Option Investor
Newsletter

Daily Newsletter, Tuesday, 3/1/2011

Table of Contents

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

Market Wrap

Market Sticker Shock on $116 Oil

by Jim Brown

Click here to email Jim Brown
An escalation of Middle East tensions, a bogus rumor and a comment about high oil prices by Bernanke in congressional testimony was a toxic witches brew for today's market.

Market Statistics

The multiple news items from the Middle East, Northern Africa (MENA) countries was a rapid-fire barrage of negative events that sent oil prices soaring and stocks plunging. New allegations about insider trading information leaked by a Goldman Board member added to the sudden decline in sentiment. Sentiment plunged so quickly that near record improvements in various economic reports was unable to stop the bleeding.

The ISM Manufacturing Index spiked to 61.4 for February from 60.8 in January. This was the sixth month of gains and the highest level of activity since 2004. New orders at 68.0 were the highest since early 2004. The employment component was the fastest rising component and rose to 64.5 from 61.7. This is the highest level of hiring in this report since the 1970s. All the other components rose as well except for inventories, which fell to 48.8 from 52.4. The gap between new orders and inventories widened from 15.4 to 19.2 and the widest since January 2010. New orders and falling inventories suggest the manufacturing sector will have to increase production to keep up.

ISM Manufacturing Chart

On Monday the ISM Chicago rose to 71.2 from 68.6 and that was the highest level of activity since the late 1980s.

The ISM New York also surged by +13.7 points to a new high at 513.4 and the employment component spiked from 54.3 to 62.5. Current business conditions rose to 77.5 from 71.2 and this is the fourth highest reading since the report began in 1993.

Not only the U.S. but Germany, France, the United Kingdom and the broader Eurozone ALL posted solid PMI data this week.

Despite the market decline today the economic recovery is accelerating into high gear.

U.S. automobile sales exploded higher in February to 13.4 million units (annualized) from 12.6 million in January. Those numbers are seasonally adjusted but the unadjusted numbers showed a sales gain of +27%. This is a huge gain and most of it was thanks to a sales surge by GM and Toyota. Sales at GM rose by 49.1%, Toyota +41.8%, Chrysler +12.6% and Ford +13.8%. Rising gasoline prices have had little impact on sales with the share of light truck sales declining only slightly from 51.6% to 49.1%.

With economic indicators literally exploding higher the market decline could easily be related to worries by hedge funds the Fed will change their FOMC statement on March 15th. If the Fed believes the economy is beginning to rebound too fast they could actually slow QE2 or end it early and funds may be expressing that worry with profit taking.

I warned last week that this worry could end our rally as we approached that March 12th meeting. It is entirely possible hedge fund managers are reacting to the employment in the economic reports and suddenly expecting a blowout in the Non-Farm payrolls on Friday that could change the Fed position on QE2.

The economic calendar for the rest of the week is mostly payroll related with the ADP, Monster and Non-Farm Payroll reports. The Fed Beige Book on Wednesday afternoon should be bullish for the market if it upgrades the outlook for each Fed region as expected.

Economic Calendar

The big drag on the market today was oil prices OR probably more specifically the threat of higher oil prices. Early this morning there was a report of an estimated 30 tanks being moved into Bahrain from Saudi Arabia. You may remember last week when Saudi said they were "prepared to intervene" if the Bahrain government needed help with the demonstrators. The news prompted an immediate spike in crude prices and worries about an increase in violence in Bahrain. However, the report proved to be false and was made by a Syrian reporter on Iranian TV.

There is a mass protest scheduled for Wednesday in Bahrain and it will be the first since the arrival of controversial opposition leader Hassan Mosheima returned from self imposed exile. His first speech after his return called for national unity and for protestors to increase demands for the ouster of the current prime minister of 40 years, Sheikh Khalifa al Khalifa. Eighteen members of Bahrain's largest party officially submitted their resignations from the lower house of parliament.

Finding out the Bahrain tank news was bogus and just an attempt by Iran to stir up trouble did little to slow the price of oil. News of an Iranian crackdown on protestors produced worries that increasing civil unrest could result in attacks on the Iranian oil infrastructure in order to cripple government funding. Iran produces about 3.8 million barrels per day of oil. A halt in production there could be serious but not fatal. Saudi Arabia has about 4 mbpd of the same kind of sour crude Iran exports so it would be painful but not a global disaster.

We also learned that Saudi Arabia arrested a high profile Shiite cleric, Tawfiq al-Amir, after he made a high profile sermon calling for a conversion to a constitutional monarchy. Saudi has zero tolerance for political dissent. The arrest was likely preemptive ahead of the scheduled March 11th day of rage protest. Saudi is also reeling from an open letter by 119 high profile educators, economists and business people supporting the March 11th protest. Arresting the cleric could have serious implications. Some believe the cleric publicized his planned sermon so he would be arrested and therefore further inflame tensions. Sort of a martyr in prison for the cause. If citizens were to increase protests and Saudi relented and released him then Saudi officials would appear weak and demands for change would grow. If Saudi keeps him in jail despite the growing protests then he becomes even a bigger focal point for the demonstrations. Either way it is a winning play by the protestors.

Security forces in Oman injured several protestors in a clash and caused new worries the unrest there would escalate. Oman produces just under one million barrels per day.

Of course Libya is still a sore spot and Gadhafi forces reportedly took back a couple towns on Tuesday. That suggests the battle has a long way to go and full production will not be returning any time soon.

The bottom line here is that you can't conclude two centuries of unrest and a half a century of rule by dictators in a peaceful manner. The old leaders are not going to leave quietly and the new leaders are inheriting a basket of snakes because of the various tribes and factions all wanting a place at the table.

All the MENA tensions sent oil spiking higher on short covering and worries about further production outages. U.S. WTI rose to $100.64 and Brent crude hit $116.76. Since the majority of our gasoline is made from oil indexed to Brent prices this means our gasoline prices are going sharply higher. The average U.S. price today is $3.38 but it should be over $3.50 by the weekend. At $116 Brent we could see prices in some areas hit $4 if the spike in crude holds.

Brent Crude Chart

U.S. WTI Crude Chart

Analysts on TV were blaming oil prices for the decline in the markets. While there is some correlation between oil price spikes and declines in the stock market I don't think that was the reason for the decline. The stock market and the oil market have been getting along fine until last week. Oil has been rising steadily since November and so has the market. The spike over $100 may have produced a little more economic risk but nothing immediate. It takes many months for the impact of higher oil prices to weigh on the economy.

Comparison chart - Brent & S&P

Normally when oil prices spike the price of energy shares rally. There was no rally in energy stocks today. There was serious selling. Oil over $100 but energy stocks getting hammered? Something does not compute. These companies are going to be printing money in Q1 thanks to the high prices so it is not a fundamental reason for the decline.

Energy Stock Losers

Many of those stocks listed above are the momentum stocks in the sector. Those were getting hit the hardest and that suggests a concentrated bout of profit taking. I suspect there was at least one large hedge fund that found themselves wishing they had taken profits when oil was $100 last week. However, the market sell off caught them off guard. Energy stocks were in strong rally mode on Monday and when oil prices returned to $100 today they were ready to pull the trigger.

I think the TV reporters attach too much importance to the surface events making the news and don't dig down to the real story. Of course a hedge fund sell off would be off their radar anyway.

In a news related sell off there is normally a sharp drop at the open to a plateau where the market tries to consolidate for a couple hours and decide direction. Today's selling was dramatic and constant. There was barely any letup other than a weak buy the dip bounce at 10:30 that was immediately sold. This smells exactly like a portfolio allocation move where a big fund decides to exit winning sectors at the top and roll over into sectors expected to do well in the future.

Nobody expects $100 oil to last. There is simply too much oil in storage and these MENA countries need to export oil to survive. There may be a few blips along the way but it would take a long time for excess supplies in storage to decline to a point where $100 is permanent in 2011. Next year, yes, this year no.

Even Bernanke said in testimony that $100 oil is not an economic killer because it is expected to be temporary. He said only a prolonged move over $100 would be a problem because of the impact on the consumer.

