Option Investor
Newsletter

Daily Newsletter, Tuesday, 4/24/2012

Table of Contents

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

Market Wrap

Apple Beats Then Warns

by Jim Brown

Click here to email Jim Brown

After declining 10 of the last 11 sessions Apple announced blowout earnings then warned on weakness in the current quarter.

Market Statistics

The worry over the mother of all earnings reports weighed on the Nasdaq for the last week and those worries were in vain. Apple posted blowout earnings of $12.30 compared to estimates of $10.04. Revenue was also a blowout at $39.2 billion compared to estimates of $36.8 billion. Apple shares were down -11 to close at $560 before the report. Despite the guidance warning for the current quarter Apple shares rallied more than $40 in after hours to $601.

Apple sold 35.1 million iPhones in Q1 compared to estimates of 32 million. Shipments of the iPad came in at 11.8 million and the low end of the expected range. The weakness was due to the late quarter arrival of the latest model. Earnings rose +92% from the $6.40 earned in Q1-2011. Mac shipments at 4.0 million and iPod at 7.7 million were in line with estimates.

Year over year Asia Pacific sales rose +114% and Japan +91%. However, quarter over quarter Asian sales were up +32% but all other regions declined.

Apple shares had been declining after AT&T and Verizon both said iPhone sales were lower than expected. Clearly global growth more than made up for weakness in the USA. iPhone revenue was down -7% from Q4 but up +85% year over year. iPad revenue was down -28% from Q4 but up +132% year over year.

In the U.S. the school system is loving the iPad. The San Diego school district bought 10,000 in the March quarter and plans to buy another 15,000 in this quarter. CEO Tim Cook said the lowered price point on the old iPad at $399 is opening up some new demand areas where the price of the new version is too high. The app store now has over 600,000 apps with more than 200,000 just for the iPad. The iTunes store generated $1.9 billion in revenue a gain of 35%.

For the current quarter Apple forecast earnings of $8.68 per share on revenue of $34 billion. Analysts were expecting $10.02 on revenue of $37.7 billion. While it could be considered a warning if other companies did it, Apple typically issues a conservative forecast so the lowball forecast was mostly ignored. Apple ended the quarter with $110 billion in cash and that represents 20% of its market cap. About 70% of that cash is overseas and can't be brought back to the U.S. without a massive tax hit.

The decline in Apple shares was responsible for 65% of the recent Nasdaq loss. That will be erased on Wednesday with the +$40 after hours gain.

Apple Chart

Juniper (JNPR) will also be helping the Nasdaq on Wednesday after reporting earnings of 16 cents compared to estimates of 13 cents. Revenue was $1.03 billion compared to estimates of $980 million. Juniper guided to 15-17 cents for the current quarter and analysts were expecting 20 cents. Juniper said there was a slower ramp into adoption of its new product line but that was finally accelerating. Juniper shares rallied +10% when the earnings were released by mistake before the close.

Juniper Chart

Lexmark (LXK) reported earnings of $1.05 that was in line with estimates. Revenue declined to $992.5 million. The company predicted earnings of .95-1.05 for Q2 with a -8% decline in revenue to $950 million. Analysts were expecting $985.6 million. Shares declined -6% on the news.

Lexmark Chart

United Technology (UTX) reported adjusted earnings of $1.31 compared to estimates of $1.21. UTX removed some of the income from business units they have up for sale. Revenue of $12.42 billion was less than the $12.88 billion expected. Earnings declined at three of the five major UTX business units. Shares were unchanged on the news.

3M (MMM) reported earnings of $1.59 compared to estimates of $1.44. Revenue of $7.49 billion was higher than estimates of $6.95 billion. 3M raised its guidance to $6.35-$6.50 from $6.25-$6.50. The company said they were experiencing a sales slowdown in consumer electronics. Manufacturers using their products to manufacture electronics like flat screen TVs were reducing orders. 3M shares rallied slightly on the earnings despite the electronics concerns.

MMM Chart

Big Lots (BIG) also warned that consumer purchases of electronic products were slowing. Big Lots blamed their sales declines on consumers buying more products online. BIG projected same store sales to decline compared to prior forecasts for a 2-4% increase. Multiple analysts immediately slashed ratings on the stock. The situation was made worse by the revelation that the CEO sold $10 million in stock on March 20th and $4.9 million on March 27th after he had told investors in the first week of March that trends were improving. Shares of BIG declined -24% on the news.

Big Lots Chart

Netflix (NFLX) declined another 14% after reporting better than expected earnings after the close on Monday but warned on slower subscriber growth. Netflix said they expected to add 200,000 to 800,000 streaming video subscribers in Q2. That was below prior estimates around 1.2 million. Netflix currently has 26 million subscribers. The company said the slow growth was due to seasonal trends and they still expect to add 7.0 million new customers in 2012. That is a major increase from the expected Q2 growth so most analysts were not impressed. Netflix shares fell -14% on the news.

Netflix Chart

Radio Shack (RSH) fell more than -10% to a 31 year low after posting an 8 cent loss compared to 33 cent profit in the year ago quarter. Analysts had predicted earnings of 4 cents. The company said consumers were window shopping their stores and then buying online from competitors. Welcome to reality. Same store sales fell -4.2%. Radio Shack has about 6,200 stores in North America and 1,100 dealers worldwide. The last time the price was this low (1981) people were buying the TRS-80 computers as state of the art equipment and Microsoft was a startup. Microsoft did not IPO until 1986. Since then Microsoft has created five billionaires and 12,000 millionaires from its employee ranks. Radio Shack rallied to $79.50 just before Y2K but short of a miracle or a major reverse stock split they will not see that level again.

Bill Gates & Paul Allen 1981

Radio Shack Chart

AT&T (T) rallied +4% after reporting earnings of 60 cents, up +5.2%. That beat analyst estimates. Ironically AT&T said its profits were higher because it did not sell as many iPhones as expected so the carrier subsidy payments to Apple had been lower. When a carrier like AT&T sells an iPhone at a discounted $199 rate they have to pay Apple the $599 price so they make up the difference. They recover their investment over the life of the contract because of the monthly fees, data plans, text messages, airtime, etc. AT&T sold 4.3 million iPhones for the quarter and added 187,000 new customers. The lower than expected iPhone sales matched the same news from Verizon. That prompted numerous analysts to predict Apple's sales would be lower than expected. Clearly they were not factoring in the better than 100% sales growth in Asia. Tonight those analysts are probably not answering their phones.

AT&T also said the average smartphone bill had fallen declined -9%. The average monthly bill for a contract based plan was $64.46. The average smartphone bill was $80. Competition is increasing and customer budgets are shrinking.

AT&T Chart

First Solar (FSLR) is now trading below its 2006 IPO price of $20 per share and its market cap has declined to $1.7 billion. The company is facing a potential eviction from the S&P-500 if the stock does not rally soon. It takes a market cap of $4 billion to be included in the S&P-500 but the requirement to stay in the index is lower. A S&P spokesman would not comment on the potential for FSLR being removed but they do take action routinely when stocks are underperforming. Currently there are 46 stocks in the S&P with market caps under $4 billion. Maxim Group analyst Aaron Chew slashed his rating to a sell and said there could be another 50% decline to go with a price target of $9. FSLR has lost its competitive advantage and recently cut capacity by 33%. The company is transitioning from manufacturing solar panels to developing solar projects for utility companies. That is not a sexy business and it is very low margin.

FSLR Chart

Earnings for the rest of the week will be highlighted by Boeing and Caterpillar on Wednesday and Amazon and UPS on Thursday.

Earnings Calendar

On the economic front it was a busy day. The Consumer Confidence for April declined to 69.2 from 70.2. That was the second monthly decline since hitting a peak of 71.6 in February. The present conditions component rose slightly to 51.4 from 49.9 but the expectations component declined from 82.5 to 81.1. Those planning on buying a car declined from 12.3% to 9.3% and those planning on home shopping declined from 4.9% to 4.4%.

Those expecting the stock market to post gains over the next year rose to 35.7% and the highest level in more than a year.

Consumer Confidence Chart

New Home Sales continued their volatile upward trajectory. In February the Census Bureau originally said new home sales were running at an annual pace of 313,000. In today's report they said March sales rose to a pace of 328,000. However, they dramatically revised the February number to 353,000 so technically March was a decline even though it was much higher than the initial estimate. They also revised the January number up from 318,000 to 329,000. Bottom line, new home sales are improving significantly but still not a boom.

New Home Sales

Home prices rose +0.4% year over year in February according to the FHFA Purchase Only Home Price Index. That compares to a decline of -0.7% in the prior month. Six out of the nine regions surveyed saw home prices rise.

The Richmond Fed Manufacturing Survey rose to 14.0 from 7.0 for April. New orders rose slightly from 11.0 to 13.0 but backorders declined slightly from 4.0 to 2.0. The overall report was neutral except for the jump in the employment component from 6.0 to 10.0. We saw an outsized jump in the employment component in the Philly Fed Survey last week from 6.8 to 17.9. The same component in the NY Empire survey the prior week rose sharply to 19.3 from 13.6. It would appear there is a hiring surge underway in the manufacturing sector and this could be reflected in future nonfarm payroll reports.

The Fed will be paying close attention to these employment statistics during the FOMC meeting currently in progress. These stronger numbers could keep the Fed on hold and reduce the chances for additional stimulus. They could counteract the sharp decline in the payroll report for March.

Richmond Fed Chart

In a separate report Mass Layoffs declined again in March to 1,293 events, down from 1,293 events in February. The number of workers impacted rose slightly to 121,310 from 119,463 but the overall down trend remained intact. The industries with the most layoff claims included temporary help services (11,732), food service contractors (9,629) and school and employee bus transportation (6,815). Manufacturing accounted for 22% of the events and 21% of the initial claims. That would contradict somewhat the stronger manufacturer components in the regional manufacturing studies. Hopefully this is just a factor of lag time in reporting.

The economics were not strongly bullish but they were enough to keep commodity prices firmly planted in positive territory. Crude prices rose slightly and remained in the current upward trend.

WTI Chart

Brent Chart

Live cattle futures were an exception. A new case of mad cow disease was reported in California and futures dropped limit down of -$3.00. The last time a case was reported the futures limited down for multiple consecutive days. The problem here is the export rules for Japan. They are already afraid of our beef and should they react to the new case the price of beef would drop dramatically.

Live Cattle Futures Chart

The remainder of the week is highlighted by the FOMC meeting and Bernanke press conference on Wednesday. That will control the market direction for the rest of the week.

Economic Calendar

The analysts have settled in on consensus expectations for the Fed announcement. They expect the Fed to dial down their expectations for growth as a result of the lower economic numbers we have seen in April. However, they expect the Fed to keep its long term forecast intact and not announce any additional stimulus measures. They do expect the Fed to issue guidance on continuing Operation Twist, which is currently set to expire in June.

If they did not extend Twist it would be a form of monetary policy tightening and nobody expects them to take that chance. They can say they will continue to buy longer term treasuries with the funds from maturing investments. Treasuries and securities they purchased over the last four years mature every month and those proceeds can be put back to work and used to keep longer term interest rates lower without requiring any additional outlays by the Fed. This is a no risk extension program that keeps the Fed in play but does not extend the balance sheet any further.

Regardless of what the Fed says the market is probably going to react violently. The Apple earnings tonight will power the Nasdaq higher on Wednesday and create another short squeeze for the indexes. The Dow closed right on 13,000 and once again in neutral territory. The Nasdaq closed at 2961 and will likely retest prior support, which should now be resistance at 3,000.

The S&P gained +5 points to close at 1372 after testing initial support at 1360 on Monday. The S&P rebound was lackluster but that was a factor of Apple's decline as well as several other big cap techs.

The S&P numbers to watch now are resistance at 1390 and initial support at 1360. A break outside that range in either direction is likely to be strong since traders are looking for a new direction to occur. They will be shorting 1390 and buying the dip at 1360. Exceeding those levels will cause a strong reversal of those trades and a new trend could be born.

