The list of stocks pushing the major indices higher is getting smaller and smaller. If the 800 level breaks, I would expect a correction toward the 775 area. You can see on the weekly chart how this looks like a failure and reversal at the trend line of resistance.

Daily chart of the Russell 2000 index

Weekly chart of the Russell 2000 index

We want to continue watching the Dow Jones Transportation Average. The sector underperformed most of February but started to bounce after testing the 5100 level. Rising oil prices are weighing on this group but a drop in oil on Friday failed to stop another day of selling for the transports. Has the oversold bounce just failed at the new trend line of lower highs? Does this mean the correction is not over yet? We won't know until we see the $TRAN breakout or breakdown. Just as many use the small cap Russell 2000 index as a sentiment indicator others use the transportation average as a sentiment indicator and a proxy for the economy. Future direction here depends on what happens with oil and that will be influenced by the U.S. dollar. Currently analysts are expecting the price of oil and gasoline at the pump to continue rising into summer, which would be bearish for transports and bearish for consumers.

Daily chart of the Transportation Average

Another chart we want to watch is Apple Inc. (AAPL). Shares have continued to rally with another +4.4% gain last week. This stock set a new record last week pushing AAPL's market cap to half a trillion dollars. It is now the largest company on the planet by market cap. Investors are bidding the stock higher in anticipation of a new product announcement this week on Wednesday. Most believe it will be a new iPad of some sort, maybe the iPad 2s or iPad 3. Regular traders of AAPL stock also know that AAPL tends to see a "sell the news" reaction to any product announcement. A sharp sell-off here could have a big impact on the NASDAQ-100 and NASDAQ composite.

Shares are up +50% from their late November 2011 lows. AAPL is definitely due for a correction. The first level to look for potential support would be the 10-dma near $526 but I would not expect that level to hold on any real pullback. The $500 level might be a good round-number, psychological level to watch.

Daily chart of Apple Inc. (AAPL)

We have another busy week of economic data in front of us. The key reports to watch are the ISM services, ADP employment report, and of course the nonfarm payrolls (jobs) report that comes out on Friday. Another potential market mover is the AAPL product announcement on Wednesday (see my comments in the prior paragraph).

- Monday, March 5 -
Factory orders for January
ISM Services index for February

- Wednesday, March 7 -
ADP employment report
Apple Inc. (AAPL) announcement (iPad 3 anyone?)

- Thursday, March 8 -
Weekly Initial Jobless Claims
Challenger mass layoffs report

- Friday, March 9 -
nonfarm payrolls (jobs) report for February
unemployment rate
Wholesale inventory data for January

Additional key dates coming up:

Mar. 20th, Greek deadline for $19 billion debt payment

The Week Ahead:

There are just over two weeks to go before Greece's March 20th deadline for its $19 billion debt payment. Right now the focus is on the Greek private sector investor vote to accept the 50% haircut on Greek bonds. If 66% of bond holders accept this deal then Greece will enact their "collective action clause" and force the remaining 34% to accept the same terms. This will likely result in lawsuits and those still holding onto their credit default swaps will try to collect. There was an uproar this past week then regulators claimed that this "voluntary" haircut would not trigger the CDS contracts. If this goes through it's going to cause a lot of concern over the entire CDS market, especially for European debt. What good are these credit default swaps if you can't collect on them when the country defaults?

I have been warning readers for weeks that my bigger concerns are not Greece but the other PIIGS countries. If Greece is allowed to cut its debt in half with this deal then Spain, Ireland, Portugal and Italy will all want the same deal. There are already accusations that Spain not trying to meet its budgetary targets. This way as the situation worsens it can try and work out a similar "soft" default on its massive debt load. The Greek story might be closing a significant chapter soon but this story of toxic European debt is far from over.

In other news the worry over rising gasoline prices continues to get play in the media. My question is this, if Wall Street was really worried about the impact of high gas prices on consumers then why is the RLX retail index setting at all-time highs? You would think investors would be selling the retailers.

Overall not much has changed from my comments a week ago at least for the big cap indices. The market's trend is up but momentum is teetering. The NASDAQ and the S&P 500 both look like they're on the verge of correcting lower. The only significant change is the relative weakness in the Russell 2000, which could be signaling the start of a market correction. At this point I would welcome a correction just to get it over with and relieve the market's overbought conditions. Now would be a good time to make a list of stocks you'd considering buy call LEAPS on following a -10% correction in their share price.

