Option Investor
Newsletter

Daily Newsletter, Tuesday, 10/20/2009

Table of Contents

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

Market Wrap

Strong Earnings, Mixed Economics

by Jim Brown

Click here to email Jim Brown

Two days into the second heaviest week of earnings and investors are already becoming less interested. Add in a drop in housing and the markets gave up some of its gains.

Market Stats Table

The morning started with the Producer Price Index report for September. Prices at the producer level fell -0.6% in September due mostly to the drop in energy prices. Obviously that will reverse in October given the rise in oil prices to $80. Despite the drop in producer prices the core inflation among intermediate and crude products rose sharply for the second consecutive month. Prices for core intermediate goods rose +0.9% in September after a +0.6% rise in August. September was the fourth consecutive month of price inflation for core goods. Core inflation in September was the highest since the recession began. The rise in the core prices provided little support to those who are worried about deflation. Instead it appears inflation is the real risk.

PPI Chart

The economic news causing investor concern today was the New Residential Construction numbers for September. Housing starts came in at 590,000 on an annualized basis. This compares similar numbers for the prior three months but less than the 610,000 expected. Both permitting and completions are slowing. This is due to the onset of winter and the end of the housing stimulus scheduled for November.

Weighing on builders is the very high inventory levels and the price pressure from the two million foreclosures expected for 2009 and again for 2010. Permits are down -29% year over year. Completions fell -10% from August levels. In September completions were down -40% year over year.

Housing Starts

Economic reports due out on Wednesday include the Mortgage Applications, Regional Employment, Oil Inventories and the Fed Beige Book. The Beige Book is far more important than the other reports on the list. This is the Fed's regional survey of economic conditions. Hopefully it will show expanding growth in all Fed regions.

The big news of the day was earnings and the biggest was the $9 gain in Apple after they posted earnings that rose +46%. Apple reported earnings of $1.82 per share on $9.87 billion in revenue compared to $1.26 per share and $7.9 billion in the comparison quarter. Consensus estimates were $1.42 per share. There is no recession in Apple products. Apple sold 7.4 million iPhones in Q3. That was the first full quarter of sales for the 3GS model. Apple also said they sold 3 million Macs thanks to the back to school season. Mac shipments rose +17%. Analysts were expecting 2.8 million. Apple sold 10.2 million iPods and that was a decline of -8% but still over the analyst consensus for 10 million. Gross margins rose +2% to 36.6%. Steve Jobs said in a statement that Apple had some great new products in the pipeline for 2010 but failed to release any details.

Apple told analysts that earnings for the current quarter would be in the range of $1.70 to $1.78 on revenue of $11.5 billion. Analysts were expecting earnings of $1.91 on revenue of $11.45 billion. Normally that kind of estimate decline would crush a stock but Apple explained that the Financial Accounting Standards Board (FASB) had changed the rules on revenue recognition and iPhones and Apple TV would have to be recognized over the two year expected life of the products. They will still recognize the same profit but some of it will be deferred. Investors did not appear concerned and shorts were crushed with the $9 gain. UBS issued a new price target of $280.

Apple Chart

Dow component Caterpillar (CAT) beat the street with earnings that fell -53% over the comparison quarter. However, that was better than analyst estimates and CAT rose nearly $2 on the news. Most of their profits came from strong cost cutting rather than increased sales. The CAT CEO said they were seeing encouraging signs of a recovery underway. He expects 3% global GDP growth in 2010. CAT narrowed guidance to $1.85-$2.05 from $1.15-$2.25. He expects sales growth of 10-25%. CAT get 70% of its sales from outside the USA and the CEO was one of the first to warn of the impending global recession back in early 2007. Because of their infrastructure focus they typically see trends developing before other indicators begin to reflect it.

CAT Chart

Lexmark (LXK) reported earnings of 65 cents and easily beat the consensus estimate of 46 cents per share. LXK stock jumped +15% or +3.59 on the news. The news was still the same with an announcement of strong cost cutting and layoffs of another 825 people. However, Lexmark said they saw an increase in demand especially in printer supplies. The company also raised guidance for Q4 and shorts were squeezed again.

Lexmark Chart

United Technology (UTX) reported earnings that beat the street but was not rewarded like Apple, CAT or LXK. UTX reported a 17% drop in profits to $1.14 per share compared to estimate of $1.12 per share. UTX said it had cut 15,000 jobs since the slump in business began. They tightened their guidance for the full year and said sales would improve but only slightly. UTX might be a candidate for a short position given their lukewarm guidance.

UTX Chart

After the bell Yahoo (YHOO) reported earnings that tripled thanks to strong cost cutting. Yahoo posted earnings of 13-cents compared to estimates of 7-cents. There was also a $98 million gain related to the sale of Alibaba.com. Yahoo did say that advertising revenue was stabilizing despite an 8% drop in ad revenue in Q3. Some analysts were expecting a decline of as much as 20%. Yahoo rallied more than a buck in after hours trading.

Yahoo Chart

SanDisk (SNDK) reported blowout earnings of 75-cents compared to estimates of 26 cents. Shares of SNDK rallied more than 10% in after hours trading. Revenue came in at $935.2 million compared to estimates of $787.9 million. That is a serious beat on revenue considering most companies are having trouble just making their revenue estimates. Sandisk said the industry fundamentals were improving suggesting better earnings were ahead.

SanDisk Chart

United Health reported a +13% gain in earnings despite a drop in enrollment. UNH reported earnings of $1.04 compared to estimates of 76-cents. Revenue rose +8% to $21.7 billion but the Healthcare Division saw revenue fall -3% with enrollment down -6%. Consumer budgets are to blame and healthcare is a large expense that sometimes gets pushed off the budget when times are lean. UNH shares rose +4%.

Pfizer (PFE) reported earnings of 51 cents compared to estimates of 48 cents. The better than expected earnings came from - all together now - "COST CUTTING". The cost cutting offset a decline in the sale of drugs and the negative impact of foreign exchange rates. Sales of Lipitor fell -12% in the U.S. and -9% worldwide in Q3. Pfizer closed negative for the day with a minor loss.

Big names on the calendar for Wednesday are EBAY, USB, WFC, MO, NVLS, VMW, AMGN and BA. Wells Fargo and Ebay will probably attract the most attention.

So far this earnings cycle 95 S&P companies have reported. 79% have beaten earnings estimates compared to 71% in Q2 and the historical range of 61-65% that beat. However, only 65% have beaten on revenue numbers this time around compared the average of 50%. The average earnings beat has been by +19% but the average revenue beat is only 0.7%. The majority of earnings gains have been from cost cutting. The cost cuts have provided some huge earnings beats but they are not repeatable. Also, because estimates are relatively low for Q3 it would be hard for somebody to not beat their earnings if they were actively working to manage their business. Investors don't like gains from cost cutting and special tax rates. For the market to really gain momentum we need to see top line revenue growth that signals a rebound in the economy.

Oil prices topped $80 overnight before retreating to $78.05 intraday. Crude closed at $79.09, down 52-cents. This was the last day of trading for the November contract, which expired at the close. The December contract becomes the front month on Wednesday and it closed today at $79.05. Crude oil has posted gains for eight consecutive days until today. Obviously there were some expiration pressures and short covering once the prior resistance at $75-76 was broken last week.

When the weekly oil inventories are reported on Wednesday analysts expect to see a +1.1 million barrel gain. Gasoline is expected to have fallen -1.6 million barrels and distillates by -1.0 million. Mastercard's Spending Pulse report for last week showed that U.S. gasoline demand rose by +3.7% last week. I suspect that was due to drivers filling up to avoid price hikes once oil prices broke over $72. In my local area there are eight service stations within 1.5 miles of my house. There was a 25-cents difference in prices from the low of $2.24 to high of $2.49 on Saturday. The three stations with $2.49 had gone up about 15 cents over the last week. I am acutely aware of oil prices and routinely watch how quickly they translate into higher gasoline prices. Given the roughly $14 rally in crude prices over the last three weeks I would bet that others were filling up last week to get one last tank of relatively cheap gas before the full impact of $80 oil hit the pumps.

Crude Oil Chart

Natural gas rallied strongly today to break over $5 and market reporters were ecstatic. I am glad to see it but the real resistance is $5.50 and that is not likely to break that easily. Storage levels are in record territory at 3,716 BCF. There has never been this much gas in storage before. With the prospect of a cold winter this massive storage level is not depressing gas prices. Frankly I am amazed. Normally when storage levels move close to the highs the pressure in the pipelines keep lower volume producers from pushing gas into the pipeline and indirectly impacts the price of gas. Currently gas in storage is 32.5% above 2008 levels and 29% above the five-year average. This would not normally be conducive to higher gas prices. However, rapid production declines in the newer shale gas plays has begun to worry producers that their reserves are not as solid as previously thought and production levels could decline faster than expected over the next 12-18 months. This is why rigs are being reactivated every week to go back to work exploring for gas.

Natural Gas Futures Chart

I think analysts are making too big a deal about the intraday relationship of the dollar and the equity markets. I understand it for the commodity markets but the equity markets should not have an intraday relationship. However, for whatever reason that relationship has increased in recent weeks. Today the dollar traded sharply lower at a new 52-week low of 75.10 overnight only to rally once the equity markets opened to trade as high as $75.76 intraday. In relative terms this kind of move on the dollar index is huge. The rebound exactly corresponded with the decline in the equity markets. When the dollar began to fade late in the day the equity markets rebounded off their lows. I cannot remember any time in my trading life that this relationship was so evident. This probably is a reflection of the global concern that the dollar is going to fall considerably lower and we are seeing higher volatility as a result.

Dollar Index Chart

Another reason we may have been seeing some weakness in the markets was the flight of cash from the Galleon Group. Galleon manages $3.7 billion and investors have already requested a return of more than 25% of those funds after the firm's founder Raj Rajaratnam was arrested last Friday for insider trading. Raj was released on $100 million bail over the weekend and was back at work on Monday and trying to assure investors there was no problem. Still over $1 billion has been already been requested to be returned by investors. The Galleon funds own/control large stakes in quite a few Nasdaq stocks. In order to recover the money depositors are requesting Galleon would have to sell major stakes in numerous tech companies. Their top tech holdings have already declined by -12% to -16% this week alone. This is probably follow me trades being unwound as well as traders trying to short the stocks ahead of the withdrawal.

According to Galleon they have until early 2010 to exit positions and return the cash. I question this since the Galleon technology fund has a monthly withdrawal schedule while some of the other Galleon funds have quarterly withdrawal dates. The monthly withdrawal deadlines are the 15th of the month with a 45-day window so October had already passed before Raj was arrested. That means any withdrawal requests made by Nov-15th will have to be returned by Jan 1st. Given the recent fund problems like Bernie Madoff and others it s not surprising that Galleon investors are suddenly demanding their money back.

The equity markets a slowly moving higher over the backs of shorts in denial. The three steps forward, two steps back is agonizing to watch because every dip could be the first day of a major decline. Instead buyers are picking up the bargains and we mark a new high the next day. This is eventually going to end but nobody knows when. Analysts are split on direction and that is what makes a market. However, the declines have been on rising volume while the advances are on smaller volume. Friday's decline came on 9 billion shares. Monday's rally on 7.7 billion. Tuesday's decline on 9+ billion shares. I would much prefer the advances were on heavier volume.

The major indexes hit new highs on Monday but new individual new highs for stocks fell to 543 from the 1136 level last Wednesday. The decline in new individual highs is also troubling. Sure you have stocks like Apple hitting new highs but for every stock hitting a new high on Tuesday there were 9 stocks trading lower. The breadth of the market is shrinking.

I know I have a bias towards market weakness for the rest of October but I am trying not to let it color my writing. As long as I continue to warn you I have it then you can make your own decision about my views.

The Dow rallied to 10100 on Monday but it was exactly to uptrend resistance and the failure today was not unexpected. Breaking out over 10100 with a big gain would have been the real surprise. The Dow can continue to creep higher and it appears it is now using 10,000 as support. That is a highly visible level and a move much below 10K would be cause for concern. Overhead resistance stiffens at 10300 and the downtrend from 2008 highs.

Dow Chart

Dow Table

The S&P-500 has already reached that downtrend resistance convergence at 1100 and has respected that resistance for the last couple days. Support on the S&P should be around 1080. With 95 of the S&P-500 already reported and most of those the major big cap stocks the quality of earnings should decline from here. That could hamper further gains.

S&P Chart

You would think that a $9 gain on Apple would have been enough to keep the Nasdaq in positive territory today. Unfortunately the Nasdaq is having a tough time moving over that long-term resistance at 2160. It moves over briefly but then is immediately pulled back. Now that all the tech titans with the exception of EBAY, AMZN and Microsoft have already reported earnings there is little spark to kindle a tech rally. If the Galleon traders are in fact dumping their portfolio of tech stocks that could also hamper further gains. Despite the decline today the bullish trend is still intact but it does appear to be losing steam. Support appears to be 2155-2160 but the recent trend has been so choppy there is no clear-cut support until about 2100.

Nasdaq Chart

I would be thrilled to see buyers hit the dip at Wednesday's open and I would be surprised to see it happen on decent volume. I am not predicting any specific decline but I feel earnings are now priced into the market and with the generals heading back to the rear to toss back a few and celebrate their cost cutting earnings, the troops appear to be in disarray. Something needs to happen to spark a continued rally and I don't know what that might be today. We had great earnings from Apple, Google, Intel, etc and now that is old news. I doubt Microsoft will follow the same trend since Windows 7 is not yet on sale. Keep your stops tight in case the rats start fleeing the ship.

Jim Brown


New Plays

Shipping On The Rise

by James Brown

Click here to email James Brown


NEW BULLISH Plays

Diana Shipping - DSX - close: 14.99 change: +0.57 stop: 13.90

Why We Like It:
DSX is a Greek shipping company and the stock appears to have formed a bullish double bottom. Shares are now testing resistance near $15.00. I suspect the stock will breakout and make a run at the $18-19 zone. The Point & Figure chart is bullish with a $21 target.

I am suggesting a trigger to open bullish positions at $15.25. However, this is a volatile stock so we want to keep our positions small. We'll use a wide stop loss at $13.90. If triggered our exit target is $18.75.

Annotated chart:

Entry on   October xx at $xx.xx <-- TRIGGER @ 15.25 (1/2 pos)
Change since picked:     + 0.00   			
Earnings Date          11/10/09 (unconfirmed)    
Average Daily Volume:       1.9 million 
Listed on   October 20, 2009    



In Play Updates and Reviews

Raising Stops Ahead of Earnings

by James Brown

Click here to email James Brown

We have several companies about to report earnings soon and we're raising stops ahead of their reports.


BULLISH Play Updates

Apartment Investment & Mgmt - AIV - cls: 14.82 chg: -0.43 stop: 13.95

AIV's close under $15.00 is short-term bearish. The next stop is probably the $14.50 level and its 30-dma, which should be close to the trendline of higher lows. Wait for a bounce before considering new positions.

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.

Entry on   October 07 at $14.72 /gap open higher
                            /originally listed at $14.52
Change since picked:     + 0.10   			
Earnings Date          10/30/09 (confirmed)    
Average Daily Volume:       3.6 million 
Listed on   October 07, 2009    


Airgas Inc. - ARG - close: 50.27 change: -0.38 stop: 46.90

ARG dipped to $49.91 before bouncing this afternoon. While I'd like to see the rebound continue the pull back may not be over yet. Keep an eye on the $49.00 and $48.00 levels as potential support.

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.

Entry on September 25 at $47.25
Change since picked:     + 3.02  			
Earnings Date          10/29/09 (confirmed)    
Average Daily Volume:       1.5 million 
Listed on September 19, 2009    


BE Aerospace - BEAV - close: 20.40 change: -0.72 stop: 19.25

The 3.4% decline in BEAV on Tuesday looks ugly but it's only a dip toward the bottom of its recent trading range. More conservative traders may want to exit early anyway. I'm not suggesting new positions at this time.

Our first target is $22.25 and I'd exit about 75% of our position there. We'll put a second target at $24.00. Keep in mind that we'll exit ahead of the October 27th earnings report.

Entry on September 12 at $19.19 
Change since picked:     + 1.21   			
Earnings Date          10/27/09 (confirmed)    
Average Daily Volume:       834 thousand
Listed on September 12, 2009    


Sotheby's - BID - close: 17.92 change: -0.74 stop: 16.80

BID's close under $18.00 is short-term bearish but I would expect to see more support near $17.50 and the $17.00 level, which is bolstered by the rising 50-dma.

I would use small positions (about 1/2 to 1/4 your normal trade size) to limit risk. Our first target is $19.95 since the $20.00 mark could be round-number resistance. Our second target is $22.00. Currently the Point & Figure chart is bullish with a $30 target. We do not want to hold over the early November earnings report.

Entry on   October 13 at $18.21 
Change since picked:     - 0.29   			
Earnings Date          11/05/09 (unconfirmed)    
Average Daily Volume:       861 thousand
Listed on   October 13, 2009    


Cracker Barrel - CBRL - close: 35.96 chg: -0.56 stop: 34.40

CBRL is starting to slip after a weeklong sideways consolidation. I've been warning readers to look for a dip toward $35.00. Wait for a bounce from $35.00 before considering new bullish positions. Our first target is $39.75. The Point & Figure chart is forecasting a $57 target.

Entry on   October 10 at $36.00 
Change since picked:     - 0.04   			
Earnings Date          11/24/09 (unconfirmed)    
Average Daily Volume:       322 thousand
Listed on   October 10, 2009    


Compania Cervecerias - CCU - close: 35.88 change: -0.91 stop: 34.90

Volatility in CCU continues. Shares slipped to $35.51 before paring its losses. I would use a bounce from here as a new entry point. This is going to be a short-term trade as earnings are coming up in a week or two. Our first target is $39.90. The P&F chart is very bullish with a quadruple top bullish breakout buy signal and a $48 target.

Entry on   October 17 at $36.39 
Change since picked:     - 0.51   			
Earnings Date          10/26/09 (unconfirmed)    
Average Daily Volume:        56 thousand
Listed on   October 17, 2009    


Check Point Software - CHKP - cls: 30.15 change: +0.07 stop: 28.90

CHKP continues to show relative strength and set a new closing high for the year. I am not suggesting new positions. Tomorrow is our last day. CHKP is expected to report earnings on Thursday morning. We need to exit on Wednesday at the closing bell (or earlier). I'm not suggesting new positions at this time.

I am adjusting our target down to $32.00.

Entry on   October 06 at $29.19 
Change since picked:     + 0.96   			
Earnings Date          10/22/09 (confirmed)    
Average Daily Volume:       2.4 million 
Listed on   October 06, 2009    


Capstone Turbine - CPST - close: 1.47 change: +0.06 stop: 1.24

CPST has finally broken out from its recent consolidation. Today's move looks like a new bullish entry point. Our first target is $1.75. We don't want to hold over the November earnings report. FYI: The Point & Figure chart is bullish with a $2.75 target.

Entry on   October 10 at $ 1.40 
Change since picked:     + 0.07   			
Earnings Date          11/09/09 (unconfirmed)    
Average Daily Volume:       3.7 million 
Listed on   October 10, 2009    


Carpenter Tech. - CRS - close: 23.56 change: -0.81 stop: 22.45 *new*

CRS fell toward technical support at its rising 40-dma. Shares have bounced near this moving average twice in the last month. More conservative traders may want to exit early anyway since today's session looks like a bearish engulfing candlestick pattern. I am raising our stop loss to $22.45.

We want to exit ahead of the October 27th earnings report. I'm not suggesting new positions at this time.

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

Entry on September 05 at $21.45 /gap higher entry
                             /originally listed at $20.92
Change since picked:     + 2.11
                             /1st target hit @ 24.90 (+16.0%)
Earnings Date          10/27/09 (confirmed)    
Average Daily Volume:       536 thousand
Listed on September 05, 2009    


F5 Networks - FFIV - close: 42.13 change: +8032 stop: 40.75 *new*

Tomorrow is our last day for FFIV. The plan is to exit at the close on Wednesday to avoid holding over earnings after the closing bell. I am ramping up our stop loss to $40.75. Our exit target is still $44.00.

Entry on   October 07 at $40.63 
Change since picked:     + 1.50   			
Earnings Date          10/21/09 (confirmed)    
Average Daily Volume:       1.2 million 
Listed on   October 07, 2009    


Gold Fields Ltd - GFI - close: 14.18 change: -0.26 stop: 12.99

The dollar bounced and that sparked some profit taking in gold. The miners really under performed with the XAU off 2.1%. Shares of GFI dipped to $14.00 and bounced to close down 1.8%.

I've been warning readers to look for a dip to $14.00 and we got it. Traders can use this move as a new entry point to buy the stock.

Our first target is $15.75. Our second target is $19.75 but that may be a little optimistic given our time frame. We plan to exit ahead of the late October earnings report. The Point & Figure chart is very bullish with a $21 target.

Entry on September 30 at $13.78 
Change since picked:     + 0.40   			
Earnings Date          10/29/09 (unconfirmed)    
Average Daily Volume:       7.7 million 
Listed on September 30, 2009    


HMS Holdings - HMSY - close: 42.07 change: -0.32 stop: 38.80

HMSY is holding up pretty well but it's facing resistance at the July highs near $43.00. I'm not suggesting new positions right here. I'd rather see another dip near $41.00 or $40.00 as a new entry point. Our target is $44.90. We'll plan to exit ahead of the October 30th earnings report.

Entry on   October 17 at $41.55 /gap open higher 
                           /originally listed at $41.30
Change since picked:     + 0.52   			
Earnings Date          10/30/09 (confirmed)    
Average Daily Volume:       227 thousand
Listed on   October 17, 2009    


Starwood Hotels - HOT - close: 34.84 change: -1.22 stop: 32.90

HOT gave into profit taking. Shares were pretty overbought with a 20% rally in just the last three weeks. I'm not suggesting new positions at this time. The plan is to exit tomorrow at the closing bell to avoid earnings. I am adjusting our second target down to $37.50.

Entry on   October 01 at $31.00
Change since picked:     + 3.84   
                             /1st target hit @ 34.75 (+12%)
Earnings Date          10/22/09 (confirmed)    
Average Daily Volume:       3.4 million 
Listed on September 19, 2009    


Jacobs Engineering - JEC - close: 45.43 change: -0.62 stop: 43.40

JEC dipped toward support near $45.00 and bounced. Readers can use this move as a new entry point to buy the stock. Our first target is $49.50. Our second target is $53.00 but we'll plan to exit ahead of the mid November earnings report.

Entry on   October 15 at $45.88 
Change since picked:     - 0.45   			
Earnings Date          11/17/09 (unconfirmed)    
Average Daily Volume:       1.2 million 
Listed on   October 15, 2009    


Microsoft - MSFT - close: 26.37 change: +0.01 stop: 25.49 *new*

The action in MSFT with the bounce near $26.00 looks like a new entry point. Unfortunately we only have two days left. MSFT reports earnings on Friday morning. We plan to exit on Thursday at the closing bell if shares don't hit our target at $27.75.

Please note our new stop loss at $25.49.

Entry on      July 27 at $23.00
Change since picked:     + 3.37   			
Earnings Date          10/23/09 (confirmed)    
Average Daily Volume:        58 million 
Listed on  July 23, 2009    


NII Holdings - NIHD - close: 32.03 change: -0.10 stop: 30.60 *new*

NIHD recovered from its morning losses and pared its decline to just 10 cents. If the stock market is positive I would expect this stock to out perform. Unfortunately we're out of time. NIHD reports earnings Thursday morning. We plan to exit tomorrow at the closing bell. I'm not suggesting new positions at this time. Our target to exit is $33.75. The plan was to use small position sizes (1/2 to 1/4 normal size) to limit risk.

Please note our new stop at $30.60.

Entry on   October 08 at $30.60
Change since picked:     + 1.43   			
Earnings Date          10/22/09 confirmed    
Average Daily Volume:       3.4 million 
Listed on September 23, 2009    


Petrobras - PBR - close: 49.64 change: -1.77 stop: 45.95 *new*

Ouch! PBR under performed its peers in the oil sector. The stock plunged to $48.25 but trimmed its losses to just -3.4%. The big move was fueled by news that the Brazilian government was imposing a 2% financial transactions tax on incoming investment funds as the country tries to deal with its rising currency in the global markets.

I am raising our stop loss to $45.95. I'm not suggesting new positions at this time.

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

Entry on   October 08 at $46.80
Change since picked:     + 2.84  			
Earnings Date          11/13/09 (unconfirmed)    
Average Daily Volume:      12.8 million 
Listed on   October 07, 2009    


Patriot Coal - PCX - close: 12.88 change: -0.67 stop: 10.90

PCX is beginning to retreat after another failed rally near $14.00. We've been expecting a pull back to it's not a surprise. I'm not suggesting new positions at this time. Look for a dip toward $11.00.

PCX has already hit our first target at $13.90. We're currently aiming for $16.75 but we'll exit ahead of the October 27th earnings report.

Entry on   October 05 at $12.14 /gap open higher
                            /originally listed at $11.78
Change since picked:     + 0.74   	
                          /1st target hit @ 13.90 (+14.5%)
Earnings Date          10/27/09 (confirmed)    
Average Daily Volume:       6.4 million 
Listed on   October 05, 2009    


Pride Intl. Inc. - PDE - close: 33.11 change: +0.47 stop: 29.95 *new*

The relative strength in PDE continues. Shares hit new highs for the year above $33.00. I am raising our stop loss to $29.95.

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

Entry on   October 08 at $31.15
Change since picked:     + 1.96   			
Earnings Date          10/29/09 (confirmed)    
Average Daily Volume:       3.7 million 
Listed on September 12, 2009    


Playboy Ent. - PLA - close: 3.65 change: +0.00 stop: 3.18 *new*

PLA closed unchanged on the session. The stock has found a new trading range in the $3.45-3.75 zone. I am raising our stop loss to $3.18. I am not suggesting new positions at this time.

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

Entry on September 01 at $ 2.65
Change since picked:     + 1.00 
                            /take profits 09/16/09 (+17.7%)
Earnings Date          11/05/09 (unconfirmed)    
Average Daily Volume:       370 thousand
Listed on  August 29, 2009    


Tractor Supply Co. - TSCO - close: 52.67 change: -0.18 stop: 51.49 *new*

This is the second day in a row that TSCO has bounced near $51.65. We are planning to exit tomorrow (Wednesday) at the close to avoid earnings. Given our remaining time I am raising the stop loss to $51.49. Our exit target is $54.40.

Entry on   October 06 at $50.56 
Change since picked:     + 2.11   			
Earnings Date          10/21/09 (confirmed)    
Average Daily Volume:       384 thousand
Listed on   October 06, 2009    


VisionChina Media - VISN - close: 10.18 change: +0.10 stop: 7.85

VISN tagged another new 2009 high at $10.50. Shares eventually pared its gains and closed with a 0.99% gain. Shares are very overbought here. I'm not suggesting new positions at this time. This is a very aggressive trade and we want to keep our positions small.

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).

Entry on   October 07 at $ 8.53 
Change since picked:     + 1.65   			
Earnings Date          10/29/09 (unconfirmed)    
Average Daily Volume:       407 thousand
Listed on   October 07, 2009    


BEARISH Play Updates

Avis Budget Group - CAR - close: 11.16 change: -0.46 stop: 12.60

Our new play in CAR is now open. Shares hit our trigger to open bearish positions at $11.25. Our target is $9.25. We'll have to keep an eye on the rising 100-dma as potential support. FYI: The P&F chart is forecasting an $8.50 target.

NOTE: CAR has a high amount of short interest, about 9% of the 101 million-share float. That raises the risk of a short squeeze. Readers may want to consider using put options to limit risk. A stop loss doesn't always work.

chart:

Entry on   October 20 at $11.25
Change since picked:     + 0.09   			
Earnings Date          11/02/09 (confirmed)    
Average Daily Volume:       3.8 million 
Listed on   October 17, 2009    


CLOSED BULLISH PLAYS

DELL Inc. - DELL - close: 15.35 change: -0.01 stop: 14.75

The big spike down to $14.47 in DELL Looks like a bad tick. Yet it appears to be a real trade of 1900 shares at 10:45:26 a.m. this morning. That means we would have been stopped out at $14.75 even though DELL traded at $15.47, $14.47, and the very next trade was back to the $15.47 zone. It's possible that it is an dealer error and someone accidentally typed in $14.47 instead of $15.47. We're going to close this play anyway.

chart:

Entry on   October 06 at $15.51 
Change since picked:     - 0.76 <-- stopped out (-4.9%)
Earnings Date          11/19/09 (unconfirmed)    
Average Daily Volume:      25.6 million 
Listed on   October 06, 2009    


Market Vectors: Steel - SLX - close: 57.39 change: -0.93 stop: 53.75

SLX has produced a failed rally and bearish reversal under $60.00 and closed with a 1.5% decline. Fortunately the stock was kind enough to gap open higher first at $59.62 before reversing. Our second and final target to exit was $59.50. The play is closed.

chart:

Entry on   October 01 at $50.25 *triggered
Change since picked:     + 9.37 <-- 2nd target gap higher @ 59.62 (+18.6%)
                            /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: 45.28 change: -0.87 stop: 44.85

We were planning to exit SYK today at the closing bell but shares hit our stop at $44.85 instead. Earnings are due out after the bell tonight.

chart:

Entry on   October 06 at $44.54 *new entry 
Change since picked:     + 0.31 <-- stopped @ 44.85 (+0.06%)
Earnings Date          10/20/09 (confirmed)    
Average Daily Volume:       3.2 million 
Listed on   October 03, 2009