Editor's Note:

The first quarter has come to a close and stocks delivered a pretty good performance with the S&P 500 up +5%. I suspect the first few days of April could see inflows as fund managers put new money to work. However, we're quickly approaching the onset of Q1 earnings season in mid April. Odds are really good that this earnings season could be pivotal in fueling the next leg higher or acting as a catalyst for investors to take some money off the table, especially if corporate guidance doesn't back up the bullish outlook for the economic recovery. There has been a lot of talk about how healthy corporations are right now. They need to prove it.

This newsletter normally wants to avoid holding a position over an earnings report. There are too many variables that could send the stock plunging lower. Thus most of our current positions will be closed in the next two to four weeks. Any new positions are likely to be relatively short-term (less than three weeks).

- James


NEW BULLISH Plays

Aon Corp. - AON - close: 53.76 change: +0.80

Stop Loss: 50.90
Target(s): 59.00
Current Gain/Loss: +0.0%
Time Frame: 4 to 5 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
The insurance sector is a mixed bag since it could take months before adjusters finish their estimates on the devastation in Japan. However, the insurance broker stocks seem to be doing quite well. Shares of AON have been showing strength the last couple of days and just broke out from a five-week consolidation pattern under resistance at $53.00. This happens to be a new historic high for the stock.

I am suggesting new bullish positions now. Nimble traders may want to wait for a dip closer to the $53 level instead since $53.00 should be new support. Our time frame is the end of April since earnings are due out in early May. FYI: The Point & Figure chart for AON is bullish with a $90 target.

- open bullish positions now -

Suggested Position: buy AON stock @ current levels

- or -

Buy the May $55.00 call (AON1121E55) current ask $0.95

Annotated chart:

Entry on April 4 at $xx.xx
Earnings Date 05/02/11 (unconfirmed)
Average Daily Volume: 2.2 million
Listed on April 2nd, 2011


Danaher Corp. - DHR - close: 52.57 change: +0.67

Stop Loss: 49.95
Target(s): 55.90
Current Gain/Loss: + 0.0%
Time Frame: about 3 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
This conglomerate keeps getting bigger. Investors applauded the recent deal back in February when DHR announced plans to buy Beckman Coulter Inc. (BEC) for $83.50 a share. Normally when a company announces a big acquisition the stock tends to fall but shares of DHR rallied on the news.

Speaking of DHR's stock, shares have been consolidating sideways in the $49-52 range for several weeks. That consolidation narrowed in the last several days and DHR finally broke out on Friday. This appears to be a new all-time, record high for DHR. I am suggesting bullish positions now with DHR above $52.00. Our first target is $55.90. However, we will plan to exit ahead of the April 21st earnings report. I'm listing a stop loss at $49.95 but more conservative traders might want to use a stop closer to the $51.00 level (the $50.80 mark would work).

- open bullish positions now -

Suggested Position: buy DHR stock @ current levels

- or -

Buy the May $55 call (DHR1121E55) current ask $0.70

Annotated chart:

Entry on April 4 at $xx.xx
Earnings Date 04/21/11 (confirmed)
Average Daily Volume: 2.9 million
Listed on April 2nd, 2011