Option Investor
Newsletter

Daily Newsletter, Tuesday, 5/17/2011

Table of Contents

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

Market Wrap

Hewlett Packard Leads Techs Lower

by Jim Brown

Click here to email Jim Brown
Dow component Hewlett Packard was crushed for a 7% loss after weak earnings and guidance and pushed the Dow to a -170 point loss at the open.

Market Statistics

Hewlett Packard (HPQ) reported earnings a day early after a memo from the CEO was leaked warning of "another tough quarter" ahead. HPQ posted earnings of $1.24 compared to estimates $1.21 but warned on future quarters. HPQ warned based on impact from the Japanese earthquake, weak PC sales and lower profits from its services business. The CEO said they were restructuring their services business and it would take a couple more quarters before those efforts showed results. HP cut its full year forecast to "at least $5.00," down from the $5.20-$5.28 previously predicted. Revenue was expected to be as much as $2 billion less than earlier forecasts.

HP was downgraded by nearly everyone in the business after the weak outlook and the memo from the CEO citing tough times ahead and an "unaffordable headcount" suggesting layoffs ahead. There were ten downgrades but Goldman upgraded HP from sell to neutral. In February HP warned and lowered its outlook after posting weak sales for Q4. Paulson's hedge fund bought a $1 billion stake in HPQ after the earnings warning in February.

Hewlett Packard Chart

The Dow declined -170 points at the open on the earnings drop from Hewlett but some weak economics also contributed to the decline. On Monday the normally bullish NY Empire Manufacturing Survey declined from 21.7 to 11.9 indicating a significant slowing of economic activity in New York. New orders fell from 22.3 to 17.2 but backorders rose from 2.6 to 9.7. The drop in the headline number still indicates the economic activity is growing but at a much slower pace. The 11.9 is only slightly above the 9.9 back in December.

Unfortunately the prices paid component shot up to 69.9 from 57.7 and the fastest rate of increase since July 2008 and the second fastest in the history of the survey. This indicates inflation pressures are growing but it also suggests manufacturers are able to pass on those prices and that is a mixed message at best. The prices received component rose from 26.9 to 28.0 and the fastest since August 2008. However, note the difference in scale between the prices paid at 69.9 and the prices received at 28.0. Manufacturers may be able to pass on some of the costs but they are still eating a lot of it.

Despite the drop in the internal production components the employment components were the strongest in years. The number of employee component rose from 23.1 to 24.7 and the average workweek spiked from 10.2 to 23.7. The workweek component was the highest since March 2006 and the employee component the highest since May 2004. Also strong was the business conditions component, which rose to 52.7 from 47.4 and the highest level since January.

Despite being released on Monday this was still dragging on the market on Tuesday because of contagion worry over the more important Philly Fed Survey do out on Thursday.

NY Empire Manufacturing Chart

New residential construction starts fell unexpectedly to 523,000 from 585,000 in the prior month. Consensus estimates were expecting an increase to 569,000. Those numbers are annualized units. Starts are only slightly above the record lows hit in January 2009 at 488,000 and new permits declined another -4% last month. Builders claim buyer traffic is very slow and have decreased since gasoline prices have moved closer to $4. This is confirming what we saw on Monday from the NAHB Housing Market Index.

The NAHB Housing Market Index was flat at 16.0 compared to estimates at 17.0 for May. The index has been flat at 16.0 for six of the last seven months indicating no improvement in the new home market. March saw a single point rise to 17.0 but it did not last. The headline number is six points lower than in may 2010. The sentiment component declined again to 20 from 22 in April and 26 in March. Homebuilder sentiment remains at near record lows and will likely stay there until next spring. The foreclosure cycle is still flooding the markets with cheap inventory that undermines builder's ability to sell homes for a profit.

Another economic disappointment this morning came from the Industrial Production report for April. The headline number was zero compared to consensus estimates of 0.4% compared to +0.7% in March. However, this report was dragged down by a monster -8.9% decline in auto production due to the parts shortage from Japan. Ex-autos it would have posted a +0.2% increase. This was another example of traders reacting to the headline number without really knowing what caused it to be flat.

