Option Investor

Daily Newsletter, Thursday, 3/11/2010

Table of Contents

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

Market Wrap

SPX Tags Its January High. Now What?

by Keene Little

Click here to email Keene Little
Market Stats

The strong rally off the February 5th low has been strong. Well, at least from a points perspective it's been strong. From a volume perspective it has left something to be desired (stronger volume would solidify its importance). Total trading volume for today was again low. Tuesday's and Wednesday's volume was at least up into the high side of average for this year. Monday's was one of the lowest days since the end of December and today's was not much better.

We continue to see the pattern of low volume on up days and higher volume on down days (of which there have been very few since February 25th) and while that can certainly continue it's not the mark of a strong bull market. There's just enough volume, especially on the buying side, to keep poking the bears in the eyes to ensure they stay in their caves. But eventually the move to shove most of the shorts out of the market will make it weaker since there will be no one to do the buying once the selling starts.

The banks have been strong this week and it has me wondering why. Did things suddenly get better in the financial community? No, the same problems exist. Perhaps they're lending more? No, not that either. And now we hear Senator Dodd, Chairman of the Senate Banking Committee, is going to present a significant bank reform bill to the committee on Monday, one that does not have Republican support but there may be just enough anger in the constituents to force passage. So why would the banks rally strong in front of this? It doesn't sound like the reform bill will help the banks make more money.

Is it possible the banks got some "help" this week to jam their stock prices higher in anticipation of some selling next week? That's of course mere speculation on my part but let's just say I wouldn't be a bit surprised if the banks were buying each other's stock with the help of OPM (that would be Other People's Money, or from us taxpayers through the Fed). It could be me but I have a hard time seeing the value of C at 4.18, up a $1 (+33%) from a month ago. And most of that gain has been in just the past week. AIG was up sharply in the last week as well (although it gave back some today). Something smells a little fishy with the piggies. They've slathered lipstick all over them but I've yet to see them fly.

The reason banks are not lending has really nothing to do with them. Yes they've tightened their lending standards but really only back towards more normal. At the peak of borrowing in 2007 there were no more lending standards. The real problem is lack of demand for loans, both from consumers as well as businesses. The credit contraction continues as people pay down their debt loads and move back towards pay-as-you-go financial planning. The government has taken up the slack and is doing all the borrowing for us. But that's because they can simply print more money, give it virtually free to the banks and tell them to buy more Treasuries.

Many worry about a failed bond auction some day by the U.S. government but we're probably a long way from that happening. They can simply print whatever amount they need to ensure the banks buy them with the printed money. It's quite a scheme when you think about it. The banks get essentially free money to buy the bonds and then earn interest on it, all without putting up a single penny of their own. It's no wonder they feel free to trade our money for themselves. It's quite a racket. Whether or not Senator Dodd's reform bill will address any of the banks' questionable practices remains to be seen.

The ones who can't print their own money are in more immediate dire straits. That includes the countries of Europe, such as Greece, which can't simply run their own printing presses to create more Euros. They have to live within their means and we'll see most European countries forced to do the same. We've heard of Portugal, Spain, Italy, Ireland and Greece but the U.K. is also in trouble. They can at least print their own currency but it probably won't be enough. Inflation becomes a significant problem once too much money is being produced.

Our own states are also running into significant trouble. An article in the U.K. Telegraph, Bernanke going wobbly, talks about the hardships in many countries and in many of our states right now, more than we hear from our own media. Several states are saying they're going to have to close half their schools and cancel many other services. Taxes will of course have to go up. Greece is not the only one that will experience social strife as people deal with higher taxes and fewer services.

The social mood swing, which has had an uptick for the past year (the reason for the stock market rally), is due to turn back down and with it will go the stock market. The next turn down will see much angrier crowds, civil disobedience and general disharmony. Just keep reminding yourself that it's part of the cycle and it too will pass. In the meantime we have a stock market to deal with.

SPX closed today at its January high (OK, 21 cents shy of it) and that leaves a lot of traders nervous about tomorrow. The bulls clearly do not want to see a double top here (a double top is anywhere in the vicinity of the previous high) and the bears clearly don't want to see that resistance level broken. There could be a lot of stops just above 1150. Stop run anyone?

There are a lot of people out now saying they see SPX 1200-1250 for a high and a big reason so many like that number is because a 62% retracement of the 2007-2009 decline is near 1229. If the market were to meander on up to that level by May it would also tag the trend line along the highs from September, which would fit as the top of a large rising wedge pattern. That trend line is currently just shy of 1200. Voila, SPX 1200-1250. If it first pulls back to test the uptrend line from March 2009 through the February 5th low, it could drop down to about 1100 and not spoil the bullish picture on the weekly chart.

S&P 500, SPX, Weekly chart

That's the bullish case for a market rally into May (which still needs a pullback and probably soon). A slightly lesser bullish scenario calls for a blow-off top into next week (opex move?) to about 1166 where SPX would have two equal legs up from November. The a-b-c move up from November is the last one in the move up from March 2009. The wave count is called a triple zigzag which means 3 separate a-b-c moves, each separated by an x-wave. Each a-b-c move on the weekly chart is labeled as wave w, y and z. There are no quadruple zigzags so once this one is complete then the rally from March will be complete. It's why I'm trying to identify where the current move up from February might end. It will be a very important top. Very important.

The more immediate bearish case calls for a high right here or possibly as high as the 1154-1156 area if it pushes higher on Friday. A price projection for two equal legs up from February 5th, labeled a-b-c on the daily chart below, is just shy of 1154. Within the 2nd leg up there is another price projection pointing to 1156 (shown on the 60-min chart next). Therefore keep your eye on those levels if reached and the market turns back down. If you're long some stock, now is a good time to suck your stops up tight. If SPX pulls back to the March-January uptrend line and finds support you can always try the long side again in case we get a rally into April/May.

S&P 500, SPX, Daily chart

Key Levels for SPX:
- cautiously bullish above 1156
- bearish below 1112

Zeroing in on the a-b-c move up from February, the c-wave is shown on the 60-min chart below. It's counting out well as a 5-wave move and the sideways triangle that formed over the past two days fits well as the 4th wave. These sideways triangle patterns always precede the final move and therefore the leg up out of this, which started this afternoon, will be the last one. Once again, I'll be watching for a possible high in the 1154-1156 area and if that breaks then watch for 1166, probably into Monday. The risk for longs is that the pattern can be considered complete at any time now, regardless of what upside level is achieved. SPX below 1140 would now be trouble and below 1125 would confirm the rally had finished.

S&P 500, SPX, 60-min chart

The DOW continues to struggle with its broken uptrend line from August, the same line where it also found resistance in early and late February. There remains upside potential to the January high of 10730, especially if SPX pushes up to 1166, but so far it's clearly the laggard index in testing its January high (and so far it's bearish non-confirmation with the TRAN which has exceeded its January high).

Dow Industrials, INDU, Daily chart

Key Levels for DOW:
- cautiously bullish above 10730
- bearish below 10438

The NDX is blasting higher and flaming the shorts in the process. It may have its sights set on the 1958 level where the move up from November would have two equal legs up. RSI and MACD are more overbought than they've been during the entire rally from March 2009. Looks and smells like a blow-off top and if it is, the downside will come just as quickly so tread carefully on the long side. A steep uptrend line may be all you need to use to keep your stop tight and following this.

Nasdaq-100, NDX, Daily chart

Key Levels for NDX:
- cautiously bullish above 1960
- bearish below 1830

Helping the NDX in its strong rally has been Apple. That stock has been on a tear to the upside since its pullback to the February 23rd low, up +15% just since that low to today's high of 225.50. With it in blue-sky territory and wondering where it might run into trouble, the next two charts show that it might be topping here but if not then where's the next target. I think it's a good example of using Fib extensions to identify potential resistance levels (or support in a decline).

When you use the Fib retracement tool, depending on how yours works, it will show extensions beyond the start of the move. It's very common to see reversals at the 127% and 138% extensions so that's what I'm looking for. When placing a retracement on the January decline I get the 127%-138% extensions at 222.48-225.27, which provides an upside target. So far AAPL has stalled at the upper level of that range.

Apple Inc, AAPL, Daily chart

Looking at the bigger picture for AAPL, I've done the same thing with the 2008 decline--a Fib retracement shows the 127%-138% extensions at 223.26-235.80. That has the daily extension close to the 127% extension on the weekly chart and suggests AAPL may be topping here and now, or at least that's the risk for anyone long the stock or thinking of doing some new buying. If AAPL is able to push higher, the next level I would look to is the 231-236 area where on the daily chart you can see the 162% extension at 231.25 and on the weekly chart the 138% extension is at 235.80. Pull your stop up tight if you're long the stock.

Apple Inc, AAPL, Weekly chart

The other big influence on the tech indexes is the semiconductor index and the SOX is again showing a potential setup for a reversal. I say potential because it's testing its broken uptrend line from March-November but it's the 3rd test since the first one in mid February. Will the 3rd time be a charm for the bulls or the bears? Usually a 3rd retest of resistance like this is the last--I'm thinking the bears are going to win this one and the next move should be well below the February low. The combination of the trend line and Fibs (50% retracement of the 2007-2008 decline and 78.6% retracement of the January decline) is going to be very tough resistance in the 358 area. The flip side of the coin says a rally much above 358 would be bullish. But be careful on the upside as I see the possibility for one more minor new high, perhaps on Friday, before topping out.

Semiconductor index, SOX, Daily chart

Like the NDX, the RUT has enjoyed a very strong rally off the February low. Unlike some of the other indexes the RUT has achieved the level where the move up from November has two equal legs up (at 676.93). For the move up from February 5th it achieved two equal legs up at 672.96. This made the 673-677 a good upside target area and now that it's been achieved I suggest caution. Not shown on the daily chart is the Fib extension off its January decline, similar to what I showed for AAPL above. The 138% extension is at 675.38, right in the middle of the two price projections. If the RUT can press higher, and close higher, it will be bullish but until that happens, keep those stops tight.

Russell-2000, RUT, Daily chart

Key Levels for RUT:
- cautiously bullish above 677
- bearish below 633

Before getting into some of the other indexes I wanted to take a look at what the VIX might be telling us. It is of course very low and that in and of itself is warning us of excessive bullish complacency in the market right now. Last Friday's low of 17.23 was basically a retest of the January lows. But what's interesting is what the VIX has been doing since last Friday. As the stock market has chugged its way higher this week so too has the VIX. That's a change in behavior and in front of opex week it has me wondering if there's a lot of put buying going on in expectation of a down week.

An indicator of previous tops has been a turn back down in the ratio of SPX to the VIX. As SPX climbs and VIX drops the ratio will climb, and then just the opposite. If SPX climbs and VIX starts to climb then the ratio may flatten out or start a reversal back down (if VIX is climbing faster than SPX). That's what we're starting to see at the moment:

SPX vs. Volatility ratio, SPX/VIX, Weekly chart

The vertical blue lines identify the turning points in the ratio during the past year. It's hard to see this week's candle in the bottom chart because it's practically hidden just beneath the downtrend line but the ratio peaked last week. What's interesting is that it peaked at its downtrend line from February 2007 and at its 200-week moving average, just as it peaked at its 200-wma in January. A lower peak in the ratio is a negative divergence against the SPX retest of its January high. The ratio has also stalled at the 38% retracement of the 2007-2008 decline and shows negative divergence on RSI. This chart is showing all the signs of a pending reversal for the stock market.

The banking sector has also been on fire this week. The BIX is now within spitting distance of its price projection at 144.88 for two equal legs up from December. It's at the top of a parallel up-channel for price action since the February low and the daily oscillators are overbought. It's a setup for a reversal. Not shown but the 60-min chart shows the possible completion of a final 5-wave move up into today's close to complete the leg up from February so we might see an immediate reversal back down on Friday. Otherwise keep an eye on the 144.88 level for a potential high.

S&P Bank index, BIX, Daily chart

For those interested in what the bonds are doing, they haven't been doing much this year. My best guess is that they've been consolidating in a bearish continuation pattern. As shown on the TLT chart below, another leg up within the triangle pattern could complete the consolidation and then a selloff into the summer. A break below the February 18th low of 88.51 would say the next leg down is already in progress. Much above 92 would suggest more bullish things for bonds. Yields are of course inverse to bond prices.

20+ Year Treasury ETF, TLT, Daily chart

The transportation index has pushed above January's high so that's bullish. I see further upside potential to a trend line along the highs from September and January, currently approaching 4400 and then a price projection at 4461 where it would have two equal legs up from November. So if the bulls can keep going here we could see one of those two levels achieved. A drop back below its January high near 4265 could spell trouble for the bulls.

Transportation Index, TRAN, Daily chart

Currently, the TRAN has made a new high above January's but the DOW has not done the same so we have bearish non-confirmation of the rally so far. A rally by the DOW above its 10730 January high would at least get these two in synch. Otherwise a drop back down below the February lows for both would be confirmation of the bear market. It's important to note that the DOW has typically diverged from the other market sectors, especially the techs, during previous market highs.

The U.S. dollar either continues to consolidate sideways in a triangle pattern since February 5th or it finished last week and the next leg up has already started. In either case the dollar remains bullish above last week's low of 79.83. The pullback from Wednesday looks corrective and points to a rally once it's finished.

U.S. Dollar contract, DX, Daily chart

There was a little disconnect between gold and the dollar this week. When the dollar initially rallied on Monday gold dropped but since Wednesday the dollar pulled back and gold kept sinking. It shows there are more concerns amongst gold bulls than just a dollar rally and now gold has broken its uptrend line from February 5th (leading indicator for the stock market?). There's nothing to say it can't get another bounce higher but at this point it's looking vulnerable to further decline, especially if the dollar starts to rally again.

Gold continuous contract, GC, Daily chart

Oil continues to chop its way higher is what appears to be a rising wedge pattern, with the top of the pattern at the broken uptrend line from February-December 2009. A price projection at 84.86 (two equal legs up from the December low) still beckons but it's looking tired and keeps threatening to break down from its rising wedge.

Oil continuous contract, CL, Daily chart

Tomorrow's economic reports should not have much effect if any on the market. The retail index had a decent day today, on top of a strong rally from February 5th so there are a lot of expectant owners of retail stocks. Hopefully they won't be disappointed since the index (RLX) is approaching the trend line along the tops from November-December, which may be the top of a large rising wedge pattern on its daily chart. And if Michigan Sentiment takes a surprising turn for the worse that could have a negative effect on retail shopping.

Economic reports, summary and Key Trading Levels

Keep an eye on the Shanghai Composite index, $SSEC on stockcharts.com, this coming week. China has been a good forecaster for our own market, usually leading the way. It peaked in August, made a lower high in November and then another lower high in January. It also made a higher low in February, above its September low so it could be building a large bullish sideways triangle consolidation pattern. Or it could be at the beginning of what will be a sharp decline (3rd of a 3rd wave down from the August high). Currently it's fighting between its 50-dma as resistance and its 200-dma as support. Today it closed on its 200-dma again, at 3051. A break lower next week could spell trouble, especially if it drops below 2950, which would likely be forecasting trouble for our market as well.

Shanghai Composite index, $SSEC, Daily chart

I'll leave you with one last chart since the setup could be interesting here. I've presented my highly secretive trading system before, known as the MPTS, and it's close to giving a potential sell signal so pay attention. For those who don't remember, the MPTS is a highly sophisticated trading system based on the phases of the moon, hence my Moon Phase Trading System. It's been a little off this year but still pretty close to calling the turns. Since September the highs have been associated with new moons and lows have occurred around full moons. We're now rallying into the next new moon which is on Monday the 15th. Whether it results in a turn back down is anyone's guess but considering we're rallying into the new moon, plus all the other factors and patterns I've reviewed tonight I'd say there's a good chance of a reversal coming.

SPX and Moon Phases, daily chart

Not surprisingly I remain bearish the stock market and while amazed at its performance off the February low I'm certainly not shocked. There are some powerful interests behind the rally. The Fed and SEC are achieving their intended goal of shoving the shorts out of the market (those nasty and un-American short players). The unintended consequence of that move is that there will be a dearth of shorts to do the buying once everyone else starts selling. But that's a problem for another day. The Fed and SEC will be coming out with lots of new rules to thwart short players, including outright bans on shorting anything they don't want shorted, especially stocks the government now owns. Be careful shorting Government Motors (GM) and financials of course.

With a very overbought market, showing an abundance of negative divergences at new highs, it is difficult to recommend even a day trade long. The market is setting up for a reversal and it has the potential to be a strong one. If any reversal ends up being a choppy sideways/down kind of correction then we'll get a good sense that the higher target levels will likely be achieved. But with indexes looking like they're in a blow-off move we could see a mirror image on the way down.

The lower than normal volume during the rally, especially as compared to the decline, is a warning not to get complacent about the long side of the market. Rallies on low volume can continue but it's not the sign of a strong bull market. Lower volume is however typical of the last leg of a rally. The pattern of a retest of the highs is very similar to the tops formed in 2000 and 2007 and after the retests the declines were usually strong and I suspect we'll see something similar.

As always it's a struggle to figure out where the tops of these moves will be. Hopefully you have enough information to watch certain levels, which in some cases are very close, for potential highs. If the market is able to rally into opex week then the higher targets on the charts will be watched. But I'm seeing an alignment of the stars (well, the moon), Fibs, trend lines and several other indicators to suggest that this opex week may be down.

Opex weeks have tended to be bullish but when they're not they're usually very bearish. Many players are forced to hedge long plays or buy puts to either close short puts or as insurance for their portfolios. Shorting stock is another way to hedge short puts. And without a lot of shorts in the market it is actually now more vulnerable to a disconnect to the downside. I think Friday's price action may tell us a lot.

The bottom line for this market, something that will true for a number of years, is that while your trading horizon may be different depending on what kind of account you're trading, I think it's important to think of yourselves as traders and not buy-and-holders. Richard Russell's quote is appropriate:

"The past decade was the dividing decade. It was the decade when the 'buy and hold' investors came away with little or nothing. The next ten years will be an exercise in 'how not to lose money.' Making money by borrowing and turning your debt into profits is history, it's over. The ideal position for the coming decade -- being out of debt. Back in the 1930s, debt and mortgages were both dirty words. They will be again."

Good luck into opex week and I'll be back with you next Thursday.

Key Levels for SPX:
- cautiously bullish above 1156
- bearish below 1112

Key Levels for DOW:
- cautiously bullish above 10730
- bearish below 10438

Key Levels for NDX:
- cautiously bullish above 1960
- bearish below 1830

Key Levels for RUT:
- cautiously bullish above 677
- bearish below 633

Keene H. Little, CMT

New Option Plays

Wireless Communications

by James Brown

Click here to email James Brown


Mobile Telesystems - MBT - close: 56.15 change: -0.58 stop: 51.90

Company Description:
Mobile TeleSystems OJSC (MTS) is the largest mobile phone operator in Russia and the CIS. MTS services over 91.33 million subscribers (as of December 31, 2008). MTS provides mobile communications in Russia, Ukraine, Uzbekistan, Turkmenistan, Armenia and Belarus, the territory with a total population of more than 230 million. (source: company press release or website)

Why We Like It:
I listed MBT last night as a possible bullish candidate. Shares have been consolidating sideways for months between $43 and $55. In just the past week the stock has broken out to new relative highs as the sector moves higher. On a short-term basis the stock does look a little overbought and due for a dip but bigger picture shares are poised to run higher. Traders quickly bought the dip this morning near $55.00. I am suggesting bullish positions now. We'll use a stop loss at $51.90 but more conservative traders may want to use a tighter stop loss. Our first target to take profits is at $59.85.

Suggested Position: BUY CALL APR 60.00 (MBT 10D60.00) @ 1.05

Annotated Chart:

Entry on March xxth at $ xx.xx
Earnings Date 03/31/10 (unconfirmed)
Average Daily Volume = 1.26 million
Listed on March 11th, 2010

In Play Updates and Reviews

Six Days Left

by James Brown

Click here to email James Brown

Editor's Note:

If you are holding March options you have six days left before expiration. Keep that in mind as you consider your exit strategy.

Current Portfolio:

CALL Play Updates

ADSK - Autodesk - $29.03, Change -0.15 Stop $27.50

ADSK drifted sideways in a very narrow range. While most of the market saw a very late day spike higher shares of ADSK did not. That could be a warning sign. I'm concerned that this stock is overbought and due for a pull back.

I am not suggesting new bullish positions in ADSK at this time.

Current Position: CALL APR 30.00 (ADSK 10D30.00) @ $0.55

Entry on March 8th at $ 28.72
Earnings Date 02/24/10 (confirmed)
Average Daily Volume = 2.75 million
Listed on March 6th, 2010

ATHN - AthenaHealth Inc - $38.20, Change +0.30 Stop $36.50

Traders bought the dip twice around the $37.50 level today. The bounce erased most of yesterday's decline but shares are still trading under their 10-dma. Remember, this trade is an earnings "lottery ticket" style of play. The plan was to open positions ahead of the earnings report on March 15th and then hold over the announcement with the expectation of a post-earnings rally. It's an aggressive strategy and readers can still buy calls now. I would expect some short-term resistance near $42.00 and then near $44.00.

Current Position: CALL APR 40.00 (ATHN 10D40.00) @ $2.00

Entry on March 8th at $ 39.20
Earnings Date = 03/15/2010
Average Daily Volume = 600,000
Listed on March 6th, 2010

BUCY - Bucyrus International - $64.95, Change -0.91 Stop $62.50

Shares of BUCY suffered a one-two punch this morning. First the stock was downgraded to a neutral by an analyst firm. Second the Chinese inflation numbers were higher than expected. That spooked investors and raised concerns that China may have to raise rates, which would slow down their growth and thus slow down demand for commodities. This sent mining-related stocks lower across the globe overnight. Shares of BUCY gapped open lower at $64.60 but fortunately traders bought the dip at $63.34. The bad news is some of the short-term technical oscillators are starting to turn negative. I am not suggesting new positions at this time. I want to reiterate my earlier comment that more conservative traders may want to take profits now! Our target to exit is $68.00.

Current Position: CALL APR 65.00 (BUCY 10D6500) @ $3.82

Entry on March 1st at $ 62.56
Earnings Date 02/18/10
Average Daily Volume = 1.75 million
Listed on February 28, 2010

Cognizant Technology - CTSH - close: 51.01 change: +0.20 stop: 48.95

So far so good. CTSH opened at $50.54 (our entry point) and traders bought the dip. Shares posted a 0.39% gain, which was inline with the S&P 500 and the NASDAQ today. I would still consider bullish positions now. Nothing has changed from my Wednesday night comments. I do feel that this is an aggressive trade because the NASDAQ looks so overbought and due for a correction. If the market does correct CTSH will likely pull back with it. Our initial target is $54.75. We'll use a stop loss at $48.95. FYI: Don't go overboard just because the option looks cheap. If CTSH does correct the value will vanish.

Suggested Position: BUY CALL APRIL $55 (CTSH 10D55.00) @ 0.40

Entry on March 11th at $ 50.54
Earnings Date 05/04/10
Average Daily Volume = 4.05 million
Listed on March 10th, 2010

NII Holdings Inc. - NIHD - close: 40.24 change: +0.09 stop: 37.90

It was a relatively quiet day for NIHD. Shares hovered around the $40.00 level and the stock opened at $40.10 (our entry point). There is no change from my prior comments. Readers can buy calls now and we'll use a stop loss at $37.90. Our first target is the $44.00 level.

Suggested Position: BUY CALL APRIL $40 (NIHD 10D40.00) @ $1.85

Entry on March 11th at $ 40.10
Earnings Date 04/22/10
Average Daily Volume = 2.68 million
Listed on March 10th, 2010

Panera Bread Co. - PNRA - close: 79.27 change: +2.00 stop: 74.75 *new*

The rally continues. Last night we changed our strategy and suggested an immediate entry into PNRA calls. The stock opened at $77.18 and outperformed the market with a 2.5% gain. The stock closed at another new high. Now the $80.00 level could be round-number, psychological resistance but PNRA doesn't appear to be slowing down. I feel this is an aggressive trade with the market so extended so stay defensive. I am raising our stop loss to $74.75.

Our first target is $82.45. FYI: It is worth noting that PNRA could announce a stock split one of these days. The last time shares split was in the $75-80 zone back in June 2002.

Suggested Position: CALL APR 80.00 (PNRA 10D80.00) @ $1.35

Entry on March 11th at $ 77.18
Earnings Date 04/28/10
Average Daily Volume = 519 thousand
Listed on March 9th, 2010

TEVA Pharmaceuticals - TEVA - close: 61.65 change: +0.71 stop: 59.50

TEVA appears to be coiling for a breakout over the $62.00 level. Traders keep buying the dip so the trend of higher lows is still intact. We have just over a week left for March options. More conservative traders may want to take some profits tomorrow! I am not suggesting new positions at this time. Our target to exit is $64.00.

Current Position: CALL MAR 60.00 (TVQ 10C6000) @ $0.70

Entry on February 20 at $ 58.74
Earnings Date 05/05/10 (unconfirmed)
Average Daily Volume = 5.1 million
Listed on February 20, 2010

PUT Play Updates

Intl. Business Machines - IBM - $127.60 change: +1.98 stop: 127.65

Hmm... I don't know what to tell you. IBM had been under performing the market these last few days. Suddenly shares spike higher with a 1.5% gain on no news. The close over its 50-dma is certainly short-term bullish. If the stock continues to rally tomorrow we'll drop IBM as a put candidate. For now our plan is unchanged. We have a trigger to buy puts at $124.90. If triggered our first target is $121.70 near the February lows. More aggressive traders may want to aim lower since IBM has broken its long-term up trend.

Trigger to buy puts @ 124.90

Suggested Position: PUT IBM 120.00 (IBM 10P120.00) @ $x.xx

Entry on March 10th at $ xx.xx
Earnings Date 04/19/10
Average Daily Volume = 5.67 million
Listed on March 9th, 2010