Option Investor
Newsletter

Daily Newsletter, Tuesday, 1/11/2011

Table of Contents

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

Market Wrap

Sell The News On Apple and Verizon

by Jim Brown

Click here to email Jim Brown
The long awaited iPhone announcement for the Verizon network was met with selling in both stocks. Verizon was hit hardest on pricing for the phone.

Market Statistics

Be careful what you wish for. Verizon may be wondering if they did the right thing by taking on the iPhone. The market has punished Verizon for this marketing win. A Bloomberg analyst said after four years of waiting Verizon's win could be very expensive. They estimate Verizon could be out $3 billion to $5 billion in subsidies for customer purchases this year alone. This will cut into profits and significantly increase the load on the network.

A UBS analyst projected Verizon to sell as many as 13 million of the devices in 2011 and every customer gets the equivalent of a $400 check from Verizon because the company pays Apple that $400 for you. Barclay's projects 9 million phones because most AT&T iPhone customers are locked into a two-year agreement. Barclay's believes the subsidy would be in the $350 range because Apple needed Verizon's volume to combat the onslaught of Android products and probably discounted the phone to Verizon.

Obviously Verizon will be a winner in the long run or they would not commit to that kind of initial outlay. Barclay's believes it will add 2.1 million new subscribers to Verizon's base in 2011. AT&T is only expected to add 650,000. AT&T is expected to sell 6 million iPhones in 2011, down from 15 million in 2010. That is quite a hit for AT&T. Data plans are turning into a cash cow for the network providers. The cost for a data plan at AT&T rose by 20% in Q3 and +19% at Verizon. It takes about six months for AT&T to recover its subsidy from the customer in the form of monthly access charges. Verizon's data plan for the iPhone will be unlimited and free from the caps imposed by AT&T. That is another negative for new AT&T iPhone sales.

Verizon Chart

Apple spiked +$6 to a new high on Monday but failed to add to those gains on Tuesday. Apple has gained $20 in January. Apple will report earnings on the 18th and at least one analyst is predicting they will announce a stock split. Jefferies analyst, Peter Misek, raised his price target on Apple to $450. He sees Apple earnings at $22.06 per share in 2011 with the consensus well back at $19.27. That consensus estimate was only $17.89 three months ago. That shows how rapidly the targets are changing. Apple has a card yet to play in the CDMA iPhone. They did not do an exclusive agreement with Verizon. That means Apple can also sell the phones to China Telecom and SK Telecom for use in Asia and that is a much larger market. Also, every new iPhone customer becomes a prime candidate for an iPad. Lastly Apple is expected to launch iPhone 5 later this summer for another complete refresh cycle. JP Morgan believes Apple will ship 67.3 million iPhones in 2011. That number truly boggles the mind for a product that did not exist in any form four years ago.

The big loser here is AT&T and the company's stock is dropping like a rock. AT&T is down -10% since the mystery press conference was announced. Potential iPhone purchaser are no longer forced to endure a network with capacity limitations and now have a choice. The choice will most likely be Verizon.

AT&T Chart

On the economic front the news was mixed. The weekly Chain Store Sales dropped sharply by a whopping -3.2% compared to a +0.4% gain in the prior week. The first week of January has been posting declines for several years. The after effects of the blizzard just accentuated the decline this year. Sales should pick up in next week's report before they dive again as a result of the new blizzard moving towards the Northeast. Sales for all of January are expected to be in the 2.5% range.

The Job Openings and Labor Turnover Survey for November showed an increase in positions but only a slight increase. The headline number rose from 32.1 to 32.2 in what could only be considered growth at a snail's pace. Because this is a lagging report with no material change the market ignored it.

In another November report the Wholesale inventories declined -0.2% compared to a gain of +1.7% in October. Analysts had expected a rise of +1%. The decline suggests inventories will not contribute to a gain in GDP in Q4. The smaller rate of inventory growth could mean a stronger manufacturing sector in 2011. The inventory to sales ratio fell to 1.15 and the lowest level since June.

The reports today were just filler as we wait for the Beige Book on Wednesday and the inflation reports on Thr/Fri and Intel's earnings on Thursday. Everything else is just noise.

Economic Calendar

With all the activity in the tech sector you would think Intel would have good earnings. Unfortunately most of the new products don't have Intel chips. Intel's sales gains will come from an increased number of servers to handle those smart devices.

