Option Investor
Newsletter

Daily Newsletter, Wednesday, 1/30/2013

Table of Contents

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

Market Wrap

FOMC Reaction is Negative

by Keene Little

Click here to email Keene Little
The market did not expect anything to change from the FOMC announcement today but it's always hopeful there will be more help (money). There were no changes to either the rate or the monetization effort and the market threw a little fit in the afternoon.

Market Stats

Even though the market did not expect any changes from the Fed this afternoon, it still harbors hope that the Fed will see something that demands more money creation. With the FOMC announcement and the confirmed "no changes" the market felt disappointed in their rich uncle and sold off. Whether that selling was just a little profit taking or the start of something bigger to the downside is not clear yet. We'll probably have a better idea of that before the weekend.

This morning's updated GDP report showed a weakening economy and it probably had many traders thinking the Fed might decide to do a little something more to help out. With a shrinking economy (GDP declined -0.1% vs. expectations for a drop to +1.0% for Q4 from the +3.1% in Q3) there are many questioning whether the Fed and government are doing enough. They're actually making things worse but that discussion is for another day.

In addition to the plethora of reports of a slowing economy we can now add the contraction in GDP. But never fear, the Fed tells us it's only transitory and that it was caused by bad weather. Damn that weather, I hate it when it does that. I think "transitory" is Bernanke's new favorite word. Whenever we have an upswing in the economy it's structural and permanent but when we have a downswing it's transitory and weather related. One could argue that many of the unemployed are without jobs because of a structural change to our economy but again, that discussion is for another day.

Speaking of employment, the ADP report was at least somewhat positive in that it showed +192K jobs for January vs. the expected +175K and an improvement from the 185K in December (but that number was a revision lower from 215K). Friday's payroll numbers are expected to be in the same ballpark.

Not surprisingly, the market has held up into the end of the month but now that we're inside the T+3 settlement window it's not surprising to see some profit taking. The danger for bulls is that when the market gets extended to the upside the profit taking can turn into some strong selling, especially by those who were late to the party and don't have the stomach to withstand any pullback.

I don't watch CNBC (haven't for the past 10 years) but I hear they're constantly reminding their viewers how close we are to the 2007 highs, with the understanding that it's a foregone conclusion that the market will pass those highs. I watched an emailed video clip of one of their analysts and one of the first things out of Maria Bartiromo's mouth (which is usually just more evidence that she has no clue what she's talking about) was a question about how long this person thought it would take to exceed the highs. So to say that there's a high-level expectation by the public that new highs are coming is probably a gross understatement. We all know what happens when too many expect the market to do something.

In the beginning of January I had shown a chart of the Commitment of Traders (COT) and it showed a very large difference between the commercial traders and the public traders. The one caution about using the COT report is that there's so much arbitrage and hedging going on that it can skew the picture. But when we have a huge difference between the two it still warrants at least a raised eyebrow. The chart below shows the circled values as of the end of December and the most current that I have through last week.

Commitment of Futures Traders, as of January 22, chart courtesy cotpricecharts.com

The small speculators (the retail crowd, which includes mutual fund managers), indicated with the white bars, have spiked up to an even larger net long position while the commercial traders (black bars) have spiked down to an even larger net short position. Something could happen that catches the commercials on the wrong side of this market and the recovery by them would create a huge blow-off top for the market. But is that the way you want to bet your money? Betting against smart money is usually not a good idea. Certainly the odds are not in your favor. When and how this resolves is anyone's guess but it will resolve and probably in the direction favoring smart money -- down.

Starting tonight's review of the charts I want to look at a simpler view of the SPX weekly chart than I've typically shown in the past and why today's high may have been THE high. Normally I use candles on my charts and I use the highs and lows for all my chart analysis. But if you look at a line chart on the weekly chart, which is based on closing prices (weekly closing prices being important), you can see that price reached the top of its rising wedge pattern, near 1510. As far as Fib projections, I use the highs and lows from the candles and interestingly, the 62% projection for the c-wave of the A-B-C move up from 2009 is at 1509.71. This morning's high was 1509.94. I'd call that close enough for government work. The EW (Elliott Wave) pattern is clean and it shows the corrective structure of the bounce off the 2009 low, showing why it will likely be revisited if not broken.

