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Newsletter

Daily Newsletter, Thursday, 1/26/2012

Table of Contents

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

Market Wrap

Dow Touches the Sky

by Jim Brown

Click here to email Jim Brown
The Dow rallied at the open to 12,841 and above the 52-week high close at 12,810 but immediately lost traction and declined to close near the lows for the day.

Market Statistics

The Dow rallied on good news from Caterpillar and 3M but collapsed on a massive $6.7 billion loss by AT&T. Banks and techs weighed on the index as well as the broader market. Have we finally reached the point where mediocre earnings and major misses have sapped the market's strength?

At the high of the day the Dow had rallied more than 14% since Thanksgiving on the hopes for the three Es of Earnings, Economy and Europe. This week each of those Es developed a bad case of acne that took them out of contention for the best looking support fundamental.

Economics

On the economic ledger the New Home Sales for December declined to 307,000 from 321,000 and well under estimates for a rise to 331,000. That was a decline of -2.2% from November and -7.3% from December 2010. Sales for all of 2012 declined by -6.2%. Months of supply remained low at 6.1 months. Average selling prices decreased -13%. This was an unexpected pimple on the face of U.S. economics

The decline in home sales was a shock to the market since all the recent data suggested the sector was improving. For all of 2011 sales declined -7.3% and that was a record low dating back to 1963. Q4 sales did improve from Q3 thanks to the record low mortgage rates. Sales are poised to improve in 2012 as pent up demand is released in the spring buying season.

New Home Sales Chart

Weekly Jobless Claims rose more than 20,000 to 377,000 from 356,000 the prior week. Nobody wants to see claims rising and even more so as the number moves closer to 400,000. Personally I think we are still seeing the impact of the seasonal confusion. Last week's decline of nearly 50,000 was way out of line so this rebound by 20K could be just another smoothing of the numbers as the volatility from the holidays slowly dissipates. This was still one more point of concern for today's market.

Jobless Claims Chart

Coming in on the positive side of the economic picture was a rise in the Kansas Fed Manufacturing Survey to +7.0 in January from -4.0 in December. Manufacturing rebounded from the contraction dip in December and back into the expansion range it has been treading since July. The average reading for the prior five months not counting December was +6.0. The production component rose to 12 from -6 and new orders rose to 8 from -2. Backorders rose to +7 from -11 and employment improved significantly to +9 from -5.

Kansas Fed Chart

The Chicago Fed National Activity Survey (CFNAI) for December rose to +0.17 from -0.46. That is the highest level since July. Relatively speaking that was a really big improvement. Think of it as rebounding from -46 to +17. I think they need to multiply their index by 100 to get away from those two digit decimal numbers.

While this rebound is significant it suggests a possible data problem in November that knocked all the components deep into negative territory and contrary to its recent trend. Then to have December rebound strongly suggests that was a blip in the data. However, industrial production, manufacturing output and capacity utilization did dive significantly in November because of the impact of the Thailand floods. This could have also been the problem with the CFNAI and the reason for the November decline. On the positive side it is now at the highest level since July and that suggests the manufacturing sector is improving.

CFNAI Chart

Durable Goods orders rose +3.0% for December compared to +4.3% in November. However, that headline number was buoyed by a huge +18.9% gain in aircraft orders. The headline number was market positive but this is a lagging report and more of a confirmation of what we already knew rather than significant new data.

For Friday the major report is the GDP with a consensus estimate of +3.0% but there are whisper numbers from 1.4% to nearly 4.0%. To say there was confusion over the economic activity in Q4 would be an understatement. This could be a market mover if it is significantly different than the official 3% consensus.

Economic Calendar

Europe

The second E with market negative news was Europe. The battle over the private debt haircut in Greece is heating up again and officials all over Europe are weighing in on the need for a quick solution. Sentiment is strongly against the private investors whose 190 billion euros are at risk of being cut. It is easy to claim it is in the best interest of Europe for them to take a 75% haircut when it is not your money. If these officials actually had skin in the game I think the outcry would be significantly different.

Greek officials claim they will have a settlement by the weekend. Unfortunately they said this last weekend as well and that did not happen. There are growing concerns the private creditors will not settle and force Greece to default. If that happens then other Greek debt may also be at risk. There is growing pressure for the ECB to also take a haircut on its loans to Greece and that would undermine the credit of the ECB. Never a dull moment.

