Closed Plays


MCK has been closed.


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BorgWarner Inc. - BWA - close: 43.86 change: +1.38

It was a rocky week for shares of BWA, bouncing around the $42-44 range. Shares spiked toward their 2010 April highs on Friday morning following their earnings announcement. BWA delivered a profit of 78 cents a share, which was 11 cents better than expected. Revenues soared +55% to $1.42 billion for the quarter, which beat the $1.32 billion estimate. Management raised their earnings guidance for the rest of 2010. It was a very bullish report but the fact that BWA failed to breakout past resistance on the news is a bit concerning.

The trend is still up but with BWA trading under resistance at its 2010 highs near $44.00-44.50 I would not open new bullish positions at this time. Please note that I'm raising the stop loss to $35.95, which is about 65 cents under the simple 200-dma. More conservative investors may want to go ahead and take profits now or raise their stops even higher.

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 $7.00/7.90
-stop loss on BWA @ 35.95

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: 55.22 change: +0.66

Oil-sector stocks have spent the last four or five days churning sideways. Shares of COP failed to move much on its earnings report on July 28th. The company delivered a profit of $1.67 a share, which was 11 cents better than expected. Traders were buying dips near the $54 level and volume improved the closer we got to the weekend. While the short-term trend is up, COP is still facing a pattern of lower highs over the last three months. The stock is up three out of the last four weeks. I'd like to see a higher low before we consider new bullish positions.

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 $3.90/4.00
-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 $4.15/4.35
-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: $34.95 change -0.73

I am not surprised to see some profit taking in CRS after shares rallied almost +20% off its July 20th lows. The company reported earnings on July 29th with a Q2 profit of 13 cents a share, which is a significant improvement over the 48-cent loss a year ago. Yet the 13-cent profit failed to meet analysts expectations. Revenues were a different story. CRS said Q2 revenues rose almost +42% to $364.2 million, which exceeded Wall Street's estimates of $354.6 million. CRS' management expect FY2011 revenue growth to hit the mid-to-high teens and they expect revenues to grow each quarter. Unfortunately the news didn't have much affect on the stock price.

While I am cautious on the market I still think CRS has potential. More aggressive traders may want to reconsider bullish positions if we see a new close over $36.50 (or above the trendline of lower highs). If you're launching new positions you will want to reconsider your stop loss. I am tempted to move our stop toward the July 20th low of $31.63.

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 $3.90/4.10
-stop loss on CRS @ 29.90 *(entry price is an estimate)

Chart of CRS:


EMC Corp. - EMC - close: 19.79 change: -0.13

Shares of EMC are still consolidating sideways after that huge rally in early July. Shares could chop sideways for several days before we see a decisive break one way or the other. If the broad market indices reverse lower that is going to make further gains in EMC more challenging. The longer-term trend is still higher but I'm not suggesting new long-term bullish positions at this time.

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 $1.45/1.49
-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 $2.76/2.86
-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: 60.48 change: +0.07

The Indian market is still flirting with two-year highs but the short-term trend has been down the last few days. This has been a headwind for shares of INFY. The U.S. traded shares of INFY have been consolidating sideways. I suspect the stock is ready to breakout higher over $61.00 soon but that will probably depend on the wider market environment. Right now I would be patient and wait. We might get a better entry point on a bounce near the simple 200-dma (that is quickly approaching the $57 area).

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 $5.10/ 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 $6.70/ 7.90
-stop loss on INFY @ 54.90

Chart of INFY:


McDonald's Corp. - MCD - close: 69.73 change: +0.35

It was a relatively quiet week for shares of MCD's stock price. It did see a new three-week low but traders bought the dip on Friday morning near technical support at its 50-dma and 100d-ma. If the selling continues we can look for additional support near the $66.00 level and its rising 200-dma. Meanwhile MCD made headlines this past week for its bond auction. The company raised $750 million with a 10-year bond auction and a 30-year bond auction. The event made headlines because MCD's 10-year bonds only yield 3.5% (actually 3.54%) but that is the lowest yielding corporate bond in nearly 15 years. If you're curious the 30-year bonds are yielding 4.92%. Why is this important? You could surmise that MCD's bond auction confirms what we already see in the U.S. bond market. Investors are nervous and they are seeking safety in fixed income securities.

I remain long-term bullish on MCD but I don't see a new entry point at this time. Potential entry points are another bounce from $66.00 or a close over $72.

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 $3.80/ 3.95
-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 $2.80/ 2.95
-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:


Millicom Intl. - MICC - close: 93.22 change: +1.32

Shares of MICC have continued to drift sideways following the July 22nd gap higher. On a positive note MICC does appear to be drifting higher with new short-term support near $90. The stock continues to have resistance near the April highs in the $93.00-94.30 zone. We might as well consider the $95 level to be the resistance. I am not suggesting new bullish positions at this time. Please note that I am raising our stop loss to $79.90. More conservative traders may want to raise theirs toward the $84 area.

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 $ 9.30/10.70
-stop loss on MICC @ 79.90

Chart of MICC:


PEPSICO Inc. - PEP - close: 64.91 change: +0.02

PEP managed to breakout over resistance in the $65 area but the midweek rally stalled. Hopefully this wasn't a bull trap where PEP rallied just enough to fill the mid May gap down before reversing. It is worth noting that volume has been below average all week long. The four-week trend is up but I'm not suggesting new bullish positions at this time.

Previous Comments:
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 $6.25/6.35
-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: 46.21 change: -1.18

The good news is that shares of RIG have stopped declining (for now). The bad news is the bounce was very anemic and stalled at the simple 10-dma. RIG has been underperforming its peers and the market. Naturally investors are still nervous that RIG might have some liability toward BP's oil spill but I think those fears are way overblown. I suspect that shares of RIG, and BP for that matter, might see a pop when they finally get the leaking well closed in the next week or two.

Investors need to be aware that RIG is due to report earnings on Wednesday, August 4th, after the market's closing bell. Wall Street expects a profit of $1.71 a share. There is a risk that RIG's earnings results could disappoint due to some unforeseen expense but I think the downside is limited given the massive drop from its April highs. If you are really concerned you could always buy some short-term puts just ahead of Wednesday's close to protect yourself. I would avoid launching new positions ahead of the earnings report. Use a dip or a bounce in the $42-40 zone as a new bullish entry point (post earnings) or wait for a new close over $50.00.

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 $ 4.80/ 5.05
-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 $ 6.00/ 6.35
-stop loss on RIG @ 39.80

Chart of RIG:


U.S. Oil Fund - USO - close: 35.34 change: +0.28

The U.S. dollar has continued to sink, hitting new three-month lows on Friday. That is giving commodities, including crude oil, a boost. Oil managed to reverse higher following the bearish weekly inventory report that showed a much big build up in stock piles when economists were expecting a decline. I am willing to admit that short-term the USO looks poised to move higher (although it only gained five cents for the entire week). More conservative traders may want to consider an early exit to cut your losses now. However, I think the dollar is pretty oversold and could bounce soon. I am not suggesting new bearish positions in the USO at this time but a close under $34.00 might change my mind.

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 $ 1.29/ 1.33
-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 $ 1.83/ 1.99
-stop loss on USO @ 36.15

Chart of USO


Consumer Discretionary Sector - XLY $31.44 +0.21

Whew! Last week was a close call for our put play on the XLY. Shares rallied to $32.18 on July 27th before reversing. Shares of this ETF bounced near their 200-dma on Friday and the four-week trend is still higher. However, I really don't see the reason for consumer discretionary stocks to be rising. Bulls could argue that the Q2 earnings season was stronger than expected and that's true. However, the economic data, the bearish decline in consumer confidence, even the recent Q2 GDP figures are all suggesting that consumer spending should be falling. The consumer savings rate is up, which means less spending money in the stores.

I am not suggesting new positions at this time. Let's see what happens after the jobs report on Friday before evaluating new entry points. More aggressive traders may want to raise their stop loss so it's above the 100-dma (32.45).

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 $ 1.18/ 1.31
-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 $ 2.10/ 2.24
-stop loss on XLY @ 32.25

Chart of XLY


CLOSED Plays

Mckesson - MCK - close: 62.82 change: -1.06

After Friday's performance I think investors were ready to sell MCK's stock no matter what the earnings news was. Shares were still struggling mid week but traders were buying the dips near the exponential 200-dma (around $63.25). Then on Friday morning, before the bell, MCK reported earnings that beat estimates by 1 cent. The company's Q2 profit came in at $1.10 a share. Revenues came in at $27.5 billion compared to analysts' estimates of $27.25 billion. It looks like a win on both fronts. Management reaffirmed their earnings guidance. How did the stock react? Poorly. Shares gapped open on Friday at $63.25, immediately spiked down to $59.63, and bounced back to close with a 1.6% loss. on the session. Volume was almost double the norm.

Our LEAPS trade was stopped out early Friday morning at $62.90. It would appear that MCK has broken its long-term up trend.

07/30/10 Stopped out @ 62.90 (reaction to earnings)

May 18, 2010 - entry price on MCK @ 71.00, option @ 3.25
symbol: MCK 11A75.00 2011 Jan $75 call - closed at $0.95 (-70.7%)
-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 - closed @ $2.50 (-39%)
-stop loss on MCK @ 62.90

Chart of MCK: