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Newsletter

Daily Newsletter, Monday, 4/2/2012

Table of Contents

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

Market Wrap

Only Scattered April Showers

by Linda Piazza

Click here to email Linda Piazza
Market Internals

Introduction

April showers appeared in scattered countries' market performances across the globe, but weather in our markets proved mostly sunny here in the U.S.

Last night, Japan's important Tankan Index disappointed, coming in for the second month in a row at -4. It had been expected to rise to 0 according to some sources. The non-manufacturing version met expectations of 5, however. These numbers measure sentiment among manufacturers and service providers. Market watchers blamed fears of the yen rising against the dollar for the weaker-than-expected manufacturing number, but some causation must be apportioned to manufacturers such as Sony, Panasonic and Sharp Corp. Sharp and Panasonic predict record losses, according to a Bloomberg report, while Sony predicts losses more than twice the previous annual loss forecast. GDP may still expand, boosted by reconstruction spending.

Also last night, HSBC released results of a private survey of smaller factories in China, with that survey questioning the true strength of the Chinese economy, says Jean Chua, a writer for CNBC. The larger March PMI had jumped to 53.1, but this smaller survey dropped to 48.3, into contraction territory. An economist with Nomura also warned that the March 53.1 number wasn't the good news that some took it to be last week. The economist, Zhiwei Zhang, advises that March's PMI almost always climbs about three points above the February number and that it actually came in below its official March average of 56. CNBC writers weren't alone in their interpretation of China's reports. In a Bloomberg article appearing overnight, writer Elizabeth Campbell reported that commodity investors were drawing back on bullish commodity trades after Goldman Sachs Group Inc. had lowered its recommendation on raw materials last week due to signs pointing to slower growth in China. We didn't see too much evidence of that drawing back today, however, with the USCI, the United States Commodity Index, rising 1.09 percent.

Others experts would have and did dispute the conclusions of that entire previous paragraph. That smaller HSBC survey is more sensitive to exports, they point out. Western analysts who worry about a hard landing in China are misinterpreting the data, they would (and did) say.

What was the end result? The Nikkei started off strong but drifted lower all night, closing up only 0.26 percent. The Hang Seng started off in positive territory but soon dropped into negative territory, closing down 0.16 percent. The Straits Times closed up 0.19 percent. In Europe, bourses climbed at the open but soon dropped, pressured by economic releases that began appearing in Europe. Our sunny skies were to lift their spirits, with gains accelerating after our markets opened and into the European close. The FTSE 100 gained 2.31 percent; the DAX 1.58 percent and the CAC 40, 1.14 percent. One article attributed the rise of an easing of China worries, but the pattern belied that reasoning. European stocks were headed down until our bourses opened and started gaining.

Beginning about 4:00 am ET, European countries had released a host of unemployment and PMI numbers that had contributed to the early declines, concluding with the Eurozone unemployment rate at 5:00 am ET. Eurostat had pegged the last unemployment rate at 10.7 percent, with the latest number edging up to the expected 10.8 percent. PMI came in as expected, too, but that expected number was 47.7, still in contraction territory. News articles pegged the situation as "worsening," even though the number met expectations, and that was when European bourses turned lower for a time. Italian unemployment was higher than expected.

Add into the pre-market stew of events a conference call for Global Payments Inc., reporting on the unauthorized system access. This weekend's newsletter detailed the debacle that resulted Friday when Krebs on Security broke the story that Global's credit card processing systems had been compromised, involving as many as 10 million cards. Today, the company said it believes that cardholder names, addresses and social security numbers were not obtained. Track 1 card data was not taken, the company believes. The before-the-open conference call revealed that Visa (V) no longer includes the company in its list of compliant service providers. GPN reports significant progress in defining and resolving the event. Investors still weren't pleased. They dropped the stock an additional 3.71 percent below its price when halted on Friday.

Monday's Developments

Market participants in the U.S. hardly knew which way to head at the beginning of the day. Were clouds going to sweep over from Asia or were sunny skies going to prevail? The confusion was apparent as indices first headed down to wait on important economic releases here in the U.S.

Thirty minutes after the U.S. cash open, the Institute for Supply Management and Census Bureau released the ISM PMI and Manufacturing Price and Construction Spending, respectively. The prior Manufacturing PMI measured 52.4, above the 50 benchmark that measures the difference between expansion and contraction. Prices had measured 61.5. Expectations had been for a climb to 53.3 on the ISM and 63.3 for the Prices. This weekend's newsletter noted that declining numbers in the Chicago region last week questioned the strength of the economy, especially when the Chicago results can be a predictor of the national ISM. The headline number unexpectedly increased to 53.4, and the markets took immediate cheer from the sunshine spreading across the markets. The prices component numbered only 61.0.

The Institute noted that the manufacturing sector produced its 32nd consecutive month of gains, with the overall economy producing 34 consecutive months with this March report. Only two industries out of 18 reported contractions, with those being computer and electronic products, and chemical products. Scanning the included sample comments from manufacturers revealed a range of comments, ranging from "some concerns regarding continued slowdown in China" from a manufacturer of computer and electronics products to "business is robust" from a manufacturer of chemical products. The table below provides a snapshot of the report's components. With Conn's (CONN) earnings tomorrow, we might get a peek at how one electronics and services store's business has been doing.

From the Institute for Supply Management:

The prior Construction spending had disappointed, falling 0.1 percent. Forecasters predicted a rebound of 0.7 percent, but construction spending instead fell 1.1 percent despite favorable weather conditions for the construction industry. This was the largest decline in seven months. Builders may worry about adding new projects when foreclosed properties may still flood markets, Timothy R. Homan concluded in a Bloomberg article. In addition, governments from local to federal have cut back on spending. In particular, a decline in power plants appears to have impacted the number.

Market participants appeared to focus more on the upside surprise in the ISM than on the downside one in construction spending. As soon as the numbers rolled out, indices climbed off their early lows and took off to challenge resistance levels up ahead.

Treasury auctions rounded out the day's economic calendar. Those included 4-week, 3-month and 6-month auctions, all at 11:30 am ET. Yields at first climbed today but then dropped off their highs, with bond market investors still keeping the accommodation talk on their radar. Yields on the five-year, ten-year and thirty-year all edged down.

Story stocks for the day of course included GPN, but owners of Avon Products (AVP) got happier news first thing this morning when Coty announced that it had submitted an offering of $23.25 a share. Coty believes it can pull together the equity financing and asserts that Avon's shareholders would like the benefits of the deal. Apparently, not all agreed, with Avon rejecting the unsolicited offer by late morning. They certainly must have liked the pop in the stock's price today, however. AVP ended at $22.70, up 3.34 points or 17.25 percent. That was about in the middle of the day's $21.81-23.38 range.

On the unhappy side of the ledger, Groupon (GRPN) revealed the revision of its Q4 financial results that had been promised Friday. This weekend, Jim Brown reported on their revision announcement late Friday. Affirmed guidance for Q1 2012 was reduced to revenues of $510-550 million from the prior $534.1 million. GRPN garnered downgrades, too, with GRPN's business model being questioned, as Jim Brown also questioned it this weekend. GRPN closed at $15.27, down 3.10 points or 16.89 percent. It closed just two cents off the day's low.

Apple (AAPL) was in the news with a new $1,001 price target, and it did its best to make progress toward that target today, closing at $618.63, up 19.08 points or 3.18 percent. It's closing in on that recent high of $621.45. The company continues to make gains in market share, including in emerging markets, analysts report. The company also garnered accolades as the Grand Award winner of The Business Journal's American Brand Excellence Awards. One analyst said that a few years from now, we'll laugh at people who shuddered at AAPL's current market cap. Sorry, guys, but I think I'm one of those who is shuddering at the new price target, at least, if not the market cap specifically. The more exuberant the numbers and the language, the more cautious I start growing. Echoes of 1999-2000 always sound in my ears when I hear stuff like that.

Let's look at charts.

Charts

The SPX hit another new recent intraday high today.

Last week included another SPX dip to its daily 9-ema, where it again found support on daily closes. Today was time for another tall white candle if the index was going to continue its usual rally pattern of testing that average, bounding up from the test then going sideways for a few days before repeating the whole process. The SPX once again obeyed the bullish edict and charged higher.

Annotated Daily Chart of the SPX:

The SPX rebounded and produced a new recent closing high. However, the news wasn't all good. Its daily candle produced a small upper candle wick that showed that there was some selling at the end of the day. The SPX has maintained its upside Keltner target that has been in place since it first broke outside the channel now near 1,407. That upside target has been nudged higher by the relentless upward climb and is now near 1,442. On a Keltner basis, that remains a viable-looking upside target as long as the SPX maintains consistent daily closes above the 9-ema, now at just under 1,407. Bulls, then, want to see the SPX maintain daily closes at or above about 1,407. However, a nearer potentially strong resistance level looms, at the site of a long-term rising trendline, now located at about 1,432-1,434, with lighter potential resistance now at 1,426-1,427.

It is always possible, particularly with the FOMC Minutes due tomorrow and other important economic events here and abroad, for the SPX to go parabolic and head straight up to that higher Keltner target, but I would decide tonight, ahead of time, how I would treat bullish profits if the SPX closely approached 1,425 and especially if it headed higher than that. The weekly chart reveals a long, long string of white candles with higher closes, interrupted only briefly with small-bodied red candles sprinkled here and there. In candlestick fashion, those higher closes are known as "record" candles, and it's usually not typical to have more than 5-8 without a real pullback. A one-candle interruption such as those we've had doesn't count. The weekly chart reveals that we're way overdue for a pullback, then, although charging-higher indices can of course continue to charge higher.

If bulls need to know what they'll do to protect profits, bears also have some deciding to do this week. They need to decide ahead of time how they would deal with bearish profits if 1,407 were closely approached this week, since that's a potential bounce zone.

"Potential" doesn't mean guaranteed, of course, and I don't have a crystal ball. I don't know if the Minutes are going to echo those sweet nothings whispered last week or if they're going to disappoint with other language. If the Minutes or news bites out of Europe disappoint and support at 1,407 is eventually lost on daily closes, watch for a potential drop toward 1,383-1,385, where next support on daily closes might lie. Below that, Keltner levels suggest 1,367-1,369 could be tested. Bulls don't want to see those levels give way on daily closes.

When the SPX and Dow are looked at together, the Dow's underperformance questions the SPX's rally pattern's strength a bit, too. The Dow has not broken out above the channel line that would set the next higher upside target. Instead, it's been finding resistance on daily closes at that channel line.

The Dow's bounces prove less exuberant, and it appears to be coiling more than bouncing. If the Dow is viewed in comparison with its sister index, the transports, we see that the transports are also much weaker on a Keltner basis, further questioning the Dow's behavior.

Annotated Daily Chart of the Dow:

On any upside breakout tomorrow morning, watch for potential resistance at about 13,333-13,340. Not unless the Dow can maintain consistent daily closes above the channel line now at about 13,263-13,265 does it set the next upside target, at about 13,645-13,655, and I would be leery if it didn't close above 13,333-13,340 that any attempted breakout had just overrun resistance a bit. We can't use the 9-ema as a barometer for the Dow because the Dow has weakened and begun chopping back and forth across that moving average.

The Dow might look weaker by comparison, but it's also a smaller index that's more easily manipulated. We can't count out the possibility of a climb. Williams in Master the Markets warns that a favored tactic of big money that has bought at a lower price and wants us retail traders to keep buying is to gap prices above resistance one fine morning. That forces reluctant bulls to buy and scared shorts to buy to cover, fueling the rally for them without big money having to spend too much. That's always a possibility.

If the Dow instead heads down and breaks below the 9-ema, now at about 13,179, watch for potentially strong support on daily closes at the level of the first red oval, near 12,950-13,020. That's a broad band, but any downdraft will narrow that band, and will probably narrow it in the direction of the lower number. Long-term bulls want that support to hold on daily closes, as a failure of that support suggests that the next target lies in the 12,540-12,635 region. We can all see historical support, too, at the early March low of 12,734.86. I of course would be watching that if I were in a profitable bearish trade and that level were tested, especially if that should happen over a couple of days. If such a drop happened over the course of two or three days, the Keltner support now a bit lower would probably have cycled higher to join that historical support.

Like the SPX, the NDX continues to rebound strongly from its 9-ema. No wonder, perhaps, with AAPL following the same pattern and a component of both indices. The NDX maintains breakout status on the daily chart, having overrun the outer boundaries of the widest Keltner channel, an action akin to overrunning the boundaries of a more familiar Bollinger band. It continues to show that it's on a momentum run, but reversals from such momentum runs can be cruel and sudden, so keep ratcheting up stops for bullish NDX-related trades as the index climbs. Chartists might notice that the NDX failed today to produce a new recent closing high.

Annotated Daily Chart of the NDX:

When an index is in breakout status like this, it's hard to determine a next upside target, as has been mentioned in the previous few Monday Wraps. You just have to let it run its course. The first sign that it has done so, at least temporarily, will be signaled by consistent daily closes beneath the 9-ema, now at 2,756.47, but likely a bit higher or lower tomorrow, depending on the early direction of the index. A failure of this support sets up a potential downside target at the channel lines now at 2,716, although those are dynamic also and likely to move in the direction of early trading tomorrow. It's the loss of this support on consistent daily closes that would meet the secondary condition to establish that the momentum run is over, and that the NDX might abide by more sedate Keltner standards that would allow us a better idea of likely next targets. A failure of support near 2,716 on consistent daily closes sets up a potential downside target now near 2,635. If a decline to that level occurred over a several day time period, it would have time to rise up to meet the 2,640-2,650 historical support level. Bulls want to see that level hold on consistent daily closes if they are to believe this just a run-of-the-mill pullback.

Like the Transports, the RUT just isn't behaving the way you'd expect it to behave in a strong rally. Usually it leads the way higher, and it's languishing at a lower Keltner level than is the SPX. For comparison, the SPX spent the entire day today at a level that is higher than the RUT's analogous 849-850-ish level, a level the RUT never approached today. In addition, the RUT did not hit a new recent closing high today. It gained, but when viewed in the context of the Keltner channels, the gain was not as meaningful.

Annotated Daily Chart of the RUT:

Because the RUT churns across its 9-ema, it doesn't set an upside target when it closes above that moving average or a downside one when it closes below it. A move up to 850-852 looks as likely as a drop to 815-818, and vice versa. If the RUT were to break above the upside target on daily closes, it sets a potential upside target near 890-892, but I would certainly be wary of pullback potential if it approached the top of the long-term black trendline drawn on the chart. That's currently at about 870. If the RUT were to lose support near 815-88 on daily closes, it sets a potential downside target near 780-783, although if that drop were to occur gradually over a several day period, the Keltner support would probably have risen to the early March low of 785.41, to join forces in providing potential support on daily closes. For now, when this chart is viewed in isolation, the crystal ball gives no preference over the next move, as to whether it's to test nearest support or nearest resistance. When viewed in the context of the RUT's typical lead-the-rally behavior, however, the possibility of a dip must be factored in. Because of the presence of a lot of financials in the RUT, watching the strong-runner financial-related indices such as the BIX and BKX might provide some insight. Both of those are coiling, too, and both currently look stronger than the RUT.

Last week, I mentioned the strength of the RLX, the S&P Retail Index. It, along with the BIX, has been playing the leading index part that the RUT, SOX and Transports often played in the past. The RLX was still doing so until today when it failed to produce a strong white candle as did many of the gaining indices. It did gain, but there was nothing impressive about that gain. The RLX still bears watching for an early sign of weakness, as an indicator index in the way these Monday Wraps have mentioned for several weeks. One source noted that the consumer discretionary group underperformed today, pointing out the Retail HOLDRS Trust (RTH) and SPDR S&P Retail ETF (XRT) as indices also in that sector. These are optionable, while the RLX is not, and I watch it as an indicator index only, not as a trading vehicle. On a Keltner basis, the XRT looks weaker than the other two. The canary in the mine or just a factor of its specific composition? I don't know since I don't follow that index. It goes without saying that AAPL should be on the radar screen for most traders, too, whether or not they trade the stock. I don't trade it, but it's certainly on my radar screen, the way I used to have CSCO there.

