Option Investor
Newsletter

Daily Newsletter, Tuesday, 1/18/2011

Table of Contents

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

Market Wrap

Earnings Misses Fail To Deter Market

by Jim Brown

Click here to email Jim Brown
Earnings misses and news Steve Jobs is still sick failed to push the market lower. The bad news bulls are alive and well.

Market Statistics

The big news for the day was the medical leave announcement by Apple CEO Steve Jobs. Steve survived pancreatic cancer a couple years ago and the board was very bad about not disclosing any material information at the time. Jobs had an operation and a liver transplant and returned in what was claimed was good health but he remained thin and gaunt and the rumors of a continued illness followed him and the company. He eventually took some time off for a "hormone imbalance" and the shares rebounded again when he returned. This time the announcement came out before the rumor mill had a chance to really ramp up although there were some who believed his health was declining again.

His announcement this weekend claimed he was taking an indefinite leave of absence to focus on his health. No medical condition was specified leaving investors to speculate his pancreatic cancer had returned. Over 39,000 people in the U.S. contract pancreatic cancer every year and 37,000 die from the disease. Since Jobs has already had this and had a portion of his pancreas removed, most would not give him a very good chance of beating it a second time. This would be a prime example that all the money in the world won't help when your number is called.

Apple shares fell -$22 at the open to $326 but that was still better than the -10% dip overseas on Monday. Shares rebounded to close at $341 ahead of earnings. After the bell Apple crushed earnings and guided higher. Earnings were $6.43 per share compared to the $5.37 analyst estimate. Revenue rose +71% to $26.74 billion and more than $2 billion over estimates. Apple sold 16.24 million iPhones an 86% increase. They sold 7.33 million iPads, 19.45 million iPods and 4.13 million Macs. The company said there was still a significant backlog of orders for the iPhone 4 and they could not fill the demand. With the iPhone 5 due out in June they are about to run into production problems where they will have to quit making 4 so they can tool up for 5.

On the conference call the COO Tin Cook said Asia was critical to Apple's future sales. For the last quarter China, Hong Kong and Taiwan generated $2.6 billion in revenue a 400% gain over the same quarter in 2009. Cook said 80% of the Fortune 100 companies are testing iPads in the enterprise space or have already begin integration of the devices. (My son's company just provided iPads to all its upper level employees.)

Apple is predicting a profit of $4.22 in Q1. That is down sequentially because Q4 is always Apple's biggest quarter for sales thanks to holiday shoppers. Apple said it finished the quarter with $60 billion in cash and investments. After the earnings shares traded as low as $327 and as high as $357 before closing at $345 and only $4 higher than the regular close.

Apple is a strong company with a great future but this has been built on the amazing business decisions made by Steve Jobs. With the company not disclosing the nature of his illness everyone will assume the worst. The SEC even launched a probe into Apple during the prior illness for lack of adequate disclosure. I would be worried that the lack of disclosure again will weaken the stock again now that the lure of earnings is not there to provide support.

Apple Chart

Also after the close IBM posted earnings of $4.24 per share and beating analyst estimates of $4.08 per share. Earnings were $5.26 billion and revenue was a billion over expectations. Order backlogs rose +$5 billion to $142 billion. Sales of mainframe computers jumped +69% led by sales of the new System Z. That system has 96 cores running at 5.2 Gigahertz and is billed as the fastest corporate mainframe you can buy.

An increase in service contracts suggests the corporate world is starting to spend money again. IBM signed contracts worth $22 billion in the quarter for an 18% increase. IBM's sales are a good indicator of the health of the corporate world. Companies don't commit to millions in new hardware and consulting services unless they are confident about the future.

IBM said it was taking business away from Hewlett Packard thanks to its broader package of hardware and services. However, analysts claim Accenture is winning service business from IBM so who really knows for sure.

IBM Chart

Not all the earnings news was good. CREE reported a +47% rise in profits but sales, profits and guidance fell short of expectations. Earnings were 55-cents compares to analyst estimates of 58-cents. Cree is a large manufacturer of LED lights and sales overseas have been falling thanks to increased competition from China resulting from huge subsidies to Chinese companies. Cree lowered expectations for the current quarter to 38-45 cents and analysts had been expecting 58-cents. Cree shares fell -$11 after the earnings report. This is a prime example of why you should not hold an option position over earnings.

