Option Investor
Newsletter

Daily Newsletter, Monday, 1/10/2011

Table of Contents

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

Market Wrap

Rally Falls Short Again

by Todd Shriber

Click here to email Todd Shriber
It may not be a pattern yet, but it is starting to look like one as stocks once again started the day off in ugly fashion only to tantalize traders with a the prospect of higher close, but the rally ran out of steam again, sending the Dow Jones Industrial to its third consecutive loss. The damage was not all that bad for the Dow, but the S&P 500 also closed while the Nasdaq managed to settle barely higher for the day. On a percentage basis, the Russell 2000 was easily the best performer among the the U.S. indexes.

Stats Table

One of the favorite outlets for blame for the market's recent down days has been a stronger dollar, though I use that term loosely. Believe it or not, the U.S. Dollar Index was home to some profit taking today and this should have been a day where the dollar bulls partied hard. After all, one of the primary reasons stocks traded lower today was because of those pesky lingering concerns about Europe's sovereign debt woes.

Yes, it is 2011 and we still have to hear about this issue, but that is the problem with contagions: They do not end quickly. There was some speculation floating about this morning that Portugal would have to seek a bailout and there were rumors reported by various European press agencies that the EU puppet masters in Berlin and Paris were pushing Portugal to accept outside aide.

As the New York Times reports, Portugal is raising taxes and cutting government employees’ wages as it tries to persuade investors that it can reduce its budget deficit, but the country is looking to sell about $26 billion in bonds this year and it is safe to say every one of those auctions will be heavily scrutinized. Neighbor Spain is planning a $3.9 billion bond auction for Wednesday, but that amount is lower than previously estimated, perhaps because appetite is weak for Portuguese and Spanish debt. The Dollar Index did not respond today, but I would keep an eye on it for the rest of the week.

Dollar Index Chart

There might be some silver lining in Europe's dark clouds and it comes from Italy. Yes, Italy. Bloomberg ran an interesting piece today quoting one money manager as saying Italian bonds have been ''unfairly punished.'' Remember, this is the same Italy that has the EU's second-worst debt burden and the yield on Italian 10-year bonds has jumped 1% in the past month, but Italy's household debt situation is vastly superior to that of Portugal or Spain, Bloomberg reported.

Give Italy this much credit: The country did not need to engage in bank bailouts during the financial crisis, something plenty of other nations wish they could say. Comparatively speaking, the growth outlook for Italy is not all that bad and it seems unlikely that the country will need a bailout. The iShares MSCI Italy Index Fund (EWI) took a small haircut today, but the volume was weak and a move above $16.50 could make this a compelling short-term trade.

Italy ETF

Back here in the states, it is understandable to see why the bulls would be frustrated with the market's lethargic ways today. This was a perfect ''Merger Monday'' with $20 billion in deals announced before the bell. Dow component DuPont (DD), one of the better performers in the index last year, announced it will acquire Denmark-based Danisco for $5.8 billion, valuing the maker of enzymes for biofuels and foods at 25% above where it closed last Friday.

Danisco is one of the largest biofuels companies in the world and the company already works with DuPont on an array of partnerships and projects, so DuPont certainly knows what it is buying here. The Danish firm was reportedly coveted by several suitors and after recently lifting a cap on shareholder voting rights, DuPont moved in for the kill, Bloomberg reported.

Danisco is the world’s largest food- ingredients maker, producing sweeteners and cultures used in ice cream and cheese and the two companies operate an ethanol joint venture, according to Bloomberg. DuPont shares lost almost 1.5% on the news, but in a testament to how strong the stock has been recently, Monday's performance is the stock's worst in a month.

DuPont Chart

It is rarely a surprise to see the shares of the company doing the buying decline, as they did in DuPont's case, but it is not typical to see the shares of the acquired firm fall, but that is exactly what happened with Progress Energy (PGN) after Duke Energy (DUK) said it will buy its rival for $13.7 billion in stock, creating the largest U.S. utility.

The combined company will serve 7.1 million electric customers with a mix of coal, natural gas, oil and renewable resources in South Carolina, North Carolina, Florida, Indiana, Kentucky and Ohio, according to the Wall Street Journal. The expected per share earnings growth for the combined company is 4%-6% per year (remember, these are utilities, not tech companies). North Carolina-based Duke's offer values Progress at $46, but apparently that was not a rich enough premium to get investors excited because Progress shares lost 1.6% to close at $43.99.

