Option Investor
Newsletter

Daily Newsletter, Monday, 12/27/2010

Table of Contents

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

Market Wrap

What China Rate Hike?

by Todd Shriber

Click here to email Todd Shriber
Bears expecting news of China's Christmas present, er, interest rate hike to cast a negative cloud over the market were probably disappointed today as it seemed having a couple of days to digest the news was enough to keep substantial loses at bay. Maybe the news was already ''priced in'' as so many pundits are fond of saying. The Dow Jones Industrial Average endured a minor loss on the day while the Nasdaq and S&P 500 both eked out small gains. The Russell 2000 was easily the most impressive of the bunch.

Stats Table

Give the Nasdaq some credit for even mustering a positive close because there were a few obstacles in its way on what was otherwise a pretty slow post-holiday Monday. First, there is the case of Tesla Motors (TSLA), the unprofitable electric carmaker. Tesla had been one of the 2010's high-flying initial public offerings, especially when considering that it is not a Chinese company and, as I just mentioned, the company makes no money.

Tesla made its debut as a public company in late June and hovered in the low 20s for much of September through November before starting a nice little climb that took the stock over $35. That was before Thursday when Capstone Investments came out with a ''sell'' rating on the stock and a $22 price target. That knocked more than $2 off the stock, but the real fun started today.

Tesla's lock-up period officially ended on Christmas, but since today was the first day the company's early investors could start selling their shares, the stock was hammered to the tune $4.54, or almost 15.1%, to close at $25.55. I am not sure if Tesla insiders were behind the bulk of the selling today, but the stock traded more than 10 times its average daily volume and Capstone's $22 price seems pretty realistic now.

The research firm actually makes a pretty valid point for selling the stock. Maybe it is two points. Capstone does not expect Tesla to be profitable or show a positive EBITDA until 2013. In this world of instant gratification, that is not going to be enough to keep investors excited.

Why is it going to take so long for Tesla to become profitable? As a car lover, my best educated guess is simple economics. Head on over to Teslamotors.com and you'll see the Roadster, the one Tesla model currently available, STARTS at $101,500. So the potential audience is already quite small for this car, but beyond that Tesla is banking on finding car enthusiasts that are also willing to make environmental responsibility a big part of their purchasing plans and that is a tough combination to find.

The truly big issue Tesla faces on its road to profitability is what else a car lover can get for roughly $100,000. A 2010 BMW M5 costs about $85,000, according to Motor Trend. Any number of Porsches can be had for less than $100,000. Spend a tad over $120,000 and you can have an Aston Martin V8. All these brands hold much more cache than Tesla and that is a big fundamental problem for the company.

Tesla Chart

Speaking of Nasdaq constituents with dubious business models, there is Netflix (NFLX). Had one bought shares of the movie rental firm in late July for around $95 and not sold them at them at the November peak of $209.24, no big deal. While a tad greedy, the trade would still be almost a double, but the chart may be saying ''get out NOW.''

Netflix slipped $4.57, or almost 2.5%, today to close just above $180. In fact, the stock briefly traded below its 50-day moving average, which now looks like support. How strong it is I am not so sure. The stock was done in today by a piece in the most recent issue of Barron's entitled ''Time to Hit the Eject Button?''

Barron's notes that while the stock has more than tripled this year, Netflix is facing soaring content acquisition costs and those costs could jump 120% in 2011. The option for Netflix to stem those costs? Buy fewer big hits, but as Barron's correctly points out, that would stifle subscriber growth.

Netflix bears have been pointing out recently that the company faces rising competition from other Nasdaq darlings such as Amazon (AMZN) and Apple (APPL) and that is true. I would also argue that Netflix faces plenty of competition from the local cable company. I have Time Warner Cable (TWC) where I live and the company has been running a series of ads for months now touting the virtues of its On Demand movie feature. Time Warner is not shy in these ads about saying they get the movies right away while Netflix has to wait 28 days. Plus, you do not have to mail anything back to cable company.

