Option Investor
Newsletter

Daily Newsletter, Sunday, 3/11/2012

Table of Contents

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

Leaps Trader Commentary

Happy Birthday, Bull Market

by James Brown

Click here to email James Brown

Friday was the third birthday for the current bull market in stocks. The major U.S. indices are up +100% off their lows three years ago. The rally continued this week in spite of Tuesday's decline, the worst one-day drop this year. Traders bought the dip and the S&P 500 index eked out a +0.1% gain for the week, marking its 9th advance out of the last ten weeks. Major headlines for the week included Apple Inc. (AAPL) launching its latest iPad. Greece saw more than 80% of its private sector investors agree to a massive write off in the value of its debt allowing the country to force the remaining bond holders to accept the same deal with their collective action clauses. This in turn sparked the ISDA to rule that a "credit event" had occurred and would trigger the associated credit-default swaps.

Economic data last week was mixed. The European Central Bank left interest rates unchanged at 1.0%. The Bank of England followed suit and left their rates unchanged at 0.5%. The Eurozone Q4 GDP estimate came in at -0.3%. Meanwhile China saw the number of bank loans, retail sales, and PMI data all come in lower than expected. The Chinese government lowered their 2012 GDP growth target from +8.0% to +7.5%, the lowest target in eight years. The China news combined with negative EU GDP numbers sparked concern about a world-wide slowdown.

Here in the U.S. we saw factory orders fall -1.0% versus estimates for a -1.9% reading. Consumer credit grew from $16.3 billion a month ago to $17.8 billion when economists had been expecting a decline. The ISM services index hit a new one-year high at 57.3 up from 56.8 the prior month. There was some concern that the ISM services prices paid component surged to the highest level since March 2011. There has also been an increased focused on gasoline prices and thankfully gas prices finally pulled back after almost 40 days of nonstop gains. Meanwhile the weekly initial jobless claims snapped a three-week trend of sub-360,000 numbers with a rise to 362,000.

The biggest economic report of the week was the February nonfarm payrolls jobs number. Economists had been expecting the U.S. economy to show a growth of +210,000 jobs. The Friday morning report came in at +227,000. Furthermore the government revised January higher from +243K to +284K and revised December higher from +203K to +223K. Unfortunately the official U3 unemployment rate did not move at 8.3% because almost 500,000 people rejoined the workforce and started looking for jobs again. Friday's report continues to show improvement for the labor market but it's very slow. The U.S. needs at least +150,000 new jobs a month just to keep up with population growth and immigration. With millions of citizens out of work it's going to take a long time to get back to "normal" employment whatever the new normal might be.

Contrary to what the Apple marketing team might tell you the biggest event of the week was the final vote on Greece's private sector bond debt swap. Greece had to get this done to qualify for the latest 130 billion euro bailout. More than 80% of investors agreed to a massive haircut in their current Greek bonds and swap them out for new ones. This high percentage of positive votes in favor of the debt swap allowed Greek to enact their collective action clauses and forced everyone else to take the same haircut.

The International Swaps and Derivatives Association (ISDA) declared that this forced restructuring of debt qualified as a credit event and investors holding credit-default swaps (CDS) could call them in. Fortunately it is estimated that only 3.2 billion euros worth of un-hedged debt remains compared to tens of billions a couple of years ago. The ISDA announcement put a wet blanket on the market's rally on Friday, prompting traders to take profits on a three-day bounce in stocks.

Why is this ISDA announcement important? If they had not declared this a credit event that allowed debt holders to trigger their CDS then it would undermine the entire global CDS market. There are trillions of dollars worth of CDS contracts out there where investors have purchased insurance on sovereign debt. If suddenly Greece can force bond holders to take less than 100% of what they are owed and it's not a credit event then why pay for these CDS contracts in the first place? Not only would the major banks be losing money on writing these CDS contracts but several European countries (e.g. PIIGS) would no longer be able to sell debt if investors could not buy insurance on it.

Major Indices:

The major U.S. indices came back from the brink. Tuesday's drop was a clear breakdown of the narrow up trend off the December lows. Yet there was no follow through. Traders bought the dip again and now the S&P 500 is testing its multi-year highs set a week ago. The market's resilience here is encouraging but this index remains overbought. Currently the S&P 500 is up +9.0% year to date. Right now I am concerned that if the S&P 500 does not breakout past last week's highs in the 1375-1378 zone it will be seen as a short-term bearish double top.

Last week I cautioned readers to look for support near 1340, which is exactly where the S&P 500 stopped on Tuesday. If the 1340 level breaks on a new decline we can look for potential support the 50-dma (near 1327), the 1320 level and the 1300 level.

Daily chart of the S&P 500 index:

The NASDAQ composite has seen a similar recovery with a +3.0% bounce off its Tuesday lows. Last week I pointed out that the 2900 level was likely support. Now the NASDAQ is testing its multi-year (decade) highs near round-number, psychological resistance at the 3,000 level. I do not believe the dip from 3,000 to 2,900 was enough to alleviate the index's overbought condition but if the NASDAQ can breakout past 3,000 it could start a new round of short covering. A failure here would look like a short-term bearish double top.