S&P 500, SPX, Weekly line chart

Now we look at the regular weekly chart that I've been showing and you can see how the weekly candle, so far, has formed a doji (it's hard to see) at its broken long-term uptrend line from 1994-2002, which stopped the 2011 and 2012 rallies. Will it be different this time? It could be if we're going to get a stronger blow-off top but at the moment that would be betting on something that's not at all certain. It needs to be treated as resistance until proven otherwise.

S&P 500, SPX, Weekly chart

In addition to the price projection at 1509.71, mentioned above with the first chart, SPX has also met its projection at 1502.76 for two equal legs up from November. There's a higher projection at 1521.47 where the move up from December 31st would have two equal legs up so any further rally could achieve that level. That would also have SPX testing its trend line along the highs from April-September 2012.

S&P 500, SPX, Daily chart

Key Levels for SPX:
- stay bullish above 1490
- bearish below 1468

There's another price projection for SPX that was met yesterday -- the 127% extension of the previous decline (September-November) at 1505.67, shown in red in the above chart. This is a common "reversal" Fib so a decline from here would fit. Looking at the Gann Square of Nine chart, 1506 is an important number since it's opposite the 2009 low at 666 (blue vector from the 7:00 position running up to the 1:00 position). From a time perspective it's 90 degrees from the September 14, 2012 high. Gann liked these time/price relationships and would consider this a potentially important setup for a reversal.

Gann Square of Nine chart (bottom left portion)

So far SPX has hit a high of 1509.94, about 4 points above the 1506 level. Nice little throw-over so far (wink). Between the Fibs, trend lines, Gann and sentiment we certainly have a good setup for the bears. Whether they take advantage of that setup is anyone's guess but I suspect we'll find out soon.

From a shorter-term perspective, this morning's high at 1509.94 came within 18 cents of a price projection at 1510.12, which is where the 5th wave of the move up from January 8th (the low of the only pullback in the January rally) is equal to the 1st wave. That short-term projection lined up very nicely with the 1509.71 projection on the first weekly chart shown above. Today SPX fell out of its up-channel from January 15th, the bottom of which is near 1503 near the end of the day so watch for a possible small bounce and a back test and failure if the bears are now in control. If SPX drops below 1498 it would tell us the high is in (even if just for a larger pullback before heading higher again). But price held the shorter-term up-channel from last Thursday (it closed at the bottom of the channel) and the pullback from this morning's high is only a 3-wave move so far. That means it could be followed by an immediate rally Thursday (it's actually a common pattern to see a reversal of the post-FOMC afternoon move) so both sides need to stay nimble here. If we do get another rally leg on Thursday I'll be watching for a move up to the 1515-1521 area for a final high.

S&P 500, SPX, 60-min chart

There are two other timing tools that call for a reversal of the rally -- the moon and the stars. The Bradley turn model is based on astrological events and one of the two important turn dates this year is January 29th (yesterday). The new and full moons have also coincided with important highs and lows for the market and we just passed the full moon on January 27th. As can be seen on the chart below we have an interesting pattern with the new and full moons. The April and June 2012 high and low were on full moons. The September and November high and low were on new moons. Maybe we'll switch back to a high and the next important low on a full moon. As a side note, I also added the 127% extensions of the previous declines on the chart to show how effective this extension is when it comes to looking for reversals. The 1505.67 extension has now been reached and it's just one of several now that point to the 1500-1510 area as potentially important for a high.

S&P 500 MPTS, Daily chart

The DOW's weekly chart below shows the confluence of trend lines just below 14K, making for a tough area of resistance for the bulls to break through. If it does break through 14K I think it will be a piece of cake to challenge its October 2007 high at 14198. But there are 4 trend lines offering resistance right here: one is the long-term trend line along the highs from 1971-1972-1987 through the 2002 and 2003 lows (did you ever wonder why the DOW stopped where it did back then?); the second is the trend line along the highs from April-September 2012; the third is the top of a parallel up-channel from 2010; and the fourth is the broken uptrend line from October 2011. Breaking through these lines is a lot to ask of the bulls after spending so much energy in January to get to this point.

Dow Industrials, INDU, Weekly chart

Key Levels for DOW:
- bullish above 11,860
- bearish below 11,530

Amazon's (AMZN) performance this morning helped NDX get an initial bounce above its resistance level at 2750 but it was unable to hold above that level. AMZN gapped up and hit a high of 284.20 (+23.85, +9.2%) and tested last Friday's high at 284.72. But it immediately sold off, gave back most of its morning gain (but it didn't close its morning gap) and then chopped sideways for the rest of the day, finishing at 272.76 (+12.41,+4.8%). With their lousy earnings report there are many people scratching their heads in amazement that the stock didn't tank instead. I read an interesting analysis on AMZN's earnings by Karl Denninger at The Market Ticker this morning (hat tip to Aaron), providing a quick explanation of what AMZN's numbers really mean: Did You READ The Report? It makes it all the more astounding how investors just love this stock but with few sane reasons to want it as an investment (one more example of how sanity and funnymentals have nothing to do with stock prices).

On NDX's weekly chart I show a resistance band at 2750-2770 and it has been struggling at or beneath this band for the entire month of January. It would be bullish above 2770 for a move up to at least 2800 where it would again back test its broken uptrend line from August 2011 (that trend line was broken in November has been resistance since December). There's a lot of work the bears need to do before proving NDX is forming a H&S top here but that's clearly the potential.

Nasdaq-100, NDX, Weekly chart

The chart above is with the arithmetic price scale, which shows the uptrend line from 2009-2011 acting as support. The daily chart below uses the log price scale and that same trend line sits above, currently near 2890, which could be an upside target if the market has a lot more rally left. The January sideways consolidation in the move up from December 31st easily fits as bullish and if it's the half-way mark then another leg up to 2900 and the 2009-2011 trend line fits well for that. Never say never with this market. That would also have the DOW and SPX pushing above their 2007 highs, another thing that could be on the "agenda."

Nasdaq-100, NDX, Daily chart

Key Levels for NDX:
- bullish above 2770
- bearish below 2685

I'm taking a slightly different look at the RUT than past weeks and instead of a rising wedge pattern for its rally from October 2011 it's looking like it could be topping out at the upper end of a parallel up-channel from the February and June 2012 high and low, which is shown on the daily chart below. Within this up-channel there are two equal legs up from June at 902.30, which was tagged last Friday. A higher projection at 916 is where the move up from November would have two equal legs. But the reversal from the top of the channel and the close below 902 could be the indication that the rally has finished. Confirmation of that doesn't come until it breaks its up-channel from November, the bottom of which is currently near 884.

Russell-2000, RUT, Daily chart

Key Levels for RUT:
- stay bullish above 884
- bearish below 884

I want to take a look at HYG tonight, which is the high-yield (junk) corporate bond fund. When traders are feeling bullish and willing to take on more risk for a higher return they'll invest in this fund. The price patterns and projections for HYG reached an inflection point last week and in my weekend update I showed why we could be looking for a reversal this week. It rallied up into a Fibonacci cluster near 95 and it was a setup for either a bullish breakout or a bearish reversal and so far we're getting the reversal. As goes HYG so too will go the stock market so I'm watching closely.

There's a fascinating relationship in the wave pattern (fractals) of the moves from 2009 and the 62% projection is repeating in a way that can't be ignored here. Below is an explanation of the wave pattern if you're interested. If not, the bottom line is that there are multiple 62% projections lined up in the 95 area, which is where HYG has stalled.

There's a 3-wave move up from 2009 that flattened out after the initial 2010 high and the entire bounce structure looks a little more complex than a simple A-B-C, which I've labeled as (w)-(x)-(y). Wave-(y) is the move up from October 2011 and is itself made up of smaller-degree w-x-y moves. Keep in mind that a w-x-y move is like an a-b-c but has no impulsive (5-wave) legs. The leg up from October 2011, wave-(y), has formed a rising wedge with all the requisite 3-wave moves inside the wedge (all these 3-wave moves is what has Elliotticians pulling their hair out trying to figure out what the wave count is). The top of the rising wedge is currently near 95.10.

High-Yield Corporate Bond ETF, HYG, Weekly chart

I've got 3 different Fib projections showing on the weekly chart below, the first being for wave-(y), the leg up from October 2011, which would be 62% of the 1st leg (wave-(w) from 2009 to April 2010) at 95.71. For the leg up from October 2011, I've broken it into a 3-wave move (labeled W-X-Y) and again wave-Y would be 62% of wave-W at 95.23. Wave-Y, which is the move up from June 2012 is another 3-wave move and wave-y, the move up from November, is 62% of the 1st leg at 94.83. That gives us a tight correlation of wave relationships between 94.83 and 95.71 for a potential completion of its bounce. Friday morning's high was 94.97 and the move down since that high is making it look like it might have topped out.

