Option Investor
Newsletter

Daily Newsletter, Thursday, 1/13/2011

Table of Contents

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

Market Wrap

Jobs, Dollars and Inflation

by Jim Brown

Click here to email Jim Brown
The bad news bulls had a full dose of economic challenges to over come today while they waited on earnings from Intel.

Market Statistics

The weekly jobless claims spiked to 445,000 for the week ended on January 8th compared to 410,000 the prior week. This was the highest level since October. Officially the consensus estimate was 404,000 but we were not even close. Everyone expected claims to rise next week as the workers terminated after the holidays filed new claims. That suggests next week could be high as well. The rise in corporate profits should slow the pace of terminations. Those who needed to trim the workforce have had plenty of opportunity over the last year. Once the New Year spike in claims passes we should expect the new claims to decline.

Producer prices rose +1.1% in December and inline with analyst estimates. The spike in crude prices and food commodities are inflating prices in nearly all consumer products. Excluding food and energy the core rate of inflation rose only +0.2%.

75% of the rise in the headline number came from a spike in energy of +3.7% with gasoline prices up +6.4% and diesel +8.6%. Home heating oil rose +12.3%. Combined fuel prices are up +28% over December 2009. The price of fresh vegetables rose +22% and +15.4% for fresh fruit. The various weather disturbances around the globe are tightening food supplies and pushing commodity prices higher. The Fed will take these things into account when they review their rate decisions but even with those gains above the actual inflation rate is still low.

The headline number on the Manufacturers Alliance Survey declined -2% to 75% but remains well into expansion territory. The optimism for 2011 is rising with the internal components for orders and shipments ticking up slightly. The period covered in this report was Q4 so it is a lagging report and was ignored.

Economic events on Friday include the Consumer Price Index, which will show how that producer inflation from today is filtering down to the consumer level.

Economic Calendar

The big report for the day was not economic. It was the Intel earnings after the close and the elephant in the room everybody was ignoring all day. After the bell Intel reported earnings of 59-cents on $11.5 billion in revenue. That was well above estimates for 53-cents and $11.37 billion. Gross profit was 67.5% and also higher than estimates. Intel also raised estimates to $11.1-$11.9 billion from $10.74 billion for Q1.

There was a catch. Intel said the quarter beat estimates because there was an extra week in the quarter but that was not the only reason. They said the ramp in to the Sandy Bridge processors with integrated graphics was strong. Sales of server processors were "particularly strong" and there was "strong growth" in both business and consumer PCs. Intel said 2010 was the best year in the company's history and 2011 would be even better.

Intel did lower the gross margin estimate for Q1 to 64% and closer to the 63.5% analysts had been projecting for Q1. Intel expects sales to increase by 10% in 2011 compared to a 24% rise in 2009. Despite the slower growth Intel shrugged off reports that PC sales are under pressure from tablets and smartphones.

The Gartner Group reported on Wednesday that worldwide PC shipments grew less than expected in Q4 due largely to the Apple iPad. Gartner said PC sales grew by 2.7% compared to earlier forecasts of 5.5%. Intel brushed off those reports saying strength in the enterprise market led to record processor revenues.

The good news was the forecast of a relatively flat Q1 compared to the normal seasonal decline. That is the real insight into the health of the tech sector. Intel shares rose 50-cents in after hours trading.

Intel Chart

The Dow was down around 50 points intraday and driven lower by a -7% drop in Merck. The company announced it had halted clinical trials on Vorapaxar, an anticlotting pill that had the potential for $5 billion in annual sales. They also narrowed the scope in a second trial. All participants in the initial 13,000 patient study will immediately quit taking the drug. The 26,500 patient study will be stopped for those with a prior history of stroke. The change in study parameters means Merck may not be able to file for approval without initiating and completing a new study. Vorapaxar was the highest profile drug in the Merck pipeline.

Merck Chart

Whole Foods Market (WFMI) jumped +5% intraday after Jefferies raised its 12-month target price to $60 a share from $47. The analyst cited improved store traffic and their big push into healthier foods. WFMI gained +84% in 2010 and it off to a good start in 2011. The analyst said customers appear to be accepting the higher priced offerings now that the recession is over.

Whole Foods Chart

In a prime example of how not to report earnings after a new IPO SemiLEDs Corp (LEDS) reported nearly doubled revenue and reported a strong increase in earnings. All right so far but then they warned pricing pressures over the next three months would lead to lower revenues and profits. The company went public on Dec-9th at $24 and traded as high as $32 in late December. After today's earnings warning they declined -34% to $18.75. Welcome to the reality of corporate earnings.

