Option Investor
Newsletter

Daily Newsletter, Saturday, 10/10/2009

Table of Contents

  1. Market Wrap
  2. New Plays
  3. In Play Updates and Reviews

Market Wrap

Cotton Anniversary

by Jim Brown

Click here to email Jim Brown

The Dow closed at a new high for the year on Friday. This was also the two-year anniversary, cotton in anniversary parlance, of the all time high of 14,164 on Oct-9th 2007. There has been a lot of water under the bridge since then.

Market Statistics

What a week! The major indexes rallied an average of 4% for the week with the Russell, brokers, oil and commodities gaining 5% or more. (Pardon me for a minute while I back into the kicking machine again.) There are so many surprised analysts that there is an unusual silence emanating from the normally talkative analyst sector. Last week proved the adage that at any given time the market attempts to make fools of the largest number of people possible.


There was minimal economics on Friday and for the week in general. Friday had the Job Openings and Labor Turnover Survey (JOLTS) for August. Jobs fell and layoffs declined. The report was completely ignored as old news.

The International Trade Deficit narrowed to $30.7 billion in August from $32B in July. This report was also ignored.

The economic calendar for next week has a few more reports that are noteworthy. Wednesday we will get the FOMC minutes, which are probably the most important economic event of the week. This is the minutes of the September FOMC meeting and will give analysts some insight into what the Fed is thinking about raising rates. On Friday Ben Bernanke said the Fed will raise rates sooner rather than later and the Fed Funds Futures immediately began pricing in a 25 point rate hike in the March/April time frame.

On Thursday we get the Philly Fed Survey, NY Manufacturing and the Consumer Price Index. Consumer prices are not expected to have risen materially and according to some Fed heads they are still worried about a deflationary threat. The two manufacturing surveys should show how regional economies are improving.

On Friday there is Industrial Production and Consumer Sentiment. Industrial production is expected to be positive but less than the +0.8% from August. Sentiment is expected to rebound to 76.5 from last months dip to 73.5.

Economic Calendar

Most of the economic reports will be overshadowed by the arrival of some major earnings events. Intel will be the headliner on Tuesday and everyone expects the Intel earnings to be strong. There have been some cautiously bullish comments from Intel over the last month but they had the tone of under promise and over deliver rather than warnings not to be too bullish. Most chip companies have guided higher throughout the month and expectations are high. Intel is expected to post 27-cents in earnings.

Johnson & Johnson on Tuesday is also expected to beat estimates due mostly to aggressive cost cutting. Estimates for earnings of $1.13 per share compared to $1.17 in Q3-08. JNJ is supposed to be recession proof and Tuesday we will see if that idea needs a Band-Aid.

JP Morgan is the first of the big banks to report and they are expected to post strong earnings. They have money and not afraid to use it. They are reportedly producing some strong trading profits in this market. Jamie Dimon offered to loan money to the FDIC two weeks ago in an interview where FDIC head Sheila Bair was on the same panel. This should be a great earnings report.

On Thursday there are several important reports. Goldman Sachs (GS) will report an estimated $4.24 per share in earnings. This is 2.5 times their earnings for Q3-08. The financial sector are expected to post strong improvements in earnings with an average of 57% improvement over 2008. Goldman is simply the leader of the pack.

IBM will report on Thursday and investors will be hoping to see if IBM can beat their estimate of $2.38 on the strength of their services division and overseas contracts. IBM hardware revenue fell -39% in Q2 so hopefully services will hold them up. IBM's $3.64 gain on Friday was responsible for nearly 50% of the Dow's 78-point rise.

Google will report on Thursday and has been garnering upgrades for the last several weeks on expectations for a good report. Credit Suisse upped their price target on Friday to $600 from $475 with a close at $515. Unfortunately Google has a bad habit of taking a serious plunge the day after their earnings report. Google declined for two weeks after their earnings in July.

