Option Investor
Newsletter

Daily Newsletter, Thursday, 2/9/2012

Table of Contents

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

Market Wrap

Point By Agonizing Point

by Jim Brown

Click here to email Jim Brown
Signs of progress in Greece helped to push the indexes to new highs but those gains were very slim.

Market Statistics

You probably heard multiple times today that Greece finally agreed to the terms of the second bailout of 130 billion euros. While that may be "technically" true it is still not a deal. The German finance minister was very quick to point out that there would be no second bailout until Greece actually implemented the terms of the first 110 billion euro bailout. Greece has failed to follow through on almost every single item it agreed to in order to get each successive tranche of the first bailout. You remember each of those crisis points as Greece teetered on the verge of default unless the quarterly payments of billions of euros was dispersed. Every quarter was a new crisis with new commitments to comply with the prior commitments.

That two years of procrastination and foot dragging is going to come back and haunt them now. The four AAA credits left in the eurozone, Germany, Finland, Netherlands and Luxembourg, are adamant that Greece fully comply with the prior agreements before they will sign off on any new agreement.

Greece still has to complete an agreement with private bond holders to take a 70% haircut before the EU will agree to the second bailout. Under the currently disclosed terms those investors would swap the 213 billion euros of debt for 30 billion in cash and 70 billion in long term debt with an interest rate of 3.5%. The present value of the deal equates to about a 70% loss of principal. Those bond holders are waiting until the EU approves the second bailout before they agree to the debt swap. Greece owes 14.5 billion euros due on March 20th to pay these creditors. If the second bailout is completed the 30 billion will be paid to these private creditors from the funds received in the second bailout. Obviously, no bailout, no debt swap.

Greece gets no respect from the EU commission because they lied multiple times about their fiscal problems. In Oct 2009 the newly elected government in Athens confessed they were broke and asked for help from the EU. They claimed they were running a budget deficit of 3.7%, above the 3.0% mandatory limit set for all EU countries. After the EU requested documentation of the budget deficit they admitted they were actually running a 12.5% deficit. This outraged the EU and they sent inspectors to examine the books because they could no longer trust what Greece had said. The inspectors found the deficit was actually higher at 15.4%.

The Greek government had used its borrowing power as an EU country to create a massive government workforce where jobs were created in order to get union support in elections over the last decade. The government workforce ballooned to more than 750,000 with 20% of the population working for the government. The jobs were guaranteed for life, they could not be fired and included fat pensions and health benefits. For the rest of the country unemployment has risen to 20.1%. The EU told them to cut 150,000 government workers and slash the minimum wage by 20%. As part of the "agreement" today they agreed to cut 15,000 workers by attrition and cut the minimum monthly wage from 750 euros to 586 euros. Since very few workers actually receive the minimum wage this is only a token concession. The average annual wage for a government employee is 75,000 euros.

The token agreement reported today is not likely to stand the test of the full EU vote. The EU has said they need to have a full agreement approved by Feb 15th in order to have funds available by the March 20th deadline. That means there are still six days left for this entire house of cards to collapse.

The market did not rally on the news of the agreement because it has been rallying on the rumor of an agreement for a month. The Nasdaq is up +12.6% for the year. The Russell 2000 +11.6%,S&P +7.6% and Dow +5.5%. The Dow is 100 points from 13,000 and investors have been digesting negative earnings like it was their last meal. The market has factored in the potential for Greece to agree to anything in order to get that big payday on March 20th. Today's gentleman's agreement is just the first step in another week or wrangling that could still end badly.

In the U.S. the economics continued to improve with the Jobless Claims declined by another 15,000 to 358,000. The prior week was revised higher by +6,000 to 373,000. Today's number was the second lowest reading since the recession. This continued trend lower is positive for sentiment because it shows the most current reading on job losses.

Weekly Jobless Claims Chart

On the negative side of the ledger the National Association of Realtors Metro Price Survey showed a -4.2% decline in home prices for Q4. The prior quarter posted a decline of -4.7%. This is a year over year comparison and should not come as a surprise to anyone reading this newsletter. Prices will continue to fall as long as there is an overhang of foreclosures. With mortgage rates at record lows there is going to be a strong wave of buying this spring.