Annotated Daily Chart of the RLX:

Tomorrow's Economic and Earnings Releases

The Eurozone holds important economic events over the next few days, leading into Wednesday's ECB announcement of its minimum bid rate. These events could impact markets across the globe. Tomorrow features a final GDP for the Eurozone, but that might be overshadowed by G7 Meetings.

Don't worry: the U.S.'s slate of releases can return the favor and churn European markets, too. Vehicle sales will be reported throughout the day tomorrow. Those and Factory Orders at 10:00 am ET would ordinarily garner a great deal of attention here in the U.S., but the globe's currency and bond traders and most U.S. equity market watchers, at least, will be awaiting the FOMC Meeting Minutes at 2:00 pm ET. Those minutes will be scoured for hints about future accommodative measures.

Market watchers forecast a gain of 1.4 percent for factory orders. This number revises the Durable Goods Orders released last week, including new data about non-durable goods.

In addition to those potentially impactful economic events, we will see the normal weekly ICSC-Goldman Store Sales at 7:45 am ET and Redbook weekly chain store sales at 8:55 am ET. The 4-week and 52-week bill auctions at 11:30 round out the morning schedule.

What about Tomorrow?

I typically show the 30-minute charts in this section, but the movements of many indices have shown more near-term adherence to the Keltner support and resistance seen on the 15-minute and 60-minute charts than the 30-minute ones this last week. For that reason, the 15-minute charts will be shown in tonight's Wrap. The SPX charged up to hit an upper Keltner target today, at a channel boundary where prices usually don't linger more than a trading day before a pullback. This afternoon, they pulled back by the end of the day.

Annotated 15-Minute Chart of the SPX:

To all English majors everywhere, I apologize for the run-on sentence in the chart's annotations.

After hitting that upper boundary and trading along it for a day or less, the SPX sometimes pulls back and then charges toward it again. Bears must be prepared for a push up to and maybe above 1,423 tomorrow morning, perhaps lingering there into the release of the FOMC minutes. That's one possible scenario for the morning. With the SPX pulling back sharply to nearby support near 1,418-1,420 by the end of the day today, it's equally important that bulls prepare for a possible pullback to 1,413-1,415 tomorrow morning, where first support on 15-minute closes might lie. If that support is tested and then prices bounce, 1,419-1,422 might then be relatively strong resistance on 15-minute closes. If instead of a bounce, that support is lost, the next nearby potential target would lie at 1,408-1,411 by the time it could be tested. If the SPX dropped that low and bounced, watch for resistance near 1,413-1,415 on the bounce. A failure of that support near 1,408-1,411 sets up a potential target near 1,397 currently but likely to be 5 points or so on either side of that number by the time it could be tested tomorrow.

Like the SPX, the Dow hit an upper boundary level where it usually stays for no more than a day at most before pulling back. It pulled back this afternoon. Like the SPX, the Dow sometimes then retests that upper boundary. However, the Dow overran the support that usually bounces it, that analogous to the SPX's 1,418-1,422 level on the chart above. The Dow may be setting a tentative near-term target down at 13,230-13,240.

Annotated 15-Minute Chart of the Dow:

If the Dow were to gap up above about 13,275 tomorrow morning, that lower near-term target does not seem as likely for a first move. Instead, the retesting of the upper chart boundary now near 13,310-13,320 seems possible. However, viewed in isolation and without any knowledge of how overnight developments might push U.S. futures, a drop to that 13,230-13,240 levels seems the likeliest next move based on what appears here. Bulls want to see that 13,230-13,240 level hold as support on 15-minute closes. They want the Dow to bounce from that level after any test of that support. However, if this is how the trading unfolds, the 13,275 level should then be viewed as potential resistance on 15-minute closes.

If that peach-colored line should be tested and not hold as support on consistent 15-minute closes, a drop toward 13,200 or slightly below would be set up as the next potential downside target. A drop to and bounce from that zone would then set up 13,230-13,240 as potential resistance on a retest. A drop through that 13,200 level instead of a bounce would set up 13,077 as a potential downside target, although that potential target would likely have moved several points either side of 13,077 by the time it could be tested.

The NDX proved weaker than the SPX when compared on a Keltner chart.

Annotated 15-Minute Chart of the NDX:

Now that you've viewed several of these intraday charts, you can see that the NDX did not charge up to that upper channel boundary as did several of the other indices, so it was weaker on this Keltner comparison. What about for tomorrow? The close proved ambiguous, and it looks about equally likely that the NDX could charge right up to about 2,795-2,800 or drop right down to 2,775 or perhaps even toward 2,765. If it charges up first, traders must be cognizant of the prior high from last week waiting as potential resistance, too, and gauge whether they want to begin locking in short-term bullish profits as that is approached or hold out longer. If the NDX should drop to test 2,775 or even 2,665, bears should be asking themselves the same question about locking in short-term bearish gains. If the NDX bounces from one of those levels, watch for potential resistance on 15-minute closes near 2,785 as there will be rollover potential there, with the emphasis always on "potential." If support at 2,765 is tested and fails to hold on consistent 15-minute closes, the NDX sets up a potential downside target near 2,740, although that support level could have moved several points either direction by the time it is tested.

Like the NDX, the RUT did not touch the upper channel boundary tested by the SPX and Dow. Unlike the NDX, however, the RUT still maintains that potential upside target, now at about 843 for the RUT.

