Closed Plays


Both FO and WMT have been closed.


Play Updates


Boeing Co. - BA - close: 68.77 change: +1.34

The markets struggled last week with four days of declines and a meager bounce on Friday. It was a different story for BA. Traders bought the dip early on Wednesday near the stock's 30-dma and the bounce continued and BA managed to breakout and close above its simple 50-dma on Friday - normally a bullish signal. News surfaced on Thursday that BA had temporarily grounded its entire fleet of 23 test planes for its 787 Dreamliner model. The company said they had found a problem with the horizontal stabilizers on the tail. It would take eight days to fix the problem but the delay would not have an impact on BA's current delivery schedule.

The relative strength in BA is encouraging. More aggressive traders may want to consider launching small speculative positions if BA can close over $70.00. I'm still concerned the market may weaken further so dips in the $65-61 zone (or better yet bounces in this area) would be a preferable entry point.

Remember we want to keep our positions very small. I'm suggesting a stop loss at $59.45. Our long-term target is $79.00.

FYI: Readers may want to consider 2012 calls.

Jun 12th, 2010 - entry price on BA @ 66.22, option @ 5.55
symbol: BA1122A70 2011 JAN $70 LEAP call - current bid/ask $6.20/6.35
-stop loss on BA @ 59.45

Chart of BA:


Popular Inc. - BPOP - close: 2.93 change: +0.06

The banking sector had been leading the market lower as investors awaited the latest news regarding financial regulation. It appears that investors fears were overdone. The Senate and House committees have agreed on a final version of the bill, which is a lot less stringent than feared. Markets hate uncertainty and today's news regarding the final version, which still has to be voted on in Congress, removes a lot of uncertainty. Thus the banking sector rallied on Friday.

BPOP did post a loss for the week but most of its trading was sideways. You could argue BPOP was outperforming its peers. Now the stock looks poised to rally higher. Readers could still open positions now but BPOP does have resistance near $3.10. More cautious traders may want to wait for a breakout or a close over the $3.10 mark before initiating positions.

Remember, keep your position size limited to reduce your risk. BPOP is still a bank and nonperforming loans could be a problem, especially since unemployment in Puerto Rico is more than 15% (Puerto Rico is BPOP's home base).

I am suggesting a stop loss at $2.40. Our first long-term target is $4.00. More aggressive traders may want to aim higher.

BUY the STOCK (BPOP) not the option.
06/14/10 Entry Point: BPOP opened @ 2.91.
Stop loss at $2.40.

Chart of BPOP:


BorgWarner Inc. - BWA - close: 39.30 change: -0.37

It may look like a nasty reversal in BWA this past week but shares have merely filled the gap from the June 15th gap higher. Traders were buying the dip near the stock's 50-dma on Friday. I am not suggesting new bullish positions at this time. More conservative traders who have not exited yet may want to raise their stop toward $36.00.

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 $4.60/5.00
-stop loss on BWA @ 34.75

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: 56.37 change: +2.43

CLF, like many stocks like last week, produced a nasty failed rally pattern near resistance. For CLF it was resistance near the 50-dma and the $60.00 level. Shares retraced toward $54 where traders have been buying the dips for the last few days. I suspect that CLF is poised to rally higher from here.

In the news CLF issued a press release late Friday night stating that the company had once again upped its offer to buy Canadian company Spider Resources Inc. CLF has raised their offer from $0.13 (Canadian $) to $0.19 per share and said they have executed a lock-up agreement with Spider's largest shareholder. It looks like CLF has managed to outbid KWG who was also pursuing a merger with Spider.

More aggressive traders might want to consider positions here with a stop loss under $50.00. Or you could wait for CLF to close over resistance near $60.00, which would confirm the move higher. Alternatively, if CLF retreats further look for support at $50 and its 200-dma and buy a dip (or a bounce) there!

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 $7.85/8.10
-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 $ 9.80/10.30
-stop loss on CLF @ 44.90

06/05/10 Suggested Cautious Traders Exit Early!

Chart of CLF:


ConocoPhillips - COP - close: 51.92 change: -0.59

Ouch! It was a rough week for COP. Shares gapped open higher on Monday and then proceeded to trade down for five days in a row. The OIX oil index also posted five declines in a row while the OSX oil services index managed a bounce on Friday probably due to a big bounce in crude oil prices. If you look at a weekly chart of COP the stock has produced a big bearish engulfing (reversal) pattern. This pattern does need to be confirmed but it remains an ominous sign. The selling in COP stalled near $52 and its rising 200-dma. Another technical worry is the rising volume on the sell-off. I would stay very cautious on COP. Wait for a new close over $54.00 before considering new bullish positions. 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 $2.97/3.05
-stop loss on COP @ 47.99

- or -

May 20, 2010 - entry price on COP @ 51.00, option @ 4.75
symbol: COP 11A55.00 2012 JAN $60 call - current bid/ask $3.45/3.65
-stop loss on COP @ 47.99

Chart of COP:


EMC Corp. - EMC - close: 19.24 change: +0.59

Bingo! Right on cue EMC pulled back. Shares dipped toward $18.50 and its 30-dma before bouncing on Friday. EMC really outperformed on Friday with a 3.1% gain. If the market cooperates we could see EMC trading near $20 resistance in a couple of weeks. The $20.00 mark has been key resistance in the past. Don't expect EMC to breakout on its first try.

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 $1.39/1.44
-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 $2.65/2.70
-stop loss on EMC @ 16.75

Chart of EMC:


Lockheed Martin - LMT - close: 78.05 change: -0.07

Defense stocks were no exception to the market's weakness last week. After struggling with resistance in the $81-82 zone LMT rolled over and dipped toward $78. Several technical indicators have turned bearish and we may have just witnessed a new lower high following a bearish double top with the March and April peaks. There has been a lot of volatility in the defense sector lately and investors are nervous as the Pentagon tries to cut its massive budget.

I would be seriously tempted to exit positions early right here and cut my losses. However, LMT still has support near $76.00. More aggressive traders may want to put their stop loss under additional support near $74.00. More conservative traders will want to exit early. On a short-term basis, the trend seems to be down. I am not suggesting new 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 $ 2.65/ 2.85
-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 $ 4.30/ 4.80
-stop loss on LMT @ 74.75

06/26/10 Repeat - Conservative traders may want to exit early.
06/05/10 More Conservative traders may want to exit early!

Chart of LMT:


Mckesson - MCK - close: 68.16 change: +0.45

Warning! MCK appears to be breaking support and its weekly chart just produced a bearish reversal pattern. Of course a lot of stocks produced bearish reversal patterns last week and these still need to be confirmed. Unfortunately I do expect MCK to consolidate lower after spending weeks failing to breakout past the $71.00 level.

Short-term MCK has fallen outside of its channel and is struggling to hold its 50-dma. I am expecting a pull back toward the $64.00 area, which should offer some support, bolstered by the simple 200-dma near $63.00. That presents a little problem since our stop loss is at $63.99. I'm suggesting we give MCK a little more room to maneuver and move the stop loss to $62.90. More aggressive and nimble traders may want to go so far as to buy some short-term puts just in case MCK does not bounce near the $64 level. No new positions at this time. We will re-evaluate if MCK does hold the $64 level.

Remember, MCK a couple of weeks ago this stock saw a sharp increase in short interest as it struggled with resistance near $71.

Previous Comments:
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 $ 2.70/ 2.85
-stop loss on MCK @ 62.90*new*

- or -

May 18, 2010 - entry price on MCK @ 71.00, option @ 4.10
symbol: MCK 12A80.00 2012 Jan $80 call - current bid/ask $ 4.40/ 5.00
-stop loss on MCK @ 62.90*new*

Chart of MCK:


Millicom Intl. - MICC - close: 86.45 change: +0.45

Investors could fall asleep watching shares of MICC. The stock has been stuck trading sideways in the $85-88 zone for nearly two weeks. The long-term trend is still higher but if you're looking for a new entry point I'd wait for a bounce from the $80 area near its rising 200-dma. More aggressive traders could look for dips near $85. It won't trade in this range forever but I don't know what the next catalyst will be. MICC's next earnings report is in the first half of July.