- James


Portfolio

Portfolio Update

by James Brown

Click here to email James Brown


Current Portfolio


Portfolio Comments:

The S&P 500 and NASDAQ extended their gains but both indices are flirting with a breakdown from their narrow bullish channels. The Dow Industrials can't hold any gains past the 13,000 mark. Meanwhile the small cap Russell 2000 index is starting to breakdown after weeks of consolidating sideways.

Is the long overdue correction lower about to begin? There are signs suggesting the market could be ready to decline but it hasn't happened yet. Our portfolio is seeing some weakness in technology and the basic material names. It certainly looks like momentum is about to roll over.

We did see HPQ hit our stop loss as the post-earnings sell-off continues. Meanwhile NTES made the jump from our watch list to play list.

I have updated stop losses on: FDX, NKE, 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

Has It Started?

by James Brown

Click here to email James Brown

Editor's Note:

The market's big cap indices are little changed from a week ago. The S&P 500 and the NASDAQ managed to eke out new weekly gains. Yet the Dow Industrials are still struggling with the 13,000 level. Meanwhile the small cap Russell 2000 index is breaking down from its trading range.

If the small caps are breaking down the big caps may not be that far behind. Momentum has definitely slowed and the S&P 500 and NASDAQ are technically just outside their narrow, bullish channels. After a +10% gain this year the S&P 500 is overdue for a pullback.

I am reluctant to open new bullish positions with the market on the verge of a correction lower. The good news is that a healthy market correction will be an entry point for new positions as we look further into 2012 and beyond.

Our watch list continues to generate new trades and we added three new candidates tonight. In addition to the watch list here are several stocks on my radar screen. They are not ready to be listed as new plays or watch list candidates but that could change on a correction or a breakout higher.

On my radar: MON, EBAY, SCHW, EXPE, MDR, CLB, AIG, ARO, SODA, CREE, C, WYNN.


Play Updates

A Very Mixed Picture

by James Brown

Click here to email James Brown

Editor's Note:

NTES has been added to the active trade list.


Closed Plays


HPQ hit our stop loss.


Play Updates


Archer-Daniels-Midland Company - ADM - close: 31.64

Comments:
03/03/12 update: ADM spent the week consolidating sideways under short-term resistance near $31.80. I don't see any changes from my prior comments. I'd wait for a dip or a bounce near the $30.50-30.00 zone before considering new bullish positions.

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 $ 1.67/ 1.72

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: 89.24

Comments:
03/03/12 update: It proved to be a bullish week for AGN. Early on the stock rallied toward resistance and its 2012 highs near $90.00. The last couple of days AGN has been consolidating sideways under the $90 level. If the stock market cooperates I would expect AGN to breakout higher. If not then shares might see support near its 100-dma or the 200-dma.

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 $ 2.85/ 3.50

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: 36.30

Comments:
03/03/12 update: The correction in AKAM continues. This should not surprise readers here. We've been expecting a pull back. I am still expecting a drop into the $35-34 zone. I am not suggesting new positions at this time.

- Suggested Positions -
FEB 10, 2012 - entry price on AKAM @ 37.60, option @ 5.40
symbol:AKAM1319A40 2013 JAN $40 call - current bid/ask $ 4.15/ 4.30

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: 8.13

Comments:
03/03/12 update: BAC recovered off its Monday morning lows but spent most of the week churning sideways in the $8.00-8.20 zone. By Friday's closing bell BAC posted a gain for the week but bigger picture the stock has been chopping sideways for three weeks. If the market does see a true correction I would expect a dip in BAC toward the $7.00 area. I am not suggesting new positions at this time.

- Suggested Positions -

AUG 29, 2011 - entry price on BAC @ 8.10, option @ 1.50
symbol: BAC1319A10 2013 JAN $10 call - current bid/ask $ 0.64/ 0.65
(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 $ 0.64/ 0.65
(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: 32.59

Comments:
03/03/12 update: BMY is virtually unchanged for the week. Traders did buy the dip on Thursday near $32.00 and created a bullish engulfing candlestick pattern (on a short-term basis) but Friday failed to show any follow through. Big picture BMY still has a long-term trend of higher lows and higher highs. At the moment I am not suggesting new bullish positions but a close over its 50-dma might change my mind.