Duke, which is also inheriting $12.2 billion in Progress debt, will gain a foothold in Florida and said the deal will add to earnings next year. The two companies did not comment on cost savings, but combing their Carolinas operations could deliver savings of $600 million to $800 million, the Journal reported. The transaction is slated to close at the end of 2011.

Progress Energy Chart

Fourth-quarter earnings season kicks off this week and Dow component Alcoa (AA) got the ball rolling today after the close. Per my usual comments, I would not put too much emphasis on Alcoa one way or the other in terms of its impact on the Dow because it is the lowest-priced stock in a price-weighted index, but it should be noted the report was pretty solid.

The largest U.S. aluminum producer earned $258 million, or 24 cents a share, compared with a loss of $277 million, or 28 cents, a year earlier. Sales jumped 4% to $5.65 billion from $5.43 billion, but that missed the Street estimate of $5.75 billion. Analysts were looking for a profit of 21 cents a share and while a beat is a beat, it is doubtful Alcoa's numbers will set the Dow on fire tomorrow despite the fact that this is the company's most profitable quarter in more than two years.

Last week, Pennsylvania-based Alcoa said it will restart production at three idled U.S. plants, boosting aluminum output by 137,000 tons this year, but some analysts are still forecasting aluminum production in 2011 will outweigh demand. The company did say it expects consumption to rise 12% this year and the wild card in that equation may be the debut of ETFs backed by physical aluminum.

Some pundits think Alcoa could see the low-20s this year and others have tossed the name around as a takeover target for a company like Rio Tinto (RIO). I am not so sure about the latter theory, but a move to $21 from where the shares currently trade would be a strong move, even if it took all of 2011.

Alcoa Chart

Looking at the charts, the S&P 500 finished the day just below 1270, right in the middle of the important 1258-1280 range. The index has come close to breaking through 1280 a couple of times recently and this is a significant level as it has not been seen since late 2008. A move above 1280 could induce enough short covering to carry the index another 10 points beyond there. A move to 1260 or lower would test the spirit of the buy-the-dips crowd.

S&P 500 Chart

Like the S&P 500, the Dow is having some issues with resistance from 2008, that being in the 11,700-11,750 area. With financials hammered on by the Massachusetts court ruling news on Friday, that was a fine opportunity for the bears to do some damage on the Dow, but stocks rallied into the close, turning a bad day into just a small loss. Alcoa will not do much for the Dow's fortunes on Tuesday, but Intel (INTC) and JPMorgan Chase (JPM) deliver their fourth-quarter reports later this week and that could spark the index. Support looks decent at 11,600.

Dow Chart

The Nasdaq was able to catapult itself above 2700 today ahead of the Verizon (VZ)/iPhone news on Tuesday. Apple shares were up 2% today and the official announcement tomorrow may be another boost to Apple and the Nasdaq, but count me among the skeptics regarding how big of a deal this really is.

First, the iPhone going to Verizon should have been priced into Apple and Verizon shares long ago. Second, Verizon is already the dominant carrier of phones that run on Google's (GOOG) Android software, so if Apple starts picking off Android customers, and there's no guarantee of that, then Google would suffer and Apple would benefit, but how big will the benefit be to the Nasdaq?

Nasdaq Chart

The 800 area has been problematic for the Russell 2000 and while I am personally bullish on small-caps in 2011, a couple of weeks of consolidation following the index's torrid close to 2010 should come as no surprise. The concern would be a move to support at 760.

Russell 2000 Chart

In a normal environment, this should be a week where the market analyzes and digests the looming earnings reports and responds accordingly, but with Europe's fiscal fiasco still looming large, it would be a positive catalyst if someone, anyone displayed a desire for Portuguese and Spanish debt. That would help ignite the risk appetite the market needs.