Harley Davidson (HOG) also reports on Thursday and they rallied strong after their July earnings on news that sales were not as bad as investors expected. For the ultimate high dollar toy with financing scarce they were expected to crash and burn. When disaster did not strike they gained nearly 60% over the next month. Can they do that again? I doubt it but it will be interesting to hear their forecast.

Nokia (NOK) reports on Thursday and few U.S. investors will be interested. With Apple and RIMM the rage in the USA we tend to forget that Nokia is still the largest cell phone maker. However, Nokia profits are expected to be less than half what they made in Q3-08.

Bank America reports on Friday and they are the bank to own long term according to analysts. However, they are still expected to post a small loss for Q3. BAC has not yet paid back their $45 billion in TARP funds.

General Electric, the most unloved corporate giant in the U.S., will report on Friday. They never miss earnings and their forecasts are normally lackluster although bullish on America. GE stock is well off its $6 low back in March but is currently struggling to hold $16. GE earnings rarely move the stock price with 11 billion shares outstanding.

By all accounts the earnings for Q3 are expected to be strong followed by an even stronger Q4 despite the lackluster rebound in economic activity. If you look under all the hype you will see that Q3 earnings are still expected to be 25% BELOW the same period in 2008 yet investors are ready to cheer these results. Revenue in Q2 came in 17% below Q2-2008 levels. Revenue in Q3 is expected to improve to ONLY a 15% decline from 2008 levels. Quite a few analysts continue to warn that these earnings will come from aggressive cost cutting not increased sales. This may be a good earnings quarter relatively speaking but it is far from a quarter of good earnings. If you back out AIG's $68 per share loss from last year the overall S&P would be posting a significantly worse comparative performance than 25% below 2008. Adding that $68 per share loss drags down the overall S&P earnings for Q3-08 significantly and that is the comparison the S&P for Q3-09 will be measured against.

Banks continue to show improving earnings despite continued loan delinquencies. Commercial real estate loans equate to 26% of all outstanding loans at banks. Despite the rising delinquencies the banks keep rolling forward as many loans as possible. This is due to the old adage that "rolling loans gather no loss." As long as you keep pushing the date of accountability farther out into the future you avoid having to take the charge off. All the banks reporting earnings this cycle will be heavily scrutinized for increases in loan loss reserves as a leading indicator of future charge offs.

Earnings Calendar

Citigroup unloaded a hot potato to Occidental Petroleum and got $250 million for selling the problem asset. Actually it was not a problem asset since it made money every year since 1997 but the government overseers wanted it to disappear. The asset was the Phibro commodities trading unit. It had averaged a $200 million annual profit for the last five years and $371 million last year. Personally I would love to buy a business that netted $371 million a year for $250 million! What a sweet deal. The problem was the massive commissions due to traders at the unit. For instance star trader Andrew J Hall made an estimated $100 million in commissions in 2008. Phibro made a fortune in 2008 from bets Hall made on the spike in oil prices.

That is a sum that Citigroup has yet to pay him and the government has protested the size of his compensation. As part of the deal Occidental has assumed the liability of Hall's unpaid commissions and reportedly he will be given an ownership position in lieu of some portion of the $100 million. Reportedly Phibro will keep their own funds separate on future deals and commissions. Citi CEO Pandit had been repeatedly asked if Hall's compensation was fair and in recent months has finally agreed that it was too high. Obviously he was under pressure from the compensation Czar and approached OXY with a sales offer to get rid of the problem. OXY had tried to buy the unit before and was rebuffed. OXY said Phibro would continue to make speculative deals in energy commodities as well as find buyers for the oil and gas OXY produces. Hall is a British born, naturalized American who has an extensive collection of contemporary art he keeps in his 1,000-year-old castle in Germany. I guess if I made $100 million a year I could get away with a few eccentric items like castles.

GM finally got a signed deal to sell the Hummer brand to the Chinese. Sichuan Tengzhong Heavy industrial Machinery Corp, try to say that fast three times, will own 80% and Hong Kong investor Suolang Duoji will own 20%. Although terms were not disclosed the reported sale price was $150 million and includes the dealer network. GM claimed in its bankruptcy they expected to get up to $500 million for the division. The CEO of Hummer said the key will be to produce new models that get over 20 mpg. Good luck with that! Only 8,193 Hummers have been sold to date in 2009.

Those hummers are going to be selling a lot slower once oil demand returns. The IEA upped their forecast for 2010 demand by +1.4 mbpd over 2009 to 86.1 mbpd. They based their upgrade on an IMF forecast that global output would grow by +3.1% in 2010. I am attending the annual Peak Oil conference next week and the consensus opinion seems to be that peak oil has already occurred. Peak oil does not mean we ran out of oil but only that we have reached the maximum of global production due to the accelerating decline in existing fields. The 86.1 mbpd estimate for 2010 is of great interest since it will probably be raised higher as the economic rebound picks up speed. However, most petroleum engineers believe we will never pump 87 mbpd. That was the expected high two years ago and it has not changed. If it were not for the recession we would be in serious trouble already. The recession has simply disguised the problem by temporarily reducing demand to a manageable level. Once demand recovers, say late in 2010, there is going to be a major awakening. I will report back from the conference next week.

Oil prices inched up to $72.35 after the close on Friday and oil appears to be getting ready for another attempt on $75. However, despite comments to the contrary OPEC shipments continue to rise. Last month shipments rose by 170,000 bpd to reduce compliance with the production quotas to 62% from 65%. Despite the increase in production the global inventory levels fell from 61.4 days to 60.7 days of supply in September. The next update will be the OPEC monthly production report and forecast on Oct-13th.

Oil Chart

Fed Chairman Ben Bernanke was credited with lifting the dollar off its lows on Friday after he said the Fed has a plan for exiting the current fiscal stimulus program. Bernanke said "the Fed would raise rates when the economic outlook had improved sufficiently" and "possibly even before there are signs of inflation." This relatively hawkish speech followed on Friday by similar comments from Kansas Fed President Hoenig. President Hoenig is one of the more hawkish anti-inflation members of the Fed and he will be a voting member of the FOMC in 2010. The impact to the Fed Funds Futures was immediate and they are now showing a 25-point increase by April. However, most analysts claim that is still too soon and suggest Q3-2010 is the likely start to draining the punchbowl.

However, historically the Fed will not raise rates until 2-3 months after peak unemployment. That is not expected until mid to late 2010 and something the Fed will have to consider when the time comes.

Dollar Index Chart

The chip stocks benefited from a broad sector upgrade from Deutsche Bank on Friday. This pushed the SOX to a +3.3% gain for the day and a 6.5% gain for the week. Tokyo Electron reported that semi equipment orders had risen 94% in Q3 from the levels seen in Q2. Tokyo Electron is the second largest chip equipment maker behind AMAT. From the rebound in the SOX it is hard to believe that last week the index had broken support and was in full crash mode.

Semiconductor Index Chart

Friday was the 2-year anniversary of the all time market highs set on Oct 9th 2007. The Dow closed at 14164.53 and the S&P at 1565.15. On Friday the Dow closed at 9864.94 and a new high for 2009. The S&P closed at 1071.49 and just a few cents away from a new high for the year at 1071.66. Despite the chip rebound the Nasdaq is still about 30 points below its 2009 high of 2167. The major indexes are still 30% off their highs despite a nearly 50% rebound from the March lows.

The Dow closing at a new high on Friday is a bullish sign. I know that sounds like closing the barn door after the horses are already out. The Dow overcame multiple levels of resistance at 9600, 9725 and 9850 to accomplish this. The +377 point rebound for the week came off the lows at 9430 we saw last Friday. The move was amazing and shorts appeared at nearly every spike. There was strong denial but even stronger buying of those dips. However, volume is declining. Friday's volume was only 6.9 billion shares but the A/D line was still 2:1 in favor of advancers. Remember, the Dow benefited from the nearly $4 gain in IBM which added about 35 Dow points on Friday.

Dow Chart

The S&P did not break out to new highs but is very close. Resistance remains 1075 but it appears to be on autopilot towards 1100-1120 with 1116 the 50% retracement level from the March lows. I like the way the S&P rallied off last Friday's lows to resistance at 1060 and then rested for two days before spiking higher. It was just enough of a pause to suck in the shorts one more time and then roast them on the Thursday morning gap well over that 1060 resistance. I believe the same thing could happen at the 1075 level. We could touch it, ease back slightly and then blast through on higher volume if Intel produces good numbers on Tuesday.

SPX Chart

The Nasdaq gained +4.45% for the week but it is still lagging the other indexes. The Nasdaq is facing strong resistance at 2140 and again at 2160. Unfortunately it will be hostage to the Intel earnings until Wednesday. It could languish until Tuesday night on fears Intel might not be as bullish as investors hope. On Wednesday it will be reactive to whatever Intel did report. The same story repeats on Thursday when Google and IBM report. There is ample precedent for the Nasdaq to run up to its resistance highs ahead of earnings and then stall out because the numbers reported were already priced into the stocks. However, should the Nasdaq move over 2150 on strong volume it would be a buy. Just watch for it to stall at those highs.

Nasdaq Chart

Russell 2000 Chart

All the betting is over and it is time for Intel to show its hole cards and let the chips fall where they may. Intel is in the drivers seat for the earnings week. They have raised their forecast twice and then downplayed the outlook several times in various public forums. All eyes are focused and the market is waiting. After the close on Tuesday the direction will be set for the majority of tech earnings since most tech stocks tend to report in the same trend as Intel.

On Thursday Google and IBM will either be the icing on the Intel cake or the Drano that flushes the Intel stink down the drain. Either way it is going to be a big week. The biggest banks and the biggest tech stocks other than Microsoft will confess their sins and traders will go along for the ride.

It is no secret that I was expecting a potential decline in October. The first couple days seemed to confirm my suspicions and then each day found a new excuse to rally. I do believe that we need to buy a breakout over the highs. If the market does move higher from here it could move a lot higher. If the Dow manages a weekly close over 9918, the September high, then Dow 10320 becomes the next target. That is the 50% retracement of the Oct-07 highs to the March-09 lows.

Jim Brown


New Plays

Restaurants, Turbines, & Industrial Goods

by James Brown

Click here to email James Brown


NEW BULLISH Plays

Cracker Barrel - CBRL - close: 36.00 chg: +0.70 stop: 32.80

Why We Like It:
Last week was an important one for CBRL. The stock broke through resistance at $35.00. I'm suggesting readers buy the breakout. We'll use a stop loss under the October low. If you look at the weekly chart we can see some resistance near $38.75 but I'm going to aim for $39.75 as our first target. The Point & Figure chart is forecasting a $57 target.

Annotated chart:

Entry on   October 10 at $36.00 
Change since picked:     + 0.00   			
Earnings Date          11/24/09 (unconfirmed)    
Average Daily Volume:       322 thousand
Listed on   October 10, 2009    


Capstone Turbine - CPST - close: 1.40 change: +0.05 stop: 1.18

Why We Like It:
CPST is an aggressive, higher-risk trade. The stock spent nearly four weeks consolidating its August-September gains. Now shares are bouncing from the 50-dma. I'm suggesting bullish positions now or on a dip back toward the $1.30-1.25 zone. Our first target is $1.75. Our second target is $1.95 but that may be too aggressive given our time frame. We don't want to hold over the November earnings report. FYI: The Point & Figure chart is bullish with a $2.75 target.

Annotated chart:

Entry on   October 10 at $ 1.40 
Change since picked:     + 0.00   			
Earnings Date          11/09/09 (unconfirmed)    
Average Daily Volume:       3.7 million 
Listed on   October 10, 2009    


Parker Hannifin - PH - close: 52.87 change: +0.92 stop: 49.90

Why We Like It:
More aggressive traders may want to buy PH right here. I'm suggesting readers use a trigger to buy PH on a dip at $51.75. If triggered our first target is $55.75. Keep in mind that this is going to be a very short-term play. PH has earnings on October 20th and we don't want to hold over the report.

Annotated chart:

Entry on   October xx at $xx.xx <-- TRIGGER @ 51.75
Change since picked:     + 0.00   			
Earnings Date          10/20/09 (confirmed)    
Average Daily Volume:       1.6 million 
Listed on   October 10, 2009    



In Play Updates and Reviews

Updating A Few Stops

by James Brown

Click here to email James Brown


BULLISH Play Updates

Apartment Investment & Mgmt - AIV - cls: 15.39 chg: +0.24 stop: 13.49

The rally in AIV continues and shares look poised to test their September and 2009 highs near $16.00 soon. If you're looking for a new entry point readers may want to wait for another dip back toward the simple 10-dma. Our first target to take profits is at $16.50. Our second target is $18.50 but we may not have time. The plan is to exit ahead of the October 30th earnings report.

Annotated chart:

Entry on   October 07 at $14.72 /gap open higher
                            /originally listed at $14.52
Change since picked:     + 0.67   			
Earnings Date          10/30/09 (confirmed)    
Average Daily Volume:       3.6 million 
Listed on   October 07, 2009    


Airgas Inc. - ARG - close: 48.48 change: +0.22 stop: 45.85

ARG bounced from the $48.00 level again for the second time in as many days. Readers looking for a new entry point may want to wait for a dip toward the $47.50-47.00 zone.

Our first target is $52.45. Our second target is $54.85. More aggressive traders could aim higher. The Point & Figure chart is bullish and predicting a $77 target.

Annotated chart:

Entry on September 25 at $47.25
Change since picked:     + 1.23   			
Earnings Date          10/29/09 (confirmed)    
Average Daily Volume:       1.5 million 
Listed on September 19, 2009    


AZZ Inc. - AZZ - close: 40.28 change: +1.11 stop: 37.85

After under performing the market on Thursday AZZ reversed higher for us. The relative strength and the close over $40.00 is bullish. I'd use this move as a new entry point if you're not willing to wait for a dip near $38.00. Our first target is $44.00. Our second target is $47.50.

Annotated chart:

Entry on   October 07 at $40.08 /gap open higher
                             /originally listed at $39.73
Change since picked:     + 0.20   			
Earnings Date          01/07/09 (unconfirmed)    
Average Daily Volume:       120 thousand
Listed on   October 07, 2009    


BE Aerospace - BEAV - close: 20.99 change: +0.43 stop: 17.90

More conservative traders may want to take profits right now! BEAV has closed right at resistance near its 2009 highs near $21.00. This would be a good spot to expect a dip. I'm not suggesting new positions at this time. Our target is $22.25.

Annotated chart:

Entry on September 12 at $19.19 
Change since picked:     + 1.80   			
Earnings Date          10/27/09 (unconfirmed)    
Average Daily Volume:       834 thousand
Listed on September 12, 2009    


Check Point Software - CHKP - cls: 29.62 change: +0.35 stop: 27.35

Bulls bought the dip in CHKP at $28.96 on Friday morning. Shares then managed to rally back to a new 2009 high although volume was pretty light. I would prefer to open new positions on a dip near $28.50. Our first target is $32.50.

Annotated chart:

Entry on   October 06 at $29.19 
Change since picked:     + 0.43   			
Earnings Date          10/27/09 (unconfirmed)    
Average Daily Volume:       2.4 million 
Listed on   October 06, 2009    


Carpenter Tech. - CRS - close: 23.94 change: -0.56 stop: 21.90

CRS suffered some profit taking on Friday but traders bought the dip twice on Friday near $23.50. I'm expecting a bounce from here assuming the market doesn't reverse on us.

CRS has already hit our first target. Our secondary target is $27.40.

Annotated chart:

Entry on September 05 at $21.45 /gap higher entry
                             /originally listed at $20.92
Change since picked:     + 2.49
                             /1st target hit @ 24.90 (+16.0%)
Earnings Date          10/28/09 (unconfirmed)    
Average Daily Volume:       536 thousand
Listed on September 05, 2009    


DELL Inc. - DELL - close: 15.81 change: -0.01 stop: 14.75

The action in DELL on Friday looks like a short-term top/reversal pattern. I would expect a dip back toward the $15.50-15.00 zone. Wait for the dip before considering new bullish positions.

Our first target to take profits is at $16.95. Our second target is $19.75. DELL doesn't move super fast so this play could take several weeks. We'll plan to exit ahead of the mid November earnings report.

Annotated chart:

Entry on   October 06 at $15.51 
Change since picked:     + 0.30   			
Earnings Date          11/19/09 (unconfirmed)    
Average Daily Volume:      25.6 million 
Listed on   October 06, 2009    


F5 Networks - FFIV - close: 41.29 change: +0.63 stop: 37.75

FFIV displayed relative strength and closed a new 18-month highs on Friday. I would look for a dip back toward $40.00 as a new entry point. Our first target to take profits is at $44.50. I'd like to aim higher but we may not have time. Earnings are in a couple of weeks.

Annotated chart:

Entry on   October 07 at $40.63 
Change since picked:     + 0.66   			
Earnings Date          10/21/09 (unconfirmed)    
Average Daily Volume:       1.2 million 
Listed on   October 07, 2009    


General Electric - GE - close: 16.18 change: -0.04 stop: 14.75

GE looks like it's losing moment. I'd expect a dip back toward the $15.50 zone before the stock moves much higher. I'm not suggesting new positions at this time. Please note that we will plan to exit on Thursday, October 15th at the closing bell to avoid holding over earnings on Friday morning.

GE has already hit our first target. We're currently aiming for $18.50. I do consider this an aggressive trade so we want to keep our positions small.

Annotated chart:

Entry on September 14 at $15.49 /gap higher entry
                             /originally listed at $15.35
Change since picked:     + 0.69
                            /1st target hit @ 17.25 (+11.3%)
Earnings Date          10/16/09 (confirmed)    
Average Daily Volume:        83 million 
Listed on September 14, 2009    


Gold Fields Ltd - GFI - close: 14.64 change: -0.35 stop: 12.99

A bounce in the dollar sparked some profit taking in gold and the gold miners reacted with a move lower. Watch for $14.00 to act as short-term support.

Our first target is $15.75. I'm adding a second target at $19.75. The Point & Figure chart is very bullish with a $21 target.

Annotated chart:

Entry on September 30 at $13.78 
Change since picked:     + 0.86   			
Earnings Date          10/29/09 (unconfirmed)    
Average Daily Volume:       7.7 million 
Listed on September 30, 2009    


Starwood Hotels - HOT - close: 33.26 change: -0.15 stop: 29.49 *new*

HOT succumbed to a little profit taking on Friday. The overall trend is still bullish. If you're looking for a new entry point I'd watch for a bounce in the $31.00-32.00 zone. I'm upping our stop loss to $29.49. Our plan was to use small position sizes to limit our risk.

Our first target is $34.75. I am adjusting our second target to $39.00. FYI: HOT has above average short interest (more than 15% of the float).

