Option Investor
Newsletter

Daily Newsletter, Thursday, 12/30/2010

Table of Contents

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

Market Wrap

One More Day in 2010

by Jim Brown

Click here to email Jim Brown
The markets weakened as the weak progressed and sellers appeared at the close. This is not a good sign for next week's markets.

Market Statistics

A sudden burst of great economic news failed to boost the markets with one day left to trade. Positively anemic volume at 3.8 billion shares failed to provide enough conviction to push the markets higher.

The weekly jobless claims came in under 400,000 for the first time since July 2008. Claims came in at 388,000 and a drop of 34,000 from the prior week. However, this is typically a volatile week since many people will wait until after the holidays to file a claim and begin looking for work.

Analysts expect claims to spike higher in January and continue over 400,000 for another month or more. California, Illinois and Georgia reported a decrease in claims of more than 1,000. New Jersey, Michigan and Missouri reported an increase of more than 1,000 new claims.

The December ISM Chicago soared to 68.6 from 62.5 in November. This was the fourth consecutive month of gains and the spike took the index to levels not seen since July 1988. The New Orders component spiked from 67.2 to 73.6 and levels not seen since 2005. Order backlogs exploded higher from 48.9 to 64.6. Production was the highest since Oct 2004 and employment the highest since 2005. This was a VERY bullish report.

The only real negative was a jump in the prices paid component to 78.2 from 70.7. This suggests inflation is slipping into the product chain. It would be hard not to expect the cost of commodities to push prices higher given their big gains in price this year.

The accelerating recovery in the Chicago area is directly related to the bullish trend in auto sales. Chrysler kept its plants open to produce Jeeps during the holidays rather than their normal shutdown because sales were so strong. The boom in the Chicago ISM bodes well for the national ISM in January but not to the extent we saw in today's report. We could see a 2-3 point increase in the national ISM.

Chicago PMI Chart

The pending home sales for November also posted an increase of 3.5% that was much better than expected. As employment continues to improve so will home sales but we still have the looming cloud of foreclosures coming in 2011.

With mortgage rates moving up almost daily that will also slow sales. However, there is a large amount of pent up buying that has not yet been felt. It will depend on the rising unemployment, rising equity market and rising consumer confidence. March will be a critical month for home sales. If the trends begins to accelerate it could signal an all clear for future buyers.

The Kansas City Manufacturing Survey is less important than the Richmond or Philly Fed or the Chicago ISM. The headline number for December was 21 and flat with November. New orders declined by a point to 24 and inventories rose +3 points to 5.

The bad news was again the rising prices. The prices paid for finished goods rose fro 3 to 18 and prices for raw materials spiked from 35 to 54. These are extremely bearish increases and suggest the deflation monster is dead but the inflation monster is waking from his slumber. The Fed still has no inflation fears so they can keep rates low but the warning signs are growing.

The EIA oil inventory report showed crude levels declines -1.3 million barrels but that was far less than the -3.2 million barrel decline analysts expected. Inventories had declined sharply for the last four weeks according to the API with a -15 million-barrel decline. Because there are accounting considerations for decreasing inventories before year-end most analysts expected a sharper decline in today's numbers. Gasoline levels declined -3.1 mb in the API report and -2.3 mb in the EIA report. This was not enough to rescue crude prices from a sharp drop. Crude declined from $91.50 yesterday to a low of $89 today. Year-end fund flows into commodities markets will probably increase the volatility over the next couple days.

Oil Chart

In stock news Anadarko Petroleum (APC) shares spiked +7% on rumors BHP Billiton (BHP) was preparing a bid. BHP failed in its acquisition attempt for Potash and they have been rumored to be looking for another oil company to increase their oil exploration division. BHP is a major player in offshore exploration and owns quite a few leases and wells in the Gulf of Mexico.

London's Daily Mail speculated BHP would offer up to $90 for APC, a 27% premium. Spokesmen for both APC and BHP declined to comment citing company policy against addressing rumors. There was a strong rumor back in September about a possible APC/BHP consolidation but nothing ever happened.

Anadarko owns 25% of the Macondo well that blew out killing 11 workers and billions in damages. APC has said it would not pay BP for the damages because it was gross negligence on BP's part. I can't imagine BHP taking a run at APC with that liability cloud over their head. BP's total including well recovery, cleanup and fines could run $40 billion and $10 billion of that would be attributable to APC. They might be able to settle for a lesser amount but it would take years of negotiating and Andarko's market cap is only $35 billion. Their cash on hand in the couple billion range and insurance was less than $1 billion. Until BP and the courts absolve APC from liability I don't see BHP paying a 27% premium.

