Option Investor
Newsletter

Daily Newsletter, Saturday, 4/9/2011

Table of Contents

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

Market Wrap

Event Risk Wins Again

by Jim Brown

Click here to email Jim Brown

Despite more bad news, the political theater playing out in Washington and weekend event risk the markets remained relatively stable with the Dow squeezing out a +3 point gain for the week.

Market Statistics

The dollar collapsed and commodities soared on inflation concerns and geopolitical events. Equities were flat to down but commodities were setting new highs. I can understand investors not wanting to hold equities over the weekend while the political theater in Washington played out because uncertainty is always a negative for the equity markets.

There were only a couple of economic reports and neither was important. The Wholesale Inventory report showed inventories rose +1% in February after a similar +1% rise in January. Sales fell by -0.8% after a +3.3% gain in January. Inventory levels remain low and any material pickup in sales would mean more orders for manufacturers. The report was pretty much as analysts expected.

The ECRI Weekly Leading Index rose again to 131.2 and a high for this cycle after a dip in early March to 129.1. This is a long-term index and little attention is paid to it on a week-to-week basis. The dip in early March showed the recovery is still fragile and has yet to reach a self-sustaining level.

The economic calendar for next week shows an increase in activity but only three reports are expected to garner any attention from traders. The Fed Beige Book, a report of economic activity in all Fed regions, is the most important report of the week. The price indexes are next in importance to indicate how inflation is filtering through the economy.

Economic Calendar

Investor focus turns to earnings next week starting with Alcoa on Monday. There are relatively few companies reporting but they include JP Morgan, Bank America and Google.

Earnings Calendar

The big news on Friday was the monster rally in the commodity sector. Oil prices rallied to 30-month highs at $113 on the WTI and $126 on Brent. The rally came after Gaddafi launched further attacks on his own oil fields to keep the rebels from raising cash by selling oil. He began launching attacks after the rebels loaded a tanker with one million barrels on Wednesday. Fighting appears to be intensifying on the ground and analysts are now saying the fighting could last the rest of the year and there could be long term damage to Libya's oil production capabilities.

WTI Crude Chart

Brent Crude Chart

In Nigeria a bomb targeting an election office killing at least eight people ahead of Saturday's election. Nigeria produces 2.6 mbpd of light crude so any unrest there could complicate the current lack of light crude from Libya. Historically the opposition groups in Nigeria target oil facilities to protest the government. The MEND rebels have publicly announced they would not target oil ahead of the election but warned they would not hesitate if the new government did not meet their demands.

In Yemen President Saleh rejected a Gulf Arab plan for him to step down and end his 32-year reign. He had initially accepted a proposal put forth by Saudi Arabia and the Gulf Cooperation Council to hold talks with the opposition. On Wednesday the GCC said there was a deal for Saleh to leave but on Friday he told thousands of supporters he would reject this "belligerent intervention." Frustration sent tens of thousands of demonstrators back into the streets and at least five were killed and dozens injured after security police fired on the crowds. That brings the total killed for the week to more than 25. More than 40% of the Yemen population lives on less than $2 per day and a third face chronic hunger. Yemen sits on a shipping lane that sees three million barrels of oil pass through daily. Yemen produces 300,000 bpd of oil.

In Bahrain the number of opposition activists arrested and detained by the government with help from Saudi troops now exceeds 500 according to the Bahraini Center for Human Rights. Dozens have been killed and dozens more are missing. The regime is using support from Saudi troops to go house to house searching for opposition activists. This suppression of dissention is suppressing fears of a new uprising so that takes Bahrain off the threat board for future oil price spikes. Bahrain has no material oil production but its proximity and relationship with Saudi Arabia makes it a flash point for a potential disruption in Saudi production.

In Syria thousands again massed in protests that left more than 30 dead and hundreds wounded in Dara. More than 130 have been killed in the last two months. The Syrian government took a page from Gaddafi's playbook and blamed the deaths on armed groups of foreigners, vandals and al-Qaeda terrorists trying to take over the country. Protestors are trying to force the ouster of President Assad after 11 years of power. Syria produces 400,000 bpd of oil.

In Egypt tens of thousands of demonstrators gathered again in Tahrir Square to demand the prosecution of former president Hosni Mubarak and accuse the current Supreme Military Council of not acting quickly enough to bring corrupt members of the old regime to justice. The military used force to breakup the demonstration and two were killed and 15 others wounded by gunfire. Three military vehicles were still burning at dawn as a result of the conflict. Egypt produces about 600,000 bpd of oil.

Now you should understand the geopolitical reasons why oil rose but there is also the financial reason. The ECB hiked rates on Thursday and the Euro currency jumped to a two year high. The ECB and several other nations including China, which hiked rates earlier in the week, are now on the path to higher rates and stronger currencies but the Federal Reserve is still on a quantitive-easing program where they create money and inject it into the markets in the form of treasury purchases. This deflates the value of the dollar. Apparently they will continue to pursue a very accommodative stimulus policy for the rest of the year.

Fed Vice Chair Janet Yellin said in a speech on Saturday it was too soon for the Fed to reverse its extremely accommodative economic policy. "Economic conditions do not yet call for the Fed to exit from its unconventional policies." She said the Fed officials are very aware of the need to ease up on the gas pedal at the "appropriate time" and has a "suite of tools" to enable a graceful exit. She also said continuing to purchase treasuries beyond current committed amounts could hinder that graceful exit. "This could lead to an undesired rise in inflation expectations" and a precise communications strategy will be key to guiding market expectations. This is why Bernanke will begin giving quarterly press conferences on April 27th to give specific guidance on future Fed policy. Of the major government security dealers surveyed last week 67% said the press conferences would lead to greater clarity on Fed policy but 47% also expected they would lead to greater market volatility.

The result of the ECB rate hike was a strong divergence between the two currencies and the dollar fell nearly 1% to a two year low.

Chart of the Euro

Chart of the Dollar Index

The impact of the falling dollar and rising geopolitical concerns in the Middle East and Northern Africa sent oil prices soaring with WTI gaining $2.75 and Brent +3.98. The average price of gasoline has risen to $3.75 per gallon and could be over $3.80 next week.

An OilSlick reader in Maui sent me this picture on Saturday morning of gasoline prices. Obviously there are drawbacks to living in paradise.

Maui Gasoline Prices

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Oil was not the only commodity spiking to new highs. Silver pulled to within 57 cents of an all time high at $40.93. The high back in 1980 of $41.50 came on an attempt by the Hunt brothers to corner the silver market. The high today is based on rising global demand plus the acquisition of silver bullion, futures and ETFs as a hedge against inflation. Silver is the poor man's gold and it is currently drastically undervalued compared to gold. If historical relationships between gold and silver were to return, as many believe could happen soon, silver would be trading over $100 per ounce.

Silver Chart - Weekly

Silver Chart - Quarterly

Gold continues to hit new highs and closed at $1476 and the high of the day on Friday. The Fed may not believe there is any material inflation in the system but you only need to look at the commodity charts to disprove that theory.

Gold Chart - Weekly

Grain prices have also been rising. Corn has doubled in the past year and that directly impacts the prices we pay for food. Of course the government does not believe food and energy are relative to inflation because of the short-term volatility but as you can see by the charts prices have definitely inflated.

Corn Chart - Weekly

CRB Commodity Index Chart

In a survey taken last week before oil prices spiked to $113 the majority of analysts surveyed did not believe the Fed would change its bias as long as oil prices were high. Many were increasing the odds of a QE3 program in order to offset the impact of high fuel prices to the struggling economy. The Fed Funds Futures are predicting no rate change through December but a hike to just under 1% by June 2012 and a Fed rate just under 1.75% for December 2012. That is far from the accelerated rate of increases most analysts were expecting six months ago. Most believed the Fed would act aggressively once they changed their bias. It sounds like the Fed will continue to refill the punch bowl for many months to come.

Stock news was limited on Friday with Tempur Pedic International (TPX) the biggest gainer at +6 after they projected earnings of 67-68 cents for Q1 and well above the 58-cents analysts expected. Raised revenue estimates of $325 million exceeded estimates of $290 million. You know stock news had to be thin when Tempur Pedic was the big news for the day.

Tempur Pedic Chart

Chip stocks weakened again on worries over supply chain problems out of Japan. These worries increased after Japan reported that 7.1 magnitude aftershock on Thursday. The semiconductor sector was rebounding prior to that Thursday quake and the SOX actually finished the week with a +1.5% gain despite the declines of the last two days.