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New Plays

Aerospace

by James Brown

Click here to email James Brown


NEW BULLISH Plays

BE Aerospace Inc. - BEAV - close: 38.76 change: -0.26

Stop Loss: 36.40
Target(s): 43.40
Current Gain/Loss: +0.0%
Time Frame: 6 to 8 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
Aerospace and defense-related names have been showing relative strength in January. Traders just bought the dip in BEAV near $38.00 today and the intraday bounce looks like a new bullish entry point. I'm suggesting small bullish positions now with a stop loss at $36.40. BEAV has some resistance in the $43.50-44.00 zone so we'll set our target at $43.40.
FYI: The Point & Figure chart for BEAV is bullish with a $44.00 target.

Open small bullish positions now.

Suggested Position: BEAV stock @ current levels

- or -

Buy the 2011 February $40.00 calls (BEAV1119B40) current ask $1.40

Annotated chart:

Entry on January 11 at $xx.xx
Earnings Date 02/01/11 (unconfirmed)
Average Daily Volume: 542 thousand
Listed on January 10th, 2010


In Play Updates and Reviews

Stocks Recover From Their Lows

by James Brown

Click here to email James Brown

Editor's Note:
The market managed to rebound off its intraday lows. The tone seems cautious. Investors overreacted when CHKP was downgraded this morning and the stock hit our stop loss.

-James

Current Portfolio:


BULLISH Play Updates

Automatic Data Processing - ADP - close: 48.13 change: +0.02

Stop Loss: 45.45
Target(s): 49.75, 52.50
Current Gain/Loss: + 2.9%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/10 update: ADP recovered from its morning dip near $47.50 and rallied to a new relative high this afternoon. There is no change from my prior comments. If you're looking for a new entry point I'd wait for a dip near $47.00. 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: 62.72 change: +3.02

Stop Loss: 57.75
Target(s): 59.75, 64.90, (option exit 61.75)
Current Gain/Loss: +14.6%
Time Frame: 8 to 9 weeks
New Positions: see below

Comments:
01/10 update: ALK rallied to $63.63 intraday before trimming its gains. The stock looks a little short-term overbought here. I would look for a dip back toward $60.00, which could be new support.

Earlier Comments:
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 (now 64.90).

Current Position: Long ALK stock @ $54.91

- or -

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

01/08: New stop loss @ 57.75. New target at $64.90
01/07: Option Target Hit @ 61.75. Option @ $3.00 (+87.5%). 01/05: Target hit at $59.75 (+8.8%)
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


BB& T Corp. - BBT - close: 26.44 change: +0.11

Stop Loss: 25.80
Target(s): 29.90
Current Gain/Loss: - 3.2%
Time Frame: 6 to 8 weeks
New Positions: Yes, see below

Comments:
01/10 update: BBT was flirting with a breakdown under $26.00 this morning. Shares dipped to $25.95 before bouncing from its 30-dma. I remain very cautious on this stock at the moment and would hesitate to launch new positions. Keep your position size small to limit your risk. Our first target is $29.90. We will have to decide whether or not we want to hold over BBT's earnings in late January.

(small positions only)

Current Position: BBT stock @ $27.32

- or -

Buy the 2011 February $28.00 calls (BBT1119B28) Entry @ 0.90

Entry on January 6 at $27.32
Earnings Date 01/21/11 (confirmed)
Average Daily Volume: 6.4 million
Listed on January 5th, 2010


Popular Inc. - BPOP - close: 3.16 change: -0.03

Stop Loss: 2.75
Target(s): 3.40, 3.95
Current Gain/Loss: + 5.3%
Time Frame: 12 to 16 weeks
New Positions: see below

Comments:
01/10 update: Monday was a relatively quiet day for BPOP. Shares tested their 10-dma before bouncing this afternoon. I would prefer to open new positions in the $3.05-3.00 zone. If the financials continue to correct this week that could happen soon. Conservative traders may want to raise their stop closer to the 50-dma (currently near $2.93).

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: 4.91 change: -0.03

Stop Loss: 4.63
Target(s): 5.00, 5.35
Current Gain/Loss: + 3.8%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/10 update: You could have fallen asleep watching Citigroup trade today. The stock spent the entire session in a six-cent range. 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

01/05: New stop loss @ 4.63
01/05: Target hit @ 5.00 (+5.7%), option @ $0.30 (+50%)

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: 40.30 change: -0.08

Stop Loss: 39.80
Target(s): 44.95, 49.00
Current Gain/Loss: + 0.1%
Time Frame: 12 to 14 weeks
New Positions: see below

Comments:
01/10 update: The trading in CBD was pretty quiet on Monday. Shares opened lower but held support near $40.00. I remain very cautious here given last week's pullback. I am not suggesting new positions at this time. 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


Walt Disney Co. - DIS - close: 39.50 change: +0.05

Stop Loss: 37.49
Target(s): 39.90, 42.50
Current Gain/Loss: + 3.2%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/10 update: DIS rebounded from its morning lows near $38.90. I'd wait for a dip closer to $38.00 before considering new bullish positions.

- Current Positions -

Long DIS stock @ 38.25

- or -

Long the 2011 February $40.00 calls (DIS1119B40) Entry @ $0.45

- or -

Long the 2011 April $40.00 calls (DIS1116D40) Entry @ $1.10

01/05: 1st Target Hit. Stock @ 39.90 (+4.3%)
01/05: 1st Target Hit. Feb. call @ $1.20 (+166%). April call @ 1.80 (+63.6%)
01/05: new stop loss @ 37.49
01/04: Play triggered @ 38.25

Entry on January 4 at $38.25
Earnings Date 02/08/11 (unconfirmed)
Average Daily Volume: 8.6 million
Listed on December 25th, 2010


Ford Motor Co. - F - close: 18.31 change: +0.04

Stop Loss: 16.75
Target(s): 18.40, 19.95
Current Gain/Loss: + 8.3%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/10 update: Ford rallied toward $18.50 a couple of times today but couldn't quite get past this level. There is no change from my prior comments. Ford looks overbought and due for a pull back toward $17.50 or $17.00. Over the weekend I suggested we sell the rest of our January calls, which opened at 93 cents this morning. I am not suggesting new bullish positions at this time. Our final, longer-term target is $19.95.

- Suggested Positions -

Long Ford stock @ $16.90

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

01/10: FYI: our January $17.50 calls opened at $0.93 (+272%)
01/08: Sell the rest of our January calls now! @ $0.89 (+256%)
01/07: Target hit. F @ 18.42. Jan. call @ $0.90 (+260%). Mar. call @ $1.29 (+111%)
01/07: 1st Target Hit. Ford @ 18.42 (+8.99%)
01/05: New stop loss @ 16.49.

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: 28.88 change: -0.23

Stop Loss: 27.90
Target(s): 30.90, 33.00
Current Option Gain/Loss: - 0.7%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/10 update: FLIR is drifting lower on very light volume. The low today was $28.53. I've been suggesting readers wait for a dip near $28.50 as our next entry point. $28.53 is close enough for me. 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

01/10: FLIR provided another entry point near $28.50
01/08: New stop loss @ 27.90

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: 41.87 change: -0.02

Stop Loss: 38.75
Target(s): 43.50, 46.75
Current Option Gain/Loss: + 3.8%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/10 update: JBHT is still consolidating sideways near $42. There is no change from my prior comments. I'm not suggesting new bullish positions at this time. More conservative traders may want to raise their stops closer to the $40 level. I am growing a little worried that JBHT could be forming a bear wedge pattern.

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


Kansas City Southern - KSU - close: 52.17 change: +0.92

Stop Loss: 47.90
Target(s): 54.75
Current Gain/Loss: unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see trigger

Comments:
01/10 update: Railroad stocks continue to show relative strength. KSU is up several days in a row. There is no change from my prior comments. KSU broke through resistance near $50.00, which should be new support. I am suggesting we use a trigger to open bullish positions at $50.50. If triggered our target is $54.75. We will have to decide in a couple of weeks if we want to hold over KSU's earnings report. Normally we would prefer to avoid holding over earnings because announcements can bring unnecessary risk.
FYI: The Point & Figure chart for KSU is bullish with a $78.00 target.

Trigger @ 50.50

Suggested Position: Buy KSU stock @ $50.50

- or -

Buy the 2011 February $50.00 call (KSU1119B50) current ask $2.95

Entry on January xx at $xx.xx
Earnings Date 01/27/11 (unconfirmed)
Average Daily Volume: 815 thousand
Listed on January 8th, 2010


Morgan Stanley - MS - close: 28.05 change: -0.15

Stop Loss: 25.95
Target(s): 29.85, 31.85
Current Gain/Loss: + 4.0%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
01/10 update: Financial stocks hit some profit taking today. We have been expecting MS to correct toward the $27.50-27.00 zone. Shares hit $27.63 at its lows on Monday. I am not convinced the correction is over yet. I am not suggesting new bullish positions at this time.

Over the weekend I suggested selling half of our January calls. These opened at $1.12 on Monday (+93%).

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

01/10: Follow up - January calls opened at $1.12 (+93%)
01/08: Sell half of our January calls @ $1.14 (+96%)
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: 28.22 change: -0.38

Stop Loss: 26.95
Target(s): 27.45, 29.75
Current Gain/Loss: +10.4%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/10 update: MSFT dipped toward short-term support near $28.00 before trimming its losses. I am not suggesting new positions at this time.

Don't forget that we only have two weeks left on our January calls.

Current Position: Long MSFT stock @ 25.55

- or -

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

01/06/11 raised final exit target to $29.75
01/06/11 new stop loss @ 26.95
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


Manitowoc Co. Inc. - MTW - close: 13.60 change: -0.15

Stop Loss: 12.30
Target(s): 14.95, 16.25
Current Gain/Loss: + 0.4%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/10 update: MTW spent the day consolidating sideways near $13.50. I would still consider new bullish positions (small positions) at this time. More conservative traders may want to raise their stop to $12.65, just underneath the Dec. 31 low of $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.

Current Position: Long MTW stock @ $13.54

- or

Long the 2011 February $14.00 calls (MTW1119B14) Entry @ $0.70

01/08: New stop loss @ $12.30

Entry on January 4 at $13.54
Earnings Date 02/02/11 (unconfirmed)
Average Daily Volume: 2.0 million
Listed on January 3rd, 2010


Mylan, Inc. - MYL - close: 22.42 change: +0.10

Stop Loss: 20.90
Target(s): 22.90, 23.60.
Current Gain/Loss: +2.8%
Time Frame: 8 to 10 weeks
New Positions: see below

Comments:
01/10 update: MYL was drifting higher toward $22.50 again. I don't see any changes from my prior comments. If you missed our entry point you might want to wait for a dip near $21.75. I am setting a secondary target at $23.60. Our first target is $22.90.

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.

Current Position: Long MYL stock @ 21.81

- or -

Long the 2011 April $22.00 calls (MYL1116D22) Entry @ $1.25

Entry on January 6 at $21.81
Earnings Date 02/24/11 (unconfirmed)
Average Daily Volume: 9.0 million
Listed on December 20th, 2010


ResMed Inc. - RMD - close: 33.36 change: -0.37

Stop Loss: 32.40
Target(s): 38.00
Current Gain/Loss: - 1.8%
Time Frame: 8 to 10 weeks
New Positions: see below

Comments:
01/10 update: The correction in RMD continues. Shares are now under their 50-dma and look headed for the early December support near $33.00. We could buy this dip now or wait for the dip to hit $33.00 before initiating positions. More conservative traders might want to wait for RMD to close back above $34.00 again. We want to keep our position size small! Our multi-week target is $38.00.

Play is now open!

Current Position: Long RMD stock @ $34.00

- or -

Long the 2011 April $35.00 calls (RMD1116D35) Entry @ $1.55

01/07: Play opened at $34.00

Entry on January 7 at $34.00
Earnings Date 02/03/11 (unconfirmed)
Average Daily Volume: 752 thousand
Listed on January 1st, 2010


Starbucks Corp. - SBUX - close: 32.77 change: -0.01

Stop Loss: 31.70
Target(s): 35.75
Current Gain/Loss: + 1.6%
Time Frame: 8 to 10 weeks
New Positions: see below

Comments:
01/10 update: SBUX bounced around the $32-33 zone only to close virtually unchanged on the session. I don't see any changes from my prior comments. There is still resistance at the top of the trading range in the $33.10 area. If you do choose to open positions I would keep your position size small.

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: 36.16 change: +0.12

Stop Loss: 34.95
Target(s): 37.75, 39.75
Current Gain/Loss: + 1.5%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/10 update: There is no change from my previous comments on SNE. The stock is consolidating sideways with a bullish trend of higher lows. Cautious traders may want to wait for a move over $36.50 before initiating new positions.

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

01/08 New stop loss @ 34.95
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


SXC Health Solutions - SXCI - close: 43.71 change: -0.86

Stop Loss: 42.40
Target(s): 49.00
Current Gain/Loss: + 0.0%
Time Frame: 8 to 9 weeks
New Positions: Yes, see trigger

Comments:
01/10 update: SXCI opened lower (44.31) and pretty much filled the gap from Friday morning before spending the rest of the day consolidating sideways. I would still consider new positions now. There is potential resistance at the December highs near $45.75 but we're aiming for $49.00.
FYI: The Point & Figure chart for SXCI is bullish with a $62.00 target.

NOTE: Buying the options is a higher-risk trade. The calls on SXCI have wider than normal spreads put option traders at a disadvantage here.

Suggested Positions: Long SXCI stock @ $44.31

- or -

Long the 2011 February $45.00 calls (SXCI1119B45) Entry @ $1.44

Entry on January 10 at $44.31
Earnings Date 03/03/11 (unconfirmed)
Average Daily Volume: xxx million
Listed on January 8th, 2010


WellCare Health Plans, Inc. - WCG - close: 32.00 change: +0.70

Stop Loss: 29.40
Target(s): 33.75, 37.75
Current Gain/Loss: + 4.0%
Time Frame: 10 to 12 weeks
New Positions: Yes, see below

Comments:
01/10 update: WCG continues to show relative strength. Traders quickly bought the dip this morning and WCG ended the day with a +2.2% gain and new multi-month highs. The $32.00 level has been resistance in the past so I wouldn't be surprised to see some profit taking here. We might get another entry point near $30 before the week is out. Keep in mind that investors will have to decide whether or not they are willing to take the risk of holding over WCG's earnings report in late February.
FYI: The Point & Figure chart for WCG is bullish with a $41 target.

Current Position: WCG stock @ $30.75

- or -

Long the 2011 March $35.00 calls (WCG1119C35) Entry @ $0.60

01/06: Play triggered @ 30.75.

Entry on January 6 at $30.75
Earnings Date 02/17/11 (unconfirmed)
Average Daily Volume: 410 thousand
Listed on January 4th, 2010


Wells Fargo & Co - WFC - close: 31.20 change: -0.30

Stop Loss: 30.40
Target(s): 29.25, 32.75
Current Gain/Loss: +16.0%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/10 update: WFC was downgraded this morning but shares found support near $31.00 and spent the day consolidating sideways. I still think readers will want to seriously consider exiting their call position now. We only have two weeks left before January options expire. I am not suggesting new positions at this time.

Current Position: Long WFC stock @ $26.88

- or -

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

01/08: Consider exiting the call position now.
01/05: New stop loss @ 30.40, final target adjusted to 32.75
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: 14.08 change: -0.13

Stop Loss: 13.98
Target(s): 14.95, 16.40
Current Gain/Loss: - 0.1%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/10 update: There is no change from my weekend comments on WWE. The stock fading lower toward support near $14.00. If this trend continues tomorrow we'll likely get stopped out at $13.98. oversold bounce. I am not suggesting new bullish positions at this time. The plan was to keep your position size small 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.

01/08/11 new stop loss $ 13.98
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

Check Point Software Technologies - CHKP - close: 44.91 change: -0.89

Stop Loss: 44.95
Target(s): 47.25, 49.75
Current Gain/Loss: - 0.3%
Time Frame: 8 to 10 weeks
New Positions: see below

Comments:
01/10 update: We have been stopped out of CHKP. Bank of America changed their rating on CHKP from a "buy" to "neutral". Investors overreacted and the stock gapped open lower at $45.03 and then plunged to $43.20 before rebounding almost to $45 again. Our stop loss was hit at $44.95.

Closed Position: Long CHKP stock @ $45.10, Exit 44.95 (-0.33%)

- or -

Long the 2011 April $45.00 calls (CHKP1116D45) Entry @ $2.55, Exit @ 2.00 (-21.5%)

01/10: Stopped out @ 44.95 (-0.33%), Option @ $2.00 (-21.5%)
01/05: New stop loss @ 44.95
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