Option Investor
Newsletter

Daily Newsletter, Tuesday, 12/28/2010

Table of Contents

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

Market Wrap

Low Volume, Low Conviction

by Jim Brown

Click here to email Jim Brown
The story has not changed with a slow melt up on very low volume and a serious lack of conviction.

Market Statistics

Weak economic reports slowed the market advance and created an undertow of sorts for bulls to overcome. Despite very strong reports about increases in retail spending the Consumer Confidence survey for December declined nearly -2 points to 52.5. Analysts were expecting a sharp gain to 58.3 from last months reading at 54.1. This decline was really unexpected.

There were declines in both internal components. Present conditions fell to 23.5 from 25.4 and the expectations component fell to 71.9 from 73.6. Those who felt jobs were plentiful declined to 3.9% from 4.3%. Those expecting an increase in income fell to 9.9% from 11.1%. Those planning on buying a car fell to 4.5% from 5.6%.

Sentiment remained above its September lows but the sharp drop in all the components is troubling. With a jump in jobless claims expected in two weeks we could see confidence decline again.

Consumer Confidence

This is completely contrary to the very bullish MasterCard Spending Pulse report out this morning. The report said holiday retail sales rose +5.5% for the biggest increase in spending since 2007. Online sales rose +15.4%. The favored categories were apparel and jewelry. Categories that flopped were 3D televisions and an excess of flat screen TVs caused prices to decline sharply. After two years in a consumer recession there was plenty of pent up demand to be released but consumers were very cost conscious. Now that the holidays are over the odds are good consumers are going back into bunker mode and lock up their wallets.

This is especially true due to the impact of $3 gasoline. The average price of gasoline in the U.S. rose to $3.05 on Monday and crude oil is still holding over $90 with analyst targets over $100 for 2011. The $3 level may not produce sticker shock but it will dampen consumer sentiment and spending patterns. Analysts believe a real slowdown in spending will not occur until prices hit $3.50 but we could see that level in 2011.

Another factor weighing on consumers is the rapid declines in home prices since their high last May. The 20-city Case Shiller composite index declined by another -0.8% in October. More recently there have been some other reports suggesting prices could have declined another -3% to -5% in November. As the formal reports are released over the next 60 days it will weigh negatively on consumer sentiment.

Case Shiller Chart (Moody's)

Contradicting the bad news on Consumer Confidence was a very upbeat manufacturing report from the Richmond Fed. The Richmond Fed Manufacturing Survey came in with a headline number of 25.0 compared to the November reading at only 9.0. The new orders index spiked from 10.0 to 29.0 and backorders went from -3 to +14. The average workweek nearly doubled from 9.0 to 15.0 and the employment component rose from 10.0 to 14.0.

This was a very bullish report with the headline number the highest level since May. The uptick in the employment components suggests manufacturers are gaining confidence and are starting to add to staff. This needs to really pickup speed over the year ahead.

We saw consumer spending was improving and that requires replenishment of product inventories to continue. Many retailers sold down inventories significantly because they were afraid to add too much to inventories ahead of the holidays. The surprise spike in retail sales has depleted those inventories and the outlook is good for reorders.

Richmond Fed Chart

There are no reports on Wednesday but Thursday has a long list. The most important is the ISM Chicago as a preview to the national ISM in early January. The EIA Oil Inventory was delayed until Thursday because of the holiday.

Economic Calendar

The quite period following the GM IPO expired today and I am sure nobody was surprised that all seven of the IPO underwriters came out with buy ratings on the stock. The gang of seven, which includes JPM, CS, C, MS, BAC, BCS and RBC Capital Markets, all issued overweight or buy ratings on the stock. Analysts believe the government will sell its remaining stake in GM in 2011. The government needs to sell its shares at $53 to breakeven on its $50 billion bailout investment. GM closed at $35.27 today. The Treasury reduced its stake from 61% to 33% during the initial IPO. For the Treasury to exit without a loss they may have to wait for sometime. Reportedly the government is open to taking a small loss so they can distance themselves from the unpopular bailout well before the next presidential election. That suggests they may try to squeeze an exit out in late 2011. GM traded down over the last month but recent news on auto sales have returned them to the initial prices.

GM Chart

Airlines are heading for a hard landing if the current price trend in crude continues higher as analysts expect. Several airlines raised prices on domestic flights by $10 each way in an effort to compensate for higher fuel prices. Unfortunately this is a losing battle. Back when oil rose to $147 the airlines were killed by ill conceived hedging programs. As a result few carriers are adequately hedged in the current price spike. They are going to need to raise rates even higher and we know from past experience that depresses travel.