Today's rebound did NOT alter the negative chart pattern currently developing.

S&P Chart

S&P Chart - Daily

The Dow rebounded to close right at 13,000 once again. This is a neutral area of light resistance with the 50-day at 13,016. The Dow rebounded on the strength of four stocks. AT&T and MMM posted earnings that beat the street. IBM raised its dividend and buyback and CAT rallied ahead Wednesday's earnings. With a majority of the Dow's blue chips already reported it will take some new incentive to push it much higher. I am sure there be some additional gains as a result of the Apple short squeeze on Wednesday but the Dow futures are up only 26 points tonight. That is not very exciting and there are bound to be some negative headlines from Europe later tonight. I would be very surprised if the Dow moved over resistance at 13,100-13,125. I have been surprised before and predicting directions and velocity after a FOMC meeting is practically impossible.

Dow Chart

Dow Chart - Daily

The Nasdaq broke down on Monday with a -40 point decline under prior support at 3,000. Today's -9 point decline was mostly Apple with BIDU contributing -16 and NFLX -13 to keep the pressure on the index.

The Nasdaq futures are showing a +36 point gain tonight and that would put the index right back at prior support of 3,000, which should now be resistance. It is hard to say how a massive Apple short squeeze will impact the index tonight because that will send the QQQs much higher and that means all the stocks in that ETF will rise.

Apple's conference call was very bullish so the Apple faithful could roar back into the shares on Wednesday. There were a lot of people who were hoping for a buying opportunity but did not want to buy before earnings just in case there was a disaster. Those investors will be chasing the stock higher on Wednesday and the Nasdaq will follow it.

Nasdaq Chart

Nasdaq Chart - Daily

The small cap Russell 2000 dipped to initial support at 785 on Monday and then rebounded to gain more points than the S&P today. However, it remains at the lower end of its recent range. Today's rebound was not bullish, just an oversold bounce from Monday.

Russell Chart - Daily

The FOMC will determine our fate after the early morning short squeeze in techs. Dow components CAT and BA both report at the open and what they say will impact the Dow's reaction to the Apple squeeze. Futures are not currently suggesting a big reaction.

Earnings have been much better than expected because estimates were so low. Nearly 82% of reporters have beaten the estimates but the indexes were nearing support lows on Monday. Once the good news is out and the obligatory single stock short squeezes have passed there is little reason for traders to remain in those stocks. Typically those already reported will be sold and traders will go hunting for a new trade with an earnings date later in the cycle. There is normally a lack of forward momentum for those stocks already reported. With 150 reporting last week and nearly 500 this week those stocks then become a drag to the market going forward.

While the Fed may control our destiny into the close, it will take some positive Fed action to push us materially higher. I don't think earnings are going to do it. Without a Fed boost I expect further declines in the weeks ahead.

Jim Brown

Send Jim an email


New Plays

Gourmet Hamburgers

by James Brown

Click here to email James Brown


NEW BEARISH Plays

Red Robin Gourmet Burgers - RRGB - close: 34.13 change: -0.51

Stop Loss: 35.55
Target(s): 31.50 or 200-Ema
Current Gain/Loss: unopened
Time Frame: exit prior to the mid May earnings report
New Positions: Yes, see below

Company Description

Why We Like It:
Shares of this restaurant chain appear to have topped out. The Q1 rally peaked at resistance near $38.00 back in March. Now RRGB is slipping with a bearish trend of lower highs and lower lows. The stock garnered some positive analyst comments on CNBC today but they had little impact on the stock price.

The low today was $33.84. I am suggesting a trigger to open small bearish positions at $33.75. We'll use a stop loss at $35.55 to start. Our target is $31.50 or the exponential 200-dma, whichever RRGB hits first. We do want to keep our position size small because the most recent data listed short interest at 12% of the very small 13.3 million share float. That does raise the risk of a possible short squeeze. You may want to trade the put options to limit your risk

Trigger @ $33.75

Suggested Position: short RRGB stock @ (trigger)

- or -

buy the May $35 PUT (RRGB1219Q35) current ask $1.95

Annotated chart:

Weekly chart:

Entry on April xx at $ xx.xx
Earnings Date 05/17/12 (unconfirmed)
Average Daily Volume = 205 thousand
Listed on April 24, 2011



In Play Updates and Reviews

DV Hits Our Exit Target

by James Brown

Click here to email James Brown

Editor's Note:
Shares of DeVry Inc. accelerated lower this morning and hit our exit target near $30. Meanwhile weakness in tech stocks pushed TIBX to our stop loss. I am suggesting an early exit for our NILE trade.

Current Portfolio:


BULLISH Play Updates

Hain Celestial Group - HAIN - close: 44.89 change: -0.30

Stop Loss: 43.90
Target(s): 49.00
Current Gain/Loss: - 0.3%
Time Frame: exit prior to the May 3rd earnings report
New Positions: see below

Comments:
04/24 update: Hmm... it's not looking too great for our HAIN trade. Yesterday's move was a bearish reversal candlestick and today's drop could be considered confirmation. More conservative traders will want to seriously consider an early exit right now. The larger trend is still up so we will keep the trade open with a stop loss at $43.90. I am not suggesting new positions at this time.

current Position: long HAIN stock @ $45.05

- or -

Long May$45 call (HAIN1219E45) Entry $1.85

04/21/12 new stop loss @ 43.90
04/03/12 triggered @ 45.05

Entry on April 03 at $45.05
Earnings Date 05/03/12 (unconfirmed)
Average Daily Volume = 279 thousand
Listed on April 02, 2011


rue21, Inc. - RUE - close: 29.66 change: -0.76

Stop Loss: 28.45
Target(s): 33.50
Current Gain/Loss: - 1.9%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
04/24 update: RUE also underperformed the market today with a -2.5% pullback but shares remain inside its larger up trend. We have a stop at $28.45 but more conservative traders may want to inch their stops closer to the 30-dma (currently 28.95). I am not suggesting new positions at this time.

Our multi-week target is $33.50. We want to exit prior to the late May earnings report. FYI: The Point & Figure chart for RUE is bullish with a long-term $48.00 target.

(small positions)

Suggested Position: Long RUE stock @ $30.25

- or -

Long May $30 call (RUE1219E30) Entry $1.70

04/17/12 triggered at $30.25

Entry on April 17 at $30.25
Earnings Date 05/24/12 (unconfirmed)
Average Daily Volume = 304 thousand
Listed on April 164, 2011


ProShares UltraPro Short QQQ - SQQQ - close: 12.11 change: +0.21

Stop Loss: 10.60
Target(s): 13.25
Current Gain/Loss: + 4.4%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
04/24 update: Buckle your seat belt because tomorrow could be a bumpy ride in the SQQQ. Today the ETF marched higher and posted a +1.7% gain thanks to another day of weakness in the NASDAQ-100 index. However, that will likely change tomorrow thanks to Apple Inc. (AAPL). After the closing bell tonight AAPL blew away Wall Street's earnings estimates and the stock is trading up +40 near $600 a share. That's going to give the NASDAQ-100 index a big boost tomorrow, which will show up as a drop in the SQQQ. I am expecting a gap down tomorrow for this ETF.

I am not suggesting new positions at this time.

Remember, this is the triple inverse ETF on the QQQ so expect volatility.

current Position: Long SQQQ @ $11.60

- or -

Long May $12.00 call (SQQQ1219E12) Entry $0.73

04/16/12 triggered at $11.60

Entry on April 16 at $11.60
Earnings Date --/--/--
Average Daily Volume = 2.3 million
Listed on April 10, 2011


BEARISH Play Updates

Barrick Gold - ABX - close: 39.61 change: -0.08

Stop Loss: 42.20
Target(s): 37.50
Current Gain/Loss: + 3.4%
Time Frame: up to the May 2nd earnings report
New Positions: Yes, see below

Comments:
04/24 update: ABX spiked toward round-number support/resistance near $40.00 and reversed lower. This is good news if you're bearish. I am not suggesting new bearish positions at this time.

Our exit target is $37.50. We do not want to hold over the early May earnings report. FYI: The Point & Figure chart for ABX is bearish with a $32.00 target.