I spent a lot of time today trying to make sense of the market and oil and the bottom line is it did not make sense. I really think this was a fund liquidation/rotation event and not specifically related to the fears $100 oil will tank the economy. On the flip side, if we did see prices remain at this level or higher, there would be a drag on the economy long term. This is consistent with my Energy Recession expectations for 2012.

The fund liquidation theory fits nicely with my comments in recent weeks about funds anticipating a change in the Fed bias soon and the potential for QE2 to end early. Funds began buying the market two months before QE2 was formerly announced and I expected them to begin selling the market two months before the end of QE2 in June. When the economic reports began accelerating over the last several weeks many analysts began predicting an early end to QE2. No less than seven Fed heads talked about QE2 in some manner last week and the potential for an early termination or ending it on schedule. That much Fed press is not lost on the people who make trading decisions at the big hedge funds.

You have to look at it from their perspective. If they were planning on holding their positions for a few more weeks before lightening the load and then suddenly the economic picture changed and Fed speak is all over the news, they have to be thinking, "what do we have to gain by remaining long?" The market is at its highs and beginning to show the increased volatility of a market that could be topping. "Why should we risk our millions in profits by sticking it out until April?" Take profits now and take the risk off the table.

Once the persistent selling began the nervous traders who bought the dip from last week are suddenly rethinking their positions. When the market began diving again after lunch and sell stops getting hit it pretty much guaranteed a negative close.

Now that brings us to an interesting point. Without any attempt at short covering at the close it suggests the decline will continue. The S&P futures closed dead on 1300 and they are below that level overnight. Technically speaking a break below 1295 on the futures is a lower low and a strong sell signal. Note the absolutely vertical decline on Tuesday. That is NOT normal market activity. This is a serious sell program(s) by funds.

S&P Futures Chart

Have you looked at the calendar lately? March 6th is the two-year anniversary of the market low in 2009 at 666.79 on the S&P. Markets love anniversaries of major market events. It reminds them of how long the trend has been in play and the odds of it continuing. Is this anniversary a factor this week? Who knows but you can bet more than a few fund managers are looking at those two years of gains and making decisions about the future.

Gold made a new high today at $1435 and silver at $34.72 on inflation worries and geopolitical risk. The prices paid components of the various ISM reports are spiking sharply and that is another reason analysts are speculating about the Fed ending QE2 early. However, Bernanke gave no indications of an early end in his congressional testimony today. Like Bullard said last week, the Fed has to tell the market what it is going to do long before it makes the change. That makes the March 15th FOMC meeting even more critical.

For Wednesday there is only one thing important for traders. That is watching to see if support holds at Dow 12,000, S&P 1,295-1,300, Nasdaq 2,700 and Russell 795. These were the support levels from last week. A break of those levels is sure to trigger some major sell programs and stop losses and the drop could be dramatic. Last week's decline was written off as minor profit taking and traders bought the dip and the good economics for two days. Those gains are now gone and traders will be looking for a double bottom to appear at support so they can buy again. If that support provides a bounce then I expect an even stronger rebound because it will be a confirmation retest of the earlier support. However, if that support fails the bulls better run for cover.

Tuesday's sell off produced a lower high on the indexes and a break below last week's support would be a lower low and invite even stronger selling.

The S&P declined to uptrend support today but I am not expecting it to hold. I think we are almost guaranteed a retest of last week's lows at 1295.

S&P-500 Chart

The Dow declined -168 points at the close but that was more than -210 points from its opening high at 12,261. I don't see any way the Dow will not test 12,000 again on Wednesday. The decline was too dramatic and margin selling at the open is sure to pressure support. A break of 12,000 would be psychologically bearish and while it would target 11,800 I think the eventual damage could be worse than that. A break below 12,000 will have traders expecting a full -10% correction and sometime those expectations become self-fulfilling because everyone is waiting for the correction to end before they will buy again.

Dow Chart

The Nasdaq declined to close right on the support from the 50-day average and uptrend resistance. However, there was very little bounce at the close on the big cap techs. Big losses in GOOG -12, PCLN -8, CEDC -8, ISRG -8, FFIV -4, DECK -4, AAPL -4 suggested there was more to come when there was very little short covering in the final few minutes.

