Option Investor
Newsletter

Daily Newsletter, Tuesday, 1/17/2012

Table of Contents

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

Market Wrap

China Surprise

by Jim Brown

Click here to email Jim Brown
China reported multiple economic numbers for Q4 that were better than expected and took trader's minds off of Europe.

Market Statistics

China reported its Q4 GDP grew at +8.9% compared to estimates of +8.7%. While that was better than expected it was still the slowest growth in the last ten quarters. Industrial Production grew by +12.8% and that was also better than the expected +12.2% estimate. Retail Sales for December rose by +18.1% and over estimates of +17.2%.

While those numbers were stronger than expected they are all down from the same statistics posted over the last couple years. This gives the government plenty of leeway in restarting its stimulus programs at a moderate pace with an eye on long term growth. There was no sign of the hard landing many analysts have been worried about.

The German ZEW economic sentiment index jumped to -21.6 from -53.8 and the biggest jump on record. The historical average for the ZEW index is +24.5. Sentiment had soured because of the German contributions to bailout the euro zone. ZEW said sentiment over the next six months was likely to stabilize rather than deteriorate further and that was also a change in outlook.

The Chinese and German news was very positive for our markets at the open but before the day ended the indexes had given back much of their gains despite positive economics from the U.S. as well.

The NY Empire Manufacturing Survey spiked to 13.5 and the highest level since April. It was 8.2 in December. This was the third consecutive month of gains. All the internal components were positive with new orders doubling to 13.7 from 6.0 and employment jumping +10 points to 12.1 from 2.3. That was the improvement jump since May. More than 50% of survey respondents said they were planning to hire and one third of respondents said their employees were overworked. Backorders improved significantly to -5.5 from -15.1 but failed to return to positive territory.

Empire Survey Chart

The economic calendar for the rest of the week is pretty crowded with Thursday the most dangerous with new debt auctions for Spain and France, the Philly Fed Survey and earnings from eight high profile big caps.

Economic Calendar

With earnings misses becoming common the odds of a rocky Thursday are pretty good. Big cap tech stocks will be well represented as well as the financial sector. Wednesday's earnings could also be a challenge for the financial sector with BK, GS, PNC, SCHW, SLM, STT and USB.

Goldman earned $4 for 2011 and is expected to earn $11 in 2012. Many analysts are starting to worry those 2012 estimates will not come true and they expect Goldman to begin guiding lower in this report.

Earnings Calendar

Financial companies have not been doing well in the Q4 reports received so far. The financial sector was responsible for a lot of today's afternoon decline. Those inflated earnings estimates are beginning to implode as companies miss their street targets.

JP Morgan missed last week but at least gave a somewhat upbeat outlook for 2012. Citigroup missed estimates today with earnings that declined -11% from the comparison quarter. Citi reported a -7% decline in revenue to $17.17 billion. Earnings of 38 cents were well below estimates of 48 cents. A weak bond market was blamed for some of the decline but CEO Vikram Pandit said "clearly the macro environment has impacted the capital markets."

Citi laid off 5,000 workers late in 2011 and 25% were in the capital markets division. Costs rose +4% in 2011 and CFO John Gerspach said "the period of rising costs was now behind us." They expect to trim costs by as much as $3 billion in 2012. Citi's exposure to troubled European countries rose by +$700 million to $7.8 billion. Gerspach said they "were not walking away from the euro zone even if Europe remained the largest overhang on the market."

Citigroup shares fell -8% on the earnings news.

Citigroup Chart

The opposite of Citi's performance came from Wells Fargo (WFC). Wells Fargo reported a +17.6% rise in profits for Q4 despite a decline in revenues. They posted earnings of 73-cents compared to estimates of 72-cents. Not a big beat but certainly better than the dismal Citi earnings. Mortgage banking income rose +30% to $2.36 billion. The unclosed pipeline of loans for Q1-2012 was $72 billion. Mortgage origination revenues rose by +59% from Q3. After Bank of America quit buying mortgages from other banks late in 2011 that left Wells Fargo in the drivers seat for acquiring mortgage loans. They are able to be selective about what they buy and evidently the business is producing huge profits. WFC shares closed fractionally higher after the sector decline eroded their early gains.