- Suggested Positions -
SEP 19, 2011 - entry price on BMY @ 30.53, option @ 1.20
symbol: BMY1319A35 2013 JAN $35 call - current bid/ask $ 1.08/ 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: 3.22

Comments:
03/03/12 update: Is the correction in the homebuilders finally over? The stock is down three weeks in a row. Yet if you look at the daily or intraday chart you can see that BZH has essentially consolidated sideways for the last eight days in a row. A close back above the $3.40 level would be encouraging.

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 $ 1.20/ 1.40

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: 14.48

Comments:
03/03/12 update: Ouch! The correction on shares of CIEN continues. The stock broke down under the $15.00 level and under both its 200-dma and 50-dma this past week. Shares are off -15% from its high two weeks ago. The next level of support is the $14.00 level. Nimble traders could buy calls on a bounce off $14 but wait until after the earnings report.

CIEN is due to report earnings on March 7th before the opening bell. Analysts are expecting a loss of 4 cents a share. The company already warned several days ago so there is a chance the stock could see a relief rally.

Earlier Comments:
Our long-term target is $21.75. 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 $1.64/1.70

03/03/12 Earnings are coming up on March 7th
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: 19.76

Comments:
03/03/12 update: It looks like the correction in CSCO has begun. You could argue the highs in February mark a bearish double top. Odds are pretty good the correction could pull CSCO into the $18.50-18.00 zone.

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 $1.82/1.85

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: 34.20

Comments:
03/03/12 update: I am surprised that DOW did not see further declines this past week. Traders bought the dip twice near $33.25 and remain inside its February trading range. While I still expect a correction lower it's possible that shares my continue to consolidate sideways. If DOW does correct look for a dip toward $31-30.

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 $ 3.20/ 3.30

- or -

Jan 09, 2012 - entry price on DOW @ 30.46, option @ 2.54
symbol: DOW1418A40 2014 JAN $40 call - current bid/ask $ 2.90/ 3.00

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: 52.29

Comments:
03/03/12 update: EPD continues to drift higher with its bullish trend of higher lows. If the market cooperates we could see EPD breakout to new highs past $53.00. On the other hand if the market finally corrects, and it's overdue for a pullback, then look for EPD to dip toward the $50 area.

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 $ 3.60/ 3.90

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: 90.78

Comments:
03/03/12 update: FDX actually delivered a gain for the week. Is the correction over? We don't know the answer yet. Traders did buy the dip twice at FDX's rising 50-dma. Yet at the same time shares are still building a bearish trend of lower highs. I am still concerned that the market is overbought and due for a correction. If the market does correct we can look for FDX to dip toward the $86-85 zone. I hate to do it but I think our stop loss at $85.75 is too high for this long-term trade. We'll adjust it back down to $84.45. 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 $ 5.20/ 5.35

03/03/12 tweaking our stop loss and moving it lower to $84.45
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: 84.45
Play Entered on: 01/11/12
Originally listed on the Watch List: 12/31/11


iShares China 25 Index ETF - FXI - close: 40.27

Comments:
03/03/12 update: The FXI posted a gain for the week but this was just a fluke of where it closed on Friday. Shares of this Chinese ETF have been consolidating sideways the last few days. Traders did buy the dip on Monday morning near its rising 30-dma.

The stock tried to breakout past $40.75 again but failed on Wednesday. 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 $ 1.75/ 1.82

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


Intel Corp. - INTC - close: 26.92

Comments:
03/03/12 update: INTC produced a gain for the week. The stock also produced a new lower high near $27.30. Shares have been churning sideways for multiple weeks now. Readers may want to wait for a dip or a bounce near $25.00 before considering new bullish positions.

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 $ 1.04/ 1.06

- or -

Feb 21, 2011 - entry price on INTC @ 27.34, option @ 2.11
symbol: INTC1418a30 2014 JAN $30 call - current bid/ask $ 2.06/ 2.14

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: 38.25

Comments:
03/03/12 update: KFT ended the week with a small gain. Unfortunately shares also set new lower lows in its four-week consolidation lower. I don't see any changes from my prior comments. 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 $ 4.20/ 4.30

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: 72.35

Comments:
03/03/12 update: It was a bullish week for KMB but the stock closed off its best levels. Shares saw a spike above $73.00 before profit taking on Thursday pulled KMB lower. Helping fuel the move higher was news that KMB's board of directors had approve an increase in the dividend to 74 cents a share, up from 70 cents. KMB now has an annual yield of 4.1%.

