None. No closed plays this week.
Arch Coal Inc. - ACI - close: 23.97 change: -0.60
Headlines have been quiet on ACI lately. The coal sector has been not been as volatile as the rest of the market but the overall trend is the same. ACI bounced last Monday and it's been drifting lower every since. Thus far ACI is holding technical support near its 200-dma. Yet if the S&P 500 retests the May lows will ACI manage to hold on to support? At a minimum I would expect this stock to test the May 6th lows near $22.63. That's not very far away from our stop loss (21.95) and odds are growing quickly that we could end up getting stopped out. I remain very cautious on ACI and would hesitate to launch new positions.
We already sold half our position for profit.
Our final long-term target for the LEAP trade is $34.75.
May 14th, 2009 - entry price on ACI @ 16.00, option @ 2.40
symbol: ACI1122A30 2011 JAN $30 LEAP call - current bid/ask $1.70/1.85
-stop loss on ACI @ 21.95
05/01/10 Sell Half, ACI @ $27.00, option @ 3.00 (+25%)
Feb 13th, 2010 - entry price on ACI @ 21.65, option @ 4.40
symbol: ACI1221A25 2012 JAN $25 LEAP call - current bid/ask $5.40/5.80
-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 - $76.23 -1.04
Believe it or not BRK.B managed a gain for the week but the action was all bearish. The bounce last Monday and Tuesday failed near the trendline of lower highs and shares appear to be rolling over again. I would expect BRK.B to retest the lows in the $73-72 zone near its rising 200-dma. I don't see any changes from my prior comments. We can still launch positions on a dip in the $73-70 zone. More conservative traders may want to wait and buy a bounce instead of buying calls on a decline.
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 BRKB1122A80 LEAP call - current bid/ask $5.75/6.00
-stop loss on BRK.B @ 69.00
Feb 6th, 2010 - entry price on BRK.B @ 73.57, option @ 6.50
symbol: 2012 JAN $85 BRKB1221A85 LEAP call - current bid/ask $8.35/8.80
-stop loss on BRK.B @ 69.00
Chart of BRK.B:
BorgWarner Inc. - BWA - close: 39.20 change: -1.56
BWA also managed a gain for the week but the bounce is rolling over. The failed rally is short-term bearish and we can probably expect BWA to retest last week's lows near $36.75 and quiet possibly the 200-dma, which is nearing the $35.00 level. A guest on CNBC this Friday suggested that BWA could suffer due to euro weakness. My short-term outlook for BWA is down and more conservative traders may want to lighten up on their positions. You could exit now for a small profit. I am not suggesting new bullish positions at this time but we'll be looking for a strong bounce in the $35-37 zone.
We have already taken profits once at $44.50. Our second and final long-term target is $49.75.
Feb 17th, 2010 - entry price on BWA @ 37.55, option @ 3.90
symbol: BWA1122A40 2011 JAN $40 LEAP call - current bid/ask $5.00/5.40
-stop loss on BWA @ 33.40
04/29/10 1st Target Hit, BWA @ 44.50, option @ $7.63 (+95%)
Chart of BWA:
CIRCOR Intl. - CIR - close: 34.64 change: -1.08
CIR displayed relative strength most of the week thanks to better than expected earnings and positive analyst comments. The company reported earnings on May 10th and blew away the estimates. The street was expecting 16 cents and CIR delivered 33 cents. Revenues were worse than expected but management raised their guidance for the second quarter. This produced a pop in the stock price and one firm raised their price target for CIR's stock to $39.
Unfortunately the rally stalled at the 2010 highs near $36.00. Friday's session looks like normal profit taking after a 17% gain from the previous Friday's close. The trend is up but CIR is facing resistance with a weak market. I would hesitate to launch new bullish positions at this time. A reversal here could look like a bearish double top pattern. Plus, I'm still very concerned about the ridiculous spreads in the November calls.
Our long-term target is the $40 area.
NOTE: I suggested readers only initiate half a position to limit our risk.