Wells Fargo Chart

TD Ameritrade (AMTD) posted profits that rose +5% but revenue was flat as trading activity slowed late in 2011. AMTD posted earnings of 27 cents compared to estimates of 26 cents. Revenue fell -1% to $653 million and analysts were expecting $671 million. The company said trading volume fell in Q4 as worries over Europe kept traders on the sidelines. Average daily trades fell to 367,479 compared to 415,739 in Q3. CEO Tomczyk said trading volume will likely improve significantly if Europe stabilizes and the market begins to move in a consistent pattern. (Good luck with that!) AMTD net customer assets rose +7% to $406.3 billion. Helping AMTD beat earnings was the purchase of 6.7 million shares of its own stock in Q4. That reduces the shares outstanding and raises the profit per share. AMTD shares fell fractionally on the earnings news.

AMTD Chart

Check Point Software (CHKP) posted earnings of 84 cents, up from 73 cents in the comparison quarter and better than analyst estimates of 82 cents. Revenue rose +12% to a record $356.8 million. The growing aggressiveness of cyber attacks and viruses has been beneficial to companies that publish antivirus software. The company said there was an increasing number of attacks by cyber-bots. Check Point is launching an anti-bot software blade in early 2012. Bots are hard to detect pieces of software that invade networks and then spy on activity and wait for future commands.

The Tel Aviv Stock Exchange, El Al Airlines and three banks were hit by a coordinated bot attack on Monday. Check Point said the attack came from thousands of computers al around the world that had been taken over by the bots. CHKP has $2.9 billion in cash and is buying back shares and looking for acquisitions. Shares rallied +8% on the news.

Check Point Software Chart

After the bell Yahoo (YHOO) spiked to a high of $16.48 from the close at $15.43 after news broke that Jerry Yang had resigned from his position at Yahoo and from his director position. Yang's official title was "Co-Founder and Chief Yahoo." He is also resigning from the boards of Yahoo Japan and Alibaba Holdings Group. He has been widely criticized as trying to orchestrate a leveraged buyout of Yahoo where he would end up as a majority owner at the expense of existing shareholders. Numerous shareholders have lobbied for his exit and threatened shareholder suits.

His abrupt exit effective as of today suggests someone is about to make an offer and one of their conditions was the elimination of Yang. He was seen as a solid opponent to multiple possible transactions that had been discussed in recent months. Without him there it could smooth a future deal and I would expect shares to begin trending higher in anticipation. Various rumored deal discussions valued Yahoo from $19 to $28 per share. Without Yang that premium could rise.

Yahoo Chart

Carnival Corp (CCL) plunged -14% after the Costa Concordia ran aground in Italy and capsized over the weekend. At least 11 people died with 24 still missing. The accident came when the captain altered course temporarily to allow the chief steward to wave to his family and friends on shore. Costa's parent is Carnival Corp. Carnival owns and operates 101 ships under several brands including Cunard, Holland America, Princess and Seabourn. Insurance claims are expected to exceed $500 million and Carnival will be responsible for $40 million in deductibles.

The capsizing of the ship comes at the start of the spring booking season and could cost them additional millions by customers suddenly deciding a cruise may no longer be a vacation option. Cruise lines will respond by slashing prices and making it an even better deal for those who believe another accident is not likely. Since 2005 there have only been 16 deaths in the cruise industry out of more than 100 million passengers. I would say the odds are definitely in the passengers favor.

Carnival Chart

The news from China boosted expectations for crude demand. Traders were worried China could see a hard landing and demand slow. Also helping crude prices was news the EU may try to fast track the embargo on Iranian crude sales with a July 1st start date or even sooner.

Iran's OPEC governor said an oil embargo would be economic suicide by Europe. Iran sells about 20% of its oil to Europe. The governor warned that rising prices would push Europe deeper into recession. He also warned that Saudi Arabia's promise to cover any shortfall was not the official position of the country and only the personal view of its oil minister Ali al-Naimi.

Obviously the Iranian official is trying to instill fear of high prices and shortages in an effort to hold off any action on an embargo.

This embargo threat should support prices through the normal seasonal lows in February and give us a higher launch point for the normal summer rally. Crude gained +2.30 for the day and is continuing to gain overnight.

Crude Oil Chart

The banking sector declined about 1.5% after an early morning rally thanks to the worries over the bank earnings due out on Wednesday. There are fears Goldman will miss earnings and guide lower and Bank America on Thursday could also disappoint. A restart of talks in Greece on the 50-75% haircut of more than 200 billion in outstanding debt is also a problem. There are an increasing number of rumors the hedge funds holding some of that debt have stiffened and will not agree to the deal without a significant sweetener. That is not likely to happen and that is increasing fears of a Greek default.