The daily chart below zooms in on the move up from November, which is the small wave-y on the weekly chart. The 2nd leg of the rally would be 62% of the 1st leg at 95.08. The 2nd leg up formed a small rising wedge pattern, which fits very well as an ending diagonal to complete the larger pattern. The breakdown from it on Monday has been followed by a strong selloff, which is typical when the pattern finishes (a rising wedge is typically retraced very quickly). I'm sure it's just coincidental (wink) that all these 62% projections happen to line up within a point of each other and share a common (fractal) pattern from the weekly chart down to the daily chart. If HYG starts to break down from here, as it appears to be doing, it's going to be an important message for the stock market (it's our canary).

High-Yield Corporate Bond ETF, HYG, daily chart

The TRAN did not have a good day today and was the leading sector to the downside (-1.5%). Whether it's the start of a reversal to the downside is too early to tell. We could see a week or two of consolidation before heading higher again and above 5917 would be bullish. On its weekly chart below I've shown the price objective out of 2012's sideways rectangle (height of the rectangle projected above the rectangle) and that projects to 5917. Last week's high was 5884 so we of course wonder if that was close enough. It stays bullish above the trend line across the highs from 2008-2011, near 5685, potentially bearish below that level and confirmed bearish below the top of the rectangle, near 5380. It's a good setup for the completion of its 3-wave move up from October 2011 but obviously it will need more price action to confirm it. So far the TRAN has rallied above its 2007 but it remains unconfirmed by a new high for the DOW and it keeps the Dow Theory sell signal intact until that happens.

Transportation Index, TRAN, Weekly chart

The dollar's inability to rally when it needed to has me turning bearish on it. But I think it's going to continue chopping around for at least another month before it makes a move one way or the other. But from a larger timeframe perspective I'm beginning to think the sideways consolidation since last September is a bearish continuation pattern. A drop below 78.80 would be more immediately bearish.

U.S. Dollar contract, DX, Daily chart

If the dollar is going to be bearish this year it's going to support the gold bugs' argument that gold will head higher as inflation worries increase. I remain unconvinced of that argument because I think we're fighting deflation and will be for the next couple of years. But the price pattern will tell us more when it breaks out of its choppy pattern. The bearish wave count calls for a continuation lower as long as it holds below 1700. A rally above 1706 would put it on a bullish trajectory. Below 1653 would keep the bears in control.

Gold continuous contract, GC, Daily chart

Oil is providing some large swings to trade but you've got to be good to catch them. It's currently swinging between support near 80 and resistance near 106 and that trading range could narrow a bit this year. The sideways triangle pattern shown on the weekly chart below is a bullish pattern and remains so as long as oil stays above 80.

Oil continuous contract, CL, Weekly chart

Thursday and Friday will be big economic reporting days with Friday being the more important day because of the Payrolls reports. Thursday morning we'll get the unemployment numbers and personal income and spending numbers. The latest consumer sentiment numbers have been declining and if we see spending also on the downswing it's not going to be market friendly. Shortly after the bell we'll get the Chicago PMI, which had been revised lower to 48.9 from 51.6 in December. Expectations are for 50 or slightly higher but anything below 50 would just add another data point showing the economy is slowing.

Economic reports and Summary

From a time and price perspective now is a good time for the market to at least take a rest. I could easily make the argument that the market needs at least a couple of weeks and some points to consolidate the gains off the December low before heading higher. That's the bullish expectation. The bearish expectation, and the direction I continue to lean, is that the bounce patterns off the 2009 lows are ending and might have finished today. Multiple sectors and indexes, even with different patterns, are lining up as potentially important ending patterns.

This suggests the correction off the 2009 low is completing and that the cyclical bull within the secular bear may be coming to an end. A new cyclical bear within the secular bear may be about to begin and if the pattern of the 1970s repeats we're going to have the worst leg down in the bear market (like what happened following new high in January 1973, which led to a new market low in October 1974, below the 1970 low). Only time will tell on that scenario but stay aware of the potential since it means you'll want to think twice before you decide to hold on through a "correction." We've got a tumultuous year ahead of us and I don't think it's going to be market friendly.

Good luck and I'll be back with you next Wednesday.