Weekly Chain Store Sales fell -2.0%. I don't normally report on these weekly numbers because they are so volatile and are impacted by regional storms and traffic patterns. However, the index has been virtually unchanged in the -0.1% range for he last six weeks. The sudden drop could have been related to the Mississippi flood but there were some interesting tidbits of information. Outlet malls saw in increase in sales while enclosed malls saw a decline in sales. The ICSC attributed the shift in sales to rising gasoline prices. The price of gasoline is impacting every facet of the economy with the builders claiming lower traffic patterns because of higher gas prices to low-end retailers showing smaller sales per person and fewer shoppers.

Wal-Mart (WMT) reported earnings today of 98-cents that was 3-cents over estimates. However, same store sales fell -1.1% due to fewer shoppers and smaller ticket sales. Wal-Mart said stress was clearly evident in the paycheck cycle. On pay dates like the 1st and 15th shoppers would show up and buy but their carts were loaded with groceries and necessities with slowing sales in discretionary items. As the cycle progressed the number of shoppers dwindled until the next paycheck arrived. Since the core Wal-Mart shopper is a blue collar worker who commutes to work on a budget they are being severely impacted by the rise in gasoline prices. Any extra money is now going into the gas tank rather than into Wal-Mart items.

On the flipside the upscale retailers are seeing sales increase. Q1 same store sales for retailers like Saks and Neiman Marcus are soaring. A $1 per gallon increase in fuel prices over 2010 levels is not impacting the salaried professionals who shop at those stores. Note in the table below how the decline in class of retailer/consumer equated with a decline in sales.

Q1 Same Store Sales

Other retailers that will report on Wednesday include BJS, ROSS, TGT LTD and ANF.

While on the subject of retail sales we also saw earnings from Home Depot (HD). The building supply company posted earnings of 50-cents that beat estimates by a penny but revenue was lower than expected at $16.82 billion compared to $17.1 billion. HD said the results of severe winter weather and a very wet spring in many places had delayed many outdoor purchases. Same store sales declined -0.7%. They beat on earnings by cutting expenses and increasing their gross margin to 8.5% from 7.7%. They maintained their full year sales forecast but raised profit estimates slightly. Lowes also reported a decline in sales. Building supply stores have a tough comparison quarter since the same period in 2010 had the benefit of the tax credit for home improvement purchases.

Home Depot Chart

The economic calendar for the rest of the week has two major reports. The FOMC minutes on Wednesday and the Philly Fed Survey on Thursday are the two most important. Normally I would rank the FOMC minutes above the Philly Fed but after the Bernanke press conference and the drop in the NY manufacturing report I think I would rank the Philly report as the most crucial for the rest of the week. Another big drop there and a drop in the next non-farm payrolls and we could have the Fed talking QE3 very quickly.

Dell (DELL) reported earnings after the bell and unlike Hewlett Packard they knocked the cover off the ball. Earnings rose +83% to 55-cents compared to 30-cents in Q1-2010 and analyst estimates of 44-cents. Not only did they beat but they raised their outlook for the rest of the year. They reaffirmed sales growth estimates of 5% to 9% and raised profit growth estimates from the prior average of 9% to a new forecast of 15%. The expect profits in the current quarter to rise +38%. Dell did post weaker than expected sales for Q1 hurt by a drop in desktop PC sales of -8%. Notebook sales rose +3% and enterprise sales rose +5%. Weaker PC sales to government customers and consumers were the biggest drag.

Dell shares rose nearly $1 in after hours.

Dell Chart

S&P earnings for the quarter have declined from the earlier pace. For Q1 467 S&P-500 companies have reported with 353 beating estimates and 101 missing estimates for a 67.2% beat ratio. For the broader market that beat ratio is 60% with more than 1900 companies reported. The average earnings growth on the S&P-500 has fallen to +18.16% from well over +25% early in the cycle.