The Nasdaq led the charge on Friday and today's close is below Friday's lows. This is bearish. However, as long as support at 2700-2710 holds the bulls might come back reenergized.

Nasdaq Chart

The Russell declined by -2% for the biggest loss other than the Dow Transports at -2.5%. Obviously the transports declined on higher oil prices. The Russell closed at 808 and well above the support at 795 from last week. In theory the accelerating economics should be especially good for the small caps. However, they are the first to be impacted by rising fuel prices.

Russell Chart

In summary bull market selling is normally short, sharp and scary and that is exactly what we got today. Each index has decent padding between today's close and the support from last week but another day like today would obliterate that safety zone. I explained last week that we should buy the dips and remain bullish as long as those key levels of Dow 12,000, S&P 1300, Nasdaq 2700 and Russell 800 were not broken. Several were penetrated but the rebound was quick. The same is true for this week. As long as those levels are not broken the drop would be considered a successful retest of support and the rebound could be even stronger. A break below those levels turns me into a cautious bear until the market finds a bottom. We have to trade the trend until the trend changes then reevaluate. Blindly sticking to a confirmed bias will make you frustrated and broke.

Jim Brown

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New Plays

A Pivotal Test

by James Brown

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Editor's Note:

Stocks experienced some widespread profit taking on Tuesday. Is it the start of something bigger? Or just a one-day reaction to rising oil prices? That's what investors want to know. The 1300-1295 area on the S&P 500 index will be key. If the S&P 500 breaks down under this level it could spark a serious correction lower. If not, then traders will probably be encouraged to buy the dip again. This could be a pivotal point in the market's advance.

We already have a very big play list and we are leaning heavily on the bullish side given the market's trend. A breakdown would likely see several of our current positions get stopped out. Nimble traders looking for bearish plays might want to focus on small caps, which are likely to underperform their large-cap rivals. Plus, consumer-related stocks might underperform if oil continues to climb.

I am not adding any new plays tonight. Let's wait and see if the major averages bounce from support or breakdown. I've attached a chart of the S&P 500 below.

- James



In Play Updates and Reviews

Oil Sours the Mood

by James Brown

Click here to email James Brown

Editor's Note:
The spike in oil has soured the mood on Wall Street. The tone of trading took a nasty turn on Tuesday. False rumors that Saudi Arabia had sent tanks into neighboring Bahrain to help the local government deter protestors started the day off on a bad note. The positive PMI data both here in the U.S. and abroad could not stop the bearish shadow cast by rising oil prices. Brent crude oil futures rose $3.60 to over $115 a barrel. Even energy stocks failed to rally on the commodity's strength. Gold broke out to new all-time highs and silver surged to new 30+ year highs as investors sought safe havens for their money.

I heard a lot of bearish comments and worries that the stock market had started a new correction lower and how small caps and consumer-related stocks would likely underperform. Yet when I look at the stock market's major averages the trend is still up. Yes, today was a bad day for the bulls and yes we should be cautious and on our guard. Until the S&P 500 breaks down under support near 1300 I'm going to remain cautiously bullish.

Tonight I would hesitate to launch new positions. Let's wait and see if stocks bounce from recent support. If they do then traders will likely rush into to buy this second dip. If not, well, readers may want to tighten their stop losses tonight just in case.

-James

Current Portfolio:


BULLISH Play Updates

Alcoa Inc - AA - close: 16.23 change: -0.62

Stop Loss: 15.95
Target(s): 18.50, 19.75
Current Gain/Loss: - 8.0%
2nd Position Current Gain/Loss: + 0.0%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
03/01 update: Caution! I have been warning readers that if AA fails near the $17.00 level it could signal a change in the stock's trend. That's exactly what happened today with a failed rally at $17 and a -3.6% decline. There is still short-term support near $16.00 but odds are growing it will not hold this time. More conservative traders may want to exit immediately. I am not suggesting new positions at this time.

