Coal and energy stocks continued to underperform. The action in CHK, CNX, and ACI has been ugly! We are choosing to take some money off the table in PEP and TIE.
CHK and CNX have been stopped out.
Arch Coal Inc. - ACI - close: 22.69 change: -0.20
Coal stocks tried to mount a rebound but the sector rolled over on Wednesday and Thursday last week. Even a new "buy" rating for ACI was not enough to stop the selling. I have been warning investors about this retreat for days and ACI is now on the downward slope of the right shoulder to a bearish head-and-shoulders pattern. The neckline and support should be near the $20 region. I've said it before. More conservative traders will want to consider an early exit to cut their losses. The bearish pattern in ACI combined with an overbought market that looks poised to correct does not bode well at all. The best we can hope for right now is that ACI rallies from the 200-dma or the $20 level.
If the H&S pattern holds true it would forecast a decline toward $13.
I'm not suggesting new bullish positions at this time. Our final target is $34.75.
May 14th, 2009 - entry price on ACI @ 16.00, option @ 2.40
symbol: OSE-AF, 2011 JAN $30 LEAP call - current bid/ask $1.30/1.40
-stop loss on ACI @ 19.85
Feb 13th, 2010 - entry price on ACI @ 21.65, option @ 4.40
symbol: YEP1221A25 2012 JAN $25 LEAP call - current bid/ask $4.50/4.90
-stop loss on ACI @ 19.85
Chart of ACI:
Biogen IDEC - BIIB - close: 58.15 change: -0.12
The rally in the biotech sector has stalled and the group remains very overbought. Shares of BIIB have already started to correct. There could be some short-term support near $56 and its 50-dma but I would expect a pull back toward the $55-54 zone. I cautioned readers a week ago to look for a pull back and it has begun. At this point I would definitely wait for a solid bounce in the $54-55 region before considering new bullish positions.
Our first target to take profits is at $64.90.
Feb 19th, 2010 - entry price on BIIB @ 56.60, option @ 4.60
symbol: OIY1122A60 2011 JAN $60 LEAP call - current bid/ask $4.60/5.10
-stop loss on BIIB @ 51.85
Chart of BIIB:
Berkshire Hathaway Inc. - BRK.B - $81.30 -0.40
Shares of Berkshire's B-shares have been overbought and due for a correction for weeks now. It looks like the pull back may have begun. I suspect this is a strong candidate for window dressing by fund managers but the stock has actually been drifting lower for over a week, which doesn't really support the window-dressing concept. BRK.B needs a healthy pull back and the dip could be anywhere in the $78 to $72 area. I'm not suggesting new positions at current levels. In the mean time more conservative traders may want to take some money off the table.
Our first target is $90.00. Our second target is $99.50
Feb 6th, 2010 - entry price on BRK.B @ 73.57, option @ 4.80
symbol: 2011 JAN $80 XPB1122A80 LEAP call - current bid/ask $6.70/7.00
-stop loss on BRK.B @ 69.00
Feb 6th, 2010 - entry price on BRK.B @ 73.57, option @ 6.50
symbol: 2012 JAN $85 WDW1221A85 LEAP call - current bid/ask $8.00/8.40
-stop loss on BRK.B @ 69.00
Chart of BRK.B:
BorgWarner Inc. - BWA - close: 37.03 change: -0.36
BWA managed a gain for the week but the action on Thursday and Friday looks like a bearish reversal and a new lower high. I am still expecting a correction toward the $34.00 level or its 200-dma.
I am not suggesting new bullish positions at this time.
Our first target is $44.50. Our second target is $49.75. FYI: More conservative traders might want to use a stop loss closer to $34.00.