The Dow declined -170 points at the open and the decline was broad based. The afternoon rebound was led by the financial sector. That has been a group that was out of favor for months as the Dodd Frank law is being factored into future earnings estimates. Also leading on the rebound were the defensive consumer discretionary stocks and stocks like Altria (MO) and Lorillard (LO), also defensive stocks.

Energy stocks also rallied despite an intraday decline to $95 on WTI crude prices. The drop in WTI is related to the impending expiration of the futures contract at Friday's close. The storage levels at the WTI contract delivery point in Cushing Oklahoma are currently at a record high of 41.6 million barrels. There is nowhere to put any new oil so arbitragers can't buy oil on the current contract and take delivery at Cushing, store it for a couple months and then resell it at a higher price. Without that arbitrager opportunity there are fewer buyers in the market and prices decline. $95 should be decent support on the contract but when these expiration pressures appear there is no safe level. Prices should begin to rise again next week and that is leading to bargain hunting in the energy stocks today.

The Brent contract expired at the close on Monday and the new contract was stable today at $110.

The MasterCard Spending Pulse report showed retail gasoline sales declined another -1% last week thanks to the higher prices. Compared to the same period in 2010 the average price of gasoline is up +38%.

WTI Crude Oil Chart

Brent Crude Chart

The S&P continued its three-week decline with another new low at 1318 and it appears we could be headed for a retest of 1295-1300. The decline below the 1329 low on May 5th confirmed the current downtrend with a lower low to match the series of lower highs. The major indexes were all playing moving average tag today. The S&P-500 hit support at the 50-day average at 1323 just before it rebounded to close at 1328.

The three-week decline has now erased nearly all the late April gains and it is quickly moving into oversold territory. Where buyers will begin to appear is still unknown. Volume was slightly stronger today at 7.7 billion shares compared to Monday's 6.8 billion. That is the result of stop losses getting hit on the morning drop and then some of those traders buying the rebound. However, new 52-week lows at 151 beat new 52-week highs at 108 for the first time since April 12th, also an expiration week and before that on March 17th, also an expiration week. That should be a clue to the volatility.

S&P-500 Chart

The Dow came within 20 points of the 50-day at 12,357 but in doing so it found initial support from February an April at 12,390. Regardless of which support level triggered the rebound I would be surprised if the gains held. The more likely level of real support is in the 12,200 range.

The Dow was impacted by the -$2.89 decline in HPQ but it was crushed by the -$4 decline in CAT and the $1.60 drop in MMM. IBM and Chevron were also big decliners at the open but IM ended the day with a +1.85 gain to help the Dow rebound.

Dow Chart

The Nasdaq continued its three-day decline at the open to touch 2759 and only two points above its 100-day average. This should be critical support and the Nasdaq did rebound strongly from that level to close positive for the day. However, it was still a lower low and it remains to be seen if the gain will hold.

Dell's earnings after the bell have powered the futures to a +7 gain on the Nasdaq and +3 on the S&P. I believe this is reflex buying and not the start of a major rebound. In nearly every expiration cycle we have one or two days where we get a washout or a spike as hedge funds and institutional traders try to exit their positions and roll forward into a new set of plays. This could result in the selling of stocks as well as options hence the volatility. This is normally done in the week before expiration or early in expiration week so volatility for the rest of the week should decline.

On the bright side the decline in Apple may be over. After dipping to $330 this morning Apple ended the day at $336 with a +$3 gain. Friday and Monday saw heavy selling in Apple shares after three weeks of steady but persistent sales. It was as though whoever was selling over those three weeks finally gave up on the slow and steady plan and pulled the trigger to dump their remaining shares. If they still had shares left today the rebound would have been an excellent opportunity to unload. Maybe this weight on the Nasdaq is over.

Nasdaq Chart

The Russell declined to close on major support at 820 after dipping to 815 and the 100-day average intraday. A continued decline under 820 would be very negative and suggest a target at 780 and several more weeks of pain. With the Russell closing negative and the Nasdaq clawing back to positive I view sentiment as severely confused. That could mean there are a lot of new short positions just waiting to be squeezed.

