Option Investor

Daily Newsletter, Thursday, 3/18/2010

Table of Contents

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

Market Wrap

Welcome to the Lawrence Welk Market

by Keene Little

Click here to email Keene Little
Market Stats

Opex pinning was alive and well today as the market essentially floundered near the flat line. With European-style options, such as SPX and RUT, expiring at the opening settlement Friday morning (which stop trading at the end of the day Thursday so we'll often see both Thursday and Friday get pinned around certain prices. The other possibility of course is that market players are simply tired and wary as to what's next. Most participants are very much aware of the market's need for a correction so it's difficult to find a willingness to get into new bullish positions.

But by the same token traders don't want to take profits for fear of missing out on further upside. And bears are essentially absent from this market--they've been burned too many times and are unwilling to do much until they see the market breaking down. This creates a stalemate and lack of conviction from both sides.

But the DOW extended its winning streak to 8 days in a row today. The rally from the February 5th low is overbought by just about any measure and looking at the DOW's climb off the February low you can see uptrend lines getting steeper. This is the definition of a parabolic climb and it appears that we could be in the final blow-off top. Parabolic rallies never end well, as we've seen multiple times in the past several years. The Fed keeps blowing bubbles and they keep popping in their faces and I expect it will be no different this time. It's always hard to figure out where that final high will be in these kinds of moves but you'll know it quickly in hindsight.

For a generally positive day in the market you wouldn't know it by the internals. Under the hood there was a lot of selling going on, as evidenced by the nearly 2:1 selling to buying volume. Declining issues beat out advancing issues. It looks like a distribution day to me, which adds to the credibility of the idea that the buying in the DOW is a defensive move. With a lot of money running into the bluest of the blue chips, and the largest of the large caps, it could be a defensive move to get out of some of the other riskier and small cap stocks in preparation for an easier bail out of the market should the need arise.

We're rapidly approaching the point, again, where downside surprises are going to show up as gaps to the downside followed by strong selling. Stops on stocks, especially those placed right below visible support levels, will likely get skipped over in those gaps to the downside so be careful how you use stops.

I know many are looking for an end-of-month/quarter rally as they paint the tape and fund managers are forced to plug their noses and chase performance. They're competing against the other fund managers and not buying based on fundamentals or even technicals. One risk that's increasing is the fact that the market may not accommodate all those fund managers who want to see the market rise into the end of the quarter. It's been known to happen more than once where big money gooses the market a couple of weeks ahead of the end of the quarter so as to get the other fund managers chasing it. They use that extra liquidity to sell into and reduce their inventory. Then they start leaning on the market hard which starts some panic selling by the other fund managers who get caught in the squeeze.

By inducing some panic selling in the market, the larger funds who sold a lot of their inventory at the top effectively cause losses at the other funds thereby further improving their own relative performance. Keep in mind that the games played in front of month/quarter end can be played both ways. The telltale signs of distribution will be shooting stars where the bulk of the day's gains are given up into the close. In addition to that, if we see more days like today where the selling is more than the buying then you know big money is distributing stock. You want to be just like big money.

Evidence continues to mount that shows much of the investing public is not interested in being invested in the stock market. They've been voting with their feet and taking money out of stock funds and putting it into bond funds. That might not work out too well in the future although probably still better than stocks. Cash is even better so if those bonds funds include U.S. Treasuries then that's a good thing. Corporate and municipal bonds funds not so good.

With mutual funds' cash values as a percent of total assets at near record low levels we know the fund managers are pretty much fully invested. They're not going to be able to add much more buying power to the market. And if they try to pump more money into the stock market into the end of the quarter they're going to know they're very low on cash and will be careful to get out of the market quickly if it turns back down. There are a lot of funds holding the exit door open with one foot, ready to bail at a moment's notice.

So who's doing the buying in this market that it just keeps heading higher relentlessly as it has been, especially for the past 6 weeks? Enter the Fed, the only player with the trees that grow money. This link is to a short video clip on Yahoo's financial site which provides a good synopsis of our current market by Scott Bleier, president of CreateCapital.com, discussing who's doing the buying and how, and why the market is perched on the edge of a cliff after this month completes (when the Fed stops purchasing mortgages): Zombie Market.

The important point about what's been happening is that the Fed has been purchasing hundreds of billions worth of mortgages (as part of their $1.25T mortgage purchase program) and other toxic assets each month from the banks, effectively handing them money to play with. And play they have--the bulk of the profits in the big banking centers has come from their trading operations.

The money these banks have been receiving from the Fed, over and above the money they've borrowed for free and then do what they want with it, has been leveraged big for their trading. This has resulted in massive amounts of money that's available for purchasing Treasuries, stocks and commodities. So the natural question is what happens when the punch bowl is removed? Will the partiers grab their coats and leave? If the major players do not have the kind of money to play with that they've had for the past year, the market is going to suffer. Buying pressure, and liquidity in general, is going to fade.

The Fed is hoping the market players will take the Fed's place (hoping for a government handoff to the public) but most of the market players are already in the market. As mentioned previously, cash as a percent of assets in mutual funds is back down to near record lows. They're fully invested. Retail traders have been showing a reluctance to reenter the market and have been placing the bulk of their money into bond funds (it's part of the socioeconomic pattern that leads to long bear markets).

Morningstar reported yesterday that investors are pulling money out of the stock funds and placing it in taxable bond funds (and shying away from tax-free municipal funds is a good thing). So where's the money going to come from to continue propping up the stock market? The worry of course is that the market will no longer have that buying pressure that it's had the past year and the correction to the rally will begin. And if we look at the parabolic climbs off the February low we can guess that the correction will be swift and painful.

The immediate question is whether or not the market will start back down before the money flow stops. I would say the majority of money managers know this market is overbought and that their sugar daddy will soon take away their allowance. At this point most know that they need to worry about the potential for a steep market pullback and very likely have their stops pulled up tight. If liquidity is going to dry up some and everyone is fully invested with tight stops, any guesses what could happen when the selling starts?

The risk is increasing again for a downside disconnect. Most think they'll simply set their stops, usually just below an easily identifiable support level, and then step aside when the market hits their stops. The trouble is when the market gaps down below support and misses many of the stops the result is a mad scramble to get out of positions at any price. Combined with low liquidity you could easily find the market dropping hundreds of DOW points in a hurry before people have a chance to catch their breath.

As a side note, this is one reason I like conditional orders rather than a stop order based on a certain price being hit. You place a market order to sell based on a condition being met such as a stock price being at or below a certain price. If the stock gaps below your stop price the conditional order will trigger the market sell order anyway. Something to think about.

So, as painful as it's been to try to find a top for this topless market, I feel the need to continue looking for it. Jumping on the bull's bandwagon at this point would be foolish (imho). It might be too early to short (depending on your time horizon and shorting vehicle) but I suspect by the time you realize the market is breaking down you will not only have missed the bulk of the move but it will be scary shorting it into the hole. It's a reason I like to pick tops, even if it takes repeated attempts.

Tonight I'm going to put the Nasdaq Composite in the spot light because it's at an interesting level where I think we need to watch it carefully. So I'll start with its weekly chart. The first thing that jumps out at me is the longer-term downtrend line for its bear market decline. The trend line runs from 2000 through the bounce high into 2007 and now we've got the bounce into 2010 hitting that line. If the larger bear market forces are still in effect, as I believe they are, the NAZ may have problems here. Only slightly higher, near 2430 is the top of a potential rising wedge pattern.

Nasdaq Composite index, COMPQ, Weekly chart

The move down from the 2007 looks like a clean impulsive (5-wave) move and that either completed a larger A-B-C pullback from the 2000 high, meaning the bear market finished in 2007, or else the move down from 2007 was only the 1st wave of a much larger 5-wave move down, meaning a lot more pain in the bear market is yet to come. The bounce off the March 2009 low counts best as a corrective wave count and that supports the larger bearish picture that new lows below the March 2009 lows will be the next big move.

