Editor's Note:

It was an overall bullish week for the newsletter. We are locking in gains on a couple of candidates.

-James


Closed Plays


AKAM and BIDU have been closed.


Play Updates


Arch Coal Inc. - ACI - close: 32.94

02/12 update: Coal stocks have been underperforming the last two weeks and ACI is no exception. I cautioned readers last week that ACI might retest the $30 level. I would wait for a dip near the $30-28 zone before considering new long-term bullish positions.

Our long-term target is $39.75. More aggressive traders could aim a lot higher, especially if you're holding the 2013 calls.

- Current Positions -
Nov 22, 2010 - entry price on ACI @ 30.15, option @ 3.90
symbol: ACI1221A35 2012 JAN $35 call - current bid/ask $ 4.10/ 4.20

- or -

Nov 22, 2010 - entry price on ACI @ 30.15, option @ 5.15
symbol: ACI1319A35 2013 JAN $35 call - current bid/ask $ 6.30/ 6.70

01/22/11 New stop loss @ 27.75
01/15/11 New stop loss @ 28.90
01/01/11 new stop loss @ 29.75
12/25/10 New stop loss @ 28.75
11/22/10 Play opened. ACI @ $30.15

Current Target: $39.75
Current Stop loss: 27.75
Play Entered on: 11/22/10
Originally listed in the New Plays 11/20/10


Berkshire Hathaway - BRK.B - close: 84.91

02/12 update: The rally in BRK.B continues. The stock has now closed above the late 2010 resistance near $84.00 but there is still that one intraday spike closer to $86.00. If you prefer to buy on strength this the action this past week could be a new bullish entry point for you. I remain somewhat cautious, especially since Berkshire is due to report earnings in very late February or early March. Reaction to earnings results elsewhere in the market has been rather dramatic. Thus I would hesitate to open positions in front of earnings.

- Current Positions -
Oct 29, 2010 - entry price on BRK.B @ 79.00, option @ 5.00
symbol: BRKB1221A90 2012 JAN $90 call - current bid/ask $ 3.95/ 4.25

01/22/11 2011 January calls expired (-100%)
12/11/10 New stop loss @ 77.75.
11/20/10 New entry point on bounce from 200-dma
11/20/10 New stop @ 75.75
10/29/10 Play triggered on dip at $79.00.

Chart of BRK.B:

Current Target: $ 99.00
Current Stop loss: 77.75
Play Entered on: 10/29/10
Originally listed on the Watch List 09/11/10


Compania de Minas Buenaventura - BVN - close: 40.04

02/12 update: What in the world has happened to shares of BVN? There has been almost no news on the stock other than the company saying they will hold their conference call on Feb. 25th. That shouldn't have any affect on the share price. There has not been any significant sell-off in the price of gold, silver or copper. So why is BVN's stock falling so sharply?

The answer could be a new ETF. The Global X FTSE Andean 40 ETF (symbol: AND) just launched a few days ago and has been trading down sharply ever since. Is this a case of the tail wagging the dog? This new AND ETF is supposed to be comprised with stocks from three countries with the makeup totaling 49% Chile, 29% Columbia, and 22% Peru. Of that 22% of Peruvian stocks, shares of BVN equal about 17%. Meanwhile the major stock market index in Chile (the Chilean SE IGPA index) has been crashing lower the last few days and just bounced on Friday. The declines in the Chilean market, shares of the new AND, and shares of BVN all look very, very similar.

BVN hit $39.30 intraday on Friday and our stop loss is at $38.95. I really can't find any other plausible explanation for BVN's drop at the moment. Given this new development readers may want to seriously consider an early exit out of this trade. There is a chance that BVN could bounce but hope really isn't an investment strategy. Then again most of the damage has already been done. For now the stock seems to be hovering near support. You might want to bet on a bounce and hold it. I'm not suggesting new positions at this time.

Earlier Comments:
I cautioned readers that our entry point at $45 was an aggressive, higher-risk trade. Our plan was to open small (half) positions to limit our risk.

- Current Positions -
Jan 5, 2011 - entry price on BVN @ 45.00, option @ 3.90
symbol: BVN1119F50 2011 JUN $50 call - current bid/ask $ 0.45/ 0.80

01/22: Adjust the stop loss to $38.95
01/05: Play is opened at $45.00 (small positions only)

Daily Chart of BVN:

Daily Chart of AND:

Weekly Chart of BVN:

Current Target: $ 54.75
Current Stop loss: 38.95
Play Entered on: 01/05/11
Originally listed on the Watch List --/--/--


Deere & Co - DE - close: 95.42

02/12 update: Shares of DE continue to rally. The stock has rallied past resistance at its 2008 highs to close at new all-time highs. What are the odds that DE will see some post-earnings profit taking? The company is due to report earnings on Feb. 16th before the opening bell. Currently the option is bidding $12.90 (+171%). Do we take profits now? Or risk a sell-off? We do own the 2012 calls so there is time for DE to recover. What are the opportunity costs of waiting for DE to recover?

I would seriously consider taking profits right now! Instead I am suggesting that we exit positions on Tuesday afternoon (at the closing bell on Feb. 15th) to avoid holding over DE's earnings report. I'd rather lock in a gain now than hold over earnings after this big run up. If by chance DE spikes to $99.00 before Tuesday's close then we'll exit at $99.00. In the meantime I am raising our stop loss to $91.75.

- Current (very small) Positions -
Nov 26, 2010 - entry price on DE @ 75.50, option @ 4.75
symbol: DE1221A90 2012 JAN $90 call - current bid/ask $12.90/13.10

02/12/11 Prepare to exit on Feb. 15th at the close.
02/12/11 New stop loss @ 91.75
02/05/11 New stop loss @ 84.00
01/15/11 New stop loss @ 78.90, Adjusted second target to $99.00
01/13/11 1st Target Hit $88.00. Option @ $10.00 (+110%)
12/25/10 New stop loss @ 74.80
12/04/10 DE offered another entry point with the move over $77.50
11/26/10 DE hit our trigger @ 75.50

Daily Chart of DE:

Current Target: $ 88.00, 99.00
Current Stop loss: 91.75
Play Entered on: 11/26/10
Originally listed on the Watch List --/--/--


Walt Disney Co. - DIS - close: 43.41

02/12 update: Our first target has been hit at $43.00. DIS reported better than expected earnings this past week. The market reacted by lifting the stock and shares gapped open higher at $42.76 on Wednesday and quickly hit our first target at $43.00. Our 2012 JAN $40 call was trading near $5.30 (+137%), and the 2013 JAN $40 call was trading near $7.40 (+103%) at that time.

DIS currently looks short-term overbought and due for some profit taking. I would expect shares to fill the gap and retest support near $40.00. I am not suggesting new positions at this time. We will raise our stop loss to $37.85.

- Current Positions -
Oct 27, 2010 - entry price on DIS @ 35.60, option @ 2.23
symbol: DIS1221A40 2012 JAN $40 call - current bid/ask $ 5.90/ 6.00

- or -

Oct 27, 2010 - entry price on DIS @ 35.60, option @ 3.63
symbol: DIS1319A40 2013 JAN $40 call - current bid/ask $ 7.50/ 7.75

02/12/11 New stop loss @ 37.85
02/09/11 1st Target Hit. Options @ +137% and +103%
02/05/11 New stop loss @ 35.75
01/08/11 New stop loss @ 34.95
01/08/11 Target changed to $43.00 and $46.00
10/27/10 Play opened, DIS opened @ $35.60

Chart of DIS:

Current Target(s): $43.00, 49.00
Current Stop loss: 35.75
Play Entered on: 10/27/10
Originally listed on the Watch List 10/24/10


SPDR Gold ETF - GLD - close: 132.32

02/12 update: Gold has been consolidating sideways even as the U.S. dollar bounces from its recent lows. Normally a rising dollar is bearish for gold prices. I still think there is a chance that the GLD could test its 200-dma before this correction is over. I am reluctant to consider new bullish positions at this time. Meanwhile we still have a lot of time on our protective put.

Currently our final long-term bullish target is $149.00.

FYI: Several weeks ago Goldman Sachs raised their 2011 price target on gold to $1,700 an ounce. Another firm raised their 2011 price target to $1,600 an ounce.

- Current Positions -
Aug 6, 2010 - entry price on GLD @ 118.00, option @ 10.75
symbol: GLD1221A130 2012 Jan $130 call - current bid/ask $10.95/11.30

- Short Term Put -

Jan 18, 2011 - entry price on GLD @ 133.63, option @ 1.70
symbol: GLD1116P125 2011 APR $125 PUT - current bid/ask $ 0.88/ 0.91

01/18/11 GLD opened at $133.63. April $125 put opened at $1.70
01/15/11 Added April Puts to protect ourselves from further declines.
01/08/11 Expecting a correction toward $125
11/09/10 Target hit - GLD opened at $138.70, 2011 Mar. Call opened @ $20.00 (+159%)
11/06/10 new stop @ 123.40
10/30/10 New stop @ 121.00. Readers may want to exit ahead of FOMC meeting
10/02/10 Sell half of the 2011 March calls, option @ 12.70 (+64.9%)
10/02/10 New stop $ 118.49
09/25/10 New stop @ 116.45, new target 138.50

Current Target(s): $149.00
Current Stop loss: 123.40
Play Entered on: 08/06/10
Originally listed on the Watch List 06/05/10


Humana Inc. - HUM - close: 58.31

02/12 update: I'm feeling pretty lucky on HUM. The company reported earnings on Feb. 7th and missed expectations by 18 cents. Wall Street wanted to see 81 cents and HUM delivered 63 cents. This bad news was offset by management raising their full year 2011 guidance. Shares of HUM could have plunged on such an earnings miss. I remain very concerned about what appears to be a failed rally/bearish reversal pattern from two weeks ago.

As a matter of fact I'm concerned enough that I am suggesting we sell half of our remaining position right here and now (current bid $8.40). We will raise our stop loss to $51.75. No new bullish positions at this time.

- Current Positions -
Sep 17, 2010 - entry price on HUM @ 50.50, option @ 6.40
symbol: HUM1221A55 2012 Jan $55 call - current bid/ask $ 8.40/ 8.70

02/12/11 Exit half of our 2012 calls now, bid $8.40 (+31.2%)
02/12/11 New stop loss @ 51.75
12/11/10 New stop loss @ 49.75
11/20/10 Entry point on the dip.
10/23/10 Exit (sell) the 2011 Jan. $55 calls, bid @ 4.40 (+137%)
10/23/10 New stop loss $ 48.75
10/16/10 New stop loss @ 47.40
10/11/10 New Entry point - HUM is breaking out past $51.00.

Chart of HUM:

Current Target(s): $69.00
Current Stop loss: 49.75
Play Entered on: 09/17/10
Originally listed on the Watch List 09/04/10


L-3 Communications - LLL - close: 80.04

02/12 update: LLL is still inching higher and is trying to breakout past round-number resistance at the $80.00 level. Shares still look a little overbought. I remain worried that LLL could see a correction toward the $76-74 zone. On a positive note the 50-dma crossing over the 200-dma (soon) is normally a very bullish development. We will raise our stop loss to $73.75. No new bullish positions at this time.

- Current Positions -
Nov 11, 2010 - entry price on LLL @ 71.87, option @ 5.80
symbol: LLL1221A75 2012 Jan $75 call - current bid/ask $ 8.90/ 9.20

02/12/11 New stop loss @ 73.75
02/05/11 There was no follow through lower.
01/29/11 LLL is correcting lower!
01/08/11 Take Profits Early. LLL @ 78.23. Option @ $8.50 (+46.5%)
01/08/11 New stop loss @ 69.90
11/11/10 Play triggered with LLL's gap open @ 71.87

Current Target(s): $79.50, 89.00
Current Stop loss: 73.75
Play Entered on: 11/11/10
Originally listed on the Watch List 11/06/10


MEDNAX Inc. - MD - close: 63.80

02/12 update: The oversold bounce in shares of MD continues. I am suggesting caution here. MD could run into resistance in the $64-66 area. The stock might roll over and retest support again. I am not suggesting new bullish positions at this time.

Prior Comments:
MD doesn't have LEAPS so we had to settle for 2011 August calls. NOTE: Keep your position size small. The options on MD wide spreads, which puts us at a disadvantage!

- Current Positions -
Feb 03, 2011 - entry price on MD @ 60.33, option @ 3.60
symbol: MD1120H65 2011 AUG $65 call - current bid/ask $ 4.10/ 5.10

02/03 Trade triggered at $61.00, Option @ $3.60

Current Target(s): $69.50
Current Stop loss: 55.90
Play Entered on: 02/03/11
Originally listed on the Watch List 01/22/11


Microsoft Corp. - MSFT - close: 27.25

02/12 update: We have been expecting shares of MSFT to correct lower for weeks. It looks like the correction has finally begun. Investors were not impressed with news that MSFT and Nokia (NOK), two companies that have struggled to compete in the smart phone market, are teaming up together to try and face off against Google's Android and Apple's iPhone systems. I am looking for MSFT to find support near the $26 area. No new bullish positions at this time.

- Current Positions -
Oct 18, 2010 - entry price on MSFT @ 25.59, option @ 3.30
symbol: MSFT1221A25 2012 Jan $25 call - current bid/ask $3.40/ 3.50

- or -

Oct 18, 2010 - entry price on MSFT @ 25.59, option @ 2.30
symbol: MSFT1319A30 2013 Jan $30 call - current bid/ask $2.25/ 2.29

01/08/11 New stop loss @ 25.90
12/11/10 New stop loss @ 24.40
11/20/10 Another Entry Point on the dip toward the 50-dma
10/28/10 MSFT delivers stronger than expected earnings.

Current Target(s): $31.00
Current Stop loss: 25.90
Play Entered on: 10/18/10
Originally listed in New Plays on 10/16/10


U S G Corp. - USG - close: 19.10

02/12 update: The rally in USG was unexpected. The action on late January was starting to look like a potential top and odds were building for a drop back toward the $15-14 level. I do not know what the catalyst was for USG's rally but the stock did (does?) have high short interest. The most recent data listed short interest at 18% of the relatively small 69-million share float. The action this past week definitely looks like a short squeeze.

USG almost hit our first target with the spike to $19.71 on Feb. 9th. Instead of waiting for USG to hit our first target at $19.90 I am suggesting we go ahead and take profits now. We'll move our stop loss up to $15.45. No new bullish positions at this time. Broken resistance near $17.50-17.00 should be new support. Our final, long-term target is still $24.75.

- Current Positions -
Dec 20, 2010 - entry price on USG @ 15.25, option @ 1.50*
symbol: USG1221A20 2012 Jan $20 call - current bid/ask $ 2.90/ 3.20

- or -

Dec 20, 2010 - entry price on USG @ 15.25, option @ 3.00
symbol: USG1319A20 2013 Jan $20 call - current bid/ask $ 4.50/ 4.90

02/12/11 Take Profits (sell half) Options @ +93.3%, +50%
02/12/11 New stop loss @ 15.45
12/20/10 Play triggered at $15.25
*entry price is an estimate.

Chart of USG:

Current Target(s): $--.--, 2nd target: 24.75
Current Stop loss: 15.45
Play Entered on: 12/20/10
Originally listed on the Watch List: 12/11/10


WellPoint Inc. - WLP - close: 65.25

02/12 update: The trend in WLP is up but on a short-term basis the stock seems to be losing momentum. I would expect a correction lower soon, possibly back toward the $60 area. Thus I am not suggesting new bullish positions at this time. We will raise our stop loss to $57.25.

- Current Positions -
Oct 14th, 2010 - entry price on WLP @ 57.75, option @ $5.25
symbol: WLP1221A65 2012 Jan $65 call - current bid/ask $ 6.90/ 7.10

02/12/11 New stop loss @ 57.25
01/08/11 New stop loss @ 54.90
12/18/10 New stop loss @ 53.75.
11/20/10 Another entry point on the bounce from the 200-dma
10/14/10 Play Triggered when WLP hit $57.75, option @ $5.25

Current Target(s): $69.75
Current Stop loss: 54.90
Play Entered on: 10/14/10
Originally listed on the Watch List 10/11/10


CLOSED Plays


Akamai Technology - AKAM - close: 41.43

02/12 update: Ouch! We've been growing cautious on AKAM for weeks, which is why we bought the May $40 put. Unfortunately, the reaction to AKAM's latest earnings report was pretty severe. The company actually beat estimates by 2 cents with revenues that were in-line with estimates. Management followed up with a warning that revenues and earnings would fall in the first quarter. The market reacted by sending shares of AKAM lower. The stock gapped open lower on Thursday at $41.69 while our stop loss was at $43.75, which doesn't really help when the stock gaps open. Our bullish call plays were closed on Thursday morning. Meanwhile the May $40 put naturally moved higher. Readers may want to cash out now (of the put) or you could hold on and see what happens. I would not be surprised to see AKAM produce an oversold bounce only to roll over again but that could take weeks. The newsletter is removing AKAM from the play list.

- Closed Positions -
Oct 06, 2010 - entry price on AKAM @ 45.50, option @ 7.50
symbol: AKAM1221A50 2012 JAN $50 call - Exit near $3.50 (-53.3%)

- Third Position -

Dec. 20, 2010 - entry price on AKAM @ 50.49, option @ 5.40
symbol: AKAM1221A60 2012 JAN $60 call - Exit near $1.50 (-72.2%)

- Short-Term Put -

Jan. 22, 2011 - entry price on AKAM @ 48.93, option @ 1.15
symbol: AKAM1121Q40 2011 MAY $40 PUT - current bid $ 3.05 (+165%)
(We'll update our entry price on Monday)

02/10/11 AKAM gaps open below our stop loss, closing our LEAPS.
02/09/11 AKAM reports earnings and provides lower guidance.
01/24/11 May $40 put opened at $1.15
01/22/11 Buy May $40 puts to protect ourselves
12/25/10 AKAM is breaking down. Cautious traders exit early.
12/18/10 New Entry point, AKAM @ $50.87, 2012 Jan. $60 call ask @ $6.35
11/27/10 New stop @ 43.75
10/30/10 Sell the 2011 Jan. calls, option bid @ 5.10 (+78.9%)
10/06/10 Play triggered when AKAM hit $45.50

Chart of AKAM:

Current Target: $69.00
Current Stop loss: 43.75
Play Entered on: 10/06/10
Originally listed on the Watch List 10/02/10


Baidu, Inc. (Baidu.com) - BIDU - close: 129.58

02/12 update: Target achieved. The super strong, post-earnings rally in BIDU continues helped along with another analyst upgrade. Shares soared past $120 last week and managed to hit $129.65 on Friday. Our final exit target was hit at $129.00 on Friday.

Our protective March $95 puts we're already pretty much worthless after the earnings report. Our final "price" on the 2012 January $100 calls was $36.55 minus the price of our protective put ($2.80) so it was $33.75 (+159.6%).

Previous Comments:
BIDU is a very volatile stock. This is an aggressive, higher-risk trade. Keep your position size small to limit your risk.

- Current Positions -
Aug 02, 2010 - entry price on BIDU @ 83.50, option @ 13.00
symbol: BIDU1221A100 2012 JAN $100 call - Exit near $36.55 (+181%)

- BONUS TRADE (short-term puts) -

Jan 22, 2011 - entry price on BIDU @ 105.10 option @ 2.80
symbol: BIDU1119O95 2011 MAR $95 PUT - current bid $0.00 (-100%)
(we'll update the entry price for Monday's open)

02/11/11 Final Target Hit @ $129.00. Adjusted option @ $33.75 (+159%)
01/31/11 BIDU reports strong earnings. Stock gaps higher on Feb. 1st
01/24/11 March $95 put opened at $2.80
01/22/11 Buy March $95 put
12/20/10 BIDU spikes down to $94.33 (our stop is $94.00)
10/30/10 Adjusted exit target to $129.00.
10/23/10 New stop loss @ 94.00
10/21/10 BIDU reports strong earnings.
10/02/10 Sell half of 2012 calls, BIDU @ 98.80, option @ 22.30 (+71.5%)
09/25/10 Take Profits on the 2011 calls, BIDU @ 97.83, option @ 14.75 (+84.3%)
09/25/10 New stop @ 79.00

Chart of BIDU:

Current Target: $129.00
Current Stop loss: 99.00
Play Entered on: 08/02/10
Originally listed on the Watch List 07/31/10