Option Investor
Newsletter

Daily Newsletter, Wednesday, 2/1/2012

Table of Contents

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

Market Wrap

Hope for A Greece Settlement Sparks Another Rally

by Keene Little

Click here to email Keene Little
Market Stats

One would think another promise from Greece for a new and improved debt restructuring agreement would not have much of an impact on the markets. But hope springs eternal and the European market rallied on the news. The banks saw a bigger relief rally and that all spilled over into the U.S. market, which started with another gap up following the higher futures. Pundits were out saying the rally was because of improving economic numbers out of China but I looked at their numbers and it all falls in the noise category. It's just more hope that this time, for sure, the rally is based on something more than hype.

The bottom line is this market can continue to rally on nothing more than money streaming in from the efforts by the world's central banks to keep the financial system propped up. We saw the same thing happen from about September 2010 into February 2011 when the market seemed to slowly melt up higher each day with nary a pullback and plenty of reasons to believe the market would roll over at any moment. With the stealth QE effort we could be seeing the same thing and in fact there is ample evidence of a liquidity push by the central banks. That money typically makes it into stocks and commodities, which is what the Fed wants (they're hoping to create a "wealth effect" that inspires people to spend more money).

Today's economic reports were uninspiring. The ADP employment report was a disappointment. December's number was revised lower from +325K down to +292K. January came in at +170K which was less than the 200K that had been expected. The market didn't care.

The ISM index was also revised lower from 53.9 down to 53.1 and while January's number was a little higher at 54.1 it was less than expected. The market didn't care.

At least construction spending was up -- it was revised higher from +0.4% in November to +1.2% and ticked slightly higher to +1.5% in December vs. expectations for +0.4%. This report was at 10:00 AM and the market had already gapped up long before then. Economic reports or lousy earnings reports, such as AMZN's, just don't matter right now. The only thing that seems to matter is whether or not Greece is going to make it, which has a significant impact on the banks (decent relief rally in them today).

Very little has changed from last week as the market remains propped up but hasn't made much headway (it has gone mostly sideways since January 19th. So I'll update a few charts to show what I'm watching.

This being the first of a new month there is the possibility that new-month money was simply being put to work today but the fact that the rally wasn't able to add anything to the gap up (the day finished with a doji), even that reason would be a stretch. Today's trading volume was again low, as it was for all of January. As can be seen on the SPY daily chart below, the pattern of declining volume has continued. The 10-dma of volume shows a lower average for January than the first part of December (the first half of December was the period of selling). Since the market started rallying from the December 19th low the volume dropped off significantly. This can certainly continue but it's not a healthy way to build a rally. It makes it look too much like it's propped up on fluff. Today's bounce took SPY back up to its broken downtrend line from 2007-2011 and its broken uptrend line from December 19th. A pullback from both leaves a little bearish kiss goodbye. Now we'll see if the bears can do anything with that. They've been a wimpy group since mid December.

SPDR S&P 500, SPY, Daily chart

As for the wave count for the bounce, there are a few possibilities noted on the chart above and I'm looking at two different major counts. One considers the August-January rally a large B-wave correction that will be followed with a C-wave down (below the October low). The other considers the October-January (February?) rally to be a 2nd wave correction that will be followed by a 3rd wave down (to well below the October low). Both point lower once this bounce has finished and I'm simply trying to figure out where and when it will finish. If we're to get just an a-b-c move up from November to complete the bounce pattern, last week's high should be the finish (possibly one more minor new high this week). If the rally from November will be a 5-wave move then we'll get a pullback into early-mid February and then a final rally into the latter part of February to complete the correction to last year's decline. A break below the uptrend line from October, confirmed with a break below the December 7th high at 127.26 (SPX equivalent level is 1267), would tell us the high is in place and the bears are in control.

Last week the DOW had made it up to its broken uptrend line from July 2009 through the July 2010 low, at 12842, which was 34 points shy of its May 2011 high. Depending on the wave count used I see potential to 12912 by the end of the week or early next week. But it too tested its broken uptrend line from November-December and pulled back slightly. Perhaps it will walk up underneath this trend line before finally topping out. A break below its 20-dma, at 12550, and Monday's low, at 12529, would be a bearish heads up for a drop down to at least its uptrend line from October, currently near 12320. It takes a drop below the December 7th low near 12257 to confirm a high is in place. In the meantime continue to give the bulls the benefit of the doubt for as long as the bears remain AWOL.

Dow Industrials, INDU, Daily chart

Key Levels for DOW:
- bullish to 12912
- bearish below 12,257

NDX left a little spinning top doji at the top of a parallel up-channel for the move up from November and is sitting marginally above its trend line along the highs from February and July 2011, which could be the top of a very large rising wedge pattern from 2009 and today's small throw-over could be the finishing touch. A drop below Monday's low near 2423 would be the first indication of trouble for the rally. Based off the wave structure I've got two projections that land right on top of each other near 2320 and therefore that remains an upside target for now.

Nasdaq-100, NDX, Daily chart

Key Levels for NDX:
- bullish to 2520
- bearish below 2423

The RUT has rallied up to the top of a parallel up-channel for the leg up from December 19th. As with the other indexes, if the pattern calls for a 3-wave move up from November to complete the correction to last year's decline then there is the potential we'll see a very important high either here or only marginally higher. If the pattern calls for a 5-wave up then we'll get a choppy pullback and then another leg up later this month to finish it off. For now, the bulls are not in trouble until the RUT breaks below 787.

Russell-2000, RUT, Daily chart

Key Levels for RUT:
- bullish to 834
- bearish below 787

Last week I showed the possibility that the TRAN would continue higher to a price projection at 5394 where a complex corrective pattern would have two equal legs up from its August low. At the same level this week is a trend line along the highs since early December. Today's high at 5374 fell short by 20 points. We'll know in hindsight whether that was close enough or if it will push marginally higher to tag that level (or higher).

Transportation Index, TRAN, Daily chart

The banks got a good boost out of the gate this morning as hope for a Greek debt settlement solves all the financial woes in the world. BKX found support this week at the cross of its 20 and 200-dma's, near 42.50 on Monday. If Monday's low completed a 4th wave correction within the rally from November then a new high should be next. I'm showing a projection to 45 where it would hit a Fib projection and its 2009-2010 broken H&S neckline. But a drop back below Monday's low near 42 would be more immediately bearish.

KBW Bank index, BKX, Daily chart

The dollar has remained inside a narrow down-channel since its January 13th high and almost broken out of it during overnight trading. But it dropped sharply back down into an early-morning low and that was also likely in reaction to what's going on in Europe. I see a little more downside potential to a projection at 78.21 where an a-b-c pullback from January 13th would have two equal legs down. A 50% retracement of the October-January rally at 78.45 could also offer support. Once the current pullback finishes I'm expecting the dollar to resume its rally and it could be very strong, which won't be kind to stock and commodity bulls.

U.S. Dollar contract, DX, Daily chart

As the dollar has pulled back in a steep and narrow down-channel, gold has rallied in a relatively narrow up-channel since its December 28th low. It's pushing up along the top of its channel, currently near 1762 (near its early-December highs) but gold is now back up to its broken uptrend line from October 2008 (tested yesterday and today). It has also retraced 78.6% of the November-December decline so if the bearish count is correct we should see gold reverse here and start down in a stronger decline. Being overbought up against resistance it would be a tough argument to say it's going higher from here. The bearish setup calls for the start of a strong decline into February/March.

Gold continuous contract, GC, Daily chart

Like gold, silver is in a narrow up-channel since its December 29th low and tested the bottom of it at the overnight low. It too has retraced 78.6% of its October-December decline and has run into resistance at its broken up-trend line from October. There is a Fib price projection at 34.39 where the 2nd leg of the bounce off the December low would be 162% of the 1st leg up so another push up to a minor new high could finish off its bounce correction. The bearish setup is the same as gold -- looking for a strong decline as the next big move.

Silver continuous contract, SI, Daily chart

Oil has a bit of a sloppy pattern and I had been thinking it would push up to a minor new high above November's and January's, perhaps up to about 105 for another test of its broken uptrend line from February 2009, shown below on its weekly chart. Now I'm not so sure. Oil broke its uptrend line from October on January 20th, bounced back up to test it last week and today it dropped below the January lows. The choppy pullback from early January supports the idea that another leg up is coming but so far it's acting weak and another break below its 50-week MA at 96.48, shown below, as well as its 200-dma at 95, could spell trouble for oil bulls (and stock market bulls since a decline in oil is generally regarded as a bearish sign about the economy).

Oil continuous contract, CL, Weekly chart

The market should not be affected by tomorrow's economic reports and could go on hold as it waits for Friday's Payrolls reports.

Economic reports, summary and Key Trading Levels

While there is the possibility we'll see the stock market float higher for weeks to come, similar to what it did in the fall of 2010, as QE money makes it into the markets, it can only be guessed what impact that will have. Right now the charts continue to flash warning signs. Overbought can stay overbought and light volume can continue to push the market higher as long as the sellers stay away. My concern is that this market is one "boo!" away from tanking and the exit door will not be wide enough to prevent bulls from being trampled to death. Both sides need to stay cautious and longs should simply follow this higher with stops. The risk is that your stop could be left high and dry if we get a big gap down.

Jeff Cooper loves to play with Gann price and time cycles as well as other number relationships. He's looking for a turn in the market to match up with 10 and 50-year cycles in February and I remember him discussing this back in December, thinking there's no way the market can hold up that long. Silly me.

Cooper often cites reversal levels based on previous lows or highs. For example, was it merely coincidence that last week's high at 1333.47 was only off by 11 cents from being exactly double the number at the March 2009 low (666.79)?

Now Cooper notes the October 9, 2007 high was at SPX 1576 and 1576 days from that high falls on February 3rd (Friday). Will it be just coincidence if we put in a major bounce high this week, especially with the 10 and 50-year cycles hitting? Food for thought while we watch and wait to see what happens.

This market is consuming a lot of buying power just to maintain even. The multiple gaps to the upside actually leaves the market more vulnerable to the downside since they leave air pockets. One piece of bad news from overseas (such as Greece not getting an agreement with the bond holders after all, which will trigger a chain reaction in defaults and CDS claims on banks) could leave a very nasty surprise for the open in the U.S. So be careful out there. I'll be back with you next Wednesday.

Keene H. Little, CMT

In the end everything works out and if it doesn't work out, it is not the end. Old Indian Saying


New Plays

Momentum Trade

by James Brown

Click here to email James Brown

Editor's Note:

In addition to tonight's new candidate, consider these stocks as possible trading ideas and watch list candidates:

(bullish candidates) HITT, HCP, CTL, HPQ, DFS, JBL

Many of the candidates above need to see a breakout past resistance directly overhead.


NEW BULLISH Plays

Flextronics Intl. Ltd. - FLEX - close: 7.09 change: +0.22

Stop Loss: 6.75
Target(s): 8.00
Current Gain/Loss: unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
This is a momentum trade. After hovering near resistance in the $6.80 area for a few days, shares of FLEX are suddenly accelerating higher. We want to keep our position size very small. This is an aggressive trade. I am suggesting we open new positions tomorrow morning but only if both FLEX and the S&P 500 index open higher. We'll use a stop loss at $6.75, just under the 10-dma and prior resistance at $6.80.

Our multi-week target is $8.00. FYI: The Point & Figure chart for FLEX is bullish with a $9.00 target.

Do not enter position unless FLEX and the S&P 500 are both positive at the open

(small positions)

Suggested Position: buy FLEX stock @ the open

- or -

buy the Feb $7.00 call (FLEX1218B7) current ask $0.26

Annotated chart:

Entry on February xx at $ xx.xx
Earnings Date 04/26/12 (unconfirmed)
Average Daily Volume = 6.0 million
Listed on February 01, 2011



In Play Updates and Reviews

Three Trades Opened Today

by James Brown

Click here to email James Brown

Editor's Note:
The stock market's widespread gains on Wednesday helped trip some entry points. Our BMRN, MS, and ZUMZ trades were all opened. I am removing P from the play list.