Keene H. Little, CMT

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


New Plays

Financials

by James Brown

Click here to email James Brown


NEW BULLISH Plays

Morgan Stanley - MS - close: 22.98 change: +0.39

Stop Loss: 21.95
Target(s): 26.00
Current Gain/Loss: unopened

Entry on January -- at $--.--
Listed on January 30, 2012
Time Frame: 6 to 8 weeks
Average Daily Volume = 27 million
New Positions: Yes, see below

Company Description

Why We Like It:
About two weeks ago shares of MS soared on a better than expected earnings report. Since then the stock has consolidated sideways inside the $22-23 trading range. Traders bought the dip at its rising 10-dma yesterday and now MS looks poised to breakout past $23.00 soon.

I am suggesting a trigger to open small bullish positions at $23.15. If triggered our target is $26.00. We will start with a stop loss at $21.95.

FYI: MS has a five-cent dividend payable on Feb. 15, 2013 and will begin trading ex-dividend on Friday, Feb. 1st.

Trigger @ 23.15 *Small Positions*

Suggested Position: buy MS stock @ (trigger)

Annotated chart:




In Play Updates and Reviews

Stocks Stymied

by James Brown

Click here to email James Brown

Editor's Note:
The stock market's advance was stymied by a disappointing Q4 GDP report.

We are adjusting the stop loss on several trades tonight. Our BLL trade was closed as planned. We want to exit our KOL trade at the open tomorrow.


Current Portfolio:


BULLISH Play Updates

Asbury Automotive Group - ABG - close: 34.30 change: -0.47

Stop Loss: 33.40
Target(s): 38.50
Current Gain/Loss: - 2.7%

Entry on January 24 at $35.25
Listed on January 23, 2012
Time Frame: Exit PRIOR to earnings on Feb. 19th
Average Daily Volume = 275 thousand
New Positions: see below

Comments:
01/30/13: ABG spent the day slowly drifting lower. I don't see any changes from my prior comments.

We are planning to exiting prior to the Feb. 19th earnings report.

Please note that we do want to keep our position size small to limit our risk.

*Small positions*

current Position: Long ABG stock @ $35.25



Acorda Therapeutics - ACOR - close: 28.82 change: -0.86

Stop Loss: 27.95
Target(s): 31.00
Current Gain/Loss: + 1.1%

Entry on January 22 at $28.50
Listed on January 19, 2012
Time Frame: 3 to 4 weeks
Average Daily Volume = 417 thousand
New Positions: see below

Comments:
01/30/13: Ouch! ACOR hit some profit taking today with a -2.8% decline. Shares did managed to bounce back and close just above its 10-dma. I warned readers to expect a pull back at $30.00 but ACOR only made it to $29.80 (yesterday). We are worried that if the wider market declines ACOR will follow it lower. I am raising our stop loss to $27.95. I am not suggesting new positions.

current Position: long ACOR stock @ $28.50

01/30/13 new stop loss @ 27.95



Avis Budget Group - CAR - close: 22.01 change: +0.00

Stop Loss: 21.40
Target(s): 24.75
Current Gain/Loss: unopened

Entry on January -- at $--.--
Listed on January 29, 2012
Time Frame: Exit prior to earnings on Feb. 13th
Average Daily Volume = 1.7 million
New Positions: Yes, see below

Comments:
01/30/13: CAR pulled back to short-term support near $21.50 today. Nimble traders could buy a bounce off this level. We are waiting for a new relative high.

Earlier Comments:
I am suggesting a trigger to open bullish positions at $22.25. If triggered our target is $24.75. However, we will plan on exiting prior to the company's earnings report on Feb. 13th.

FYI: . The stock could see a short squeeze. The most recent data listed short interest at almost 15% of the 87.7 million share float.

Trigger @ 22.25

Suggested Position: buy CAR @ (trigger)



Cognex Corp. - CGNX - close: 39.52 change: -0.47

Stop Loss: 38.80
Target(s): 44.00
Current Gain/Loss: unopened

Entry on January -- at $--.--
Listed on January 26, 2012
Time Frame: Exit PRIOR to earnings on Feb. 11th
Average Daily Volume = 192 thousand
New Positions: Yes, see below

Comments:
01/30/13: CGNX briefly dipped under short-term technical support at its 10-dma before bouncing. We are still waiting for a breakout past resistance.

I am suggesting a trigger to open bullish positions at $40.15. If triggered our target is $44.00. However, we do not want to hold over the Feb. 11th earnings report.
FYI: The Point & Figure chart for CGNX is bullish with a $57.00 target.

Trigger @ 40.15

Suggested Position: buy CGNX stock @ (trigger)



Computer Sciences Corp. - CSC - close: 42.23 change: -0.36

Stop Loss: 41.25
Target(s): 44.90
Current Gain/Loss: + 0.1%

Entry on January 22 at $42.60
Listed on January 15, 2012
Time Frame: Exit prior to earnings on Feb. 5th
Average Daily Volume = 1.4 million
New Positions: see below

Comments:
01/30/13: CSC drifted lower with a -0.8% decline. If the market does see a pullback I expect CSC to follow it lower. Therefore we are raising the stop loss to $41.25. I am not suggesting new positions at this time.

Don't forget that we plan to exit prior to earnings on Feb. 5th.

current Position: long CSC stock @ $42.60

01/30/13 new stop loss @ 41.25
01/29/13 new stop loss @ $40.90
01/22/13 trade opened on gap higher @ $42.60



FLIR Systems - FLIR - close: 24.26 change: -0.02

Stop Loss: 23.45
Target(s): 26.25
Current Gain/Loss: + 0.2%

Entry on January 28 at $24.20
Listed on January 26, 2012
Time Frame: exit PRIOR to earnings on Feb. 7th
Average Daily Volume = 952 thousand
New Positions: Yes, see below

Comments:
01/30/13: FLIR spiked to a new multi-month high this morning. Unfortunately the rally didn't last and shares gave it all back. The stock closed virtually unchanged on the session.

I am not suggesting new positions at the moment.

Earlier Comments:
This is a short-term trade. We will exit prior to the earnings report on February 7th. Our target is $26.25. FYI: The Point & Figure chart for FLIR is bullish with a $34.50 target.

*Small Positions*

Suggested Position: Long FLIR stock @ $24.20



Gulfport Energy - GPOR - close: 41.20 change: -1.40

Stop Loss: 40.75
Target(s): 44.50
Current Gain/Loss: + 0.4%

Entry on January 22 at $41.02
Listed on January 19, 2012
Time Frame: 4 to 6 weeks
Average Daily Volume = 1.0 million
New Positions: see below

Comments:
01/30/13: Ouch! GPOR had looked poised to breakout. Unfortunately the stock reversed sharply lower today with a -3.2% decline. I couldn't find any news to explain the relative weakness today. Readers may want to leave their stop loss below the $40.00 level. If this pullback continues I would definitely expect GPOR to retest $40.00 as potential support. The stock might bounce at $40.00. However, we are raising our stop loss to $40.75 to limit our risk.

current Position: long GPOR stock @ $41.02

01/30/13 new stop loss @ 40.75
01/29/13 new stop loss @ 39.65



Hartford Financial Services Group - HIG - close: 24.61 chg: -0.28

Stop Loss: 23.95
Target(s): 27.50
Current Gain/Loss: - 0.8%

Entry on January 23 at $24.80
Listed on January 22, 2012
Time Frame: exit PRIOR to earnings on Feb. 4th
Average Daily Volume = 4.6 million
New Positions: see below

Comments:
01/30/13: HIG drifted toward the $24.50 level and short-term support at the 10-dma. Readers may want to inch up their stops again. We only have a few days left.

The company is scheduled to report earnings on Monday, Feb. 4th after the closing bell. We do not want to hold over the report. Therefore we will plan to either exit this coming Friday at the close or on Monday at the closing bell.

current Position: Long HIG stock @ $24.80

01/29/13 new stop loss @ 23.95. We only have a few days left.



Coal ETF - KOL - close: 24.98 change: -0.37

Stop Loss: 24.85
Target(s): 29.85
Current Gain/Loss: - 4.3%

Entry on January 08 at $26.10
Listed on January 07, 2012
Time Frame: 6 to 8 weeks
Average Daily Volume = 190 thousand
New Positions: see below

Comments:
01/30/13: There was no follow through on yesterday's bounce in the KOL. Shares turned lower again with a -1.4% decline. We are throwing in the towel. The newsletter is dropping this trade at the open tomorrow morning.