Qualcomm (QCOM) should benefit from the Verizon iPhone deal. That opens up an entirely new consumer product Qualcomm. They are assumed to be the supplier for the CDMA phone and will also benefit when Apple offers the phones in Asia.

Despite the expectations for a decent earnings cycle analysts are downplaying the hopes for big gains in the stock prices. Alcoa reported earnings on Monday, beat the street by 3-cents and raised guidance saying aluminum demand could rise +12% in 2011 on top of 13% growth in 2010. Prices received rose +17% per ton. Shares were up +7% for 2011 ahead of the announcement so it is no surprise the stock has been flat this week. Buy the rumor, sell the news.

That may be what we see from the majority of earnings reports. Intel may be the exception since their stock has been flat for the last two months. Any good news could revive interest but less than stellar guidance could just as easily send it lower.

Intel agreed to settle a patent suit with Nvidia by paying $1.5 billion over the next five years and cross license certain products. The deal was seen as a major win for Nvidia. It is a major win for some readers as well. I pounded the table in this column for Nvidia many months ago because of their new GPU product. That is a slide in card with 240 processors that fits into a desktop PC and elevates it to the level of supercomputer status. Most desktops that accommodate the cards can accept up to four of them for 960 processors in one PC. The technology is gradually catching on as a way for engineers to have the equivalent of a supercomputer on their desk for under $10K. I believe Nvidia will continue to rise but I would wait for some profit taking before jumping on board.

Nvidia Chart

Intel Chart

On the positive side Sears Holding (SHLD) and Tiffany (TIF) both upgraded their forecast for earnings. Sears said earnings could be twice what analysts were expecting and their shares rose +6%. Tiffany said holiday sales were brisk. On the downside Talbots said it expected a larger Q4 loss as sales trends declined. Talbots caters to women over 50 and operates 584 stores in North America. Stiff price competition and cold weather were blamed. Talbots has been trying to attract younger women without success. Talbot shares fell -17%.

Talbots Chart

The Alaska Pipeline shutdown helped push oil prices back to $91.13 at the close for a gain of $1.88. The shutdown was caused by a minor leak in a booster pump station. Only 18 barrels have been leaked so far but it is in the basement of the pump station. That is about 750 gallons of oil and I am sure that is making a significant mess plus create a fire danger.

The TAPS operator Alyeska is installing a 157-foot section of pipe to bypass the leak so the line can be restarted. Winter is the worst time for an outage because once the oil in the pipe cools it begins to turn to wax and clog the pipes and pumps. They want to get the flow restarted ASAP to lessen the danger of a larger stoppage from freezing. They estimate it will be restarted before Friday.

The pipeline carries about 600,000 bpd over the 800-mile length. In addition to the pipeline stoppage an upgrader at the Horizon oil sands project in Alberta has been offline since Thursday due to a fire and that knocked out 115,000 bpd that flows to Midwest refineries. The fire was in a coker unit where two of the four drums were damaged. Canadian Natural Resources (CNQ) said they were going to try to restart the unit at half of capacity using the two drums that were undamaged. They will try to repair the other two while the unit is in operation. This is a major expense for CNQ and it will not be a quick fix. The company said they would have to lower its production estimates for 2011 and cut back on some planned capital spending.

Brent Crude has been on a rampage lately with Brent closing at $97.54 today, +6 over the price of U.S. WTI. The problem with Brent is falling output in the North Sea due to maintenance, a new inspection program to prevent a Gulf spill type accident and accelerated depletion. The output from the North Sea has declined nearly 25% in the last three years.

Crude Oil Chart

The markets started off in positive territory but struggled to stay there until the close. The Nasdaq traded briefly in negative territory at 2:PM as the result of a sell program in the S&P futures. All the indexes took a substantial dive on the sell program and all recovered pretty quickly.

The S&P rallied once again to resistance at 1278 and that is where the futures sell program triggered. I don't want to make a big deal out of describing technicals today because nothing happened. Volume was light at a hair over 7.0 billion shares. Traders are waiting on the Beige Book report and Intel's earnings. Actually they are just waiting on Intel.

This is the week before expiration and we had a couple days of minor declines. This was just a minor snapback rally after overnight gains in Asia tickled the shorts in the U.S. and forced a cover.