Moving to the daily chart below, I've often pointed out how Fib extensions of a prior move will act as support/resistance. The 127% and 138% extensions are very common reversal levels. These Fibs make it crowded on the chart but bear with me while I point them out. When I place these 127% and 138% Fib extensions off the Nasdaq's January-February decline I get about 2388 and 2413, resp.

Next, a price projection for two equal legs up from November is at 2402, right in between those two extensions. This confluence of Fibs in the 2388-2413 area tells me there's a good chance it's going to be resistance, or at least pay attention if price stalls there. Wednesday's high was 2400 and the daily candle was a bearish shooting star. Furthermore, that shooting star candlestick was at its downtrend line from 2000-2007 (log scale). Today's candle is a spinning top doji so it's either indecision or part of a topping pattern. The setup here for a reversal is strong and while it obviously takes some downside price action to confirm a top is in place I think it's currently a very good setup for it.

Nasdaq Composite index, COMPQ, Daily chart

The Nasdaq will become more bearish with a break below its uptrend line from February 5th, currently near 2325 (its March 15th low as well), and then below 2250 would confirm the high for the leg up from February 5th is complete. The greater significance of this is that the leg up from February should be the completion of the price pattern from the March 2009 low and that's what makes the setup for a reversal here so important. But if price chops sideways/down over the next week and stays inside the up-channel from February then I'd look for another leg up to about 2460 to complete the rally leg from February 5th (shown with the light dashed line).

Key Levels for Nasdaq Composite:
- cautiously bullish to ~2460
- bearish below 2250 with a bearish heads up below 2325

Like the Nasdaq, SPX tagged its price projection at 1165.57 for two equal legs up from November. It accomplished that in less time than the November January rally and the steepness of the leg up from February 5th is another indication that this is very likely a blow-off move. A break below the parallel up-channel from February, near 1140, would be bearish while a choppy sideways/down correction next week would likely lead to another leg up into month end. So it will be the next pullback/decline that will provide clues for what the end of the month might look like. But the bottom line is that a fast move like this, at the end of a bigger move, is usually an ending move that leads to a fast and strong reversal.

S&P 500, SPX, Daily chart

Key Levels for SPX:
- cautiously bullish above 1170
- bearish below 1112

Zooming in on the leg up from February 5th, the parallel up-channel shows what to watch for. Currently, since about March 1st, SPX has been holding in the top half of the channel and that's bullish. Today's price action looks like a small correction and as long as 1160 holds we could see another leg up to about 1180 to potentially finish the rally. A break below 1140 would be a drop below the channel and indicate the rally is over. So let the channel be your guide here.

S&P 500, SPX, 60-min chart

On the DOW's daily chart below I've drawn in the successively steeper uptrend lines to shows how it's going parabolic. And if you look back over the past year at its rally, each time it had a relatively long string of positive days (usually with small white candles) it was followed by a swift break down. Each of them recovered and the next break down will likely have the dipsters swooping back in to buy it, but one of these days that buying is going to end in heartbreak and I think we're now close. If month-end buying manages to hold the market up it will likely be a no-brainer shorting opportunity but in the meantime be careful of a sudden and surprising strong selloff.

Dow Industrials, INDU, Daily chart

Key Levels for DOW:
- cautiously bullish above 10800
- bearish below 10438

The RUT is in a very similar pattern but clearly stronger relative to its January high. It's hugging the top of its up-channel from February but you can see the negative divergence showing up at this week's highs. As with the others, we could see just a small correction that holds inside its up-channel, the bottom of which is currently near 673, followed by another leg up into the end of the month or we could see a breakdown sooner than that. The rally is clearly stretched and showing signs of weakening.