Current Portfolio:


BULLISH Play Updates

Autodesk, Inc. - ADSK - close: 37.00 change: +1.00

Stop Loss: 35.25
Target(s): 39.90
Current Gain/Loss: + 1.3%
Time Frame: up to the late Feb. earnings report
New Positions: see below

Comments:
02/01 update: ADSK displayed some relative strength today with a +2.7% gain. Our position went from -1.3% to +1.3%. Please note that I am raising the stop loss to $35.25. I am not suggesting new positions at this time.

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

02/01/12 new stop loss @ 35.25
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


BioMarin Pharma. - BMRN - close: 37.74 change: +2.10

Stop Loss: 35.40
Target(s): 38.50
Current Gain/Loss: + 4.2%
Time Frame: up to the Feb. 16th earning report
New Positions: see below

Comments:
02/01 update: Wow! BMRN was a strong performer today with a +5.8% gain. This could be short covering. The stock's breakout past short-term resistance at $36.00 is bullish. Our trade was triggered at $36.20. BMRN has closed right under its early 2012 highs. I would expect a little profit taking tomorrow. We are raising our stop loss up to $35.40. I am not suggesting new positions at this time.

Earlier Comments:
We want to keep our position size small. Our target is $38.50. More aggressive traders could aim higher but we do not want to hold over the Feb. 16th earnings report. FYI: The Point & Figure chart for BMRN is bullish with a long-term $47.50 target.

(small positions)

current Position: long BMRN stock @ 36.20

- or -

Long Feb. $35 call (BMRN1218B35) Entry $1.90

02/01/12 new stop loss @ 35.40

Entry on February 01 at $36.60
Earnings Date 02/16/12 (confirmed)
Average Daily Volume = 1.0 million
Listed on January 28, 2011


Cisco Systems Inc. - CSCO - close: 19.80 change: +0.15

Stop Loss: 18.95
Target(s): 21.75
Current Gain/Loss: + 2.2%
Time Frame: exit ahead of the Feb. 8th earnings report
New Positions: see below

Comments:
02/01 update: CSCO's +0.7% gain lagged behind the NASDAQ's +1.2% gain. Shares of CSCO did close back above their 10-dma but the stock remains under resistance at the $20.00 mark.

Keep in mind we only have a few days left. We plan to exit prior to the Feb. 8th earnings report.

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: 39.33 change: +0.43

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:
02/01 update: DIS rallied +1.1% but the stock has stalled near the top of its two-week trading range. We plan to exit prior to the Feb. 7th earnings announcement. I am not suggesting new positions at this time.

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


Eaton Corp. - ETN - close: 49.82 change: +0.79

Stop Loss: 47.45
Target(s): 54.75
Current Gain/Loss: unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see below

Comments:
02/01 update: ETN outperformed the major indices with a +1.6% gain. Yet the stock remains stuck under resistance near the $50.00 level. The intraday high was $50.15. (Note: I changed our April $50 call for a March $50 call).

I am suggesting bullish positions if ETN can trade at $50.25 or higher. We'll use a stop loss at $47.45 to start. Our multi-week target is $54.75.

FYI: The Point & Figure chart for ETN is bullish with a long-term $67 target.

Breakout Trigger to buy @ $50.25

Suggested Position: stock @ $50.25

- or -

buy the FEB $50 call (ETN1218B50)

- or -

buy the MAR $50 call (ETN1221C50)

Entry on January xx at $ xx.xx
Earnings Date 01/26/12
Average Daily Volume = 3.7 million
Listed on January 28, 2011


Gulfport Energy - GPOR - close: 32.93 change: +0.07

Stop Loss: 31.40
Target(s): 37.00
Current Gain/Loss: - 3.5%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
02/01 update: GPOR's failure to participate in the market's widespread rally is disappointing. If shares do not improve soon we might drop it as an active candidate. You could argue that GPOR is consolidating in a bull flag pattern. If that's the case then a rally past $33.50 could be used as a new bullish entry point.