Noted value investor Whitney Tilson is one of the big names that has made public his short position in Netflix, arguing that the stock is overpriced and any bump in the road could result in a nasty sell-off and that the company's business model is going the way of the dodo bird, meaning the cost to streaming content could be too rich for Netflix to absorb and keep delivering the numbers investors have become accustomed to.

Obviously, every noted investor from Warren Buffett to George Soros is wrong from time to time and Tilson is no exception. Only time will tell if he is right about Netflix, but the guy is pretty smart. After all, he was snatching up shares of BP (BP) in June and that trade has worked out pretty well.

Netflix Chart

Yes, there was some good news on Monday and it came from what formerly would have been viewed as an unlikely place: American International Group (AIG). Booted from the Dow, posterboy for too big to fail and frequent object of my own attempts at humor in this space, AIG has been getting its act together and has been doing so for a while now.

On Monday the company announced it has obtained $4.3 billion in credit facilities and that it will be able to use those facilities once it is done paying its tab to Uncle Sam. The news sent AIG shares up $5.05, or 9.3%, $59.38 on volume that was better than triple the daily average. The stock touched a new 52-week high of $60.96.

AIG, whose tab from the Federal Reserve and the Treasury Department once amounted to $182 billion, said in a statement that it is close to seeing the finish line in its recapitalization plan. The loans to AIG were provided by more than 30 banks, according to Bloomberg News.

AIG Chart

Looking at the charts, the S&P 500 did not move much from Thursday's close, but if resistance is viewed as anything over Thursday's close of 1256, then here we are. It is not officially a short week as U.S. markets will be open on New Years Eve, but saying volume will be light for much of this week is stating the obvious. Support for the S&P 500 is 1240, but I think we head into 2011 at 1250 or higher.

S&P 500 Chart

It was not the most exciting of days for the Dow, save for two add-on acquisitions in the agriculture space announced by DuPont (DD). The AIG news was enough to lift Bank of America (BAC) and JPMorgan Chase (JPM) to gains of 1.6% and 1.4%, respectively. While buyers of Dow stocks have been apprehensive and the index has been mired in a tight trading range over the past few weeks, if financials keep partying like its 2006, then resistance at 11,575 could be done away with by the end of this week, if not sooner.

Dow Chart

Since the Nasdaq did not do much today, if it was overextended last week, it remains so, at least for now. The index is a long way from any marquee support, notably 2600 for starters and 2710 remains the next critical resistance hurdle to be cleared.

In addition to Netflix, another Nasdaq darling that might be worth keeping an eye on in the near-term is Priceline (PCLN). Expedia (EXPE) and Orbitz (OWW) are having quite the tiff with American Airlines (AMR) and on the sly, Delta (DAL) has pulled their fares from several lesser-known reservations Web sites. I am not saying Priceline is a short, but this is an issue worth keeping an eye on as it pertains to the company.

Nasdaq Chart

While the Russell 2000 did not set the world on fire on Monday, it was another solid day for the small-cap index that looks poised to reclaim its 2007 high at 856. Support looks firm at 760 though the index is a fair bit removed from that area.

Russell 2000 Chart

I am not expecting much in the way of excitement this week, but they say a picture is worth a thousand words, so I leave you with an interesting chart that illustrates the behavior of the S&P 500 in the days leading up to and immediately following Christmas. Happy New Year. S&P 500 Holidays Performance

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New Plays

Wireless Telecom

by James Brown

Click here to email James Brown


NEW BULLISH Plays

NII Holdings Inc. - NIHD - close: 44.45 change: -0.26

Stop Loss: 41.75
Target(s): 49.00, 53.50
Current Gain/Loss: + 0.0%
Time Frame: 8 to 10 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
NIHD is a Central and South American telecom company. Shares have been consolidating sideways for months. This past month the stock broke out over key resistance in the $43-44 zone. This pull back to $43.50 this morning and the rebound higher looks like a new entry point to hop on board.

