Closed Plays


KOL and WLT have been stopped out.


Play Updates


BorgWarner Inc. - BWA - close: 42.97 change: +0.79

The news flow on BWA has been very quiet lately but I'm not complaining. After two weeks of consolidating sideways shares look rested and ready for another leg higher. The stock broke out to new relative highs on Friday. The next obstacle is the 2010 highs near $44.50. I suspect that BWA might inch up toward this level and then stall as investors wait for the company's earnings report.

BWA is due to report earnings on Friday, July 30th before the opening bell. Wall Street expects a profit of 66 cents a share. More conservative traders may want to go ahead and take profits ahead of the earnings report just in case BWA disappoints.

Prior Comments:
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 $6.60/7.10
-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:


ConocoPhillips - COP - close: 53.79 change: +0.52

Sentiment seems to be improving for the oil sector. There has been a few headlines regarding storms moving toward the Gulf of Mexico but that is pretty normal this time of year. One of the bigger headlines this past week was a story that four of the five biggest western oil companies (Exxon Mobil, Chevron Corp., ConocoPhillips, and Royal Dutch Shell PLC) have all pulled together and will form a $1 billion nonprofit joint venture to develop a system that can mobilize within 24 hours of an oil well blow out. These oil companies want to be able to handle emergencies down to 10,000 feet of water and be able to capture up to 100,000 barrels a day. You'll notice that BP was not included in this list.

Technically shares of COP are improving. The stock has been chopping around the last couple of weeks but after traders bought the dip on July 20th the short-term trend has been up. A breakout over $54.00 would be encouraging. That might happen after COP's earnings report. The company is due to report earnings on Wednesday, July 28th before the opening bell. Analysts are estimating a profit of $1.57 a share. I would not launch new positions ahead of the earnings report.

Prior Comments:
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 $3.10/3.20
-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 $3.85/4.05
-stop loss on COP @ 47.99

07/17/10 COP's bounce has failed. Consider an early exit!
07/03/10 More Conservative traders may want to exit early!

Chart of COP:


Carpenter Technology - CRS - close: $37.17 change +1.37

It has been a very good week for CRS. Traders bought the dip on Tuesday, July 20th when CRS fell toward its simple 200-dma. The stock is up more than 15% from this low. If you're feeling optimistic we might be able to call the two lows in July a bullish double bottom pattern but CRS still has a bearish trend of lower highs to break. While the trend appears to be improving for CRS I would hesitate to launch new positions in front of earnings. CRS is due to report earnings on July 29th before the opening bell. Wall Street expects a profit of $0.27 a share.

Previous Comments:
The plan was to initiate small positions to limit our risk. Our long-term target is $44.75.

June 29, 2010 - entry price on CRS @ 34.00, option @ 5.30*
symbol: CRS 10L35.00 2010 DEC $35 call - current bid/ask $5.40/5.60
-stop loss on CRS @ 29.90 *(entry price is an estimate)

Chart of CRS:


EMC Corp. - EMC - close: 20.21 change: +0.34

Shares of EMC continue to show strength. The company reported earnings this past week beating analysts' estimates by a penny with profits of 28 cents a share. Revenues also beat estimates at $4.02 billion for the quarter. Furthermore EMC raised their guidance for the year telling investors they expect to beat their prior guidance on profits and revenues. Analysts remain bullish on the company and one firm expressed their opinion that EMC is still in the early stages of a significant growth cycle.

Technically EMC saw a correction down to the 50% retracement of its two-week July rally and traders quickly bought the dip. If the market cooperates EMC has a good chance to hit new relative highs before the month is out.

Previous Comments:
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 $1.72/1.76
-stop loss on EMC @ 17.45

- or -

May 6, 2010 - entry price on EMC @ 18.25, option @ 2.50
symbol: EMC 12A20.00 2012 Jan $20 call - current bid/ask $3.05/3.20
-stop loss on EMC @ 17.45

07/17/10 new stop @ 17.45
07/03/10 More Conservative Traders may want to exit early!