The Justice Dept approved Google's acquisition of ITA Software but the approval had a list of conditions attached. Google must continue to license the ITA service to online airfare sites for at least five years and on terms described in the settlement as "reasonable and nondiscriminatory." Bing, Orbitz, TripAdvisor, Hotwire and Kayak use the ITA software for about 65% of their bookings. Google must also put in place internal firewalls to prevent access to sensitive information gathered from customers of those companies. Google must also allow the government to monitor compliance for five years. Google is paying $700 million for ITA.

Google is under investigation for antitrust concerns and this deal may actually increase those concerns. Now that the Justice Dept will have a window inside the search company to "monitor" compliance there are some analysts that believe this will open eyes at the Justice Dept on exactly how much control Google really does have. A lawyer for Expedia said "the Justice Dept is clearly reserving judgment on whether it needs to take further enforcement action in this area." Google shares were down -$3 on Friday.

Johnson & Johnson (JNJ) shares were also flat despite an agreement to pay $70 million for bribes in Greece, Poland and Romania relating to sales of medical devices. They even admitted kickbacks to Saddam Hussein's regime. This fine is seen as the first of many because of a long history of bribes to get by restrictions on operating in other countries.

Toyota (Nyse:TM) announced on Friday it would resume production in Japan at half capacity from April 18th to April 27th. The automaker suspended production at all 18 plants in Japan after the March 11th earthquake. Plants will close again from April 28th to May 9th for Japan's Golden Week holiday. Toyota also said it would suspend production at U.S. plants in a series of one day shutdowns because of parts shortages. The shutdowns will impact 25,000 workers. The company said future production plans in Japan and the U.S. would be decided at a later date as more parts came available. Reportedly they are still trying to source 150 different parts where the original maker can't supply due to quake damage. Originally they were trying to find alternate sources for more than 500 different parts so conditions have improved. For cars built in America Toyota claims 85% of the parts are manufactured in North America and only 15% come from overseas. Ford is still not taking orders for various black and red cars because the pigments are made by a company in Japan that is in the evacuation zone around the damaged nuclear plant. If you want a "tuxedo black" Ford you are out of luck.

The political theater played out in multiple acts all day on Friday with every sound bite scripted to blame the other side. The uncertainty weighed on the markets because nobody knew how a government shutdown at midnight on Friday would affect the recovery or the billions in government spending. Late Friday night with less than an hour to spare the gruesome threesome of Boehner, Reid and Obama reached an agreement to cut another $37 billion in Federal spending and avert a government shutdown. This should produce a minor relief rally on Monday morning.

The S&P dipped to 1322 intraday before rebounding into the close. The 1325 level was my buy the dip threshold from Thursday night and baring some unforeseen event over the weekend we should move higher from here. The key resistance levels at 1333 and 1340-44 are still in play. Volume on Friday's decline was the lightest in two weeks at 6.4 billion shares. There is still a lack of conviction but the daily headlines all week were about the impending government shutdown. Who knows how much that affected trading but I am sure there was an impact. If we see a rebound on Monday that takes the S&P back over 1333 I think that would be bullish. Obviously over 1340-44 would be very bullish.

S&P-500 Chart

The Dow rebounded significantly off its -85 point low to end with a loss of only 29 points. Considering the weekend event risk I view that as very acceptable. The dip to 12,320 was exactly to support and without any negative events over the weekend I would think the potential for a rally on Monday is good. Dow component Alcoa will report after the bell but commodity prices have been rising and that should have helped their profits but the trade off was rising input costs. JPM and BAC report later in the week.

Dow Chart - 15 min

Dow Chart

The Nasdaq declined below initial support at 2780 but remained above 2770. The minor rebound was lackluster but at least it was enough to keep it in the consolidation pattern. The Nasdaq was hurt by large declines in ISRG, FSLR, WRLD, STRA, APPL and GOOG but the weakness in the index was really broad based. There were a lot of stocks down over a buck. I believe we have some serious worry building about the impact of the Japanese quake on tech stock earnings.

The quake happened on March 11th and that removed nearly three weeks from the quarter on the production side but even more importantly it may have created some longer-term problems. We will find out in the earnings cycle which companies are seeing longer-term disruptions to the supply chain and there may be more firms confessing than originally thought. If the Nasdaq does rally at the open on Monday we need to pay close attention to its hang time. If it spikes and them immediately falls back below 1280 we could be in trouble.

Nasdaq Chart - 15 Min

Nasdaq Chart - Daily

Fund managers got a buying opportunity on the Russell on Friday. The small cap index fell -1% to close -19 points off its intraday high at 859 on Wednesday. That is more than a -2% drop from the highs and it erased the gains for the entire week. However, it is still up +7% for the year and the biggest gain of the broader market indexes.

I don't know if investors were simply more concerned a government shutdown would hit small caps harder or they were just taking profits off the table to be safe. Minus eight points on the Russell is not the end of the world. We could easily recover that in an opening short squeeze. However, I am concerned a Monday close with anything less than an eight-point gain could be viewed negatively. The Russell fell out of its consolidation pattern and that is a concern.

Russell Chart

The Dow transports are being dragged lower by the higher oil prices. Airlines are raising prices and shippers are raising prices but crude is spiking faster than they can make the changes. The transports were at a new two-year high the prior week with oil at $108. Do you really think the difference between $108 and $113 is that material? I believe this was profit taking caused by the constant headlines on higher prices rather than a material change in the outlook. Of course projections for $130 Brent crude are definitely a drag on sentiment for the sector.

Dow Transport Chart

To put everything in perspective for the coming earnings cycle we have to realize that oil prices have been over $90 since January 1st. Oil companies are raking in the money but companies with a dependence on oil, either as a fuel in some form or a raw material, are going to show a hit to earnings. It may be minimal but I suspect it will exist. That is another wildcard for investors. Was it enough to cause a material drag on the bottom line? Prices did not move over $100 until late February but have remained high and well over that level last week. Was that enough time to damage earnings?

The problem may not be a material decline in Q1 earnings but come in the form of guidance warnings for Q2 and beyond.

Earnings for the S&P are back in the $95-$97 range with a few estimates over $100. They are almost back at their pre recession highs. You would think the recovery was roaring forward at a 6% GDP clip. Obviously the strong earnings are coming from restructuring moves made during the recession. Employers cut payrolls, eliminated low profit divisions and trimmed up into lean, mean, moneymaking machines. If the recovery ever does begin to accelerate to the 4% to 5% growth range they will be making a lot of money. That is what investors have been betting on since March 2009. The Q1 earnings cycle will tell us if that was a good bet or not.

Jim Brown

Send Jim an email

"You can't fail if you never stop trying!" - Yogi Bear


New Plays

All That Glitters

by James Brown

Click here to email James Brown

Editor's Note:

In addition to tonight's new play these stocks caught my eye and might offer an opportunity.

Potential bullish candidates: SWN, CSCO, LYB, and AIXQ

Potential bearish candidates: ROG, and IIVI

- James


NEW BULLISH Plays

iShares Gold Trust - IAU - close: 14.39 change: +0.12

Stop Loss: 13.75
Target(s): 15.75
Current Gain/Loss: + 0.0%
Time Frame: 9 to 12 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
The IAU is an exchange traded fund designed to reflect the ups and downs in gold. Given all the uncertainty around the world and concerns over inflation the rally in gold could have further to run. The breakout in the IAU past the $14.00 area looks like a bullish entry point. I would keep our positions small since the precious metals could start to see more volatility as this very crowded trade could start to get a little frothy.

I am suggesting bullish positions now but you could wait and buy dips in the $14.25-14.00 zone. We'll use a stop loss at $13.75. Our first upside target is $15.75.

- Small Positions Only -

Suggested Position: buy the IAU @ current levels

Annotated chart:

Entry on April 11 at $xx.xx
Earnings Date --/--/--
Average Daily Volume: 3.8 million
Listed on April 9th, 2011


In Play Updates and Reviews

Investors Nervous Ahead of Earnings

by James Brown

Click here to email James Brown

Editor's Note:
After a week of consolidating sideways the major averages slipped lower into the weekend. Investors must be nervous as we approach earnings season. There was plenty of profit taking and a number of bearish reversals on Friday.

-James

Current Portfolio:


BULLISH Play Updates

ACI Worldwide Inc. - ACIW - close: 32.44 change: -0.13

Stop Loss: 30.90
Target(s): --.--, 34.75
Current Gain/Loss: + 9.4%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
04/09 update: As expected shares of ACIW are starting to fade lower. At the very least we should expect a dip to $32.00 and probably the $31.00 area. Once again I am suggesting more conservative traders to take profits now. I am not suggesting new positions. We will plan on exiting ahead of the late April earnings.

Officially we're aiming for the $34.75 level but plan to exit ahead of the late April earnings report.