Secondly the blizzard forced the cancellation of as many as 7,000 flights and the delays will prove very costly. Many of the delays resulted in cancelled travel plans and fare losses to the carriers. An analyst at Dahlman Rose believes the industry could lose more than $100 million from the cancellations.

With airline earnings in late January a February put position might be a wise investment. United Continental (UAL) closed at a three month low today and odds are good they will miss estimates in January.

United Continental Chart

Copper rallied again on a report suggesting there will be a severe shortage of copper in 2011. One unidentified company owns over 90% of the copper stored in the warehouses of the London Metals Exchange on Dec-22nd. This is the largest position in a couple years according to the exchange. A 90% position would be worth about $3.5 billion at today's price. This position crossed over the 50% threshold in November and is now over 90%. Some analysts believe this stockpile is controlled by JP Morgan in anticipation for their launch of a copper ETF in 2011. JPM has denied they have any ownership but that does not mean someone is not acquiring it for them.

Barclays issued a report last week claiming physical supplies will decline sharply in 2011 because production is not keeping pace with demand. In 2011 demand is expected to exceed production by 825,000 tons and force the consumption of current inventories. The net shortage is expected to be 449,000 tons and that will cause copper prices to rocket higher.

Copper Chart

Commodities have been the big winners in 2010. Palladium is up +92%, cotton +82%, silver +80%, coffee +76%, lumber +53%, copper +29% and gold +28%. As long as China is continuing to grow at a 10% rate and India +9% the demand for hard commodities will grow. Once the recovery accelerates in the developed countries the shortages will become even more acute. This is a symptom of too many people rushing into the new century at a breakneck pace.

Stock news was pretty slim today and volume showed a complete lack in interest in trading. Most trading desks are closed and retail traders are more concerned about exchanging gifts and cashing in gift cards than watching charts all day.

Volume across all exchanges was barely over 4 billion shares. That is half a normal day and only slightly over the 3.6 billion shares traded on Monday. The Monday volume was helped by the blizzard keeping even more traders at home. Volume is only expected to get worse as the week winds down.

Despite the slow volume over the last couple weeks the S&P has managed to post a gain on all buy three days in December. This melt up is going so slowly it is like watching grass grow. We have been at the 1258 level for four days now and we can't seem to break out of the rut.

I mentioned last week I expected a low volatility week with fund managers just trying to hold their gains rather than push the indexes higher. That appears to be exactly what we are seeing. Volume is a weapon of the bulls and apparently they are out of ammunition.

The S&P range for the day was THREE points. That should be a clue as to what the rest of the week will look like unless somebody triggers a big buy program in hopes of creating a year-end short squeeze. Resistance is 1260 and support 1254. This market is wound so tight there is going to be a huge pressure release in January.

S&P-500 Chart

The Dow actually made a new high today thanks to a $1 gain in Chevron. The next biggest mover was 43-cents in Hewlett Packard. If you missed the market today you did not miss anything. Nothing really changed on the chart and the intraday attempt to tag 11,600 failed due to lack of interest.

Resistance other than the round number target at 11,600 is 11,650. Initial support is 11,540. The range was less than 100 points once again and stretching the streak to 17 days.

Dow Chart

The Nasdaq gave up four points on a completely lackluster day for techs. Google was the big loser at -3.46, not really a decent loss considering Google's price. Others included PCLN -3.44, LULU -2.83, STRA -4.82 and RNOW -3.01. A couple of those names you probably never heard before. That is the kind of day it was.

The index finished right in the middle of its recent range and gave no clues as to its future direction. Apple is starting to catch some heat from analysts and they are projecting a decline soon. They are quoting increased competition and narrowing margins. Since Nasdaq is 21% of the NDX and 5% of the Nasdaq Composite any decline in Apple will have serious repercussions for the Nasdaq.

Resistance is 2670, support 2646.

Nasdaq Chart

The Russell was the biggest percentage loser of the major indexes at -0.4% but it was not a big loss. It was twice the percentage of the other indexes and that is troubling even with the miniscule decline. We know that a decline in the small caps will be the leading indicator of a decline in the big caps.

This was not enough today to be anything but noise. However, watch the Russell closely over the next couple days to see if traders are starting to take bearish positions ahead of year-end.