Support at 1258 has not been tested in over a week and resistance at 1278-1280 is solid as a rock. Be patient, the current trend is sideways and range bound. Intel's earnings should change the trend.

S&P-500 Chart

The Dow rallied to exactly 11,700 and strong resistance on the strength in Hewlett Packard, American Express and Chevron. Most of the gains occurred on the short covering at the open but Hewlett received an upgrade that helped keep the index in the green. Chevron was up on the spike in oil prices and positive guidance and American Express on the sudden resurgence of interest in financials. Just slightly over half the Dow components were positive so there was definitely no sudden burst of bullish sentiment.

The Dow has round number resistance at 11,700 but we did move over that level for one day on the 5th and test the stronger resistance from August 2008 at 11,725. When that level held the Dow began to decline to touch support at 10,600 on Monday. Today was a pressure equalization day. Shorts were lightly squeezed and a few bulls prevented a loss by jumping on the 2:PM dip. It was a nothing day.

Dow Chart

The Nasdaq benefited from a +9 gain in ISRG and HTWR plus strong gains in APOL, SHLD, GOOG, ININ and SINA. Those are not your normal Nasdaq leaders with the exception of Google. Apple's minor decline did not help or hurt and the target upgrade to $450 will eventually be a benefit.

The Nasdaq added +9 points to 2,716 and closed at a new high. It is hard to say anything bad about a new high. The volatility is increasing as we near expiration and Intel's earnings. The Nasdaq's gains moved it out of the range for the last three days so that is mildly bullish. However, it was still a passing time day ahead if Intel. I would not read too much into today's action.

Nasdaq Chart - 15 Min

Nasdaq Chart - 90 Min

The Russell showed a little more strength and has recovered from the dip to 780 support and even closed over initial resistance. The stronger resistance at 800 is still waiting but I liked the gains today even on low volume. The A/D on the Russell was 1145 advancers, 710 decliners with 152 new highs and only 4 new lows. That is pretty favorable statistics given the earnings risk ahead.

If we did not have the Intel earnings on Thursday I would probably be more bullish because of the Russell but I am probably just seeing the glass half full.

Russell 2000 Chart - 90 min

In summary I would be careful with longs AND shorts ahead of Intel's earnings on Thursday evening. That is by far the most important event of the week. Intel could give us a blow off top or that sudden sinking feeling with poor guidance. The market is pried to perfection today and the risk level is high.

We did not hear much about the European debt sales today but those are still a worry for the days ahead. The move by the ECB and the mystery investor (China, Federal Reserve?) into Portugal's debt over the weekend has calmed those fears but they can erupt at any time.

Don't apply too much credibility to the market action today. We were just passing time ahead of Intel.

Jim Brown

Send Jim an email


New Plays

Content Delivery

by James Brown

Click here to email James Brown


NEW BULLISH Plays

Limelight Networks - LLNW - close: 6.29 change: +0.04

Stop Loss: 5.95
Target(s): 6.90, 7.25
Current Gain/Loss: + 0.0%
Time Frame: 6 to 8 weeks
New Positions: Yes, see below

Company Description:
Limelight Networks, Inc. provides solutions that enable business and technology decision makers to profit from the shift of content and advertising to the online world, the explosive growth of mobile and connected devices, and the migration of IT applications and services into the cloud. Over 1600 customers worldwide use Limelight's massively scalable software services that engage audiences, enhance brand presence, analyze viewer preferences, optimize advertising, manage and monetize digital assets, and ultimately help build stronger customer relationships. (source: company press release or website)

Why We Like It:
After December's nearly month-long correction in LLNW the stock is finally rebounding. The initial push off the 100-dma boosted LLNW from $5.80 toward $6.50. Now traders are buying the dip again with the recent test of the $6.00 area. LLNW can be a volatile stock and I consider this an aggressive, higher-risk trade. The stock does look poised to rally higher after its 61.8% Fibonacci retracement of its August-November run up. There is potential resistance at the 50-dma. I would keep your position size pretty small to limit your risk. While the options do offer a bit more reward here they also offer a lot more risk! You might be happier just trading the stock. I'm suggesting we start the play with a stop loss at $5.95. Our targets are $6.90 and $7.25.

Open Small Positions Now.

Suggested Position: LLNW stock @ current levels.

- or -

Buy the 2011 February $5.00 call (LLNW1119B5) current ask $1.50

Annotated chart:

Entry on January 12 at $xx.xx
Earnings Date 02/22/11 (unconfirmed)
Average Daily Volume: 1.3 million
Listed on January 11th, 2010


In Play Updates and Reviews

A Lackluster Session

by James Brown

Click here to email James Brown

Editor's Note:
Tuesday was largely a forgettable session. Early gains faded into a listless churn. Generally there was little change from my prior comments. WWE did hit our stop loss.

-James

Current Portfolio:


BULLISH Play Updates

Automatic Data Processing - ADP - close: 48.35 change: +0.22

Stop Loss: 45.45
Target(s): 49.75, 52.50
Current Gain/Loss: + 3.4%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/11 update: ADP rallied to a new 52-week high at $48.67 intraday. 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: 62.21 change: -0.74

Stop Loss: 57.75
Target(s): 59.75, 64.90, (option exit 61.75)
Current Gain/Loss: +13.2%
Time Frame: 8 to 9 weeks
New Positions: see below

Comments:
01/11 update: After ALK's recent gains it's normal to see a little profit taking. I am not suggesting new positions at this time but we can keep an eye on the $60.00 level for short-term 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

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: 26.53 change: +0.09

Stop Loss: 25.80
Target(s): 29.90
Current Gain/Loss: - 2.8%
Time Frame: 6 to 8 weeks
New Positions: Yes, see below

Comments:
01/11 update: BBT was trying to bounce this morning but it did not make it very far. There is no change from my prior comments. 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


BE Aerospace Inc. - BEAV - close: 38.58 change: -0.18

Stop Loss: 36.40
Target(s): 43.40
Current Gain/Loss: - 0.8%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
01/11 update: BEAV opened at $38.89 (entry point) but failed to rally past the $39.00 level. If we're patient we might see a better entry point in the $38-37 zone. We want to keep our position size small to limit our risk. 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.

Current Position: BEAV stock @ $38.89

- or -

Long the 2011 February $40.00 calls (BEAV1119B40) Entry @ $1.35

Entry on January 11 at $38.89
Earnings Date 02/01/11 (unconfirmed)
Average Daily Volume: 542 thousand
Listed on January 10th, 2010


Popular Inc. - BPOP - close: 3.20 change: -0.03

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:
01/11 update: BPOP is still slowly drifting higher. There is no change from my prior comments. I would prefer to open new positions in the $3.05-3.00 zone. 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: 4.94 change: +0.03

Stop Loss: 4.63
Target(s): 5.00, 5.35
Current Gain/Loss: + 4.4%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/11 update: C managed to erase yesterday's loss but that's about it. Volume was pretty light. Citigroup is due to report earnings on the 18th of January and we normally want to avoid holding over an earnings report. 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: 41.68 change: +1.38

Stop Loss: 39.80
Target(s): 44.95, 49.00
Current Gain/Loss: + 3.5%
Time Frame: 12 to 14 weeks
New Positions: see below

Comments:
01/11 update: CBD outperformed on Tuesday with a +3.4% gain. I didn't see any specific news to account for the stock's relative strength. The Brazilian Bovespa was only up +0.4%. Volume improved on today's rally in CBD, which is a good sign. I'm still a little bit cautious about launching new positions here. 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: 39.40 change: -0.10

Stop Loss: 37.49
Target(s): 39.90, 42.50
Current Gain/Loss: + 3.0%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/11 update: DIS showed some strength this morning but the gains faded into a small loss. I'm still expecting DIS to correct lower toward $38. 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: 18.28 change: -0.03

Stop Loss: 16.75
Target(s): 18.40, 19.95
Current Gain/Loss: + 8.1%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/11 update: I have been warning readers that Ford looks short-term overbought here above $18 and is due for some profit taking. Look for a dip near $17.50. 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: 28.87 change: -0.01

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:
01/11 update: Tuesday was a forgettable day for FLIR. The stock traded in a narrow range to close virtually unchanged. I'm suggesting readers look for dips near $28.50 or even the 200-dma 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

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: 41.80 change: -0.07

Stop Loss: 38.75
Target(s): 43.50, 46.75
Current Option Gain/Loss: + 3.6%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/11 update: Positive analyst comments this morning boosted JBHT to $42.63 intraday but the gains were short lived. 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: 51.43 change: -0.74

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

Comments:
01/11 update: The rally in the railroad stocks may have run out of gas. KSU popped higher at the open only to reverse lower. We've been waiting for a dip back toward $50.00 so maybe that will happen soon. 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: 27.96 change: -0.09

Stop Loss: 25.95
Target(s): 29.85, 31.85
Current Gain/Loss: + 3.7%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
01/11 update: The early morning gains in MS faded although MS has been able to maintain its short-term trend of higher lows. I don't see any changes from my prior comments. Look for a correction into the $27.50-27.00 zone. 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: 28.11 change: -0.11

Stop Loss: 26.95
Target(s): 27.45, 29.75
Current Gain/Loss: +10.0%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/11 update: MSFT is hovering near support at the $28.00 level. Readers may want to consider an early exit on the January calls right here. If MSFT breaks down those calls are going to get hammered lower. I am not suggesting new positions at this time.

Don't forget that we have less than 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: 13.78 change: +0.18

Stop Loss: 12.30
Target(s): 14.95, 16.25
Current Gain/Loss: + 1.7%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/11 update: MTW is still showing relative strength. The stock hit new multi-month highs this morning at $14.00. There is no change from my prior comments. 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: 22.59 change: +0.17

Stop Loss: 20.90
Target(s): 22.90, 23.60.
Current Gain/Loss: +3.5%
Time Frame: 8 to 10 weeks
New Positions: see below

Comments:
01/11 update: MYL is still creeping higher and hit relative highs over $22.50 today. 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: 32.66 change: -0.70

Stop Loss: 32.40
Target(s): 38.00
Current Gain/Loss: - 3.9%
Time Frame: 8 to 10 weeks
New Positions: see below

Comments:
01/11 update: The correction in RMD is accelerating. The relative weakness in this stock this past week has been worrisome. Shares are testing support near $32.50 and its simple 200-dma. It's do or die time with our stop loss at $32.40. The low today was $32.54. 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: 32.26 change: -0.51

Stop Loss: 31.70
Target(s): 35.75
Current Gain/Loss: + 0.0%
Time Frame: 8 to 10 weeks
New Positions: see below

Comments:
01/11 update: The bounce in SBUX has rolled over. Shares are still stuck in the middle of their trading range. I am not suggesting new positions at this time.

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: 36.36 change: +0.20

Stop Loss: 34.95
Target(s): 37.75, 39.75
Current Gain/Loss: + 2.1%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/11 update: Shares of SNE are still drifting higher. The stock looks poised to breakout past $36.00 soon. 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: 44.00 change: +0.29

Stop Loss: 42.40
Target(s): 49.00
Current Gain/Loss: - 0.7%
Time Frame: 8 to 9 weeks
New Positions: see below

Comments:
01/11 update: SXCI delivered a bounce on Tuesday (+0.6%) while volume was very average. I would still consider new positions here. 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: 292 thousand
Listed on January 8th, 2010


WellCare Health Plans, Inc. - WCG - close: 31.60 change: -0.40

Stop Loss: 29.40
Target(s): 33.75, 37.75
Current Gain/Loss: + 2.7%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/11 update: Bingo! Right on cue shares of WCG stumbled at resistance near $32.00. I warned readers to expect some profit taking here. I'm suggesting readers wait for a dip near $30 before considering new positions. 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: 31.40 change: +0.20

Stop Loss: 30.40
Target(s): 29.25, 32.75
Current Gain/Loss: +16.8%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/11 update: WFC is due to report earnings on January 19th. We normally want to avoid holding over an earnings report. Readers should prepared to exit prior to earnings. If you're holding the January calls I would strongly consider an early exit now. 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


CLOSED BULLISH PLAYS

World Wrestling Entertainment - WWE - close: 14.02 change: -0.06

Stop Loss: 13.98
Target(s): 14.95, 16.40
Current Gain/Loss: - 0.8%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/11 update: Shares of WWE continue to underperform. Shares hit a lot of $13.97, which was enough to close this play since our stop loss was at $13.98. According to my data today the April $15 calls traded at $0.40 at their lows although I find that a little hard to believe.

Closed Position: Long WWE stock @ $14.10, exit @ 13.98 (-0.85%)

- or -

Buy the 2011 April $15.00 calls (WWE1116D15), entry @ $0.45, exit @ 0.40

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

01/11/11 Stopped out @ 13.98 (-0.85%). Option at less than 40 cents.
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

Chart:

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