(small positions)

current Position: short ABX stock @ $41.02

- or -

Long May $40 PUT (ABX1219Q40) Entry $1.13

04/21/12 new stop loss @ 42.20

Entry on April 17 at $41.02
Earnings Date 05/02/12 (confirmed)
Average Daily Volume = 7.9 million
Listed on April 164, 2011


American Public Education - APEI - close: 34.98 change: +0.49

Stop Loss: 36.60
Target(s): 31.00
Current Gain/Loss: - 0.7%
Time Frame: up to its May 10th earnings report
New Positions: see below

Comments:
04/24 update: APEI just erased most of yesterday's decline. The oversold bounce may not be over yet. Readers might want to wait for a bounce toward short-term technical support at the 10-dma (near 35.85) before considering new positions.

Earlier Comments:
The plan was to limit our risk with small positions. Our exit target is $31.00 but we do not want to hold over the May 10th earnings report. This is a higher-risk trade. Lots of investors think APEI is going lower and the most recent data listed short interest at 20% of the very small 16.8 million share float. That does raise the risk of a short squeeze. You may want to limit your exposure by trading options.

(small positions)

Suggested Position: short APEI stock @ $34.75

- or -

Long May $35 PUT (APEI1219Q35) Entry $2.10

04/23/12 new stop loss @ 36.60
04/19/12 triggered at $34.75

Entry on April 19 at $34.75
Earnings Date 05/10/12 (unconfirmed)
Average Daily Volume = 202 thousand
Listed on April 18, 2011


Consolidated Graphics - CGX - close: 39.70 change: +0.05

Stop Loss: 42.25
Target(s): 36.50
Current Gain/Loss: + 2.8%
Time Frame: up to its early May earnings report
New Positions: see below

Comments:
04/24 update: Tuesday proved to be a quiet day for CGX with shares drifting sideways in a narrow range. I am not suggesting new positions at this time.

Bear in mind that we may have to exit early ahead of the early May earnings report. FYI: The Point & Figure chart for CGX is bearish with a $28.00 target.

(small positions)

current Position: short CGX stock @ $40.85

04/23/12 new stop loss @ 42.25
04/20/12 triggered at $40.85

Entry on April 20 at $40.85
Earnings Date 05/01/12 (unconfirmed)
Average Daily Volume = 45 thousand
Listed on April 19, 2011


Ctrip.com Intl. - CTRP - close: 21.09 change: +0.15

Stop Loss: 22.26
Target(s): 18.00
Current Gain/Loss: + 2.8%
Time Frame: exit prior to the May 16th earnings report
New Positions: see below

Comments:
04/24 update: CTRP spent the day drifting sideways in a narrow range. That could change tomorrow. Tech stocks are likely to rally on the heels of AAPL's earnings report. We could see CTRP rise toward resistance at the top of its trading range near $21.80-22.00. Nimble traders could use a drop under $20.50 as a new entry point.

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

04/21/12 new stop loss @ 22.26
04/19/12 planned exit for the April puts: 10 cents (-84.6%)
04/18/12 prepare to exit the April $21 puts at the close tomorrow
04/12/12 new stop loss @ 22.51

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


First Solar, Inc. - FSLR - close: 18.64 change: -0.61

Stop Loss: 22.25
Target(s): 15.25
Current Gain/Loss: + 2.9%
Time Frame: exit prior to earnings in early May
New Positions: see below

Comments:
04/24 update: Our new bearish trade on FSLR is off to a good start. Shares opened at $19.19 and fell to a -3.1% decline for the day. This is another record low. The stock IPO'd back in 2006 at $20. Now there is speculation growing that FSLR could get kicked out of the S&P 500 because it's market cap is too low (at $1.7 billion).

We have a stop loss at $22.25. More conservative traders may want to use a tighter stop but I want to warn you that FSLR shares can be volatile.

Earlier Comments:
Broken support at $20.00 should be new resistance. Please note that we want to keep our position size small to limit our risk because the most recent data listed short interest at 42% of the 59.8 million share float. That does raise the risk of a short squeeze. Readers might want to use put options to really limit risk.

(small positions)

current Position: short FSLR stock @ $19.19

- or -

Long May $18 PUT (FSLR1219Q18) Entry $1.36

Entry on April 24 at $19.19
Earnings Date 05/03/12 (unconfirmed)
Average Daily Volume = 7.1 million
Listed on April 23, 2011


Hi Tech Pharmacal - HITK - close: 32.52 change: -0.22

Stop Loss: 35.05
Target(s): $30.50
Current Gain/Loss: + 5.5%
Time Frame: 2 to 4 weeks
New Positions: see below

Comments:
04/24 update: HITK underperformed the market today with a -0.6% decline. The stock is nearing possible support at its April 16th low and its simple 300-dma. More conservative traders may want to lock in gains on a dip near $32.00. Currently we're aiming for $30.50. I'm not suggesting new positions at this time.

current Position: short HITK stock @ $34.40

04/21/12 new stop loss @ 35.05, adjust exit target to $30.50
04/19/12 planned exit for our April put: $1.30 (-13.3%)
04/18/12 prepare to exit our April $35 puts at the close tomorrow
04/14/12 new stop loss @ 35.55
04/10/12 triggered at $34.40

Entry on April 10 at $34.40
Earnings Date 07/05/12 (unconfirmed)
Average Daily Volume = 155 thousand
Listed on April 09, 2011


ICICI Bank Ltd. - IBN - close: 32.35 change: -0.26

Stop Loss: 34.85
Target(s): 30.25
Current Gain/Loss: - 0.9%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
04/24 update: Trading in IBN was very quiet with shares slowly drifting sideways. I would still consider new bearish positions here or you could wait for a new failed rally near $33.00, which should be new overhead resistance.

Our target is $30.25. More aggressive traders could aim lower.

Suggested Position: short IBN stock @ 32.05

- or -

Long May $32 PUT (IBN1219Q32) Entry $1.32

04/23/12 triggered on gap down at $32.05, trigger was 32.75

Entry on April 23 at $32.05 (gap down)
Earnings Date --/--/-- (unconfirmed)
Average Daily Volume = 1.9 million
Listed on April 14, 2011


ChipMOS Tech. - IMOS - close: 12.04 change: -0.75

Stop Loss: 14.35
Target(s): 11.50
Current Gain/Loss: + 8.0%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
04/24 update: The sell-off in IMOS is accelerating lower with a -5.8% decline today. Our trade is up +8% and readers may want to take profits now. The stock could see a bounce tomorrow since AAPL could lead a rally in technology stocks tomorrow.

I am lowering our stop loss to $14.05. I'm not suggesting new positions at this time.

The plan was to keep our position size small to limit our risk. IMOS can be a volatile stock. FYI: The Point & Figure chart for IMOS is bearish with a $8.00 target.

(small positions)

current Position: short IMOS stock @ $13.08

- or -

Long May $12.50 PUT (IMOS1219Q12.5) Entry $0.99

04/24/12 new stop loss @ 14.05, readers may want to take profits now with our trade up +8%.

Entry on April 23 at $13.08
Earnings Date 05/14/12 (unconfirmed)
Average Daily Volume = 356 thousand
Listed on April 21, 2011


Blue Nile Inc. - NILE - close: 30.40 change: +0.31

Stop Loss: 32.51
Target(s): 26.00
Current Gain/Loss: - 3.6%
Time Frame: exit prior to the early May earnings report
New Positions: see below

Comments:
04/24 update: I am suggesting an early exit on our NILE trade. Traders bought the dip yesterday near its April low. They bought the dip again this afternoon. I suspect we will see NILE bounce toward overhead resistance near its 30-dma (approaching $32.00). While the larger trend is still down I would rather exit early now and cut our losses and then we can wait and watch for a new entry point down the road. We will exit positions at the open tomorrow morning.

Earlier Comments:
The plan was to keep our position size small to limit our risk. The most recent data listed short interest at 31% of the very small 13.7 million share float. That does raise the risk of a short squeeze. You may want to use options to limit your risk.

