Editor's Note:

It looks like the market top has finally arrived. Readers may want to consider taking some money off the table. The correction could take weeks.


Closed Plays


APA graduated from our watch list to our play list and immediately reversed lower. Shares eventually hit our stop loss. The TBT saw a sharp move lower on bond strength and hit our stop loss.


Play Updates


Arch Coal Inc. - ACI - close: 27.00 change: -0.46

Take some money off the table. It has been a difficult week for coal stocks to maintain their gains with the sector struggling with big declines in shares of Massey Energy (MEE), the company that suffered the big coal mine disaster. News on Friday that the FBI might be investigating MEE for potential criminal charges sent MEE down 11%. Meanwhile shares of ACI have been hovering sideways in the $27-28 zone. The longer-term trend for ACI still appears to be up but shares are struggling with resistance near the $28 level. This past week there has been some bullish speculation that coal prices could rise sharply by the end of 2010, which would be positive for the sector. Unfortunately short-term ACI looks like it's ready to pull back toward the $25-24 zone.

I am suggesting we go ahead and sell half our position. Better to take some money off the table now with the major market averages looking vulnerable.

I'm not suggesting new bullish positions at this time. Our final target for the LEAP trade 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 $3.00/3.20
-stop loss on ACI @ 21.95

05/01/10 Sell Half, ACI @ $27.00, option @ 3.00 (+25%)

--2nd Entry--
Feb 13th, 2010 - entry price on ACI @ 21.65, option @ 4.40
symbol: YEP1221A25 2012 JAN $25 LEAP call - current bid/ask $7.60/7.90
-stop loss on ACI @ 21.95

05/01/10 Sell Half, ACI @ $27.00, option @ 7.60 (+72%)

Chart of ACI:


Berkshire Hathaway Inc. - BRK.B - $77.00 -1.09

This is a big weekend for Berkshire. The company holds their annual meeting on May 1st. Attendance this year is expected to be a record in the 35,000 to 40,000 investors traveling to Omaha, Nebraska to listen to Mr. Buffett talk about the company's $26 billion acquisition of Burlington Northern (BNI) and answer questions regarding his $5 billion investment in Goldman Sachs, which was looking very good until about two weeks ago.

As far as the stock price of BRK.B shares have continued to correct as we expected they would. The stock should find support near $75 and near $70. I have been suggesting readers wait for a dip into the $73-70 zone before considering new bullish positions. More conservative traders can wait to buy the bounce instead of buying the dip.

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 $5.30/5.60
-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 $7.40/8.10
-stop loss on BRK.B @ 69.00

Chart of BRK.B:


BorgWarner Inc. - BWA - close: 43.34 change: -0.73

Target achieved! BWA reported earnings on Thursday morning (April 29th). Not only did BWA beat estimates by 24 cents with a profit of 65 cents per share but management raised their 2010 guidance. Q1 revenues also beat expectations. The stock reacted by gapping open higher on Thursday morning at $44.07 and hitting $44.55 intraday. Our first target to take profits was at $44.50. The option traded at $7.63.

Short-term BWA looks a little overbought and I would expect a correction back toward $40.00. Let's see the stock reaffirm support near $40 before considering new bullish positions. I am raising our stop loss to $34.90. Our second and final target is still $49.75.

Feb 17th, 2010 - entry price on BWA @ 37.55, option @ 3.90
symbol: ZWY1122A40 2011 JAN $40 LEAP call - current bid/ask $6.60/7.70
-stop loss on BWA @ 34.90 *new*

04/29/10 1st Target Hit, BWA @ 44.50, option @ $7.63 (+95%)

Chart of BWA:


Celgene Corp. - CELG - close: 61.99 change: +0.37

CELG drifted sideways into its earnings report. The company announced on April 29th before the opening bell and beat estimates by 3 cents a share. Revenues were much higher than expected and management raised their 2010 guidance. The stock reacted with a gap open higher and a surge toward the $64 level. The news also garnered some bullish analysts comments. The action this past week looks like a bullish breakout/reversal from a five-week correction. Yet short-term I would expect a dip back toward the $60-58 zone again. I would wait for the pull back again and then consider buying the next rebound higher. Keep in mind I am cautious about opening new positions with the major indices looking ready to finally correct lower.