Feb 17th, 2010 - entry price on BWA @ 37.55, option @ 3.90
symbol: ZWY1122A40 2011 JAN $40 LEAP call - current bid/ask $3.10/3.50
-stop loss on BWA @ 32.49
Chart of BWA:
Celgene Corp. - CELG - close: 62.14 change: -0.56
I warned readers a week ago that CELG had formed a bearish reversal and short-term top. The stock is now testing short-term support near $62.00. I do not believe it will hold. Look for a pull back toward the $60-58.00 zone. We can launch new bullish positions if CELG rebounds from this lower level of support. Investors will want to keep an eye on the BTK biotech index, which is in desperate need of a correction. If the BTK does correct CELG's own pull back could get exaggerated.
Our target is the $74.00 level. I have been suggesting the 2011 Jan. $65 calls but readers may want to buy the 2012 calls.
FYI: A few weeks ago CELG was number 5 on Morningstar's top ten list of potential takeout (acquisition) targets.
Mar 1st, 2010 - entry price on CELG @ 60.75, option @ 5.40
symbol: VCS1122A65 2011 JAN $65 LEAP call - current bid/ask $5.50/5.70
-stop loss on CELG @ 54.75
Chart of CELG:
Deluxe Corp. - DLX - close: 19.72 change: +0.09
DLX produced a gain for the week but I'm still cautious on the stock. The trend is up but momentum is still waning. DLX is still having trouble closing above the $20 level. The first level of support would be the 50-dma and just below that is what should be price support near $18.00. More conservative traders may want to raise their stop losses toward the $18 area. I am not suggesting new positions at this time. Wait for shares to bounce after a correction. Our target is $24.75.
Mar 1st, 2010 - entry price on DLX @ 19.10, option @ 1.10
symbol: DLX1016J20 2010 OCT $20 call - current bid/ask $1.30/1.65
-stop loss on DLX @ 16.75
Chart of DLX:
EMR $49.80 +0.31 -- Emerson Electric Co.
EMR continues to show relative strength. The stock tagged a new 52-week high on Friday at $50.20. Midweek shares garnered an upgrade and a new broker price target at $55.00. More conservative traders may want to exit right here. When the market corrects I would expect EMR to dip toward the $46-45 zone. We are upping our stop loss to $43.75. EMR has already hit our first target at $47.50. Our second and final target is $54.50.
Sept. 8th, 2009 - entry price on EMR @ 38.00, option @ $4.50
symbol: VHH-AH, 2011 JAN $40 call - current bid/ask $10.30/10.80
-stop loss on EMR @ 43.75 *new*
02/18/10 1st Target hit @ 47.50, option @ $8.80 (+95.5%)
Chart of EMR:
Fortune Brands - FO - close: 49.06 change: -0.46
You could argue that the lack of profit taking in shares of FO is a bullish sign. I suspect that money managers are just waiting for the quarter to end before locking in gains. FO is short-term overbought. I am expecting a correction. Wait for a dip toward the $46-44 zone before considering new bullish positions. Overall I remain very bullish on FO. We just need to wait for the right entry point. Our target is $62.00.
Mar. 12th, 2009 - entry price on FO @ 47.55, option @ $2.20
symbol: FO1018I50 SEP 2010 $50 call - current bid/ask $2.85/ 3.10
-stop loss on FO @ 39.95
Chart of FO:
Forest Oil Corp. - FST - close: 25.00 change: -0.44
Ouch! Oil and oil service stocks have continued to under perform thanks in part to a rally in the dollar on the back of euro currency weakness. Once shares of FST broke technical support at the 50-dma shares accelerated lower. On a short-term basis the sell-off looks complete and shares are off 16% from their recent highs near $30.00. However, the wider market (S&P 500) is still overbought and looks poised to correct, which could send FST even lower!
I am not suggesting new bullish positions at this time and more conservative traders will want to seriously consider an early exit right here to avoid or minimize any losses. If it looks like FST bounces and then begins to roll over again the newsletter will probably abandon ship.
Our long-term target is $37.50.