May 6th, 2010 - entry price on CIR @ 30.50, option @ 5.00
symbol: CIR 10K35.00 2010 NOV $35 call - current bid/ask $1.40/5.20
-stop loss on CIR @ 27.45
Chart of CIR:
Continental Resources - CLR - close: 46.65 change: -1.60
Friday's session was rough with a 3.3% drop but CLR still managed a 6.7% gain on the week. CLR certainly acts like it wants to rally and the only thing holding it back is weakness in oil prices and the rest of the sector. Therein lies our challenge. The oil sector looks ready to breakdown as crude oil nears the $70 a barrel area. My bias on CLR is still bullish but if the sector sinks this stock could struggle. I would not be surprised to see CLR retest the $43-42 zone or even its rising 200-dma.
Our long-term target is $59.00.
Our original plan called for a Half Position (or smaller) to limit our risk.
Apr 28, 2010 - entry price on CLR @ 45.25, option @ 4.40
symbol: CLR1018L50 2010 DEC $50 call - current bid/ask $5.00/5.50
-stop loss on CLR @ 39.75
Chart of CLR:
EMC Corp. - EMC - close: 18.57 change: -0.27
CSCO's earnings results should have buoyed the tech sector but investors sold the news instead. Meanwhile shares of EMC are following the action in the NASDAQ. The oversold bounce is failing and the short-term trend appears to be down. I am still expecting a correction toward the $17.50-17.30 zone near its rising 200-dma. Wait for the dip and use it (or a bounce near there) as a new entry point.
Currently our stop loss is at $16.75. More aggressive traders may want to use a wider stop (maybe $15.90). Our first target is $22.50. Our second, longer-term target is $24.75.
May 6, 2010 - entry price on EMC @ 18.25, option @ 1.40
symbol: EMC 11A20.00 2011 Jan $20 call - current bid/ask $1.30/1.35
-stop loss on EMC @ 16.75
- or -
May 6, 2010 - entry price on EMC @ 18.25, option @ 2.50
symbol: EMC 12A20.00 2012 Jan $20 call - current bid/ask $2.38/2.54
-stop loss on EMC @ 16.75
Chart of EMC:
Flowserve - FLS - close: 107.24 change: -4.73
Last week was a volatile one for FLS. Shares rallied from $103.50 to over $113.50 the first three days of the week. The simple 30-dma has turned into overhead resistance and the rally stalled. Friday's widespread market decline prompted some profit taking and FLS gave back 4.2%. Short-term the trend looks bearish with this failed rally pattern and I would expect FLS to retest the May lows and the $100 level near the rising 200-dma. More conservative traders will want to seriously consider taking some money off the table. Consider reducing your exposure with smaller positions. If the $100 level does hold as support we'll reconsider new entry points then.
Currently we have a stop loss at $92.40 and our long-term target is $135.00. Meanwhile in corporate news FLS held their annual meeting on Friday, May 14th. I didn't see any significant headlines surface from the meeting.
May 6, 2010 - entry price on FLS @ 102.00, option @ 13.60
symbol: FLS 11A110.00 2011 Jan $110 call - current bid/ask $11.60/12.60
-stop loss on FLS @ 92.40
- or -
May 6, 2010 - entry price on FLS @ 102.00, option @ 14.90
symbol: FLS 12A120.00 2012 Jan $120 call - current bid/ask $15.30/17.20
-stop loss on FLS @ 92.40
Chart of FLS:
Fortune Brands - FO - close: 48.50 change: -0.87
Shares of FO managed a gain for the week but shares have been struggling with the $50.00 level the last few days. I don't see any changes from my previous comments where I suggested that FO's correction was headed for the $45.00 level. We may want to focus on the rising 200-dma closer to $44.00. I am not suggesting new bullish positions at this time and more conservative traders may want to exit completely. You could always reopen positions if we see a new entry point. Seriously this may be a good idea since we're dealing with September 2010 calls and not LEAPS.
