Closed Plays


CIR and IMN are closed.


Play Updates


BorgWarner Inc. - BWA - close: 37.60 change: -2.37

News flow for BWA remains light. The stock was performing pretty well midweek but traders sold it hard on Friday for a 5.9% loss. This now looks like a failed rally at $40.00 resistance. I would expect another decline toward support in the $35-34 zone and its 200-dma. I am repeating my comments from last week that more conservative traders will want to strongly consider exiting the remainder of our position right now to avoid a loss. No new positions at this time.

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 $4.20/4.80
-stop loss on BWA @ 33.75

05/29/10 Sell half of remaining position, BWA @ 37.26, option @ 3.90 (+0.00%)
04/29/10 1st Target Hit, BWA @ 44.50, option @ $7.63 (+95%)

Chart of BWA:


Cliffs Natural Resources - CLF - close: 49.22 change: -4.00

Friday's jobs report created huge doubts about the economic rebound and cyclical stocks like CLF were hammered. Shares lost about 10% for the week but most of that came from Friday's 7.5% sell-off. The close under $50.00 is bearish but CLF still has some technical support at its rising 200-dma near 47.75. I cautioned readers last week that CLF would remain very volatile and get pushed around by movement in the dollar. Friday's market saw the dollar breakout from a two-week consolidation phase, which doesn't bode well for CLF. Given the current market conditions and the breakout higher in the dollar I am strongly suggesting that more conservative traders exit early right now. You can minimize any losses in the 2011 Jan. $60 calls and actually avoid a loss in the 2012 Jan. $70 calls.

NO new positions at this time!

Prior Comments:
This is an aggressive trade. CLF can be volatile. Plus, there is a chance that Australia will levy a new tax on resource names like CLF. I suggested readers keep their position size small. Our first target is $75.00.

May 21, 2010 - entry price on CLF @ 46.50, option @ 6.65
symbol: CLF 11A60.00 2011 JAN $60 call - current bid/ask $5.55/5.85
-stop loss on CLF @ 44.90

- or -

May 21, 2010 - entry price on CLF @ 46.50, option @ 7.55
symbol: CLF 12A70.00 2012 JAN $70 call - current bid/ask $ 7.75/ 8.30
-stop loss on CLF @ 44.90

06/05/10 Suggested Cautious Traders Exit Early!

Chart of CLF:


ConocoPhillips - COP - close: 50.06 change: -1.92

Bulls are getting hit hard in the energy sector. COP is only down $1.00 from our initial entry point but the options are trading a lot lower. COP traded in a 5% range this past week. Unfortunately Thursday's failed rally near $52.50 and its 100-dma is bearish. I am very concerned that the bullish breakout in the U.S. dollar on Friday will continue to weigh on oil and thus push the oil sector lower. More conservative traders may want to exit early or raise their stops toward the May 25th low of $48.51. At this point I do expect COP to retest that low near $48.50 and probably dip toward the $47.50 area. I am not suggesting new bullish positions at this time. Our first target is $69.00.

May 20, 2010 - entry price on COP @ 51.00, option @ 3.75
symbol: COP 11A55.00 2011 JAN $55 call - current bid/ask $2.57/2.70
-stop loss on COP @ 46.00

- or -

May 20, 2010 - entry price on COP @ 51.00, option @ 4.75
symbol: COP 11A55.00 2012 JAN $60 call - current bid/ask $3.40/3.60
-stop loss on COP @ 46.00

Chart of COP:


EMC Corp. - EMC - close: 18.38 change: -0.68

According to a IDC Q1 sales in the external data storage market rose 17.1% from a year ago. That should be good news for companies like EMC and NetApp but I'm guessing comparisons to Q1 2009 are pretty easy. The news didn't have an affect on the stock price. As of Thursday EMC was looking strong with a bullish breakout over its 50-dma and the $19.00 level but Friday saw this move reversed. I remain very cautious on EMC. If you're interested in launching new positions try and time one on a dip or rebound near $17.50. If you do launch positions keep them small. If the major market averages breakdown I expect EMC to follow them lower.

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 $1.17/1.23
-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 $2.55/2.60
-stop loss on EMC @ 16.75

Chart of EMC:


Fortune Brands - FO - close: 45.68 change: -2.17

FO spent the week consolidating sideways and looked ready to breakout higher until Friday rolled around. Anything related to consumer buying plunged and FO gapped open lower and lost 4.5% on the session. The stock appears to be headed for a retest of support near $44.00 and its rising 200-dma. Nimble traders could try buying call options on a dip or a bounce near $44.00 but I would be very cautious and use very small positions.

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 $1.40/ 1.60
-stop loss on FO @ 42.90

05/29/10 -Conservative traders should exit now-
04/17/10 Sell Half - FO @ $52.00, option @ $4.30 (+95%)

Chart of FO:


Lockheed Martin - LMT - close: 77.39 change: -2.32

On Tuesday LMT announced it was selling two units and reorganizing the rest of its divisions. The news didn't have much of an impact on the stock price. LMT just drifted sideways near $80.00 albeit with a very subtle trend of lower highs. That trend got a lot more violent on Friday with a 2.9% loss and a close under its 200-dma. The combination of the jobs report sparking a market-wide sell-off and news that the Pentagon is trying to cut $100 billion from their budget over the next five years was the double whammy. Yet if you think about it, potential budget cuts and the market decline could have been an easy reason to sell LMT even more. I do expect LMT to hit their May 21st low near $76.00 and it wouldn't surprise me to see the stock trade closer to $75.00. At that point we're in danger of getting stopped out. More conservative traders may want to exit now to preserve capital. I am not suggesting new bullish positions at this time.

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 $ 3.20/ 3.60
-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 $ 4.80/ 5.40
-stop loss on LMT @ 74.75

06/05/10 More Conservative traders may want to exit early!

Chart of LMT:


Mckesson - MCK - close: 68.56 change: -2.72

MCK closed at new 10-year highs on Thursday yet Friday's 3.8% pull back took a chunk out of the option values below. We can blame Friday's move on the market but if MCK doesn't bounce back soon Thursday will look like a bull trap. Nimble traders could try buying calls on dips near $66.00 but I would be very cautious here. More conservative traders may want to raise theirs toward $66. This was labeled an aggressive trade with a plan to keep positions small. Our first target is $94.50.

May 18, 2010 - entry price on MCK @ 71.00, option @ 3.25
symbol: MCK 11A75.00 2011 Jan $75 call - current bid/ask $ 3.60/ 3.90
-stop loss on MCK @ 63.99

- or -

May 18, 2010 - entry price on MCK @ 71.00, option @ 4.10
symbol: MCK 12A80.00 2012 Jan $80 call - current bid/ask $ 5.10/ 6.10
-stop loss on MCK @ 63.99

Chart of MCK:


Millicom Intl. - MICC - close: 79.12 change: -2.25

MICC has spent the last two weeks bouncing around the $76-82 range. Considering the weakness in the market here and overseas I'd say that's almost a victory. Last week I suggested aggressive traders could buy calls on dips near $77 and we got that entry point on June 1st. I remain very cautious here. Instead of buying dips readers may want to wait for a close over $82.00 (or even $85) as small confirmation the trend is still higher.

Keep in mind that this is a higher-risk trade given MICC's volatility. 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 $ 5.10/ 6.20
-stop loss on MICC @ 74.40

Chart of MICC:


PEPSICO Inc. - PEP - close: 61.44 change: -1.93

PEP was holding up reasonably well with traders buying dips near $62 and its 200-dma. That changed on Friday with PEP gapping open lower and close under these support levels. Odds just jumped significantly that PEP will retest the $60 level and probably hit our stop loss at $59.85. I strongly suggest more conservative traders exit now to avoid a loss. No new positions at this time. 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 $5.15/5.35
-stop loss on PEP at $59.85

06/05/10 More cautious traders may want to exit now to avoid a loss.

03/27/10 SELL HALF: PEP $ 66.59, Option @ $8.00 (+77.7%)

Chart of PEP:


Titanium Metals - TIE - close: 17.01 change: -0.91

TIE has continued to outperform. Shares managed to hit a new one-year high on Thursday but failed to hold it. Overall the path of least resistance appears to be up but I want to warn you. The dollar's strength is pressuring the commodity market and several commodities are starting to breakdown. TIE's relative strength is impressive but if the market really starts to breakdown this stock could become a target for profit taking.