Chart of EMC:


Infosys Technologies - INFY - close: 60.18 change: +0.22

Shares of INFY were downgraded to a "sell" on Tuesday, which helped account for the stock gapping open lower that day. Fortunately, traders bought the dip but INFY is still struggling with some resistance near $60 and a small cloud of moving averages. I would prefer to open new positions on a bounce from the simple 200-dma near $56.00 but readers may want to consider waiting to buy calls on a close above the $65.00 level instead.

Previous Comments:
We have a stop loss at $54.90. Our long-term target is $79.00.

July 1, 2010 - entry price on INFY @ 59.00, option @ 7.50
symbol: INFY 11A60.00 2011 Jan $60 call - current bid/ask $5.20/ 5.40
-stop loss on INFY @ 54.90

- or -

July 1, 2010 - entry price on INFY @ 59.00, option @ 8.20
symbol: INFY 12A65.00 2012 Jan $65 call - current bid/ask $7.20/ 8.00
-stop loss on INFY @ 54.90

Chart of INFY:


McDonald's Corp. - MCD - close: 69.90 change: -1.50

Shares of MCD have been churning sideways this past week as investors waited for the company's earnings report. MCD delivered a better than expected profit of $1.13 a share on revenues of $5.95 billion. Wall Street was expecting $1.12 a share on $5.91 billion. MCD said same-store sales rose +4.8% globally. In the U.S. they were up +3.7%. Months ago MCD introduced their McCafe line of drip coffee as they try and steal market share from Starbucks. They have been very successful and have done well expanding their coffee drinks to include new frappes (McFrappes) and their new fruit smoothies.

MCD is the world's largest restaurant company and management is very happy with these results. Don Thomson, MCD's COO, said that the company continues to perform well and take market share, which is impressive in today's high-unemployment, low consumer confidence environment. I'm not too surprised to see some "sell-the-news" profit taking on Friday morning but shares pared their losses by the close. Shares of MCD remain under resistance in the $71.50-72.00 zone. If you are looking for an entry point I'd probably wait for another bounce from the $67 area or a close over $72.00.

Prior Comments:
Keep your positions small. Our long-term target is $79.75. FYI: The Point & Figure chart forecasting an $82 (long-term) target.

June 29, 2010 - entry price on MCD @ 66.50, option @ 2.65
symbol: MCD 11A70.00 2011 Jan $70 call - current bid/ask $3.50/ 3.65
-stop loss on MCD @ 64.75

- or -

June 29, 2010 - entry price on MCD @ 66.50, option @ 2.20
symbol: MCD 12A80.00 2012 Jan $80 call - current bid/ask $3.05/ 3.25
-stop loss on MCD @ 64.75

07/17/10 Take Profits! 2011 Jan $70 call @ 4.00 (+51%), 2012 $80 call @ 3.50 (+59%)

Chart of MCD:


Mckesson - MCK - close: 65.63 change: +1.08

Uh-oh! Trading in MCK has certainly taken a turn for the worse. Apparently earnings from a rival firm, MHS, on Thursday were disappointing. Actually it wasn't earnings but the company's gross margins are coming under pressure. Traders sold off the entire PBM industry. What really concerns me was the volume on MCK's decline. Shares saw volume of more than 9.4 million shares versus the normal 2.8 million. High-volume declines are normally a warning sign. Now I have been warning readers that MCK would probably retest the $65-64 zone and shares hit $63.60 on Thursday. The oversold bounce on Friday has stalled and the short-term trend is very bearish. MCK is under performing while the market moves higher and that seems like a good reason for more conservative traders to exit early or at least scale back their positions.

The $64 region should be support so I'm not ready to abandon ship just yet. However, I'm not suggesting new bullish positions at this time. Let's wait and see what MCK's earnings look like on July 30th. The company is due to report before the opening bell. Analysts expect a profit of $1.09 a share.

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 $ 1.50/ 1.60
-stop loss on MCK @ 62.90

- or -

May 18, 2010 - entry price on MCK @ 71.00, option @ 4.10
symbol: MCK 12A80.00 2012 Jan $80 call - current bid/ask $ 3.20/ 3.60
-stop loss on MCK @ 62.90

Chart of MCK:


Millicom Intl. - MICC - close: 92.55 change: +0.54

MICC is having a pretty good week in spite of lousy earnings number. The company reported on July 20th and Wall Street's estimates were in the $1.36-1.40 a share range. MICC delivered $1.23, so it looks like a miss, but shares didn't react too badly. The stock did gap lower but immediately bounced on Tuesday at the 50-dma near the $84.00 mark. MICC said revenues for the quarter were up +14% to $929 million, which was above estimates. Revenues in S. America grew +19% while revenues in Africa jumped +23%. Gross margins slipped from 79.1% to 78.9%. Meanwhile the company ended the quarter with 36.7 million wireless subscribers, which is a +19% improvement from a year ago.

Market reaction to these results has been bullish and MICC is up more than eight points off its intra-week low. Rising volume on the rally is another positive signal. If you're looking for an entry point I would watch for MICC to retest and bounce from the $88 level. Keep in mind that shares still have some resistance near $94.00.

Previous Comments:
Keep your positions 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 $ 9.60/10.70
-stop loss on MICC @ 74.40

Chart of MICC:


PEPSICO Inc. - PEP - close: 64.45 change: +0.24

PEP reported earnings on July 20th and beat estimates by 2 cents with a profit of $1.10 a share. Revenues soared +39.7% to $14.8 billion, which also beat estimates. PEP reaffirmed their prior guidance for the rest of 2010. The stock's initial reaction was a spike higher and shares closed at new relative highs on Tuesday. Unfortunately there has been no follow through with PEP stuck under the $65.00 level.

I am cautiously optimistic here. Shares of PEP appear to have formed an inverse (bullish version) head-and-shoulders pattern with resistance near $65. A breakout would suggest a rally toward $70 but PEP has substantial resistance near the $67.00 level. I am not suggesting new bullish positions at this time. Our final target remains $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 $6.00/6.10
-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: 45.26 change: -1.41

We should be worried about RIG. It appears that the rebound has failed. Both BP and RIG were down big on Monday as the markets worried about oil seepage from the ground around the capped Macondo well head. Shares of RIG lost more than -7% on Monday alone. Exacerbating the loss was one firm's price target downgrade for RIG from $86 to $69 on Monday. Yet most of the market and most of the oil sector bounced from their Tuesday lows and drifted higher the rest of the week. Even BP and APC are drifting higher from their Tuesday lows but RIG is not.

Why would shares of RIG be sinking and shares of BP climbing? I did read one opinion that expressed concern about demand for RIG's drilling equipment in the Gulf might be lowered than expected given the oil industry is still frustrated over the White House's moratorium on drilling. That might be a stretch since the moratorium has failed to hold up in court. Although I will say on an anecdotal note, I spoke to someone who works for Schlumberger (SLB) in Louisiana this past week. She said the industry is frozen as they wait for more clarity on the drilling ban.

I suspect the problem here is the new story that some of the fire alarms on the deepwater drilling rig that exploded had been disabled. Transocean owns the rig but it was leased and operated by BP. It is unclear who's responsibility the fire alarms would be. At first glance it seems like the responsibility would be BP's since it is their people running the rig. Yet the sell-off in shares of Transocean (RIG) suggests the market thinks this could be RIG's responsibility.

We knew this was an aggressive trade so I want to give room for RIG to maneuver. I'm suggesting we adjust our stop loss to $39.80. This way RIG can dip toward the $40.00 level if need be and we can give it a chance to bounce.

In other news RIG said they were preparing to move the two relief wells out of the path of Tropical Storm Bonnie. BP has two Transocean rigs trying to drill a relief well so they can plug the Macondo well with cement and seal it permanently.

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 now at $39.80. Our long-term targets are $59 and $75. FYI: The P&F chart is forecasting an $82 target.

Jun 09, 2010 - entry price on RIG @ 43.50, option @ 6.50
symbol: RIG 11A50.00 2011 Jan $50 call - current bid/ask $ 5.00/ 5.15
-stop loss on RIG @ 39.80

- or -

Jun 09, 2010 - entry price on RIG @ 43.50, option @ 7.25
symbol: RIG 12A60.00 2012 Jan $60 call - current bid/ask $ 6.15/ 6.45
-stop loss on RIG @ 39.80

Chart of RIG:


U.S. Oil Fund - USO - close: 35.39 change: -0.03

In the last two sessions the USO oil ETF has gotten a boost thanks to weakness in the U.S. dollar. prior to Thursday's breakout over the $35.00 level the USO was stuck in a $34-35 trading range. If the dollar continues to fall it will be bullish for commodities and yet U.S. demand for oil remains slack with oil inventories nearing their recent highs.

Whether or not the U.S. sees a double dip recession the economy is clearly slowing down. That should be bearish for oil demand and prices. I would wait and watch the USO to see if it produces another failed rally under the $36.00 level. If we do see the failed rally use it as a new entry point for bearish positions. Previous Comments:
I'm suggesting a stop loss at $36.15. Our first target to take profits is $28.00. Our second is $25.25. Keep your positions small to limit your risk.

- PUT PLAY -

July 06, 2010 - entry price on USO @ 33.06, option @ 2.34
symbol: USO 11M30.00 2011 Jan $30 PUT - current bid/ask $ 1.35/ 1.40
-stop loss on USO @ 36.15

- or -

July 06, 2010 - entry price on USO @ 33.06, option @ 2.70
symbol: USO 12M25.00 2012 Jan $25 PUT - current bid/ask $ 1.82/ 1.87
-stop loss on USO @ 36.15

Chart of USO


Consumer Discretionary Sector - XLY $31.55 +0.45

Reaction to the Q2 earnings cycle has taken on a much more bullish tone in the last few days. Traders are buying stocks and the XLY has broken out past its mid-July highs and broken out above its simple 50-dma. These are clearly short-term bullish developments. Yet the situation for the consume remains unchanged. Consumer sentiment and confidence has been falling, which should translate into less sales for consumer discretionary items.

I'm not ready to give up yet. Watch the $32.00 level for potential resistance. If we see a failed rally, use it as a new entry point for puts.

Previous Comments:
Use a stop loss at $32.25. Our first target is $26.00.

This is a PUT play!

July 19, 2010 - entry price on XLY @ 30.09, option @ 1.95
symbol: XLY 11M28.00 2011 Jan $28 PUT - current bid/ask $ 1.24/ 1.35
-stop loss on XLY @ 32.25

- or -

July 19, 2010 - entry price on XLY @ 30.09, option @ 2.81
symbol: XLY 12M25.00 2012 Jan $25 PUT - current bid/ask $ 2.18/ 2.32
-stop loss on XLY @ 32.25

Chart of XLY


CLOSED Plays

Market Vectors Coal ETF - KOL - $34.20 +0.55

Ouch! Our coal-sector play did not last long thanks to a better than expected earnings report from energy-giant Peabody Energy (BTU). Peabody reported earnings on July 20th and beat estimates by 6 cents while revenues missed estimates. Investors were more interested in the company's assessment of the coal industry. BTU said coal imports were rising in 2010 and coal stockpiles have been falling sharply and should be back toward normal levels soon. BTU said China's demand has been moving higher again. Their report sparked a big rally in coal stocks and the KOL rocketed higher with a breakout past resistance near $32.50 and its 50-dma.

Our play was stopped out at $33.25 on Thursday, July 22nd. The plan was to keep positions small to limit our risk.

- This is a PUT play -

07/22/10 Stopped out @ 33.25. Option was at $1.65 (-31.2%)
07/19/10 Option opened @ $2.40

PUT 2011 JAN $27.00 strike (KOL1122M27) opened Monday at $2.40

Chart of KOL


Walter Energy - WLT - close: 73.30 change: +0.95

Our new WLT put play has been killed by the four-day rally in coal stocks thanks to BTU's earnings report. In the KOL closed play update above I discuss how very positive comments from BTU's management regarding the coal industry has ignited a fire under the coal stocks. Is it true buying or just short covering, we don't know yet. What we do know is WLT surged 10 points last week. Our play was stopped out at $70.55 on Wednesday (July 21).

This is a PUT play.

07/21/10 Stopped out! WLT @ 70.55

PUT 2011 JAN $55.00 strike (WLT1122M55) Opened @ $5.60, closed @ 4.50 (-19.6%)

- or -

PUT 2012 JAN $50.00 strike (WLT1221M50) Opened @ $10.20, closed @ 8.70 (-14.7%)

Chart of WLT