Option Investor
Newsletter

Daily Newsletter, Tuesday, 12/7/2010

Table of Contents

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

Market Wrap

All About Taxes

by Jim Brown

Click here to email Jim Brown
The market rallied on the news of the tax cut extension and then crashed back to earth when the Senate vowed to filibuster the deal.

Market Statistics

The only material economic report today was the Consumer Credit for October. Credit rose at an annual rate of $3.4 billion and the largest gain since a $5.7 billion pace in July 2008. The $3.4 billion was a +1.7% jump and followed a +0.6% gain in September.

On the surface this would appear to be good news since consumers have been paying down credit and deleveraging ever since the recession started. However, much of the credit swing has been led by a big rise in student loans. A recent change in the process makes the government the primary lender to students. The borrowing category that included student loans rose +6.8% in October following a +7.6% increase in September. Auto loans have also picked up in volume. Experian showed that loans to subprime borrowers rose +8% in the third quarter compared to the same quarter in 2009. It was the first year-over-year increase since 2007.

All the buzz over the tax compromise had the markets moving higher until after the president's press conference. Once the Senate democrats started complaining and threatening to filibuster the bloom faded from the rose and the Dow gave back a 90-point gain to end in negative territory.

The deal will prevent a large tax increase for everyone for another two years and contained a 2% cut in Social Security taxes. That is an instant infusion of money into consumer pockets. It is not a lot but every little bit helps. The deal also contained some incentives for businesses that allow tax write-offs on new equipment. The long-term unemployment insurance payments will be extended for another 13 months. Up to two million workers would have run out of benefits by year-end. That will be a continuation of a direct stimulus for the economy with billions of dollars in payments flowing directly through workers hands and into the economy.

The group Citizens for Tax Justice estimates the package would save the average taxpayer $3,000 in 2011. That savings comes from the cancellation of the tax increase and the cut in social security taxes. Economists at Deutsche Bank claim the Social Security tax cut alone would increase economic growth by 0.7% in 2011. The Center for American Progress estimates it would create 720,000 jobs within two years. Mark Zandi at Moody's raised his GDP forecast for 2011 from 2.7% to 4.0% on the news. Economists at JP Morgan raised their GDP estimate fro 3.0% to 3.5%.

Analysts estimate the cost of the various elements of the compromise could be as much as $1 trillion over two years. BNP said it would increase the Federal deficit in 2012 from 6.9% of GDP to a "much scarier" 9.8%. This will put the new congress under an even more urgent directive to reduce spending and they may have to resort to trimming the fat from some of the sacred cows like Social Security and Medicare.

The bond market sold off on the news in what could have been the early wave of investors moving out of bonds and headed for stocks. We have seen negative fund flows from equity funds and into bonds since the flash crash and eventually this trend will reverse. With almost every analyst now projecting a stronger recovery in 2011 and a strong equity market the incentive to stay invested in the bond bubble is rapidly eroding.

The yield on the five-year Treasury note traded at 1.745% and the highest level since July. The 10-year hit 3.16% and the highest since June. The 30-year hit 4.41%.

The dollar exploded higher on the rising economic estimates. The morning low at 79.20 on the dollar index was a two-week low but it did not last. The rise in the dollar crushed oil prices and commodities in general.

Dollar Index Chart

Crude Oil Chart

Copper rallied to a new high 31-month overnight at 412.50 but was crushed back to 400 on the rise in the dollar. Copper was spiking on expectations for higher demand from a rebounding U.S. economy plus demand from China.

There is also a behind the scenes story in the copper market. Open interest in the copper futures rose to a record 310,740 contracts on Monday. Meanwhile copper stockpiles in LME warehouses have fallen by 30% and the lowest levels since October 2009. Demand will outpace supply in 2011 of 367,500 tons according to Bloomberg. Analysts warn that stocks could fall to an all-time low of less than one weeks usage according to an analyst at Merrill Lynch.