APC Chart

Also in the energy sector the coal companies had a good day due to the positive manufacturing reports and the drop in jobless claims. This suggests economic activity is rising and the demand for coal for electricity and for steel production will continue to grow. Walter Energy (WLT) rose +3.5% and Patriot Coal (PCX) +5%. They are both big in metallurgical coal.

U.S. stock mutual funds had their first positive week for fund flows since April and they should post a positive gain for the month. The Investment Company Institute (ICI) said domestic funds took in $335 million for the week ended on 12/21. That is a drop in the bucket compared to the $100 billion in outflows since May 5 through Dec 15th. Foreign stock funds took in $3.6 billion last week.

Bond funds saw outflows of $4.37 billion as investors run from the bond bubble and move towards more risky investments for 2011. That was less than the $8.6 billion in outflows in the prior week as a result of Meredith Whitney's muni bond default warning.

The news out of Europe is very quiet but there are still some problems simmering in their debt markets. I believe the lack of news is related to the holidays and once into the New Year we should expect the worries over Spain to blossom into the next hurdle for the equity markets.

The S&P closed lower for only the fourth time in December and the month is setting up for the best December since the 1990s. However, we have seen selling at the close for the last three days. It was not a lot of selling and definitely not on heavy volume but it was still there.

Volume was very light at 3.8 billion and internals were negative but we really can't draw any conclusions over today's holiday trading. Market direction on Friday should be a coin toss.

I had a reader ask me what would happen if the market did not go down in January. Since about the middle of November the analyst community has switched to an almost unanimous expectation for the market to decline -7% to -10% in January. The expectations are now so widespread that it almost seems like the move we might see is a continued rally. When everyone moves to the same opinion the market tends to do the opposite.

Pullbacks are inevitable and they never come in the time frame investors expect. If we did get a decent continuation of the rally in January we might see a situation where bearish traders and traders waiting in cash for a dip might be forced to chase stocks higher. I know this would drive the bears crazy. They have been calling for a market top every day this week so a continued move higher would be very painful and could generate a dece4nt short squeeze.

I would not bet on market direction on Friday because shorts will be trying to establish positions for next week and fund managers will be trying to window dress into the close. All of this should be on the lowest volume day of the year.

The S&P closed at 1258, again. It seems like it has closed there every day for the last week. The markets have moved sideways with no material gains and a negative close on Friday would pretty much kill the hopes of a Santa Claus rally. In theory that predicts a bearish January. However, the Santa period also includes the first two days of January so suspicious traders can still hope.

S&P-500 Chart

The Dow, like the S&P, has gone flat. Volatility has died and the depth of the candles is almost invisible. We have stretched the string of less than triple digit days to 19 days. This spring is being compressed so tightly the odds of a triple digit explosion next week are nearly 100%.

Support remains 11,544 and resistance 11,600 but neither of those will matter next week. The numbers we will be talking about next Friday will be materially different.

Dow Chart

The Nasdaq has had a solid top at 2670 for the last week and support is 2660. Who would have thought we would be talking about a 10-point range for an entire week? Monday's gap down was immediately bought and pushed right back into the range.

The Nasdaq big caps are not performing well. Most of the charts are looking heavy and I fear we will see some selling in stocks like Apple, Google, Priceline and Netflix next week. The bulls may be waiting for the dip but hopefully they don't buy the first negative day.

Nasdaq Chart

There was no change on the Russell. This formation is very unsupported and odds are good we are going to retest support at 765. The Russell has been trading in a very narrow range for the last two weeks with no deviation at all.

Russell Chart

It is really tough writing about the markets for more than two weeks with almost no movement. How many ways can you say low volatility, managers holding positions for year-end and watch for big changes in January? It is boring for me and I am sure it is boring for readers.

Fortunately it will be January soon and there will be plenty to write about. Volatility will increase and the markets should go directional pretty quickly. It may not be the direction your hoping for but at least there will be opportunities to trade and make some money.

I still believe there will be a buying opportunity in January but I have to admit the concept of skipping a meaningful dip and just continuing higher intrigues me. It is always possible and in the 13 years I have been writing it has happened more than once. Everyone continued to predict a disaster but the market was not listening. Whichever option we are presented in January I look forward to the change.

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New Plays

Semiconductors

by James Brown

Click here to email James Brown


NEW BULLISH Plays

NVIDIA Corp - NVDA - close: 14.99 change: +0.05

Stop Loss: 14.45
Target(s): 16.75, 17.90
Current Gain/Loss: unopened
Time Frame: 10 to 12 weeks
New Positions: Yes, see trigger

Company Description

Why We Like It:
The semiconductor stocks continue to trade inside their bullish channel. NVDA has been a pretty good performer in this group. Over the last three weeks NVDA has been consolidating sideways with a neutral pattern of higher lows and lower highs. While that pattern is normally neutral the prevailing trend, which is up, should win out. I am suggesting a trigger to launch bullish positions at $15.15. This is a little bit aggressive since the SOX semiconductor index looks overbought. We want to keep our position size small. If triggered at $15.15 we want to take profits at $16.75 and at $17.90. Our time frame is two or three months. We'll try and limit our risk with a relatively tight stop loss.

Trigger @ $15.15 (small positions)

Suggested Position: Buy NVDA stock @ $15.15

- or -

Buy the 2011 February $15.00 calls (NVDA1119B15)

- or -

Buy the 2011 March $15.00 calls (NVDA1119C15)

Daily NVDA chart:

Hourly NVDA chart:

Entry on December xx at $xx.xx
Earnings Date 02/17/11 (unconfirmed)
Average Daily Volume: 13.2 million
Listed on December 30th, 2010


In Play Updates and Reviews

Waiting for the End

by James Brown

Click here to email James Brown

Editor's Note:
Investors seem to be waiting for the end of 2010 and the beginning of 2011 before making any moves in the stock market. The market continues to drift sideways. There is almost no change from my Wednesday play updates.

-James

Current Portfolio:


BULLISH Play Updates

Alcoa Inc - AA - close: 15.21 change: +0.08

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:
12/30 update: AA is developing a short-term trend of lower highs. This might suggest a deeper correction soon. I'd like to see a dip back toward $14.50. 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: 46.43 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:
12/30 update: Traders bought the dip this morning but ADP is still struggling. 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: 57.49 change: +0.06

Stop Loss: 54.90
Target(s): 59.75, 64.00, (option exit 61.75)
Current Gain/Loss: + 4.7%
Time Frame: 8 to 9 weeks
New Positions: see below

Comments:
12/30 update: It was a very quiet day for ALK. I'm surprised the XAL airline index did not perform better given the decline in oil prices on Thursday. I remain cautious on ALK 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: 3.10 change: +0.03

Stop Loss: 2.75
Target(s): 3.40, 3.95
Current Gain/Loss: + 3.3%
Time Frame: 12 to 16 weeks
New Positions: see below

Comments:
12/30 update: BPOP is still drifting higher and outperformed the banking sector indices today. 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: 4.76 change: -0.01

Stop Loss: 4.49
Target(s): 5.00, 5.35
Current Gain/Loss: + 0.6%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
12/30 update: Citigroup spent the session moving sideways. There is no change from my prior comments. 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: 42.26 change: +0.35

Stop Loss: 39.25
Target(s): 44.95, 49.00
Current Gain/Loss: + 4.9%
Time Frame: 12 to 14 weeks
New Positions: see below

Comments:
12/30 update: The rally in CBD continued and the stock is now testing resistance near the $42.50 area. I am not suggesting new positions at this time but we could see a new entry point soon. 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

12/29 new stop loss @ 39.25
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: 46.02 change: +0.23

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:
12/30 update: I couldn't find any news behind the early morning spike higher on CHKP today. It's not like CHKP has a lot of short interest. The rally ran out of steam just over $47.00 and did not hit our first target. If CHKP closes under $45.50 soon the move is going to look like a bearish reversal. I am not suggesting new positions at this time.

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: -0.12

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:
12/30 update: There is no change on my prior comments for DIS. 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: 16.69 change: -0.05

Stop Loss: 16.29
Target(s): 18.40, 19.95
Current Gain/Loss: - 1.2%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
12/30 update: I am a little bit concerned that if Ford breaks down under the $16.60 level it could be headed for the $16.00 mark, which would close out our play since the stop is at $16.29. I am growing a little bit more hesitant to launch new positions. You could wait for a move over the $17.00 level before initiating positions.

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: 29.97 change: +0.13

Stop Loss: 27.40
Target(s): 30.90, 33.00
Current Option Gain/Loss: + 2.9%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
12/30 update: FLIR is inching higher and higher as if it wants to breakout over the $30.00 mark. I would wait for a dip near $29.00 or $28.50 before considering new bullish positions. 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: 40.83 change: +0.32

Stop Loss: 38.75
Target(s): 43.50, 46.75
Current Option Gain/Loss: + 1.2%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
12/30 update: JBHT was showing some relative strength today. The stock added 0.78%. This bounce could be used as a new bullish entry point.

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: 27.33 change: +0.05

Stop Loss: 25.49
Target(s): 29.85, 31.85
Current Gain/Loss: + 1.4%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
12/30 update: MS saw its earnings estimates downgraded today but the news did not have much affect on the stock price. I would still wait for a dip near the simple 200-dma before launching new positions. 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: 27.85 change: -0.12

Stop Loss: 25.95
Target(s): 27.45, 29.00
Current Gain/Loss: + 9.0%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
12/30 update: We have been expecting MSFST to correct. Shares have been fading lower four days in a row. I am expecting a dip toward $27.00, maybe lower. 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: 21.17 change: -0.03

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:
12/30 update: There is no change from my prior comments on MYL. MYL is still consolidating in the $21.00-21.50 zone. I am moving our trigger to open positions down to $20.50. More conservative traders could wait for a dip closer to $20.00 or the rising 50-dma.

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 @ $20.50

Suggested Position: Buy MYL stock @ $20.50

- 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: 44.33 change: +0.07

Stop Loss: 41.75
Target(s): 49.00, 53.50
Current Gain/Loss: - 0.3%
Time Frame: 8 to 10 weeks
New Positions: see below

Comments:
12/30 update: NIHD tried to rally but just didn't have enough gas to get past the $45.00 level or its 10-dma. We may want to postpone launching new positions until we see NIHD over $45.00. Or you could wait for another dip near the $42.50 area.

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: 32.41 change: -0.10

Stop Loss: 31.70
Target(s): 34.75
Current Gain/Loss: + 0.5%
Time Frame: 8 to 10 weeks
New Positions: see below

Comments:
12/30 update: There is no change from my prior comments on SBUX. Shares continue to churn sideways. More conservative traders might be tempted to raise their stops a little bit closer to $32.00. I would prefer to see a move over $32.75 or even $33.25 before initiating new positions. 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: 17.52 change: +0.03

Stop Loss: 15.95
Target(s): 17.00, 17.90
Current Gain/Loss: +11.7%
Time Frame: 10 to 12 weeks
New Positions: no

Comments:
12/30 update: There is no change from my prior comments on SLE. The stock continues to hover near $17.50. 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

12/29/10 new stop loss @ 15.95
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: 35.57 change: -0.30

Stop Loss: 34.40
Target(s): 37.75, 39.75
Current Gain/Loss: - 0.8%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
12/30 update: SNE pulled back toward the $35.50 area again. We can use this dip as another entry point. Patient traders may want to wait as we might get a lower entry point near $35.00 soon.

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: 40.21 change: +0.05

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:
12/30 update: There is no change from my prior comments on TRMB. Our plan is to open bullish positions on a dip at $38.50. However, we might want to reconsider and buy a breakout over $40.60 with a stop at $39.49 as an alternative.

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: 41.71 change: -0.53

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:
12/30 update: The early morning strength in TX quickly faded. There is no change from my prior comments. 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: 30.82 change: -0.20

Stop Loss: 28.90
Target(s): 29.25, 32.90
Current Gain/Loss: +14.6%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
12/30 update: The upward momentum is fading a little bit. We might see WFC retest the $30.00 level. 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: 14.29 change: -0.06

Stop Loss: 13.90
Target(s): 14.95, 16.40
Current Gain/Loss: + 1.7%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
12/30 update: WWE provided us a new entry point on Thursday. Last night I suggested readers wait for a dip into the $14.15-14.00 zone before launching positions. WWE dipped to $14.15 and rebounded midday. I would still consider new positions here at current levels. We will move our stop loss higher to $13.90.

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.

12/30/10 new stop loss @ 13.90
12/30/10 WWE provides another entry point at $14.15

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: 18.95 change: -0.05

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

Comments:
12/30 update: There is no change from my prior comments on WY. 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