I am suggesting bullish positions now. We can buy the stock or buy calls. My time frame is several weeks but we may end up exiting the January calls earlier than our stock position since January options expire in about four weeks. I'm listing a stop loss at $41.75 but cautious traders might want to consider a stop loss closer to $43.25 instead. FYI: The Point & Figure chart for NIHD is bullish with a $61 target.

Suggested Position: Buy NIHD stock @ current levels

- or -

Buy the 2011 January $45.00 calls (NIHD1122A45) current ask $1.45

- or -

Buy the 2011 February $48.00 calls (NIHD1119B48) current ask $1.15

Annotated chart:

Entry on December 28 at $xx.xx
Earnings Date 02/24/11 (unconfirmed)
Average Daily Volume: 1.9 million
Listed on December 27th, 2010


In Play Updates and Reviews

Not Much Change

by James Brown

Click here to email James Brown

Editor's Note:
Over the weekend China raised interest rates, which sparked some profit taking across the Asian and European markets. The U.S. market opened lower but strength in the financials helped fuel a rebound. You won't see a lot of change on the play list below but SBUX did hit our new aggressive entry point.

-James

Current Portfolio:


BULLISH Play Updates

Alcoa Inc - AA - close: 15.34 change: +0.20

Stop Loss: 14.25
Target(s): 14.95, 15.95
Current Gain/Loss: +15.5%
Time Frame: 8 to 10 weeks
New Positions: see below

Comments:
12/27 update: AA recovered from its morning low but still settled with a -0.7% decline. This isn't surprising after last week's potential top on Thursday. I'm expecting a correction toward the $14.50 area. Cautious traders may want to take profits now. Currently our final exit target is $15.95. Aggressive traders could aim higher (maybe the $17 area). No new positions at this time.

Current Position: Long AA stock @ 13.18

12/25: new stop loss @ 14.25
12/21: 1st Target Hit @ 14.95 (+13.4%)

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


Automatic Data Processing - ADP - close: 46.57 change: +0.05

Stop Loss: 45.95
Target(s): 49.75, 52.50
Current Gain/Loss: unopened
Time Frame: 10 to 12 weeks
New Positions: Yes, see trigger

Comments:
12/27 update: ADP is moving the wrong direction. The stock did recover from its intraday lows as traders bought the dip near short-term support at $46 and its 30-dma. I am not convinced the correction is over. We will keep our trigger to buy a breakout at $47.25.
FYI: The Point & Figure chart for ADP is forecasting a bullish price target of $66.00.

Buy-the-breakout Trigger @ $47.25

Suggested Position: Buy ADP stock @ $47.25

- or -

Buy the 2011 February $50.00 call (ADP1119B50)

*Note: just because the Feb. $50 calls are cheap don't go overboard and buy too many. They're cheap for a reason. ADP may not hit $50 by Feb. expiration.

Entry on December xx at $xx.xx
Earnings Date 01/26/11 (unconfirmed)
Average Daily Volume: 2.8 million
Listed on December 16th, 2010


Alaska Air Group - ALK - close: 56.55 change: -0.85

Stop Loss: 54.90
Target(s): 59.75, 64.00, (option exit 61.75)
Current Gain/Loss: + 2.9%
Time Frame: 8 to 9 weeks
New Positions: see below

Comments:
12/27 update: The XAL airline index tagged another new relative low on Monday. Shares of ALK saw a lot more volatility and closed with a -1.4% drop. The stock is testing very short-term support near $56.00. More conservative traders may want to consider raising their stops toward today's low (55.73). I am not suggesting new bullish positions at this time.

We want to sell half of our stock position at $59.75. Sell all of our January options at $61.75. Sell the rest of our stock position at $64.00.

Current Position: Long ALK stock @ $54.91

- or -

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

12/21: First target is 59.75, adding second target at $64 for ALK stock.
12/21: Adjusting our only exit target on the calls to $61.75.

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


Popular Inc. - BPOP - close: 3.03 change: +0.05

Stop Loss: 2.75
Target(s): 3.40, 3.95
Current Gain/Loss: + 1.0%
Time Frame: 12 to 16 weeks
New Positions: see below

Comments:
12/27 update: Banking stocks were some of the best performers today. BPOP managed to outperform its peers with a +1.6% gain. I remain somewhat cautious on the stock given last week's lower high. I am not suggesting new bullish positions at this time. Conservative traders may want to raise their stop closer to the 50-dma.

Current Position: Long BPOP stock @ $3.00

- or -

Long the 2011 April $3.00 calls (BPOP1116D3) Entry @ $0.34

12/22: Close over $3.00 is another bullish entry point.
12/18: New stop loss @ 2.75

Entry on December 14 at $ 3.00
Earnings Date 01/20/11 (unconfirmed)
Average Daily Volume: 11.7 million
Listed on December 11th, 2010


Citigroup Inc. - C - close: 4.77 change: +0.09

Stop Loss: 4.49
Target(s): 5.00, 5.35
Current Gain/Loss: + 0.8%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
12/27 update: Monday turned out to be a strong session for Citigroup. The stock rallied immediately off its morning low and closed with a +1.9% gain. I am not suggesting new bullish positions at these levels. This remains an aggressive, higher-risk trade. The plan was to keep our position size small to limit their risk.

Current Position: Long Citigroup stock @ $4.73

- or -

Long the 2011 March $5.00 calls (C1119C5) Entry @ $0.20

Entry on December 20 at $ 4.73
Earnings Date 01/18/11 (confirmed)
Average Daily Volume: 688 million
Listed on December 18th, 2010


Companhia Brasileira de Distribuicao - CBD - close: 40.83 change: -0.02

Stop Loss: 37.90
Target(s): 44.95, 49.00
Current Gain/Loss: + 1.5%
Time Frame: 12 to 14 weeks
New Positions: see below

Comments:
12/27 update: It was another forgettable day for CBD with the stock bouncing from its rising 40-dma again but shares failed to close in positive territory. I remain cautious on launching new positions. CBD can be a volatile stock so readers should consider this a higher-risk trade.

NOTE: We may need to reconsider our time frame on CBD. It could take longer than previously expected for shares to hit our targets.

Current Position: Long CBD stock @ $40.25

12/21 New stop loss @ 37.90

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


Check Point Software Technologies - CHKP - close: 45.92 change: +0.07

Stop Loss: 43.95
Target(s): 47.25, 49.75
Current Gain/Loss: + 1.8%
Time Frame: 8 to 10 weeks
New Positions: see below

Comments:
12/27 update: CHKP recovered from its morning swoon and managed to challenge its highs from last week. Nothing has changed from my prior comments. I would prefer to initiate new positions on a dip near $45.00.

Our first target is $47.25. Our second, longer-term target is $49.75. This could take several weeks. Investors will have to decide whether or not they are willing to hold over CHKP's earnings in late January.

Current Position: Long CHKP stock @ $45.10

- or -

Long the 2011 April $45.00 calls (CHKP1116D45) Entry @ $2.55

Entry on December 20 at $45.10
Earnings Date 01/26/11 (unconfirmed)
Average Daily Volume: 1.4 million
Listed on December 18th, 2010


Walt Disney Co. - DIS - close: 37.48 change: -0.22

Stop Loss: 36.75
Target(s): 39.90, 42.50
Current Gain/Loss: unopened
Time Frame: 10 to 12 weeks
New Positions: Yes, see trigger

Comments:
12/27 update: DIS saw a little bit of profit taking on Monday. There is no change from my weekend comments. Nimble traders could try and buy a dip near $37.00. I am suggesting we wait for a breakout over resistance with a trigger to launch positions at $38.25. We'll use a stop loss at $36.75. Our targets are $39.90 and $42.50. Our time frame is two or three months.

Trigger @ 38.25

- Suggested Positions -

Buy DIS stock @ 38.25

- or -

Buy the 2011 February $40.00 calls (DIS1119B40)

- or -

Buy the 2011 April $40.00 calls (DIS1116D40)

Entry on December xx at $xx.xx
Earnings Date 02/08/11 (unconfirmed)
Average Daily Volume: 8.6 million
Listed on December 25th, 2010


Ford Motor Co. - F - close: 16.87 change: +0.09

Stop Loss: 16.29
Target(s): 18.40, 19.95
Current Gain/Loss: - 0.2%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
12/27 update: The action today could be a new bullish entry point in Ford. The stock dipped to $16.60 and delivered a nice rebound higher this afternoon. Traders may want to consider new positions right here. Or you could wait for a move over the $17.00 level. We'll try and limit our risk with a stop loss at $16.29.

FYI: The Point & Figure chart for Ford is bullish with a long-term target of $19.50.

- Suggested Positions -

Long Ford stock @ $16.90

- or -

Long the 2011 January $17.50 calls (F1122a17.5) Entry @ $0.25

- or -

Long the 2011 March $18.00 calls (F1119C18) Entry @ $0.61

Entry on December 23 at $16.90
Earnings Date 01/27/11 (unconfirmed)
Average Daily Volume: 58.7 million
Listed on December 22nd, 2010


FLIR Systems Inc. - FLIR - close: 29.83 change: +0.20

Stop Loss: 27.40
Target(s): 30.90, 33.00
Current Option Gain/Loss: + 2.5%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
12/27 update: FLIR showed some relative strength. The stock quickly recovered from its gap open lower and shares rallied toward round-number resistance at $30.00. I am still expecting a correction toward $29.00. Wait for that dip near the $29.00 mark as our next entry point. FLIR doesn't move super fast but our targets are $30.90 and $33.00.

Current Position: Long FLIR stock @ $29.10

- or -

Long the 2011 April $30.00 calls (FLIR1116D30) Entry @ $1.60

Entry on December 22 at $29.10
Earnings Date 02/10/11 (unconfirmed)
Average Daily Volume: 1.6 million
Listed on December 18th, 2010


JB Hunt Transport Services - JBHT - close: 40.62 change: -0.12

Stop Loss: 38.75
Target(s): 43.50, 46.75
Current Option Gain/Loss: + 0.7%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
12/27 update: The Dow Jones Transportation index managed to post a gain but most of the action was sideways. Shares of JBHT also spent the day moving sideways. I am suggesting readers look for a dip near $40.00 as our next entry point to launch bullish positions.

FYI: The Point & Figure chart for JBHT is bullish with a $54.50 target.

Suggested Position: Long JBHT stock @ $40.33

- or -

Buy the 2011 February $40 calls (JBHT1119B40) Entry @ $1.85

12/22 Entry at $40.33
12/21 New Entry Point - Launch Positions Now (open of 12/22)

Entry on December 22 at $40.33
Earnings Date 01/28/11 (unconfirmed)
Average Daily Volume: 1.2 million
Listed on December 13th, 2010


Morgan Stanley - MS - close: 27.51 change: +0.10

Stop Loss: 25.49
Target(s): 29.85, 31.85
Current Gain/Loss: + 2.0%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
12/27 update: Strength in the financial sector gave MS a boost. The stock quickly rebounded from its morning low and shares are now challenging the $27.50 mark. If you're still looking for an entry point I would consider new positions now or anywhere in the $27-26.50 zone. Our first target is $29.85.

Current Position: Long MS stock @ 26.95

- or -

Long the 2011 January $27.50 calls (MS1122a27.50) Entry @ $0.58

- or -

Long the 2011 April $27 calls (MS1116D27) Entry @ $1.64

Entry on December 22 at $26.95
Earnings Date 01/20/11 (unconfirmed)
Average Daily Volume: 12.2 million
Listed on December 21st, 2010


Microsoft Corp. - MSFT - close: 28.07 change: -0.23

Stop Loss: 25.95
Target(s): 27.45, 29.00
Current Gain/Loss: + 9.8%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
12/27 update: MSFT dipped toward the $28 level and its rising 10-dma. The stock remains overbought and long over due for some profit taking. I would not launch new positions here. Wait for a correction.

Current Position: Long MSFT stock @ 25.55

- or -

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

12/25/10 new stop @ 25.95
12/18/10 new stop @ 25.70
12/14/10 Target hit @ 27.45 (+7.4%), option @ $2.55 (+83.4%)
12/11/10 New stop @ 25.45
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


Mylan, Inc. - MYL - close: 21.42 change: +0.01

Stop Loss: 19.70
Target(s): 21.90, 22.90
Current Gain/Loss: unopened
Time Frame: 12 to 14 weeks
New Positions: Yes, see trigger

Comments:
12/27 update: Monday was a quiet day for MYL. The stock traded sideways in a 32-cent range. There is no change from my prior comments. Aggressive traders could buy a breakout over $21.50. I'm suggesting we wait for a dip to $20.65.

The most recent data listed short interest at 12% of the 287 million-share float. Any significant rallies could fuel some short covering.
FYI: The Point & Figure chart for MYL is bullish with a $33 target.

Trigger to buy-the-dip @ $20.65

Suggested Position: Buy MYL stock @ $20.65

- or -

Buy the 2011 April $20.00 calls (MYL1116D20)

Entry on December xx at $xx.xx
Earnings Date 02/24/11 (unconfirmed)
Average Daily Volume: 9.0 million
Listed on December 20th, 2010


Starbucks Corp. - SBUX - close: 32.47 change: -0.16

Stop Loss: 31.70
Target(s): 34.75
Current Gain/Loss: + 0.6%
Time Frame: 8 to 10 weeks
New Positions: see below

Comments:
12/27 update: Our aggressive entry point to open bullish positions in SBUX has been hit! The market's morning swoon pushed SBUX to $32.16. Our trigger was $32.25. We're starting this play with a stop loss at $31.70. I would still consider new bullish positions in the $32.30-31.75 zone. The plan was to keep our position size very small to limit our risk as SBUX remains overbought.

FYI: 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.

Suggested Position: Long SBUX stock @ $31.25

- or -

Long the 2011 January $33.00 call (SBUX1122A33) Entry @ $0.55
Long the 2011 April $34.00 call (SBUX1116D34) Entry @ $1.30

12/27/10 Trigger hit @ 32.25
12/25/10 new trigger 32.25, new stop 31.70

chart:

Entry on December 27 at $32.25
Earnings Date 01/20/11 (unconfirmed)
Average Daily Volume: 7.1 million
Listed on December 8th, 2010


Sara Lee Corp - SLE - close: 17.51 change: -0.01

Stop Loss: 15.75
Target(s): 17.00, 17.90
Current Gain/Loss: +11.6%
Time Frame: 10 to 12 weeks
New Positions: no

Comments:
12/27 update: Day four - SLE continues to hover near the $17.50 level. This sideways churn is not good for our options. Readers may want to exit the options early. I am not suggesting new positions at this time.

Current Position: Long SLE stock @ $15.68

- or -

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

12/21/10 New stop loss @ 15.75
12/18/10 New stop @ 15.45, New final target @ 19.75
12/17/10 Target Hit @ 17.00 (+8.4%), option @ $2.00 (+48.1%)

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: 35.61 change: +0.04

Stop Loss: 34.40
Target(s): 37.75, 39.75
Current Gain/Loss: + 0.0%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
12/27 update: There is nothing new to report on for SNE. Shares are still hovering near their 30-dma. Readers can launch positions here in the $35.75-35.00 zone.