Annotated 15-Minute Chart of the Russell 2000:

However, if the RUT were to gap lower tomorrow morning, maintaining early values below about 838, the upside potential target is less likely to be achieved. Consistent 15-minute closes beneath the 838 level set a potential downside target of 833-836, with that range probably narrowing toward the lower end of the range by the time it could be tested. If the RUT were to test that zone and then bounce, 838-840 should then be viewed as potential resistance on 15-minute closes. A failure of that 833-ish support to hold on consistent 15-minute closes sets up a potential downside target of about 825, although that could likely be pushed 5 points either direction, depending on the direction of early trading and the length of time it took to test that level, if it is tested.

So, what can we tell by this? We know that markets sometimes zoom up just under next resistance or down just above next support before an important FOMC number or release, and then park there with no little price movement but with rising implied volatilities until after the announcement. We know that indices then sometimes scream one direction or the other afterwards, sometimes with a quick sharp reversal which is itself then reversed, before we know the afternoon direction. We know furthermore that sometimes that afternoon direction is reversed the next day, after market participants have had an opportunity to pore over the release and decide what they think it really means for the market.

We can't predict much from knowing market behavior around events such as the FOMC minutes, particularly in emotion-charged trading environments and particularly with events looming in Europe, too. We can only go back to the charts. What I see on the short-term charts is that the SPX and Dow behaved more strongly than the NDX and RUT, on a Keltner channel basis. Both the SPX and Dow sometimes charge up to the upper boundary and then pull back and retest it again. It's the result of that retest that gives us more information about the next move. That remains a possibility for tomorrow, and it's likely they'll pull the other indices up, too, if they're charging higher to retest those channel boundaries. However, the Dow's dip was deeper than it should be for that scenario, and the NDX and RUT couldn't even manage a test of those upper channel boundaries today, looking weaker on a Keltner basis. The SOX, transports, BIX and even the high-flying RLX all looked weaker on a Keltner channel basis than did the SPX and Dow. Hold the possibility in mind of another charge up to retest those upper boundaries, where indices would wait out the FOMC Minutes, but don't yet give that action a probability status. I would want to see the BIX consistently above today's 159.58 high and the RLX above 625.30 before I believed too strongly in bounce potential tomorrow morning. If you want to see the bounce scenario play out in early trading, you want the Dow and NDX to quickly move above last week's highs and stay there and you want the RUT to at least attempt to place catch up with regard to last week's highs.

If you're in short-term trades, decide tonight how much risk you'll take into the FOMC Minutes announcement. Whatever happens tomorrow, remember to enjoy the gains the index makes if you're in bullish trades, but to keep ratcheting up stops as prices climb. Ask yourself how much risk you want to take on, especially before or in the immediate aftermath of the FOMC announcement. It only makes sense.


New Plays

Taking Another Swing

by James Brown

Click here to email James Brown


NEW BULLISH Plays

Hain Celestial Group - HAIN - close: 44.76 change: +0.95

Stop Loss: 42.75
Target(s): 49.00
Current Gain/Loss: unopened
Time Frame: up to its early May earnings report
New Positions: Yes, see below

Company Description

Why We Like It:
We recently closed a successful bullish trade on HAIN. Yet given the stock's relative strength today we want to take another swing at it. Shares surged off their morning lows and look poised to breakout past the $45.00 level. The stock is already at record highs so the $45.00 level could be psychological resistance.

I am suggesting a trigger to open small bullish positions at $45.05 with a stop loss at $42.75. Our target is $49.00 but we plan to exit prior to the early May earnings report.
FYI: The Point & Figure chart for HAIN is bullish with a $59.00 target.

Trigger @ 45.05

Suggested Position: buy HAIN stock @ (trigger)

- or -

buy the May$45 call (HAIN1219E45) current ask $1.55

Annotated chart:

Entry on April xx at $ xx.xx
Earnings Date 05/03/12 (unconfirmed)
Average Daily Volume = 279 thousand
Listed on April 02, 2011



In Play Updates and Reviews

A Little Profit Taking

by James Brown

Click here to email James Brown

Editor's Note:
A few of our candidates saw some profit taking now that the first quarter is over. EBAY, RDEA, and STMP were all stopped out.

BMC and MU were triggered.

Current Portfolio:


BULLISH Play Updates

Akamai Technologies - AKAM - close: 36.73 change: +0.03

Stop Loss: 35.40
Target(s): 39.75 & 41.50
Current Gain/Loss: - 0.2%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
04/02 update: I am urging caution here. AKAM dipped toward support near $36 and its 50-dma this morning. More conservative traders might want to tighten their stop loss closer to the 50-dma. Nimble traders could buy dips or bounces near $36.00 or the 50-dma.

current Position: Long AKAM stock @ $36.82

- or -

Long Apr $36 call (AKAM1217D36) entry $1.92

- or -

Long May $40 call (AKAM1219E40) entry $1.39

03/29/12 new stop loss @ 35.40
03/15/12 new stop loss @ 34.95
03/13/12 trade opened this morning
03/12/12 not open yet. try again.

Entry on March 13 at $36.82
Earnings Date 04/26/12 (unconfirmed)
Average Daily Volume = 2.9 million
Listed on March 10, 2011


ANN Inc. - ANN - close: 28.78 change: +0.14

Stop Loss: 27.90
Target(s): 31.75
Current Gain/Loss: - 0.3%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
04/02 update: ANN dipped to $28.28 before bouncing back and closing in positive territory. I remain cautious here. More conservative traders may want to exit early. I am not suggesting new positions at this time.

current Position: Long ANN stock @ 29.25

- or -

Long May $30 call (ANN1219E30) current ask $1.05

03/28/12 new stop loss @ 27.90
03/26/12 ANN gapped open above our trigger (28.75). Trade opened this morning at $28.89

Entry on March 26 at $28.89
Earnings Date 05/18/12 (unconfirmed)
Average Daily Volume = 1.5 million
Listed on March 24, 2011


BMC Software Inc. - BMC - close: 40.16 change: -0.10

Stop Loss: 39.30
Target(s): 44.00
Current Gain/Loss: + 0.3%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
04/02 update: Traders bought the dip in BMC near $40 this morning and the stock rallied to a new multi-month high. Our trigger to open positions was hit at $40.55.

Our multi-week target is $44.00. We'll have to keep a wary eye on potential resistance at the 300-dma (currently 43.30). FYI: The Point & Figure chart for BMC is bullish with a $57 target.

Suggested Position: Long BMC stock @ 40.55

- or -

Long May $40 call (BMC1219E40) Entry $2.20

04/02/12 triggered at $40.55

Entry on April 02 at $40.55
Earnings Date 05/02/12 (unconfirmed)
Average Daily Volume = 2.0 million
Listed on March 29, 2011


Broadcom Corp. - BRCM - close: 38.89 change: -0.41

Stop Loss: 37.60
Target(s): 44.00
Current Gain/Loss: + 0.3%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
04/02 update: There was no follow through on Friday's rally for BRCM. Shares spiked down at the open and ended the session with a -1% loss. Readers may want to wait for a rally past $40.00 before considering new bullish positions.

Earlier Comments:
The rise past $39.00 has created a brand new Point & Figure chart triple top breakout buy signal that is currently forecasting at $50 target.

current Position: Long BRCM stock @ $38.75

- or -

Long May $40 call (BRCM1219E40) Entry $1.52

03/31/12 BRCM set a new multi-month closing high above $39.00
03/28/12 new stop loss @ 37.60, BRCM could be forming a bearish reversal.

Entry on March 19 at $38.75
Earnings Date 04/26/12 (unconfirmed)
Average Daily Volume = 8.8 million
Listed on March 17, 2011


ClickSoftware Tech. - CKSW - close: 12.44 change: -0.24

Stop Loss: 12.40
Target(s): 14.90
Current Gain/Loss: unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see below

Comments:
04/02 update: CKSW is breaking down from its $12.00-13.00 trading range. If the stock does not recover tomorrow we will drop it as a bullish candidate.

Currently I am suggesting a trigger to open small bullish positions at $13.15. We will try and limit our risk with a stop at $12.40. Our target is $14.90. More aggressive traders may want to aim higher. FYI: The Point & Figure chart for CKSW is bullish with a $19.25 target.

Trigger @ 13.15

Suggested Position: buy CKSW stock @ (trigger)

- or -

buy the May $12.50 call (CKSW1219e12.5)

Entry on March xx at $ xx.xx
Earnings Date 04/28/12 (unconfirmed)
Average Daily Volume = 184 thousand
Listed on March 26, 2011


Level 3 Communications - LVLT - close: 25.92 change: +0.19

Stop Loss: 24.70
Target(s): 29.00
Current Gain/Loss: - 0.9%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
04/02 update: LVLT is still consolidating with a short-term bearish trend of lower highs and lower lows. Shares just hit a new lower low today at $25.25. I don't see any changes from my weekend comments. Weekend comments:
On the weekly chart it looks like the stock has topped out. The stock should have support at $25.00 but more conservative traders may just want to exit early now and cut their losses especially if you're holding the April calls. I am not suggesting new positions at this time. We are expecting LVLT to test the $25.00 area.

Earlier Comments:
The stock could see a short squeeze. The most recent data listed short interest at 26% of the 153 million-share float. FYI: The Point & Figure chart for LVLT is bullish with a long-term $41.50 target.

current Position: Long LVLT stock @ $26.17

- or -

Long Apr $25 call (LVLT1221D25) Entry $2.30

03/31/12 LVLT is underperforming. Readers may want to exit early
03/26/12 today's bounce off the 10-dma could be a new entry point
03/15/12 new stop loss @ 24.70, adjust exit target to $29.00
03/15/12 trade opened on LVLT's gap higher at $26.17, which is above our trigger to open positions at $25.25.

Entry on March 15 at $26.17
Earnings Date 05/03/12 (unconfirmed)
Average Daily Volume = 2.4 million
Listed on March 14, 2011


NetApp, Inc. - NTAP - close: 45.05 change: +0.28

Stop Loss: 43.75
Target(s): 49.75
Current Gain/Loss: - 2.0%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
04/02 update: NTAP quietly bounced higher most of the session but didn't quite keep up with the rebound in the major indices. The stock might see some action tomorrow since the company will be presenting at an investor conference tomorrow.

This move over $45.00 looks like a new bullish entry point.

Our short-term target is $49.75. More aggressive traders may want to aim higher. The Point & Figure chart for NTAP is bullish with a $65.00 target.

current Position: Long NTAP stock @ $45.97

- or -

Long Apr $45 call (NTAP1221D45) Entry $2.05

Entry on March 26 at $45.97
Earnings Date 05/23/12 (unconfirmed)
Average Daily Volume = 5.8 million
Listed on March 24, 2011


NXP Semiconductors - NXPI - close: 26.12 change: -0.49

Stop Loss: 25.35
Target(s): 29.75
Current Gain/Loss: - 1.4%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
04/02 update: NXPI underperformed today with a -1.8% decline. Traders did buy the dip near its 20-dma but NXPI looks poised for more weakness tomorrow morning. I am not suggesting new positions at this time. FYI: The Point & Figure chart for NXPI is bullish with a $45.00 target.

(small positions)

current Position: Long NXPI stock @ $26.50

- or -

Long Apr $25 call (NXPI1221D25) Entry $2.25

03/23/12 NXPI hit our trigger for small positions at $26.50

Entry on March 23 at $26.50
Earnings Date 05/03/12 (unconfirmed)
Average Daily Volume = 1.6 million
Listed on March 19, 2011


St. Jude Medical - STJ - close: 43.89 change: -0.42

Stop Loss: 42.95
Target(s): 48.50
Current Gain/Loss: - 0.8%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
04/02 update: An analyst downgrade this morning helped push STJ lower and shares hit $43.01 this morning. The stock managed to bounce back toward $44 and its 300-dma before closing with a -0.9% loss. Readers may want to wait for a new rise past $44.60 or past $44.80 before considering new bullish positions. FYI: The Point & Figure chart for STJ is bullish with a $66.00 target.

current Position: buy STJ stock @ $44.25

- or -

Long May $45 call (STJ1219E45) Entry $1.40

03/30/12 triggered
03/29/12 new entry point: trigger @ 44.25
03/28/12 not open yet. try again.

Entry on March 30 at $44.25
Earnings Date 04/18/12 (unconfirmed)
Average Daily Volume = 3.0 million
Listed on March 27, 2011


TJX Companies - TJX - close: 39.87 change: +0.16

Stop Loss: 38.25
Target(s): 41.50
Current Gain/Loss: + 3.2%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
04/02 update: Today was it! If you were looking for an early exit near round-number resistance at $40.00 then today was your day. TJX traded to $39.99 this morning. I am suggesting we go ahead and exit our April $37.50 calls now at the open tomorrow morning. Hopefully TJX doesn't gap down at the open. Currently these calls have a bid at $2.55 (+59%). I am not suggesting new positions at this time.

current Position: Long TJX stock @ $38.60

- or -

Long Apr $37.50 call (TJX1221D37.5) Entry $1.60

04/02/12 prepare to exit Apr 37.50 calls at the open tomorrow, current bid is $2.55 (+59%)
03/31/12 new stop loss @ 38.25
03/29/12 new stop loss @ 37.95
03/26/12 conservative traders may want to take profits near the $40.00 mark
03/21/12 TJX hit our entry trigger at $38.60

Entry on March 21 at $38.60
Earnings Date 05/15/12 (unconfirmed)
Average Daily Volume = 4.6 million
Listed on March 20, 2011


The Toro Company - TTC - close: $71.45 change: +0.34

Stop Loss: 69.40
Target(s): 74.75
Current Gain/Loss: + 2.5%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
04/02 update: Traders bought the dip in TTC yet again and the stock closed up +0.4%. Yet shares remain under resistance near $72.00. I am suggesting readers wait for a new rally past $72.00 before considering new bullish positions.

FYI: The Point & Figure chart for TTC is bullish with a $79.00 target.

current Position: Long TTC stock @ $69.32

03/27/12 new stop loss @ 69.40
03/22/12 adjust exit target to $74.75
03/20/12 new stop loss @ 67.40
03/15/12 new stop loss @ 66.40
03/13/12 Our TTC trade has been opened.
03/12/12 trade did not open. try again.
03/10/12 trade did not open. try again.
03/09/12 trade did not open. TTC opened lower and then bounced

Entry on March 13 at $69.32
Earnings Date 05/21/12 (unconfirmed)
Average Daily Volume = 330 thousand
Listed on March 08, 2011


Websense, Inc. - WBSN - close: 21.38 change: +0.29

Stop Loss: 20.30
Target(s): 23.50
Current Gain/Loss: + 0.6%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
04/02 update: WBSN briefly traded under short-term support near $21.00 this morning and then surged higher. The stock closed up +1.3% and the bounce today looks like a new bullish entry point. More conservative traders might want to adjust their stops closer to today's low (20.93). FYI: The Point & Figure chart for WBSN is bullish with a $26.00 target.

current Position: buy WBSN stock @ $21.24

03/29/12 new stop loss @ 20.30
03/26/12 Trade opened on WBSN's gap higher at $21.24. This is above our trigger of $21.15.

Entry on March 26 at $21.24
Earnings Date 04/24/12 (unconfirmed)
Average Daily Volume = 388 thousand
Listed on March 22, 2011


Wyndham Worldwide - WYN - close: 47.09 change: +0.58

Stop Loss: 44.30
Target(s): 49.50
Current Gain/Loss: + 4.0%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
04/02 update: WYN continues to show relative strength. The stock added +1.2% and set a new record high. While the trend is up I am not suggesting new positions at this time.

Our multi-week target is $49.50. FYI: The Point & Figure chart for WYN is bullish with a long-term $82.00 target.

current Position: Long WYN stock @ $45.25

- or -

Long Apr $45 call (WYN1221D45) Entry $1.65

03/29/12 new stop loss @ 44.30
03/13/12 new stop loss @ 43.75
03/13/12 trade triggered at $45.25

Entry on March 13 at $45.25
Earnings Date 04/26/12 (unconfirmed)
Average Daily Volume = 1.7 million
Listed on March 12, 2011


BEARISH Play Updates

Ctrip.com Intl. - CTRP - close: 21.73 change: +0.09

Stop Loss: 23.05
Target(s): 18.00
Current Gain/Loss: - 0.1%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
04/02 update: It was a quiet day for CTRP. The stock opened at $21.70, tested the $22.00 level as overhead resistance, and then faded lower. I would still consider new positions at current levels.

Earlier Comments:
Readers may want to keep their position size small or limit their risk by trading put options. The most recent data listed short interest at about 10% of the 131 million share float. That could raise the risk of a short squeeze.

It's possible the $20.00 level could act as round-number, psychological support but we are aiming for $18.00. The Point & Figure chart for CTRP is bearish with a $15.00 target.

current Position: short CTRP stock @ $21.70

- or -

Long Apr $21 PUT (CTRP1221P21) Entry $0.65

Entry on April 02 at $21.70
Earnings Date 05/--/12 (unconfirmed)
Average Daily Volume = 3.6 million
Listed on March 31, 2011


Greenbrier Companies - GBX - close: 20.31 change: +0.52

Stop Loss: 21.05
Target(s): 18.50
Current Gain/Loss: + 5.5%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
04/02 update: Warning! Traders bought the new relative low in GBX this morning. By the closing bell shares had created a bullish engulfing candlestick reversal pattern. More conservative traders may want to exit immediately. I am lowering our stop loss down to $21.05. I am not suggesting new positions at this time.

Earlier Comments:
Traders should be aware that the $20.00 level, with the 200-dma, could be short-term support but we are aiming for a drop to $18.50.

current Position: short GBX stock @ $21.50

04/02/12 new stop loss @ 21.05, GBX has created a one-day bullish reversal signal. Readers may want to exit immediately.
03/28/12 new stop loss @ 22.05, readers may want to take profits now
03/26/12 new stop loss @ 22.55
03/17/12 Friday's intraday pullback from $23.00 can be used as a new bearish entry point.
03/14/12 triggered at $21.50
03/13/12 removed the April $22.50 put as a suggested trade due to a ridiculously wide spread.

Entry on March 14 at $21.50
Earnings Date 04/09/12 (unconfirmed)
Average Daily Volume = 468 thousand
Listed on March 12, 2011


Micron Technology Inc. - MU - close: 8.10 change: -0.00

Stop Loss: 8.41
Target(s): 7.05
Current Gain/Loss: - 1.5%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
04/02 update: MU continued to sink this morning and hit our trigger for bearish positions at $7.98. Yet the stock reversed higher at $7.96 and traded to $8.25 intraday. The overall pattern remains bearish here but I would wait for a new relative low at $7.95 before considering new bearish positions.

current Position: short MU stock @ $7.98

- or -

Long Apr $8.00 PUT (MU1221P8) Entry $0.37

04/02/12 triggered at $7.98

Entry on April 02 at $7.98
Earnings Date 06/21/12 (unconfirmed)
Average Daily Volume = 33.0 million
Listed on March 31, 2011


CLOSED BULLISH PLAYS

eBay Inc. - EBAY - close: 36.59 change: -0.31

Stop Loss: 36.65
Target(s): 39.50
Current Gain/Loss: + 0.9%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
04/02 update: EBAY underperformed this morning and broke down to new two-week lows. Shares opened at $36.68 and quickly hit our stop loss at $36.65.

I would definitely keep EBAY on your watch list for a dip or a bounce in the $34.00-35.00 zone as a possible bullish entry point.

current Position: Long EBAY stock @ $36.29 exit $36.65 (+0.99%)

- or -

Apr $35 call (EBAY1221D35) entry $2.02 exit $1.82 (- 9.9%)

04/02/12 stopped out at $36.65
03/29/12 new stop loss @ 36.65
03/26/12 new stop loss @ 35.75
03/13/12 trade opened this morning
03/12/12 not open yet. try again. added a trigger at $36.85

chart:

Entry on March 13 at $36.29
Earnings Date 04/26/12 (unconfirmed)
Average Daily Volume = 10.6 million
Listed on March 10, 2011


Ardea Biosciences - RDEA - close: 21.50 change: -0.26

Stop Loss: 21.40
Target(s): 24.90
Current Gain/Loss: - 5.5%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
04/02 update: RDEA underperformed again with a -1.1% decline on Monday. Shares traded under both the 20-dma and 300-dma and hit our stop loss at $21.40.

closed Position: Long RDEA stock @ $22.65 exit $21.40 (-5.5%)

04/02/12 stopped out at $21.40
03/23/12 RDEA hit our entry trigger @ 22.65

chart:

Entry on March 23 at $22.65
Earnings Date 03/09/12
Average Daily Volume = 307 thousand
Listed on March 22, 2011


Stamps.com Inc. - STMP - close: 27.88 change: -0.28

Stop Loss: 26.49
Target(s): 32.50
Current Gain/Loss: - 6.2%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
04/02 update: STMP displayed relative weakness this morning with a sharp plunge to $26.25, near its simple 150-dma, before bouncing back and paring its losses to just 12 cents. Our stop loss was hit at $26.49. I didn't see any news behind the intraday volatility.

Earlier Comments:
If the rally does continue we could see STMP accelerate due to short covering. The most recent data listed short interest at almost 16% of the very small 13.2 million share float.

This is a volatile stock. I am suggesting we keep our position size small to limit our risk.

(small positions)

closed Position: Long STMP stock @ $28.25 exit $26.49 (-6.2%)

- or -

Apr $30 call (STMP1221D30) Entry $0.85 exit $0.25* (-70.5%)

04/02/12 stopped out at $26.49
*option exit is an estimate. It did not trade at the time of our exit
03/29/12 new stop loss @ 26.49
03/21/12 STMP hit our entry trigger at $28.25

chart:

Entry on March 21 at $28.25
Earnings Date 04/30/12 (unconfirmed)
Average Daily Volume = 508 thousand
Listed on March 15, 2011