Option Investor
Newsletter

Daily Newsletter, Thursday, 5/19/2011

Table of Contents

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

Market Wrap

Surprising Strength Despite Economic Uncertainty

by Jim Brown

Click here to email Jim Brown
Economically it was an ugly day with the Philly Fed Survey taking another massive hit for May but the markets recovered from the opening volatility and moved higher when logically they should have sold off.

Market Statistics

However, we know from past experience if we are looking for the equity markets to act logically we will always be disappointed. The Philly Fed Survey for April declined from a 25-year high in March at 43.4 to 18.5 and a significant reversal. The May report showed that decline in economic activity continued with a headline number of only 3.9 and another -15 point drop. Expectations were for a minor increase of a couple points. This means this index of activity has declined nearly 40 points in only two months and is only 3.9 points away from economic contraction. This is not a good sign for the recovery process.

New orders plunged from 18.8 to 5.4 and backorders imploded from 12.9 to -7.8. Shipments declined from 29.1 to only 6.5. Inventory levels also went negative at -5.4 from +12.0 in March. Manufacturers are moving back to inventory reduction mode rather than building up inventories for future sales. This suggests their outlook has turned negative.

However, the one component that did rise actually rose significantly and contradicts the order components. The employment component spiked from 12.3 to 22.1 for more than an 80% increase in hiring. Why would manufacturers suddenly go on a hiring spree with the orders and shipments in crash mode? To further confuse the issue the hours worked component fell from 17.7 to 3.9. Obviously hiring more workers means fewer hours worked but not that significant a drop.

The Philly Fed Survey has a very strong correlation to the national ISM due out on June 1st. This report suggests we could see another big drop in that report.

Philly Fed Chart

Another negative report came from the Conference Board's Leading Indicators for April. The headline number fell -0.3%. It was the first decline in the index since June 2010. Only four of the ten components posted gains. The drags on the index were jobless claims, supplier deliveries, average workweek, building permits and new orders.

Existing home sales for April declined to an annualized 5.05 million units from 5.09 million in March. Months of inventory increased from 8.3 to 9.2 and home prices declined -5% year over year. April is a month where home sales should increase and these numbers suggest continued weakness rather than improvement.

On the positive side the weekly Jobless Claims fell by -25,000 to 409,000 and the lowest level since April 16th. Continuing claims declined to 3.711 million from 3.792 million. Reportedly this is a result of some automakers putting people back to work as parts shortages begin to ease.

The reports due out on Friday are Regional Employment, Mass Layoffs and the ECRI Weekly Leading Index. None of those are expected to move the market.

The big news in the market today was the Linkedin (LNKD) IPO. Shares were priced at $45 and a $4.25 billion market cap but immediately exploded to as high as $120 intraday. LNKD closed at $93.92 for a gain of +109% and values the company at nearly $10 billion. Linkedin earned $2.08 million in Q1 on $93.9 million in revenue. That works out to about $8.5 million in profit for the year and values the company with a PE of more than 1,000. Linkedin has already warned that it does not expect to be profitable on a GAAP basis in 2011 and it expects its revenue growth rate will decline. The company only sold 7.84 million shares in order to generate some hysteria as investors raced to get a piece of the company. Volume today was more than 30 million shares so almost four times the amount that was offered.

Linkedin Chart - 5-Min

Linkedin is a stock begging to be shorted. Unfortunately for traders there will be no shares available until next Wednesday. I would expect a major decline once shares become available to be shorted. Also, the derision given to the spike in price on the opening day should very quickly sour expectations for further gains.

The big news is the prospects for the coming Facebook and Groupon IPOs. If Linkedin can command this kind of buying interest then how much bigger will those two companies be when they IPO? Faecbook has already been valued at $50 billion by some analysts based on demand for shares in the private market and investments by some key venture capital firms.

This makes the interest in next week's big IPO even crazier. The Russian company Yandex (YNDX) will sell $1 billion in shares. This is the Russian equivalent of Google and the biggest Internet company in Russia. Shares are expected to price in the $20-$22 range.

In other news Goldman Sachs downgraded the chip equipment sector to "cautious" from "neutral" on expectations for a glut in the processor market in the months to come. Goldman said processor shipments outpaced PC sales by 10% in the first quarter alone. The analyst said PC sales are still slowing and consumers will be pressured by fuel prices in Q2. Capex levels in 2012 will likely decline -20% as capacity peaks in Q4. Wall Street consensus estimates are for a +6% increase in sales by Intel. Goldman believes Intel sales will be flat with average selling prices declining on excess capacity.

Goldman cut Intel (INTC) and KLA-Tencor (KLAC) to a "sell" from neutral and cut Applied Materials (AMAT) to neutral from buy.

Intel Chart

KLAC Chart

Citi ignored the sector downgrade by Goldman and reiterated their overweight rating on the tech sector and especially Hewlett Packard. However, Citi lowered its price target on HPQ to $45 from $65. That does not imply any serious conviction on the part of Citi and HPQ declined on the news.

Hewlett Packard Chart

Brocade Communications (BRCD) reported Q1 earnings after the bell and beat the street by +3-cents with earnings of 6-cents per share. That was a +9.8% increase over the comparison quarter. Revenue rose +17% and was inline with expectations. The stock was flat in after hours trading.

A stock that was not flat was the Gap (GPS). Gap reported income that fell -23% to 40-cents. That actually beat the street by a penny because analysts were expecting a bad quarter. However, same store sales declined -3%. The company warned it now expects full year earnings to decline to $1.40-$1.50 from its February forecast of $1.88-$1.93. Analysts were expecting $1.84. Their average costs are expected to rise by up to 20% in the last half of the year thanks to rising cotton prices and higher labor costs in China. Shares plunged from $23.33 to $19.71 (-16%) in after hours. Retailers for lower cost items are finding the current economic environment very tough to navigate.

Gap Chart

Liberty Media (LINTA) offered to buy Barnes & Noble (BKS) for $1.02 billion or $17 per share. That equates to a 20% premium over the BKS closing price at $14 tonight. Barnes and Noble put itself up for sale back in August saying its shares were undervalued. BKS has been developing its Nook electronic reader in order to compete with Amazon. Rival Borders Group filed for bankruptcy in February when it could not stop the bleeding as a result of Amazon's dominance and the impact of the Kindle on book sales. BKS will introduce a new electronic reader product at a media event in New York next Wednesday. The offer by Liberty Media is contingent on the Chairman and largest shareholder (29%), Leonard Riggio, remaining with the company and be involved with its operation. One analyst said he believed the $17 was a starting price and the eventual price could be closer to $20.

Barnes & Noble Chart

Commodities were weak again despite a decline in the dollar. On Wednesday we saw crude prices rally to more than $100 but they could not hold their gains. The flood headlines are fading and the weaker economic reports are suggesting demand could slow. Even a new hurricane forecast for the season that starts in two weeks could not give crude a lift. The NOAA forecast calls for an above normal hurricane season with 12-18 named storms, 6-10 hurricanes and 3-6 major hurricanes of category three or above. That is winds of more than 110 mph. The 2010 season produced 19 named storms and tied with 1887 and 1995 as the third most active season. There were 12 hurricanes and tied with 1969 as the second most active in that category. No hurricane made landfall in the U.S. in 2010. The gulf has been rather lucky in the storm category since Katrina and Rita in 2005. There has been minimal damage with no direct hits since 2008.

Crude prices declined to $98.57 for a loss of -1.53 but that is just over half of the $2.73 gained on Wednesday. WTI futures expire at the close on Friday so this is probably expiration volatility with a dose of flood panic for good measure.

Crude Chart

The S&P managed to hold in positive territory at the close but the conviction was definitely lacking. Despite the rebound from Tuesday's lows we are still in a downtrend that started on May 2nd. We have seen progressive lower highs and lower lows and our two day bounce has not changed that trend. The progressively weaker economics should eventually lead to a weaker market as traders move to the sidelines ahead of the end of QE2. There is too much uncertainty and what is certain, like today's Philly Fed Survey, has been negative.

I still believe we have risk to 1295-1300 on the S&P. That risk will remain until we see a new relative high over 1360.

S&P Chart

The Dow pattern is the same as the S&P. We saw a bounce off the 50-day average but considering how oversold we were on Tuesday there was little conviction to the bounce. Dow 12,605 is resistance and we are heading into a weekend with event risk. I believe the Dow has risk to 12,200 over the next several weeks.

Dow Chart

The Nasdaq managed to gain +8 points but it could not break over the 2825 resistance level despite decent gains in the big cap tech stocks. We have seen more conviction in the Nasdaq over the last three days than in the broader market but the downgrade on the chip sector by Goldman was an anchor for that conviction. The pattern on the Nasdaq is the same as the other indexes with a down trending channel. I believe there is further downside risk ahead.

Nasdaq Chart

I see no reason to rush into the market on Friday. We have so many conflicting events with economics weakening and numerous companies lowering their guidance for the rest of 2011. Friday is not likely to post a big market move thanks to the churn from expiring options. What it will do is set us up for a pivotal move next week. We will either fail at the top of the current down trending channel or less likely but still possible, break through that top and start moving back towards the recent highs. I would be very surprised to see that happen but I have been surprised before.

Definitely, enter passively and exit aggressively.

Jim Brown

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New Plays

Room for Dessert

by James Brown

Click here to email James Brown


NEW BULLISH Plays

Cheesecake Factory Inc. - CAKE - close: 31.59 change: +0.72

Stop Loss: 28.95
Target(s): 33.95, 37.00
Current Gain/Loss: + 0.0%
Time Frame: 8 to 10 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
Restaurant stocks have been showing strength lately. Consumers, it would seem, are still going out to eat. Shares of CAKE are climbing after a multi-week consolidation above technical support at the 200-dma. I am suggesting bullish positions now or you can wait for a dip into the $31-30 zone. The 2010 high peaked near $34.00 so we'll set our first target at $33.95. Given enough time I would expect CAKE to breakout to new highs. Our second, more aggressive target is $37.00.

Keep in mind that CAKE doesn't move very fast (at least not normally) so we'll need some patience for this trade to work. FYI: The Point & Figure chart for CAKE is bullish with a $59 target.

Suggested Position: buy CAKE stock @ current levels

- or -

buy the July $33 call (CAKE1116G33) current ask $0.85

Annotated chart:

Entry on May 20 at $xx.xx
Earnings Date 07/21/11 (unconfirmed)
Average Daily Volume: 1.0 million
Listed on May 19th, 2011


In Play Updates and Reviews

Exiting Early

by James Brown

Click here to email James Brown

Editor's Note:
I am suggesting an early exit in GILD and RTN. Meanwhile the credit card names continue to rally and EXPE posted another strong gain.

-James

Current Portfolio:


BULLISH Play Updates

Capital One Financial - COF - close: 56.21 change: +0.89

Stop Loss: 51.75
Target(s): 57.00, 59.50
Current Gain/Loss: + 5.9%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
05/19 update: COF continues to rally. The stock is up four days in a row and just closed at new two-year highs with a rise above the late April peak. Shares are starting to look a little bit overbought but another rally tomorrow and COF might hit our first target at $57.00. Readers may want to take profits on the options early since the bid is currently at $2.14 (+122%). I am not suggesting new positions at current levels.

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


Covidien Plc. - COV - close: 57.48 change: +0.08

Stop Loss: 55.40
Target(s): 63.50
Current Gain/Loss: + 0.2%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
05/19 update: COV opened at $57.34 and was kind enough to offer us an entry point near $57.00 with a dip this morning. Shares eventually recovered to close back in positive territory. I would still consider new positions now. The $60 level might offer some resistance but I'm setting our target at $63.50.

Current Position: Long COV stock @ $57.34

- or -

Long the July $60 call (COV1116G60) Entry @ $0.65

Entry on May 19 at $57.34
Earnings Date 07/28/11 (unconfirmed)
Average Daily Volume: 3.5 million
Listed on May 18th, 2011


Discover Financial Services - DFS - close: 25.68 change: +0.35

Stop Loss: 23.90
Target(s): 27.25
Current Gain/Loss: + 6.5%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
05/19 update: DFS extended its gains to set new three-year highs. It was our plan to exit our May $24 calls tonight at the closing bell. I am not suggesting new positions at this time. If you are looking to hop on board I'd wait for a dip in the $25.00 area, which should be new support.