Previous Comments:
If you open positions keep them small to limit your risk. MICC is (normally) a volatile stock. 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 $ 7.70/ 9.00
-stop loss on MICC @ 74.40

Chart of MICC:


NovaGold Resources - NG - close: 7.37 change: +0.12

I certainly wish our trade in NG was more exciting. The stock posted a massive 1-cent gain for the week. Unfortunately for us our entry point made the week's performance a little worse. NG gapped open on Monday at $7.50 and immediately reversed lower. Traders bought the dip near $7.00 and NG is once again challenging the $7.50 level but it's a little disappointing. Gold prices have rallied back toward their all-time highs. You'd think NG would perform better.

I suggested this play was a little more risky since NG had been underperforming its peers. Yet bigger picture the trend in NG remains higher. Nimble traders could try and jump in on another dip near $7.00. Readers may want to wait for NG to actually close over the $7.50 level and its 50-dma (currently 7.56) before initiating positions.

Previous Comments:
I consider this an aggressive, speculative play on the gold miners, which can be a very volatile group. Our stop loss is at $6.26. More cautious traders could use a stop near $6.50. Our first target is $9.00. Our second target is $9.90. I prefer the stock over the option because the spreads on the option are so wide.

Keep your position size small to limit your risk!

Buy the Stock: NG @ current levels, stop loss: 6.25

- or -

Jun 21, 2010 - entry price on NG @ 7.50, option @ 1.40
symbol: NG 11A7.50 2011 Jan $7.50 call - current bid/ask $ 1.25/ 1.40
-stop loss on NG @ 6.26

Chart of NG:


PEPSICO Inc. - PEP - close: 60.77 change: -1.63

PEP has just produced a six-day slide. The declines from Monday-Thursday we can blame on the market's weakness. I don't see a reason for PEP to under perform on Friday and under perform it did. Shares lost 2.6% with a new four-month close. This does not bode well at all. Volume soared to 22 million versus the normal 6.8 million shares a day. The most logical explanation might be the Russell index rebalancing. As the index adds new components, fund managers need sell part of the stake in the rest of the index to raise cash to buy the new components. At least that's one possibility. I find the action on Friday to be very bearish and odds just spiked significantly that PEP will hit our stop loss at $59.85 soon. More conservative traders will want to seriously consider an early exit right now! If you exit now you can minimize or avoid a loss with the option at $4.45. Our final target has been $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 $4.45/4.55
-stop loss on PEP at $59.85

06/26/10 Repeat - More cautious traders will want to consider an exit.
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:


Transocean Ltd. - RIG - close: 49.77 change: +0.02

Volatility could be a constant companion with us in this RIG trade. Shares soared +16% a week ago and just gave back about 10% this week. The dip to $50 this week isn't that surprising considering the widespread market declines. I would use this pull back as a new bullish entry point just remember to keep your positions small.

The oil sector was in the headlines this past week as a judge with the U.S. district court in New Orleans overturned the Obama administration's six-month moratorium on deepwater drilling. The Justice Department appealed the decision and asked for a "stay" but the judge said now to a stay on his decision. The courts felt that Obama's moratorium was a punitive measure. The court battle isn't over yet. Prosecutors could appeal it to a higher court. The concern is if this judge's decision is overruled then drilling companies will move their rigs elsewhere and production in the Gulf could dry up for years, which will negatively impact the entire nation.

Previous Comments:
This is a very aggressive trade given the unknown risks associated with RIG's connection to the Gulf oil spill. Our stop loss is at $38.45. More conservative traders could place theirs closer to $40.00 or the low near $41.88. Our long-term targets are $59 and $75.

Jun 09, 2010 - entry price on RIG @ 43.50, option @ 6.50
symbol: RIG 11A50.00 2011 Jan $50 call - current bid/ask $ 8.40/ 8.65
-stop loss on RIG @ 41.80

- or -

Jun 09, 2010 - entry price on RIG @ 43.50, option @ 7.25
symbol: RIG 12A60.00 2012 Jan $60 call - current bid/ask $ 9.30/ 9.65
-stop loss on RIG @ 41.80

Chart of RIG:


Ruby Tuesday Inc. - RT - close: $ 9.13 change: +0.16

Consumer-related stocks were hammered pretty good last week. Investors were shocked by the record-breaking decline in new home sales. Shares of RT were pummeled from short-term resistance near $10.50 toward support near $9.00. The low on Friday was $8.83, which was almost to tag the 200-dma near $8.76. I think the decline is overdone. However, the better than expected consumer sentiment numbers on Friday did not have much impact on RT or the rest of the consumer-related stocks.

Traders can use this dip as an entry point. More conservative traders might want to raise their stop loss toward the $8.75 level.

Previous Comments:
I prefer buying the stock over the option. Our long-term targets are $12.00 and $14.75.

Jun 08, 2010 - entry price on RT stock @ 9.05
-stop loss on RT @ 8.40

- or -

Jun 08, 2010 - entry price on RT @ 9.05, option @ 1.90
symbol: RT 11A10.00 2011 Jan $10 call - current bid/ask $ 0.90/ 1.50
-stop loss on RT @ 8.40

Chart of RT:


U.S. Natural Gas ETF - UNG - close: 8.31 change: +0.24

The U.S. dollar oscillated sideways most of the week before turning lower on Friday. Aside from Monday's decline the UNG has been trading sideways near the $8.00 level. Friday's drop in the dollar boosted commodities. A week ago I suggested readers wait for a dip near $8.00 before launching new positions. UNG provided that pull back. If you missed it I would still be tempted to buy this ETF on the bounce.

Prior Comments:
Look for the $9.00 level and the 200-dma to offer some overhead resistance. Our first long-term target is $10.85 but we will probably adjust this as necessary. Just because the options look "cheap" don't buy too many. Be disciplined with your position size. You can add to positions later once UNG confirms the trend change.

Jun 12, 2010 - entry price on UNG @ 8.17, option @ 1.38
symbol: UNG1122A8 JAN 2011 $8 LEAP call - current bid/ask $1.37/1.41
-stop loss on UNG @ 7.35

- or -

Jun 12, 2010 - entry price on UNG @ 8.17, option @ 1.59
symbol: UNG1221A10 JAN 2012 $10 LEAP call - current bid/ask $1.43/1.55
-stop loss on UNG @ 7.35

Chart of UNG:


WLT - Walter Energy Inc. close: $70.86 change: +2.56

WLT gapped higher on Monday as the markets reacted to news that China was going to allow for a more flexible yuan. That excitement proved to be short lived. The rally in WLT failed at the $75.00 level. The 3.7% gain on Friday could have been influenced by the drop in the U.S. dollar. I doubt the lower than expected GDP numbers inspired any buying interest.

Thus far WLT is struggling with a trend of lower highs. I would wait for another dip (or bounce) near $65.00 as our next entry point. Or you could wait for a close over $75.00 (or even $80). I do want to warn readers that the 50-dma is about to cross under the 200-dma. This event is normally a very bearish signal. It's been nicknamed the "death cross".

Prior Comments:
Keep an eye open on news regarding China. The plan was to use small positions to limit our risk. Our first target is $99.00.

May 6, 2010 - entry price on WLT @ 73.00, option @ 12.00
symbol: WLT 11A80.00 2011 Jan $80 call - current bid/ask $ 7.60/ 8.00
-stop loss on WLT @ 63.90

- or -

May 6, 2010 - entry price on WLT @ 73.00, option @ 14.10
symbol: WLT 12A90.00 2012 Jan $90 call - current bid/ask $11.30/12.00
-stop loss on WLT @ 63.90

Chart of WLT:


Wynn Resorts - WYNN - close: 89.04 change: +3.01

WYNN has jumped from our watch list to our play list. Shares hit our breakout trigger point at $87.75 on Monday, June 21st when shares opened at $86.97 and spiked to $88.50. After a week of churning sideways WYNN managed to surge 3.5% on Friday with strong volume. The stock garnered an upgrade on Thursday with one firm boosting WYNN to a "buy" and raising their price target from $85 to $115.

If you don't want to chase it here you could wait for a dip back toward $85.00. Given the $87.75 entry point we have a stop loss at $79.45. Our long-term target is $112.50.

This was labeled an aggressive, higher-risk trade. WYNN is a volatile stock. We want to keep our position size small to limit our risk.

Jun 21, 2010 - entry price on WYNN @ 87.75, option @ 11.90
symbol: WYNN 11A90.00 2011 Jan $90 call - current bid/ask $12.70/12.95
-stop loss on WYNN @ 79.45

- or -

Jun 21, 2010 - entry price on WYNN @ 87.75, option @ 16.25
symbol: WYNN 12A100.00 2012 Jan $100 call - current bid/ask $17.45/18.15
-stop loss on WYNN @ 79.45

Chart of WYNN:


CLOSED Plays

Fortune Brands - FO - close: 42.29 change: +0.16

Yuck! FO has suffered an ugly two weeks. The bounced attempt from the 200-dma quickly failed on Monday. Tuesday saw FO breakdown under technical support at its 200-dma. The dismal new home sales sent shockwaves through anything related to the consumer and FO eventually closed the week at four-month lows. Our stop loss at $42.90 was hit on June 23rd.

We have already chosen to sell half our position near $52.

Mar. 12th, 2009 - entry price on FO @ 47.55, option @ $2.20
symbol: FO1018I50 SEP 2010 $50 call - current bid/ask $0.65/ 0.80
-stop loss on FO @ 42.90

06/23/10 - Stopped out @ 42.90, option at $0.35
05/29/10 -Conservative traders should exit now-
04/17/10 Sell Half - FO @ $52.00, option @ $4.30 (+95%)

Chart of FO:


Wal-Mart Stores Inc. - WMT - close: 48.80 change: -1.23

We all know WMT is famous for "slashing prices" but not with regards toward its stock price. Shares were pummeled this week as investors worried about the state of the consumer. The abysmally low new home sales numbers raised concerns about consumer spending even though we knew home sales would be down because of the tax credit expiration. To make a bad week even worse WMT significantly underperformed the market on Friday with a 2.4% decline. This breakdown under psychological support at $50.00 is very bearish as it also breaks the long-term trendline of support dating back to the 2007 low.

So why did WMT underperform so badly? In addition to the reasons above the Obama administration is pressing for cardcheck again, which would allow employees to automatically create a union if more than 50% agree to it no matter what the business has to say about it. Would you believe that the financial regulation bill could have played a part? WMT has been trying to start a bank in the U.S. for a while now but kept running into obstacles. It makes perfect sense. If you have millions and millions of consumers in your store every week, why not provide them the convenience of placing a bank right there in the store. WMT would immediately have a huge customer base. There was chatter today that the 1,500-page fin-reg bill could have something in it that might prevent WMT from finally starting a bank in the U.S.

One of the biggest reasons WMT underperformed on Friday was probably the Russell indices rebalancing. This time fund managers had to account for the new Berkshire Hathaway B shares being added to the index. This created a need to raise a lot more cash than normal. Money managers sell stocks to raise cash so they can afford to buy the new components and match the index. Big cap, highly liquid stocks like WMT (and PEP) were sold so funds could raise cash.

WMT hit our stop loss at $48.95 on Friday closing our play.

Mar 7th, 2009 - entry price on WMT @ 54.14, option @ 4.60
symbol: WWT1221A55 JAN 2012 $55 LEAP call - current bid/ask $3.35/3.50
-stop loss on WMT @ 48.95

06/25/10 - Stopped out @ 48.95, option @ $2.75 (-40%)

Chart of WMT