Daily chart of the NASDAQ Composite index:

The action in the small-cap Russell 2000 index might be more significant. After almost a month of consolidating sideways the $RUT broke down and was trading under both the 800 level and its 50-dma. Yet the three-day bounce has fueled a +3.8% rebound lifting the $RUT back into its prior trading range. You can also see on the daily chart below that this is a rebound off a trend line of support. While this bounce is encouraging the Russell 2000 still has resistance at the top of its trading range near 830 and a trend line of lower highs evident on the weekly chart below.

If the $RUT can breakout past 830 then it would be a sign that this rally has a lot further to go. If the bounce in the small cap index fails then I would expect a much deeper correction. We could see the $RUT drop toward the 770-760 area or lower.

Daily chart of the Russell 2000 index

Weekly chart of the Russell 2000 index

We're still watching the Dow Jones Transportation Average. Rising oil and gasoline prices have been a burden for this sector. Plus, a drop in coal demand has been impacting the railroads. You can see how the $TRAN index has traded one channel for another. If the transports can breakout past the top of this new bearish channel it would be bullish for market sentiment. This could depend on the price of oil, which will be influenced by trading in the U.S. dollar. Now that the Greece problem is temporarily solved the euro could bounce, pushing the dollar lower. Normally a lower dollar means higher commodities, which would be bearish for the transports. Keep in mind that these currency-commodity relationships don't hold up 100% of the time. We'll have to see how the week progresses.

chart of the Transportation Average

Another sector to watch is the financials. If the financial sector can keep their rally alive then it will fuel bullish sentiment for the rest of the market. Currently the XLF financial ETF has bounced back toward resistance. A breakout here would be bullish and could spark another leg higher.

Daily chart of the Financial ETF (XLF)

Looking ahead the Producer Price Index (PPI) and Consumer Price Index (CPI) will provide a look at inflation in the U.S. economy. The Empire State survey and Philly Fed survey will showcase business growth in two key regions. Yet the biggest event for the week might be the FOMC meeting on Tuesday. No one is expecting any changes from the Fed so the focus will be on the Federal Reserve's statement. The market will want to see if the FOMC hints at any future QE3 or other forms of policy to stimulate the economy. We suspect that Bernanke and gang will not announce any changes or offer any hints until the two-day April meeting so he can follow up the Fed statement with his quarterly press conference. With the U.S. economy starting to slowly get better, month by month, will the Federal Reserve stick to their previously stated low (almost zero percent) interest rate policy into 2014?

- Tuesday, March 13 -
Retail sales for February
Business inventories for January
FOMC interest rate decision

- Wednesday, March 14 -
Import/Export prices for February

- Thursday, March 15 -
Weekly Initial Jobless Claims
New York Empire State Manufacturing Index for March
PPI for February
Philly Fed data

- Friday, March 16 -
CPI for February
Industrial production and Capacity Utilization
Michigan Sentiment for March

Additional key dates coming up:

Mar. 19th, Greek debt auction for CDS-backed bonds
Mar. 20th, Greek deadline for $19 billion debt payment

The Week Ahead:

What should investors be looking at now that the Greek private sector bond swap is done? On a short-term basis we have five days left until March options expiration. We have seven trading days left until the March 20th deadline for Greece's bond payment. Of course now that they have the bond swap done Greece qualifies for the big 130 billion euro bailout so March 20th should be a non-event (we hope). Elsewhere in Europe the focus could switch to Spain and Portugal. Spain is already challenging the EU's resolve by declaring they won't hit their previous 2012 budget deficit targets (i.e. deficits will be higher than planned). While the Greek problem could be temporarily off the market's radar the toxic debt issue for Europe remains.

Looking at the U.S. the number of Americans on food stamps has risen to one in seven. The official unemployment rate is 8.3% but if you include the underemployed and those that have used up all their unemployment benefits it's closer to 15%. Rising gasoline prices are going to have a much bigger impact on this section of the population. Gas prices remain a point of concern for market pundits but thus far the surge in gas at the pump has not hurt stocks and we're definitely not seeing any impact in the retail stocks with the RLX retail index at new highs. A recent poll showed that gas would have to hit $5.30 a gallon before Americans would start adjusting their lifestyle. You can bet that if gas gets anywhere near $5.00 a gallon it's going to become a major issue for the upcoming election.

The good news tonight is that U.S. economic data is still slowly improving, which has helped the market maintain its bullish trend. Of course we don't live in a vacuum and we'll have to keep a wary eye on slowing growth in Europe and China. The market will also stay focused on oil. The situation in Iran has not changed. There is still speculation of a potential military strike on Iran's nuclear facilities sometime this year. Iran naturally wants to foster any geopolitical worries since high oil prices helped their economy.

Here at home investors could turn their attention toward the U.S. residential market as we get closer to spring. The situation seems to be improving with builder confidence on the rise and inventories falling. We are also about six weeks away from the next round of earnings season. Once we get past earnings in April then investors will worry about the seasonal trends like the "sell in May" crowd. Plus, we will face a very nasty Presidential race here in the U.S., which could sour consumer sentiment.

Overall the market trend is still up but if the major indices don't breakout past their recent highs it will look like a bearish top and could set up for a deeper correction lower. Big picture we are still in a bull market but stocks remain overbought and a -5% to -10% pull back in stock would probably be healthy. At the same time a breakout past current highs could spark more short covering and money managers will be chasing performance again.

Don't forget to set your clocks ahead this weekend as we "spring forward" with daylight savings time.

- James


Portfolio

Portfolio Update

by James Brown

Click here to email James Brown


Current Portfolio


Portfolio Comments:

Stocks are seeing a three-day rebound back toward their highs!

A week ago the market was looking pretty fragile and vulnerable to a sell-off. The major indices plunged on Tuesday, marking the worst one-day loss this year. Yet there was no follow through lower. Maybe it was enthusiasm over finally seeing Greece get their bond swap done. Whatever the reason traders bought the dip again and now the S&P 500 index and the NASDAQ are retesting their recent highs. Even the small cap Russell 2000 index has seen a strong rebound.

The market's widespread sell-off on Monday and Tuesday did hit some stop losses and we lost CIEN, MRVL, ONNN, and X.

I have updated stop losses on: AGN, AKAM, and SBUX.

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

Online Auctions & Meat Production

by James Brown

Click here to email James Brown


- New Trades -

eBay Inc. - EBAY - close: 36.25

Company Info

Why We Like It:
We have had our eye on EBAY for a long time. I've mentioned it multiple times in my "radar screen" posts. The stock spent almost all of 2011 consolidating sideways in a very wide trading range. The 2012 breakout past key resistance in the $35 area is very bullish. The Point & Figure chart is also bullish and is forecasting at $46.00 target.

I am suggesting we launch bullish positions at the opening bell on Monday morning. Investors should be aware that EBAY could gap higher on Monday thanks to news out Friday night that Standard & Poor's is adding EBAY to the S&P 100 index soon.

I am suggesting a stop loss at $33.45. Our long-term target is $44.50.

- Suggested Positions -
Mar 12, 2012 - entry price on EBAY @ --.--, option @ --.--
symbol: EBAY1319A40 2013 JAN $40 call - current bid/ask $ 2.84/ 2.89

- or -

Mar 12, 2012 - entry price on EBAY @ --.--, option @ --.--
symbol: EBAY1418A40 2014 JAN $40 call - current bid/ask $ 5.15/ 5.35

Chart of EBAY:

Current Target: $44.50
Current Stop loss: 33.45
Play Entered on: 03/12/12
Originally listed in the New Plays 03/10/12


Tyson Foods, Inc. - TSN - close: 19.86

Company Info

Why We Like It:
TSN makes a wide variety of food items but they are best known for their meats. The stock saw a correction in January but shares found support near the 50% retracement of its Q4 2011 rally and support near its long-term moving averages (e.g. the 200-dma). Now TSN is rising out of this multi-week base it has built in the $18.50-19.50 zone.

I am suggesting we launch bullish positions at the opening bell on Monday with a stop loss at $18.50. The $20 and $21 levels are overhead resistance but I'm setting our long-term target at $24.50. FYI: The Point & Figure chart is bullish with a $31.50 target.

- Suggested Positions -
Mar 12, 2011 - entry price on TSN @ --.--, option @ -.--
symbol: TSN1319A20 2013 JAN $20 call - current bid/ask $ 1.85/ 1.95

- or -

Mar 12, 2011 - entry price on TSN @ --.--, option @ -.--
symbol: TSN1418A20 2014 JAN $20 call - current bid/ask $ 3.00/ 3.60

Chart of TSN:

Current Target: $24.50
Current Stop loss: 18.25
Play Entered on: 03/12/12
Originally listed in the New Plays 03/10/12



Play Updates

Stocks Bounce Back

by James Brown

Click here to email James Brown


Closed Plays


CIEN, MRVL, ONNN, and X were all stopped out.


Play Updates


Archer-Daniels-Midland Company - ADM - close: 31.13

Comments:
03/10/12 update: The market sell-off on Tuesday was a rough one for ADM. Shares plunged toward support near prior highs. Fortunately ADM produced a sizeable bounce the following day. Yet the stock can't seem to break back above the $31.50 area and its 10-dma. This lack of follow through on the bounce is bearish. There is a good chance that shares see another dip, possibly toward $30.00 or lower, before moving higher again. I am not suggesting new positions at this time.

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 $ 1.44/ 1.49

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: 91.87

Comments:
03/10/12 update: It proved to be a bullish week for AGN. The stock broke out past significant resistance near $90.00 and rallied to new record highs. If you're looking for a new entry point consider buying calls on a bounce off the $90.00 level. I am raising our stop loss to $84.50.