Current Position: Long AA stock @ $17.65

- or -

Long the March $17.00 calls (AA1119C17) Entry @ $0.98

-2nd position, Entry Feb. 25th -

New Position: Buy AA stock @ 16.84

- or -

Buy the March $17.00 calls (AA1119C17) Entry @ $0.39

02/25 AA opened at $16.84. March $17 calls opened @ $0.39
02/24 Open new positions on the bounce.
02/23 use the bounce as a new entry point.
02/22 Adjust the stop loss to $15.95
02/18 AA provides another entry point
02/14 AA hits our breakout trigger @ 17.65, Stop @ 16.25

Entry on February 14 at $17.65
Earnings Date 04/11/11 (unconfirmed)
Average Daily Volume: 41 million
Listed on February 2nd, 2010


ACI Worldwide Inc. - close: 31.10 change: -0.21

Stop Loss: 27.80
Target(s): 33.00, 34.75
Current Gain/Loss: + 4.9%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
03/01 update: ACIW is still holding up pretty well and shares only saw a minor decline today. However, if the market breaks support then ACIW will probably end up retesting the $28 area. I am not suggesting new positions at this time. Our upside targets are $33.00 and $34.75.

FYI: ACIW does have options but the spreads are very wide, which puts us at a significant disadvantage.

SMALL bullish positions

Current Position: Long ACIW stock @ $29.63

Entry on February 25 at $29.63
Earnings Date 04/28/11 (unconfirmed)
Average Daily Volume: 122 thousand
Listed on February 24th, 2010


AnnTaylor Stores - ANN - close: 23.14 change: -0.07

Stop Loss: 22.85
Target(s): 25.90, 27.85
Current Gain/Loss: - 3.0%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
03/01 update: I am somewhat amazed that ANN did not breakdown under the $23.00 level today. On a short-term basis the stock is poised to decline and more conservative traders will want to seriously consider an early exit now. No new positions at this time.

Small Positions

Current Position: Long ANN stock @ $23.86

- or -

Long the March $22.50 calls (ANN1119C22.5) Entry @ $2.35

02/23 New stop loss @ 22.85
02/22 New stop loss @ 22.40

Entry on February 14 at $23.86
Earnings Date 03/11/11 (confirmed)
Average Daily Volume: 3.0 million
Listed on February 8th, 2010


Baxter Intl. - BAX - close: 52.19 change: -0.96

Stop Loss: 49.90
Target(s): 54.90, 57.50
Current Gain/Loss: + 0.3%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
03/01 update: Hmm... the market's weakness led BAX to a -1.8% decline. More than that shares failed near their February highs. This sets up for a perfect little bearish double top pattern. Odds are good that BAX will test the $51-50 zone again. I am not suggesting new bullish positions at this time. The plan was to keep our position size small to limit our risk.

FYI: The Point & Figure chart for BAX is bullish with a $73 target.

(small positions only)

Current Position: Long BAX stock @ 52.00

- or -

Long the May $55 call (BAX1121E55) Entry @ $1.05

Entry on February 22 at $52.00
Earnings Date 04/21/11 (unconfirmed)
Average Daily Volume: 5.8 million
Listed on February 19th, 2010


Boston Scientific Corp. - BSX - close: 7.52 change: +0.36

Stop Loss: 6.85
Target(s): 7.80, 8.90
Current Gain/Loss: + 4.1%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
03/01 update: Shares of BSX were upgraded before the opening bell. Shares reacted by gapping open higher at $7.55 and hitting $7.69 before paring its gains. Cautious traders will want to lock in gains now since the major market indices look vulnerable. I would expect BSX to fill the gap and that means a dip back toward the $7.25-7.20 zone. No new positions at this time. The plan is to keep our position size small to limit our risk.