(Small Positions)

Current Position: long DFS stock @ $24.10

- or -

May $24 calls (DFS1121E24) Entry @ 0.50, exit 1.55 (+210%)

05/19 exit May calls. closed @ $1.55 (+210%)
05/18 Plan on exiting May $24 call at Thursday's close
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


Danaher Corp. - DHR - close: 55.22 change: +0.33

Stop Loss: 52.65
Target(s): 58.00-60.00 zone
Current Gain/Loss: + 0.0%
Time Frame: 8 to 10 weeks
New Positions: see below

Comments:
05/19 update: After yesterday's surge higher the rally continued for DHR this morning. Shares opened higher and then spiked to $55.73. Unfortunately the rally ran out of steam and shares closed within a nickel of where they opened. I would still consider positions here but the action today might suggest a dip into the $54.50 soon. Patient traders could wait to launch positions near $54.50 instead. DHR doesn't move super fast so we'll need patience. Our target is the $58-60 range.

Current Position: Long DHR stock @ $55.17

- or -

Long the Sept. $57.50 call (DHR1117I57.5) Entry @ $1.90

Entry on May 19 at $55.17
Earnings Date 07/21/11 (unconfirmed)
Average Daily Volume: 3.5 million
Listed on May 18th, 2011


Dr. Pepper Snapple Group - DPS - close: 42.28 change: +0.64

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

Comments:
05/19 update: DPS continues to rally without us. We may want to adjust our entry point higher. However, for today we'll leave our buy-the-dip trigger 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


Ecolab Inc. - ECL - close: 52.68 change: -0.18

Stop Loss: 50.95
Target(s): 57.00, 59.90
Current Gain/Loss: unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see trigger

Comments:
05/19 update: Hmmm... the action in ECL was interesting today. The stock briefly traded above resistance at $53.00 but reversed at $53.24 and closed lower on the session. The move looks like a failed rally and potentially a bearish reversal. Thankfully ECL did not hit our trigger to open positions at $53.25. I am adjusting our trigger point a little bit higher to $53.35 now. If triggered we'll use a stop loss at $50.95. Our targets are $57.00 and $59.90.

Trigger @ 53.35

Suggested Position: buy ECL stock @ 53.25

- or -

buy the July $55 call (ECL1116G55) current ask $0.60

Entry on May x at $xx.xx
Earnings Date 07/26/11 (unconfirmed)
Average Daily Volume: 1.5 million
Listed on May 18th, 2011


EMC Corp. - EMC - close: 27.99 change: +0.23

Stop Loss: 26.45
Target(s): 29.95, 32.25
Current Gain/Loss: + 1.6%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
05/19 update: EMC managed to stay in positive territory all day. The stock looks poised to rally past short-term resistance at $28.00. I would be tempted to launch new positions here.

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


Expedia Inc. - EXPE - close: 27.26 change: +0.62

Stop Loss: 24.74
Target(s): 27.75, 29.75
Current Gain/Loss: + 5.4%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
05/19 update: The short squeeze in EXPE continues. Shares rallied another +2.3% on above average volume. This could last a little while as the most recent data listed short interest at almost 12% of the float. I would expect some resistance at $28.00, which is why our first target is $27.75. I would not open new positions at current levels. Our targets are $27.75 and $29.75.

Current Position: Long EXPE stock @ 25.85

- or -

Long the June $25 call (EXPE1118F25) Entry @ $1.20

- or -

Long the July $27 call(EXPE1116G27) Entry @ $0.95

Entry on May 18 at $25.85
Earnings Date 07/28/11 (unconfirmed)
Average Daily Volume: 5.5 million
Listed on May 17th, 2011


Kansas City Southern - KSU - close: 56.67 change: +0.70

Stop Loss: 53.45
Target(s): 59.75, 63.50
Current Gain/Loss: + 0.5%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
05/19 update: KSU popped higher on Thursday. Shares opened at $56.39. The early morning rally faded but the stock still managed to close up +1.25%. There is a good chance KSU will retest $56.00 if you're patient you could wait for a dip closer to the $55.50 area as your entry point. Our upside targets are $59.75 and $62.50.