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

04/02 New stop loss @ 30.90
03/24 first exit was at $32.25 (+8.8%)
03/23 Sell half now! exit price at the open on 3/24
03/22 New stop loss @ 29.75, 1st Target adjusted to $32.85
03/19 New stop loss @ 29.35

chart:

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


AutoNation, Inc. - AN - close: 34.85 change: -0.91

Stop Loss: 33.49
Target(s): 38.00, 39.75
Current Gain/Loss: - 1.1%
Time Frame: 3 to 5 weeks
New Positions: see below

Comments:
04/09 update: ANN completely erased the last two days of gains. In the process the stock has produced its fourth failed rally near $36 in the last two weeks. I am growing more cautious on this trade. We should expect a dip toward support in the $34.00-33.50 zone. Wait for the dip or a bounce in that area before considering new positions.

Our upside targets are $38.00 and $39.75 although that might be a little optimistic. We do not want to hold over the late April earnings report.

Current Position: Long AN stock @ $35.25

- or -

Long the May $36 calls (AN1121E36) Entry @ $1.15

chart:

Entry on March 30 at $35.25
Earnings Date 04/26/11 (confirmed)
Average Daily Volume: 972 thousand
Listed on March 29th, 2011


Aon Corp. - AON - close: 53.27 change: -0.90

Stop Loss: 50.90
Target(s): 59.00
Current Gain/Loss: -0.9%
Time Frame: 4 to 5 weeks
New Positions: see below

Comments:
04/09 update: Bearish engulfing candlestick patterns were popular on Friday. Shares of AON produced one of these bearish reversals although this pattern normally needs to see follow through lower. I would be careful here and probably wait for another bounce from the $53.00 or $52.00 levels before considering new bullish positions. More conservative traders may want to raise their stops since AON is testing support near $53.00. Our time frame is the end of April since earnings are due out in early May. FYI: The Point & Figure chart for AON is bullish with a $90 target.

Current Position: Long AON stock @ $53.76

- or -

Long the May $55.00 call (AON1121E55) Entry @ $0.95

chart:

Entry on April 4 at $53.76
Earnings Date 05/02/11 (unconfirmed)
Average Daily Volume: 2.2 million
Listed on April 2nd, 2011


Danaher Corp. - DHR - close: 51.55 change: -0.50

Stop Loss: 49.95
Target(s): 55.90
Current Gain/Loss: - 1.9%
Time Frame: about 3 weeks
New Positions: see below

Comments:
04/09 update: DHR is still consolidating lower. The stock should find some support in the $51.00-50.50 zone near the bottom of its bullish channel and its 50-dma. Readers may want to wait for a bounce from these levels before considering new bullish positions. We have less than two weeks with earnings coming up on April 21st. I'm listing a stop loss at $49.95 but more conservative traders might want to use a stop closer to the $51.00 level (the $50.80 mark would work).

Current Position: long DHR stock @ $52.57

- or -

Long the May $55 call (DHR1121E55) entry @ $0.70

chart:

Entry on April 4 at $52.57
Earnings Date 04/21/11 (confirmed)
Average Daily Volume: 2.9 million
Listed on April 2nd, 2011


Dick's Sporting Goods Inc. - DKS - close: 41.07 change: -0.07

Stop Loss: 38.45
Target(s): 42.75, 44.75
Current Gain/Loss: +4.2%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
04/09 update: After Tuesday's rally higher shares of DKS spent the last few days consolidating sideways. I am making some adjustments to our strategy. We'll move the stop loss higher to $38.45. I'm moving our first target to $42.75. Our second target will be $44.75. Wait for another dip or bounce in the $40.50-40.00 zone before considering new bullish positions. More conservative traders might want to tighten their stop even higher.

FYI: The Point & Figure chart for DKS is bullish with a $65 target.

- Small Positions -

Current Position: Long DKS stock @ $39.39

- or -

Long the June $40 calls (DKS1118F40) Entry @ $2.35

04/09 New stop loss @ 38.45, New targets @ 42.75 and $44.75
04/02 New stop loss @ 37.45

chart:

Entry on March 21 at $39.39
Earnings Date 05/18/11 (unconfirmed)
Average Daily Volume: 1.6 million
Listed on March 19th, 2010


eBay Inc. - EBAY - close: 31.14 change: -0.39

Stop Loss: 29.90
Target(s): 34.90, --.--
Current Gain/Loss: - 0.3%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
04/09 update: I am starting to wonder if EBAY has been forming a bear-flag pattern. Shares are slowly working on a trend of higher lows and higher highs but it's not getting anywhere. I am raising our stop loss to $29.90 but more conservative traders may want to consider an early exit now to avoid and/or minimize any losses. I am not suggesting new positions at this time. I am removing the second target.