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 $ 3.80/ 4.20

03/10/12 new stop loss at $84.50
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: 84.50
Play Entered on: 10/17/11
Originally listed on the Watch List: 09/24/11


Akamai Technologies - AKAM - close: 36.84

Comments:
03/10/12 update: I suspect the correction in AKAM is over. We have been looking for shares to fill the gap and dip into the $35-34 zone. AKAM slipped to $34.70 on Tuesday before bouncing off its 40-dma. Now shares have broken out past the short-term trend line of lower highs. I would consider new positions here at current levels. I am moving our stop loss up to $31.75.

I am adding a second position to our AKAM play, to be opened on Monday morning. I am suggesting readers keep their position size small.

- Suggested Positions -
FEB 10, 2012 - entry price on AKAM @ 37.60, option @ 5.40
symbol:AKAM1319A40 2013 JAN $40 call - current bid/ask $ 4.30/ 4.45

2nd Position (enter on Monday, March 12th)
MAR 12, 2012 - entry price on AKAM @ --.--, option @ -.--
symbol:AKAM1319A40 2013 JAN $40 call - current bid/ask $ 4.30/ 4.45

03/10/12 new stop loss @ 31.75
03/10/12 consider adding a second position on Monday morning,
let's keep our position size small.
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: 31.75
Play Entered on: 02/10/12
Originally listed on the Watch List: 02/04/12


Bank of America - BAC - close: 8.05

Comments:
03/10/12 update: It was a volatile week for financials. Shares of BAC saw a third test of the bottom of its $7.60-8.30 trading range. A breakout past the $8.30-8.35 zone would definitely be bullish and signal a new leg higher. If you were looking for a new entry point I'd be tempted to buy calls on a close over $8.35.

- Suggested Positions -

AUG 29, 2011 - entry price on BAC @ 8.10, option @ 1.50
symbol: BAC1319A10 2013 JAN $10 call - current bid/ask $ 0.58/ 0.60
(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 $ 0.58/ 0.60
(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: 32.91

Comments:
03/10/12 update: Investors continue to buy the dip in BMY and they did it again near the $32.00 level. The action over the last few weeks looks like a new bottom for BMY. Readers might want to consider new bullish positions if BMY can close over the 50-dma or the mid February high near $33.25.

- Suggested Positions -
SEP 19, 2011 - entry price on BMY @ 30.53, option @ 1.20
symbol: BMY1319A35 2013 JAN $35 call - current bid/ask $ 1.17/ 1.20

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: 3.48

Comments:
03/10/12 update: BZH gave us a scare with Tuesday's breakdown under $3.00 and the 50-dma. Fortunately traders bought the dip and BZH produced a strong bounce from its lows near $2.90 to Friday's intraday high of $3.67. The rebound has broken the three-week trend of lower highs but I suspect we could see BZH retest the $3.30-3.10 zone again.

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 $ 1.30/ 1.55

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


Cisco Systems - CSCO - close: 19.80

Comments:
03/10/12 update: CSCO managed a small gain for the week. Shares did violate their 50-dma but traders bought the dip near its late January low near $19.30. Now CSCO is facing short-term resistance near $20.00. I am not a 100% convinced the correction is over but if the NASDAQ composite can breakout past the 3,000 level it could easily help fuel more gains for big cap tech stocks like CSCO.

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 $1.80/1.83

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: 34.06

Comments:
03/10/12 update: Tuesday's sharp breakdown in DOW looked like the beginning of a significant correction lower. Yet there was no follow through. Traders immediately bought the dip the next day. Now DOW is back inside its prior trading range. The big bounce is encouraging but I am not suggesting new positions at this time. If the market does correct we can look for support near $32 and $30.

- Suggested Positions -
Jan 09, 2012 - entry price on DOW @ 30.46, option @ 2.40
symbol: DOW1319A35 2013 JAN $35 call - current bid/ask $ 3.10/ 3.20

- or -

Jan 09, 2012 - entry price on DOW @ 30.46, option @ 2.54
symbol: DOW1418A40 2014 JAN $40 call - current bid/ask $ 2.88/ 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: 51.50

Comments:
03/10/12 update: EPD spent most of the week slowly drifting lower. The stock has been overbought so a little consolidation would be healthy. If the broader market does see a correction I would expect EPD to pull back toward $50.00 or even its 100-dma near $47.50.

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 $ 3.10/ 3.40

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: 91.79

Comments:
03/10/12 update: FDX has recovered from its gap down under $90 on Tuesday. On the weekly chart this past week looks like a bullish reversal candle. However, FDX is still facing short-term resistance near $92.00. We'll need to keep an eye on oil prices. If oil rises it will put pressure on the transports. That could happen if the dollar reverses its recent bounce. 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 $ 5.60/ 5.80

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: 39.03

Comments:
03/10/12 update: The FXI was definitely showing some volatility this past week. News that China saw slower bank loans, lower retail sales, and lower PMI data this past week is bearish for the Chinese economy. The government strengthened worries about a slowdown when they adjusted their 2012 growth target from +8.0% to +7.5%, the lowest target since 2004. This news helped push the FXI from the $40 level down toward $37.50. The ETF broke down under its 50-dma and 200-dma only to bounce back on Thursday.

I am not convinced the correction is over. The $40 area is now overhead resistance again. I am not suggesting new positions at this time.

On a positive note, all of this economic data showing a slowdown in China should spur the government to help stimulate their economy, which would be bullish for the FXI.

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 $ 1.39/ 1.46

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: 27.07

Comments:
03/10/12 update: The SOX semiconductor index produced sharp declines on Monday-Tuesday last week but managed to bounce back and post a gain by Friday's closing bell. Meanwhile INTC did not see that much volatility. Traders bought the dip near its rising 50-dma and shares climbed toward the $27 level again. While the larger trend is up I am not suggesting new positions at this time.

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 $ 1.05/ 1.09

- or -

Feb 21, 2011 - entry price on INTC @ 27.34, option @ 2.11
symbol: INTC1418a30 2014 JAN $30 call - current bid/ask $ 2.14/ 2.20

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: 37.95

Comments:
03/10/12 update: KFT held up pretty well while the rest of the market sank on Tuesday. That changed on Wednesday when KFT was downgraded. The stock did not hit new relative lows, which is somewhat positive but KFT is still suffering under a four-week trend of lower highs. At this point I would expect KFT to correct lower toward $37 and its 100-dma. 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 $ 3.85/ 4.05

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: 71.77

Comments:
03/10/12 update: The market's drop on Tuesday pushed KMB toward its recent lows. Thus far the stock is maintaining a bullish trend of higher lows. Although on a short-term basis KMB is struggling with the $72.00 level.

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/ 1.95

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: 4.94

Comments:
03/10/12 update: Ouch! LDK just lost -11% for the week. Shares saw a seven-day sell-off from the bearish reversal on Feb. 28th until LDK finally saw an oversold bounce on Thursday. Unfortunately the bounce stalled at the 200-dma on Friday morning. The low for the week was $4.80 and we have a stop loss at $4.75.

More conservative traders may want to abandon ship and exit early. If you exit now you could still escape without any losses on the call option. The newsletter is going to hold tight and leave our stop at $4.75. 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 $ 0.92/ 1.09

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: 39.56

Comments:
03/10/12 update: It was a volatile week but LLY's three-day bounce off of Tuesday's low pushed the stock to a small gain. Shares are now testing short-term resistance near $39.60 and its 50-dma. If the market cooperates I would expect LLY to gap open higher on Monday thanks to news out Friday night that Standard & Poors is going to add LLY to the S&P 100 index. Thus mutual funds that seek to track the index will need to start buying shares of LLY.

If LLY can close over $40.00 again I would be tempted to buy calls.

- Suggested (SMALL) Positions -
Jan 05, 2012 - entry price on LLY @ 39.50, option @ 1.19
symbol: LLY1319A45 2013 JAN $45 call - current bid/ask $ 1.33/ 1.41

- or -

Jan 05, 2012 - entry price on LLY @ 39.50, option @ 2.75
symbol: LLY1418A45 2014 JAN $45 call - current bid/ask $ 1.87/ 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: 54.83

Comments:
03/10/12 update: LVS was way overbought and due for a correction. I'm not surprised to see the profit taking last week especially with the March 2nd reversal near $58.00. The stock plunged toward $52.70 by Tuesday's low. The stock market's three-day bounce lifted LVS to a +5.8% gain (Tuesday's low to Friday's high) before LVS finally succumbed to more profit taking.

I did hear bullish comments this week on LVS and its growth overseas but shares could still see a correction back toward the $52-50 zone. Broken resistance near $50.00 should be significant support. 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 $ 5.25/ 5.40

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: 35.73

Comments:
03/10/12 update: I am urging caution on LXK. The stock only posted a minor loss for the week but the action is bearish. The stock has been hovering on either side of the rising 50-dma. The consolidation looks like a bear-flag pattern. Friday's failure at the 10-dma is bearish as well. I am expecting a correction back down toward the $34.00 level and its 100-dma. 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 $ 2.65/ 2.85

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: 86.80

Comments:
03/10/12 update: After a month of churning sideways and failing to breakout past resistance in the $88.50 zone MMM was due for a pullback. Shares gapped down on Tuesday, under its 50-dma. The bounce back has been quick but the rebound is stalling near the bottom of its recent trading range. This action is bearish and I suspect the correction is not over yet.

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 $ 3.00/ 3.10

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


Motorola Solutions, Inc. - MSI - close: 50.74

Comments:
03/10/12 update: MSI would have been up for the week but profit taking on Friday (-1.9%) left shares at a 10-cent loss for the week. The profit taking started on Thursday. MSI rallied to new multi-year highs above $52.50 before finally paring its gains. Shares did stall at short-term technical support near the 10-dma on Friday. Yet if MSI just produced a reversal I would not be surprised to see a dip toward the $48.00 area (which could be used as a new entry point). I am not suggesting new positions today.

