Option Investor
Newsletter

Daily Newsletter, Thursday, 12/9/2010

Table of Contents

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

Market Wrap

Good Day Except for the Dow

by Jim Brown

Click here to email Jim Brown
For the fifth consecutive day the Dow has been a drag on the markets. With daily point change of 20 points or less the Dow has only moved +8 points in five days.

Market Statistics

The Dow does not have any big losers or big winners and has gone dormant while the tax compromise is debated by lawmakers. Starting last Friday the Dow gained 20 points, lost -20 on Monday, -3 on Tuesday, +13 on Wednesday and -2 today for a total of +8 for the week. It is not that there are not any decent stocks in the Dow but more a case of the big caps losing money as fund managers move to tech stocks and small caps. Over the same period the Russell 2000 has gained +17 points and that is on a 750-point index. That is a +2.2% gain in the Russell. The out performance is clearly visible as is the reason the Dow is lethargic.

The indexes all moved higher at the open after the new Jobless Claims came in at 421,000 and brought the four week moving average down to 427,500 and the lowest level since August 2008. The headline number was a drop of -17,000 over the prior week. We could be very close to a headline number under 400,000. The most recent low was 410,000 two weeks ago.

The only other economic report was the Wholesale Trade for October. Wholesale inventories jumped a strong +1.9% and September was revised higher to +2.1%. The consensus estimate was for a much lower gain of +0.8%. Wholesale sales surged by +2.2% and nondurable goods spiked +3.2%. Don't let anybody tell you there is no food inflation. Farm prices rose +20.5% after an even larger +25.6% in September. The worry over the impact of droughts and floods in overseas markets was pushing grains higher. These gains should mean there will be an upward revision in the Q3 GDP in the next release.

The weekly natural gas report showed a drop of -89 Bcf into storage as colder weather increased demand significantly. Gas in storage at 3,725 bcf is still 9.8% above 2009 levels. The news spiked gas prices to a three-month high at $4.63 but a sell program hit shortly after the report to push prices back to $4.42. Gas should not be able to move much higher because of the abundance of supply unless we see a winter that resembles a new ice age. The bottom should be $4 but there is limited upside.

Natural Gas Chart - Weekly

The economic reports due out for Friday contain no earth shaking events. The Consumer Sentiment for December is probably the most important. We should continue to see sentiment rise along with the stock market and the coming holidays.

The most important event on the horizon is the FOMC meeting next Tuesday.

Economic Calendar

Besides the shift in fund manager interest away from large caps and back into the riskier techs and small caps another reason for the lagging Dow is the debate over the tax cuts. The House Democrats are putting up a strong defense to the President's compromise and have refused to pass it. The Senate is due for a vote as early as Friday. The House has enough Democratic votes to prevent it from passing if they really want to stand united. We saw a rally as soon as the compromise was reported but when Democrats instantly began vowing a defeat the markets have gone sideways. The markets want the tax cuts extended and they will probably continue sideways until the fate of the compromise is decided. If it fails I would expect a major decline. If it eventually passes I would expect an acceleration of the rally. Until then it is a stock pickers market.

One stock I would not pick is GMCR. Green Mountain Coffee (GMCR) angered investors today after they finally reported earnings for the last quarter. There was a previously reported delay and disclosure of some accounting errors. Today they raised revenue guidance but lowered the outlook on profits. GMCR is currently under SEC investigation for accounting irregularities and another announcement was credited with pounding the stock. GMCR said investors could no longer rely on prior guidance on shipments of K-cup packs, previously estimated to grow 64% to 68% in 2011. That guidance is no longer going to be updated and the company will no longer provide sales estimates. Instead, from time to time, the company "may" comment on general sales trends.

For a company under SEC investigation to say prior guidance is no longer reliable, there is no current guidance and future guidance has been canceled is the kiss of death to a stock price. Shares fell -20% in after hours trading.

GMCR Chart

If you were lucky enough to be an owner of Lululemon (LULU) today you were greeted with a +14% gain today to an all time high. LULU reported earnings of 36-cents that easily beat estimates of 25-cents. The clothing maker raised guidance for Q4 to between 46-48 cents.

LULU Chart

AIG investors were rewarded with a +13% gain of $5.56 after the company announced it had struck a deal with the Federal Reserve to repay its bailout loans, close a Fed credit line and dispose of the remaining stock held by the Treasury. No details were given but AIG is expected to hold a secondary offering so the government can unload the rest of its shares to the public. AIG is in significantly better shape than it was two years ago and stands a good chance of getting out from under government control. AIG will use the proceeds from the sale of two non-U.S. life insurers to repay the Fed.

AIG Chart

National Semi (NSM) reported earnings of 34-cents vs estimates of 32-cents. Revenue of $390 million missed estimates of $399 million. NSM guided lower for the current quarter to a range of $344-$359 million and analysts were expecting $382 million. NSM said a temporary supply chain adjustment to absorb excess inventory would lower revenue in Q4. Shares traded down about 60-cents in after hours. Considering the big gains over the last two weeks that was a negligible drop.

NSM Chart

The Treasury Dept auctioned off $13 billion in 30-year securities today and the auction was very strongly bid. Recent long-term auctions have had weak demand. The bid-to-cover ratio at 2.74 today was the highest level since August with foreign central banks buying the largest amount (49.5% of the offering) in more than a year. (Unbelievable) The Fed is buying in the 3-7 year range so it was not a result of the Fed hiking the bidding. After two days of declines in bonds this rejuvenated the bond market. I believe it will be temporary. I think we are in for a bond bubble burst once that tax compromise becomes law.

30-Year Treasury Yield Chart

Another factor weighing on the market is the chance of a rate hike by China this weekend. They have said they were going to raise rates and analysts expect it this weekend. The only question is by how much? China suspended a 3-year bond auction scheduled for Thursday and according to analysts that is almost a guarantee of a rate hike. Because analysts were so strongly expecting a rate hike the auction might not have gone well. You don't want to buy bonds at one rate only to have that rate jump a couple days later.

China is going to report several data points including CPI on Saturday and that is another reason the bond sale probably would have drawn few bids. If the rate hike is only a token increase then our markets on Monday should be fine. If China takes a hard line on inflation and really spikes the rate then Monday will be a bad day for equities. Most analysts believe China will go easy because they can't afford to have their growth fall below 8% or unemployment will spike. They are between a rock and a hard place. There is no easy solution. China's CPI in June was 2.9%. It rose to 3.6% in September and 4.4% in October. Analysts are expecting 4.7% in Nov but there are quite a few claiming it could be over 5%.

OPEC meets this weekend to discuss production quotas but nothing should change. There are no signs they will change production. Crude inventories are at record levels and other than Asia the economic recovery is progressing very slowly. Most sound bites from OPEC oil ministers call $80 to $85 oil reasonable. There are some hawks saying anything up to $100 is reasonable given the depreciation in the value of the dollar. Most analysts do not believe OPEC will make any production changes as long as prices remain under $100. Crude closed today at $88.41. I am projecting $120 oil in 2011 and $150 in 2012.

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The large cap stocks may be waiting for the tax deal to pass but the small caps and techs are in a stealth rally of their own. This is what some analysts are calling the "reflation trade." With the economy recovering and the long-term outlook for the dollar weaker they are expecting dollar denominated stocks to move higher. Earnings are expected to be strong and grow stronger in 2011.

The Nasdaq closed today at the highest level since December 2007. Since Google, Amazon, Apple and other big caps failed to participate it was purely on the back of the small cap techs. This is the cash rotating out of the big caps and into stocks expected to outperform in 2011. This is a bullish event!

The S&P closed at a new two year high at 1232 and is slowly extending its move away from prior resistance. Wednesday's dip is now history and were it not for the tax deal and China's rate hike we would be moving up much quicker.

The markets are on hold until Monday. The S&P has support at 1220 and next resistance on the S&P is around 1250. That is the most quoted target for the S&P for year-end.

S&P-500 Chart

The Dow is in a holding pattern as I described earlier with a total movement of +8 points for the last five days. Support at 11,335 is holding despite cash moving from large caps to small caps. The big caps are the most affected by sentiment surrounding the tax deal. Until something happens in that deal I would be surprised to see any major Dow gains. There is risk from the China rate hike since most of the Dow stocks do considerable business overseas. I believe it is a "news event" risk rather than fundamental or earnings risk. If China makes a major move we could see a major dip given the profits from the big gains in the prior week. Resistance is 11,444 and support 11,335.

Dow Chart

The Nasdaq is in a stealth rally tacking on additional points every day but no significant moves. The Nasdaq has posted gains for the last seven days. As I reported earlier it is not being supported by the big cap techs. Stocks like Google, Apple and Amazon are either lagging or negative as cash moves out of large caps and into small caps.

Note on the chart that after the gap up rally at the beginning of December it has been a slow upward progression with small gains. The bears are still shorting the new highs but the buyers keep picking up the pieces and pushing prices higher. Resistance is now 2625 and support 2600.

Nasdaq Chart

The Russell has moved sideways for three days as it consolidates its gains from the December rally. However, the intraday chart show a much tighter range on Thursday afternoon that could be signaling an upside breakout ahead.

That breakout may not come until next week because of the news event risk on Friday. Support is now 764 and resistance is nearly 800. The Russell should be our sentiment indicator of overall market health.

Russell Chart - 90 Min

Russell Chart - 10 Min

The Dow Transports continue to move higher as well and that is also a confirming signal the broader market should continue making gains.

In summary we have some event risk while we wait for the next compromise on the tax deal and the China rate hike. Friday is a tossup and Monday is dependent on China then unfounded worries over a possible change at Tuesday's FOMC meeting. By Wednesday we should be directional again and baring any unforeseen events I believe the markets will be moving higher.

Remember, we are in "don't fight the Fed" mode in a recovering economy. Stocks almost always go up in this situation. I know it is painful for the bears to watch and theorize about hidden market movers and governments manipulating the markets as a reason to justify their losses. I lost a good subscriber this week. He has been with us since 1999 but he had turned so bearish about the future it was killing him. While I agreed with him about the U.S. financial problems long term he could not rationalize why the markets were moving higher today. Whenever I expressed my bullish bias in recent months he would always email me a list of reasons why the economy and the market were about to crash. I am going to miss RP but I think this is a good example of how we can't let our bias become so emotional that we can no longer trade correctly. Remember, "the trend is your friend" and "the markets can remain irrational far longer than we can remain liquid."

I know everyone reading this has a bias. You may not agree with me but you need to agree with the market. Otherwise you will suffer financially and become frustrated. I know readers who have been shorting gold for the last six months because they "believed" it was overbought. It may be but others have made millions following the trend.

I "believe" the markets are going higher long-term. Whether they go up tomorrow or next week is always up for debate. Because of my long-term bias I am still in buy the dip mode. I will remain there until proven wrong. The bears can put their conspiracy theories aside and come along for the ride or continue pounding their head against the wall in frustration. If you agree or disagree I will be happy to discuss it with you. Send me an email! Send me an email

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Don't fight the Fed!

Jim Brown


New Plays

Ready for a Comeback

by James Brown

Click here to email James Brown


NEW BULLISH Plays

World Wrestling Entertainment - WWE - close: 14.36 change: +0.11

Stop Loss: 13.75
Target(s): 14.95, 16.40
Current Option Gain/Loss: unopened
Time Frame: 10 to 12 weeks
New Positions: Yes, see trigger

Company Description:
World Wrestling Entertainment, Inc., a publicly traded company (NYSE:WWE - News), is an integrated media organization and recognized leader in global entertainment. The company consists of a portfolio of businesses that create and deliver original content 52 weeks a year to a global audience. WWE is committed to family-friendly, PG content across all of its platforms including television programming, pay-per-view, digital media and publishing. WWE programming is broadcast in more than 145 countries and 30 languages and reaches more than 500 million homes worldwide. The company is headquartered in Stamford, Conn., with offices in New York, Los Angeles, Chicago, London, Shanghai, Singapore, Tokyo, and Mexico City. (source: company press release or website)

Why We Like It:
It looks like WWE has found a bottom. Shares were hammered back in August after the company missed its earnings estimates. Now WWE has spent over three months building a new base in the $14-13.50 zone. The recent breakout could be the beginning of a new leg higher. Aggressive traders could launch positions now. I am suggesting we wait and use a trigger to open bullish positions at $14.10. We'll start with a stop loss at $13.75, under the 50-dma. Our first target is $14.95. Our second, longer-term target is $16.40.

Trigger @ $14.10

Suggested Position: Buy WWE stock @ $14.10

- or -

Buy the 2011 April $15.00 calls (WWE1116D15)

*Note: The call options on WWE have very large spreads, making them a higher-risk trade.

Annotated chart:

Entry on December xx at $xx.xx
Earnings Date 02/10/11 (unconfirmed)
Average Daily Volume: 242 thousand
Listed on December 9th, 2010


In Play Updates and Reviews

Semiconductors and Financials Gain

by James Brown

Click here to email James Brown

Editor's Note:
The rally continues for chip stocks and banks turn up the heat with big gains. Cautious traders may want to consider early exits in LRCX and WFC to lock in gains.

-James

Current Portfolio:


BULLISH Play Updates

Alcoa Inc - AA - close: 14.15 change: +0.01

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:
12/09 update: AA is going nowhere fast. Shares closed virtually unchanged again. The bearish reversal from Dec. 7th could still be in effect even though AA hasn't seen any follow through yet. The bigger picture is still bullish for AA. Look for a dip toward $13.60. 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: 56.37 change: +0.34

Stop Loss: 51.90
Target(s): 59.75
Current Option Gain/Loss: + 2.6%
Time Frame: 8 to 9 weeks
New Positions: see below

Comments:
12/09 update: It was another lackluster session for ALK. Shares slowly drifted higher. While the path of least resistance seems to be higher I remain cautious on ALK. I would hesitate to launch new positions at the moment. 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: 45.81 change: +0.18

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:
12/09 update: Financials were the best performing sector on Thursday. Yet AXP's +0.3% gain significantly underperformed the 2.2% gains in the banking indices. There is no change from my previous comments. 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 4.69 change +0.05

Stop Loss: 4.08
Target(s): 4.60, 4.85
Current Option Gain/Loss: +12.7%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
12/09 update: Citigroup is still melting higher, extending its gains to 8 out of the last 9 sessions. This stock is overbought and due for some profit taking. 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%)

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: 40.01 change: -0.58

Stop Loss: 36.75
Target(s): 44.95, 49.00
Current Option Gain/Loss: - 0.6%
Time Frame: 10 to 12 weeks
New Positions: Yes, see below

Comments:
12/09 update: Uh-oh! CBD has seen two down days in a row. That's been relatively uncommon of late. Shares are now testing potential support near $40.00. If this level fails look for additional support near $39 and its 50-dma. I would consider new positions here near $40 or at $39 but readers may want to wait for a bounce first! 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: 59.06 change: +0.60

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:
12/09 update: The banking sector's sprint higher continues. We still don't want to chase this move but we might need to reconsider our entry point strategy. Currently the plan is to buy CYN (or calls) at $55.50. FYI: The Point & Figure chart is bullish with a $71 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: 50.10 change: -0.94

Stop Loss: 48.95
Target(s): 54.90, 57.45
Current Option Gain/Loss: - 1.7%
Time Frame: 6 to 8 weeks
New Positions: Yes, see below

Comments:
12/09 update: Okay, now I'm worried. HANS tried to bounce this morning but didn't get very far. Shares closed under technical support at the 50-dma. Yet managed to stay above round-number, psychological support at $50.00 - at least for now. While I would normally consider this dip to $50 as a new bullish entry point readers may want to wait for some sign of a bounce first before initiating positions.

Current Position: Long HANS stock @ $51.00

- or -

Long the January $55.00 calls (HANS1122A55) Entry @ $0.65

Entry on December 8th @ $51.00
Earnings Date 11/04/10 (confirmed)
Average Daily Volume: 750 thousand
Listed on October 16, 2010


Lam Research - LRCX - close: 51.27 change: +1.06

Stop Loss: 45.90
Target(s): 48.50, 52.50
Current Option Gain/Loss: +13.3%
Time Frame: 8 to 10 weeks
New Positions: see below

Comments:
12/09 update: Wow! The semis continue to post gains. LRCX outperformed its peers with a +2.1% gain. We need to be ready to exit. The SOX closed at 416 and should find resistance in the 420-430 zone dating back to 2008. Odds are good the SOX could see its rally stall and reverse near 420. In the meantime LRCX just grows more and more overbought. I am not suggesting new bullish positions at this time. Feel free to exit at any time here! Cautious traders will want to seriously consider exiting tomorrow (Friday) before the closing bell. Officially our final exit target is $52.50. FYI: I am raising our stop loss to $45.90.

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

12/09 New stop loss $ $45.90
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: 27.08 change: -0.15

Stop Loss: 24.70
Target(s): 27.45, 29.00
Current Gain/Loss: + 5.9%
Time Frame: 8 to 10 weeks
New Positions: Yes, see below

Comments:
12/09 update: MSFT's early morning gap higher quickly failed. There is no change from my prior comments. I would still expect a pull back before shares breakout past $27.50. 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: 10.46 change: +0.03

Stop Loss: 9.15
Target(s): 11.90
Current Option Gain/Loss: + 2.1%
Time Frame: 10 to 12 weeks
New Positions: See below

Comments:
12/09 update: PIR traded sideways in a narrow range. There is no change from my prior comments. I would still expect a retracement to the $10.00 level. If the market sees any sharp declines then PIR could hit $9.50. Wait for the dip or a bounce from these 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


Starbucks Corp. - SBUX - close: 32.40 change: -0.18

Stop Loss: 29.90
Target(s): 34.75
Current Option Gain/Loss: unopened
Time Frame: 8 to 10 weeks
New Positions: Yes, see trigger

Comments:
12/09 update: SBUX saw a little bit of profit taking today. I'm hoping it continues for another couple of days. We want to launch bullish positions on a dip at $31.25. If triggered our first target is $34.75. I should mention that SBUX is currently in a legal battle with Kraft Foods (KFT) over distribution of SBUX's ground coffee brand but investors seem to be ignoring it.
FYI: The Point & Figure chart is very bullish with a long-term target of $54.

Trigger @ $31.25

Suggested Position: Buy SBUX stock @ $31.25

- or -

Buy the 2011 January $32.00 call (SBUX1122A32)
Buy the 2011 April $33.00 call (SBUX1116D33)

Entry on December xx at $xx.xx
Earnings Date 01/20/11 (unconfirmed)
Average Daily Volume: 7.1 million
Listed on December 8th, 2010


Sara Lee Corp - SLE - close: 15.84 change: +0.25

Stop Loss: 14.70
Target(s): 17.00, 17.90
Current Option Gain/Loss: + 1.0%
Time Frame: 10 to 12 weeks
New Positions: Yes, see below

Comments:
12/09 update: SLE is showing relative strength again. Shares gained +1.6% to set a new two-year closing high. If you're looking for a new position I would prefer to buy a dip near $15.50.
FYI: the Point & Figure chart is suggesting a long-term bullish target of $32 for SLE.

Current Position: Long SLE stock @ $15.68

- or -

Long the 2011 April $15.00 calls (SLE1116D15) Entry @ $1.35

Entry on December 8 at $15.68
Earnings Date 02/03/11 (unconfirmed)
Average Daily Volume: 7.6 million
Listed on December 7th, 2010


Sony Corp. - SNE - close: 36.20 change: -0.16

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:
12/09 update: SNE is still drifting sideways. There is no change from my previous comment. The stock 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: 46.81 change: +0.63

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:
12/09 update: Don't chase this move in TSCO. We are waiting for a correction. Currently the plan is to launch bullish positions 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: 41.02 change: +0.34

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:
12/09 update: TRMB extended its gain and managed to close over $41.00, a feat not seen since 2007. There is no change from my prior comment. 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: 30.07 change: +0.70

Stop Loss: 27.90
Target(s): 29.25, 31.90
Current Option Gain/Loss: +11.8%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
12/09 update: Banking stocks were the best performers on Thursday. WFC certainly did its part in the rally with a +2.3% gain. Shares closed over the $30.00 level but I want to caution readers that the $30.25-30.30 zone could be overhead resistance. Fortunately, broken resistance near $29.25 should be new support. I am not suggesting new positions at this time. Please note our new stop loss at $27.90. Our final target to exit is $31.90.

Current Position: Long WFC stock @ $26.88

- or -

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

12/09: New stop loss @ $27.90
12/08: Target Hit $29.25 (+8.8%), Option @ $2.30 (+98.2%)

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