Oct 15th, 2009 - entry price on FST @ 23.85, option @ 7.40
symbol: OJG-AD, 2011 $20 LEAP call - current bid/ask $ 6.90/ 7.10
-stop loss on FST @ 23.45
Chart of FST:
Intel Corp. - INTC - close: 22.24 change: -0.11
INTC helped lead the semiconductor sector higher with a rally to new 52-week highs last week. Yet the rally was stopped cold near the $22.75 level. The trend is up but stocks are overbought. Look for a correction back to the $21.50-21.00 zone. I am inching our stop loss up to $19.25, which is still under the simple 200-dma. FYI: Earnings are coming up on April 13th.
Our long-term target is the $24-26 zone.
FYI: Shares of Intel don't move very fast. Readers might want to consider turning this play into a calendar or diagonal spread to further maximize your gains.
June 13th, 2009 - entry price on INTC @ 16.31, option @ 1.36
symbol: VNL-AD, 2011 LEAP $20 call - current bid/ask $3.30/3.35
-stop loss on INTC @ 19.25 *new*
Chart of INTC:
Mosaic Co. - MOS - close: $59.35 change: +0.91
This could end up being a very volatile week for MOS, which already sees more than its fair share of volatility. Right now it's tough to read what's happening with MOS. Fundamentally the industry should be poised to do well with a projected rise in demand for their products. Yet the trading has been erratic in MOS. You could almost argue the stock has produced a bear-flag pattern this past week. Thursday's session was a one-day bearish reversal pattern but there was no follow through on Friday. Technical indicators are not much help given all the choppiness. The Point & Figure chart, which tends to eliminate a lot of the noise is still bullish.
MOS reports earnings on March 31st after the closing bell. Wall Street expects a profit of 63 cents a share. A few analysts have predicted that MOS will beat estimates. If too many investors start getting too optimistic for MOS' earnings report then that sets up a stronger chance of a disappointment and the usual sell-off. If management says the wrong thing or delivers poor results this stock could easily be trading near $54 or less in a heartbeat.
I am not suggesting new positions at this time. We will wait and see how the stock reacts following its earnings announcement.
If you already have a bullish LEAP position in MOS then I am suggesting we buy the April $50 puts. They're cheap but if MOS collapses on us it should take the sting out of any correction in the LEAP calls. Currently the April $50 puts are going for $0.17 each. You could choose the $55s for $0.78.
Our long-term target is the $90-100 zone. (Readers might want to consider the 2012 LEAPS too).
NOTE: In 2009 MOS issued a special cash dividend of $1.30 per share payable back on December 3rd, 2009. The CBOE issued a new LEAPS symbol to account for the dividend. The old 2011 LEAPS have a root symbol of ZHX. The LEAPS we want to use are the ZXW root symbols.
Jan 28th, 2010 - entry price on MOS @ 56.00, option @ 6.10
symbol: ZXW-AM, 2011 LEAP $65 call - current bid/ask $6.50/6.90
-stop loss on MOS @ 51.90
Buy the April $50 puts (current ask $0.17) as a precaution over earnings.
Chart of MOS:
Manitowoc Inc. - MTW - close: 13.13 change: -0.03
MTW continues to build on its trend of higher lows and higher highs but just barely. The intraday reversals on Thursday and Friday last week are actually worrisome. I would expect shares to correct back toward $12.00 or its 100-dma on any market pull back. Thus I'm not suggesting new bullish positions at this time. Our long-term target is $17.00.
Oct 30th, 2009 - entry price on MTW @ 9.10, option @ 2.61
symbol: VMT-AB, 2011 JAN $10 call - current bid/ask $4.00/4.30
-stop loss on MWT @ 9.85
01/18/10 Sell Half! MTW @ 13.70, option at $4.80 bid (+83.9%)
- or -
Oct. 30th 2009 - entry price on MTW (the stock) @ 9.10
- stop loss on MTW @ 9.85
01/18/10 Sell Half! MTW @ 13.70 (+50.5%)
Chart of MTW:
Oracle Corp. - ORCL - close: 25.69 change: -0.35
ORCL rallied to new multi-year highs just ahead of its earnings report on Thursday. The stock hit $26.25. Results of $0.38 a share were in-line with expectations. Revenues came in a little bit ahead of estimates. Guidance was generally in-line with Wall Street's estimates. It was only natural to see some profit taking on Friday after the event and the 1.3% decline on Friday was pretty minor. If the market corrects I would look for ORCL to pull back toward the $24 area. I am not suggesting new positions at this time.