Russell Chart

TrimTabs.com reported today their most recent survey of hedge fund managers show 46% of the 92 managers surveyed are bullish on the S&P. That is up from 31% in November. Those bearish fell from 39% to 19%. Both readings were all time highs and lows. TrimTabs said an "inflationary growth consensus has emerged for 2011. Managers are betting aggressively on the economic recovery." The funds surveyed have assets of $1.8 trillion. The aggregate performance of these funds for 2010 was +5% when the S&P rallied +7.9% including dividends. This suggests bonuses were slim and they will be aggressively long for 2011 given their need to outperform in the coming year and their bullish outlook.

I remain bullish long term but I am growing progressively worried we are going to see a decent dip in early January. Because of those fund outlooks described above I expect the dip to be quickly bought and we will move higher from there. I would be cautious about long positions over the next two weeks and keep those stops tight.

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New Plays

Holding On Tight

by James Brown

Click here to email James Brown

Editor's Note:

Tuesday's session was a quiet one for Wall Street. The east coast is still trying to dig itself out from a massive blizzard. The weather and the holidays has left interest in the stock market at a minimum. It would seem everyone is holding on to their positions until the year ends. Unless there is some unexpected news event odds are we will continue to drift sideways.

Our market bias for 2011 is bullish but we're expecting a correction in mid January. I am a little bit hesitant to launch a bunch of new bullish positions now with this looming two or three weeks in front of us. That doesn't mean we can't make money on the bullish side in the first half of January but we will have to be nimble.

With the market in a narrow range today I didn't see anything worth adding to our play list tonight.

- James


In Play Updates and Reviews

Low Volume Freeze

by James Brown

Click here to email James Brown

Editor's Note:
The stock market was frozen sideways as snow storms and holiday plans kept interest in stocks at a minimum. I can save you some time tonight. Almost nothing changed from yesterday. For the most part commodity-related names and banks drifted higher but gains were pretty minor. Nearly everything else was moving sideways.

-James

Current Portfolio:


BULLISH Play Updates

Alcoa Inc - AA - close: 15.25 change: +0.02

Stop Loss: 14.25
Target(s): 14.95, 15.95
Current Gain/Loss: +15.7%
Time Frame: 8 to 10 weeks
New Positions: see below

Comments:
12/28 update: Commodity-related stocks managed to rally in spite of strength in the U.S. dollar. AA's rally didn't get very far. There is no change from my prior comments. 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: 46.53 change: -0.04

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:
12/28 update: ADP tried to bounce but the early morning strength faded. Currently our plan is to wait for a breakout and launch bullish positions 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: 57.04 change: +0.49

Stop Loss: 54.90
Target(s): 59.75, 64.00, (option exit 61.75)
Current Gain/Loss: + 3.8%
Time Frame: 8 to 9 weeks
New Positions: see below

Comments:
12/28 update: The XAL airline index dropped again but this time ALK outperformed its peers. I remain cautious on the stock given the sector's weakness. More conservative traders may want to consider raising their stops. 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: 3.08 change: +0.05

Stop Loss: 2.75
Target(s): 3.40, 3.95
Current Gain/Loss: + 2.6%
Time Frame: 12 to 16 weeks
New Positions: see below

Comments:
12/28 update: Financials continue to show strength. BPOP rallied toward last week's 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: 4.78 change: +0.01

Stop Loss: 4.49
Target(s): 5.00, 5.35
Current Gain/Loss: + 1.0%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
12/28 update: Citigroup failed to truly participate in the banking sector's strength but then gains for the banks were relatively minor. 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: 40.43 change: -0.40

Stop Loss: 37.90
Target(s): 44.95, 49.00
Current Gain/Loss: + 0.4%
Time Frame: 12 to 14 weeks
New Positions: see below

Comments:
12/28 update: Uh-oh! The action today in CBD has produced a bearish engulfing candlestick (reversal) pattern. This could be just a fluke due to the market's low holiday volume. Plus, these patterns normally need to see confirmation. Still, 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: 45.83 change: -0.09

Stop Loss: 43.95
Target(s): 47.25, 49.75
Current Gain/Loss: + 1.6%
Time Frame: 8 to 10 weeks
New Positions: see below

Comments:
12/28 update: CHKP spiked to a new high over $46.00 only to reverse. 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: 37.36 change: -0.12

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:
12/28 update: DIS continues to slip but traders bought the dip at $37.07. I suggested that nimble traders could try and buy a dip near $37.00. Officially the newsletter is waiting for a breakout over $38.00. I am suggesting a trigger 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: 16.73 change: -0.14