That is relative to the U.S. financial market because European banks cannot be shorted. That means anyone trying to hedge their holdings in Europe can only do so by shorting American banks, which have tens of billions at risk in Europe. The Banking Index turned down sharply mid afternoon.

Bank Index Chart

The markets have been trending slowly higher in 2012 without any serious conviction. However, a survey of 214 fund managers handling a total of $655 billion in assets showed 27% currently overweight in cash. That was down from 35% in December. Asset allocators were seen the most bullish on U.S. equities since April 2010. America has replaced emerging markets as the location of choice for investments.

Despite the recent earnings misses the official S&P earnings estimates for all of 2012 is currently just over $105. That would be a record with a +9% gain for the year. That survey came from analysis of more than 9,000 analyst projections compiled by Bloomberg. Unless that estimate begins to implode it suggests a positive year for stocks. A PE of 15 would imply a 1,575 value for the S&P.

The S&P spiked to 1,303 at the open but immediately declined to 1,300 where resistance remained rock solid for the next four hours. When the financials began to weaken at 2:PM the index collapsed to nearly 1,290 and back under the 1,295 resistance that has held for the last week.

A move below initial support at 1,280 could signal an end to this early January rally and target 1,250 for an initial pause.

S&P Chart

The Dow continues to respect uptrend resistance but it is also creeping steadily higher. The +60 point gain was far less than the +151 gain at the open but it was still a gain. Initial resistance at 12,500 came back to haunt the index at the close. JP Morgan was the biggest decliner at -1.01.

The melt up continues but there is still no conviction. That does not mean we can't continue higher as traders still overweight cash become frustrated waiting for a dip that never comes. This is going to be a pivotal week for earnings and headlines from Europe and it could change investor sentiment dramatically in either direction.

Dow Chart

The Nasdaq spiked to a dead stop at 2740 resistance at the open and held there for most of the day. At noon there was an attempt to push higher but that garnered only two additional points before sellers appeared and the Nasdaq declined with the rest of the market at 2:PM.

With super Thursday tech earnings a major worry for anyone long tech stocks I would be very surprised to see traders buying techs ahead of those earnings. The risk is huge with GOOG, INTC, IBM and MSFT all reporting on the same day. Google is known for massive swings up or down after their report and that can dramatically drive the tech sector.

Support is 2700 and resistance 2740.

Nasdaq Chart

The Russell managed a temporary spike over resistance at 770 at the open but was immediately hammered back below that level. This resistance has been rock solid and although the Russell continues to edge closer to a breakout there is no volume and no conviction. A break over 770 would be very bullish for sentiment.

Resistance 770, support 760.

Russell Chart

Volume was still mediocre at only 6.6 billion shares despite this being an expiration week and the first day back from a three day weekend with dozens of major headlines. Traders are still nibbling at the edges but there has been no material change in sentiment. They are waiting for a resolution in Europe and for guidance from the next round of earnings reports. The rest of this week will be critical. This could be a pivotal week for the quarter where traders decided to either move to the sidelines because of lower guidance and headlines or bite the bullet and take a chance on the U.S. being the flight to quality destination for the rest of the world.

There is a change in store for us over the next several days and it is anyone's guess as to the direction. A continued move higher will run into major resistance at the October highs and it will probably take far better news from Europe to push us over that level. Conversely we could easily see a flurry of earnings misses and lowered guidance create a market pause until further economic clarity is seen.

I remain cautious but long until proven wrong.

The EOY special is over but we have a few packets left. First come, first served. When they are gone they are gone. 2011 Special

Jim Brown

Send Jim an email


New Plays

Biotech & Oil Services

by James Brown

Click here to email James Brown

Editor's Note:

In addition to tonight's new plays the stocks below might offer a short-term trading opportunity. Check them out:

NILE - The stock's bounce reversed at the 50-dma today. I would be tempted to open bearish positions on NILE if shares traded under $35.00. You could aim for the $32.00-30.50 area.

ADP - shares are breaking out past major resistance near $55.00.

RDC - watch for a breakout past its simple 150-dma.

CIT - a rally past $37.50 might be an entry point.

EXPE - the stock appears to be breaking out from a three-week consolidation pattern.

CRZO - this stock is testing the bottom of its $24-30 trading range.

NUAN - technically today's drop has produced a bearish engulfing candlestick (reversal) pattern. I would expect some follow through lower. There could be some support in the $26-27 area.


NEW BULLISH Plays

BioMarin Pharmaceuticals - BMRN - close: 35.86 change: +0.87

Stop Loss: 33.80
Target(s): 39.50
Current Gain/Loss: unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
BMRN is a biotech stock with a steady trend of higher lows and higher highs. Traders just bought the dip near short-term support in the $34-35 area. I am suggesting we buy the bounce today with a stop loss at $33.80. However, we only want to open positions if both the S&P 500 and BMRN open positive tomorrow morning. If the S&P 500 happens to open flat then we'll base our entry on BMRN's open.

Our target is $39.50. We want to exit prior to the earnings report in mid February. FYI: The Point & Figure chart for BMRN is bullish with a $47.50 target.

NOTE: BMRN does have options but the spreads are too wide to trade.

*See Entry Details Above*

Suggested Position: buy BMRN stock @ the open

Annotated chart:

Entry on January xx at $ xx.xx
Earnings Date 02/16/12 (unconfirmed)
Average Daily Volume = 839 thousand
Listed on January 17, 2011


NEW BEARISH Plays

C&J Energy Services, Inc. - CJES - close: 18.00 change: -0.67

Stop Loss: 19.75
Target(s): 15.00
Current Gain/Loss: unopened
Time Frame: 4 to 6 weeks, exit prior to earnings
New Positions: Yes, see below

Company Description

Why We Like It:
CJES is in the oil services industry. Shares have spent the last few weeks building a top of lower highs. The stock finally broke its bullish trend of higher lows and its 50-dma a few days ago. Today saw the oversold bounce reverse under the $20 level (the high was $19.72).

I am suggesting small bearish positions if CJES trades at $17.80. We'll use a stop above Tuesday's high. Our target is $15.00. We do want to keep our position size small to limit our risk. The most recent data listed short interest at about 15% of the small 35.9 million-share float. That does raise the risk of a short squeeze. You may want to use put options to limit your risk instead of shorting the stock.

FYI: The Point & Figure chart for CJES is bearish with a $12.00 target.

Trigger @ 17.80

Suggested Position: short CJES stock @ 17.80

- or -

buy the Feb $17.50 put (CJES1218N17.5) current ask $0.95

Annotated chart:

Entry on January xx at $ xx.xx
Earnings Date 02/15/12 (unconfirmed)
Average Daily Volume = 923 thousand
Listed on January 17, 2011



In Play Updates and Reviews

Opened Trades

by James Brown

Click here to email James Brown

Editor's Note:
Our new trading candidates SAI and SWHC have both been opened.

Readers have a decision to make about PETS.

-James

Current Portfolio:


BULLISH Play Updates

Ball Corp. - BLL - close: 37.14 change: -0.50

Stop Loss: 39.00
Target(s): 36.25
Current Gain/Loss: + 1.6%
Time Frame: up to the earnings report (01/26)
New Positions: see below

Comments:
01/17 update: Hmm.... BLL underperformed the market on Tuesday. Shares failed at resistance near $38.00 and closed near short-term support at $37.00 and its simple 10-dma. I am not suggesting new positions at this time. We want to exit prior to the earnings report on January 26th. More conservative traders might want to raise their stops toward the $36.50 level or closer to the 10-dma.

Earlier Comments:
Our target is $39.00. More conservative traders may want to take profits early near $38.00 instead. FYI: The Point & Figure chart for BLL is currently bearish but a rally past $37.00 would produce a brand new buy signal.

current Position: Long BLL stock @ 36.55

- or -

Long Feb $35 call (BLL1221A35) entry 2.30

01/12/12 new stop loss @ 36.25
01/11/12 new stop loss @ 35.75
01/06/12 trade triggered at $36.55
01/05/12 adjusted stop loss to $35.35, plan to exit prior to earnings

Entry on January 06 at $36.55
Earnings Date 01/26/12 (confirmed)
Average Daily Volume = 985 thousand
Listed on January 03, 2011


Cisco Systems Inc. - CSCO - close: 19.31 change: +0.25

Stop Loss: 18.60
Target(s): 20.75
Current Gain/Loss: unopened
Time Frame: up to CSCO's February earnings
New Positions: Yes, see below

Comments:
01/17 update: CSCO is getting closer to our entry point. Shares rallied +1.2% today and closed at new relative highs. Traders could actually open positions now instead of waiting for our trigger at $19.35.

Earlier Comments:
We want to ride the stock up to its early February earnings report but exit prior to the announcement. FYI: The Point & Figure chart for CSCO is bullish with a long-term $27.00 target.