CREE Chart

Citigroup lost ground after it reported earnings of 4-cents compared to analyst estimates for 8-cents. Citi blamed the lower earnings on lower than expected trading in bonds and higher expenses. Citi also blamed it on the rising cost of its debt. Stock trading also took a hit with the equity proprietary trading desk seeing a -24% decline in revenues. Citigroup shares fell -6% on the news and helped to keep most banking sector shares in negative territory. The NYSE volume was 5.6 billion shares and 1.81 billion of those were Citigroup shares. Volume was very heavy in Citi. The stock just moved over $5 last week and back into the realm where all mutual funds could buy it. That illusive goal evaporated today with a close at $4.80.

Citigroup Chart

Meredith Whitney issued a buy rating on a big bank today. Yes, you read that correctly. The banking bear is losing her fur coat. Whitney upgraded JP Morgan to a buy from outperform based on improving economic conditions and improving credit quality. This was her first upgrade since Goldman in 2009. She said there was an "abundance of evidence that earnings had stabilized" at JPM. The only other financial stocks she rates a buy are MasterCard and Visa.

Ameritrade profits rose +6.5% to $145 million or 25-cents per share and inline with estimates. Revenue rose +5.1%. The key point from the Ameritrade earnings was the return of the retail investor. Daily customer trades in Q4 averaged 370,000 and that was +50,000 above the volume in Q3. Even better the CEO said that volume has risen to 439,000 in Q1 and a gain of another 70,000 trades per day. He said the retail investor was putting money back into equities and the trend was very strong. 40% of the money flows were in to U.S. equities and out of bonds.

Ameritrade Chart

Charles Schwab Corp (SCHW) also reported earnings but theirs fell -27% due to a charge for the settlement of a court case on its YieldPlus Fund. Earnings were $119 million or 10-cents compared to $164 million and 14-cents in the year ago quarter. Schwab said client trades had risen only 2% compared to the +11% gains by Ameritrade. Schwab reported a gain of 225,000 new accounts for the quarter compared to 164,000 new accounts at Ameritrade.

Schwab Chart

AIG announced the bankers the government had chosen to handle the $20 billion secondary offering. Goldman, Bank America, Deutsche Bank and JP Morgan will all co-host the underwriting. In an unusual move they will be all be book-runners and the fee is rumored to be in the 50-75 basis point range. That is very low but given the size of the offering it is still a lot of money. However they slice it up the amount of money involved in the offering is going to be a significant hit for the market. Take out $20 plus billion out of circulation and put it into a single stock and the rest of the market will take the hit.

AIG Chart

Cargill announced it was going to spin off its 64%, $24 billion stake in Mosaic (MOS). Cargill is a private company. By spinning off Mosaic they are trying to diversify their investments and maintain that private status. The shares of Mosaic will be distributed to Cargill shareholders, the family trusts, and to Cargill debt holders. They will also be exchanged for Cargill shares and for debt. The plan then allows the shares to be traded on the secondary market over a period of time.

Analysts believe this provides an opportunity for someone to make a run at Mosaic. The potential suitors always include BHP Billiton and Rio Tinto. Mosaic CEO also said on a conference call there was a provision in the deal to allow Mosaic to be sold before the two-year window had expired. However, any potential deal would have to be high enough to compensate for the tax impact on the private shareholders. This is seen as putting a floor under the price for Mosaic with only positive moves ahead. BHP tried to acquire Potash for $39 billion and failed. Mosaic was seen as unavailable given the 64% ownership by Cargill.

Mosaic Chart

Bonds took a serious hit around 9:15 this morning when a $6 billion sale of long dated maturities hit the market. Analysts initially believed it was a fat finger trade but the exchange said no, it was a real trade. Yields spiked sharply with the spread between the 30-year yield and 2-year yield hitting a record wide. After the exchange said it was a valid trade analysts then focused on a possible rate lock scenario. With up to $25 billion in corporate securities coming to market this week it could have been a bank selling treasuries to lock in the rate. This is called "rate locking" and it is a common practice in big offerings. Strange I did not read a single analyst that claimed it was an investor moving out of bonds in favor of equities.