Current Position: Long SNE stock @ $35.60
- or -
Long the 2011 APRIL $35 calls (SNE1116D35) Entry @ $2.26

12/22 Triggered @ $35.60
12/21 New trigger @ 35.60, New stop @ 34.40

Entry on December 22 at $35.60
Earnings Date 02/03/11 (unconfirmed)
Average Daily Volume: 888 thousand
Listed on November 23rd, 2010


Trimble Navigation - TRMB - close: 40.33 change: +0.18

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:
12/27 update: TRMB was showing a little relative strength with a nice bounce from its morning low. We still don't want to chase it here. If TRMB closes over $40.75 I'll drop it as a bullish candidate. I'm suggesting a trigger to buy the dip at $38.50.

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


Ternium S.A. - TX - close: 41.76 change: -0.21

Stop Loss: 35.85
Target(s): 43.00, 45.00
Current Gain/Loss: unopened
Time Frame: 12 to 14 weeks
New Positions: Yes, see trigger

Comments:
12/27 update: There is no change from my prior comments on TX. We don't want to chase it at current levels. At the moment our buy the dip entry point is $38.25 but we might adjust that if TX finds new support near $40.00.

Buy-the-Dip Trigger @ $38.25

Suggested Position: Buy TX stock

Note: TX does have options but the spreads are horrendously wide so I'm not suggesting any calls on this trade.

Entry on December xx at $xx.xx
Earnings Date 02/23/11 (unconfirmed)
Average Daily Volume: 295 thousand
Listed on December 14th, 2010


Wells Fargo & Co - WFC - close: 31.21 change: +0.22

Stop Loss: 28.90
Target(s): 29.25, 32.90
Current Gain/Loss: +16.1%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
12/27 update: Strength in the banking sector propped up the market this morning. WFC did its part with a sharp rally from the opening low. I am not suggesting new positions at this time. Our target to exit is $32.90. Aggressive traders could set their target near resistance at $34.00 instead. The Point & Figure chart is very bullish with a long-term $48 target.

Current Position: Long WFC stock @ $26.88

- or -

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

12/22: New stop loss @ 28.90, New final target @ 32.90
12/21: New stop loss @ 28.49
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


World Wrestling Entertainment - WWE - close: 14.50 change: +0.14

Stop Loss: 13.75
Target(s): 14.95, 16.40
Current Gain/Loss: + 2.8%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
12/27 update: WWE is still drifting higher. There is no change from my prior comments. I would prefer to launch new positions in the $14.30-14.00 zone. Readers may want to wait and buy a bounce instead of buying a dip.

Suggested Position: Long WWE stock @ $14.10

- or -

Buy the 2011 April $15.00 calls (WWE1116D15), entry @ $0.45

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

Entry on December 13 at $14.10
Earnings Date 02/10/11 (unconfirmed)
Average Daily Volume: 242 thousand
Listed on December 9th, 2010


Weyerhaeuser Co. - WY - close: 18.71 change: +0.15

Stop Loss: 16.99
Target(s): 19.95
Current Gain/Loss: unopened
Time Frame: 8 to 10 weeks
New Positions: Yes, see trigger

Comments:
12/27 update: WY was showing relative strength with a rally to a new seven-month high. We are waiting for a dip toward short-term support near $18.00. The plan is to buy the stock or calls at $18.10. We'll use a stop at $16.99 but more conservative traders might consider a stop loss closer to $17.50 instead. Our first target is $19.95.

Trigger @ 18.10

Suggested Position: Buy WY stock @ $18.10

- or -

Buy the 2011 April $20 calls (WY1116D20)

Entry on December xx at $xx.xx
Earnings Date 02/04/11 (unconfirmed)
Average Daily Volume: 4.7 million
Listed on December 25th, 2010