Trigger @ 19.35

Suggested Position: buy CSCO stock @ 19.35

- or -

buy the Feb $20 call (CSCO1218B20)

Entry on January xx at $ xx.xx
Earnings Date 02/08/12 (confirmed)
Average Daily Volume = 39.0 million
Listed on January 12, 2011


Harley-Davidson - HOG - close: 42.03 change: +1.28

Stop Loss: 39.40
Target(s): 44.50
Current Gain/Loss: + 2.6%
Time Frame: up to the earnings report (late January)
New Positions: see below

Comments:
01/17 update: Uh-oh! HOG delivered a very disappointing session. The stock popped higher and hit $42.82 before fading to a -1.4% decline. That doesn't bode well and might signal a correction back toward what should be support near $40.00. I am not suggesting new positions at this time.

HOG is tentatively scheduled to report earnings in late January and we do not want to hold over the announcement.

current Position: long HOG stock @ 40.35

- or -

Long Feb $40 call (HOG1221B40) entry $2.06

01/14/12 new stop loss @ 39.40. There is potential resistance in the $43.00-43.25 area.

Entry on January 10 at $40.35
Earnings Date 01/24/12 (unconfirmed)
Average Daily Volume = 1.5 million
Listed on January 05, 2011


PetMed Express Inc. - PETS - close: 10.96 change: +0.14

Stop Loss: 10.45
Target(s): 11.90
Current Gain/Loss: + 3.4%
Time Frame: up to the January earnings report.
New Positions: see below

Comments:
01/17 update: It's decision time for traders here. PETS displayed relative strength with a +1.2% gain. Yet the stock stalled right underneath resistance near $11.00. There could be additional resistance at the simple and exponential 200-dma at $11.10 and $11.21. You have to decide do you exit now? Or do you hold on and expect a breakout past resistance.

The premise of our trade was to catch a short squeeze in PETS. That's why I am suggesting we hold on but we will raise our stop loss up to $10.45. I am not suggesting new positions at this time.

We do want to exit prior to the January 23rd earnings announcement.

Earlier Comments:
A breakout could spark a short squeeze. The stock could see a short squeeze due to the high amount of short interest. The most recent data listed short interest is almost 26% of the very small 19.8 million-share float.

NOTE: I would prefer to trade the stock over the options but we're listing the options as an alternative.

(small positions)

current Position: Long PETS stock @ $10.59

- or -

Long Feb $10 call (PETS1218B10) entry $0.74

01/17/12 new stop loss @ 10.45, Readers have a decision to make with PETS near resistance at $11.00. Do you exit now or hold on?
01/14/12 new stop loss @ 10.29
01/11/12 new stop loss @ 10.20
01/10/12 new stop loss @ 10.10
01/04/12 readers may want to exit early. PETS is not cooperating and the action looks bearish.
01/03/12 PETS gapped higher at $10.59, which is above our trigger at $10.45.

Entry on January 03 at $10.59
Earnings Date 01/23/12 (confirmed)
Average Daily Volume = 231 thousand
Listed on December 27, 2011


SAIC, Inc. - SAI - close: 13.04 change: +0.02

Stop Loss: 12.74
Target(s): 14.50
Current Gain/Loss: - 0.4%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
01/17 update: Our new trade on SAI is open. Shares rallied to $13.25 this morning before reversing lower. That's a big disappointing. Once again I would want to see both SAI and the S&P 500 both open positive before considering new bullish positions.

Our target is $14.50 but I have to warn you that I see potential resistance near $13.50, and the 150-dma, the exponential 200-dma and the simple 200-dma.

(Small Positions)

Suggested Position: long SAI stock @ $13.10

- or -

Long Feb $12 call (SAI1218B12) Entry $1.30

Entry on January 17 at $13.10
Earnings Date 03/22/12 (unconfirmed)
Average Daily Volume = 1.7 million
Listed on January 14, 2011


Starbucks Corp. - SBUX - close: 47.71 change: +0.35

Stop Loss: 45.75
Target(s): 49.75
Current Gain/Loss: + 3.5%
Time Frame: up to the January earnings report.
New Positions: see below

Comments:
01/17 update: SBUX continues to set new highs. Shares rallied toward the $48.00 level this morning. Readers can look for short-term support at the rising 10-dma. I am inching our stop loss up to $45.95.

Shares held up pretty well considering news out this morning that coffee production in Colombia, a major producer of coffee beans, saw its coffee been crop shrink to its lowest level since 1976. A shortage of coffee could raise input prices on SBUX's products and thus squeeze margins.

I am not suggesting new positions at this time.

current Position: long SBUX stock @ $46.08

- or -

Long FEB $47 call (SBUX1218B47) entry $1.56

01/17/12 new stop loss @ 45.95
01/14/12 new stop loss @ 45.75, plan to exit prior to earnings
01/12/12 new stop loss @ 44.90
01/11/12 new stop loss @ 44.60
01/07/12 new stop loss @ 43.95

Entry on December 29 at $46.08
Earnings Date 01/26/12 (confirmed)
Average Daily Volume = 5.1 million
Listed on December 28, 2011


Smith & Wesson Holding Corp. - SWHC - close: 4.69 change: -0.11

Stop Loss: 4.45
Target(s): 5.65 or 6.40
Current Gain/Loss: - 2.9%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
01/17 update: Our aggressive trade on SWHC is not off to a very good start. Shares opened higher at $4.83 so the trade is open but the stock reversed at $4.89 and closed down -2.2%. The relative weakness is a bit troubling. Readers may want to wait for a dip or a bounce in the $4.55-4.50 area before considering new positions.

Earlier Comments:
I do consider this a very aggressive trade and we want to keep our position size small. The $5.00 level could be resistance but we're going to aim higher. I am setting two different targets depending on your risk tolerance. I'd aim for $5.65 or $6.40. FYI: The Point & Figure chart for SWHC is bullish with a long-term $9.50 target.

(Small Positions)

Suggested Position: long SWHC stock @ $4.83

Entry on January 17 at $4.83
Earnings Date 03/12/12 (unconfirmed)
Average Daily Volume = 962 thousand
Listed on January 14, 2011


Textainer Group Holdings - TGH - close: 29.79 change: +0.27

Stop Loss: 28.95
Target(s): 34.00
Current Gain/Loss: - 2.6%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
01/17 update: TGH spent Tuesday's session consolidating sideways but it did close near its high for the session. I remain cautious. We'll wait for another rally past $30.60 before considering new positions.

Earlier Comments:
A breakout could spark some short covering. The most recent data listed short interest at 11% of the very small 12.8 million share float. That raises the risk of a short squeeze. Plus, TGH should appeal to the high-yield crowd since shares sport a 4.7% yield. NOTE: TGH does have options but the spreads are a little wide.

current Position: Long TGH stock @ 30.60

01/13/12 TGH hit our trigger at $30.60 and reversed in less than one second. I am suggesting caution here.

Entry on January 13 at $30.60
Earnings Date 02/09/12 (unconfirmed)
Average Daily Volume = 172 thousand
Listed on January 11, 2011


Vertex Pharmaceuticals - VRTX - close: 36.51 change: -0.30

Stop Loss: 33.95
Target(s): 39.50
Current Gain/Loss: unopened
Time Frame: up to the February earnings
New Positions: Yes, see below

Comments:
01/17 update: VRTX underperformed the market today with a -0.8% decline. Shares are nearing short-term support at $36.00.

Earlier Comments:
I am suggesting we open bullish positions at $35.05 and use a stop loss at $33.95. I would keep our position size small. We have less than three full weeks before we plan to exit to avoid VRTX's early February earnings report.

Trigger @ 35.05 (small positions)

Suggested Position: buy VRTX stock @ 35.05

- or -

buy the Feb $35 call (VRTX1218B35)

01/14/12 adjusted strategy: trigger @ 35.05, stop loss 33.95.

Entry on January xx at $ xx.xx
Earnings Date 02/02/12 (unconfirmed)
Average Daily Volume = 3.0 million
Listed on January 10, 2011


BEARISH Play Updates

Target Corp. - TGT - close: 49.88 change: +0.06

Stop Loss: 50.50
Target(s): 46.05
Current Gain/Loss: - 3.9%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
01/17 update: TGT is still hovering near resistance at the $50.00 level. I remain bearish on the stock with TGT below $50 and its simple 200-dma and I would still consider new positions now.

(small positions)

current Position: short TGT stock @ 48.00

- or -

Long Feb $50 PUT (TGT1218B50) entry $2.65

01/05/12 new stop loss @ 50.50
01/05/12 Our trade was opened on the gap down at $48.00 instead of our trigger at $49.45 thanks to TGT's missed same-store sales numbers and an earnings warning.

Entry on January 05 at $48.00
Earnings Date 02/22/12 (unconfirmed)
Average Daily Volume = 4.6 million
Listed on January 04, 2011