Our long-term target is $29.75.
FYI: Shares of ORCL don't move very fast. Readers might want to consider turning this play into a calendar or diagonal spread to further maximize your gains.
Dec. 18th, 2009 - entry price on ORCL @ 24.05, option @ 2.55
symbol: VOC-AE, 2011 LEAP $25 call - current bid/ask $2.72/2.76
-stop loss on ORCL @ 21.40.
Chart of ORCL:
PEPSICO Inc. - PEP - close: 66.59 change: +0.04
PEP's rally has been stopped in its tracks. After a six-week rally from $59 to $67 it looks like shares have finally ran out of gas. I suspect money managers are just waiting for the quarter to end before taking some profits off the table. I am suggesting that we take some money off the table right now! We'll sell half our position at current levels and up our final target to $72.25. Look for a dip toward the $64-62 zone on any market correction.
July 7th, 2009 - entry price on PEP @ 57.25, option @ $4.50(estimate)
symbol: VP-AL, 2011 $60.00 LEAP call - current bid/ask $8.00/8.15
-stop loss on PEP at $59.40
03/27/10 SELL HALF: PEP $ 66.59, Option @ $8.00 (+77.7%)
Chart of PEP:
Potash Corp. - POT - close: $120.72 change: +0.75
The profit taking continues and Thursday's session has produced a bearish reversal pattern. I am still suggesting that readers wait for a correction into the $115-110 zone and then look for a bounce before considering new bullish positions. This week rival MOS is due to report earnings on March 31st after the closing bell. MOS' results could have an impact on shares of POT.
We sold half our position near $125. Our final target is $160.00.
Jan. 28th, 2010 - entry price on POT @ 101.00, option @ 11.75
symbol: VPT-AB, 2011 LEAP $110 call - current bid/ask $22.80/23.15
-stop loss on POT @ 99.50
SELL HALF (03/13/10) option @ $26.35 bid (+124%)
Chart of ORCL:
PartnerRe Ltd. - PRE - close: 80.20 change: +0.19
Shares of PRE continue to perform well but I would keep a wary eye on the IUX insurance index. This index is up about seven weeks in a row and looks very overbought and due for a correction. If the market and the IUX index correct we can expect PRE to follow suit. Readers may want to step back and see what happens over the next week or two before considering new bullish positions in PRE.
Our first target is $84.90. Our second, longer-term target is $97.50.
Feb. 13th, 2010 - entry price on PRE @ 76.28, option @ 2.70
symbol: PRE1021H80, 2010 AUG $80 call - current bid/ask $3.50/3.80
-stop loss on PRE @ 69.75
Chart of PRE:
Reynolds American Inc. - RAI - close: 53.42 change: -0.17
I'm sorry to say that RAI is going nowhere fast. Shares spent most of last week in a $1.00 range. Resistance in the $54-55 zone is still very much alive. More conservative traders will want to consider between taking profits now or raising their stops toward the $52 level. I am not suggesting new positions at this time. At the moment our final exit target is $57.50. More aggressive traders may want to aim higher.
July 24th, 2009 - entry price on RAI @ 42.50, option @ $4.50(estimate)
symbol: OWO-AH, 2011 JAN $40.00 LEAP call - current bid/ask $12.70/14.90
-stop loss on RAI at $49.75
Sold Half on 10/19 @ 49.50, option @ $8.90 (+97%)
Chart of RAI:
UltraShort 20+ Year Treasury Bond ProShares - TBT - cls: 49.24 chg: -0.14
We are finally starting to see some action in the bond market.