Our long-term 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:


Continental Resources - CLR - close: 49.16 change: +1.30

CLR was a new watch list candidate from last week. Shares performed perfectly with dip toward $45.00 and rebound higher. Our plan was to launch small positions on a dip to $45.25. The stock has been unaffected by any weakness in the energy sector. While the stock is nearing potential round-number resistance at $50.00 shares did close at new 52-week highs. The company is due to report earnings on May 5th after the closing bell. Wall Street is looking for a profit of 35 cents a share. The company has been beating the estimate the last three quarters so investors are probably expecting another beat. If they fail to meet expectations we can expect some short-term profit taking. The $45.00 level should remain short-term support. Our long-term target is $59.00.

FYI: Cautious traders may want to consider short-term protective puts or taking some quick profits ahead of the earnings report. The choice depends on how much risk you're willing to take.

Half Position (or smaller)

Apr 28, 2010 - entry price on CLR @ 45.25, option @ 4.40
symbol: CLR1018L50 2010 DEC $50 call - current bid/ask $6.20/6.50
-stop loss on CLR @ 39.75

Chart of CLR:


Fortune Brands - FO - close: 52.42 change: -1.58

Warning! The action in FO this past week looks like a top or bearish reversal pattern. The company pre-announced better than expected earnings on April 27th and the stock spiked to $55.68. That proved to be the high for the week. The company reported earnings on April 29th and the results were better than expected on both profits and revenues. Management narrowed their prior guidance to the upper end of the range. Investors have taken a sell-the-news approach and FO is correcting.

A negative reaction to bullish earnings news is certainly a warning sign. On a short-term basis the $50.00 level should be support. If the $50 level breaks we're looking at possible support near $48 and $46. I am not suggesting new bullish positions at this time. Let's wait and see where FO finds support and look for a rebound.

More cautious investors will want to seriously consider selling the rest of their position right now with the option double what we started at. You could always jump back in on the next bounce.

We have already chosen to sell half our position near $52. Our long-term (final) target is $59.75.

Mar. 12th, 2009 - entry price on FO @ 47.55, option @ $2.20
symbol: FO1018I50 SEP 2010 $50 call - current bid/ask $4.40/ 4.80
-stop loss on FO @ 45.75

04/17/10 Sell Half - FO @ $52.00, option @ $4.30 (+95%)

Chart of FO:


Forest Oil Corp. - FST - close: 29.30 change: +0.53

It has been a rough week for the energy sector as the market reacts to the oil spill in the Gulf of Mexico. Both the OIX oil index and OSX oil services index are down for the week. FST also suffered a pull back but overall the stock is holding up pretty well. Shares were downgraded on April 28th but traders actually bought the intraday dip. Traders have continued to buy dips near the short-term rising 10-dma. FST acts like it wants to rally higher but that will depend on earnings.

FST is due to report earnings on Monday, May 3rd after the closing bell. Estimates are currently for a profit of 47 cents a share. I am not suggesting new positions ahead of the earnings report. If FST does see any profit taking we can look for short-term support in the $26-25 zone.

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 $ 9.80/10.70
-stop loss on FST @ 23.45

Chart of FST:


McDermott Intl. - MDR - close: 27.41 change: -0.87

Caution! The upward momentum in MDR has stalled. Shares of MDR failed twice near the $29.00 level last week. This small double top pattern is bearish. News that one of MDR's subsidiaries has won a $90 million contract in Michigan on Friday was not enough to stop shares from losing 3% during the market sell-off. I would not be surprised to see MDR correct back toward the $25.00 level. We can probably expect the stock to churn sideways to down into its earnings report on May 11th.