Stop Loss: 16.29
Target(s): 18.40, 19.95
Current Gain/Loss: - 1.0%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
12/28 update: It was a quiet day for Ford with the stock trading in a 20-cent range. 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: 29.80 change: -0.03

Stop Loss: 27.40
Target(s): 30.90, 33.00
Current Option Gain/Loss: + 2.4%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
12/28 update: FLIR spent the session drifting sideways. There is no change from my previous comments. 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: 40.48 change: -0.14

Stop Loss: 38.75
Target(s): 43.50, 46.75
Current Option Gain/Loss: + 0.3%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
12/28 update: No change from my prior comments. 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: 27.66 change: +0.15

Stop Loss: 25.49
Target(s): 29.85, 31.85
Current Gain/Loss: + 2.6%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
12/28 update: Financials managed to extend their rally but gains were weak. MS outperformed with a +0.5% gain. Readers could launch positions now or wait for a dip toward $27.00 or the 200-dma. 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: 28.01 change: -0.06

Stop Loss: 25.95
Target(s): 27.45, 29.00
Current Gain/Loss: + 9.6%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
12/28 update: Upward momentum in MSFT appears to be fading. It's about time. We've been waiting for a correction. I would not launch new positions here.

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: 21.26 change: -0.16

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:
12/28 update: Shares of MYL failed at $21.50 again. 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


NII Holdings Inc. - NIHD - close: 44.00 change: -0.45

Stop Loss: 41.75
Target(s): 49.00, 53.50
Current Gain/Loss: - 1.1%
Time Frame: 8 to 10 weeks
New Positions: see below

Comments:
12/28 update: NIHD opened at $44.49 and then quickly faded toward the $44.00 level. Shares hovered near $44 all day long. The lack of follow through on yesterday's afternoon bounce is a little bit worrisome. Readers may want to wait for a move over $44.75 before initiating new positions.

My time frame is several weeks and we may end up exiting the January calls earlier than our stock position since January options expire in about four weeks. 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.

Current Position: Long NIHD stock @ $44.49

- or -

Long the 2011 January $45.00 calls (NIHD1122A45) Entry @ $1.15

- or -

Long the 2011 February $48.00 calls (NIHD1119B48) Entry @ $1.10

Entry on December 28 at $44.49
Earnings Date 02/24/11 (unconfirmed)
Average Daily Volume: 1.9 million
Listed on December 27th, 2010


Starbucks Corp. - SBUX - close: 32.39 change: -0.08

Stop Loss: 31.70
Target(s): 34.75
Current Gain/Loss: + 0.4%
Time Frame: 8 to 10 weeks
New Positions: see below

Comments:
12/28 update: SBUX dipped toward $32.00 before paring its losses. We can still open bullish positions at current levels. More conservative traders looking for strength could wait for a move over $32.75. 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

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: 17.55 change: +0.04

Stop Loss: 15.75
Target(s): 17.00, 17.90
Current Gain/Loss: +11.9%
Time Frame: 10 to 12 weeks
New Positions: no

Comments:
12/28 update: In the news today SLE announced that it will sell its cleaning products division (White King and the Janola unit) to Symex Holdings, an Australian company, for $50 million. Shares of SLE really didn't move much on the news. 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: 35.84 change: +0.23

Stop Loss: 34.40
Target(s): 37.75, 39.75
Current Gain/Loss: + 0.6%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
12/28 update: SNE gapped open higher at the open and eventually settled with a +0.6% gain. I would still consider new bullish positions at current levels.

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: 39.93 change: -0.40

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:
12/28 update: There is no change from my prior comments. We are waiting for a correction with a trigger to open positions at $38.50. If we don't see shares move soon we might drop it. Then again, if TRMB closes over $40.60, we could launch new positions with a tight stop loss at $39.49. Keep that in mind as an alternative strategy.

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: 41.61 change: -0.15

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:
12/28 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: 31.20 change: -0.01

Stop Loss: 28.90
Target(s): 29.25, 32.90
Current Gain/Loss: +16.0%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
12/28 update: The relative strength in the banking sectors today did not have much influence on shares of WFC. Shares of this bank slid sideways in a very narrow range. 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: 14.45 change: -0.05

Stop Loss: 13.75
Target(s): 14.95, 16.40
Current Gain/Loss: + 2.4%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
12/28 update: 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: 18.84 change: +0.13

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

Comments:
12/28 update: WY is another commodity-related name that managed to rally in spite of strength in the U.S. dollar. 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