LEDS Chart

ITT Corp reported on Wednesday it would spin off two separate companies to focus on water management and defense while the parent company would remain in aerospace, transportation, energy and industrial engineering. Shares rose +16.5% on Wednesday. On Thursday shares fell more than 3% after two brokers downgraded the company. How fast the bloom fades after a favorable announcement.

ITT Chart

Marathon Oil (MRO) also announced a plan to split itself into two companies. One will focus on exploration and one will focus on the refining business. Marathon is considered the fifth largest U.S. refiner of gasoline and other fuels. This is an old plan that has resurfaced. They originally discussed it in 2008 but shelved it during the financial crisis. Analysts at Tudor Pickering Holt felt it was the right move and would free up Marathon to become a more aggressive exploration company. The new company would be called Marathon Petroleum Corp and trade on the NYSE under the symbol MPC. The division had revenues of $45.5 billion in 2010. The tax-free spin off is planned for June 30th. Marathon shares rose +6% on the news.

Marathon Chart

After the bell today Coinstar (CSTR), operator of Redbox DVD vending machines, warned is would miss profit estimates because of delays in access to Hollywood's newest movies. The company has agreed to a 28-day delay in receiving the latest DVD releases and giving studios a four-week window to sell their latest movies before offering them for rental in a Redbox. Coinstar projected Q4 profits would be in the range of 67-cents compared to prior estimates of 82-cents. This drop came despite a 31% rise in revenues. Analysts were expecting 86 cents. Shares of Coinstar fell as low as $38 in afterhours after closing at $56.91.

Coinstar Chart

Goldman Sachs created some currency excitement today with their call to go long the euro against the dollar. Goldman believes the European debt problems will eventually be solved and the euro will rise again. The bank feels the resolution will provide the economic stability to produce an even stronger Eurozone and euro. Pledges by China and Japan to buy Eurozone debt will help reduce the risk premium on those countries. Goldman also believes the current U.S. economic policy will push the dollar lower and become an obstacle to investment inflows into the USA.

The positive debt auctions by Portugal and Spain this week have gone a long way towards proving Goldman's forecast. The dollar index dropped a full two points this week for the sharpest decline in months. A three-day, two-point decline in a currency is like an earthquake registering an eight on the Richter scale. The dollar index has returned to support at 79.0 and a break there could see another three-point decline.

Dollar Index Chart

Euro Chart

Noted bank analyst Richard Bove was out pounding the table on the financial sector today. He claims the next two years will be the new golden age of banking. He bases his views on the monstrous cash hoards held by many banks. During the crisis banks were told to raise cash. When the worry over a double dip and the financial stress test was rampant they were told to raise cash again. Now that conditions have improved significantly they have all this cash and nothing to do with it. Loan demand is still very low but improving as is credit quality. Bove claims Citigroup, Bank America, Bank of New York, State Street and Northern Trust have so much cash their shares are selling for less than their cash position. He said buying banks with that much cash is easy justification. They will eventually put that cash to work and he expects 20% to 25% earnings growth over 2011 and 2012.

Up until late November the financial sector was lackluster at best. The XLF flat lined from May through October before finally beginning to move higher in December.

XLF Chart

The markets rallied strongly on Wednesday thanks to a monster short squeeze prompted by a successful debt auction in Portugal. Despite the minor declines today they held their gains even though the economic news was bad. The falling dollar should have pushed equities higher but the fear of Intel releasing a negative surprise kept the markets in check. The bad news bulls had a full buffet of sound bites to swallow as the climbed the wall of worry and apparently they needed a siesta before continuing their journey.

A couple weeks ago I theorized if January was going to follow historical norms that the 13th would be my target for a market top. Over the last ten years the average date is the 12th, which would fit nicely with Wednesday's spike and fade, but I thought funds would want to see how Intel reported before making a buy/sell/hold decision. Tomorrow will be the day of decision. I will be proven right or wrong but that is of no consequence. The important part of that discussion is that unlike most of the bears I remain bullish. I believe any January dip will be a buying opportunity and I am looking forward to it.

The S&P rallied to 1287 on Wednesday and closed at 1283 today. That short squeeze pushed the S&P over resistance at 1278-1280 and today's failure to drop back below those levels on bad news is encouraging. There is always the possibility we will see a continued pattern of two steps forward, one step back that will frustrate the bears tremendously. Bull markets can remain overbought for a long time even when the technicals are suggesting a pause. The S&P is WELL ABOVE decent support at 1258-1260 and it would take a major change in sentiment, even temporarily, to break below those levels.