Italy sold five billion euros of two year debt on Thursday and at a yield of 3.76%. That is the lowest since August and more than a full point below what it was forced to pay a month ago. The reason for the falling yields is the LTRO loans by the ECB that liquefied the European banking system. Banks can borrow from the ECB at 1% for three years and then buy this short term debt at 3.76% and have a reasonably safe short term investment.

Italy plans to sell another eight billion of 6-month bills and three billion of 12-month bills on Friday. They are taking advantage of the current market for short term debt created by the LTRO loans. Italy has 26 billion in BTP bonds and 10 billion of coupon payments due on Feb 1st.

Citi warned that moving all of its debt to short term obligations would put Italy at risk of another downgrade because the shorter term debt is more volatile. Italy's current average duration is 7 years. They noted that another two notch downgrade by Moody's would make their bonds no longer acceptable for the European inflation index and cause automatic selling by funds that track the composition of the index. Being kicked out of that index and automatic selling by funds could dramatically lower the bond values in the marketplace and raise yields. S&P also warned about shortening the duration and the possibility of a resulting credit downgrade.

Portugal's 10-year bonds yields rose to more than 15% and the credit default swaps rose to a record high of 1350 bpd. This is the same rate as Greek bonds back in August that brought Greece into sharp focus and increased their chances of a default. This suggests Portugal could be the next default candidate and quite a bit of its debt is protected by default swaps where private sector Greek debt only has about four billion in guarantees. This means a default in Portugal would reverberate throughout the European banking system.

Things are heating up in Europe again with the possibility of a Greek default growing. Since most analysts already believe Greece will default the news is probably already prices into the market. JP Morgan CEO Jamie Dimon said today that a Greek default will have a zero impact on U.S. banks. However, we would be exposed to the impact on Europe from that default. If Greece defaults then Portugal, Ireland, Spain and Italy would be more likely to default using the excuse "why should Greece be able to cancel its debt and become more competitive and we can't cancel ours?"

Europe does not have just one pimple but a full blown case of acne that is ready to erupt.

Earnings

Today was actually a pretty good day for earnings. There were some minor eruptions and more major event but overall today's events were mostly good news. The major event came from Carbo Ceramics (CRR). This company makes ceramic proppants for fracturing horizontal wells. The company reported earnings of $1.43 compared to estimates of $1.70. Revenues were $158 million versus estimates of $179 million. Shares dropped -21% or a whopping -$27 to $104.

A $27 drop is newsworthy when it happens to Google because Google's stock price is $600. For a $130 stock to drop -27 is a disaster. The reason for the decline was a sudden drop in the number of natural gas wells being drilled thanks to the multiyear low in nat gas prices. Carbo said there was a -70% decline in proppant volume in the Haynesville Shale in Q4. That is a monster decline. The company said it expects volume to return because the major drillers are in the middle of a massive move of rigs from gas fields to oil fields and once they get up to speed in their new locations the number of wells being drilled and fracked would return to prior levels.

However, the move is causing some logistical problems for drillers and for service companies. Moving the infrastructure already in place in the gas fields half a continent away to the oil fields is a major expense and time consuming affair. Equipment, supplies, people, etc all need to be moved but at the same time they have to leave enough crews behind to continue to service the gas drilling at a much lower activity level. I thought Carbo was an acquisition candidate before today's drop so I really believe it is a target today. It was slightly more than a $3 billion market cap company on Wednesday and today that is slightly more than $2 billion. It is a 30% off sale!

AT&T (T) activated 7.6 million iPhones in the quarter but the company still took a major $6.7 billion loss thanks to some monster charges for the aborted T-Mobile bid. For comparison Verizon only activated 4.3 million iPhones. Unfortunately AT&T loses money on every iPhone it sells. They discount the phones to several hundred dollars under cost in order to get the monthly airtime fees. AT&T reported a loss of $1.22 per share thanks to the large number of activations and the $4.2 billion charge for the breakup fee it had to pay to T-Mobile. Whoever agreed to a $4 billion breakup fee should be fired and then banished to a remote third world country. Why anyone in management would believe the No 2 carrier buying the No 4 carrier would not reduce competition and not be blocked by regulators is a puzzle to me.

AT&T was the second largest loser on the Dow. Fortunately it is not a high dollar stock so the weighting impact was minimal.

AT&T Chart

Under Armour (UA) fell -5% after reporting a 2-cent beat, revenues in line and then guiding lower thanks to excess inventory and a weak consumer thanks to warmer than normal winter weather.

Sandisk (SNDK) shares fell -11% or -$6 after beating earnings estimates but then guiding lower for Q1 and beyond. The company reported earnings of $1.29 compared to estimates of $1.26. However, its revenue forecast of $1.30-$1.35 billion was significantly below the $1.46 billion analysts expected. Full year 2012 revenue guidance was $6.4 billion compared to estimates of $6.64 billion. The company said the strong yen, weak dollar was delaying projects in China.

SanDisk Chart

Juniper (JNPR) reported earnings after the bell of 28 cents that was in line with estimates but they also guided lower for 2012. Revenue guidance for Q1 was $960-$990 million and analysts were expecting $1.1 billion. The CEO said Q4 revenues were light due to softer demand from service providers. Juniper shares declined -8% in after hours.

Also declining after hours was Riverbed Technology (RVBD). Shares fell -14% after the bell after the company beat estimates but guided to earnings of 19-20 cents when analysts were expecting 25-cents.

Cirrus Logic was down -7% after releasing earnings that were in line with its prior guidance. The company preannounced it would beat earnings and everyone raised guidance. When it only reported in line with the raised guidance the stock was sold. If you preannounce you are going to beat you better beat big.

Starbucks (SBUX) shares traded lower after the bell after reporting earnings that increased +10% to 50-cents per share but guiding to $1.78-$1.82 for the full year with analyst estimates at $1.83.

On the positive side of the earnings ledger Time Warner Cable (TWC) rallied +8% after beating estimates, raising guidance and announcing a $4 billion stock buyback. Earnings were $1.39, a +40% rise and beat estimates of $1.20. Revenue rose by +4% to $4.99 billion. Believe it or not a decline in political ads in Q4 caused a drop in advertising revenue. Political ads declined? Who knew?

TWC added 117,000 broadband Internet customers and well over the 87,000 analysts expected. However, it lost 129,000 residential video on demand customers. You can thank NetFlix, Hulu and Amazon for that loss. NetFlix said yesterday it added 610,000 new subscribers in Q4.

TWC Chart

Dow component Caterpillar (CAT) posted earnings of $2.32 that rose +58% on revenue for all of 2011 that rose +41%. They raised their outlook from $68 billion to $72 billion for all of 2012. Shares rallied strongly at the open and CAT was the primary reason the Dow spiked over 12,800. CAT has been responsible for 150 of the last 500 points in the Dow rally. CAT rallied exactly to resistance before losing traction. With the positive guidance I expect that resistance to eventually be retested. A move over $114 would be bullish but given the strength of the rally since $90 I would expect some profit taking first.

CAT Chart

If you were betting the farm on the three Es the problems described above may have been a disappointment. Apparently there were a lot of disappointed investors because volume increased to nearly eight billion shares from an average for January of just over six billion. Down volume was 2:1 over up volume. When the Dow's opening spike to a new 52-week high was immediately sold the market sentiment soured quickly. However, despite the day long slide the pace of selling was slow and orderly. There was no rush for the exits.

Tonight traders have to decide if they are comfortable remaining long at this level or decide it is time to take some chips off the table. The Dow move over 12,800 could have been the signal the bears were waiting for only they did not show up in force. The month of dip buying on bad news has apparently made them a bit cautious.

The S&P saw a monster spike to close at 1325 on Wednesday thanks to the Fed saying low rates would continue into late 2014 and they would consider QE3 if economic conditions did not improve soon. That was a veiled suggestion that the March meeting could provide some fireworks. Of course it would not be the first time Bernanke attempted to talk the market up by suggesting there was further accommodation ahead. The comments are keeping a floor under gold, silver, copper and crude.

Unfortunately it did not keep a floor under equities or at least not at the new high levels. The S&P did find late day support well above the 1310 level that has been support for the last five days. I would have expected 1310 to be bought but the low for the day was just under 1314 with a close at 1318.

Fortunately that 1310 level will provide us with a clear indication that the trend has changed. It was pierced intraday twice this week but was immediately bought. If it is broken again and buyers don't rush in then the trend has changed and I would look at 1280 as the next support point.

S&P Chart - 30 Min

S&P Chart - Daily

The Dow slammed to a dead stop at the resistance highs and fell back below 12,750 that held it in check the prior four days. However, the uptrend resistance should not be support. The intraday dip to 12,700 was too neat for me and I suspect that level will be tested again and will probably break. The real support I expect to hold would be 12,600. That gives the Dow some breathing room and time for another temporary solution in Europe.

Dow Chart

The Nasdaq lost traction well below major resistance at 2875 so that target could be several days or even weeks in our future. Short term support is 2780 and a break there could signal the end of the recent tech run. Today's decline was just noise. A break below 2780 would be real profit taking. The Nasdaq is very extended and Google has been on a steady decline after their earnings. It is time for a rest for techs.

A break of 2780 should test 2700.

Nasdaq Chart - 30 Min

Nasdaq Chart - Daily

Like the Dow the OEX is a big cap index. The OEX skidded to a stop at solid resistance at 600 but the decline to 596 was minimal. If you are looking for a reason to sell the market this is not it. For the big caps to hold at this level it means there is still a lot of confidence among institutional holders. A break over 600 would be strongly positive since it takes a lot of money to move the needle on the OEX.

S&P Big Cap Index $OEX

Likewise the lack of a meaningful decline in the Russell suggests fund managers are not ready to be ringing the register. The Russell is WELL below the same relative resistance as the OEX. This suggests we will eventually see a rotation out of large caps and into small caps but for now fund managers are still interested in the safety of liquidity of the large caps. With Europe on a day to day suicide watch basis they can't afford to move from highly liquid to barely liquid positions. This may continue until Europe is resolved or until we do get a serious bout of profit taking that reduces small cap risk.

Russell Chart

I was cautious on the market in my Tuesday night commentary with a qualification that the Fed could move the needle if they wanted. Their surprise move to a late 2014 date for raising interest rates did just that. The dollar collapsed and equities and commodities rallied. Today's earnings only solidified what we already knew. Some companies are in the sweet spot but quite a few others are seeing a completely different picture as evidenced by the constant decline in 2012 guidance.

This "should" make it harder for the markets to move higher but there appears to be a lot of pent up demand for equities. With bond yields in the sub 2% range and below the rate of inflation there is no future in bonds or money market accounts. After three years of hoarding cash we may be seeing some of that money flow into the market in a desperate attempt to capture some appreciation. The European problem has not gone away and may get worse but the ECB seems to have found a way to buy some more time. If they can keep kicking the can down the road there may be an eventual resolution but I doubt it. The U.S. investor has a need for instant gratification and they are not getting it from watching the daily can kicking. They have a need for speed and they are not getting it from bonds or European headlines. Unfortunately the U.S. earnings headlines are not setting a blistering pace. We will be lucky if we don't fall below the 50% mark for those companies beating estimates.

Due investors bite the proverbial bullet and start putting more money to work in the market after a +15% rally since Thanksgiving or do they wait for another round of economics and give Europe a chance to work out its problems? I am betting they are not going to rush into the market. Dip buying will probably remain a viable strategy until it fails. Then we will start looking for the next resting place while we bide our time ahead of Q1 earnings.

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

Jim Brown

Send Jim an email


New Plays

Underperforming Oil Services

by James Brown

Click here to email James Brown


NEW BEARISH Plays

Superior Energy Services - SPN - close: 25.78 change: -1.68

Stop Loss: 26.25
Target(s): 22.50 or 20.50
Current Gain/Loss: unopened
Time Frame: up to the Feb. 23rd earnings report
New Positions: Yes, see below

Company Description

Why We Like It:
SPN sold off on big volume today. Energy stocks in general were underperformers. Yet SPN underperformed its peers with a -6.1% decline as investors worried about higher fracking costs in the U.S. This stock already has a bearish posture to it with what appears to be a triple top in the $31 area under its exponential 200-dma.

Shares of SPN are now headed for support near $25.00. I am suggesting we open small bearish positions on a breakdown with a trigger at $24.75. If triggered I'm setting an aggressive target at $20.50 but more conservative traders may want to exit near $22.50, which might be support near its October 2011 lows.

I do have to warn you that being short SPN seems pretty popular these days. The most recent data listed short interest at 33% of the 72.5 million-share float. That definitely raises the risk of a short squeeze. Readers may want to use put options to limit your risk.

FYI: The Point & Figure chart for SPN is bearish with an $18 target.

Trigger @ 24.75

Suggested Position: short SPN stock @ 24.75

- or -

buy the Feb $25 PUT (SPN1218N25)

Annotated chart:

Entry on January xx at $ xx.xx
Earnings Date 02/23/12 (confirmed)
Average Daily Volume = 2.8 million
Listed on January 26, 2011



In Play Updates and Reviews

Starbucks Closes At New Highs

by James Brown

Click here to email James Brown

Editor's Note:
We exited our SBUX trade at the closing bell tonight to avoid holding over earnings.

Meanwhile ADSK, GPOR, JPM, and TCK were all opened.

Current Portfolio:


BULLISH Play Updates

Autodesk, Inc. - ADSK - close: 36.55 change: +0.32

Stop Loss: 34.75
Target(s): 39.90
Current Gain/Loss: + 0.1%
Time Frame: up to the late Feb. earnings report
New Positions: see below

Comments:
01/26 update: ADSK hit our trigger to open positions at $36.50 today. Unfortunately the trading action today looks bearish. Shares opened higher at $36.45, spiked to $38.00, and then reversed to close almost where it opened. I am very cautious here. This suddenly looks like a possible top. Readers may want to inch up their stop loss.

Our target is $39.90 but more aggressive traders could definitely aim higher. We do not want to hold over the late February earnings report. FYI: The Point & Figure chart for ADSK is bullish with a long-term $49.00 target.

current Position: Long ADSK stock @ 36.50

- or -

Long Feb $37 call (ADSK1218B37) Entry $1.08

01/26/12 the action today looks like a potential top or bearish reversal. Be careful!

Entry on January 26 at $36.50
Earnings Date 02/23/12 (unconfirmed)
Average Daily Volume = 2.5 million
Listed on January 24, 2011


Cisco Systems Inc. - CSCO - close: 19.83 change: +0.00

Stop Loss: 18.95
Target(s): 21.75
Current Gain/Loss: + 2.3%
Time Frame: up to CSCO's February earnings
New Positions: see below

Comments:
01/26 update: CSCO tried to rally past $20.00 but could not hold its gains this morning. The stock spent the rest of the session churning on either side of the $19.80 area. The fact that CSCO closed unchanged is a little bit encouraging considering the market's losses today. However, CSCO is stuck under resistance at $20.00. If the market corrects we should expect it to follow lower.

I am not suggesting new positions at this time.

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.

Long Position: Long CSCO stock @ 19.37

- or -

Long Feb $20 call (CSCO1218B20) Entry $0.43

01/24/12 new stop loss @ 18.95, target adjusted to $21.75
01/18/12 trade opened on gap higher at $19.37

Entry on January 18 at $19.37
Earnings Date 02/08/12 (confirmed)
Average Daily Volume = 39.0 million
Listed on January 12, 2011


Walt Disney Company - DIS - close: 39.35 change: -0.21

Stop Loss: 37.90
Target(s): 42.50
Current Gain/Loss: - 0.6%
Time Frame: up to earnings on Feb. 7th
New Positions: see below

Comments:
01/26 update: DIS slowly drifted lower all session before finally bouncing in the last few minutes of trading. If the S&P 500 and DIS both open positive tomorrow I would be tempted to launch new positions. More conservative traders might want to adjust their stops closer to the $38.50 area.

Earlier Comments:
Our bullish target might be a little optimistic given our time frame. We do not want to hold over DIS' earnings report on Feb 7th. Speaking of targets, we are aiming for $42.50 but the Point & Figure chart for DIS is bullish with a long-term $53 target.

(Small Positions)

Suggested Position: Long DIS stock @ 39.60

- or -

Long Feb $40 call (DIS1218B40) Entry $0.87

01/23/12 adjusted strategy. Use trigger @ 39.60
01/21/12 trade not open yet. try again.

Entry on January xx at $ xx.xx
Earnings Date 02/07/12 (confirmed)
Average Daily Volume = 7.7 million
Listed on January 19, 2011


Gulfport Energy - GPOR - close: 33.50 change: -0.45

Stop Loss: 31.40
Target(s): 37.00
Current Gain/Loss: - 1.9%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
01/26 update: Our GPOR trade is open. Both the stock and the S&P 500 met our entry point requirements. Shares spiked to $34.47 this morning before reversing lower into a -1.3% decline. A little profit taking is normal. If you don't want to buy GPOR here then look for a dip near its rising 10-dma instead.

Our target is $37.00 but keep an eye on the $35.00 level, which could be resistance.

Current Position: long GPOR stock @ 34.15

- or -

Long FEB $35 call (GPOR1218B35) Entry $1.25

01/26/12 Trade finally opened. GPOR @ 34.15
01/25/12 trade did not open. try again.
01/24/12 trade did not open. try again.

Entry on January 26 at $34.15
Earnings Date 03/12/12 (unconfirmed)
Average Daily Volume = 522 thousand
Listed on January 23, 2011


Human Genome Sciences - HGSI - close: 9.76 change: -0.16

Stop Loss: 8.49
Target(s): 11.00
Current Gain/Loss: + 7.7%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
01/26 update: HGSI spiked to a new multi-week high at $10.28 this morning but reversed as the market turned lower. Shares closed down -1.6% after yesterday's big rally. Please note that we are moving our stop loss up to $8.49. Readers might want to consider a stop closer to $8.75 instead.

I am not suggesting new positions at this time.

Earlier Comments:
Keep in mind this is an aggressive trade and HGSI can be a volatile stock. Our target is $11.00 but readers should note that the $10.00 level and the simple 100-dma could act as overhead resistance. I am suggesting we keep our position size small to limit our risk.

(small positions)

current Position: Long HGSI stock @ $9.06

- or -

Long Feb $10 call (HGSI1218B10) Entry $0.59

01/26/12 new stop loss @ 8.49
01/25/12 readers may want to take profits now (HGSI @ $9.92)
01/19/12 HGSI gapped open higher at $9.06 on a new "buy" rating

Entry on January 19 at $9.06
Earnings Date 02/23/12 (unconfirmed)
Average Daily Volume = 7.1 million
Listed on January 18, 2011


Host Hotels & Resorts - HST - close: 16.39 change: -0.24

Stop Loss: 15.45
Target(s): 17.90
Current Gain/Loss: unopened
Time Frame: up to the Feb. 14th earnings report
New Positions: Yes, see below

Comments:
01/26 update: We have been waiting for a pull back in HST, which appears to have started today. Shares fell -1.4%. Right now the current plan is to wait and buy a dip at $16.00. FYI: The Point & Figure chart for HST is bullish with a $24.00 target.

Buy-the-dip trigger @ 16.00
(Small Positions)

Suggested Position: buy HST stock @ $16.00

- or -

buy the Feb $16 call (HST1218B16)

01/24/12 trade not open yet. adjust strategy to buy the dip at $16.00.

Entry on January xx at $ xx.xx
Earnings Date 02/14/12 (confirmed)
Average Daily Volume = 7.5 million
Listed on January 21, 2011


J.P.Morgan Chase & Co - JPM - close: 37.49 change: -0.11

Stop Loss: 35.95
Target(s): 42.50
Current Gain/Loss: - 1.4%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
01/26 update: Be careful here. JPM spiked to $38.10 this morning and quickly reversed. Shares spent most of the day in its recent $38-37 trading range. Our trigger to open bullish positions was hit at $38.05 but I am not suggesting new positions at current levels. Wait for a new relative high above $38.10.

Earlier Comments:
More conservative traders may want to wait for JPM to actually close over $38.00 before launching new positions. Our multi-week target is $42.50. FYI: The Point & Figure chart for JPM is bullish with a long-term $56 target.

Current Position: Long JPM stock @ $38.05

- or -

Long Feb $38 call (JPM1218B38) Entry $1.00

- or -

Long Mar $38 call (JPM1217C38) Entry $1.50

01/26/12 triggered at $38.05
01/24/12 still not open. adjust strategy to use a trigger @ 38.05
01/23/12 trade not open yet, S&P 500 opened negative. Try again.

Entry on January 26 at $38.05
Earnings Date 01/13/12
Average Daily Volume = 35.2 million
Listed on January 21, 2011


Marvell Technology - MRVL - close: 15.76 change: -0.26

Stop Loss: 15.40
Target(s): 19.00
Current Gain/Loss: unopened
Time Frame: exit ahead of earnings in early March
New Positions: Yes, see below

Comments:
01/26 update: Our new play on MRVL is not open yet. Shares spiked to $16.20 this morning but quickly reversed as the market sank. Today's move looks like a potential bearish reversal with a bearish engulfing candlestick pattern. Overall I don't see any changes from my prior comments.

I am suggesting a trigger to open bullish positions at $16.35 with a stop loss at $15.40. If triggered our multi-week target is $19.00. However, keep an eye on the $18.00 area as potential overhead resistance. FYI: The Point & Figure chart for MRVL is bullish with a $21.00 target.

Trigger @ 16.35

Suggested Position: buy MRVL stock @ 16.35

- or -

buy the Feb $17 call (MRVL1218B17)

- or -

buy the May $17 call (MRVL1219E17)

Entry on January xx at $ xx.xx
Earnings Date 03/01/12 (unconfirmed)
Average Daily Volume = 14.1 million
Listed on January 25, 2011


Smith & Wesson Holding Corp. - SWHC - close: 5.07 change: +0.13

Stop Loss: 4.55
Target(s): 5.65 or 6.40
Current Gain/Loss: + 4.9%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
01/26 update: SWHC is showing relative strength. Not only did it breakout past round-number resistance at $5.00 but it also closed up +2.6% on a day the major indices were down. I am not suggesting new positions at this time.

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

01/24/12 new stop loss @ 4.55

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


Teck Resources - TCK - close: 42.74 change: +0.41

Stop Loss: 40.75
Target(s): 49.00
Current Gain/Loss: - 0.8%
Time Frame: up to Feb 9 earnings report.
New Positions: see below

Comments:
01/26 update: Our bullish TCK trade has been opened at $43.10. Shares gapped higher at $42.93, spiked toward $44.00, but eventually faded back under $43 again. While the breakout above its simple 200-dma is bullish the intraday reversal lower is bearish. I am hesitant to launch new positions tonight.

Earlier Comments:
More aggressive traders might want to keep their stop under $40.00 instead. Our target is the $47.00 level. Our target is pretty optimistic given our time frame. We do not want to hold over the Feb. 9th earnings report. FYI: The Point & Figure chart for TCK is bullish with a long-term $61.00 target.

(small positions)

current Position: long TCK stock @ 43.10

- or -

Long Feb $43 call (TCK1218B43) entry $2.05

01/26/12 trade opened at $43.10
01/25/12 adjusted exit target to $47.00.

Entry on January 26 at $43.10
Earnings Date 02/09/12 (confirmed)
Average Daily Volume = 2.3 million
Listed on January 23, 2011


Textainer Group Holdings - TGH - close: 32.11 change: +0.14

Stop Loss: 29.90
Target(s): 34.00
Current Gain/Loss: + 4.9%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
01/26 update: TGH outperformed the market with another gain today (+0.4%) but I would not chase it here. Shares are starting to look short-term overbought. More conservative traders may want to take profits now. I am not suggesting new positions at this time.

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

01/25/12 new stop loss @ 29.90
01/19/12 new stop loss @ 29.40
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


BEARISH Play Updates

None. Currently we do not have any active bearish trades.


CLOSED BULLISH PLAYS

Starbucks Corp. - SBUX - close: 48.34 change: +0.57

Stop Loss: 46.95
Target(s): 49.00
Current Gain/Loss: + 4.9%
Time Frame: up to the January earnings report.
New Positions: see below

Comments:
01/26 update: The trading gods have smiled on us. Most of the market was drifting lower today. Yet SBUX bucked the trend. Shares rallied off support near $47.00 and closed at new all-time highs. It was our plan to exit at the close tonight to avoid holding over earnings after the bell.

The stock might see another spike higher tomorrow due to its strong earnings report but I'm not seeing a lot of strength after hours. SBUX beat estimates by 2 cents and beat on revenues and management guided higher. All around it seems like a solid report. We will want to keep SBUX on our watch list. A dip to technical support at the 50-dma might work.

closed Position: long SBUX stock @ $46.08, exit $48.34 (+4.9%)

- or -

FEB $47 call (SBUX1218B47) entry $1.56 exit $2.30 (+47.4%)

01/26/12 exit at the close
01/24/12 prepare to exit at the close on Jan. 26th.
new stop loss @ 46.95
01/21/12 new stop loss @ 46.75
01/19/12 Readers may want to take profits now!
01/18/12 new stop loss $ 46.40, adjust exit to $49.00
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

chart:

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