Annotated chart:

Entry on   October 01 at $31.00
Change since picked:     + 2.26   			
Earnings Date          10/27/09 (unconfirmed)    
Average Daily Volume:       3.4 million 
Listed on September 19, 2009    


Microsoft - MSFT - close: 25.55 change: -0.12 stop: 24.40 *new*

If MSFT doesn't clear resistance near $26.00 soon we may want to consider an early exit. MSFT reports earnings on October 23rd, which gives about two weeks left for this play. I am raising our stop loss to $24.40. Our target is $27.75.

Annotated chart:

Entry on      July 27 at $23.00
Change since picked:     + 2.55   			
Earnings Date          10/23/09 (confirmed)    
Average Daily Volume:        58 million 
Listed on  July 23, 2009    


NII Holdings - NIHD - close: 30.38 change: +0.00 stop: 27.60

NIHD slipped toward its 10-dma on Friday afternoon before bouncing back to unchanged ahead of the closing bell. I would still consider new bullish positions at this time. More conservative traders may want to raise their stops. The plan was to use small position sizes (1/2 to 1/4 normal size) to limit risk. Our first target is $33.75. FYI: The P&F chart is very bullish with a $57 target.

Annotated chart:

Entry on   October 08 at $30.60
Change since picked:     - 0.22   			
Earnings Date          10/22/09 (unconfirmed)    
Average Daily Volume:       3.4 million 
Listed on September 23, 2009    


Petrobras - PBR - close: 47.96 change: +0.52 stop: 43.70

PBR continues to edge higher after breaking out past resistance on Thursday. The $50.00 level is likely round-number, psychological resistance so don't be surprised to see PBR pull back on its initial test of the $50 mark.

Our first target is $52.50. Our second target is $59.00. The P&F chart is bullish with a $63 target.

Annotated chart:

Entry on   October 08 at $46.80
Change since picked:     + 1.16   			
Earnings Date          11/13/09 (unconfirmed)    
Average Daily Volume:      12.8 million 
Listed on   October 07, 2009    


Patriot Coal - PCX - close: 13.07 change: +0.25 stop: 9.95

PCX continues to out perform and garnered even more positive comments from the brokers on Friday morning. Shares are starting to look a little overbought from their lows near $10.00.

I'm using a wide stop loss given PCX's recent volatility. We'll take profits at $13.90. We'll cautiously set a secondary target at $16.75 but the plan is to exit ahead of the late October earnings report.

Annotated chart:

Entry on   October 05 at $12.14 /gap open higher
                            /originally listed at $11.78
Change since picked:     + 0.93   			
Earnings Date          10/28/09 (unconfirmed)    
Average Daily Volume:       6.4 million 
Listed on   October 05, 2009    


Pride Intl. Inc. - PDE - close: 31.51 change: -0.45 stop: 28.25

As expected PDE pulled back after testing $32.00. Look for a dip near $31.00 or $30.00 as our next entry point.

Our first target is $34.75. We'll plan to exit ahead of the late October earnings report.

Annotated chart:

Entry on   October 08 at $31.15
Change since picked:     + 0.36   			
Earnings Date          10/29/09 (unconfirmed)    
Average Daily Volume:       3.7 million 
Listed on September 12, 2009    


Playboy Ent. - PLA - close: 3.17 change: +0.23 stop: 2.78 *new*

PLA out performed the market on Friday with a 7.8% rally. Volume came in at 284K shares. I couldn't find anything specific to account for the rally but there has been some discussion that Hugh Hefner may be open to selling the company. Is this rally buyout speculation? The stock has broken the three-week trend of lower highs and looks poised to test resistance near $3.40 soon.

I would be tempted to buy a dip near $3.10-3.05 with a stop near $2.80. We're actually raising our stop loss to $2.78 for the newsletter.

Our second target remains the $3.95 level. FYI: The Point & Figure chart is bullish with a long-term $7.50 target.

Annotated chart:

Entry on September 01 at $ 2.65
Change since picked:     + 0.52 
                            /take profits 09/16/09 (+17.7%)
Earnings Date          11/05/09 (unconfirmed)    
Average Daily Volume:       370 thousand
Listed on  August 29, 2009    


Pioneer Natural Res. - PXD - cls: 39.53 change: +0.47 stop: 33.40

PXD continues to rally - without us. The stock has soared after reversing near $34.00 a few days ago. I'm unwilling to chase it here. The $40 level could be round-number resistance.

We'll keep the trigger at $36.50 for now. If triggered our first target is $39.95. Our second target is $43.50. The Point & Figure chart is bullish with a $50 target.

Annotated chart:

Entry on September xx at $xx.xx <-- TRIGGER @ 36.50
Change since picked:     + 0.00   			
Earnings Date          11/04/09 (unconfirmed)    
Average Daily Volume:       2.1 million 
Listed on September 26, 2009    


Market Vectors: Steel - SLX - close: 55.00 change: +0.22 stop: 49.95

SLX edged even closer to resistance in the $55.00-55.50 zone. This ETF looks a little short-term overbought and due for a dip. I'm not suggesting new positions at this time. SLX has already hit our first target at $54.75. Our second target is $59.50. Our time frame is several weeks.

Annotated chart:

Entry on   October 01 at $50.25 *triggered
Change since picked:     + 4.75   			
                            /1st target hit @ 54.75 (+8.9%)
Earnings Date          00/00/00 
Average Daily Volume:       309 thousand
Listed on September 19, 2009    


Stryker Corp. - SYK - close: 45.52 change: +0.90 stop: 42.49

SYK is finally showing some strength. The stock rallied 2% on Friday and broke from the little consolidation it was stuck in. I hesitate to launch new positions but I'm more inclined to keep it now. More conservative traders may want to raise their stops a bit.

Our first target is $47.75.

Annotated chart:

Entry on   October 06 at $44.54 *new entry 
Change since picked:     + 0.98   			
Earnings Date          10/20/09 (confirmed)    
Average Daily Volume:       3.2 million 
Listed on   October 03, 2009    


Tractor Supply Co. - TSCO - close: 53.33 change: +0.32 stop: 47.40

TSCO managed to post another gain but shares are overbought and due for a pull back. I would expect TSCO to fill the gap, which means a dip back toward $51.00.

Our first target to take profits is at $54.75. Our second target is $57.45. FYI: The Point & Figure chart is very bullish with a $72 target.

Annotated chart:

Entry on   October 06 at $50.56 
Change since picked:     + 2.77   			
Earnings Date          10/21/09 (unconfirmed)    
Average Daily Volume:       384 thousand
Listed on   October 06, 2009    


VisionChina Media - VISN - close: 8.52 change: -0.50 stop: 7.45

We knew that VISN was volatile, which was why we suggested very small positions and a wide stop loss. The stock spiked to $9.43 Friday but eventually reversed and erased Thursday's gain. Look for short-term "support" near $8.15-8.00.

Our first target is $10.90. Our second target is $13.75. The Point & Figure chart is bullish with a $15.00 target. My time frame is several weeks (maybe year end).

Annotated chart:

Entry on   October 07 at $ 8.53 
Change since picked:     - 0.01   			
Earnings Date          10/29/09 (unconfirmed)    
Average Daily Volume:       407 thousand
Listed on   October 07, 2009    


BEARISH Play Updates

*We currently do not have any bearish play updates*


CLOSED BULLISH PLAYS

Rockwell Automation - ROK - close: 41.33 change: -0.48 stop: 39.95

I am giving up on ROK. We're cutting it loose and cutting our losses.

chart:

Entry on September 10 at $43.71 /gap higher entry
                           /originally listed at $43.15
Change since picked:     - 2.38  <-- exit early (-5.4%)
Earnings Date          11/10/09 (unconfirmed)    
Average Daily Volume:       1.4 million 
Listed on September 10, 2009