Suggested Position: Long the KOL (etf) @ $26.10

- (or for more adventurous traders, try this option) -

Long APR $27 call (KOL1320D27) entry $1.03

01/30/13 prepare to exit at the opening bell tomorrow
01/26/13 KOL is not performing. Readers may want to just exit early now.
01/12/13 new stop loss @ 24.85



North American Palladium - PAL - close: 1.66 change: -0.04

Stop Loss: 1.55
Target(s): 2.45
Current Gain/Loss: + 0.6%

Entry on January 14 at $ 1.65
Listed on January 12, 2012
Time Frame: 8 to 9 weeks
Average Daily Volume = 2.8 million
New Positions: see below

Comments:
01/30/13: The sideways chop in PAL continues. We are raising our stop loss to $1.55. I am not suggesting new positions at this time.

current Position: long PAL stock @ $1.65

01/30/13 new stop loss @ 1.55



Sonic Corp. - SONC - close: 11.16 change: -0.01

Stop Loss: 10.80
Target(s): 12.75
Current Gain/Loss: + 0.1%

Entry on January 14 at $11.15
Listed on January 12, 2012
Time Frame: 8 to 9 weeks
Average Daily Volume = 658 thousand
New Positions: see below

Comments:
01/30/13: SONC is still drifting sideways without any direction. There is short-term support at $11.00 and short-term resistance at the 10-dma.

Earlier Comments:
Our multi-week target is $12.75. We may have to be patient to give SONC time to get that far. FYI: The Point & Figure chart for SONC is bullish with a $15.50 target.

current Position: Long SONC stock @ $11.15

01/26/13 new stop loss @ $10.80



BEARISH Play Updates

K12, Inc. - LRN - close: 17.95 change: -0.49

Stop Loss: 19.55
Target(s): 16.25
Current OPTION Gain/Loss: +10.0%
Entry on January 15 at $18.90
Listed on January 14, 2012
Time Frame: Exit prior to earnings on Feb. 5th
Average Daily Volume = 221 thousand
New Positions: see below

Comments:
01/30/13: It's taken a bit longer than expected but our option trade on LRN is finally in positive territory. LRN underperformed the market again with a -2.6% decline and a new four-week low. I am adjusting our stop loss down to $19.55.

Don't forget that we will be exiting soon. The company is scheduled to report earnings on Feb. 5th. We will plan on exiting on Feb. 4th if shares don't hit our target by then.

long Feb $20 PUT (LRN1316n20) entry $2.00*

01/30/13 new stop loss @ 19.55
01/26/13 new stop loss @ 20.05
*01/15/13 our entry point on the option is an estimate. There were a few trades at $1.80 this morning before LRN hit our entry point.



Questcor Pharmaceuticals - QCOR - close: 25.32 change: -0.27

Stop Loss: 26.25
Target(s): 20.50
Current Gain/Loss: unopened

Entry on January -- at $--.--
Listed on January 15, 2012
Time Frame: exit prior to earnings in late February
Average Daily Volume = 1.8 million
New Positions: Yes, see below

Comments:
01/30/13: Believe it or not but QCOR actually hit a new relative low today. There are no changes from my prior comments. I am suggesting a trigger to open bearish positions at $24.90. If triggered our target is $20.50.

Please note: that short interest on QCOR is significant. The most recent data listed short interest at 50% of the 54.7 million-share float. It might be easier and safer* to buy put options on QCOR instead of trying to short the stock.

*By using puts you can limit your risk to the cost of your initial investment of the put price.

Trigger @ 24.90

Suggested Position: short QCOR stock @ (trigger)

- (or for more adventurous traders, try this option) -

buy the Feb $25 PUT (QCOR1316n25)



CLOSED BULLISH PLAYS

Ball Corp. - BLL - close: 45.93 change: -0.29

Stop Loss: 45.80
Target(s): 48.40
Current Gain/Loss: + 4.7%

Entry on November 06 at $43.85
Listed on November 3, 2012
Time Frame: exit prior to earnings on Jan. 31st
Average Daily Volume = 687 thousand
New Positions: see below

Comments:
01/30/13: The early morning rally in BLL didn't last and shares reversed to a -0.6% decline. It was our plan to close positions at the closing bell tonight to avoid holding over earnings tomorrow.

closed Position: Long BLL stock @ $43.85 exit $45.93 (+4.7%)

01/30/13 scheduled exit
01/29/13 new stop loss @ 45.80, exit tomorrow at the close
01/26/13 new stop loss @ 45.40, prepare to exit on Jan. 30th at the closing bell if BLL doesn't hit our target by then
01/17/13 new stop loss @ 44.80
01/05/13 adjusting the exit target to $48.40
01/02/13 new stop loss @ 44.40, adjust target to $47.00
12/20/12 new stop loss @ 43.85
12/12/12 new stop loss @ 43.45
11/24/12 new stop loss @ 43.25
11/17/12 new stop loss @ 42.55
11/06/12 triggered @ 43.85

chart: