We are only one day into the second quarter and bulls are still in control but that could change on Monday. Investors have yet to react to the jobs report.
I would hesitate to make any big decisions on Monday. Stocks could see a knee-jerk reaction lower on the worse than expected pace of job growth. At the same time this could be the catalyst needed to spark a much needed correction in the stock market.
No closed plays this week.
Arch Coal Inc. - ACI - close: 23.38 change: +0.53
ACI managed to post a gain for the holiday shortened week but the stock is under performing its peers in the coal sector. The short-term trend is still bearish with lower highs and lower lows. Traders did buy the dip at the exponential 200-dma but I remain very cautious here. We are still facing the potential bearish head-and-shoulders pattern with the neckline and support near 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 $1.45/1.55
-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 $4.80/5.10
-stop loss on ACI @ 19.85
Chart of ACI:
Biogen IDEC - BIIB - close: 57.52 change: +0.13
Biotech stock BIIB has now spent two weeks correcting after topping out near the $60.00 level. Shares have been under performing the market and the BTK biotech index. I have been suggesting that investors look for a dip toward the $55-54 zone but shares might find some support near $56 and its rising 50-dma. My concern is that the major market indices have not even begun to correct yet and when they do BIIB could see an even sharper pullback. I remain cautious here and would wait for a solid bounce from support. The question is where will BIIB find support ($56, $54 or $52).
Our first target to take profits is at $64.90.
FYI: Earnings are expected in mid April but the date is not yet confirmed.
Feb 19th, 2010 - entry price on BIIB @ 56.60, option @ 4.60
symbol: OIY1122A60 2011 JAN $60 LEAP call - current bid/ask $4.20/4.60
-stop loss on BIIB @ 51.85
Chart of BIIB:
Berkshire Hathaway Inc. - BRK.B - $81.65 +0.38
It's been four weeks now since BRK.B topped out near $83.50. The stock produced a bearish reversal on March 8th and it has been slowly sinking ever since. To have only fallen a couple of dollars is a pretty mild correction. Broken resistance near $80.00 "should" offer some support but I wouldn't bet on it when the market eventually corrects. We remain very long-term bullish on BRK.B but a much more normal correction would be a pull back into the $77-73.00 area. Take your time and wait for the entry point to come to you.
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 $6.80/7.00
-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 $8.10/8.70
-stop loss on BRK.B @ 69.00
Chart of BRK.B:
BorgWarner Inc. - BWA - close: 39.22 change: +1.04
It has been a bullish week for BWA. After spending a couple of days consolidating near its 50-dma the stock took off in the last two sessions. Now BWA is closing at new 52-week highs. I couldn't find any specific news to account for the relative strength but I'm not complaining. Volume has been above average on this rally, which is normally a bullish sign. Shares actually look pretty bullish here. Let's hope the market doesn't derail it.
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 $3.30/4.40
-stop loss on BWA @ 32.49
Chart of BWA:
Celgene Corp. - CELG - close: 62.08 change: +0.12
Shares of biotech firm CELG have continued to pull back but the selling has stalled near the $62 level. That doesn't mean the correction is over but it's a step in the right direction. Since I'm still expecting the market to pull back I would wait for CELG to retest the $60-58 zone before considering new bullish positions. If the BTK biotech index 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 $5.30/5.50
-stop loss on CELG @ 54.75
Chart of CELG:
Deluxe Corp. - DLX - close: 19.45 change: +0.03
DLX has been drifting sideways for two weeks now. While the trend is still up momentum is almost gone and shares are due for a correction. I've been suggesting readers wait for a pull back toward the $18.00 level, which as broken resistance should be new support.
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 $1.15/1.50
-stop loss on DLX @ 16.75
Chart of DLX:
EMR $50.83 +0.49 -- Emerson Electric Co.
Shares of EMR continue to outperform. The stock broke through round-number, psychological resistance at the $50.00 level this past week. It's a very bullish development but I'm still concerned the stock is overextended. Shares have rallied to potential resistance near the July 2008 highs. More conservative traders may want to go ahead and take some money off the table right now! I am adjusting our stop loss again, this time to $44.75.
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 $11.10/11.50
-stop loss on EMR @ 44.75 *new*
02/18/10 1st Target hit @ 47.50, option @ $8.80 (+95.5%)
Chart of EMR:
Fortune Brands - FO - close: 49.02 change: +0.51
Shares of FO have spent two weeks now consolidating sideways. I had suspect it was lack of selling by fund managers waiting for the quarter to end. Let's see what happens this week. We're bullish on FO but don't want to chase it after a 20% rally from $40. The stock should find some support on a dip into the $46-44 zone. Wait for the dip before considering new bullish positions.
Our long-term target is $62.00. Unfortunately we could only find September calls, which will obviously get a lot cheaper on a pull back.
Mar. 12th, 2009 - entry price on FO @ 47.55, option @ $2.20
symbol: FO1018I50 SEP 2010 $50 call - current bid/ask $2.70/ 2.85
-stop loss on FO @ 39.95
Chart of FO:
Forest Oil Corp. - FST - close: 26.84 change: +1.02
Oil and oil service stocks have been rebounding thanks to a nice rally in crude oil futures. The recent parade of stronger manufacturing numbers should also indicate rising demand for commodities. Shares of FST have rallied from under the $25 level but shares still face resistance in the $27-30 zone and so far this could be nothing more than an oversold bounce. I remain cautious on FST, especially since the wider market indices like the S&P 500 have yet to correct.
I am not suggesting new bullish positions at this time.
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 $ 8.20/ 8.50
-stop loss on FST @ 23.45
Chart of FST:
Intel Corp. - INTC - close: 22.39 change: +0.10
After peaking near $22.75 two weeks ago INTC has been consolidating sideways. The trend is up but the waning momentum could be suggesting shares are ready to correct. Broken resistance near the $21.00 area should offer some support.
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 $3.30/3.40
-stop loss on INTC @ 19.25
Chart of INTC:
Mosaic Co. - MOS - close: $58.33 change: -2.44
Thursday was not a good session for MOS. The company reported earnings on Wednesday night and missed Wall Street's estimates by 5 cents. Revenues rose more than 25% but still missed analysts' expectations. The post-earnings sell-off produced a 4% decline on Thursday and a bearish breakdown from a two-week consolidation pattern. The short-term outlook on MOS is bearish and I would expect a correction toward $55.00 and its rising 200-dma. Longer-term analysts still seem optimistic for this industry, especially later this year. Wait for the bounce near $55.00 before considering new bullish positions.
Last week I suggested buy the April $50 puts trading near $0.17 at the time as a precaution that MOS collapsed after earnings. It looks like we may not need them and they'll probably expire worthless. Once they expire I'll add the cost of the $0.17 to our option price for the initial trade.
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 $5.10/5.45
-stop loss on MOS @ 51.90
Chart of MOS:
Manitowoc Inc. - MTW - close: 13.38 change: +0.38
MTW continues to creep higher. Thursday's session looks like a bullish breakout from a weeklong consolidation but it needs to see some follow through (check the intraday chart to see it). The trend is certainly up but I am not suggesting new bullish positions at this time. I still think the $13.75-14.25 zone could be a tough level of resistance for MTW to breakthrough and more conservative traders may want to take profits there again. 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 $4.10/4.40
-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: 25.46 change: -0.25
It has been about 3 1/2 months and ORCL is just slowly inching higher. I'm starting to wonder if it just moves too slowly for us. If you're not turning this trade into a calendar spread or a diagonal spread I would actually consider exiting, taking my money and looking for something that has more potential. If ORCL does correct we can expect support near $24.00 and the 200-dma near $23.00. I am raising our stop loss to $22.49.
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 $2.52/2.58
-stop loss on ORCL @ 22.49 *new*
Chart of ORCL:
PEPSICO Inc. - PEP - close: 66.68 change: +0.52
The $67.00 level remains a solid top on shares of PEP. You could argue that the lack of profit taking in the stock is a show of relative strength. I still think shares look overbought and are probably due for a pull back. We can expect PEP to see some support in the $63-62 zone and the $60 level near the rising 200-dma. I am not suggesting new positions at this time. Our adjusted final target is $72.25.
July 7th, 2009 - entry price on PEP @ 57.25, option @ $4.50(estimate)
symbol: VP-AL, 2011 $60.00 LEAP call - current bid/ask $7.95/8.10
-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: $117.51 change: -1.84
The less than stellar earnings report from MOS on Wednesday night sparked some profit taking across the industry. Shares of POT lost 1.5% and set new three week lows. I have been warning readers to expect a pull back toward the $115-110 zone and shares are getting closer. The 50-dma and 100-dma are nearing $115 and should offer some support. Yet if the broader market actually corrects I would expect POT to slip toward the $110-105 area. I would definitely sit back and wait. We could see a much better entry point in a couple of weeks.