Lastly the Wholesale Trade numbers for December increased much stronger than expected. Inventories rose +1.0% and sales +1.3%. Expectations for inventories was for a gain of only +0.4% after a zero reading the prior month. Durable sales rose +2.4% and nondurable +0.4%.

The economic calendar for Friday is slim with Consumer Sentiment the only report that might generate some market buzz.

Economic Calendar

In stock news Oracle (ORCL) announced it would be paying $1.9 billion for Taleo (TLEO), a recruitment software firm with products delivered as a cloud service. This follows a similar purchase by SAP of SuccessFactors, a human resources software company. In October Oracle agreed to buy RightNow Technologies for $1.43 billion. That company handles customer service over the cloud. The recent acquisitions should revise valuations for SalesForce.com (CRM) and NetSuite (N).

TLEO Chart

Alibaba said it was working with bankers to come up with a $3 billion loan to buy back part of the 40% stake held by Yahoo. That stake is thought to be worth up to $13 billion. There was also talk about taking Alibaba private. Yahoo announced earlier this week that Chairman Roy Bostock and three other directors will step down. Reuters reported several weeks ago that Blackstone Group and Bain Capital were preparing a bid for all of Yahoo for around $25 billion. That would be 20% more than its current market cap. Yahoo shares have been in a consolidation pattern since late October as sale and acquisition rumors persist.

Yahoo Chart

Akamai (AKAM) rallied +14% after posting earnings of 45-cents compared to estimates of 40-cents. Revenue of $323.7 million also beat estimates of $311.7 million. Akamai exited the quarter with $849 million in cash after producing cash from operations of $136 million for the quarter.

Akamai Chart

Synacor (SYNC) announced it was slashing the price of its expected share price to $5-$6 per share, down from $10-$12 per share. The company is partly owned by Intel. Synacor will sell $5.45 million shares and existing shareholders, including Intel, will sell 1.36 million. That price cut does not bode well for the IPO. On Wednesday the agricultural biotech company Ceres Inc also cut the price range on its coming IPO.

After the bell Nuance (NUAN) reported earnings of 34 cents that missed estimates of 36 cents. Revenue of $360 million was well below estimates of $391 million. Nuance said relationships with mobile companies have become "more comprehensive and complex" lately resulting in delayed revenue and longer negotiation cycles. They also guided to earnings of 36-40 cents in the current quarter compared to estimates of 38 cents. Shares of NUAN declined to $27.70 and a -10% loss from the close.

Nuance Chart

Expedia (EXPE) reported earnings of 58-cents that beat the street estimates of 53-cents. However, revenue of $787.1 million was well below the $812 million estimate. Content costs jumped +29% and selling and administrative costs rose +19% to pressure profits. Shares of EXPE declined sharply in after hours.

EXPE Chart

Linkedin (LNKD) reported earnings of 6-cents compared to 3-cents in the year ago quarter. Adjusted earnings of 12-cents beat estimates of 7-cents. The company added 14 million members for the quarter and revenue more than doubled to $168 million. At year end there were 145 million profiles on Linkedin. Shares rallied more than $5 after the report.

Linkedin Chart

Crude oil continued to move higher on the falling dollar and the potential resolution of the Greece crisis. The saber rattling in Iran plus problems in other Middle Eastern countries including Egypt, Syria and Nigeria sent Brent prices over $118.

Brent Oil Chart

U.S. WTI Crude Oil Chart

The market is inching higher but it is struggling. The S&P has sold off at the open every day this week but then rallied to close barely positive. To illustrate that point the S&P is up only +7 points for the week after four days of trading. That is not even a good day much less a decent week. Resistance at 1350 was broken at the close today but we still have a ways to go to break out to a new high. The high close in 2011 was 1363.61.

I am becoming increasingly worried the market is preparing for a bout of profit taking. However, as long as the dips are being bought and new highs being made we can't abandon the trend. We could easily see the S&P break through that final resistance barrier and race into the clouds. However, we could also see it stall here because of the major gains since December.

If we were to see a 2-3 day decline I am relatively sure there are millions of traders that would flood in from the sidelines and into the dip. Unfortunately I am still worried about the miniscule daily gains. There is a serious lack of conviction on the part of the buyers.

S&P Chart

The Dow also scored another new high but with a gain of only +6 points. For an index that is closing in on 13,000 it has only gained +28 points for the entire week. That is an average of 7 points per day. That is far from bullish.

Support is 12,800 and I can't help but believe it will be tested soon. That would be market positive and represent only a drop of -91 points. Stronger support is well back at 12,600 and would be very healthy if that occurred.

Dow Chart

The Nasdaq moved up to another new high at 2927 but it was a battle. The index started out in negative territory but recovered late in the morning thanks to gains in Apple. Apple shares rose by +16 to close at a new high at $493 after news broke they would have a new product announcement on March 3rd. This is rumored to be the iPad3 or the new Apple TV product.

Apple shares have risen +22% in 2012. Apple is 15% of the Nasdaq 100 and it has accounted for 25% of the Nasdaq 100 gains in 2012. If Apple stubs its toe the Nasdaq could crash. There are quite a few analysts that believe a touch of $500 is going to be an electric fence for the shares. We all know Apple is a great stock but no stock regardless of its history will rise forever. The Apple chart is a warning sign for the Nasdaq in general.

Apple Chart

Nasdaq Chart

The Russell 2000 is weakening. This is our canary in the coal mine and it appears to be suggesting investors are no longer buying small caps. They are not yet taking profits in any volume but there is some limited selling. A break below the lows from the last two days (822) would be a technical sell signal. The gap open on the 3rd was to 820.84 making the target for a break under 820 a gap fill at 812 where it closed on the 2nd.

Russell 2000 Chart

We can't abandon the trend as long as the Nasdaq and Dow are making new highs but we can tighten up our stops for the day when the unexpected headline begins a decline. We could also see the market simply collapse under its own weight after more than 100 companies have posted earnings misses and even more have guided lower for the current quarter.

The Greek bailout deal was announced and there was no rocket ride higher. The obvious reason is that the market has already priced in a solution because Greece will say anything to get the money. The second obvious reason was the instant rejection of the agreement by Germany with a list of prior commitments Greece failed to honor. While most analysts expect Greece to eventually get the March 20th bailout there are plenty of tense days still ahead and anything can happen. Traders may be readying their exits.

I am becoming increasingly cautious about being long but we need to let the market tell us when to exit. Many people have gone broke trying to predict market tops. I suggest tightening stops and let the market trigger the exit.

Jim Brown

Send Jim an email


New Plays

Is the Rally Stalling?

by James Brown

Click here to email James Brown

Editor's Note:

The stock market's rally is starting to look a little tired. Is it time for a rest?

We are not adding any new plays tonight but here are a few candidates that caught my eye:

MSI - shares are quickly approaching significant resistance in the $48.00 area. A rally past $48.25 could be a bullish entry point.

JDSU - this tech stock has rallied past technical resistance at its simple 200-dma. Now it's testing resistance near $14.00.

XLNX - semiconductor stocks have been showing some strength. XLNX might be a bullish candidate on a breakout past resistance near $37.00.

INTC - this is another semiconductor stock that looks poised to breakout from its three-week consolidation. Watch for a move past $27.00.

-James


In Play Updates and Reviews

Double Check Your Stops

by James Brown

Click here to email James Brown

Editor's Note:
The market's upward momentum is slowing. The market could see a pull back soon. It might be time to double check our stop loss placement.

I am suggesting we exit our GPOR and TGH positions tomorrow. We want to close some of our February call positions tomorrow.

Our KBH and XME trades have been opened.

Current Portfolio:


BULLISH Play Updates

Autodesk, Inc. - ADSK - close: 38.40 change: +0.04

Stop Loss: 36.50
Target(s): 39.90
Current Gain/Loss: + 5.2%
Time Frame: exit prior to the Feb 23rd earnings announcement
New Positions: see below

Comments:
02/09 update: ADSK managed to eke out another gain. It seems like the rally is losing steam. I am suggesting we exit our Feb. $37 calls at the opening bell tomorrow. 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

02/09/12 prepare to exit Feb. $37 calls, current bid $1.65 (+52.7%)
02/08/12 new stop loss @ 36.50
02/07/12 new stop loss @ 36.25
02/02/12 new stop loss @ 35.75
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


Discover Financial Services - DFS - close: 28.89 change: +0.11

Stop Loss: 27.25
Target(s): 31.50
Current Gain/Loss: unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see below

Comments:
02/09 update: DFS is still quietly consolidating under resistance near $29.00. We have a buy-the-dip entry point at $28.15. Our multi-week target is $31.50.

buy a dip trigger at $28.15

Suggested Position: buy DFS stock @ (entry trigger)

- or -

buy the MAR $28 call (DFS1217C28)

02/08/12 new trigger @ 28.15, stop loss 27.25
02/07/12 still not open. Adjust strategy to buy a dip at $28.30, stop loss at $27.40
02/06/12 not open yet. try again.

Entry on February xx at $ xx.xx
Earnings Date 03/22/12 (unconfirmed)
Average Daily Volume = 6.2 million
Listed on February 04, 2011


Emulex Corp. - ELX - close: 10.85 change: -0.14

Stop Loss: 10.59
Target(s): 12.10
Current Gain/Loss: unopened
Time Frame: 4 to 8 weeks
New Positions: Yes, see below

Comments:
02/09 update: Hmm... the rally in ELX seems to be losing some momentum. Shares faded lower after failing to breakout to new highs this morning. I do not see any changes from my prior comments.

Shares of ELX are without a doubt overbought given its surge from $7.00 in early January to $11.00. I do consider this an aggressive trade and we want to keep our position size small to limit our risk.

I am suggesting a trigger to open positions at $11.15 with a stop loss at $10.59. Our exit target is $12.10. The Point & Figure chart for ELX is bullish with a long-term $19.50 target.

Trigger @ $11.15 (small positions)

Suggested Position: buy ELX stock @ (trigger)

- or -

buy the Mar $11 call (ELX1217C11)

Entry on February xx at $ xx.xx
Earnings Date 04/25/12 (unconfirmed)
Average Daily Volume = 2.0 million
Listed on February 07, 2011


Eaton Corp. - ETN - close: 51.80 change: +0.15

Stop Loss: 49.75
Target(s): 54.75
Current Gain/Loss: + 3.0%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
02/09 update: ETN managed to deliver another gain but momentum is slowing. Readers may want to think about taking profits now. I am raising our stop loss to $49.75. Please note that we will exit our February $50 calls at the opening bell tomorrow. The current bid on these calls is at $1.95 (+95%).

I am not suggesting new positions at this time.

current Position: Long ETN stock @ $50.25

- or -

Long FEB $50 call (ETN1218B50) Entry $1.00

- or -

Long MAR $50 call (ETN1221C50) Entry $1.70

02/09/12 new stop loss @ 49.75
02/09/12 exit the Feb $50 calls at the open tomorrow, current bid is $1.95 (+95%).
02/06/12 new stop loss @ 48.40

Entry on February 03 at $50.25
Earnings Date 01/26/12
Average Daily Volume = 3.7 million
Listed on January 28, 2011


Flextronics Intl. Ltd. - FLEX - close: 7.12 change: +0.18

Stop Loss: 6.85
Target(s): 8.00
Current Gain/Loss: + 1.2%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
02/09 update: FLEX produced a nice reversal today with a +2.5% gain. The move today looks like a new bullish entry point just remember this is an aggressive trade. I am adjusting our stop loss to $6.85.

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

(small positions)

current Position: Long FLEX stock @ $7.03

- or -

Long Feb $7.00 call (FLEX1218B7) Entry $0.22

02/09/12 new stop loss @ 6.85
02/04/12 new stop loss @ 6.80
02/03/12 trade opened. FLEX opened at $7.03
02/02/12 not open yet. try again.

Entry on February 03 at $7.03
Earnings Date 04/26/12 (unconfirmed)
Average Daily Volume = 6.0 million
Listed on February 01, 2011


Gulfport Energy - GPOR - close: 35.91 change: -0.25

Stop Loss: 34.75
Target(s): 37.00
Current Gain/Loss: + 5.8%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
02/09 update: Upward momentum in GPOR is slowing. I am suggesting we go ahead and exit early on Friday at the closing bell. We'll up our stop loss to $34.75 just in case the market is down tomorrow.

Current Position: long GPOR stock @ 34.15

- or -

Long FEB $35 call (GPOR1218B35) Entry $1.25

02/09/12 prepare to exit positions at the close tomorrow
02/06/12 new stop loss @ 33.75
02/02/12 new stop loss @ 31.85
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


J.P.Morgan Chase & Co - JPM - close: 37.86 change: -0.44

Stop Loss: 37.39
Target(s): 42.50
Current Gain/Loss: - 0.5%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
02/09 update: Uh-oh! Not only did JPM completely erase yesterday's gains but today's move has painted a bearish engulfing candlestick pattern, which can be a one-day bearish reversal signal. I am raising our stop loss up to $37.39. We want to exit our February $38 calls at the closing bell tomorrow (assuming we're not stopped out first). I am not suggesting new positions at this time.

Earlier Comments:
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

02/09/12 new stop loss @ 37.39
02/09/12 prepare to exit Feb $38 calls at the close tomorrow
02/04/12 new stop loss @ 36.90
02/02/12 new stop loss @ 36.45
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


KB Home - KBH - close: 11.98 change: +1.06

Stop Loss: 10.75
Target(s): 13.50
Current Gain/Loss: + 7.9%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
02/09 update: Wow! KBH is moving a lot faster than expected. Shares opened at $10.91 but quickly rallied past the $11.00 level. The stock soared to new seven-month highs near $12.00. Our trigger to open positions at $11.10 was hit this morning. I am raising our stop loss up to $10.75.

Earlier Comments:
A breakout higher could produced another short squeeze. The most recent data listed short interest at 41% of the 65 million-share float. Bear in mind that KBH can be a volatile stock. Readers may want to keep their position size small. Our exit target is $13.50. FYI: The Point & Figure chart for KBH is bullish with a long-term $20.00 target.

current Position: Long KBH stock @ $11.10

- or -

Long Mar $12 call (KBH1217C12) Entry $0.50

02/09/12 new stop loss @ 10.75

Entry on February 09 at $11.10
Earnings Date 04/05/12 (unconfirmed)
Average Daily Volume = 7.8 million
Listed on February 08, 2011


Marvell Technology - MRVL - close: 16.43 change: +0.00

Stop Loss: 15.75
Target(s): 19.00
Current Gain/Loss: + 0.1%
Time Frame: exit ahead of earnings on Feb. 23rd.
New Positions: see below

Comments:
02/09 update: MRVL continues to churn sideways on less and less volume. The stock closed unchanged today. I am growing cautious here and we will raise our stop loss to $15.75. I'm not suggesting new positions at this time.

More conservative traders holding the February calls will want to seriously consider an early exit some time tomorrow. February options expire in six trading days.

Earlier Comments:
Let's keep our position size small. 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.

(small positions)

current Position: Long MRVL stock @ 16.40

- or -

Long Feb $17 call (MRVL1218B17) Entry $0.25

- or -

Long May $17 call (MRVL1219E17) Entry $1.06

02/09/12 new stop loss @ 15.75
02/02/12 triggered at $16.40
01/28/12 adjusting our entry trigger to $16.40
01/27/12 MRVL issued an earnings warning

Entry on February 02 at $16.40
Earnings Date 03/23/12 (confirmed)
Average Daily Volume = 14.1 million
Listed on January 25, 2011


Morgan Stanley - MS - close: 20.34 change: -0.10

Stop Loss: 19.75
Target(s): 21.25
Current Gain/Loss: + 5.9%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
02/09 update: The early morning rally attempt in MS failed. Shares spent the rest of the day churning sideways. I am suggesting we exit our February $20 calls at the opening bell tomorrow. The current bid is $0.67 (+91%).

We will raise our stop loss to $19.75 for the rest of our positions. I am not suggesting new positions at this time. Our exit target is $21.25.

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

02/09/12 new stop loss @ 19.75, prepare to exit Feb. $20 calls tomorrow at the opening bell. Current bid is $0.67
02/08/12 new stop loss @ 19.25 . adjusted exit target to $21.25
02/06/12 readers may want to take profits on the Feb. 20 calls (+154%)
02/04/12 new stop loss @ 18.65
02/02/12 new stop loss @ 18.25
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: 5.26 change: +0.01

Stop Loss: 4.90
Target(s): 5.60
Current Gain/Loss: + 8.9%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
02/09 update: After yesterday's volatility today was pretty quiet 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. 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

02/08/12 big intraday dip and bounce, low was $4.93
02/04/12 new stop loss @ 4.90, adjust exit to $5.60
02/02/12 new stop loss @ 4.75
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


Textainer Group Holdings - TGH - close: 31.53 change: -0.19

Stop Loss: 30.95
Target(s): 34.00
Current Gain/Loss: + 3.0%
Time Frame: exit prior to earnings on Feb. 14th
New Positions: see below

Comments:
02/09 update: The upward momentum in TGH has stalled. The stock has been stuck in a trading range for the last several days. I am suggesting we exit positions at the closing bell tomorrow.

current Position: Long TGH stock @ 30.60

02/09/12 prepare to exit at the close tomorrow
02/07/12 new stop loss @ 30.95
02/04/12 new stop loss @ 30.80, exit prior to earnings (Feb 14th)
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 02/14/12 (confirmed)
Average Daily Volume = 172 thousand
Listed on January 11, 2011


Metals & Mining ETF - XME - close: 55.24 change: -0.23

Stop Loss: 53.95
Target(s): 64.75
Current Gain/Loss: - 0.5%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
02/09 update: Our XME trade is finally open but the stock has continued to show relative weakness. The S&P 500 opened positive by a very, very small margin while the XME gapped open higher at $55.55. That was enough to trigger bullish positions here. Unfortunately the XME proceeded to fall to new lows for the week. I am expecting support near $54.00. Readers may want to wait for a bounce off the $54.00 area before considering new bullish positions.

Earlier Comments:
I do consider this an aggressive, higher-risk trade. The XME could still have resistance at its simple 200-dma near $58.50 and price resistance near the $60.00 level. We want to keep our position size small to limit our risk. We will need some patience for this trade to pay off. Our multi-week target is $64.75. FYI: The Point & Figure chart for XME is bullish with a long-term $76 target.

(small positions)

current Position: Long XME @ $55.55

- or -

Long MAR $60 call (XME1217C60) Entry $0.51

02/09/12 trade opened this morning @ 55.55
02/08/12 not open yet. try again.
02/07/12 not open yet. try again.
02/06/12 not open yet. try again.

Entry on February 09 at $55.55
Earnings Date --/--/--
Average Daily Volume = 3.2 million
Listed on February 04, 2011


Zumiez Inc. - ZUMZ - close: 29.86 change: +0.45

Stop Loss: 27.90
Target(s): 32.25 or 34.50
Current Gain/Loss: + 3.8%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
02/09 update: ZUMZ displayed some relative strength today. Traders bought the dip near technical support at the rising 50-dma and ZUMZ closed up +1.5%. I'm suggesting readers way to for a rise past $30.30 before considering new bullish positions.

More conservative traders might want to raise their stop loss toward the $28.25-28.50 area.

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

02/08/12 new stop loss @ 27.90
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

None. We do not have any active bearish trades.