I would wait for a convincing bounce in the $24-26 zone before considering new positions and readers may want to wait until after we see the market's reaction to earnings before considering new positions.

Our long-term target is $37.50. Investors may want to consider 2012 LEAPS and aim higher.

- Half position size -
Apr 14th, 2010 - entry price on MDR @ 28.25, option @ 2.95
symbol: 2011 JAN $30 LEAP call - current bid/ask $ 2.40/ 2.65
-stop loss on MDR @ 23.90

Chart of MDR:


Manitowoc Inc. - MTW - close: 14.01 change: -0.36

Ouch! It was a painful week for MTW. Shares spike to a new 52-week high last Monday ($16.43) but couldn't hold on to it. The earnings report on April 27th was a disappointment. MTW's losses were worse than expected and revenues missed estimates. Shares plunged from $16 to almost $13.50 during Tuesday and Wednesday's pull back. The oversold bounce late in the week is already fading. More conservative traders will want to seriously consider a complete exit right here and now. We have already taken profits once. Consider hitting the eject button. I am not suggesting new bullish positions at this time. I am expecting the correction to continue toward the $12.50-12.00 zone.

Our final target is $17.50. I am not suggesting new bullish positions at this time.

Oct 30th, 2009 - entry price on MTW @ 9.10, option @ 2.61
symbol: VMT-AB, 2011 JAN $10 call - current bid/ask $4.60/4.90
-stop loss on MWT @ 11.75

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 @ 11.75

01/18/10 Sell Half! MTW @ 13.70 (+50.5%)

Chart of MTW:


PEPSICO Inc. - PEP - close: 65.22 change: +0.02

We have been looking for PEP to correct into the $64-62 zone and shares slipped to $63.60 last week before bouncing. Unfortunately the oversold bounce stalled on Friday near short-term resistance at $66 and its 30-dma. Thus I don't think the correction is over yet. This time I'd focus on the $63-62 area before expecting a bounce. The larger trend is still up but I'm not suggesting new bullish positions at this time.

Our (adjusted) final target is $72.25. FYI: In other news PEP said their annual shareholders meeting will be held on May 5th.

July 7th, 2009 - entry price on PEP @ 57.25, option @ $4.50(estimate)
symbol: VP-AL, 2011 $60.00 LEAP call - current bid/ask $6.85/7.05
-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: $110.50 change: -0.11

POT spent the week bouncing around the $106-112 zone as investors waited for the earnings report due out on April 29th. The results were better than expected with a profit of $1.47 a share compared to estimates of $1.32. Revenues also beat expectations yet management lowered their Q2 and 2010 guidance. The conference call seemed to be full of bullish headlines for the sector yet POT said it will start shutting down production in spite of what appears to be rising demand both here and abroad. Market reaction was mild considering the lowered guidance.

Technically it looks like POT could be building a new base to rally from in the $106-112 zone but I would hesitate to launch new positions given the broader market's weakness this past week. A close over $117 in POT might change my mind.

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 $15.05/15.40
-stop loss on POT @ 98.50

SELL HALF (03/13/10) option @ $26.35 bid (+124%)

Chart of ORCL:


PartnerRe Ltd. - PRE - close: 77.58 change: -1.11

Oops! The oil rig blast in the Gulf of Mexico has turned into daily headlines regarding the oil spill and what could end up being the worst natural disaster in the U.S. It turns out that PRE has exposure to the event and recently announced that losses could exceed $1 billion. This explains the sudden, sharp decline in the stock price. We've talked about a pull back toward support in the $76-75 zone before and that's exactly where PRE bounced on Friday. Yet I would hesitate to open new positions since the oil spill is still an ongoing disaster. Due to this event more conservative traders will want to seriously consider an early exit right now to cut their losses early. PRE has already announced that their earnings next quarter will be affected by this event. In the meantime the company is due to report earnings on May 6th after the closing bell. Wall Street expects a loss of 77 cents a share.