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: 10.15 change: +0.32

Stop Loss: 9.45
Target(s): 11.00
Current Gain/Loss: +12.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
02/01 update: HGSI rallied off new short-term support near $9.80 this morning. More conservative traders may want to raise their stops closer to the $9.80 level. Readers may want to seriously consider an early exit right now. 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

01/28/12 new stop loss @ 9.45, readers may want to exit and lock in profits now.
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: 16.54 change: +0.12

Stop Loss: 15.95
Target(s): 17.90
Current Gain/Loss: + 0.6%
Time Frame: up to the Feb. 14th earnings report
New Positions: see below

Comments:
02/01 update: HST is still drifting higher. I don't see any changes from my prior comments.

The plan was to keep our position size very small. We're using a stop loss at $15.95. More conservative traders may want to put their stop closer to the simple 10-dma instead. FYI: The Point & Figure chart for HST is bullish with a $24.00 target.

(Small Positions!!)

current Position: Long HST stock @ $16.44

01/31/12 trade opened on gap higher
01/30/12 still not open. try again.
01/28/12 adjusted entry strategy. Buy HST stock at the open but only if stock and S&P 500 open positive. New stop loss at $15.95. Small positions only!
01/24/12 trade not open yet. adjust strategy to buy the dip at $16.00.

Entry on January 31 at $16.44
Earnings Date 02/14/12 (confirmed)
Average Daily Volume = 7.5 million
Listed on January 21, 2011


J.P.Morgan Chase & Co - JPM - close: 37.60 change: +0.30

Stop Loss: 35.95
Target(s): 42.50
Current Gain/Loss: - 1.1%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
02/01 update: The financial sector displayed some relative strength today but JPM lagged behind its peers. Shares rallied toward resistance near $38.00 and stalled. I would consider new bullish positions if JPM can trade at $38.15 or higher.

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: 15.94 change: +0.40

Stop Loss: 15.40
Target(s): 19.00
Current Gain/Loss: unopened
Time Frame: exit ahead of earnings on Feb. 23rd.
New Positions: Yes, see below

Comments:
02/01 update: MRVL displayed some relative strength with a +2.5% gain. Yet we're still waiting for a breakout to new relative highs.

Currently our plan is to open bullish positions when MRVL trades at $16.40 or higher. Let's keep our position size small.

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 @ 16.40 (small positions)

Suggested Position: buy MRVL stock @ 16.40

- or -

buy the Feb $17 call (MRVL1218B17)

- or -

buy the May $17 call (MRVL1219E17)

01/28/12 adjusting our entry trigger to $16.40
01/27/12 MRVL issued an earnings warning

Entry on January xx at $ xx.xx
Earnings Date 03/23/12 (confirmed)
Average Daily Volume = 14.1 million
Listed on January 25, 2011


Morgan Stanley - MS - close: 19.39 change: +0.74

Stop Loss: 17.75
Target(s): 21.90 (or 23.75)
Current Gain/Loss: + 1.0%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
02/01 update: Hmm... I would be cautious with MS. The stock is not trading as expected. Shares did show relative strength today. The stock gapped open higher above resistance and opened at $19.19. Our trigger to open bullish positions was $19.05 so the play opened this morning. MS rallied to $20.09 (a +7.7% move) before trimming its gains to just +3.9%. The breakout past resistance near $19.00 and its simple and exponential 200-dma is bullish but the reversal at $20.00 looks bearish.

At this point I would wait for a new bounce off the $19.00 area before considering new positions. So look for a dip first. Our multi-week target $21.90 but more aggressive traders can aim for the $24.00 area instead.

current Position: Long MS stock @ $19.19

- or -

Long FEB $20 call (MS1218B20) Entry $0.35

- or -

Long APR $20 call (MS1221D20) Entry $1.16

02/01/12 Trade opened on MS' gap open higher at $19.19, above our trigger of $19.05

Entry on February 01 at $19.19
Earnings Date 04/23/12 (unconfirmed)
Average Daily Volume = 25.5 million
Listed on January 28, 2011


Smith & Wesson Holding Corp. - SWHC - close: 5.19 change: +0.05

Stop Loss: 4.65
Target(s): 5.65 or 6.40
Current Gain/Loss: + 7.4%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
02/01 update: Another day, another new relative high for SWHC. I am not suggesting new positions at this time. More conservative traders may want to take profits now.

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

01/28/12 new stop loss @ 4.65
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: 42.34 change: +0.02

Stop Loss: 40.75
Target(s): 49.00
Current Gain/Loss: - 1.7%
Time Frame: up to Feb 9 earnings report.
New Positions: see below

Comments:
02/01 update: The action in TCK today is disappointing. The stock did not join in the market's widespread rally. Instead TCK merely drifted sideways and closed virtually unchanged on the session. This is troubling. More conservative traders may want to exit early now. If we do not see some improvement in TCK soon we might close the play early. I am not suggesting new positions at this time.

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: 31.59 change: +0.00

Stop Loss: 30.60
Target(s): 34.00
Current Gain/Loss: + 3.2%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
02/01 update: Hmm... TGH is another stock that did not participate in the market rally today. This is worrisome. Readers may want to just go ahead and exit early 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

01/28/12 new stop loss @ 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


Zumiez Inc. - ZUMZ - close: 29.38 change: +0.82

Stop Loss: 27.40
Target(s): 32.25 or 34.50
Current Gain/Loss: + 2.1%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
02/01 update: Our new trade on ZUMZ is open. Both the stock and the S&P 500 met our entry point requirements. ZUMZ gapped open higher at $28.75 and rallied toward $30 before trimming gains and settling with a +2.8% gain. The relative strength is encouraging.

Earlier Comments:
I am setting two different targets. Conservative traders can exit at $32.25. More aggressive traders can exit at $34.50.

current Position: Long ZUMZ stock @ 28.75

- or -

Long Feb. $30 call (ZUMZ1218B30) Entry $1.00

02/01/12 Trade opened with ZUMZ gapping higher at $28.75

Entry on February 01 at $28.75
Earnings Date 03/12/12 (unconfirmed)
Average Daily Volume = 627 thousand
Listed on January 31, 2011


BEARISH Play Updates

Portfolio Recovery Associates - PRAA - close: 67.03 change: +2.08

Stop Loss: 68.05
Target(s): 60.50
Current Gain/Loss: - 1.8%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
02/01 update: I am suggesting readers trade cautiously here. The stock market's widespread gains fueled a sharp oversold bounce in PRAA (+3.2%). Shares are testing a short-term trend line of lower highs. A breakout higher could spark some short covering.

We have a stop loss at $68.05. More conservative traders may want to lower their stop closer to the $67.50 area. I am not suggesting new positions at this time.

Earlier Comments:
Our target is $60.50. More aggressive trades could aim lower. FYI: The Point & Figure chart for PRAA is bearish with a $56.00 target.

current Position: short PRAA stock @ $65.83

Entry on February 01 at $65.83
Earnings Date 02/15/12 (unconfirmed)
Average Daily Volume = 156 thousand
Listed on January 31, 2011


CLOSED BULLISH PLAYS

Pandora Media, Inc. - P - close: 12.89 change: -0.30

Stop Loss: 13.25
Target(s): 15.90 or 17.75
Current Gain/Loss: unopened
Time Frame: 6 to 12 weeks
New Positions: Yes, see below

Comments:
02/01 update: Uh-oh! Pandora did not participate in the market's rally today. That's not a good sign. I warned readers yesterday that if Pandora closed under $13.00 we'd remove it as a bullish candidate.

Trigger @ $14.25

Trade did not open.

02/01/12 removed from the play list, unopened.

chart:

Entry on January xx at $ xx.xx
Earnings Date 03/01/12 (unconfirmed)
Average Daily Volume = 1.9 million
Listed on January 30, 2011