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 $19.65/20.00
-stop loss on POT @ 99.50
SELL HALF (03/13/10) option @ $26.35 bid (+124%)
Chart of ORCL:
PartnerRe Ltd. - PRE - close: 79.76 change: +0.04
The trend in PRE is still up but the rally has stalled near resistance around the $80.50 level. At the same time the IUX insurance index remains overbought and way overdue for a pull back. I would much rather consider new bullish positions on a dip or a bounce in the $76-75 zone so I suggest waiting a couple of weeks to see if we get that opportunity. If we do see a new entry point I would use the November calls.
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 $3.20/3.40
-stop loss on PRE @ 69.75
Chart of PRE:
Reynolds American Inc. - RAI - close: 54.78 change: +0.80
My, my, what a difference a week can make. The stock has shot higher and is now challenging resistance and its 52-week highs in the $54.70-55.00 zone. After weeks of consolidating sideways if RAI can breakout I see it making a move toward $60.00. Therefore I am adjusting our final target from $57.50 to $59.75. More conservative traders can stick to the $57.50 target or go ahead and take profits right now (not a bad idea, really!). We will move our stop loss to $50.75. I am not suggesting new positions at this time.
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 $13.50/15.80
-stop loss on RAI at $50.75 *new*
Sold Half on 10/19 @ 49.50, option @ $8.90 (+97%)
Chart of RAI:
UltraShort 20+ Year Treasury Bond ProShares - TBT - cls: 48.91 chg: +0.22
There was no follow through last week as the sell-off in bonds stalled. The TBT found resistance at the $50.00 level. This is probably temporary. The big picture fundamentals of rising U.S. debt will eventually push yields higher and that's bearish for bonds (and bullish for the TBT). I have been suggesting that readers wait for a move over $51.50 before launching new positions.
Our first long-term target is $59.75. Our second target is $67.50. Keep in mind that this security tends to move pretty slowly.
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 $2.54/2.74
-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 $4.70/5.05
-stop loss on TBT @ 45.90
Chart of TBT
Titanium Metals - TIE - close: 16.87 change: +0.28
The rally continues for TIE. Shares hit another new 52-week high at $17.39 on Tuesday. Shares of TIE are extremely overbought. When the correction comes it could be severe. I would not be surprised to see a pull back toward the $13-14 zone. I am not suggesting new bullish positions at this time. We decided to sell half our position a week ago. Our final, 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 $3.60/3.90
-stop loss on TIE @ 11.90
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 $5.00/5.30
-stop loss on TIE @ 11.90
03/27/10 SELL HALF: TIE @ 16.21, option @ 4.50 (+73%)
Chart of TIE:
iShares 20+Yr Bond ETF - TLT - close: 88.95 change: -0.55
There was no follow through in the sell-off two weeks ago but that's okay. We know this is a slow-moving equity. The trend is our friend and a real breakdown in the TLT appears imminent. Please note our new stop loss at $93.15. 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 $4.05/4.25
-stop loss on TLT @ 93.15 *new*
Jan. 09th, 2010 - entry price on TLT @ 89.29, option @ 8.90
symbol: YLI-MB, JAN 2012 $80 LEAP put - current bid/ask $6.30/6.70
-stop loss on TLT @ 93.15 *new*
Chart of TLT
UnitedHealth Group Inc. - UNH - close: 32.99 change: +0.32
The action in shares of UNH has been lagging behind the HMO healthcare index. The trading in UNH has also narrowed to a 75-cent range over the last several days. This activity following the lower high and failed rally on March 22nd doesn't inspire any confidence. Given the market's overbought condition I would wait for a pull back toward the $30.00 level, which should be support for UNH.
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 $2.98/3.05
-stop loss on UNH @ 28.95
Chart of UNH:
Visa Inc. - V - close: 92.55 change: +1.52
Shares of V continue to show relative strength. Traders have been buying the dips for nearly two weeks now and the stock outperformed the broader market on Thursday with a 1.6% gain. The challenge now is getting past its all-time high from last month. Plus, we're faced with the prospect that if the market corrects shares of V could be a big target for profit taking. I remain bullish on Visa but readers may want to be patient here. Odds are probably pretty good that V will retest the $88-85 zone again.
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 $4.85/5.00
-stop loss on V @ 81.75
Chart of V:
Wal-Mart Stores Inc. - WMT - close: 55.49 change: -0.11
Another week has gone by and shares of WMT are virtually flat. Big picture the trend is up but short-term if the market corrects I expect WMT to correct with it.
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 $5.35/5.50
-stop loss on WMT @ 49.45
Chart of WMT