If you're looking for an entry point I would look for a dip or a bounce near the $15.00 area and its rising 100-dma.

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. More aggressive traders may want to aim a lot higher.

Feb. 20th, 2010 - entry price on TIE @ 12.06, option @ 2.60
symbol: WWN1221A15, 2012 JAN $15 LEAP call - current bid/ask $5.60/5.90
-stop loss on TIE @ 13.49

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

Chart of TIE:


WLT - Walter Energy Inc. close: $67.79 change: -4.38

Ouch! Last week was painful for WLT. The stock fell almost 14%. On Tuesday it dropped toward $70 and traders sold the midweek bounce. It looks like the market is reacting to news that China appears to be having some success slowing down their economy. The recent Chinese PMI data came below economists' estimates. Investors fear that China might go too far and really slam on the brakes to keep their economy from overheating and this will affect demand for coal.

The breakdown under $70 on Friday significantly raises the risk that WLT will retest support near $65 at its May lows. We recently raised our stop loss to $64.90 and I am concerned we could get stopped out soon.

Prior Comments:
Keep an eye open on news regarding China. Fears that China will slow down its economy too much could send coal names back into a down trend again.

Our first target is $99.00.

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 $ 7.40/ 7.90
-stop loss on WLT @ 64.90

- or -

May 6, 2010 - entry price on WLT @ 73.00, option @ 14.10
symbol: WLT 12A90.00 2012 Jan $90 call - current bid/ask $10.30/11.40
-stop loss on WLT @ 64.90

Chart of WLT:


Wal-Mart Stores Inc. - WMT - close: 50.40 change: -1.32

WMT only lost 16 cents for the week but the action was definitely bearish. The oversold bounce reversed at the $52 level and Friday saw WMT slide 2.5% back toward support near $50.00. The company made headlines on Friday when the CEO, speaking to shareholders at their annual meeting, said WMT plans to hire 500,000 people over the next five years (worldwide). The emphasis is on their global growth because growth in the U.S. has slowed. It's possible that investors were disappointed that WMT couldn't think of a better use for $15 billion since management just announced a massive stock buyback program. I still think WMT is a buy near support at $50 and its long-term trendline but if it closes under $50 we probably want out. I'm keeping our stop loss (to exit this trade) at $48.95 for the moment.

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 $3.90/4.15
-stop loss on WMT @ 48.95

Chart of WMT


CLOSED Plays

CIRCOR Intl. - CIR - close: 28.19 change: -1.40

CIR has not been the best play for us, starting with the terribly high entry price on the option. This past week has not been a good week for CIR. Tuesday's plunge back under the 200-dma was followed with a failed rally near $30.00. Odds are very good that we will get stopped out soon. I'm suggesting we exit early now to salvage a little bit of capital.

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 $0.90/2.15
-stop loss on CIR @ 27.45

06/05/10 Exit Early, CIR @ 28.19, option @ 0.90 (-82%)

Chart of CIR:


Imation Corp. - IMN - close: 9.19 change: -0.81

Ouch! What in the world happened to IMN. Shares spiked higher at the open on Friday, tagged resistance near $10.50 (Shares hit $10.54) and hit its 30-dma before immediately plunging. Shares lost over 8% on no news. There is no reason for IMN to under perform this badly. Unless the company has invested too much in Hungarian bonds. The Friday plunge to new relative lows was enough to hit our stop loss at $9.25 and close this play.

May 6, 2010 - entry price on IMN @ 10.00,
Stop loss at $9.25

06/04/10 Stopped out @ 9.25 (-7.5%)

- or -

May 6, 2010 - entry price on IMN @ 10.00, option @ 1.00
symbol: IMN 10J10.00 2010 Oct $10 call - current bid/ask $0.60/1.40
-stop loss on IMN @ 9.25

06/04/10 Stopped out @ 9.25, option @ 0.60 (-40%)

Chart of IMN: