Option Investor
Newsletter

Daily Newsletter, Monday, 1/3/2011

Table of Contents

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

Market Wrap

Happy 2011, Mr. Market

by Todd Shriber

Click here to email Todd Shriber
Sure stocks were looking a tad rich heading into the new year. A 6.5% jump for the S&P 500 during December certainly underscores that fact, but all those experts and pundits that were calling for a January swoon are going to have wait another day for it start because most stocks had no intention of doing anything today but moving higher. By the end of the day, the Dow had retreated a fair bit from its session highs, but a gain of 0.8% is still a fine way to start the new year. The S&P 500 added 1.1% and the Nasdaq surged almost 1.5%. Once again, the Russell 2000 was the juggernaut of the U.S. indexes, adding almost 2% on the day.

Stats Table

It seems like only a few months ago that equities were held hostage to every economic data point, but it appears that trend is reversing and today would be a fine example as stocks got a boost from some positive manufacturing data. The Institute for Supply Management's manufacturing index popped to 57 in December from 56.6 in November. While that missed the estimate of 57.2, a reading above 50 is still bullish and the number matched the median forecast of 63 economists surveyed by Bloomberg News.

''The manufacturing sector continued its growth trend as indicated by this month’s report. We saw significant recovery for much of the U.S. manufacturing sector in 2010. The recovery centered on strength in autos, metals, food, machinery, computers and electronics, while those industries tied primarily to housing continue to struggle,'' ISM's Norbert Ore said.

Cullen Roche over at Pragmatic Capitalism notes that a deeper examination of today's report shows the data was actually quite strong and notes that current ISM levels are consistent with real GDP growth of just under 4%.

ISM Chart

While the ISM report was cautious to say the least on housing, a report from the Commerce Department today showed construction spending rose in November for a third straight month. The 0.4% increase exceeded the median forecast of economists surveyed by Bloomberg News and followed a 0.7% gain the previous month, Bloomberg reported.

In stock-specific news, I will start out with bad news so I can today's wrap on a positive note. Indeed, there was some bad news for select names, but the broader market was able to work past these glum headlines. Offender Number One is Clorox (CLX). The consumer products giant that makes its namesake bleach, Pine Sol and Hidden Valley Ranch salad dressing did not get off to bang in 2011.

Rather, it was a whimper after the California-based company cut the top end of its sales forecast and said sales will grow by 1% at best or perhaps show no change at all for the fiscal year ending June 30. Sales probably fell 3%-4% last quarter as the top line was pressured by more spending on promotions and Venezuela's currency devaluation. For that quarter, Clorox probably earned 57 cents to 63 cents a share, excluding a charge, but analysts polled by Bloomberg were expecting 73 cents a share.

On a day when the Consumer Staples Select Sector SPDR (XLP) notched a small gain, Clorox tumbled $1.71, or 2.7%, to $61.57 on volume that was six times the daily average.

Clorox Chart

Over on the Nasdaq, online travel reservations firm Expedia (EXPE) lost 30 cents, or 1.2%, to close at $24.79, which is not that bad of a day all things considered. Over the weekend, Expedia announced that it is removing American Airlines (AMR) fares and schedules from its site, calling the carrier's pricing proposals ''anti-consumer.''

To say the rift between airlines and companies like Expedia is growing is an understatement. Last month, American pulled its fares from Expedia rival Orbitz (OWW) and perhaps in a sign of solidarity, Expedia proceeded to move American's fares lower in its search. Sales of American tickets account for just 2% of Expedia's revenue, but not offering access to one of the largest airlines in the world could be bad news for Expedia going forward.

Making matters worse, Soleil Securities downgraded Expedia to ''hold'' and cut its price target on the stock to $28 from $35, citing competition concerns posed to Expedia's TripAdvisor from Google's (GOOG) Place. The icing on the cake is American telling customers to head to other travel sites, namely Priceline (PCLN), over Expedia.

Expedia Chart

If it is price target changes that you are after, here is a whopper and it pertains to one of the market's highest fliers: Molycorp (MCP). One of the few U.S.-based companies that is actually trying to mine for rare earths in this country surged 15.2% today after Dahlman Rose reiterated its ''buy'' rating on the stock and raised its price target to $85 from $49, citing China's reduced rare earths export quotas and Molycorp's ability to create value through joint ventures.

Molycorp is no joke, at least the stock is not. The shares have surged 16% in the past week and more than doubled in the past month, so it may seem that the run is tired. On the other hand, if the Dahlman Rose price target proves accurate, today's close of $57.50 will end up looking like a steal.

Molycorp Chart

Speaking of materials names, one that is considerably less sexy than Molycorp enjoyed a fine day as well and that is Dow component Alcoa (AA). The aluminum giant gained 41 cents, or almost 2.7%, on volume that was roughly 75% better than the daily average to close at $15.80. Alcoa's jump was good for the third-best performance among the 30 Dow constituents.

Deutsche Bank upgraded the stock to ''buy'' from ''hold'' and boosted its price target on Alcoa to $22 from $14, implying substantial upside from where the stock closed today. ''Alcoa's laggard status has piqued investor interest in the name as a possible come-back play for 2011 and given signs of operational stability, we don't disagree,'' Deutsche said in a client note.

Remember that there has been significant scuttlebutt that an ETF or two backed physical aluminum could be introduced this year and that would likely prop up aluminum prices, making Alcoa an indirect beneficiary of the new aluminum ETF.

Alcoa Chart

Looking at the charts, the run of 20 straight days with the Dow not trading in a 100-point range was snapped today as the index's range was about 135 points from bottom to top. Even with all that commotion, the high of the day was 11,711, so a legitimate run to resistance at 11,750 was not made today. The good news for the Dow on Monday was strength in the financials. Bank of America (BAC) led the charge with a ''who cares about WikiLeaks'' gain of 6.4% and JPMorgan Chase chipped in with a gain of 2.7%. Dow bulls should be pleased to see two of 2010's worst performers, AA and BAC, start 2011 off in a big way. More on another Dow 2010 laggard, Microsoft, in a minute.

Dow Chart

The S&P 500's solid day was enough to carry the index past resistance at 1260 and the close just below 1272 means 1280 could be dealt with in the coming days. Support is still 1225-1230. The year-end higher forecasts have already started to trickle in as Citigroup raised its 2011 target for the S&P 500 to 1400 from 1300 today.

S&P 500 Chart

To end 2010, the Nasdaq was showing some signs of a looming breakdown, but that will have to wait for another day as the index did what it could to move above 2700 today, falling just short at the close. That said, 2700 is more round number resistance than anything else and real resistance in the 2825-2850 area is still a long way off while support still looks firm at 2600.

Nasdaq Chart

The Russell 2000 continued its torrid pace today and now rests just below 800 and that is after a 25% gain in 2010, almost double what the S&P 500 delivered. Profits are surging at smaller companies compared to their large-cap counterparts. The average company in the Russell 2000 posted a 165% gain in income last year, the most since 2003, as S&P 500 profits rose 29%, according to data compiled by Bloomberg and analysts are forecasting an 80% rise in the profits of Russell 2000 constituents this year. If that proves accurate, 850 on the Russell 2000 may not last for long.

Russel 2000 Chart

I am not bold enough to say that all of 2011 will be a picnic for the bulls and I am not convinced that the market will not retreat a bit somewhat during the first quarter, but overall, it is hard to not be constructive on stocks for the year. Using history as a guide going back to 1928, the third year of a presidential term sees the S&P 500 add just over 14% on average and that number climbs over 17% when a Democrat is in the White House. Go back seven decades and the average gain for the Dow is 24% in a president's third year.

An unrelated fun fact is Goldman Sachs and a Russian investor have poured a combined $500 million into Facebook on top of previous investments, valuing the social networking site at $50 billion. That would be a larger market cap than three Dow stocks: Alcoa, DuPont (DD) and Travelers (TRV). That also makes Dow component Microsoft look pretty darn smart for investing in Facebook way back in 2007.

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New Plays

Construction Machinery

by James Brown

Click here to email James Brown


NEW BULLISH Plays

Manitowoc Co. Inc. - MTW - close: 13.49 change: +0.38

Stop Loss: 11.95
Target(s): 14.95, 16.25
Current Gain/Loss: +0.0%
Time Frame: 10 to 12 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
Investors have been bidding up construction-related stocks on expectations for a strong 2011. MTW actually has a couple of different businesses but one of them is construction cranes. The rally on Monday pushed MTW to short-term resistance at $13.50. You could wait for a breakout over $13.50 or you could wait for a dip back toward the $13.25-13.00 zone. I am suggesting new bullish positions now but we want to keep our position size small to limit our risk. We're starting this play with a wide (aggressive) stop loss at $11.95. More conservative traders may want to use a stop closer to 412.50 or even Friday's low near 12.70. Our targets are $14.95 and $16.25. FYI: The Point & Figure chart for MTW is bullish with a long-term $21 price target.

Suggested Position: Buy MTW stock @ current levels.

- or

Buy the 2011 February $14.00 calls (MTW1119B14) current ask $0.65

Annotated chart:

Entry on January xx at $xx.xx
Earnings Date 02/02/11 (unconfirmed)
Average Daily Volume: 2.0 million
Listed on January 3rd, 2010


In Play Updates and Reviews

AA Scores!

by James Brown

Click here to email James Brown

Editor's Note:
AA hit our final target on today's gain. Several stocks saw breakouts higher. CHKP also hit one of our targets today. We're taking profits early and closing our SLE play. I've updated our stop loss on MS and changed our entry point strategy on TRMB. We've also dropped WY as a candidate.

-James

Current Portfolio:


BULLISH Play Updates

Automatic Data Processing - ADP - close: 47.05 change: +0.77

Stop Loss: 45.45
Target(s): 49.75, 52.50
Current Gain/Loss: + 0.6%
Time Frame: 10 to 12 weeks
New Positions: Yes, see below

Comments:
01/03 update: Over the weekend I suggested buying ADP on the dip. Unfortunately the stock gapped open higher at $46.75 this morning (our new entry point). Shares spiked above resistance near $47.00 before paring its gains. I would still consider new positions here but you will want to keep your position size small to limit your risk.
FYI: The Point & Figure chart for ADP is forecasting a bullish price target of $66.00.

Current Position: Long ADP stock @ $46.75

- or -

Long the 2011 February $45.00 call (ADP1119B45) Entry @ $2.00

01/03: Entry @ $46.75
01/01: New stop loss @ 45.45
01/01: New entry point @ current levels, new option strike (Feb. $45)

Entry on January 3 at $46.75
Earnings Date 01/26/11 (unconfirmed)
Average Daily Volume: 2.8 million
Listed on December 16th, 2010


Alaska Air Group - ALK - close: 57.88 change: +1.19

Stop Loss: 54.90
Target(s): 59.75, 64.00, (option exit 61.75)
Current Gain/Loss: + 5.4%
Time Frame: 8 to 9 weeks
New Positions: see below

Comments:
01/03 update: Airlines were strong performers on Monday. ALK gained +2%. Yet I remain somewhat cautious on ALK and the group. I am not suggesting new bullish trades.

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: 3.20 change: +0.06

Stop Loss: 2.75
Target(s): 3.40, 3.95
Current Gain/Loss: + 6.6%
Time Frame: 12 to 16 weeks
New Positions: see below

Comments:
01/03 update: Banking stocks were big performers on Monday. BPOP gained +1.9% and closed at new multi-month highs. I'm not suggesting new positions at current levels. Conservative traders may want to raise their stop closer to the 50-dma (currently near $2.90).

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: 4.90 change: +0.17

Stop Loss: 4.49
Target(s): 5.00, 5.35
Current Gain/Loss: + 3.5%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/03 update: Citigroup was showing lots of relative strength on Monday. The stock broke out to new multi-month highs and closed with a +3.5% gain. Our first target to take profits is at $5.00. 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: 43.40 change: +1.42

Stop Loss: 39.80
Target(s): 44.95, 49.00
Current Gain/Loss: + 7.8%
Time Frame: 12 to 14 weeks
New Positions: see below

Comments:
01/03 update: CBD has broken out to new all-time highs over recent resistance. Over the weekend I suggested readers could buy a breakout over $42.50. You might want to wait for a dip back toward $42.50 before considering 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

01/01 new stop loss @ 39.80
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: 46.89 change: +0.63

Stop Loss: 43.95
Target(s): 47.25, 49.75
Current Gain/Loss: + 3.9%
Time Frame: 8 to 10 weeks
New Positions: see below

Comments:
01/03 update: Target achieved. CHKP is having a hard time keeping its gains. The stock spiked to $47.94 and then retreated back under the $46 level. Our first target was hit at $47.25. The option was trading at $3.75 (+47%) and hit a high over $4. We still have a longer-term target at $49.75. 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

01/03: 1st Target Hit @ $47.25 (+4.7%) Option @ $3.75 (+47%)

chart:

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: 37.82 change: +0.31

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:
01/03 update: DIS rallied toward resistance near $38.00 and failed. I'm suggesting we wait for a breakout over $38.00 and use a trigger at $38.25 to open positions. 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: 17.25 change: +0.46

Stop Loss: 16.29
Target(s): 18.40, 19.95
Current Gain/Loss: + 2.0%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/03 update: Ford delivered a strong move with a +2.7% gain but the stock has not yet broken out past its November 2010 highs (near $17.42). If you were waiting for a move over $17.00 as your entry point you got it today.

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: 29.65 change: -0.10

Stop Loss: 27.40
Target(s): 30.90, 33.00
Current Option Gain/Loss: + 1.9%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/03 update: Shares of FLIR were downgraded this morning and the stock dipped to $29.00 before paring its losses. I have been suggesting readers wait for a dip near $29.00 or $28.50 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: 41.64 change: +0.83

Stop Loss: 38.75
Target(s): 43.50, 46.75
Current Option Gain/Loss: + 3.2%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/03 update: Just as we expected the transports broke out higher and JBHT rallied to new highs. If you're looking for a new entry point wait for a dip near the $41-40 zone.

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: 28.23 change: +1.02

Stop Loss: 25.49
Target(s): 29.85, 31.85
Current Gain/Loss: + 4.7%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
01/03 update: Financial stocks were showing relative strength today. MS outperformed many of its peers with a +3.7% gain. I am raising our stop loss to $25.95. I'm not suggesting new positions at this time. 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

01/03: New stop loss @ 25.95

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: 27.98 change: +0.07

Stop Loss: 25.95
Target(s): 27.45, 29.00
Current Gain/Loss: + 9.5%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/03 update: MSFT did not really participate in the market's rally on Monday. Shares did post a gain but the stock underperformed the major indices. I want to caution readers that MSFT is still very overbought from its December rally. I am not suggesting new positions at this time. I'd prefer to see a dip near the rising 50-dma.

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: 21.66 change: +0.53

Stop Loss: 19.99
Target(s): 22.90
Current Gain/Loss: unopened
Time Frame: 12 to 14 weeks
New Positions: Yes, see trigger

Comments:
01/03 update: MYL rallied to a new seven-month high with Monday's +2.5% gain. Aggressive traders may want to buy this breakout. I am raising our trigger to buy the dip from $20.50 to $21.25. We'll move our stop loss to $19.99. More conservative traders could move it closer to $20.50.

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 @ $21.25

Suggested Position: Buy MYL stock @ $21.25

- 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: 43.48 change: -1.18

Stop Loss: 41.75
Target(s): 49.00, 53.50
Current Gain/Loss: - 2.2%
Time Frame: 8 to 10 weeks
New Positions: see below

Comments:
01/03 update: Warning! The action in NIHD today is very bearish. The stock has produced a failed rally and bearish reversal pattern. More conservative traders will want to seriously consider an early exit right here. I am not suggesting new bullish positions at this time. If NIHD underperforms again tomorrow we might close this trade early.

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


NVIDIA Corp - NVDA - close: 15.82 change: +0.42

Stop Loss: 14.45
Target(s): 16.75, 17.90
Current Gain/Loss: + 4.4%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/03 update: NVDA delivered another strong performance with a +2.7% gain on Monday. I would not chase it here. If you're looking for a new position wait for a dip near $15.25. Our time frame is two or three months. We'll try and limit our risk with a relatively tight stop loss.

(small positions)

Current Position: Long NVDA stock @ $15.15

- or -

Long the 2011 February $15.00 calls (NVDA1119B15) Entry @ $1.05

- or -

Long the 2011 March $15.00 calls (NVDA1119C15) Entry @ $1.25

Entry on December 31 at $15.15
Earnings Date 02/17/11 (unconfirmed)
Average Daily Volume: 13.2 million
Listed on December 30th, 2010


ResMed Inc. - RMD - close: 35.02 change: +0.38

Stop Loss: 32.40
Target(s): 38.00
Current Gain/Loss: unopened
Time Frame: 8 to 10 weeks
New Positions: Yes, see trigger

Comments:
01/03 update: RMD bounced with the market's widespread gains but shares still look poised for a pull back toward support near $34.00. I am suggesting a trigger to launch bullish positions at $34.00 with a stop loss at $32.40. If triggered our multi-week target is $38.00.

Trigger to buy-the-dip @ $34.00

Suggested Position: Buy RMD stock @ $34.00

- or -

Buy the 2011 April $35.00 calls (RMD1116D35) current ask $2.05

Entry on January xx at $xx.xx
Earnings Date 02/03/11 (unconfirmed)
Average Daily Volume: 752 thousand
Listed on January 1st, 2010


Starbucks Corp. - SBUX - close: 33.25 change: +1.12

Stop Loss: 31.70
Target(s): 35.75
Current Gain/Loss: + 3.1%
Time Frame: 8 to 10 weeks
New Positions: see below

Comments:
01/03 update: SBUX added +3.4% and closed at new three-year highs. This move over resistance near $33.00 could be used as a new bullish entry point. The plan was to keep our position size very small to limit our risk as SBUX remains overbought. Please note that I am raising our exit target to $35.75.

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

01/03/11 New target at $35.75
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


Sony Corp. - SNE - close: 36.38 change: +0.67

Stop Loss: 34.75
Target(s): 37.75, 39.75
Current Gain/Loss: + 2.1%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/03 update: SNE rallied +1.8% to close over recent resistance near $36.00. If you were waiting for a move over $36.00 to buy SNE you got it today.

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

01/01 New stop loss @ 34.75
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


Seagate Technology - STX - close: 14.97 change: -0.06

Stop Loss: 14.70
Target(s): 16.95, 17.75
Current Gain/Loss: unopened
Time Frame: 10 to 12 weeks
New Positions: Yes, see trigger

Comments:
01/03 update: The action in STX was disappointing today. Shares rallied to $15.33 and failed. We are waiting for a breakout past resistance. I am suggesting a breakout trigger at $15.45. Our targets are $16.95 and $17.75. I anticipate this trade taking several weeks. However, STX is due to report earnings in about three weeks. Normally we do not want to hold over earnings. Conservative traders will want to exit ahead of the announcement.
FYI: The Point & Figure chart for STX is bullish with a long-term $28.50 target.

Trigger at $15.45

Suggested Position: Buy STX stock @ $15.45

- or -

Buy the 2011 February $15 calls (STX1119B15) current ask $0.91

Entry on January xx at $xx.xx
Earnings Date 01/20/11 (unconfirmed)
Average Daily Volume: 7.1 million
Listed on January 1st, 2010


Trimble Navigation - TRMB - close: 40.64 change: +0.71

Stop Loss: 39.40
Target(s): 42.75, 44.75
Current Option Gain/Loss: + 0.0%
Time Frame: 8 to 10 weeks
New Positions: Yes, see below

Comments:
01/03 update: Attention! We are changing our entry point strategy on TRMB. I've been talking about potentially buying a breakout higher. TRMB did indeed breakout higher from its recent sideways consolidation. I'm suggesting we open bullish positions now. We want to keep our position size small to limit our risk! We'll move our stop loss to $39.40. Our targets are now $42.75 and $44.75.

Open positions now. (Small Positions Only)

Suggested Position: Buy TRMB stock @ current levels

- or -

Buy the 2011 February $40.00 calls (TRMB1119B40) current ask $2.30

chart:

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


Wells Fargo & Co - WFC - close: 31.58 change: +0.59

Stop Loss: 28.90
Target(s): 29.25, 32.90
Current Gain/Loss: +17.4%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/03 update: Strength in the banking stocks pushed WFC toward its late December highs and a +1.9% gain. 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: 14.36 change: +0.12

Stop Loss: 13.90
Target(s): 14.95, 16.40
Current Gain/Loss: + 1.8%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/03 update: WWE managed a +0.8% gain but that was weak compared to the major stock market indices. I remain bullish on the stock but would only consider small positions to limit your risk.

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


CLOSED BULLISH PLAYS

Alcoa Inc - AA - close: 15.80 change: +0.41

Stop Loss: 14.25
Target(s): 14.95, 15.95
Current Gain/Loss: +21.0%
Time Frame: 8 to 10 weeks
New Positions: see below

Comments:
01/03 update: Target achieved. AA gapped open higher this morning at $15.82 and spiked to $16.20 on some positive analyst comments this morning. Our target was hit at $15.95 closing this play. I'd keep AA on your watch list as a potential buy-the-dip candidate for late January. Keep an eye on the 40 or 50-dma as support.

Closed Position: Long AA stock @ 13.18. Exit @ $15.95 (+21%)

01/03: Final target hit @ $15.95 (+21%)
12/25: new stop loss @ 14.25
12/21: 1st Target Hit @ 14.95 (+13.4%)

chart:

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


Sara Lee Corp - SLE - close: 17.48 change: -0.03

Stop Loss: 15.95
Target(s): 17.00, 17.90
Current Gain/Loss: +11.4%
Time Frame: 10 to 12 weeks
New Positions: no

Comments:
01/03 update: SLE is still not moving, which is rather disappointing given the market's strength. I am giving up on SLE. More aggressive traders could hold on but I'm not sure what your upside is.

Closed Position: Long SLE stock @ $15.68, exit @ $17.48 (+11.4%)

- or -

Long the 2011 April $15.00 calls (SLE1116D15) Entry @ $1.35, exit $2.55 (+88%)

01/03/11 Exit early @ 17.48 (+11.4%), option @ $2.55 (+88%)
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%)

chart:

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


Weyerhaeuser Co. - WY - close: 19.76 change: +0.83

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

Comments:
01/03 update: I am giving up on WY. We missed the entry point. The stock never pulled back after its Christmas week consolidation sideways. Now the stock is nearing potential resistance at $20.00 (and our target). I am removing WY as a bullish candidate. Our play never opened.

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