- (Small Positions to Limit our Risk)

Current Position: Long BSX stock @ 7.22

- or -

Long the April $7.00 calls (BSX1116D7) Entry @ $0.44

Entry on February 28 at $ 7.22
Earnings Date 04/26/11 (unconfirmed)
Average Daily Volume: 16 million
Listed on February 26th, 2010


Gildan Activewear - GIL - close: 31.20 change: -0.78

Stop Loss: 28.99
Target(s): 34.85, 38.00
Current Gain/Loss: Unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see trigger

Comments:
03/01 update: As we expected GIL hit some profit taking. It was probably exacerbated by the market's widespread declines. Shares lost -2.4% and hit $31.03 intraday. That means we are still sitting on the sidelines since our trigger to open positions was at $31.00. I am going to tweak our entry point to try and take advantage of the market's weakness. Let's move our buy-the-dip trigger down to $30.35 and we'll move our stop loss to $28.99, just under the 200-dma.

Trigger @ 30.35

Suggested Position: buy GIL stock @ 30.35

- or -

Buy the April $30 call (GIL1116D30)

03/01 Adjusted buy-the-dip trigger to $30.35
03/01 Adjusted stop loss to $28.99

Entry on March x at $xx.xx
Earnings Date 05/12/11 (unconfirmed)
Average Daily Volume: 634 thousand
Listed on February 28th, 2010


Intuit - INTU - close: 51.42 change: -1.16

Stop Loss: 49.49
Target(s): 54.75, 59.00
Current Gain/Loss: - 0.8%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
03/01 update: The bounce in INTU is rolling over. Shares seem headed for a retest of support near $50.00. Wait for the dip or bounce from this level before initiating new bullish positions.

Current Position: Long INTU stock @ $51.87

- or -

Long the March $52.50 calls (INTU1119C52.5) Entry @ $1.10

- or -

Long the April $55.00 calls (INTU1116D55) Entry @ $1.05

Entry on February 25 at $51.87
Earnings Date 05/19/11 (unconfirmed)
Average Daily Volume: 2.8 million
Listed on February 24th, 2010


Lincare Holdings Inc. - LNCR - close: 29.00 change: -0.34

Stop Loss: 27.95
Target(s): 29.90, 31.75
Current Gain/Loss: + 2.2%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
03/01 update: Normally healthcare stocks are seen as safety plays when the market gets nervous. Yet that didn't save LNCR from a little profit taking today. Shares look poised to retest support near $28.00. I am not suggesting new bullish positions at this time.

FYI: The Point & Figure chart for LNCR is bullish with a $40 target. Plus, investors will be interested to note that LNCR has relatively high short interest. The most recent data listed short interest at 11.5% of the 86-million share float. With the recent breakout this stock could see a short squeeze.

- Small Bullish Positions -

Current Position: Long LNCR stock @ 28.37

- or -

Long the March $29.00 calls (LNCR1119C29) Entry @ $0.75

03/01 The exit number below were updated for Tuesday's open
02/28 Sell Half to lock in a gain. LNCR @ $29.52 (+4.0%)
02/28 Sell Half: March $29 calls bid $0.85 (+13.3%)
02/22 New stop loss @ 27.95
02/19 New stop loss @ 27.45
02/12 Adjusted entry point to current levels.

Entry on February 14 at $28.37
Earnings Date 04/19/11 (unconfirmed)
Average Daily Volume: 932 thousand
Listed on February 9th, 2010


Maxim Integrated Products - MXIM - close: 26.77 change: -0.81

Stop Loss: 25.95
Target(s): 29.90, 33.50
Current Gain/Loss: - 3.2%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
03/01 update: The action in the SOX semiconductor index was a bit worrisome. The rebound in the SOX has failed at the underside of its prior bullish channel. This does not bode well for the bulls. Meanwhile the trend for MXIM is still higher but if the SOX accelerates lower it's going to be tough for MXIM to maintain its momentum. Technicians could argue that MXIM just produced a three-candle bearish reversal pattern. I am not suggesting new bullish positions at this time. Look for MXIM to test the $26 area soon.

Current Position: Long MXIM stock @ $27.68

- or -

Long the April $30 calls (MXIM1116D30) Entry @ $0.35

Entry on February 28 at $27.68
Earnings Date 04/28/11 (unconfirmed)
Average Daily Volume: 3.3 million
Listed on February 26th, 2010


Omnicom Group Inc. - OMC - close: 49.69 change: -1.21

Stop Loss: 47.65
Target(s): 54.00
Current Gain/Loss: -0.7%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
03/01 update: OMC tagged a new two-year high and reversed. The move today also produced a bearish engulfing (reversal) candlestick pattern. Normally these reversals need to see confirmation but it's a warning for the bulls. I am not suggesting new bullish positions at this time.

Current Position: Long OMC stock @ $50.04

- or -

Long the April $50 calls (OMC1116D50) Entry @ $1.65

Entry on February 28 at $50.04
Earnings Date 04/20/11 (unconfirmed)
Average Daily Volume: 2.8 million
Listed on February 26th, 2010


Signet Jewelers Limited - SIG - close: 43.40 change: -0.47

Stop Loss: 42.65
Target(s): 49.75
Current Gain/Loss: - 4.0%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
03/01 update: SIG managed to hold near support in the $43 area but if the S&P 500 breaks down we can expect SIG to follow it lower. Yesterday we raised the stop loss to $42.65. I am not suggesting new positions at this time.

Current Position: Long SIG stock @ $45.25

- or -

Long the March $45 calls (SIG1119C45) Entry @ $1.85

02/28 New stop loss @ 42.65
02/28 Consider scaling back positions here.

Entry on February 18 at $45.25
Earnings Date 03/30/11 (unconfirmed)
Average Daily Volume: 436 thousand
Listed on February 16th, 2010


Sony Corp. - SNE - close: 36.27 change: -0.57

Stop Loss: 34.80
Target(s): 39.90, 43.50
Current Gain/Loss: - 1.2%
Time Frame: 8 to 10 weeks
New Positions: see below

Comments:
03/01 update: Tomorrow could be a rough day for SNE. The Japanese market is likely to trade lower in reaction to the weakness in New York today. If that happens then SNE will probably gap open lower tomorrow. The $35.50 level should offer some support. Readers may want to wait and see where SNE bounces before initiating new positions.

FYI: The Point & Figure chart for SNE is bullish with a $53 target.

Current Position: long SNE stock @ $36.72

- or -

Long the April $38 calls (SNE1116D38) Entry @ $0.85

Entry on March 1 at $36.72
Earnings Date 05/12/11 (unconfirmed)
Average Daily Volume: 862 thousand
Listed on February 28th, 2010


UnitedHealth Group - UNH - close: 42.45 change: -0.13

Stop Loss: 41.95
Target(s): 44.75
Current Gain/Loss: + 3.1%
Time Frame: 8 to 10 weeks
New Positions: see below

Comments:
03/01 update: Typically healthcare stocks tend to be viewed as safe haven plays when the market gets nervous. Yet we didn't see a lot of action in UNH. Of course shares didn't sell-off either. Technically the stock continue to look vulnerable to me. I remain very cautious here. More conservative traders may want to go ahead and take profits now with an early exit. No new positions at this time.

Current Position: UNH stock @ $41.15

02/26: New stop loss @ 41.95
02/22: New stop loss @ 41.80
02/17: New stop loss @ 41.49
02/12: New stop loss @ 41.25
02/12: Exit the call options early (bid $1.47 +22.5%)
02/08: New stop loss @ 40.75

Entry on January 28 at $41.15
Earnings Date 01/20/11 (unconfirmed)
Average Daily Volume: 5.9 million
Listed on January 20th, 2010


Wyndham Worldwide - WYN - close: 30.73 change: -0.55

Stop Loss: 29.90
Target(s): 34.50, 37.50
Current Gain/Loss: - 2.2%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
03/01 update: WYN appears headed for round-number support near $30.00 soon. Wait for the dip or a bounce from this level before considering new bullish positions. We have a tight stop at $29.90. Readers may want to consider lowering their stop to give WYN more room to maneuver.

Current Position: Long WYN stock @ $31.45

- or -

Long the April $32 calls (WYN1116D32) Entry @ $1.15

Entry on February 28 at $31.45
Earnings Date 04/28/11 (unconfirmed)
Average Daily Volume: 3.2 million
Listed on February 26th, 2010