Current Position: Long KSU stock @ $56.39

- or -

Long the June $60 call (KSU1118F60) Entry @ $0.53

Entry on May 19 at $56.39
Earnings Date 07/27/11 (unconfirmed)
Average Daily Volume: 1.0 million
Listed on May 18th, 2011


Riverbed Technology, Inc. - RVBD - close: 38.84 change: +0.86

Stop Loss: 34.95
Target(s): 39.90, 43.00
Current Gain/Loss: + 4.2%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
05/19 update: RVBD rallied off its intraday lows and closed up +2.2% on the session. Shares look ready to challenge resistance at $40.00 soon. Our first target is $39.90.

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: 17.53 change: +0.05

Stop Loss: 16.95
Target(s): 18.40
Current Gain/Loss: + 1.1%
Time Frame: 8 to 9 weeks
New Positions: see below

Comments:
05/19 update: There is no change from my prior comments on SAI. SAI is bouncing back toward the top of its trading range and resistance at $17.60. Until SAI breaks out past this level I am not suggesting new positions. Even if SAI does breakout I remain wary of this stock. Defense contractors could suffer once the budget cut talks resume in Washington.

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: 36.13 change: -0.31

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

Comments:
05/19 update: Semiconductor stocks struggled a bit today after Goldman Sachs downgraded their view of the sector and one of its largest component Intel (INTC). The SMH lost -0.8% on the day.

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: 40.09 change: +0.46

Stop Loss: 37.30
Target(s): 42.00, 44.50
Current Gain/Loss: + 2.7%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
05/19 update: XRAY continues to show relative strength. The stock just closed over round-number resistance at the $40.00 mark. 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

St. Jude Medical - STJ - close: 51.92 change: -0.58

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

Comments:
05/19 update: The bounce in STJ seems to be failing. Shares lost -1.1%. Currently our plan is to open (small) bearish positions at $51.00. 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: 26.51 change: -0.07

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

Comments:
05/19 update: A pull back in the U.S. dollar today failed to help the price of oil. Action in the oil sector was mixed. VLO spent the day churning sideways. Currently our plan is to launch bearish positions at $25.49. As an alternative we can watch for a failed rally near $28.00 and its 50-dma.

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

Gilead Sciences Inc. - GILD - close: 40.19 change: -0.16

Stop Loss: 39.95
Target(s): 44.75
Current Gain/Loss: - 2.8%
Time Frame: 8 to 9 weeks
New Positions: see below

Comments:
05/19 update: I am giving up on GILD. The stock is not cooperating. It keeps trying to bounce from support near $40.00 but there is no follow through. I am suggesting an early exit now.

Closed Position: Long GILD stock @ $41.38, exit $40.19 (-2.8%)

- or -

June $41 calls (GILD1118F41) Entry @ $1.44, Exit 0.65 (-54.8%)

05/19 Exit early. GILD @ 40.19 (-2.8%), Option @ -54.8%
05/17 new stop loss @ 39.95

chart:

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


CLOSED BEARISH PLAYS

Raytheon Co. - RTN - close: 49.73 change: +0.46

Stop Loss: 50.15
Target(s): 45.25
Current Gain/Loss: - 2.1%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
05/19 update: I am throwing in the towel with RTN. Technically the stock is still trading under resistance at the $50.0 mark and under its 50-dma and 100-dma. Yet after weeks of churning sideways below this resistance there was no follow through lower. A breakout now could spark some short covering. Nimble traders may actually want to consider bullish positions on a move above $50.00. I am suggesting an early exit immediately. We already had plans to exit our May puts tonight at the close.

Small Positions

closed Position: Short RTN stock @ $48.68, exit 49.79 (-2.1%)

- or -

May $47.00 PUTs (RTN1121Q47) Entry @ $0.28, exit 0.0 (-100%)

05/19 Exit early. RTN @ 49.79 (-2.1%), Option @ -100%

chart:

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