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 $ 1.80/ 1.90

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: 5.56

Comments:
03/03/12 update: Warning! The action in LDK this past week was bearish. Previously we thought worries about a major cut in Germany subsidies for the solar industry had already been factored into the market but now there are new worries about changes to Germany subsidies affecting the solar business.

The action in LDK's stock price was bearish with a failed rally pattern on Tuesday and four declines in a row. LDK ended the week with a -6.2% loss. The 50-dma or 200-dma might offer some technical support but I suspect LDK would test the $5.00 level on any significant market weakness. We have a stop loss at $4.75. Keep in mind that LDK is due to report earnings sometime in the next two to three weeks. The actual date is unconfirmed.

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 $ 1.15/ 1.28

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: 39.48

Comments:
03/03/12 update: LLY posted a gain for the week with traders buying the dip on Monday morning. Shares got a little boost on Friday thanks to an analyst upgrade. Recent gains, while less than inspiring, appear to have broken the six-week trend line of lower highs. The situation for LLY seems to be improving but 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 $ 1.31/ 1.37

- or -

Jan 05, 2012 - entry price on LLY @ 39.50, option @ 2.75
symbol: LLY1418A45 2014 JAN $45 call - current bid/ask $ 1.95/ 2.00

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: 56.38

Comments:
03/03/12 update: LVS continues to outperform. The stock is up seven out of the last eight weeks. This past week saw shares breakout past resistance near $54.00 and rally to new three-year highs. The trend is clearly up but LVS is looks overbought. I am not suggesting new positions at this time.

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 $ 6.25/ 6.40

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: 35.95

Comments:
03/03/12 update: Hmm....we'd better buckle our seat belt. LXK lost about $1.30 for the week. This is the second weekly decline in a row. Two weeks ago the action created a bearish reversal pattern on the weekly chart. This past week confirms the reversal. I cautioned readers to expect a pullback toward the simple 50-dma (nearing $35.60). If the market finally sees a widespread correction lower then we might see LXK dip toward the $34.00 area. I am not suggesting new positions at this time.

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 $ 2.90/ 3.60

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: 87.52

Comments:
03/03/12 update: MMM has spent the entire month of February consolidating sideways in the $86.50-88.50 range. During that time the 50-dma has crossed up and over its 200-dma, which is normally a bullish development. At the same time the major indices have broken out to new multi-year highs while MMM failed to participate, this is a bearish. I suspect that if the market does breakdown we'll see MMM dip toward the $83.00-82.00 area.

I am not suggesting new positions at this time.

- Suggested Positions -
Jan 19, 2012 - entry price on MMM @ 85.10, option @ 3.30
symbol: MMM1319A95 2013 JAN $95 call - current bid/ask $ 3.25/ 3.55

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: 15.07

Comments:
03/03/12 update: MRVL posted another decline for the week. Shares are now down three out of the last four weeks. The breakdown under its 50-dma is bearish but shares seem to be holding near the $15.00 level and its 200-ema for now. Unfortunately I am concerned that if the major indices do correct lower we'll see MRVL continue to drop.

More conservative traders may want to exit early now and just cut their losses. More aggressive traders could risk letting MRVL dip toward the simple 200-dma, which was support in the past, but that means you'll need to lower your stop loss so it's under $14.50.

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 $ 1.18/ 1.23

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: 50.84

Comments:
03/03/12 update: MSI posted a gain for the week. Traders bought the dip on Monday morning and pushed shares past $50.00. MSI spent the next three days consolidating sideways. An analyst upgrade on Friday helped shares outperform the major indices.

While MSI is showing strength I am not suggesting new positions at this time.

- Suggested Positions -
Feb 17, 2012 - entry price on MSI @ 49.35, option @ 2.27
symbol: MSI1319A55 2013 JAN $55 call - current bid/ask $ 2.59/ 2.77

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: 108.74

Comments:
03/03/12 update: NKE continues to rally and shares set new record highs. I am raising our stop loss to $99.40. More conservative traders may want to go ahead and take some money off the table and raise their stop loss higher.

I am not suggesting new positions at this time.

- Suggested Positions -
Jan 13, 2012 - entry price on NKE @ 98.39, option @ 4.95
symbol: NKE1319A110 2013 JAN $110 call - current bid/ask $ 9.00/ 9.20

03/03/12 new stop loss @ 99.40
02/18/12 new stop loss @ 96.75
02/04/12 new stop loss @ 94.75

Current Target: $119.00
Current Stop loss: 99.40
Play Entered on: 01/13/12
Originally listed on the Watch List: 12/24/11


NetEase.com - NTES - close: 52.52

Comments:
03/03/12 update: NTES, our new watch list candidate last week, has hit our entry point. The plan was to wait for shares to close over $51.50 and then buy calls the next day. The stock surged higher on Monday and Tuesday. Tuesday's move was the breakout and NTES closed at $53.31. Our traded opened on Wednesday's gap down at $52.74.

The action last week is bullish but if you're worried about a market correction you could wait for NTES to retest the 50-dma before considering new positions.

Earlier Comments:
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).

- Suggested (Small) Positions -
Feb 29, 2012 - entry price on NTES @ 52.74, option @ 4.70
symbol:NTES1319A60 2013 JAN $60 call - current bid/ask $ 4.10/ 5.10

Chart of NTES:

Current Target: $ 64.50
Current Stop loss: 46.50
Play Entered on: 02/29/12

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


ON Semiconductor Corp. - ONNN - close: 8.75

Comments:
03/03/12 update: The SOX semiconductor index looks vulnerable here. This past week saw the SOX produce a new lower high. The sector could be setting up for a correction lower soon. Of course ONNN is already in correction mode. The stock is down three weeks in a row. Shares really underperformed on Friday with a -3.2% decline.

ONNN should find support somewhere near its 50-dma, 200-dma, or prior resistance near $8.50. I am not suggesting new positions at this time but a bounce off the $8.50 level would look like a new entry point.

- Suggested (small) Positions -
Jan 19, 2012 - entry price on ONNN @ 8.96, option @ 1.00
symbol:ONNN1319A10 2013 JAN $10 call - current bid/ask $ 0.75/ 0.85

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: 62.43

Comments:
03/03/12 update: After a ten-week rally shares of QCOM finally saw a pullback. The stock is dipping toward prior resistance near $62.00, which is new short-term support. If the market sees a real correction I would expect QCOM to dip toward the $60-58 zone.

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 $ 7.45/ 7.55

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: 42.07

Comments:
03/03/12 update: The bounce off RAI's late January lows continues. Shares managed to rally past major resistance at $42.00 and close at new all-time highs. Recent strength in tobacco stocks may have gotten a boost from a legal win. A federal judge ruled that the U.S. government can not force the cigarette makers to put graphic images on their packaging since it violates the company's free speech. Prosecutors are appealing. In the meantime RAI has reaffirmed its long-term up trend.

- 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 $ 1.70/ 1.85

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: 35.94

Comments:
03/03/12 update: Ouch! It was a rough week for RDC. Investors decided to sell the news when RDC reported earnings on Feb. 28th. The company beat estimates by four cents and beat the revenue estimate. Gross margins did see a drop, which may have been the catalyst for the sell-off.

If the broader market does see a correction it could push RDC toward support near $35. I suspect our stop loss at $34.75 is just a little too tight. We'll adjust our stop loss to $33.70 so it's just under the January 30th, 2012 low.

A bounce in the $35.00 area could be used as a new bullish entry point.

- Suggested Positions -
Feb 03, 2012 - entry price on RDC @ 37.54, option @ 4.30
symbol: RDC1319A40 2013 JAN $40 call - current bid/ask $ 2.95/ 3.20

03/03/12 stop loss might be too tight, adjust to $33.70
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: 48.89

Comments:
03/03/12 update: SBUX was slowly drifting higher this past week, emphasis on slowly. Shares are still trading under the all-time highs set three weeks ago. While SBUX has essentially consolidated sideway the last three weeks I would not be surprised to see a correction toward the 100-dma. I'm not suggesting new positions at this time.

- Suggested (SMALL) Positions -
Dec 27, 2011 - entry price on SBUX @ 45.40, option @ 4.00
symbol: SBUX1319A50 2013 JAN $50 call - current bid/ask $ 4.30/ 4.45

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: 45.25

Comments:
03/03/12 update: Traders bought the dip near its 50-dma and 200-ema. TEVA ended the week with a gain but remains under resistance in the $46.00-46.50 zone. FYI: The Point & Figure chart is still bullish with a $65 target.

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 $ 1.95/ 2.02

- or -

Jan 19, 2012 - entry price on TEVA @ 45.40, option @ 4.40
symbol: TEVA1418A50 2014 JAN $50 call - current bid/ask $ 3.90/ 4.10

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: 55.84

Comments:
03/03/12 update: UNH is still drifting higher but momentum seems to be slowing down. Traders bought the dip at short-term support near the 10-dma on Friday. If the market rallies again we'll probably see UNH breakout past short-term resistance near $56.00. However, readers may want to wait for a new dip or bounce off the rising 50-dma before considering new bullish positions.

- Suggested Positions -
Feb 15, 2012 - entry price on UNH @ 54.53, option @ 3.25
symbol: UNH1319A60 2013 JAN $60 call - current bid/ask $ 3.40/ 3.55

- or -

Feb 15, 2012 - entry price on UNH @ 54.53, option @ 5.00
symbol: UNH1418A60 2014 JAN $60 call - current bid/ask $ 5.85/ 6.25

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: 38.67

Comments:
03/03/12 update: VZ is slowly building on its bullish trend of higher lows. Friday saw a breakout over technical resistance at the 50-dma. I am growing less concerned that the action over the past five weeks is a bear-flag pattern. However, 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 $ 1.36/ 1.41

- or -

Dec 23, 2011 - entry price on VZ @ 39.42, option @ 2.87
symbol: VZ1418A40 2014 JAN $40 call - current bid/ask $ 2.24/ 2.35

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: 27.51

Comments:
03/03/12 update: The situation does not look good for X. Basic material and steel-related stocks have been underperforming. The group looks poised for more declines. X is already testing support near $27 and its 100-dma. More conservative traders may want to abandon ship right here. The bearish trend of lower highs in X is suggesting the stock will see another move lower soon.

Our stop loss remains 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 $ 3.70/ 3.80

03/03/12 readers may want to exit early now!
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: 86.33

Comments:
03/03/12 update: February's mid-month bounce off its 50-dma has stalled under prior resistance near $88.00. Bears could argue that XOM is forming a double top pattern. If XOM breaks down under its 50-dma I would expect a dip toward $84 near the bottom of its bullish channel or a dip toward prior resistance near $82.00.

I am not suggesting new positions at this time. Shares could see a little volatility this week following its analyst meeting on March 8th.

- Suggested Positions -
Dec 22, 2011 - entry price on XOM @ 83.56, option @ 4.63
symbol: XOM1319A90 2013 JAN $90 call - current bid/ask $ 4.35/ 4.45

- or -

Dec 22, 2011 - entry price on XOM @ 83.56, option @ 6.25
symbol: XOM1418A95 2014 JAN $95 call - current bid/ask $ 5.30/ 5.50

03/03/12 bears could argue that XOM is forming a potential double top pattern with the peak in late January and late February
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


Hewlett-Packard - HPQ - close: 25.32

Comments:
03/03/12 update: It's been a rough two weeks for HPQ. The sell-off started with its earnings report on February 22nd. Shares have since broken down through multiple layers of support. Our stop loss was hit at $25.75 on February 29th.

- Suggested (SMALL) Positions -
Longer-term Trade
Sep 26, 2011 - entry price on HPQ @ 22.59, option @ 3.75
symbol: HPQ1319A25 2013 JAN $25 call - exit $3.25 (-13.3%)
Stop Loss @ 25.75

02/29/12 stop loss hit at $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

Chart of HPQ:

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



Watch

Conglomerates, Cars, & Cable TV

by James Brown

Click here to email James Brown


New Watch List Entries

BRK.B - Berkshire Hathaway

F - Ford Motor Co.

TIVO - TiVo Inc.