(small positions)

current Position: short NILE stock @ $29.35

- or -

May $30 PUT (NILE1219Q30) Entry $2.40

04/24/12 prepare to exit at the open tomorrow morning
04/23/12 Warning! NILE has reversed higher. This could be a bullish double bottom. Readers may want to exit immediately to limit losses.

Entry on April 23 at $29.35
Earnings Date 05/03/12 (unconfirmed)
Average Daily Volume = 246 thousand
Listed on April 21, 2011


Rovi Corp. - ROVI - close: 27.96 change: -0.31

Stop Loss: 30.25
Target(s): 26.25
Current Gain/Loss: + 4.5%
Time Frame: exit prior to the May 3rd earnings report
New Positions: see below

Comments:
04/24 update: ROVI quietly drifted lower on Tuesday and ended the session with a -1.0% decline. Look for overhead resistance at the 10-dma and the $30.00 level.

Earlier Comments:
There is potential support near $28.00 and $26.00. We are setting our exit target at $26.25.

open positions on Monday morning

Suggested Position: short ROVI stock @ $29.27

- or -

Long MAY $30 PUT (ROVI1219Q30) Entry $2.45

04/23/12 new stop loss @ 30.25

Entry on April 16 at $29.27
Earnings Date 05/10/12 (unconfirmed)
Average Daily Volume = 1.2 million
Listed on April 14, 2011


St. Jude Medical - STJ - close: 37.89 change: +0.06

Stop Loss: 40.05
Target(s): 34.25
Current Gain/Loss: - 1.2%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
04/24 update: STJ produced a minor bounce back toward prior support and now new short-term resistance at the $38.00 level. Readers can still launch positions here or wait for a failed rally near the 10-dma. More conservative traders may want to use a stop near the simple 150-dma currently at $39.10.

Our target is $34.25. FYI: The Point & Figure chart for STJ is bearish with a $31.00 target.

current Position: short STJ stock @ $37.45

- or -

Long May $37.50 PUT (STJ1219Q37.5) Entry $1.20

04/23/12 new stop loss @ 40.05
04/23/12 triggered at $37.45

Entry on April 23 at $37.45
Earnings Date 04/18/12
Average Daily Volume = 5.1 million
Listed on April 21, 2011


CLOSED BULLISH PLAYS

TIBCO Software - TIBX - close: 31.54 change: -1.36

Stop Loss: 31.65
Target(s): 35.75
Current Gain/Loss: - 5.5%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
04/24 update: Technology stocks were showing relative weakness today. TIBX was no exception. The stock really underperformed with a -4.1% decline. The stock has broken the bullish trend line of higher lows and hit our stop loss at $31.65 in the process.

closed Position: Long TIBX stock @ $33.50 exit $31.65 (-5.5%)

- or -

May $34 call (TIBX1219E34) Entry $1.30 exit $0.35 (-73.7%)

04/24/12 stopped out at $31.65
04/23/12 new stop loss @ 31.65
04/13/12 triggered at $33.50

chart:

Entry on April 13 at $33.50
Earnings Date 03/29/12 (already announced)
Average Daily Volume = 3.1 million
Listed on April 12, 2011


CLOSED BEARISH PLAYS

DeVry, Inc. - DV - close: 30.91 change: -0.17

Stop Loss: 32.70
Target(s): 30.25
Current Gain/Loss: + 7.0%
Time Frame: up to the April 24th earnings report
New Positions: see below

Comments:
04/24 update: We had planned to exit our DV trade at the close tonight but shares hit our exit target at $30.25 instead.

closed Position: short DV stock @ $32.54 exit $30.25 (+7.0%)

04/24/12 target hit at $30.25
04/23/12 new stop loss @ 32.70, exit tomorrow at the close
04/21/12 prepare to exit on Tuesday at the closing bell
04/14/12 new stop loss @ 33.25
04/10/12 new stop loss @ 34.05
04/09/12 DV gapped open lower at $32.54

chart:

Entry on April 09 at $32.54
Earnings Date 04/24/12 (confirmed)
Average Daily Volume = 670 thousand
Listed on April 07, 2011