Steel stocks continue to show relative strength. Meanwhile the volatility index sinks to new lows.


CALL Play Updates

FUQI Intl. - FUQI - close: 20.78 change: +0.45 stop: 18.45

The rally in FUQI continues. The stock broke through the $20.50 level and hit our trigger to buy calls at $20.51. The play is open and we're aiming for $24.75. Broken resistance near $20.00 should offer new support but FUQI can be a little volatile so I'd actually watch the $20.00-19.50 zone for support. More conservative traders might want to inch up their stop loss. This is an aggressive, higher-risk trade.

Chart:

Entry  on   January 06 at $ 20.51   (small positions 1/4)
Change since picked:       + 0.27
Earnings Date            03/31/10 (unconfirmed)
Average Daily Volume =        1.0 million  
Listed on   January 04, 2010         


Intl. Business Mach. - IBM - close: 130.00 change: -0.85 stop: 128.90

I'm a little concerned with the action in IBM. Granted the big caps didn't move much today with the DJIA up one point and the S&P 500 up less than one point. Unfortunately the intraday chart has IBM sliding lower and on the verge of breaking what should be support near $130.00. We already have a relatively tight stop at $128.90. If shares don't bounce soon it looks like we could get stopped out. Readers may want to wait until after Friday's jobs report before launching new positions.

Our first target is $134.95. Our second target is $139.00. Our time frame is about four weeks. We do not want to hold over IBM's earnings report.

Entry  on  December 28 at $131.55
Change since picked:       - 1.55
Earnings Date            01/19/10 (unconfirmed)
Average Daily Volume =        5.8 million  
Listed on  December 26, 2009         


Infosys Tech. - INFY - close: 56.11 change: -0.87 stop: 54.75 *new*

We have about three days left before INFY's earnings report. I'm not suggesting new bullish positions and more conservative traders may want to exit early. I am raising our stop loss to $54.75. The plan is to exit ahead of the January 12th earnings report if INFY doesn't hit our target first. INFY has already hit our first target at $55.75. Our second and final target is $59.50.

Entry  on  December 05 at $ 51.88 /gap down entry point
                           /originally listed at $52.46
Change since picked:       + 4.23
                            /1st target hit @ 55.75 (+7.4%)
Earnings Date            01/12/10 (confirmed)
Average Daily Volume =        1.4 million  
Listed on  December 05, 2009         


J.P.Morgan Chase - JPM - close: 43.92 change: +0.24 stop: 41.40

Banks continued to rally and JPM added another 0.5%. You could argue JPM is a little bit short-term overbought. If you're looking for a new entry point wait for a dip near $42.50-42.00. Although I might suggest waiting until after we see the market reaction to the jobs report on Friday.

The target for our aggressive, short-term trade is the $46.90 level. The plan is to exit ahead of earnings but I'm considering holding a small position over the earnings report.

Entry  on   January 04 at $ 42.85 (small positions 1/2)
Change since picked:       + 1.07
Earnings Date            01/15/10 (confirmed)
Average Daily Volume =       31.6 million  
Listed on   January 04, 2010         


L-3 Communications - LLL - close: 87.57 change: +0.20 stop: 84.90

LLL is still consolidating sideways. I'm concerned that investors could be using the market strength to exit LLL. The stock isn't moving and technical indicators are starting to roll over. More conservative traders may want to raise their stops. I am not suggesting new positions at this time.

I did label this an aggressive, higher-risk trade. Our first target to take profits is at $89.95. Our second and final target is $94.00. We want to exit ahead of the late January earnings report. FYI: The Point & Figure chart is bullish with a $104 target.

Entry  on  December 28 at $ 86.80 
Change since picked:       + 0.77
Earnings Date            01/28/10 (unconfirmed)
Average Daily Volume =        1.0 million  
Listed on  December 26, 2009         


Precision Castparts - PCP - close: 114.90 change: +0.46 stop: 109.45

PCP continues to bounce with a 0.4% gain but the stock is still trading under resistance at its December highs near $115.60. I'm not suggesting new positions at this time. PCP has already hit our first target at $112.45. Our second target is $118.75. More aggressive traders may want to aim higher but I would not hold over the late January earnings report.

Picked on  December 01 at $107.35
Change since picked:       + 7.55
                            /1st target hit $112.45 (+4.7%)
Earnings Date            01/20/10 (unconfirmed)
Average Daily Volume =        817 thousand 
Listed on  November 28, 2009         


TORO Co. - TTC - close: 41.90 change: -0.10 stop: 40.90

I'm surprised but there was no follow through on yesterday's intraday bounce in TTC. That's okay and it's why we listed a trigger to open positions. Nothing has changed.

I'm suggesting a trigger to buy calls at $42.60. We'll use a stop at $40.90 but more conservative traders may want to cinch up their stops toward Tuesday's low (41.45). If triggered at $42.60 our is $45.90. We do not want to hold over the February earnings report.

FYI: I'm still concerned about a potential market correction in January so keep your positions small to reduce your exposure.

Entry  on   January xx at $ xx.xx <-- TRIGGER @ 42.60 (small positions)
Change since picked:       + 0.00
Earnings Date            02/18/10 (unconfirmed)
Average Daily Volume =        289 thousand 
Listed on   January 05, 2010         


UnitedHealth Group - UNH - close: 31.79 change: +0.31 stop: 28.90

UNH continues to bounce but I'm not expecting any fireworks from this stock as the market will probably trade sideways until Friday's jobs report. In the news today UNH announced plans to buy back $750 million in debt. I am not suggesting new positions at these levels.

This was a "lottery ticket" style of play. We knew it was risky given all the political ups and downs for the healthcare bill. Our time frame was several weeks and we listed January and March calls. At this time if you choose to open new positions I'd use March calls but that would require holding over the late January earnings report (to get the most out of your March calls). Our first target is $34.00. Our longer-term target is $36.00.

Entry  on  December 10 at $ 30.31 
Change since picked:       + 1.48
Earnings Date            01/21/10 (unconfirmed)
Average Daily Volume =        819 thousand 
Listed on  December 10, 2009         


Whirlpool - WHR - close: 81.06 change: -0.72 stop: 79.45

WHR is still consolidating sideways. I'm growing nervous as we approach the jobs report. More conservative traders may want to exit on Thursday. You could always jump back in later. I'm not suggesting new positions at this time but we're watching for a breakout past $82.50. WHR has already hit our first target at $84.75. Our second target is $89.00.

Entry  on  December 19 at $ 80.76 /gap higher entry
Change since picked:       + 0.30
                             /1st target hit $84.75 (+4.9%)
Earnings Date            02/08/10 (unconfirmed)
Average Daily Volume =        1.6 million  
Listed on  December 19, 2009         


PUT Play Updates

Fedex Corp. - FDX - close: 83.84 change: -0.70 stop: 85.51

While yesterday it looked like FDX might rebound out of its consolidation there was no follow through today. Our plan remains unchanged. I'm suggesting a trigger to buy puts at $81.90. If triggered our first target is $78.10. Our second target is $75.10. More aggressive traders could aim for the November 2009 lows near $72.00.

Entry  on   January xx at $ xx.xx <-- TRIGGER @ 81.90
Change since picked:       + 0.00
Earnings Date            03/18/10 (unconfirmed)
Average Daily Volume =        3.3 million  
Listed on   January 02, 2010         


Strangle & Spread Play Updates

(What is a strangle? It's when a trader buys an out-of-the-money (OTM) call and an OTM put on the same stock. The strategy is neutral. You do not care what direction the stock moves as long as the move is big enough to make your investment profitable.)

United Parcel Service - UPS - close: 57.85 change: -0.43 stop: n/a

Hindsight is usually 20/20 and I wish I had recommended UPS as a candidate for the Option Writer newsletter. The stock has been stuck in a trading range for weeks! I'm not suggesting new strangle positions.

January Strangle
The options suggested for the January strangle were the January $60.00 calls (UPS-AL) and the January $55.00 puts (UPS-MK). Our estimated cost was $1.35. I would plan to sell if either option hit $3.50 or more.

Picked on  November 21 at $ 57.99 /gap open entry
Change since picked:       - 0.14 
Earnings Date            02/02/10 (unconfirmed)
Average Daily Volume =        4.7 million  
Listed on  November 21, 2009         


CLOSED BULLISH PLAYS

NUCOR Corp. - NUE - close: 49.57 change: +1.45 stop: 43.90

Target achieved. Steel stocks were showing strength and NUE rallied to resistance near $50.00. The high today was $50.10. Our target to exit was $49.50.

Chart:

Entry  on  December 22 at $ 45.85 (1/2 position or less) /gap higher entry
Change since picked:       + 3.65 <-- target hit @ 49.50 (+7.9%)
Earnings Date            01/28/10 (unconfirmed)
Average Daily Volume =        4.5 million  
Listed on  December 22, 2009         


Volatility Index - VIX - close: 19.16 change: -0.19 stop: 18.95

The market did not make much progress today but the tone was still bullish and the VIX index sank to new lows. Our stop loss was hit at $18.95. Our play is closed but more aggressive traders may want to seriously consider re-launching a small bullish position on Thursday in case the market plunges on a "sell the news" move following the jobs report on Friday. Investors seem to be expecting good news so there is the potential for a big disappointment.

Chart:

Entry  on   January 02 at $ 21.68 
Change since picked:       - 2.73 <-- stopped out @ 18.95 (-12.5%)
Earnings Date            --/--/--
Average Daily Volume =        --- million  
Listed on   January 02, 2010         


Zebra Technologies - ZBRA - close: 28.62 change: -0.05 stop: 27.70

Ouch! ZBRA was downgraded to an "under perform" this morning and the stock gapped open lower at $27.41. That's below our stop loss at $27.70 so the play was closed immediately. The bounce back is encouraging but I'm not suggesting new positions. You may want to keep ZBRA on your watch list for a breakout past $29.00 again.

Chart:

Entry  on  December 30 at $ 28.39 
Change since picked:       - 0.98 <-gap down exit @ 27.41 (-3.4%)
Earnings Date            02/09/10 (unconfirmed)
Average Daily Volume =        166 thousand 
Listed on  December 30, 2009         


CLOSED BEARISH PLAYS

Flowserve - FLS - close: 100.80 change: +2.71 stop: 98.25

FLS displayed relative strength and rallied past resistance near its 50-dma and the $100.00 mark with a 2.7% gain. I couldn't find any specific news to account for the relative strength. Yesterday I suggested that nimble traders may want to buy calls on a breakout past $100. I'm dropping FLS as a bearish candidate. The stock never hit our trigger to buy puts at $93.875.

Chart:

Entry  on   January xx at $ xx.xx <-- TRIGGER @ 93.85
Change since picked:       + 0.00           *never opened*
Earnings Date            02/24/10 (unconfirmed)
Average Daily Volume =        612 thousand 
Listed on   January 02, 2010