Russell-2000, RUT, Daily chart

Key Levels for RUT:
- cautiously bullish above 687
- bearish below 650

The semiconductor index has been another index where I keep calling a top and then it turns around and makes another one. Tellingly, the SOX has not been able to make it back above its January high and continues to struggle with its broken uptrend line from March-November. Unless it can make a quick move higher and break back above its broken uptrend line and the top of a rising wedge pattern formed since the February low it continues to look bearish here and yesterday's high looks like another potential top. A break of the uptrend line from February 5th, currently near 355, would confirm a high has been made. At least it should. ;-)

Semiconductor index, SOX, Daily chart

Yesterday the S&P banking index tagged the trend line along the highs from May-October 2009 and the top of its parallel up-channel for price action since the February 5th low and today it dropped sharply back. It's obviously early to declare a top is in but it too is a good setup for a reversal back down from here. Confirmation of a high in place comes with a break below 142 (the bottom of the up-channel), with confirmation below 139.

S&P Bank index, BIX, Daily chart

Looking at the weekly chart of the BIX, to keep its year-long rally in perspective (since we constantly hear about how strong the bank rally has been), you can see not much of the 2007-2009 decline has been retraced (less than 28%). Furthermore, once the spike up from March to early May completed, the rest of the "rally" has been very labored. At 148.02, tagged yesterday, the move up from July accomplished a Fib 62% of the leg up into May. The trend line along the highs that it tagged yesterday looks to be the top of a rising wedge pattern and the wave count can now be considered complete. That sets it up for a complete retracement, and then some, of the 2009-2010 rally. While the rally could certainly continue, there is nothing bullish about the weekly chart. Nothing.

S&P Bank index, BIX, Weekly chart

Bonds continue to consolidate since January as the bond market tries to figure out what kind of buying pressure there may be for bonds after this month. If the Fed is serious about taking away the punch bowl and reducing its QE (quantitative easing) program, which includes the purchases of mortgages, then there will be less demand for Treasuries. Lower demand will result from the Fed not handing the banks so much money as I discussed in the beginning of this report. Less demand for bonds will drop their prices and send yields higher. This is of course one of the worries about our debt level and how much more expensive it will be to service it once yields start heading higher.

The sideways triangle pattern in TLT, the 20+ Year Treasury ETF, if it plays out like I think it will, says bond prices will drop. TLT could make it a little higher to the top of its triangle pattern, near 91.90, or it could pull back first and then tag the top of the triangle later this month. But the triangle pattern, which would be negated with a move above 92.40, is a bearish continuation pattern and that's why I'm expecting a move down out of it once the current bounce completes, which it could do at any time now that we've got the bounce off the March 10th low.

20+ Year Treasury ETF, TLT, Daily chart

If you want to see a relentless move higher look no further than the Transports. There aren't many red candles in that move up from February. The move up now has RSI more overbought than I could find going back many years. The only two times it's been this high in the past 13 years is 1997 and 2006. So it's a rare event and after the 2006 high it was followed by a steep decline that lasted over a month. 1997 had a mini crash in October following its steep rally, giving back the two-month rally in 3 days.

Transportation Index, TRAN, Daily chart

Yesterday the TRAN tagged the top of its parallel up-channel for price action since November and looked like it was going to stall there but today it pushed marginally higher. It may have its price projection at 4461 in its sights, for two equal legs up from November. Regardless, this one is in danger of collapsing back down.

The weekly chart of the TRAN below shows it has also done a slight throw-over above the top of a potential rising wedge pattern, a typical finish to these patterns and especially with a blow-off move. This bearish rising wedge calls for a complete, and fast, retracement, which means it could be back under the March 2009 low before the year is out.

Transportation Index, TRAN, Weekly chart

The U.S. dollar looks to have completed its choppy sideways/down correction from the February high, creating a bull flag in the process. Yesterday's low tagged the bottom of the bull flag at the same place it tagged the bottom of the parallel up-channel shown on the chart. This channel was created by connecting the 1st and 3rd waves and attaching a parallel to the bottom of the 2nd wave. This parallel line often does a very good job of showing you where the 4th wave will find support. Today's strong bounce back up is a good sign for dollar bulls. Confirmation will be a move above 81.50 with an upside target in the 83-84 area.

U.S. Dollar contract, DX, Daily chart

The metals and the dollar don't always trade in synch and today was one of them. With the dollar rallying fairly strongly we did not see a commensurate move down in gold. That could be bullish if gold manages to break its downtrend line from October, currently near 1132. If that happens we could see gold make a run up to the 1170-1175 area. Otherwise a drop back below its uptrend line from February 5th, near 1111 and its 50-dma, would likely lead to strong selling and a quick test of its 200-dma at 1044.

Gold continuous contract, GC, Daily chart

Oil prices have been holding up (and gas prices at the pump) and many are speculating that there's an "Iran premium" priced in. The war drums have been beating again recently as news broke out about a large number of bunker buster bombs being shipped to Diego Garcia, an island in the middle of the Pacific, which can be used to launch stealth bombers to take out Iran's nuclear facilities. Maybe it's only an attempt to add a little more pressure on Iran (shipping the bombs was made public by the Navy) but it's certainly going to keep traders bidding up the price of oil in case Iran is attacked and then retaliates on the oil shippers. And the flip side of that scenario is that if there is an Iran premium priced into the market, the removal of worries about an attack on Iran, even if only for a few months, could deflate the price of oil quickly.

If the dollar rallies it will likely add some downward pressure on commodities, including oil. The price pattern certainly supports the collapse of oil prices from here after completing a rising wedge pattern and then seeing a retest of it yesterday. The retest of the broken uptrend line from February 5th has been followed with a kiss goodbye today. The rising wedge pattern points to a fast and complete retracement of it, so back below the February 5th low (69.50) in probably a month's time (or less).

Oil continuous contract, CL, Daily chart

There were no surprises in this morning's economic reports which also points to an economy that's just sputtering along. Nothing much has changed and the market didn't react to any of the reports. There are no major economic reports on Friday.

Economic reports, summary and Key Trading Levels

The bottom line for the market is that it appears to be in a blow-off top. It has many of the same markings that we've seen in the past. We should be experts at identifying bubbles by now and we've got another Fed-induced bubble in this market. The rally lacks any real strength and that's a big warning when you see lots of points added to the board but only by a few star players. Take out those players and the team falls on its face.

The below chart plots the number of stocks above their 200-dma and you can see that fewer and fewer stocks are participating in the rallies since last September. Very simply, that makes for an unhealthy market. The fact that the line has bounced back up to the descending trend line, and tipped back over, is another warning to those who are holding out for "just a little bit more and I'll promise to get out." Pigs get fat, hogs get slaughtered.

NYSE stocks above their 200-dma, Daily chart

I also continue to keep my eye on the Shanghai Composite index, $SSEC on stockcharts.com, for some clues for our own market. Since it's been a leading indicator, making its highs and lows before ours, I want to see how it's going to handle its 50 and 200-dmas that it's been battling recently, as well as the potential triangle pattern that it's been in since its August high and September low (a sharper triangle pattern uses the downtrend line from January, which is where SSEC is currently battling, along with its broken 50-dma).

Shanghai Composite index, $SSEC, Daily chart

My MPTS (Moon Phase Trading System) has been off by a couple of days this year but considering the previous highs and lows associated with new and full moons I continue to watch for a possible high this week that coincides with Monday's new moon. The market may be getting a little extra help this week because of opex influence and if so then next week will be down. Here's the latest update to the MPTS:

SPX daily chart with moon phases

So once again we've had a bullish opex week, helped no doubt with the continuing flood of dollars into the market through the banks from the Fed. I'm wondering what April's opex week will be like without that extra help. With the near completion of opex and price patterns that look potentially complete I am urging continued caution here. I think next week could be difficult for the market. Even if we'll see higher prices into April (to meet some cyclical studies pointing to that possibility), the price pattern calls for a pullback correction that lasts at least a few days first. Therefore a hangover early next week should be expected.

If the larger price pattern, the one from March 2009, is completing, then any decline from here has the potential to become more severe. I believe it's a risky play to try for more rally vs. the downside risk. For that reason I certainly don't believe any new long plays are warranted (day trades only). I think the safer play is to try a short, look for a move down next week and then lower your stop in case we get another push higher into early April.