S&P-500 Chart

The Dow rallied to 11,782 on Wednesday's short squeeze and only gave back 50 points from that intraday high. With Dow component MRK down -2.46 today and responsible for all of the Dow's point decline I would say the staying power was excellent. The Dow has decent support at 10,600 that is sure to produce a bounce should we test that level again. The volatility is returning but the dip buyers are alive and well.

Resistance at the 2008 highs in the 11,700-11,750 range appears to have slowed the advance and a move over those levels would be strongly bullish. The three-day decline starting last Thursday was minimal and the intraday lows were bought. Nothing has really changed on the chart/trend other than the battle at 11,750. The outcome of that battle will likely be decided on Friday.

Dow Chart

The Nasdaq chart turned more bullish this week after it broke over the 2720 level on Wednesday. Today's -2 point decline was noise and I consider it bullish given the Intel event risk traders were facing. The Nasdaq has gone almost two months without a decent bout of profit taking so we need to keep that possibility in the back of our mind.

Decent support is 2675 and quite a ways below our current level. It will be interesting to see if the breakout line at 2720 will reverse to support on the next decline.

Nasdaq Chart

In summary the short squeeze on Wednesday changed the flavor of the market somewhat to push us over resistance that had held for a week. The lack of a significant decline on the Nasdaq today ahead of Intel's earnings is bullish for sentiment. The indexes continue to creep higher and even though the indicators are overbought this could continue if frustrated buyers fail to wait for a meaningful dip before jumping in. Every short dip that is bought increases the frustration of those waiting for a meaningful dip as a buying opportunity. I know this for a fact because I am one of them. Watch for Friday to be a pivotal day in the market. With expiration only a week away we could see some increased volume as funds exit option positions.

Jim Brown

Send Jim an email


New Plays

Friday Might See Volatility

by James Brown

Click here to email James Brown

Editor's Note:

The market traded sideways on Thursday but Friday could be a much different story. Better than expected earnings from Intel (INTC) tonight could fuel gains for the technology sectors tomorrow. Meanwhile JPM is due to report earnings on Friday morning and their report will set the tone for the financials. I am somewhat concerned that the rally is looking tired but the trend remains higher.

I'm not adding any new positions tonight. We already have a huge play list and we need to start trimming the number of candidates to make room for new trading ideas. Look for new trades in the weekend newsletter.

- James


In Play Updates and Reviews

Banks Could Move Tomorrow

by James Brown

Click here to email James Brown

Editor's Note:
The financials could see some volatility on Friday in reaction to JPM's report.

-James

Current Portfolio:


BULLISH Play Updates

Automatic Data Processing - ADP - close: 48.51 change: -0.47

Stop Loss: 45.45
Target(s): 49.75, 52.50
Current Gain/Loss: + 3.7%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/13 update: ADP hit some profit taking on Thursday but this is normal after the stock's recent gains. I would look for support near $47.50. I am not suggesting new positions at this time. 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: 63.68 change: +0.57

Stop Loss: 58.75
Target(s): 59.75, 64.90, (option exit 61.75)
Current Gain/Loss: +15.9%
Time Frame: 8 to 9 weeks
New Positions: see below

Comments:
01/13 update: ALK tested resistance at the $64.00 level several times today. Volume was light on today's +0.9% gain. ALK looks a little overbought here. I am not suggesting new positions at this time.

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

01/12: New stop loss @ 58.75
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: 26.87 change: +0.02

Stop Loss: 25.80
Target(s): 29.90
Current Gain/Loss: - 1.6%
Time Frame: 6 to 8 weeks
New Positions: Yes, see below

Comments:
01/13 update: Thursday was a quiet session for BBt with the stock trading sideways under $27 and its 200-dma. I am not suggesting new bullish positions at this time. Our plan was to keep our 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: 39.16 change: -0.04

Stop Loss: 36.40
Target(s): 43.40
Current Gain/Loss: + 0.6%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
01/13 update: BEAV spent another day consolidating sideways. Shares look poised to rally higher if the market will cooperate. I would consider new positions here but a dip near $38 would be more attractive. 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: 3.21 change: -0.05

Stop Loss: 2.75
Target(s): 3.40, 3.95
Current Gain/Loss: + 7.0%
Time Frame: 12 to 16 weeks
New Positions: see below

Comments:
01/13 update: Financials failed to see any follow through on yesterday's gains. BPOP lost a nickel but traders are still buying the dips. Our first target is $3.40. I am not suggesting new positions at this time. Conservative traders may want to raise their stop closer to the 50-dma.

Current Position: Long BPOP stock @ $3.00

- or -

Long the 2011 April $3.00 calls (BPOP1116D3) Entry @ $0.34

12/22: Close over $3.00 is another bullish entry point.
12/18: New stop loss @ 2.75

Entry on December 14 at $ 3.00
Earnings Date 01/20/11 (unconfirmed)
Average Daily Volume: 11.7 million
Listed on December 11th, 2010


Citigroup Inc. - C - close: 5.04 change: -0.04

Stop Loss: 4.75
Target(s): 5.00, 5.45
Current Gain/Loss: + 6.5%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/13 update: Citigroup spiked to $5.12 before succumbing to profit taking. I don't see any changes from my prior comments. We have a new stop loss at $4.75. The $4.80 level should offer some support on any serious move lower. I am not suggesting new positions at this time. 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

01/12: New stop loss @ 4.75, new target at $5.45
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: 41.06 change: -0.94

Stop Loss: 39.80
Target(s): 44.95, 49.00
Current Gain/Loss: + 2.0%
Time Frame: 12 to 14 weeks
New Positions: see below

Comments:
01/13 update: CBD gave back -2.2% with what appears to be a failed rally near $42. The stock's larger up trend is in jeopardy. I am not suggesting new bullish 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: 39.26 change: +0.09

Stop Loss: 37.49
Target(s): 39.90, 42.50
Current Gain/Loss: + 2.6%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/13 update: DIS spent the day consolidating sideways above the $39 level. I'm not convinced the correction is over. I'm still expecting DIS to move 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: 18.68 change: -0.03

Stop Loss: 17.40
Target(s): 18.40, 19.75
Current Gain/Loss: +10.5%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/13 update: Ford spiked toward $19.00 (18.97) intraday before giving back all of its gains. Is this a top? We can't tell yet but Ford remains short-term overbought and due for some profit taking. I am not suggesting new bullish positions at this time.

- Suggested Positions -

Long Ford stock @ $16.90

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

01/12: New stop loss @ 17.40
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: 29.13 change: +0.10

Stop Loss: 27.90
Target(s): 30.90, 33.00
Current Option Gain/Loss: + 0.1%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/13 update: Our FLIR play has turned positive again but I remain cautious on this stock. I would hesitate to launch new 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: 42.02 change: +0.19

Stop Loss: 38.75
Target(s): 43.50, 46.75
Current Option Gain/Loss: + 4.1%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/13 update: JBHT is consolidating sideways near the $42 level. Unfortunately I don't see any changes from my previous 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


JetBlue Airways Corp. - JBLU - close: 6.89 change: -0.07

Stop Loss: 6.58
Target(s): 7.45
Current Gain/Loss: - 0.8%
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Comments:
01/13 update: Hmm... the XAL airline index managed a gain today but JBLU lost -1%. That's telling me that we may want to be a bit more defensive on our entry point. The play is open but readers could wait for a dip closer to $6.60 or a close over $7.00 before initiating new positions. Any strength could spark a short squeeze. The most recent data listed short interest at 21% of the 228 million-share float.

I am suggesting very small bullish positions now. We'll use a stop loss at $6.58. Our target is $7.45. We want to exit in front of the late January earnings report.
FYI: The Point & Figure chart for JBLU is bullish with a $12 target.

Open Small Bullish Positions Now (at current levels)

Suggested Position: JBLU stock @ current levels

- or -

Buy the 2011 February $7.00 call (JBLU1119B7) current ask $0.35

Entry on January 13 at $xx.xx
Earnings Date 01/27/11 (unconfirmed)
Average Daily Volume: 3.5 million
Listed on January 12th, 2010


Kansas City Southern - KSU - close: 51.86 change: +0.48

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

Comments:
01/13 update: KSU is still consolidating sideways. We're still waiting for a pullback. 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


Limelight Networks - LLNW - close: 6.24 change: -0.02

Stop Loss: 5.95
Target(s): 6.90, 7.25
Current Gain/Loss: - 1.4%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
01/13 update: It was a very quiet day for LLNW with the stock drifting sideways in a narrow range. The high today was $6.32. I am repeating my comments from yesterday. I'd probably wait for a move past $6.33 or another bounce near $6.00 before initiating new positions.

We want to keep our 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.

-Small Positions-

Current Position: LLNW stock @ $6.33

- or -

Long the 2011 February $5.00 call (LLNW1119B5) Entry @ $1.45

Entry on January 12 at $6.33
Earnings Date 02/22/11 (unconfirmed)
Average Daily Volume: 1.3 million
Listed on January 11th, 2010


Morgan Stanley - MS - close: 28.30 change: -0.41

Stop Loss: 25.95
Target(s): 29.85, 31.85
Current Gain/Loss: + 5.0%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
01/13 update: Banking stocks hit some profit taking today but that could change tomorrow. JPM reports earnings on Friday morning and if the results are strong the banks could lead the market higher. Obviously the reverse is also true. If JPM disappoints then the sector will likely correct. I am not suggesting new bullish positions at this time.

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: 28.19 change: -0.36

Stop Loss: 26.95
Target(s): 27.45, 29.75
Current Gain/Loss: +10.3%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/13 update: MSFT was testing short-term support near $28.00 again. I am not suggesting new positions at this time.

Please note that we're down to our last five trading days on our January calls. I am suggesting that we exit our January $25.00 calls tomorrow (Friday) at the closing bell!

Current Position: Long MSFT stock @ 25.55

- or -

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

01/13/11 Plan to exit our January calls tomorrow at the close.
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: 13.69 change: -0.14

Stop Loss: 12.30
Target(s): 14.95, 16.25
Current Gain/Loss: + 1.1%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/13 update: MTW is losing steam under the $14.00 level. I would expect a dip back toward $13.00 and consider new positions there. 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: 22.73 change: +0.13

Stop Loss: 20.90
Target(s): 22.90, 23.60.
Current Gain/Loss: +4.2%
Time Frame: 8 to 10 weeks
New Positions: see below

Comments:
01/13 update: MYL is still drifting higher and outperformed its peers in the biotech sector. The high today was $22.83. Readers may want to consider taking profits now. Our first target to exit is $22.90. No new positions at this time.

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


Starbucks Corp. - SBUX - close: 32.41 change: +0.21

Stop Loss: 31.70
Target(s): 35.75
Current Gain/Loss: + 0.5%
Time Frame: 8 to 10 weeks
New Positions: see below

Comments:
01/13 update: It was a quiet day for SBUX. Shares managed a bounce but the stock is still stuck in its 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: 35.62 change: -0.78

Stop Loss: 34.95
Target(s): 37.75, 39.75
Current Gain/Loss: + 0.6%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/13 update: Uh-oh! SNE is breaking down. Shares lost -2.1% and is breaking the trend of higher lows. I didn't see any specific news and the Japanese NIKKEI did not see any unusual declines. Volume was big on SNE's drop today. That's a warning sign. If SNE does not recover tomorrow we may want to close this play early! No 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: 43.60 change: -0.71

Stop Loss: 42.40
Target(s): 49.00
Current Gain/Loss: - 1.6%
Time Frame: 8 to 9 weeks
New Positions: see below

Comments:
01/13 update: SXCI is slipping toward support near $43.00 again. I would consider this dip a new entry point but more conservative traders may want to wait and buy a bounce. 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: 31.27 change: +0.26

Stop Loss: 29.40
Target(s): 33.75, 37.75
Current Gain/Loss: + 1.6%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/13 update: WCG delivered a +0.8% bounce off its rising 10-dma. I'm not convinced the correction is over yet. I'd prefer to launch new positions near $30.00. Wait for the dip. 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: 31.89 change: -0.12

Stop Loss: 30.40
Target(s): 29.25, 32.75
Current Gain/Loss: +18.6%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/13 update: Tomorrow could be very interesting. JPM is due to report earnings Friday morning before the market opens. If the banks beats estimates then the financials should rally and WFC might hit our target. If JPM disappoints then the opposite will happen and banks will correct. Yesterday I suggested that we might want to exit our January calls at $32.50 (even though our target is $32.75). No matter what happens we will want to exit our January calls tomorrow (Friday) before the closing bell since January options only have five trading days left. Nimble traders may want to aim higher than our target at $32.75 if JPM delivers a strong report.

In summary, exit our January calls tomorrow at the close assuming WFC hasn't hit our target yet. We will exit our stock position in front of WFC's earnings report on January 19th. 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

ResMed Inc. - RMD - close: 33.03 change: -0.14

Stop Loss: 32.40
Target(s): 38.00
Current Gain/Loss: - 4.7%
Time Frame: 8 to 10 weeks
New Positions: see below

Comments:
01/13 update: Our play has been closed. RMD was downgraded this morning. Shares opened at $32.76 and quickly dipped to $32.26 before paring its losses. Our stop loss was hit at $32.40. RMD does look like it wants to bounce from its simple 200-dma. Readers may want to keep an eye on it.

Stopped out. (small positions only)

Closed Position: Long RMD stock @ $34.00, exit 32.40 (-4.7%)

- or -

Long the 2011 April $35.00 calls (RMD1116D35) Entry @ $1.55, exit $0.74(-52.2%)

01/13: Stopped out @ 32.40 (-4.7%), Option exit @ 0.74 (-52.2%)
01/07: Play opened at $34.00

chart:

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