The U.S. continues to sell record levels of debt. Investors are starting to grasp just how dangerous this ballooning debt could be. Or it could be a move by the Chinese to lower how much they buy U.S. treasuries since the U.S. is threatening them with the "currency manipulator" label. Whatever the reason is it doesn't matter. The demand for bonds is falling and yields are rising. I suspect this could end up being a multi-year trend.
The TBT still has a bearish trend of lower highs so I'm sticking to my prior comments. Readers will want to wait for a move over the $51.50 level before considering new bullish positions.
Our first long-term target is $59.75. Our second target is $67.50.
FYI: The TBT is an exchange traded fund (ETF) that tries to deliver twice the inverse performance of the Barclays Capital 20+ Year U.S. Treasury index.
Jan. 09th, 2010 - entry price on TBT @ 50.63, option @ 4.90
symbol: XRJ-AC, JAN 2011 $55 LEAP call - current bid/ask $2.65/2.89
-stop loss on TBT @ 45.90
Jan. 09th, 2010 - entry price on TBT @ 50.63, option @ 7.90
symbol: YHT-AH, JAN 2012 $60 LEAP call - current bid/ask $5.00/5.25
-stop loss on TBT @ 45.90
Chart of TBT
Titanium Metals - TIE - close: 16.21 change: +0.29
Take profits now! Shares of TIE surged to new 18-month highs last week. News that Boeing was raising their airplane production levels and rumors that TIE could be a takeover target combined to send TIE to an intraday high of $17.00. Titanium is a major component in aircraft construction so news that BA was raising their build out rate is bullish for TIE. Thursday's session looks like a bearish reversal and while there was no confirmation I am suggesting we take profits now. The combination of TIE looking very overbought combined with a market rally that looks very fragile seems like a good excuse to take some money off the table.
I am suggesting we sell half of our TIE position now. We will raise our stop loss to $11.90. Our long-term target is $19.75.
Feb. 20th, 2010 - entry price on TIE @ 12.06, option @ 1.40
symbol: VWN1122A15, 2011 JAN $15 LEAP call - current bid/ask $3.20/3.50
-stop loss on TIE @ 11.90 *new*
03/27/10 SELL HALF: TIE @ 16.21, option @ 3.20 (+128.5%)
Feb. 20th, 2010 - entry price on TIE @ 12.06, option @ 2.60
symbol: WWN1221A15, 2012 JAN $15 LEAP call - current bid/ask $4.50/4.80
-stop loss on TIE @ 11.90*new*
03/27/10 SELL HALF: TIE @ 16.21, option @ 4.50 (+73%)
Chart of TIE:
iShares 20+Yr Bond ETF - TLT - close: 88.50 change: +0.25
The action in the TLT is the mirror opposite of the TBT. As bonds decline the TLT followed them lower. Shares of the TLT actually hit new relative lows at $88.37 on Thursday. I have been suggesting that readers look for a close under the $88.00 level before considering new put LEAPS.
Our first target is $81.00.
FYI: The TLT is an exchange traded fund that tries to mimic the performance of the Barclays Capital U.S. 20+Year Treasury Bond Index.
Jan. 09th, 2010 - entry price on TLT @ 89.29, option @ 6.40
symbol: VJL-MG, JAN 2011 $85 LEAP put - current bid/ask $3.85/4.45
-stop loss on TLT @ 94.15
Jan. 09th, 2010 - entry price on TLT @ 89.29, option @ 8.90
symbol: YLI-MB, JAN 2012 $80 LEAP put - current bid/ask $5.85/6.90
-stop loss on TLT @ 94.15
Chart of TLT
UnitedHealth Group Inc. - UNH - close: 32.63 change: -0.49
Uh-oh! The relative strength rally in healthcare stocks peaked on Monday following the vote on healthcare. The sector has been slipping lower ever since. You could argue that this past week has created a new lower high for UNH. We are now faced with the strong possibility that shares are headed back toward support near $30.00 again. I am not suggesting new bullish positions at current levels.
The plan was to use small positions to limit our risk.