Our first target is $34.90. We do not want to hold over EBAY's late April earnings report.

Current Position: Long EBAY stock @ $31.25

- or -

Long the May $33.00 calls (EBAY1121E33) Entry @ $0.75

chart:

Entry on March 28 at $31.25
Earnings Date 04/27/11 (confirmed)
Average Daily Volume: 10 million
Listed on March 24th, 2011


Ford Motor Co. - F - close: 15.33 change: -0.20

Stop Loss: 14.45
Target(s): 16.45, 17.45
Current Gain/Loss: + 1.8%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
04/09 update: The pull back in Ford on Friday can be used as a new bullish entry point. I've been suggesting readers wait for a dip into the $15.25-15.00 zone and Ford slipped to $15.16 intraday. This happens to be close to Ford's 50-dma. I am adjusting our stop loss higher to $14.45. More conservative traders might want to use a stop closer to $14.70 instead. Our targets are $16.45 and $17.45.

Current Position: Long F stock @ $15.05

- or -

Long the April $15 calls (F1116D15) Entry @ $0.33

chart:

Entry on March 24 at $15.05
Earnings Date 04/21/11 (unconfirmed)
Average Daily Volume: 82 million
Listed on March 15th, 2010


Gildan Activewear - GIL - close: 32.37 change: -0.55

Stop Loss: 30.95
Target(s): 34.85, 38.00
Current Gain/Loss: + 6.6%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
04/09 update: There should be no surprises here. I cautioned readers to expect a dip toward $32.00, which should be support. Unfortunately we are running out of time on our April $30 calls. I am suggesting an early exit for the April $30 calls now! and we will raise our stop loss for the remainder of our position to $30.95. I am not suggesting new positions at current levels.

Current Position: long GIL stock @ 30.35

- or -

April $30 call (GIL1116D30) Entry @ $1.60, Exit @ 2.20 (+37.5%)

04/09 New stop loss @ 30.95
04/09 Exit the April $30 calls now! Option @ +37.5%
03/19 New stop loss @ 29.70
03/08 Triggered $ 30.35
03/01 Adjusted buy-the-dip trigger to $30.35
03/01 Adjusted stop loss to $28.99

chart:

Entry on March 8 at $30.35
Earnings Date 05/12/11 (unconfirmed)
Average Daily Volume: 634 thousand
Listed on February 28th, 2010


NVIDIA Corp. - NVDA - close: 17.55 change: -0.55

Stop Loss: 16.85
Target(s): 19.95, 21.75
Current Gain/Loss: - 3.5%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
04/09 update: Friday was not a good day for NVDA. The stock reversed Thursday's gains with a -3.0% decline. Shares are back to testing the $17.50 level and look poised to drop toward $17.00. More conservative traders will want to seriously consider an early exit right now. I am not suggesting new positions at this time. Our April calls are pretty much out of luck at this point unless NVDA suddenly rockets higher.

Our first target for NVDA is at $19.95. Our second target is $21.75.

Prior Comments:
This is a very speculative, higher-risk trade. Remember to keep your positions small to limit your risk.

- small bullish positions -

Current Position: long NVDA stock @ $18.19

- or -

Long the April $20 calls (NVDA1116D20) Entry @ $0.72

chart:

Entry on March 14 at $18.19
Earnings Date 05/12/11 (unconfirmed)
Average Daily Volume: 35 million
Listed on March 12th, 2010


PACCAR Inc. - PCAR - close: 51.28 change: -1.51

Stop Loss: 48.95
Target(s): 54.75, 57.00
Current Gain/Loss: unopened
Time Frame: two or three weeks
New Positions: Yes, see trigger

Comments:
04/09 update: Believe it or not we're still on the sidelines with PCAR. The stock fell -2.8% but the low on Friday was $51.09. I am suggesting we buy the stock (or calls) on a dip at $51.00. More conservative traders can wait for a dip closer to $50.00 and its 200-dma. This could end up being a really short-term trade with April earnings coming up quick. Our first target is $54.75. FYI: The Point & Figure chart for PCAR is bullish with a $69 target.

Trigger @ 51.00

Suggested Position: buy PCAR stock @ 51.00

- or -

Buy the May $49.70 call (PCAR1121E49.70)

chart:

Entry on April x at $xx.xx
Earnings Date 04/19/11 (unconfirmed)
Average Daily Volume: 2.8 million
Listed on April 6th, 2011


Patterson-UTI Energy Inc. - PTEN - close: 29.23 change: +1.21

Stop Loss: 26.75
Target(s): 31.50, 34.00
Current Gain/Loss: + 3.4%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
04/09 update: Shares of PTEN were upgraded on Friday morning and this produced a gap higher. The stock closed up +4.3% and that's after paring its gains. There is a chance PTEN might fill the gap so readers may want to wait on launching new positions. I am raising our stop loss to $26.75.

Prior Comments:
The $30.00 mark might offer some resistance but I'm targeting a climb to $31.50 and the $34.00 levels.

Current Position: Long PTEN stock @ 28.25

- or -

Long the May $30 calls (PTEN1121E30) Entry @ $0.95

04/09 New stop loss @ $26.75

chart:

Entry on March 25 at $28.25
Earnings Date 04/28/11 (unconfirmed)
Average Daily Volume: 2.8 million
Listed on March 17th, 2010


Ryder Systems Inc. - R - close: 49.72 change: -1.17

Stop Loss: 47.95
Target(s): 53.00
Current Gain/Loss: - 1.0%
Time Frame: 3 to 5 weeks
New Positions: see below

Comments:
04/09 update: We have been expecting R to pull back toward the $50.00 area. Friday's decline was a little bit worse than expected but shares should have support near their 50-dma near the $49 area. More conservative traders may want to wait for a dip or a bounce near $49.00 before considering new bullish positions. I am raising our stop loss to $47.95. Our target is the $53.00 level. We do not want to hold over the late April earnings report.

Current Position: Long R stock @ $50.25

- or -

Long the May $50 call (R1121E50) Entry @ $2.55

04/09 New stop loss @ 47.95

chart:

Entry on March 30 at $50.25
Earnings Date 04/21/11 (unconfirmed)
Average Daily Volume: 388 thousand
Listed on March 26th, 2011


SAIC, Inc. - SAI - close: 17.25 change: -0.05

Stop Loss: 16.75
Target(s): 18.40
Current Gain/Loss: - 0.4%
Time Frame: 8 to 9 weeks
New Positions: see below

Comments:
04/09 update: Traders bought the dip twice near $17.20 on Friday. We can use this dip as a new entry point but given the action in the broader market I suspect SAI might test the $17.00 area soon. It might be better to wait for a dip near $17 before initiating positions.

Our first bullish target is $18.40. Keep in mind that SAI does not move very fast. While the stock does have options I prefer the stock to avoid the time decay on the options. I will list the August $18 calls for more aggressive traders.

Current Position: long SAI stock @ $17.33

- or -

Long the August $18.00 call (SAI1120H18) entry @ $0.55

chart:

Entry on April 6 at $17.33
Earnings Date 06/02/11 (unconfirmed)
Average Daily Volume: 2.4 million
Listed on April 5th, 2011


Williams Companies, Inc. - WMB - close: 30.83 change: -0.19

Stop Loss: 29.90
Target(s): 34.50
Current Gain/Loss: - 1.3%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
04/09 update: The long-term trend for WMB is up but the stock has been struggling to make progress the last several days. I am not suggesting new positions at this time. We will raise our stop loss to $29.90. More conservative traders may want to exit early to minimize any losses.

Current Position: long WMB stock @ $31.26

- or -

Long the May $30 calls (WMB1121E30) Entry @ $2.10

04/09 New stop loss @ 29.90

chart:

Entry on March 28 at $31.26
Earnings Date 05/05/11 (unconfirmed)
Average Daily Volume: 7.0 million
Listed on March 26th, 2011


BEARISH Play Updates

Overseas Shipholding Group - OSG - close: 31.17 change: -0.31

Stop Loss: 33.10
Target(s): 27.75, 25.25
Current Gain/Loss: + 3.2%
Time Frame: 8 to 9 weeks
New Positions: see below

Comments:
04/09 update: Friday was a relatively quiet day for OSG with a -0.9% decline. The stock is trying to hold the $31 level. Look for another failed rally near $32 if you're looking for a new entry point. Don't be surprised to see another bounce from $30.00. Our first target is $27.75.

Our plan was to use small positions to limit our risk. The P&F chart is forecasting a $25 target.

- Small Bearish Positions -

Current Position: Short OSG stock @ $32.20

- or -

Long the April $30 PUTS (OSG1116P30) Entry @ $0.75

04/05 New stop loss @ 33.10
03/16 New stop loss @ 33.55

chart:

Entry on March 11 at $32.20
Earnings Date 05/04/11 (unconfirmed)
Average Daily Volume: 705 thousand
Listed on March 10th, 2010


CLOSED BULLISH PLAYS

Harley Davidson - HOG - close: 39.56 change: -0.63

Stop Loss: 39.75
Target(s): 47.00, 49.75
Current Gain/Loss: - 5.6%
Time Frame: 3 to 5 weeks
New Positions: see below

Comments:
04/09 update: Our HOG trade did not pan out. Shares have continued to correct lower. The stock is now testing its March lows. Our stop loss was hit at $39.75.

Closed Position: long HOG stock @ $42.13, Exit @ 39.75 (-5.6%)

- or -

May $45 calls (HOG1121E45) entry @ $0.95, Exit @ 0.25 (-73.6%)

04/08 Stopped out $39.75 (-5.6%), Option @ -73.6%

chart:

Entry on March 31 at $42.13
Earnings Date 04/19/11 (unconfirmed)
Average Daily Volume: 2.0 million
Listed on March 30th, 2011


Polycom Inc. - PLCM - close: 46.93 change: -1.45

Stop Loss: 47.40
Target(s): 54.85,
Current Gain/Loss: - 5.4%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
04/09 update: PLCM underperformed on Friday with a -3% decline and a breakdown under support at its 50-dma and its early April lows. Our stop loss was hit at $47.40. Our plan was to keep our position size small to limit our risk.

- Small Bullish Positions -

Closed Position: Long PLCM stock @ $50.18, Exit @ 47.40 (-5.4%)

- or -

May $52.50 call (PLCM1121E52.5) Entry @ 2.00, Exit @ 0.85 (-57.5%)

04/08 Stopped out $47.40 (-5.4%), Option @ -57.5%
04/02 New stop loss @ 47.40
03/23 Entry price on the May $52.50 call is an estimate.

chart:

Entry on March 23 at $50.18
Earnings Date 04/21/11 (unconfirmed)
Average Daily Volume: 967 thousand
Listed on March 22nd, 2011


Tesoro Corp - TSO - close: 25.79 change: -0.89

Stop Loss: 25.75
Target(s): 29.90
Current Gain/Loss: - 1.5%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
04/09 update: Investors might be concerned about demand destruction as oil prices continue to rise. Shares of TSO delivered their third decline in a row. Shares hit our stop loss at $25.75 on Friday afternoon.

Prior Comments:
This is a higher-risk, more aggressive trade. Keep your position size small.

Closed Position: Long TSO stock @ 26.15, Exit @ 25.75 (-1.5%)

- or -

May $27.00 calls (TSO1121E27) Entry @ $1.60, Exit @ 1.25 (-21.8%)

04/08 Stopped out @ 25.75 (-1.5%), Option @ -21.8%
04/07 New stop loss @ 25.75
04/05 New stop loss @ 24.90

chart:

Entry on March 24 at $26.15
Earnings Date 04/25/11 (unconfirmed)
Average Daily Volume: 8.2 million
Listed on March 21st, 2010


Weyerhaeuser Co. - WY - close: 23.61 change: -0.49

Stop Loss: 23.40
Target(s): 27.25, 29.25
Current Gain/Loss: - 4.3%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
04/09 update: We have been worried about WY the last couple of days. The stock actually gapped open higher on Friday morning but traders immediately sold into strength. The stock plunged to a new relative low and hit our stop loss at $23.60. The move looks like a new failed rally/bearish reversal pattern.

Prior Comments:
Keep your positions small to limit your risk.

Suggested Position: long WY stock @ $24.68

- or -

July $25 call (WY1116G25) Entry @ $1.64, Exit @ 0.80 (-51.2%)

04/08 Stopped out @ 23.60 (-4.3%), Option @ -51.2%
04/07 New stop loss @ 23.60
03/24 New stop @ 23.40

chart:

Entry on March 16 at $24.68
Earnings Date 04/29/11 (unconfirmed)
Average Daily Volume: 6.4 million
Listed on March 15th, 2010