Yield Chart on 30-year Treasury

The economics today were mixed but positive. The January NY Empire Manufacturing Survey came in better than expected at 11.9, up from 10.6 in December. New orders rose by a whopping 10 points to 12.4 and the employment index rose from -3.4 to +8.4.

The NAHB Housing Market Index was level in January for the third consecutive month. Compared to the risk of a decline given the negative impact of winter weather this was mildly bullish. Buyer traffic actually increased but only slightly.

The market had every chance to sell off today. Citigroup missed estimates by 50%. Apple's CEO has disappeared onto another medical mystery tour. Cree blew their earnings and knocked the Intel bloom off the chip sector. The bad news was there and if the market was as fragile as the bears would have you believe this was a perfect opportunity for a decline.

Instead the indexes, including the Apple weighted Nasdaq, posted gains with the exception of the Russell, which lost 0.01 point. Apple's opening decline did penalize the Nasdaq for a 15-yard loss but it recovered.

The Dow, S&P and Nasdaq all closed at a new two-year high. The bad news bulls are alive and well at least for the time being. If that $6 B sale in bonds is any indication the trend is accelerating towards equities and away from bonds. That means the long-term future of equities is growing brighter. Short term is still questionable due to the lack of a meaningful bout of profit taking but long term is very positive.

The S&P closed at 1295 and very close to round number resistance at 1300. I can visualize the bears poised with their finger on the sell button for Wednesday when IBM pushes the Dow and S&P higher. Support is now 1275.

S&P-500 Chart

The Dow ended with a +50 point gain but that was not the real story. The Dow slammed into an invisible wall at 11850 and was unable to penetrate it all day. I don't know why this level suddenly appeared as intraday resistance but it was rock solid. I could have seen this occurring at 11900 and the converging resistance but somebody was sitting on it well in advance of that level.

Dow Chart - 15 min

Dow Chart - 90 Min

The Nasdaq survived the early decline of Apple and the big drop in F5 Networks and Cree. This was the real world equivalent of dodging a bullet. Unfortunately in the case of Apple that bullet may come around again now that the earnings are behind us. Great earnings but now there is a cloud over Steve Jobs health once again and there is nothing to keep investors motivated. Any day now we could get a rumor that his cancer has returned and it is terminal. That would be a very bad day for Apple. Since the company has decided not to disclose any more info the worst will be assumed. There was also no announcement of a stock split as some had expected. I would not be surprised to see Apple retest support at $300 over the coming weeks.

Resistance on the Nasdaq is 2775-2800 and support well back at 2725. That is plenty of room for some volatility without disrupting the longer-term trend.

Nasdaq Chart

In summary I think we were lucky today. We could have sold off on various events but the bad news bulls persevered and we moved higher. The IBM and Apple earnings after the close undoubtedly had a lot to do with keeping investors motivated. How that plays out for the rest of the week is a mystery that will slowly unfold. Having the bulls win today was good for overall market sentiment and could be a factor in drawing some more money out of bonds and into equities. If we do see a dip in the near future I would see it as a buying opportunity.

Jim Brown

Send Jim an email


New Plays

Trading the Market

by James Brown

Click here to email James Brown


NEW BULLISH Plays

NASDAQ OMX Group - NDAQ - close: 24.40 change: +0.03

Stop Loss: 23.24
Target(s): 26.50
Current Gain/Loss: unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see trigger

Company Description

Why We Like It:
NDAQ is slowly stair-stepping higher and shares are in the process of breaking out from its most recent trading range. Aggressive traders might want to buy NDAQ here. I'm suggesting we wait for a dip at $24.00 and use a stop loss at $23.24. We want to keep our positions very small to limit our risk. I'm still concerned the market could see a top in the next week or two. (More aggressive traders may want to consider using the February or March calls).

Buy the Dip Trigger @ $24.00

Suggested Position: Buy NDAQ stock @ $24.00

Annotated chart:

Entry on January xx at $xx.xx
Earnings Date 02/02/11 (unconfirmed)
Average Daily Volume: 1.5 million
Listed on January 18th, 2010


In Play Updates and Reviews

Citigroup Stumbles

by James Brown

Click here to email James Brown

Editor's Note:
Citigroup's earnings encumbered the rebound for bank stocks. Yet the major averages managed to post gains anyway. Our Citigroup position was stopped out. MYL hit our bullish exit target. I'm suggesting an early exit in SNE.

-James

Current Portfolio:


BULLISH Play Updates

Automatic Data Processing - ADP - close: 48.96 change: +0.21

Stop Loss: 46.75
Target(s): 49.75, 52.50
Current Gain/Loss: + 4.7%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/18 update: ADP gapped open lower this morning but recovered to close in positive territory. The stock looks poised to rally past the $49.00 level soon. Our first target is $49.75. I am not suggesting new bullish positions at this time. Our plan was to keep your position size small to limit your risk.
FYI: The Point & Figure chart for ADP is forecasting a bullish price target of $72.00 (it was $66).

Current Position: Long ADP stock @ $46.75

- or -

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

01/15: New stop loss @ 46.75
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 (confirmed)
Average Daily Volume: 2.8 million
Listed on December 16th, 2010


Alaska Air Group - ALK - close: 62.97 change: -1.13

Stop Loss: 59.95
Target(s): 59.75, 64.75, (option exit 61.75)
Current Gain/Loss: +14.6%
Time Frame: 8 to 9 weeks
New Positions: see below

Comments:
01/18 update: Rival airline Delta (DAL) reported earnings today and missed estimates by 5 cents. This news sparked a wave of profit taking in the airline sector. The XAL index lost -2.6%. ALK lost -1.7%. I am not suggesting new positions at this time. Our final target is $64.75.

Current Position: Long ALK stock @ $54.91

01/15: New stop loss @ 59.95, Final Target adjusted to $64.75
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 01/25/11 (confirmed)
Average Daily Volume: 331 thousand
Listed on November 20th, 2010


BB& T Corp. - BBT - close: 27.49 change: -0.29

Stop Loss: 26.75
Target(s): 29.90
Current Gain/Loss: + 0.6%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
01/18 update: BBT delivered a disappointing day. Shares lost -1% following Friday's bullish move higher. Tomorrow is our last day. We want to exit on Wednesday at the closing bell to avoid holding over earnings on Thursday morning.

Our plan was to keep our position size small to limit your risk.

(small positions only)

Current Position: BBT stock @ $27.32

- or -

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

01/18: Tomorrow is our last day. Prepare to exit.
01/15: New stop loss @ 26.75

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: 40.61 change: +1.20

Stop Loss: 37.75
Target(s): 43.40
Current Gain/Loss: + 4.4%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
01/18 update: BEAV is showing some relative strength with a bullish breakout past the $40.00 mark. If you prefer to buy on strength then this move could be your entry point. We want to keep our position size small to limit our risk.

Current Position: BEAV stock @ $38.89

- or -

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

01/15: new stop loss @ 37.75

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: 3.22 change: -0.08

Stop Loss: 3.04
Target(s): 3.40, 3.95
Current Gain/Loss: + 7.3%
Time Frame: 12 to 16 weeks
New Positions: see below

Comments:
01/18 update: Banking stocks succumbed to profit taking on Tuesday. BPOP lost -2.3%. Shares should find some support near $3.10. I am not suggesting new bullish positions at this time.

I want to remind readers that I can't find a good earnings date for BPOP. It could be January 20th or it could be the 26th. We don't want to hold over the report so prepare to exit on Wednesday at the closing bell just in case. I am not suggesting new positions at this time.

Current Position: Long BPOP stock @ $3.00

- or -

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

01/18: Prepare to exit at the close tomorrow
01/15: New stop loss @ 3.04
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


CA Technologies - CA - close: 25.46 change: +0.22

Stop Loss: 24.19
Target(s): 26.65, 27.90
Current Gain/Loss: + 0.0%
Time Frame: 6 to 7 DAYS
New Positions: Yes, see below

Comments:
01/18 update: Our short-term trade in CA is off to an okay start. Shares opened at $25.21 and closed with a +0.8% gain. I'd prefer to launch positions in the $25.25-25.00 zone but keep in mind our very short time frame. We want to plan on exiting bullish positions on January 25th at the closing bell to avoid holding over CA's earnings report that evening.

FYI: The Point & Figure chart for CA is bullish with a $39.50 target.

Current Position: Long CA stock @ $25.21

- or -

Long the 2011 February $25 calls (CA1119B25) Entry @ $1.00

Entry on January 18 at $25.21
Earnings Date 01/25/11 (confirmed)
Average Daily Volume: 2.4 million
Listed on January 15th, 2010


Walt Disney Co. - DIS - close: 39.39 change: +0.10

Stop Loss: 37.85
Target(s): 39.90, 42.50
Current Gain/Loss: + 2.9%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/18 update: DIS is trying to bounce after spending a few days building support near $39.00. Aggressive traders could buy this bounce on Tuesday but if you do I would consider a tight stop close to the $39.00 level. Our first target has already been hit. We're currently aiming for $42.50.

- 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

01/15: New stop loss @ 37.85
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


FLIR Systems Inc. - FLIR - close: 29.72 change: +0.23

Stop Loss: 28.49
Target(s): 30.90, 33.00
Current Option Gain/Loss: + 2.1%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/18 update: FLIR continues to bounce and shares are nearing resistance at $30.00 again. I am not suggesting new positions at this time.

Current Position: Long FLIR stock @ $29.10

- or -

Long the 2011 April $30.00 calls (FLIR1116D30) Entry @ $1.60

01/15: New stop loss @ 28.49
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: 42.52 change: +0.30

Stop Loss: 40.75
Target(s): 43.50, 46.75
Current Option Gain/Loss: + 5.4%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/18 update: JBHT extended its gains thanks to some positive analyst comments this morning. Traders bought the dip midday near $42.00. I don't see any changes from my weekend comments. We are not suggesting new bullish positions. Our first target to take profits is at $43.50.

Current Position: Long JBHT stock @ $40.33

- or -

Buy the 2011 February $40 calls (JBHT1119B40) Entry @ $1.85

01/15 New stop loss @ 40.75
12/22 Entry at $40.33
12/21 New Entry Point - Launch Positions Now (open of 12/22)

Entry on December 22 at $40.33
Earnings Date 01/28/11 (unconfirmed)
Average Daily Volume: 1.2 million
Listed on December 13th, 2010


Morgan Stanley - MS - close: 28.75 change: -0.23

Stop Loss: 27.49
Target(s): 29.85, 31.85
Current Gain/Loss: + 6.6%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
01/18 update: It was a quiet day for MS with the stock trading in the $29.00-28.50 zone. Tomorrow is our last day. The plan is to exit all remaining positions at Wednesday's closing bell to avoid holding over MS' earnings report.

Current Position: Long MS stock @ 26.95

- or -

2011 January $27.50 calls (MS1122a27.50) Entry @ $0.58, exit 1.63 (+181%)

- or -

Long the 2011 April $27 calls (MS1116D27) Entry @ $1.64

01/15: Take Profits. Exit Jan. calls @ 1.63, half April calls @ 2.82
01/15: Sell half of our stock position @ 28.98 (+7.5%)
01/15: New stop loss @ 27.49
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 (confirmed)
Average Daily Volume: 12.2 million
Listed on December 21st, 2010


Microsoft Corp. - MSFT - close: 28.66 change: +0.36

Stop Loss: 27.49
Target(s): 27.45, 29.75
Current Gain/Loss: +12.7%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/18 update: MSFT was showing strength today with a +1.2% gain. Is this a case of AAPL's loss is MSFT's gain? You probably heard that Steve Jobs was taking another medical leave of absence from his CEO position at AAPL. Shares of AAPL lost -7% on the news.

Aggressive traders might want to consider new bullish positions in MSFT but if you do I would use a relatively tight stop loss. Earnings will be here in about a week so for most of our readers I am not suggesting new positions.

Current Position: Long MSFT stock @ 25.55

- or -

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

01/15/11 New stop loss @ 27.49
01/14/11 Follow up. Exit Jan $25 calls @ 3.25 (+133.9%)
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: 13.86 change: -0.04

Stop Loss: 12.90
Target(s): 14.95, 16.25
Current Gain/Loss: + 2.3%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/18 update: MTW continues to churn under resistance at the $14.00 level. I'm about ready to close this play early. No new positions at this time. 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

01/15: New stop loss @ 12.90
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


SXC Health Solutions - SXCI - close: 44.16 change: +0.15

Stop Loss: 42.40
Target(s): 49.00
Current Gain/Loss: - 0.3%
Time Frame: 8 to 9 weeks
New Positions: see below

Comments:
01/18 update: SXCI traded in a tight range most of the session but shares were in rally mode the last few minutes. I'm cautiously bullish here but would not open new positions.

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: 32.73 change: +1.28

Stop Loss: 29.85
Target(s): 33.75, 37.75
Current Gain/Loss: + 6.4%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/18 update: WCG displayed relative strength with a +4.0% gain and a bullish breakout past resistance near $32.00. Volume was strong on the rally, which is normally a good sign. I am not suggesting new positions at these levels.

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.

Current Position: WCG stock @ $30.75

- or -

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

01/15: new stop loss @ 29.85
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


CLOSED BULLISH PLAYS

Citigroup Inc. - C - close: 4.80 change: -0.33

Stop Loss: 4.84
Target(s): 5.00, 5.45
Current Gain/Loss: + 2.3%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/18 update: Ouch! It was an ugly day for Citigroup shares. This morning C reported earnings of 4 cents a share. Wall Street was expecting 8 cents. Revenues were a miss as well. The stock reacted with a gap open lower at $4.93 and a drop to $4.78 at its lows. Our stop loss was hit at $4.84 closing this trade. This was labeled 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, exit @ 4.84 (+2.3%)

- or -

2011 March $5.00 calls (C1119C5) Entry @ $0.20, Exit @ 0.22 (+10%)

01/18: Stopped out @ 4.84 (+2.3%), March call @ 0.22 (+10%)
01/15: New stop loss @ 4.84
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%)

chart:

Entry on December 20 at $ 4.73
Earnings Date 01/18/11 (confirmed)
Average Daily Volume: 688 million
Listed on December 18th, 2010


Mylan, Inc. - MYL - close: 23.83 change: +1.03

Stop Loss: 21.90
Target(s): 22.90, 23.60.
Current Gain/Loss: +8.2%
Time Frame: 8 to 10 weeks
New Positions: see below

Comments:
01/18 update: Target achieved. MYL surged higher (+4.5%) and hit $24.07 intraday on news that the company had received final approval from the FDA for its Acrabose Tablet, the generic version of Bayer's Precose Tablet. These is a treatment to help with type 2 diabetes.

Our final target was hit at $23.60.

Closed Position: Long MYL stock @ 21.81, exit @ 23.60 (+8.2%)

- or -

2011 April $22.00 calls (MYL1116D22) Entry @ $1.25, exit @ $2.30 (+84%)

01/18: Target hit @ 23.60 (+8.2%), option @ $2.30 (+84%)
01/15: New stop loss @ 21.90
01/15: Take Profits. Sell Half. MYL @ 22.80 (+4.5%) Option @ 1.72 (+37%)

chart:

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


Sony Corp. - SNE - close: 35.87 change: -0.01

Stop Loss: 35.25
Target(s): 37.75, 39.75
Current Gain/Loss: + 0.7%
Time Frame: 10 to 12 weeks
New Positions: see below

Comments:
01/18 update: SNE is not performing the way it should be. I am suggesting an early exit right here. More aggressive traders may want to let it ride and just inch up their stop loss. I'd keep SNE on your watch list for a breakout past the $36.50 level.

Closed Position: Long SNE stock @ $35.60, exit $35.87 (+0.76%)
- or -
2011 APRIL $35 calls (SNE1116D35) Entry @ $2.26, Exit @ 2.25 (-0.4%)

01/18 Exit early!
01/15 New stop loss @ 35.25
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

chart:

Entry on December 22 at $35.60
Earnings Date 02/03/11 (unconfirmed)
Average Daily Volume: 888 thousand
Listed on November 23rd, 2010