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 $2.70/ 2.85
-stop loss on FO @ 42.90
04/17/10 Sell Half - FO @ $52.00, option @ $4.30 (+95%)
Chart of FO:
Forest Oil Corp. - FST - close: 27.10 change: -0.77
Euro weakness produces dollar strength that pushes oil prices lower. Weak crude oil prices drag down the oil sector. This is the environment that shares of FST are facing. The OIX oil index and OSX oil services index both look like they could breakdown into a more serious decline. If that happens we can expect FST to follow suit. It hasn't happened yet but odds of a breakdown in oil and the oil sector seem to be growing. Therefore more cautious traders may want to exit any FST positions. You could exit now for a small profit. I am still focusing on FST's support near the $25.00 area. Alternatively readers could up their stops toward the May 6th low near $24.50. 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: FST1122A20.00 2011 $20 LEAP call - current bid/ask $ 8.70/ 9.00
-stop loss on FST @ 23.45
Chart of FST:
Imation Corp. - IMN - close: 10.65 change: -0.09
IMN surged 8% last week but the rally stalled right where you could expect it to near support/resistance at the $11.00 level. The action on Friday is somewhat encouraging with traders buying the dip twice near $10.45. However, if the market continues to slide we may see another entry point near the $10.00-9.75 zone. I would take a more cautious tone and wait for IMN to retest these lows and bounce before launching new positions. I prefer buying the stock over the calls but calls will give you more leverage.
Our first long-term target is $12.25. Our second, even longer-term target is $14.25.
May 6, 2010 - entry price on IMN @ 10.00,
Stop loss at $8.95
- or -
May 6, 2010 - entry price on IMN @ 10.00, option @ 1.00
symbol: IMN 10J10.00 2010 Oct $10 call - current bid/ask $1.30/1.80
-stop loss on IMN @ 8.95
Chart of IMN:
Lockheed Martin - LMT - close: 80.79 change: -1.56
I have to warn you that the relative weakness in LMT this past week is not a good sign. The market managed a minor gain for the week but LMT actually lost ground. The initial oversold bounce in LMT stalled near its 30-dma and 50-dma around the $84 level. The rally failed several times and eventually shares reversed. Now the stock is retesting support near $80.00 and its rising 100-dma. I am very concerned that LMT will break $80 and if that happens we'll probably see a quick drop to the 200-dma near $77.75.
I am not suggesting new bullish positions at this time. Let's see where LMT eventually finds support. Our first target is $99.00. Our second, longer-term target is $109.00.
FYI: Our plan was to only use small (half) positions to limit our risk.
May 6, 2010 - entry price on LMT @ 80.50, option @ 6.50
symbol: LMT 11A85.00 2011 Jan $85 call - current bid/ask $ 4.50/ 4.80
-stop loss on LMT @ 74.75
- or -
May 6, 2010 - entry price on LMT @ 80.50, option @ 7.70
symbol: LMT 12A90.00 2012 Jan $90 call - current bid/ask $ 5.90/ 6.40
-stop loss on LMT @ 74.75
Chart of LMT:
Millicom Intl. - MICC - close: 86.97 change: -1.18
Shares of MICC continue to see lots of volatility. After a 10% plunge the prior week MICC just rebounded 10%. The bounce stalled near round-number resistance at $90.00 before paring its gains. Longer-term I'm still bullish on MICC but given the market's weakness both overseas and here in the U.S. I would probably expect another correction. Look for a retest of the $80 level or its rising 200-dma. Nimble could try and launch new positions on a dip or a bounce near $80.00 again.
Keep in mind that this is a higher-risk trade given MICC's volatility and our relatively wide stop loss. I would use small positions if you do open a trade. Our long-term target is $99.50 and the $109.00 levels.
May 6, 2010 - entry price on MICC @ 80.00, option @ 8.60
symbol: MICC 11A90.00 2011 Jan $90 call - current bid/ask $ 9.70/10.30
-stop loss on MICC @ 67.75
Chart of MICC:
PEPSICO Inc. - PEP - close: 66.07 change: -0.41
PEP surged to a new 52-week high on May 12th thanks to Goldman Sachs putting PEP on their conviction buy list. Unfortunately that proved to be the top for the week as traders started taking profits on the big oversold bounce. PEP's relative strength this past week is encouraging but the latest candle on the weekly chart looks like a topping formation. I am not suggesting new bullish positions at this time. More conservative traders may want to take profits now or raise their stop loss. Our 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 $7.75/7.95
-stop loss on PEP at $59.40
03/27/10 SELL HALF: PEP $ 66.59, Option @ $8.00 (+77.7%)
Chart of PEP:
Titanium Metals - TIE - close: 15.40 change: -0.79
It looks like momentum traders are back at it in TIE. Shares rallied to a new 52-week high ($18.15) this past week with a breakout over resistance near the $17.35 area. Investors sold the new high but TIE's relative strength this past week is encouraging. I remain bullish on TIE but the stock could see sharp bouts of profit taking if the broader market indices continue to slide lower. I am not suggesting new long-term bullish positions at this time.
A few weeks ago we closed the 2011 January $15 call LEAP. We still have the 2012 January $15 call LEAP. 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 $5.20/5.60
-stop loss on TIE @ 12.90
03/27/10 SELL HALF: TIE @ 16.21, option @ 4.50 (+73%)
Chart of TIE:
Whiting Petroleum - WLL - close: 83.13 change: -2.54
The same factors influencing FST are affecting WLL (euro/dollar & dollar/oil relationships). The larger trend in WLL is still up but the action this past week is bearish with a failed rally under the $90.00 level. On a positive note there was no confirmation of the huge bearish engulfing candlestick pattern on the weekly chart - at least not yet. If the OIX oil index and OSX oil services index breakdown WLL could struggle. Considering this potentially bearish environment for oil stocks I would hesitate to launch new positions. More aggressive traders may want to consider launching positions on another bounce in the $77-78 zone.
Our long-term target is $99.50. Remember, this was an aggressive entry point and we wanted to keep positions small to limit our risk (half a position).
Apr 27, 2010 - entry price on WLL @ 83.50, option @ 7.50
symbol: OVK1122A90 JAN 2011 $90 LEAP call - current bid/ask $ 9.20/ 9.60
-stop loss on WLL @ 74.75
Chart of WLL:
WLT - Walter Energy Inc. close: $72.80 change: -2.71
Analysts love WLT due to the company's position supplying coking coal and metallurgical coal to the steel industry. Yet the coal sector continues to struggle and WLT's stock price looks vulnerable. The bounce stalled under $80 and shares spent most of the week testing support near $70 and its rising 200-dma. I would like to think WLT will be able to hold this level but with the major market indices looking weak WLT could breakdown and test the 2010 lows near $64.00. This is an aggressive trade because WLT is so volatile and we are using a wide stop loss. I hesitate to launch new positions at this time but nimble traders may want to consider buying calls on a dip or a bounce in the $65-63 zone or a close over $81.00.
Our first target is $99.00.
FYI: In the news this past week WLT's Board of Directors authorized a new stock buy back program worth $45 million. This replaces the prior $100 million repurchase program that was recently completed (source: company press release).
The plan was to use small positions to limit our risk.
May 6, 2010 - entry price on WLT @ 73.00, option @ 12.00
symbol: WLT 11A80.00 2011 Jan $80 call - current bid/ask $ 9.70/10.20
-stop loss on WLT @ 62.40
- or -
May 6, 2010 - entry price on WLT @ 73.00, option @ 14.10
symbol: WLT 12A90.00 2012 Jan $90 call - current bid/ask $12.80/13.90
-stop loss on WLT @ 62.40
Chart of WLT:
Wal-Mart Stores Inc. - WMT - close: 52.12 change: -0.28
Investors appear to be cautious on WMT. This past week the Commerce Department said retail sales rose 0.4% in April, which was better than expected and marked the seventh monthly gain in a row. Yet the retail stocks failed to see any strength on the news. Technically shares of WMT look weak. The stock has spent several days now under its 200-dma while it tries to hold on to support near the $52.00 level. The stock produced a failed rally near $53 on Wednesday and it looks like shares want to trade down toward the $50.00 level.
Hopefully the company will offer some good news on Tuesday and turn things around. WMT is due to report earnings on Tuesday morning (May 18th) before the opening bell. Analysts expect a profit of 85 cents a share. Their results and more importantly any guidance could determine WMT's direction this week.
I am not expecting any big surprises so I don't see a need to buy protective puts ahead of the report but that is a strategy more conservative traders may want to consider.
Given the market's bearish tone and WMT's bearish trend of lower highs I would wait for a dip closer to $50 before considering new long-term bullish positions.
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 $4.75/4.85
-stop loss on WMT @ 49.45
Chart of WMT