If we start seeing important key levels breaking to the downside then you'll know you're on the right side of the market. Just understand that short plays here are counter to the current trend. The uptrend will end but we have no evidence yet that it has. That requires tight control of new short plays until the market drops and gives you some breathing room. My preference is to pick tops (which has clearly been a challenge) and bottoms but more conservative players will want to see the trend break down and then look for counter-trend bounces to try the short side. If my longer-term view of the market for this year is correct you'll have plenty of time and opportunities to play the short side. Don't rush things.

Good luck next week and be careful of the return of the bears. I'll be back with you next Thursday to evaluate whether or not they've been more successful than we've seen since February.

Key Levels for SPX:
- cautiously bullish above 1170
- bearish below 1112

Key Levels for DOW:
- cautiously bullish above 10800
- bearish below 10438

Key Levels for Nasdaq Composite:
- cautiously bullish to ~2460
- bearish below 2250 with a bearish heads up below 2325

Key Levels for RUT:
- cautiously bullish above 687
- bearish below 650

Keene H. Little, CMT

New Option Plays

What to Watch

by James Brown

Click here to email James Brown

Editor's Note:

The market remains overbought. It's been that way for days and honestly I'm not sure what is going to make it change. Tomorrow could see some volatility thanks to option expiration but I doubt it. We have two weeks left before the quarter ends and rally could continue as money managers do some window dressing. At the same time investors are nervous that China could tighten their monetary policy again and that the situation with Greece is not improving fast enough. The market could get taken hostage by overseas headlines.

I'm not adding any new plays tonight. This is a small watch list of stocks that caught my eye.

CELG - biotech stocks have seen a huge month. CELG is challenging resistance near $65.00. I would put CELG on your watch list for a dip back toward $62 or $60.

INFY - This India-based company has broken out to new multi-year highs. I would look for a correction.

PCLN - This Internet stock is hitting levels not seen since the 2000 era. If you're bullish on the market then consider bullish positions on PCLN above $245.

SHLD - Shares of SHLD have stalled under their January highs. A reversal here could look like a bearish double-top pattern.

In Play Updates and Reviews

Option Expiration Tomorrow

by James Brown

Click here to email James Brown

Editor's Note:

I want to remind readers that if you are holding March options they expire after tomorrow. The market's rally looks a little tired but that hasn't stopped it before.

Current Portfolio:

CALL Play Updates

ADSK - Autodesk - $29.42 Change -0.10 Stop $28.75

ADSK did not see much action today. The stock has effectively filled the gap from yesterday morning. I don't see any changes from my prior comments. ADSK is clearly overbought and due for a reversal but continues to drift higher anyway. I am suggesting we exit at $31.00. 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

Cash America - CSH - close: 40.69 change: +0.09 stop: 35.95

The consolidation in shares of CSH is narrowing and the stock looks even closer to breaking out over resistance at $41.00. I am adjusting our entry point strategy to have two potential entries.

First, we'll keep the buy-the-dip strategy with a trigger to buy calls at $38.25. If CSH hits $38.25 we want to buy the April $40 calls and we'll use a stop loss at $35.95. Our first target is $41.00. Our second target is $44.00.

However, we will add a second entry point to buy calls on a breakout at $41.20. This is a much more aggressive entry point so we want to keep positions small. If CSH hits our trigger at $41.20 we'll use a stop loss at $39.40. Our target is $44.25. We want to buy the April $45 calls. They are cheap so don't go overboard. Remember, small positions! This way if CSH reverses on us we will limit our risk.

Buy-the-Dip: Use a trigger at $38.25 to buy calls.

Suggested Position: BUY CALL APRIL $40 (CSH 10D40.00) current ask $1.95

Buy-the-Breakout: Use a trigger at $41.20 to buy calls.

Suggested Position: BUY CALL APRIL $45 (CSH 10D45.00) current ask $0.15

Entry on March xxth at $ xx.xx
Earnings Date 04/22/10
Average Daily Volume = 272 thousand
Listed on March 13th, 2010

Cognizant Technology - CTSH - close: 51.83 change: +0.21 stop: 49.75 *new*

CTSH displayed some relative strength with a 0.4% gain. The stock looks poised to go higher given its recent breakout from the two-week consolidation. However, some of the technical indicators are looking tired. I am adjusting our stop loss to $49.75. Our initial target is $54.75.