- Suggested Positions -
Feb 17, 2012 - entry price on MSI @ 49.35, option @ 2.27
symbol: MSI1319A55 2013 JAN $55 call - current bid/ask $ 2.53/ 2.69

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: 109.98

Comments:
03/10/12 update: NKE is marching higher in a narrow bullish channel. The market-wide drop on Tuesday barely fazed it. Friday saw NKE showing relative strength with a +1.9% gain and a close at record highs near $110.

The company has earnings coming up on March 22nd and after such a strong run up there is a big chance that NKE could see a sell-the-news reaction to its earnings results. Thus I a tempted to exit positions prior to the report. Our 2013 $110 call has almost doubled and readers may want to start taking profits now.

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 $ 9.75/ 9.95

03/10/12 readers may want to take profits now with the bid on our call at $9.75
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: 54.29

Comments:
03/10/12 update: Investors bought the dip on Tuesday and NTES has delivered a strong +10% gain in the last three days. Shares are now testing their 2011 and all-time highs in the $54-55 zone. I am not suggesting new positions at this time.

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 $ 4.70/ 5.60

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

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


QUALCOMM Inc. - QCOM - close: 63.93

Comments:
03/10/12 update: It turned out to be a bullish week for QCOM. Traders bought the dip on Tuesday and the following three-day bounce pushed QCOM to new multi-year highs. Meanwhile the company's management raised its quarterly cash dividend by 16% from $0.215 to $0.25 a share. QCOM has also upped its stock buyback program to $4.0 billion. I am tempted to raise our stop loss here.

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 $ 8.40/ 8.50

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: 42.08

Comments:
03/10/12 update: In spite of all the volatility on Monday and Tuesday shares of RAI closed virtually unchanged for the week. If shares can convincingly breakout past resistance near $42.00 it should herald a new leg higher.

- 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 $ 2.05/ 2.15

03/10/12 another close over $42.50 could be used as a bullish entry point.
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: 35.58

Comments:
03/10/12 update: RDC produced a nice bounce off technical support near its 50-dma, 200-dma and exponential 200-dma, which were all tagged on Tuesday. Yet the rebound reversed on Friday. This is short-term bearish and suggests the correction is not over yet. I would not be surprised to see RDC retest the $34.50-34.00 area again. I am not suggesting new positions at this time.

- Suggested Positions -
Feb 03, 2012 - entry price on RDC @ 37.54, option @ 4.30
symbol: RDC1319A40 2013 JAN $40 call - current bid/ask $ 2.85/ 3.10

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: 33.70
Play Entered on: 02/03/12
Originally listed on the Watch List: 01/28/12


Starbucks Corp. - SBUX - close: 51.84

Comments:
03/10/12 update: The up trend in SBUX is suddenly picking up speed. The stock did not see much of a dip during the market's sell-off on Tuesday. The market's widespread three-day bounce provided a fertile ground for SBUX's current surge higher. The big headlines for SBUX this week was news the company is launching a single-cup at-home espresso and coffee machine called the "Verisimo", which is similar to the Keurig machines sold by Green Mountain Coffee Roaster (GMCR). This helped push SBUX to new record, all-time highs on Friday and past the $50.00 level. Now after the closing bell on Friday it was announced that Standards & Poor's will add SBUX to the S&P 100 index in a week.

I want to remind readers that our exit target is $55.00. More aggressive traders may want to aim higher (maybe the $60 area). I am raising our stop loss to $44.75. More conservative traders may want to raise their stop closer to the 47-48 zone instead. 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 $ 6.10/ 6.20

03/10/12 new stop loss at $44.75
03/09/12 S&P announces SBUX will be added to the S&P 100 index
03/08/12 SBUX announces the "Verisimo" single-cup machine
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: 44.75
Play Entered on: 12/27/11
Originally listed on the Watch List: 12/10/11


Teva Pharmaceuticals - TEVA - close: 44.92

Comments:
03/10/12 update: TEVA continues to churn sideways. The stock is bouncing around between technical support at the rising 50-dma and overhead technical resistance at the 300-dma. This neutral pattern of higher lows and lower highs normally breaks out into the prevailing trend, which in this case is higher.

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 $ 1.74/ 1.81

- or -

Jan 19, 2012 - entry price on TEVA @ 45.40, option @ 4.40
symbol: TEVA1418A50 2014 JAN $50 call - current bid/ask $ 3.70/ 3.95

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: 55.78

Comments:
03/10/12 update: UNH did not see much of a correction. Shares have bounced back toward the prior week's resistance near $56.00. A breakout past this level could send shares toward the next level of resistance in the $59-60 zone. I am not suggesting new positions at this time.