Russell 2000 Chart

Over the last two years the May expiration week has not been kind to the market. In May 2009 the S&P fell -4.9% during this week. In May 2010 it fell -4.23%. Past performance is no guarantee of future results but those who ignore the past are many times doomed to repeat it. While we should not act on historical results of that nature we should be aware of them and the potential for a repeat.

I am still cautious about the market this week despite the rebound today. It was still lackluster in my opinion. The Dell earnings could trigger some short covering and that could take us out of danger for a day or two but without moving over last week's highs we would still be in a technical downtrend.

With QE2 rapidly coming to a close and the economy slowing we need to be conscious of the potential for a new trend to form. The debt ceiling debate will continue to grow each day and the flood is costing tens of billions every day in the Mississippi river area. There are some major events in progress and we need to wait them out until a new trend develops.

Definitely, enter passively and exit aggressively.

Jim Brown

Send Jim an email

Register for my OilSlick.com newsletter and receive free daily updates and commentary on the energy sector. Register here


New Plays

Poised to Rally

by James Brown

Click here to email James Brown


NEW BULLISH Plays

Expedia Inc. - EXPE - close: 25.56 change: +0.61

Stop Loss: 24.74
Target(s): 27.75, 29.75
Current Gain/Loss: unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see trigger

Company Description

Why We Like It:
EXPE has not caved into the market's recent selling pressure. Instead the stock has continued to consolidate sideways with a bullish pattern of higher lows. EXPE looks poised to break out from this consolidation very soon. I am suggesting a trigger to open bullish positions at $25.85. If triggered our stop is $24.75. Our targets are $27.75 and $29.75.

Trigger @ 25.85

Suggested Position: buy EXPE stock @ 25.85

- or -

buy the June $25 call (EXPE1118F25) current ask $1.10

- or -

buy the July $27 call(EXPE1116G27) current ask $0.50

Annotated chart:

Entry on May x at $xx.xx
Earnings Date 07/28/11 (unconfirmed)
Average Daily Volume: 5.5 million
Listed on May 17th, 2011



In Play Updates and Reviews

Stopped Out

by James Brown

Click here to email James Brown

Editor's Note:
The stock market's major indices pared their losses on the session but the declines were enough to hit some stops. ARW, IR, and ORCL were stopped out. I am suggesting an early exit on ADSK and I've removed KLAC as a candidate.

-James

Current Portfolio:


BULLISH Play Updates

Capital One Financial - COF - close: 54.87 change: +1.39

Stop Loss: 51.75
Target(s): 57.00, 59.50
Current Gain/Loss: + 3.3%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
05/17 update: The bounce in COF seems to be gaining momentum. Shares added +2.5% and the stock has convincingly broke the two-week trend of lower highs. If you don't feel like chasing it here look to buy a dip. We are raising our stop loss to $51.75.

Current Position: Long COF stock @ $53.07

- or -

Long the June $55 calls (COF1118F55) Entry @ $0.96

05/17 New stop loss @ 51.75

Entry on May 5 at $53.07
Earnings Date 07/21/11 (unconfirmed)
Average Daily Volume: 3.7 million
Listed on May 4th, 2011


Discover Financial Services - DFS - close: 25.26 change: +0.19

Stop Loss: 23.90
Target(s): 27.25
Current Gain/Loss: + 4.8%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
05/17 update: DFS started to see some profit taking this morning but traders were buying the dip near $24.75. I see today's afternoon bounce as a new entry point to open bullish positions. We are raising our stop loss to $23.90.

NOTE: Our May $24 calls will expire soon. We need to exit these calls tomorrow or Thursday. They currently have a bid of $1.10 (+120%).

(Small Positions)

Current Position: long DFS stock @ $24.10

- or -

Long the May $24 calls (DFS1121E24) Entry @ 0.50

05/17 New stop loss @ 23.90
05/04 Triggered at $24.10.
04/30 Added an alternative entry point @ $25.25
04/26 New trigger @ 24.10, New stop loss @ 23.40

Entry on May 4 at $24.10
Earnings Date 06/23/11 (unconfirmed)
Average Daily Volume: 5.9 million
Listed on April 12th, 2011


Dr. Pepper Snapple Group - DPS - close: 42.22 change: +0.36

Stop Loss: 37.90
Target(s): 44.90
Current Gain/Loss: unopened
Time Frame: 8 to 10 weeks
New Positions: Yes, see trigger

Comments:
05/17 update: DPS is still drifting higher. There is no change from my prior comments. I am suggesting a buy-the-dip trigger to open bullish positions at $40.25. If triggered we'll use a stop loss at $37.90. Our target is $44.90.

buy-the-dip Trigger @ $40.25

Suggested Position: buy DPS stock @ $40.25

- or -

Buy the August $45 call (DPS1120H45) current ask $0.80

Entry on May x at $xx.xx
Earnings Date 07/28/11 (unconfirmed)
Average Daily Volume: 2.1 million
Listed on May 14th, 2011


EMC Corp. - EMC - close: 27.42 change: +0.00

Stop Loss: 26.45
Target(s): 29.95, 32.25
Current Gain/Loss: - 0.4%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
05/17 update: It was a quiet day for EMC with shares churning sideways. The stock eventually closed unchanged on the session. I'm very cautiously bullish here. If you launch positions now consider a tighter stop loss. The bears will argue that EMC produced a double top in April and the current consolidation is a bear-flag pattern.

Current Position: Long EMC stock @ $27.55

- or -

Long the June $27.00 calls (EMC1118F27) Entry @ $1.35

Second Option Position (listed 05/12/11)

Long the June $29.00 calls (EMC1118F29) Entry @ $0.45

05/12 New entry point. Added second option position.

Entry on May 3 at $27.55
Earnings Date 04/20/11
Average Daily Volume: 21.4 million
Listed on April 27th, 2011


Gilead Sciences Inc. - GILD - close: 40.47 change: -0.09

Stop Loss: 39.95
Target(s): 44.75
Current Gain/Loss: - 1.9%
Time Frame: 8 to 9 weeks
New Positions: see below

Comments:
05/17 update: GILD has provided an intraday bounce at the $40.00 level. Readers can use this move as a new entry point. I am inching our stop loss higher to $39.95. FYI: The Point & Figure chart for GILD is bullish with a $57 target.

Current Position: Long GILD stock @ $41.38

- or -

Long the June $41 calls (GILD1118F41) Entry @ $1.44

05/17 new stop loss @ 39.95

Entry on May 13 at $41.38
Earnings Date 07/19/11 (unconfirmed)
Average Daily Volume: 10.9 million
Listed on May 12th, 2011


Riverbed Technology, Inc. - RVBD - close: 36.56 change: -0.31

Stop Loss: 34.95
Target(s): 39.90, 43.00
Current Gain/Loss: - 1.8%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
05/17 update: RVBD dipped toward $35 like we expected. The afternoon bounce could be used as a new bullish entry point. More conservative traders may want to wait for a close over the 100-dma before considering new positions.

Current Position: Long RVBD stock @ $37.25

- or -

Long the June $40 call (RVBD1118F40) Entry @ $1.15

Entry on May 12 at $37.25
Earnings Date 07/21/11 (unconfirmed)
Average Daily Volume: 5.1 million
Listed on May 11th, 2011


SAIC, Inc. - SAI - close: 17.31 change: -0.01

Stop Loss: 16.95
Target(s): 18.40
Current Gain/Loss: - 0.0%
Time Frame: 8 to 9 weeks
New Positions: see below

Comments:
05/17 update: RVBD is testing support at the bottom of its trading range near $17.20. I am not suggesting new positions at this time.

Current Position: long SAI stock @ $17.33

- or -

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

04/30 Warning, SAI has produced a reversal. consider an early exit
04/27 New stop loss @ 16.95

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


Semiconductor HOLDRs - SMH - close: 35.66 change: -0.47

Stop Loss: 35.49
Target(s): 39.95
Current Gain/Loss: unopened
Time Frame: 8 to 12 weeks
New Positions: Yes, see trigger

Comments:
05/17 update: Semiconductor stocks are still correcting. I don't see any changes from my prior comments.

Currently we're waiting for a breakout past resistance at $37.00. Our trigger to open positions is at $37.05. If the market's sell-off continues I might reconsider buying a dip near the 50-dma.

The SMH doesn't move very fast so it could take several weeks for this play to work out. Our first target is $39.95. The Point & Figure chart for SMH is bullish with a $61 target.

FYI: The top ten components in the SMH are: TXN, INTC, AMAT, ALTR, ADI, LLTC, XLNX, KLAC, BRCM, and ATML.

Trigger @ 37.05

Suggested Position: buy the SMH @ $37.05

- or -

Buy the August $40 calls (SMH1120H40) current ask $0.61

Entry on May x at $xx.xx
Earnings Date --/--/--
Average Daily Volume: 9.8 million
Listed on May 12th, 2011


DENTSPLY Intl. - XRAY - close: 39.19 change: +0.03

Stop Loss: 37.30
Target(s): 42.00, 44.50
Current Gain/Loss: + 0.4%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
05/17 update: XRAY spent the day in a very narrow range atop the $39.00 level. I do not see any changes from my prior comments. I am not suggesting new positions at this time. Our profit targets are $42.00 and $44.50. FYI: The Point & Figure chart for XRAY is bullish with a $59 target.

NOTE: Readers may want to avoid the options. XRAY doesn't have a lot of option volume and the spreads are wide, which puts traders at a disadvantage.

Current Position: Long XRAY stock @ 39.00

- or -

Long the June $40 call (XRAY1118F40) Entry @ 0.60

Entry on May 12 at $39.00
Earnings Date 07/25/11 (unconfirmed)
Average Daily Volume: 904 thousand
Listed on May 7th, 2011


BEARISH Play Updates

Raytheon Co. - RTN - close: 48.85 change: -0.22

Stop Loss: 50.15
Target(s): 45.25
Current Gain/Loss: - 0.3%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
05/17 update: RTN broke down under short-term support at $49.00. This is encouraging but I am still not suggesting new positions. Do not forget that May options expire soon. We need to exit our May puts tomorrow or Thursday.

Small Positions

Current Position: Short RTN stock @ $48.68

- or -

Long the May $47.00 PUTs (RTN1121Q47) Entry @ $0.28

Entry on May 2 at $48.68
Earnings Date 04/28/11
Average Daily Volume: 2.6 million
Listed on April 30th, 2011


St. Jude Medical - STJ - close: 51.70 change: +0.02

Stop Loss: 54.20
Target(s): 47.00
Current Gain/Loss: unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see trigger

Comments:
05/17 update: STJ dipped to a new two-week low this morning and then bounced. The stock closed almost unchanged on the session. We're still waiting for a breakdown. Our trigger to open small bearish positions is at the $51.00 level. Our first target is $47.00.

I would keep our position size small (about half or less than a normal trade) to limit our risk.

Trigger @ 51.00 (Small Positions)

Suggested Position: Short STJ stock @ 51.00

- or -

buy the June $50 PUT (SJT1118R50) current ask $0.95

Entry on May x at $xx.xx
Earnings Date 07/21/11 (unconfirmed)
Average Daily Volume: 2.6 million
Listed on May 16th, 2011


Valero Energy - VLO - close: 25.90 change: -0.33

Stop Loss: 27.05
Target(s): 23.00
Current Gain/Loss: unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see trigger

Comments:
05/17 update: VLO is inching closer and closer to another breakdown. The low today was $25.59. I am suggesting a trigger to open bearish positions at $25.49. If triggered we'll use a stop at $27.05 and target a drop to $23.00 near the 200-dma. However, while we wait for VLO to hit our trigger at $25.49 I am watching for another failed rally type of move. If we see VLO bounce and reverse near $28 and its 50-dma then we'll probably switch our entry point, short the failure at resistance and adjust our stop.

Trigger @ $25.49

Suggested Position: Short VLO stock @ $25.49

- or -

buy the June $25 PUT (VLO1118R25) current ask $0.70

Entry on May x at $xx.xx
Earnings Date 07/27/11 (unconfirmed)
Average Daily Volume: 11 million
Listed on May 14th, 2011


CLOSED BULLISH PLAYS

Autodesk Inc. - ADSK - close: 44.39 change: -1.18

Stop Loss: 42.75
Target(s): 48.50
Current Gain/Loss: - 1.7%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
05/17 update: ADSK is not cooperating. The stock is down three days in a row after failing at the $46.00 level. The sell-off seems to be picking up speed. Shares lost gave up -2%. We were planning on exiting tomorrow night at the closing bell. I am suggesting an early exit now.

closed Position: Long ADSK stock @ $44.25, exit $43.49 (-1.7%)

- or -

May $45 calls (ADSK1121E45) Entry @ $1.19, exit 0.55 (-53.7%)

05/17 exit early. ADSK @ 43.49 (-1.7%), Option @ -53.7%
05/10 New stop loss @ 42.75

chart:

Entry on May 3 at $44.25
Earnings Date 05/19/11 (confirmed)
Average Daily Volume: 2.1 million
Listed on April 23rd, 2011


Arrow Electronics, Inc. - ARW - close: 43.97 change: -0.90

Stop Loss: 43.90
Target(s): 49.90
Current Gain/Loss: - 5.1%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
05/17 update: It was an ugly day for ARW. The stock gapped open lower and then plunged to $43.00 before trimming its losses. Our stop loss was hit at $43.90. I couldn't find any news to explain the relative weakness in ARW today.

closed Position: long ARW stock @ $46.30, exit 43.90 (-5.1%)

- or -

June $47.50 call (ARW1118F47.5) Entry @ $1.20, Exit 0.25 (-79.1%)

05/17 Stopped out. ARW @ 43.90 (-5.1%), Option @ -79.1%

chart:

Entry on May 11 at $46.30
Earnings Date 07/28/11 (unconfirmed)
Average Daily Volume: 1.1 million
Listed on May 10th, 2011


Ingersoll-Rand - IR - close: 48.45 change: -1.28

Stop Loss: 48.75
Target(s): 54.75
Current Gain/Loss: - 2.7%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
05/17 update: We've been cautious on IR ever since the drop on May 11th. Shares have broken down under the $49.00 level and hit our stop loss at $48.75. There was no news to explain the relative weakness in IR (-2.5%) and shares did not see the same late day rebound seen across most of the market.

closed Position: long IR stock @ $50.12, Exit @ 48.75 (-2.7%)

- or -

June $50 call (IR1118F50) Entry @ $1.80, Exit 0.80 (-55.5%)

05/17 stopped out @ 48.75 (-2.7%), option @ -55.5%

chart:

Entry on May 9 at $50.12
Earnings Date 07/22/11 (unconfirmed)
Average Daily Volume: 2.6 million
Listed on May 7th, 2011


KLA-Tencor - KLAC - close: 42.59 change: -0.89

Stop Loss: 43.95
Target(s): 49.85
Current Gain/Loss: unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see trigger

Comments:
05/17 update: KLAC has continued to roll over. I am dropping this stock as a bullish candidate. Our trigger to open positions was never hit.

Our trade never opened.

chart:

Entry on May x at $xx.xx
Earnings Date 07/28/11 (unconfirmed)
Average Daily Volume: 653 thousand
Listed on May 9th, 2011


Oracle Corp. - ORCL - close: 33.94 change: -0.24

Stop Loss: 33.95
Target(s): 38.00
Current Gain/Loss: - 2.1%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
05/17 update: Profit taking in ORCL continued after yesterday's breakdown. The stock hit our stop loss at $33.95.

closed Position: Long ORCL stock @ $34.70, exit 33.95 (-2.1%)

- or -

June $35 call (ORCL1118F35) Entry @ $0.98, exit 0.55 (-43.8%)

05/10 New stop loss @ 33.95

chart:

Entry on April 25 at $34.70
Earnings Date 06/23/11 (unconfirmed)
Average Daily Volume: 25.1 million
Listed on April 23rd, 2011