Mining companies are having trouble keeping pace with demand because new reserves are harder to find and mine and ore quality in existing mines is declining as the main deposits have already been produced. That means less copper is extracted from each ton of earth processed. In 1990 copper production was roughly 1.6% of the ore processed. Today that average has declined to 1.1%.

Also impacting supplies is the sudden proliferation of ETFs dealing with copper. ETF Securities, Blackrock and JP Morgan have said they will start copper ETFs.

One unidentified company was holding between 50% and 79% of LME copper stockpiles from Nov-22nd to Dec-2nd according to exchange data. That brings back memories of the Hunt brothers trying to corner the silver market back in the 1980s.

JP Morgan has also very active in buying copper futures over the last couple weeks. They are rumored to be building stock for their coming copper ETF. However, their ETF has not yet been approved by regulators. When questioned JP Morgan claimed "a client" was building a position in copper futures. This market has nowhere to go but up. However, with those big players establishing monster positions they will eventually need to liquidate. If you play in their game be sure to keep your stop losses active.

Copper Chart

H&R Block posted weaker than expected earnings after the bell. HRB reported a loss of 36-cents compared to analyst estimates of 33-cents. HRB typically posts losses in quarters when tax processing is slow. Revenues declined -.5%. The loss was +2 cents better than the 38-cent loss in Q3 2009. Shares declined slightly in after hours trading.

Google (GOOG) was added to the best ideas list at Morgan Stanley with a target price of $730. That was a step up from the prior target at $700. In a research note the analysts said Google is not fully appreciated for the number of revenue sources they are using. He raised his earnings estimate for 2010 to $25.79 per share.

Google said its Chrome browser is now in use by 120 million people. The Chrome OS is going to power devices like notebooks and netbooks, which will be sold by Verizon with a data plan that starts at $10 a month. I know a dozen people who are going to buy one as soon as they are available. These tablets are going to be a major seller. The Chrome App store was scheduled to open today. Google shares were up +$14 intraday but decline to +9 at $587 at the close.

Texas Instruments gave its mid-quarter guidance after the close. They narrowed guidance to the midpoint and still inline with analyst estimates. TXN is now expecting earnings from 61-65 cents and analysts were expecting 63-cents. Yawn. TXN did say the decline in PC sales appeared to have bottomed. The company said it was confident the recent correction in demand would be short lived. The company said sales of chips would be weaker in Q4 in products like TVs and hard drives but Netbook chips had bottomed and were recovering. Shares declined slightly after the release.

Citigroup (Nyse:C) traded nearly 3.5 billion shares today on news the government had sold all of its remaining common shares. Because of those shares moving into the market and out of restricted basis S&P was forced to rebalance Citi's weighting in the S&P-500. Citi accounted for 43.4% of the NYSE volume on Tuesday. However, according to Birinyi Associates the NYSE volume without Citi was the second lowest in the last month at 3.2 billion shares.

Citi Chart

After the close the IMF posted a meeting notice on their website for a Friday meeting to vote on the 22.5 billion euro bailout for Ireland. Earlier today Ireland passed the first stage of its new austerity budget that was necessary to qualify for the bailout. I can't imagine the IMF/ECB will want to roil the markets further with indecision so odds are good that bailout vote will pass.

CNBC reported the afternoon sell off was due to a news headline saying the government had issued over a dozen subpoenas to prominent funds in their recent insider trading probe. The new flurry of subpoenas represented an expansion of the federal investigation into the so-called expert network firms. Those firms helped funds by providing research and contacts from the companies the funds wanted to add to their portfolios. The Dept of Justice had no comments on the Reuters story.

I don't think the sell off was due to the insider trading news. I think it was due to an old fashioned sell the news program. For the last week the market has been in rally mode on expectations of the compromise with the Dow up +400 points.

The compromise was announced, the press conference held and then the democrats in the Senate announced they would filibuster the proposal. That last announcement prompted the sell the news move and even though most believe the filibuster will either never happen or fail. It is called trading the news not the facts.

Even with the big decline from the intraday highs the market has still accumulated some major gains since last Tuesday. For it to rest here on an obvious sell program is not surprising. The S&P could easily decline back to 1200 if the bears suddenly found some conviction but I don't see it. The fix is in. We still have the Fed put in the form of the QE2 program with Ben saying he could spend even more money if needed. The tax cut extension compromise will be passed even though there will be politicians on both sides offering sound bites in opposition crafted specifically for their constituents back home. Lawmakers who were not running for election in November saw what happened to their brethren and they want to avoid a repeat of that slaughter when the 2012 elections roll around. I would expect a lot of political posturing but it will be mostly flash and little substance.

The markets may see some actual sell the news profit taking simply because the intraday sell off reminded traders that the market can go both ways. There is no guarantee it will always go up even if every analyst on the street believes it should. There are still plenty of buyers on the sidelines wishing they had gotten in 400 points ago. They will buy the dip.

The S&P could decline a few points to 1215-1218 for an orderly bout of profit taking or we could go into flush the weak holders mode and drop back to 1200. Either way I still believe the dip will be bought.

S&P Chart

The Dow may have lost -90 points intraday but it closed flat. A flat close still means it held its +350 points of gains from the last four days. That is not bearish when you consider how much of those gains could have been at risk.

The Dow could decline to 11,200 without really doing any damage but I would be very surprised to see it decline to 11,000 again. The economics and fundamentals are simply too strong for the reluctant buyers not to buy the dip.

Dow Chart

Tech traders may have felt the need to take profits ahead of the Texas Instruments mid-quarter guidance after the close. There was no specific reason for the sell off other than a large sell program that hit all indexes equally. Nothing happened after the close to pressure techs on Wednesday so now it is up to the dip buyers to decide where they would like to enter the market.

The Nasdaq could decline -100 points without any major damage to the trend but I seriously doubt that will happen. Analysts are still predicting S&P 1250 by year-end so fund managers can't afford not to be long.

Nasdaq Chart

If you need any reassurance the bulls are still alive you need to look no further than the Russell. The Russell surged over resistance at 760 and HELD its gains. It did close -6 points off its highs but still well over 760. This is a strong bullish signal. Unless the Russell begins to weaken the rally is still alive.

Russell Chart

In summary I believe the afternoon sell off was simply a sell the news event by a major fund. The net advance/decline ratio dropped by -500 stocks in less than five minutes. This was NOT investors taking profits. This was a major sell program that could have been triggered by the news flow. The follow on to the initial drop was trader flight because they did not know what happened and their stops were getting hit. This is normal market activity.

Advance/Decline Chart

I expect the market to find a bottom and restart the move higher before year end. I am in buy the dip mode until proven wrong. The economic picture is improving daily and funds should be flowing out of bonds and into stocks.

Over 1,000 stocks hit new 52-week highs today. Don't fight the Fed, buy the dip.

I apologize for the lateness of the newsletter tonight. I had some technical difficulties.

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Jim Brown


New Plays

New Two-Year Highs

by James Brown

Click here to email James Brown


NEW BULLISH Plays

Sara Lee Corp - SLE - close: 15.71 change: +0.24

Stop Loss: 14.70
Target(s): 17.00, 17.90
Current Option Gain/Loss: + 0.0%
Time Frame: 10 to 12 eeks
New Positions: Yes, see trigger

Company Description:
Each and every day, Sara Lee delights millions of consumers and customers around the world. The company has one of the world's best-loved and leading portfolios with its innovative and trusted food and beverage brands, including Ball Park, Douwe Egberts, Hillshire Farm, Jimmy Dean, Sara Lee and Senseo. Collectively, our brands generate nearly $11 billion in annual net sales. Sara Lee has approximately 33,000 employees in its continuing operations worldwide. (source: company press release or website)

Why We Like It:
SLE looks poised to run after a month-long consolidation between the $15.00 and $15.50 levels. The stock displayed relative strength today with a breakout to a new two-year high and close over resistance at $15.50. SLE doesn't move super fast but the trend is up. I am suggesting bullish positions now but you don't have to rush into positions immediately. The action in the stock market looks like a possible short-term top. If you're patient we might get a better entry point in SLE closer to $15.25. Essentially I'm suggesting bullish positions on SLE in the $16.00-15.00 zone. FYI: the Point & Figure chart is suggesting a long-term bullish target of $32 for SLE.

Open Positions at current levels

Suggested Position: Buy SLE stock

- or -

Buy the 2011 April $15.00 calls (SLE1116D15) current ask $1.40

Annotated chart:

Entry on December 8 at $xx.xx
Earnings Date 02/03/11 (unconfirmed)
Average Daily Volume: 7.6 million
Listed on December 7th, 2010


In Play Updates and Reviews

Profits on GPC and WRLD

by James Brown

Click here to email James Brown

Editor's Note:
We are exiting our bullish positions on GPC and WRLD. Citigroup also hit a target today. The action in the market's major averages looks like a short-term top. We should expect a pull back that could last a couple of days, but fortunately it should offer a new entry point.

-James

Current Portfolio:


BULLISH Play Updates

Alcoa Inc - AA - close: 14.15 change: -0.09

Stop Loss: 12.90
Target(s): 14.95, 15.95
Current Option Gain/Loss: + 7.3%
Time Frame: 8 to 10 weeks
New Positions: Yes, but see below

Comments:
12/07 update: Reversal alert! AA spiked to $14.50 this morning and then gave it all back. This looks like a short-term bearish reversal following the recent gains. I'm not surprised. We've been expecting a pull back. I would consider new positions on a dip near the $13.60-13.50 zone. (If we do see another entry point we might consider buying some 2011 call options).

Current Position: Long AA stock @ 13.18

Entry on November 16 at $13.18
Earnings Date 01/10/11 (unconfirmed)
Average Daily Volume: 26.1 million
Listed on November 6th, 2010


Alaska Air Group - ALK - close: 56.20 change: +0.16

Stop Loss: 51.90
Target(s): 59.75
Current Option Gain/Loss: + 2.3%
Time Frame: 8 to 9 weeks
New Positions: Yes, see below

Comments:
12/07 update: ALK is still showing a little strength and still outperforming the XAL airline index. ALK managed to hit a new multi-year high this morning but eventually succumbed to some profit taking. The close over $56 is bullish but I suspect if the market sees a pull back ALK will likely follow. More conservative traders might want to consider a stop closer to $54.

Current Position: Long ALK stock @ $54.91

- or -

Long the 2011 January $60 calls (symbol: ALK1122A60) entry @ $1.60

Entry on November 22 at $54.91
Earnings Date 01/27/11 (unconfirmed)
Average Daily Volume: 331 thousand
Listed on November 20th, 2010


American Express - AXP - close: 44.78 change: -0.22

Stop Loss: 41.49
Target(s): 47.50, 49.85
Current Option Gain/Loss: unopened
Time Frame: 10 to 12 weeks
New Positions: Yes, see trigger

Comments:
12/07 update: AXP hit a new relative high this morning but ended the session in the red. There is no change from my prior comment. Wait for a dip. I'm suggesting we launch bullish positions on a dip at $43.50. If triggered we'll use a stop loss at $41.49, under the 200-dma. We will plan on taking profits at $47.50 and at $49.85. Our time frame is several weeks.

Trigger @ $43.50 Suggested Position: Buy AXP stock at $43.50

- or -

Buy the 2011 April $45 calls (AXP1116D45)

Entry on December xx at $xx.xx
Earnings Date 01/20/11 (unconfirmed)
Average Daily Volume: 9.0 million
Listed on December 2nd, 2010


Citigroup Inc - C - close 4.62 change +0.17

Stop Loss: 4.08
Target(s): 4.60, 4.85
Current Option Gain/Loss: +11.0%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
12/07 update: Target achieved. Investors seem enthusiastic that the U.S. will exit their Citigroup stake. The government made about $12 billion on their stock position and maintains some warrants worth a couple of hundred million dollars. Meanwhile shares of C gapped open higher and hit $4.65 intraday. We have had three exit target. Our first target is $4.60. I am adjusting our final exit target to be $4.85 (I'm eliminating the $4.75 and $4.95 targets). Odds favor some profit taking soon. Look for support near $4.40 and $4.30.

I am not suggesting new positions at this time.

Current Position: Long C stock, entry was at $4.16

12/07: Target achieved @ $4.60 (+10.5%)
12/04 Exit the December $4.00 calls (+40%)

chart:

Entry on October 27, 2010
Earnings Date 01/19/11 (unconfirmed)
Average Daily Volume: 523 million
Listed on October 25, 2010


Companhia Brasileira de Distribuicao - CBD - close: 41.84 change: +0.38

Stop Loss: 36.75
Target(s): 44.95, 49.00
Current Option Gain/Loss: + 3.9%
Time Frame: 10 to 12 weeks
New Positions: Yes, see below

Comments:
12/07 update: CBD gapped open higher this morning but eventually pared it gains to settle with a +0.9% advance. The trend is up but CBD is arguably short-term overbought. If you're looking for an entry point wait for a dip into the $40.50-40.00 zone. More conservative traders may want to consider a stop loss closer to $38.00. We have a wide stop because CBD can be so volatile. Bear in mind this is a higher-risk trade.

Current Position: Long CBD stock @ $40.25

Entry on November 23 at $40.25
Earnings Date 03/02/11 (unconfirmed)
Average Daily Volume: 608 thousand
Listed on November 20th, 2010


City National Corp. - CYN - close: 56.80 change: -0.58

Stop Loss: 52.95
Target(s): 58.00, 60.00+
Current Option Gain/Loss: unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see trigger

Comments:
12/07 update: CYN rallied toward resistance near $58.00 and failed. This should be a short-term top and I would expect a pull back toward $55 soon. Use a trigger to launch bullish positions at $55.50. FYI: The Point & Figure chart is bullish with a $68 target.

Trigger @ $55.50

Suggested Position: buy CYN stock @ $55.50

- or -

Buy the 2011 February $60 calls (cyn1119B60) current ask $1.90*

*Caution: most of the option spreads on CYN seem a little too wide. I consider the options a more aggressive trade. You may want to keep your position size small.

Entry on December xx at $xx.xx
Earnings Date 01/27/11 (unconfirmed)
Average Daily Volume: 223 thousand
Listed on December 4th, 2010


Hansen Natural Corp. - HANS - close: 52.94 change: +0.00

Stop Loss: 48.95
Target(s): 54.90, 57.45
Current Option Gain/Loss: unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see trigger

Comments:
12/07 update: There is no change from my prior comment. We want to see HANS dip to $51.00. More conservative traders could wait to launch bullish positions on a dip closer to $50.00 or its 50-dma.

Trigger @ 51.00

Suggested Position: BUY the stock

- or -

BUY the January $55.00 calls (symbol:HANS1122A55)

Entry on November xx
Earnings Date 11/04/10 (confirmed)
Average Daily Volume: 750 thousand
Listed on October 16, 2010


Lam Research - LRCX - close: 49.72 change: +0.23

Stop Loss: 44.90
Target(s): 48.50, 52.50
Current Option Gain/Loss: + 9.8%
Time Frame: 8 to 10 weeks
New Positions: Yes, see below

Comments:
12/07 update: The rally in LRCX has been impressive. Shares posted their fifth gain in a row and tagged new two-year highs. The stock is now short-term overbought and due for a correction. I would expect a pull back toward the $47.50 area. Look for a new entry point there.

FYI: Cautious traders may want to take profits in our 2011 January $45 calls early. The bid has reached $5.40 (+89%).

Current Position: Long LRCX stock @ 45.25
- or -
Current Position: Long the 2011 January $45 calls (LRCX1122A45) Entry @ $2.85

12/04 New stop loss @ $44.90
12/02 Target hit @ $48.50, LRCX +7.2%, option @ $4.55 (+59.5%)

Entry on November 30 at $45.25
Earnings Date 01/27/11 (unconfirmed)
Average Daily Volume: 4.5 million
Listed on November 18th, 2010


Microsoft Corp. - MSFT - close: 26.87 change: +0.03

Stop Loss: 24.70
Target(s): 27.45, 29.00
Current Option Gain/Loss: + 5.1%
Time Frame: 8 to 10 weeks
New Positions: Yes, see below

Comments:
12/07 update: MSFT managed to spike to a new three-week high but eventually settled almost unchanged on the session. I still expect a pull back after last week's gains. Wait for a dip toward the $26.00-25.50 zone before considering new positions.
FYI: We may need to adjust our time frame and focus on three or four months for MSFT to pay off. If you're buying calls, keep that in mind.

Current Position: Long MSFT stock @ 25.55

- or -

Buy the 2011 January $25.00 calls (symbol: MSFT1122A25) Entry @ $1.39

11/29/10 New stop @ 24.70

Entry on November 17 at $25.55
Earnings Date 01/27/11 (unconfirmed)
Average Daily Volume: 68.4 million
Listed on November 15th, 2010


Peir 1 Imports - PIR - close: 10.31 change: -0.33

Stop Loss: 9.15
Target(s): 11.90
Current Option Gain/Loss: + 0.7%
Time Frame: 10 to 12 weeks
New Positions: No

Comments:
12/07 update: Caution! PIR spiked toward $11.00 this morning and then settled with a -3% loss. This looks like a short-term bearish reversal. I would expect a pullback toward the $10.00-9.50 zone. Wait for the dip or a bounce from this level before considering new positions.

Investors should know that PIR is due to report earnings on December 16th. We plan to hold over that event. I consider holding over the earnings announcement a high-risk event. Keep that in mind as you plan your trades.

Current Position: Long PIR stock @ $10.24

- or

Buy the 2011 March $10.00 calls (PIR1119C10) Entry @ $1.55

Entry on December 2 at $10.24
Earnings Date 12/16/10 (confirmed)
Average Daily Volume: 2.3 million
Listed on December 1st, 2010


Sony Corp. - SNE - close: 36.10 change: -0.47

Stop Loss: 33.45
Target(s): 36.50, 39.00
Current Option Gain/Loss: unopened
Time Frame: 10 to 12 weeks
New Positions: Yes, see trigger

Comments:
12/07 update: SNE is still consolidating sideways above $36.00 but it looks like the stock could correct soon. We want to see a dip toward $34.00. Our trigger to open bullish positions is $34.50.

Trigger @ $34.50

Suggested Position: Buy SNE stock
- or -
Buy the 2011 APRIL $35 calls (SNE1116D35) current ask $2.45

Entry on December xx at $xx.xx
Earnings Date 02/03/11 (unconfirmed)
Average Daily Volume: 888 thousand
Listed on November 23rd, 2010


Tractor Supply Co. - TSCO - close: 46.37 change: +0.35

Stop Loss: 39.90
Target(s): 47.50
Current Option Gain/Loss: unopened
Time Frame: 8 to 10 weeks
New Positions: Yes, see trigger

Comments:
12/07 update: Naturally TSCO delivered another new high. Shares remain short-term overbought. We want to see a correction. Our trigger to open bullish positions is at $43.00.

Buy-the-Dip Trigger @ $43.00

Suggested Position: Buy TSCO stock
- or -
Buy the 2011 January $45 calls (symbol:TSCO1122A45)

Entry on December xx at $xx.xx
Earnings Date 01/27/11 (unconfirmed)
Average Daily Volume: 751 thousand
Listed on November 11th, 2010


Trimble Navigation - TRMB - close: 40.32 change: +0.47

Stop Loss: 36.40
Target(s): 41.00, 43.00
Current Option Gain/Loss: unopened
Time Frame: 8 to 10 weeks
New Positions: Yes, see trigger

Comments:
12/07 update: TRMB displayed some relative strength with a +1.1% gain on Tuesday. The stock is short-term overbought and due for some profit taking. I am suggesting we wait for a dip to $38.50 and then open positions. If triggered we'll use a stop loss at $36.40. Our first target is $41.00. FYI: The Point & Figure chart is bullish with a $65 target for TRMB.

Trigger @ $38.50

Suggested Position: Buy TRMB stock @ $38.50

- or -

Buy the 2011 February $40.00 calls (TRMB1119B40) current ask $2.35

Entry on December xx at $xx.xx
Earnings Date 02/02/11 (unconfirmed)
Average Daily Volume: 435 thousand
Listed on December 4th, 2010


Wells Fargo & Co - WFC - close: 28.47 change: -0.27

Stop Loss: 26.40
Target(s): 29.25, 31.90
Current Option Gain/Loss: + 5.9%
Time Frame: 10 to 12 weeks
New Positions: Yes, see below

Comments:
12/07 update: No surprises here. We've been expecting a dip back toward the $28.00-27.50 zone. It looks like that pullback has begun today with a -0.9% loss. If you're looking for a new entry point I would wait for a dip toward $27.50.

Current Position: Long WFC stock @ $26.88

- or -

Long the 2011 January $27.50 call (WFC1122A27.5) Entry @ $1.16

Entry on November 30 at $26.88
Earnings Date 01/19/11 (unconfirmed)
Average Daily Volume: 32.7 million
Listed on November 29th, 2010


CLOSED BULLISH PLAYS

Genuine Parts Co. - GPC - close: 50.90 change: +0.37

Stop Loss: 46.85
Target(s): 51.50
Current Option Gain/Loss: + 5.5%
Time Frame: 6 to 8 weeks
New Positions: No

Comments:
12/07 update: Close enough for me! It's time to exit. GPC has continued to rally and shares hit $51.44 late this afternoon. Our target has been $51.50. I am suggesting we go ahead and exit now, especially since the action in the major market indices looks like a potential short-term top. I would keep GPC on your watch list. We can reconsider new positions on a dip near support.

Closed Position: Long GPC stock @ $48.24, exit @ $50.90 (+5.5%)
- or -
Long the 2011 January $50.00 calls (GPC1122A50) Entry @ $0.40, exit @ $1.50 (+275%)

chart:

Entry on November 29 at $48.24
Earnings Date 02/16/11 (unconfirmed)
Average Daily Volume: 763 thousand
Listed on November 27th, 2010


World Acceptance Corp. - WRLD - close: 49.68 change: +1.16

Stop Loss: 41.90
Target(s): 47.25, 49.75
Current Option Gain/Loss: +12.4%
Time Frame: 6 to 8 weeks
New Positions: Yes, see below

Comments:
12/07 update: Target achieved! WRLD surged toward round-number resistance near $50.00 and hit $49.91. Our final target to exit was hit at $49.75. I remain bullish on WRLD and could keep this stock on your watch list. We could re-evaluate new positions on a dip near the $47-46 zone.

Closed Position: Long WRLD stock @ 44.25, exit @ $49.75 (+12.4%)
- or -
Long the 2011 January $45 calls (WRLD1122A45) Entry @ $2.40, exit @ $5.25 (+118.7%)

12/07 Final Target Hit @ $49.75 (+12.4%), option @ $5.25 (+118.7%)
12/01 First Target Hit @ $47.25 (+6.7%), Option @ $3.50 (+45.8%)
12/01 New stop @ 41.90

chart:

Entry on November 29 at $44.25
Earnings Date 01/27/11 (unconfirmed)
Average Daily Volume: 122 thousand
Listed on November 27th, 2010