Active Watch List Candidates

CDE - Coeur d'Alene Mines Corp

CVX - Chevron Corp

MCD - McDonald's Corp

NVDA - NVIDIA Corp


Dropped Watch List Entries

NTES graduated to the play list.



New Watch List Candidates:


Berkshire Hathaway (B shares) - BRK.B - close: 78.29

Company Info

On a short-term basis Warren Buffett's Berkshire looks bearish with Wednesday's reversal lower. Yet bigger picture the trend is bullish. I am suggesting we launch small bullish positions if BRK.B can close over $80.75. If triggered we'll use a stop loss at $77.25. Our long-term target is the $94-98 range.

Breakout trigger:
Wait for a close over $80.75, buy calls the next day.

(Small Positions) use a stop loss at $77.25.

BUY the 2013 Jan $85 call (BRKB1319A85)

Chart of BRK.B:

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


Ford Motor Co. - F - close: $12.72

Company Info

Vehicle sales in the U.S. are expected to rise to 14 million in 2012. That's a big improvement over last year. I suspect Ford will be a big winner if the sales pace continues to improve. The stock has been consolidating sideways in the $12.00-13.00 zone the last six-week. A breakout higher can be used as an entry point.

I am suggesting we wait for Ford to close over $13.25 and then buy calls the next day with a stop loss at $11.75. Our long-term target is $16.50.

Breakout trigger: Wait for Ford to close over $13.25, buy calls the next day.

BUY the 2013 Jan $12.50 call (F1319A12.5)

- or -

BUY the 2014 Jan $15 call (F1418A15)

Chart of F:

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


TiVo Inc. - TIVO - close: 11.64

Company Info

On a short-term basis TIVO looks like a buy right now. The stock is bouncing off prior resistance and what is new support near $11.00. I would be tempted to buy calls now with a stop loss just under the $11.00 level. However, I am more concerned about a correction in the major indices so instead of buying this bounce I am suggesting we wait for a breakout.

The early February rally stalled near $12.25. I am suggesting we wait for TIVO to close over $12.25 and then buy calls the next day. We'll use a stop loss at $10.90. Our long-term target is $16.00. FYI: The Point & Figure chart is bullish with a long-term $18.50 target.

Breakout trigger: Wait for TIVO to close over $12.25, buy calls the next day. Stop loss at $10.90.

BUY the 2013 Jan $12.50 call (TIVO1319A12.5)

Chart of TIVO:

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


Active Watch List Candidates:



Coeur d'Alene Mines Corp. - CDE - close: 27.57

Comments:
03/03/12 update: It was a volatile week for precious metals and the mining stocks. Early last week gold and silver were soaring but the both reversed hard on Wednesday following Bernanke's comments and a bounce in the dollar. CDE saw its big rally on Tuesday reverse. It was a close call but CDE did not meet our entry requirements, which was a close over $30.25 so our trade is not open yet.

Aggressive traders might want to consider buying a dip near the $26.50 lows with a tight stop. I am suggesting we still wait for a breakout higher. We are adjusting our trigger from a close over $30.25 to $30.50.

If our trade is opened we'll start with a stop loss at $27.25. Our long-term target is $37.00.

Breakout trigger:
Wait for a close over $30.50 and buy calls the next day.

BUY the 2013 Jan $35 call (CDE1319A35)

03/03/12 adjusted trigger to close over $30.50

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


Chevron Corp. - CVX - close: 109.61

Comments:
03/03/12 update: CVX managed a gain for the week but the action on Wednesday looks like a bearish reversal pattern. If the market corrects then CVX could drop toward the $105 area.

I don't see any changes from my prior comments. 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)

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BUY the 2014 Jan $120 call (CVX1418A120

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


McDonald's Corp. - MCD - close: 99.50

Comments:
03/03/12 update: It's about six weeks old but the neutral pattern of higher lows and lower highs continues. Normally we would expect the prevailing trend to resume. In this case the prevailing trend is up. However, the market is overbought and due for a pullback so we are waiting for a correction.

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: 15.38

Comments:
03/03/12 update: The correction in NVDA seems to have found support near the 200-ema. That might be wishful thinking. We are still on the sidelines. It looks like NVDA has produced a very big base over the last eight months but we want to wait for a breakout.

The plan is to 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.

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