- Suggested Positions -
Feb 15, 2012 - entry price on UNH @ 54.53, option @ 3.25
symbol: UNH1319A60 2013 JAN $60 call - current bid/ask $ 3.35/ 3.50

- or -

Feb 15, 2012 - entry price on UNH @ 54.53, option @ 5.00
symbol: UNH1418A60 2014 JAN $60 call - current bid/ask $ 5.85/ 6.35

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: 39.10

Comments:
03/10/12 update: The slow drift higher in VZ is starting to pick up a little momentum. The stock rallied to new six-week highs. While the trend is up 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 $ 1.52/ 1.57

- or -

Dec 23, 2011 - entry price on VZ @ 39.42, option @ 2.87
symbol: VZ1418A40 2014 JAN $40 call - current bid/ask $ 2.41/ 2.55

03/10/12 VZ is starting to see some positive momentum higher
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


Exxon Mobil - XOM - close: 84.30

Comments:
03/10/12 update: Investors need to turn cautious on XOM. Most of the market, including most of the energy sector, started to rebound the past three days. Shares of XOM did not. Instead XOM has continued to sink lower. Shares are now down two weeks in a row. It's starting to look like a bearish double top with the peaks in January and February. There is a growing risk that we will see XOM correct toward support near $80 and its 200-dma.

I am not suggesting new positions 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 $ 3.30/ 3.40

- or -

Dec 22, 2011 - entry price on XOM @ 83.56, option @ 6.25
symbol: XOM1418A95 2014 JAN $95 call - current bid/ask $ 4.60/ 4.80

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


Ciena Corp. - CIEN - close: 14.99

Comments:
03/10/12 update: CIEN posted a gain for the week but it was a volatile week. The correction in CIEN was not over yet. Shares continued to plunge on Monday and Tuesday. CIEN broke support at $14.00 and hit our stop loss at $13.75. Actually the market-wide plunge on Tuesday pushed CIEN to gap open lower on March 6th at $13.70 further exacerbating our loss. The option was stopped out at $1.28. Since then CIEN reported earnings on the 7th and rebounded just as I suspected.

- Suggested Positions -
Feb 09, 2012 - entry price on CIEN @ 16.66, option @ 2.89
symbol: CIEN1319A17.50 2013 JAN $17.50 call - exit $1.28 (-55.7%)

03/06/12 stopped out on gap down at $13.70
03/03/12 Earnings are coming up on March 7th
02/21/12 CIEN issues a revenue warning

Chart of CIEN:

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


Marvell Technology - MRVL - close: 14.87

Comments:
03/10/12 update: MRVL continued to show relative weakness this past week. The stock hit our stop loss at $14.75 on March 5th. Traders did buy the dip near its 200-dma and the $14.50 level on Tuesday but the bounce back is struggling with the 200-ema.

- Suggested Positions -
Feb 03, 2012 - entry price on MRVL @ 16.74, option @ 2.14
symbol:MRVL1319A17.5 2013 JAN $17.50 call - exit $1.05 (-50.9%)

03/05/12 stopped out at $14.75
02/23/12 MRVL reported earnings
02/11/12 adjust stop loss down to $14.75

Chart of MRVL:

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

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


ON Semiconductor Corp. - ONNN - close: 8.81

Comments:
03/10/12 update: ONNN posted a small gain for the week. Unfortunately that does not tell the whole story. The stock plunged on Monday and closed under what should have been support near $8.50 and its 200-dma. Then the market dropped on Tuesday and ONNN gapped open lower at $8.31, which was under our stop loss at $8.35. Our trade was closed immediately. Yet ONNN quickly recovered and the stock is up four days in a row.

We have been stopped out but readers may want to keep ONNN on their watch list for a new entry point if shares can close over the $9.00 level again.

- Suggested (small) Positions -
Jan 19, 2012 - entry price on ONNN @ 8.96, option @ 1.00
symbol:ONNN1319A10 2013 JAN $10 call - exit $0.55 (-45.0%)

03/06/12 stopped out when ONNN gapped open lower at $8.31.
02/11/12 new stop loss @ 8.35
02/04/12 new stop loss @ 7.90

Chart of ONNN:

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


U.S. Steel Corp. - X - close: 26.85

Comments:
03/10/12 update: Basic material and industrial names continued to underperform this past week, especially on Monday and Tuesday. Shares of X broke down from its sideways consolidation and hit our stop loss at $26.40 on March 5th.

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 - exit $3.20 (-36.0%)

03/05/12 stopped out at $26.40
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)

Chart of X:

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



Watch

Consumer Goods and Apparel

by James Brown

Click here to email James Brown


New Watch List Entries

CL - Colgate-Palmolive

LTD - Limited Brands


Active Watch List Candidates

BRK.B - Berkshire Hathaway

CDE - Coeur d'Alene Mines Corp

CVX - Chevron Corp

F - Ford Motor Co.

MCD - McDonald's Corp

TIVO - TiVo Inc.


Dropped Watch List Entries

NVDA was removed as a watch list candidate.



New Watch List Candidates:


Colgate-Palmolive Co. - CL - close: 93.98

Company Info

Shares of CL have been consolidating sideways within a larger up trend for months. Now the stock is on the verge of breaking out past major resistance in the $94-95 zone. We want to be ready when it happens.

I am suggesting we wait for CL to close over $95.25 and then buy calls the next day with a stop loss at $89.00. Our long-term target is $109.00.

Breakout trigger: Wait for CL to close over $95.25 and buy calls the next day (stop @ 89.00).

BUY the 2013 Jan $100 call (CL1319A100) current ask $2.56

- or -

BUY the 2014 Jan $100 call (CL1418A100) current ask $5.65

Chart of CL:

Originally listed on the Watch List: 03/10/12


Limited Brands, Inc. - LTD - close: 46.74

Company Info

Shares of LTD, much like the RLX retail index, are trading near all-time highs. The stock's ability to hold support near the $45.00 level is positive. I'm almost tempted to buy calls on a breakout past $47.00. However, I am not convinced the market's correction is over yet. I am proposing a buy-the-dip strategy here in case the market does see a stronger correction.

Let's plan on buying calls if LTD can dip to $42.50 and we'll use a stop loss at $39.50. Our long-term target is $54.50.

Buy-the-Dip trigger: $42.50 (stop loss @ 39.50)

BUY the 2013 Jan $45 call (LTD1319A45)

Chart of LTD:

Originally listed on the Watch List: 03/10/12


Active Watch List Candidates:



Berkshire Hathaway (B shares) - BRK.B - close: 79.41

Comments:
03/10/12 update: Shares of BRK.B did not see much profit taking last Tuesday. The stock has continue to consolidate sideways and Friday saw a breakout over some short-term moving averages. If the market cooperates we could see BRK.B challenging resistance near $80 soon.

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)

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


Coeur d'Alene Mines Corp. - CDE - close: 26.33

Comments:
03/10/12 update: Gold and silver prices have been volatile as they react to big moves in the currency markets. This volatility in silver is being reflected in shares of CDE. Shares are flirting with a significant breakdown under most of its major moving averages this past week. If we do not see CDE show some improvement this week then I'll drop it as a candidate. Currently we are waiting for a breakout over $30.00. The plan is to wait for CDE to close over $30.50 and then buy calls the next day.

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: 109.57

Comments:
03/10/12 update: If the dollar reversed lower it should help fuel new gains in oil, which should benefit the oil stocks. CVX is still hovering under major resistance near the $111 level.

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)

- or -

BUY the 2014 Jan $120 call (CVX1418A120

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


Ford Motor Co. - F - close: $12.58

Comments:
03/10/12 update: Shares of Ford are still consolidating sideways in the $12.00-13.00 zone. We are waiting for a breakout past resistance near $13.00.

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)

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


McDonald's Corp. - MCD - close: 96.84

Comments:
03/10/12 update: After several weeks of consolidating sideways at record highs MCD finally broke down when they announced February global same-store sales growth of +7.5%. Yes, they are growing at more than +7% and investors sold the news. There are plenty of companies that would kill for that kind of improvement. February's +7.5% number was up from January's +6.7% pace but below analysts expectations in the 7.7%-to-8.2% range. The biggest disappointment was a slowdown in the Asia Pacific, Middle East, and African operations.

The intraday low this past week was $96.46 so our trade is not open yet. We have a trigger to buy calls at $95.50. More conservative traders may want to use a trigger closer to $94.00 or even $92.00 if we see the market's major indices correct lower. I am still willing to buy the dip at $95.50 with a stop loss at $89.50. Instead of buying the dip readers may want to wait and buy the bounce instead.

Last week I cautioned readers to watch the 100-dma and sure enough that's where MCD is trading.

If triggered 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: 14.82

Comments:
03/10/12 update: Graphics chip maker NVDA is still correcting lower. Shares spent most of the week churning sideways in the $14.50-15.00 zone. Aggressive traders might want to consider small bullish positions on a rally past $15.50. Please note that the newsletter is giving up on NVDA, at least for now. We wanted to buy a breakout over $17.00 but that may not happen for a long time. I am dropping NVDA as a candidate.

Our trade never opened.

03/10/12 removed NVDA from the watch list.

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


TiVo Inc. - TIVO - close: 11.28

Comments:
03/10/12 update: TIVO saw a dip toward its 50-dma and bounced. Looking at the big picture on the weekly chart this pullback in TIVO still looks like an entry point for bullish positions. However, I am suggesting we wait for a strong rebound. We will adjust our entry point. Instead of waiting for a close over $12.25 we'll wait for a close over $11.75 instead and then buy calls the next day.

We'll use a stop loss at $10.75. 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 $11.75, buy calls the next day. Stop loss at $10.75.

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

03/10/12 adjust entry strategy to buy calls after TIVO closes over $11.75 with a stop at $10.75.

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