Our first target is $84.90. I am adjusting our secondary target to $89.50.

Feb. 13th, 2010 - entry price on PRE @ 76.28, option @ 2.70
symbol: PRE1021H80, 2010 AUG $80 call - current bid/ask $2.20/2.50
-stop loss on PRE @ 74.75

Chart of PRE:


Titanium Metals - TIE - close: 15.42 change: -0.64

Warning! Shares of TIE are forecasting a move lower. Momentum stalled under $17.50 and now we're seeing traders sell into strength. TIE looks like it's about to breakdown under support in the $15.50-15.25 zone and when it does I would expect a dip toward the $14.00-13.00 area. If you do not want to endure that sort of move then I suggest you exit now. Further complicating matters is the company's earnings report. I still can't find a confirmed date but TIE is due to announce earnings sometime in the May 3rd-May 13th range. Analysts estimate a profit of 3 cents a share.

Aggressive traders may want to consider buying short-term puts to profit from the decline but I normally try to avoid holding short-term positions over an earnings announcement and not having an earnings date makes that a challenge.

Two weeks ago we closed the 2011 January $15 call LEAP. We still have the 2012 January $15 call LEAP. I am not suggesting new positions at this time. Our final, long-term target is $19.75.

Feb. 20th, 2010 - entry price on TIE @ 12.06, option @ 2.60
symbol: WWN1221A15, 2012 JAN $15 LEAP call - current bid/ask $3.90/4.30
-stop loss on TIE @ 12.90

03/27/10 SELL HALF: TIE @ 16.21, option @ 4.50 (+73%)

Chart of TIE:


iShares 20+Yr Bond ETF - TLT - close: 92.13 change: +1.05

Deteriorating conditions in the European debt market seems to be driving more money into U.S. bonds. Bonds have been rising and the TLT broke through one of its trendlines of lower highs. Shares of this ETF are nearing resistance in the $92.50 region and its 200-dma. More conservative traders may want to go ahead and exit early now to limit their losses. I am not suggesting new positions at this time but nimble traders can watch for a failed rally and bearish reversal near resistance as a possible entry point. Our first, long-term 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 $3.00/3.20
-stop loss on TLT @ 93.15

Jan. 09th, 2010 - entry price on TLT @ 89.29, option @ 8.90
symbol: YLI-MB, JAN 2012 $80 LEAP put - current bid/ask $5.50/6.25
-stop loss on TLT @ 93.15

Chart of TLT


UnitedHealth Group Inc. - UNH - close: 30.31 change: -0.99

A bullish earnings report from rival Aetna on Thursday was not enough to keep the rally in healthcare stocks alive. Traders sold the move in UNH as the market's Friday decline accelerated. Thus far support near $30.00 and its rising 200-dma is holding. However, I am losing faith that this level is going to hold. The HMO healthcare sector index has much further to fall before it finds similar support. Plus the S&P 500 looks like it is just beginning to correct. More conservative investors will want to strongly consider an early exit right now. Odds are growing that we'll get stopped out in the next week or two.

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 $1.91/1.99
-stop loss on UNH @ 28.95

Chart of UNH:


Visa Inc. - V - close: 90.23 change: -2.59

Last Monday morning's gap open near $97.50 proved to be a high for the week. Shares quickly reversed lower as investors started selling Visa ahead of its earnings report. The company announced on April 28th and the results were good. A profit of $0.96 a share was 5 cents better than expected. Revenues surged almost 19% and came in better than expected. Management reaffirmed their 20% earnings growth and raised their revenue estimates. What did the market do? They sold the news. The stock is off more than 6% for the week and is has broken down under its 50-dma. Shares did manage to hold support near prior resistance at the $90.00 level. Will this area hold? Probably not if the wider market breaks down. I am expecting a pull back into the $87.50-85.00 zone. Conservative investors could exit now and avoid or minimize any losses with the option still near $4.60. More aggressive traders may want to widen their stop loss a little. I believe that if Visa closes under $90.00 our risk of getting stopped out jumps significantly.

I am not suggesting new positions at this time. If we do end up getting stopped out we'll watch Visa for new support in the $80-75 area. Our long-term target is the $109 mark.

Mar 9th, 2009 - entry price on V @ 91.00, option @ 4.60
symbol: VSK1122A100 JAN 2011 $100 LEAP call - current bid/ask $4.60/4.75
-stop loss on V @ 84.90

Chart of V:


Whiting Petroleum - WLL - close: 90.33 change: +0.87

We were lucky with WLL. The stock was a new watch list candidate and shares dipped low enough to hit our trigger at $83.50 just before surging to new highs. We were triggered on April 27th. The company reported earnings on April 28th and bested estimates by 5 cents. Revenues surged more than 110% from a year ago and also beat estimates. The sideways trading over the last four weeks now looks like a base of support in case WLL see any profit taking. Our long-term target is $99.50. More aggressive traders could aim higher. Remember, this was an aggressive entry point and we wanted to keep positions small to limit our risk (half a position).

Half position

Apr 27, 2010 - entry price on WLL @ 83.50, option @ 7.50
symbol: OVK1122A90 JAN 2011 $90 LEAP call - current bid/ask $11.30/11.90
-stop loss on WLL @ 74.75

Chart of WLL:


Wal-Mart Stores Inc. - WMT - close: 53.64 change: -0.06

The slow-moving shares of WMT continue to do just that - move slowly. The trend over the past few weeks has been down and last week was no exception. Traders were selling into strength near the 100-dma. I have been suggesting that readers should focus on the $52.00 as a potential entry point. I'd adjust that to focus on the 200-dma near $52.50 first. Just remember that this is a very long-term trade for us. We don't have to buy the dips. You can wait to buy a bounce (which could be weeks away).

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 $4.65/4.85
-stop loss on WMT @ 49.45

Chart of WMT


CLOSED Plays

APA - Apache Corp. - close $101.76 change: -1.16

It was a volatile week for APA and unfortunately we were caught up in it. Shares spiked to $111.00 on Monday, which was enough to hit our trigger at $110.50. We knew this was an aggressive entry point so the plan was to initiate small positions. Unfortunately the oil sector turned south as investors reacted to the daily headlines of the oil rig fire and oil spill spreading across the Gulf of Mexico. To complete this perfect storm APA reported earnings on April 29th and missed estimates by 14 cents. The stock reacted to earnings on Friday morning with an intraday spike down to $96.06. That's a $15 range in a week where we were triggered and stopped out. Of course our stop was actually hit on Thursday at $102.45.

Triggered on 04/26/10 at $110.50, option at $9.30

Stopped out on 04/29/10 at $102.45, option at $7.76 (-16.5%)

Chart of APA:


UltraShort 20+ Year Treasury Bond ProShares - TBT - cls: 45.19 chg: -1.08

The TBT is a double-inverse ETF on the U.S. bond market so the moves this past week were exaggerated enough to hit our stop loss. Shares broke support and hit our stop at $45.90 on April 27th. This was the same day stocks sank sharply and money moved into the perceived safety of bonds.

Long-term my bias on bonds has not changed. The pace of U.S. debt and its deficit is unsustainable and eventually the bond market is going to react unless this country does something serious about tackling this problem.

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 $1.60/1.84
-stop loss on TBT @ 45.90

Stopped out 04/27/10, TBT @ 45.90, option @ $1.80 (-63%)

Jan. 09th, 2010 - entry price on TBT @ 50.63, option @ 7.90
symbol: YHT-AH, JAN 2012 $60 LEAP call - current bid/ask $4.20/6.60
-stop loss on TBT @ 45.90

Stopped out 04/27/10, TBT @ 45.90, option @ $4.10 (-48%)

Chart of TBT