Our long-term target is $42.50.
Dec 16th, 2009 - entry price on UNH @ 31.55, option @ 3.80
symbol: VUH-AG, 2011 JAN $35 LEAP call - current bid/ask $3.00/3.10
-stop loss on UNH @ 28.95
Chart of UNH:
Visa Inc. - V - close: 90.25 change: -0.16
The action in V last week was certainly encouraging. There was no follow through on the previous week's reversal. Traders bought the dip near $88 and shares slowly regained the pivotal $90 level. Unfortunately it might be short-lived. The market's rally is losing steam fast. If the S&P 500 corrects it would not surprise me to see V pull back toward the $85 region and its 100-dma. Therefore I am not suggesting new bullish positions at this time. We can be ready to buy the dip but stay on the sidelines for now.
Our long-term target is the $109 mark. Investors might want to consider the 2012 LEAPS instead.
Mar 9th, 2009 - entry price on V @ 91.00, option @ 4.60
symbol: VSK1122A100 JAN 2011 $100 LEAP call - current bid/ask $4.20/4.40
-stop loss on V @ 81.75
Chart of V:
Wal-Mart Stores Inc. - WMT - close: 55.51 change: -0.10
The rally in WMT has stalled. Shares spent last week churning sideways in a narrow range. Honestly, I don't see any changes from my prior comments. Shares look poised to correct. We can launch new positions on a dip into the $54-52.50 range but I would be patient and wait to buy LEAPS on a bounce.
This is a long-term trade for us so you can take your time on an entry point.
Our long-term target is the $63.00 level. Since WMT does not move very fast readers may want to supplement their position by turning it into a calendar spread or a diagonal spread to enhance their gains.
Mar 7th, 2009 - entry price on WMT @ 54.14, option @ 4.60
symbol: WWT1221A55 JAN 2012 $55 LEAP call - current bid/ask $5.40/5.55
-stop loss on WMT @ 49.45
Chart of WMT
Chesapeake Energy Corp. - CHK - close: 24.21 change: +0.42
Natural gas has continued to sink to new multi-year lows. Consumption during the winter months has been a lot less than expected and storage levels remain above five-year highs. It looks like shares of CHK are finally beginning to catch up to the weakness in its main commodity. Last week's big rally in the dollar also hammered commodity stocks lower. The stock hit our stop loss at $22.75 on Thursday closing this trade.
Oct 30th, 2009 - entry price on CHK @ 24.00, option @ 4.70
2nd entry Feb. 6th, 2009 - entry on CHK @ 24.52, option @ 3.80
symbol: VEC-AE, JAN 2011 $25 LEAP call - current bid/ask $2.03/2.10
-stop loss on CHK @ 22.75
Position Closed on 03/25/10 at $22.75, Option closed at $2.07 (-56% & -45%)
Chart of CHK:
Consol Energy Inc. - CNX - close: 42.50 change: -0.47
The ugliness in shares of CNX continues and so does the acquisition spree. Two weeks ago CNX plunged on news it was buying the natural gas business from Dominion Resources. On Monday, March 22nd CNX announced it was buying the rest of CNX Gas Corp. that it did not already own for about $363 million. Shares of CNX gapped open lower and spiked down toward the $43.00 level. Our stop loss was hit at $43.99 closing this trade. The stock tried to bounce midweek but rolled over again with the rest of the coal names. CNX also broke down under its 200-dma, which should have been technical support. All together it has been a horrendous couple of weeks with CNX falling from $55 to $42.50.
CNX hit our first target back in September.
Sep 1st, 2009 - entry price on CNX @ 36.50, option @ 7.80(estimate)
symbol: VTL-AH, 2011 JAN $40 LEAP call - current bid/ask $ 7.90/ 8.30
-stop loss on CNX @ 43.99
STOPPED OUT 03/22/10 @ 43.99, option price $9.60 (+23%)
1st Target hit 09/16/09 @ 48.50, option price $15.40 (+97%)
Chart of CNX