Current 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

Green Mountain Coffee Roasters - GMCR - cls: 96.80 chg: -0.81 stop: 92.75

Hmmm... I am surprised that GMCR did not show more strength today. The stock had its price target raised to $105 by a Wall Street firm this morning. The stock opened higher but failed to clear yesterday's high. On an optimistic note traders did buy the dip several times near $96.00.

This is an aggressive trade with small positions. Our first target to take profits is at $99.75. More aggressive traders may want to aim higher.

Current Position: BUY CALL APRIL $100 (GMCR 10D100.00) @ $2.00

Entry on March 17th at $ 95.26
Earnings Date 04/29/10
Average Daily Volume = 1.17 million
Listed on March 13th, 2010

L-3 Communications - LLL - close: 94.18 change: +0.17 stop: 91.25

LLL is off to an okay start. The market really didn't move much today. Shares opened at $93.88 (our entry point) and traders bought the dip near $93.50, which is close to prior resistance. The overall trend remains higher. There is no change from my prior comments.

Aggressive traders willing to take the risk of buying calls in this environment can buy calls on LLL at current levels. Our first target is $97.00. Our final target is $99.75.

Normally I would probably choose the $95 calls but this is a very aggressive entry point given the market's condition. I'd rather have the least amount of capital invested so I'm suggesting the $100 strike. Keep your position size limited.

Current Position: BUY CALL APRIL 100.00 (LLL 10D100.00) @ $0.30

Entry on March 18th at $ 93.88
Earnings Date 04/22/10
Average Daily Volume = 908 thousand
Listed on March 17th, 2010

NII Holdings Inc. - NIHD - close: 40.84 change: -0.40 stop: 38.45 *new*

It was a quiet session for NIHD. Shares traded inside of yesterday's range. Nimble traders could try buying dips near $40.00. I am still concerned that the wider market is too overbought and due to correct. I am raising our stop loss to $38.45. 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: 78.59 change: +0.32 stop: 74.75

PNRA continues to bounce around the $78-79 zone. I don't see any changes from my prior comments. Some of the technical indicators are suggesting this rally is tired. I am not suggesting new positions at current levels. Remember, this is an aggressive trade with both PNRA and the market so overextended. 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

Transocean Ltd. - RIG - close: 83.67 change: -1.80 stop: 83.45

Concerns over Greece sent the euro currency lower and that boosted the dollar. A stronger dollar sent oil lower and RIG under performed with a 2.1% decline. The stock is now testing technical support at its 200-dma. I am going to give this stock one more day to bounce or we'll drop it as a bullish candidate. Currently we're still sitting on the sideline with a plan to buy calls if RIG hits $87.55.

If triggered our first target to take profits is at $93.50. Our second and final target is $99.00 but that could take a few weeks.

Trigger to buy calls @ 87.55

Suggested Position: BUY CALL APRIL $90 (RIG 10D90.00) current ask $1.25

Entry on March xxth at $ xx.xx
Earnings Date 05/05/10
Average Daily Volume = 7.0 million
Listed on March 16th, 2010

PUT Play Updates

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Mobile Telesystems - MBT - close: 55.06 change: -3.02 stop: 54.40

We have been stopped out of MBT. Unfortunately I can't explain what sparked the sell-off today. The Russian stock market did not see any big moves. The profit taking in European markets was mild. I didn't see any downgrades for MBT. Yet shares opened lower and dove toward the $54.00 level. This play is closed but I would keep MBT on your watch list. A dip toward $52.00 or $50.00 might be another bullish entry point.

Stopped at $54.40

Closed Position: CALL APR 60.00 (MBT 10D60.00) @ $0.65
Entry was $1.10


Entry on March 12th at $ 56.34
Earnings Date 03/31/10 (unconfirmed)
Average Daily Volume = 1.26 million
Listed on March 11th, 2010