Option Investor

Daily Newsletter, Wednesday, 9/8/2010

Table of Contents

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

Market Wrap

Widespread Signs of Deceleration

by Jim Brown

Click here to email Jim Brown
The highlight statement of the Fed Beige Book was "Continued growth, but with widespread signs of deceleration."

Market Statistics

The most critical economic report for the week was the Federal Reserve's Beige Book, which covered the period from mid-July through the end of August. The report showed that most Fed districts were seeing continued growth but at a pace that was slowing.

On balance consumer spending was a bit stronger but most districts reported that most sales were for necessities or lower priced items. Tourism picked up in the northeast but declined in the Gulf coast areas because of oil spill concerns.

Manufacturing continued to expand but also at a slower pace. Residential real estate was very slow with most districts reporting a decline in prices. Commercial real estate remained depressed and showed little improvement over the prior period.

Lending either weakened or remained the same in most districts although lending to businesses declined even further on worries about the economic outlook. Several districts reported weaker demand for credit because of continued deleveraging. The exception was residential refinancing which continued to increase due to historic lower rates.

Wage and price pressures were virtually nonexistent other than increases in commodities and agricultural foods. The combination of fires, drought and floods overseas have reduced the availability of grain, increased demand for U.S. imports and driven up prices for U.S. farmers.

The report confirmed the slowdown in the U.S. economy in nearly every region of the country with the weakest conditions in the West and Midwest. This coincides with the dramatic downturn in employment in those same areas.

Analysts reviewing the Beige Book data believe the recovery will continue but also be a jobless recovery. The country is not expected to return to full employment for 3-5 years. Moody's said they don't believe it will result in a return to recession although the odds have risen from 20% to 35% over the last month. However, some regions may return to recession status but overall analysts still believe the country, as a whole will avoid a double dip.

That is a brave statement to say some regions will fall back into recession but overall the country will remain in growth mode. That suggests we will be walking a thin line between recession and growth over the next six months. That is not a very bullish outlook.

The market had declined from its opening highs in advance of the report and the conflicting data failed to produce a material rebound. There was a slight relief bounce that conditions were not worse but that was tempered by the "widespread deceleration" comments.

On the employment front the Job Openings and Labor Turnover Survey (JOLTS) reported a sharp increase in job openings to 3.042 million in July. That was an increase of 178,000 over the June period. However, this is a lagging report and the August non-farm payrolls have already been released. The JOLTS survey does precede actual hiring since the announcement of job openings can be 30-60 days before the actual hiring process is completed. The JOLTS data is encouraging but needs to post an increase in positions next month as well in order to actually indicate a new trend.


Other economic reports included the Mortgage Applications at 880.0 compared to the prior week at 893.0. Weekly chain store sales fell -0.4%. Consumer credit for July fell by -$3.6 billion as consumers continue to pay down debt in fear of trouble ahead.

Reports due out on Thursday include Jobless Claims, International Trade, Oil and Gas Inventories.

The EIA crude oil inventories should be interesting after the API report after the bell tonight showed a drop in crude inventories of -7.1 million barrels compared to estimates for a gain of 900,000 barrels. If the EIA report comes in with a similar number we could see a major move in crude prices. There is a heavy short interest in crude because of the normal decline in demand in September. Prices did not move tonight because the API report is not widely disseminated or followed.

While on the topic of oil, the long awaited report from BP on their investigation into the Horizon disaster was released this morning. The 192-page report was accompanied by a 27-minute video with animations of the disaster as they believe it occurred. The report was amazing in the depth of detail and explanation of the various components and the pictures they provided on the scope of the recovery were amazing.

Unfortunately the report was an attempted whitewash of BP and an attempt to shift blame to everyone involved. The depth and detail of the report was an effort to show how hard BP worked and the obstacles and challenges they overcame. They are obviously hoping that showing the depth and expense of the effort will help buy them some considerations when the various agencies begin deliberating over the fines and penalties to be levied.

BP did overcome some serious challenges including things like operating 27 ROVs at the same time a mile underwater during the peak of the operations. Coordinating those operations with no less than five drillships on the surface plus more than 150 other vessels had to be on a scale that nobody other than a military operation had ever done before. Of course they would not have needed any of it had they paid attention to business on the well.

BP blamed Halliburton for a bad cement job that allowed the hydrocarbons to escape up the casing but they glossed over the fact that BP canceled the required test to determine if they had a good cement job because it would have taken another day to complete. BP glossed over the Halliburton recommendation for a minimum of 21 centralizers and the BP decision to use only a third of those because of the time it would have required to install them. A centralizer keeps the casing in the center of the well so concrete can be pumped up the sides of the casing to seal the casing from the rock.

BP blamed Transocean for a failing blow out preventer but did not acknowledge that BP would not allow Transocean the time required to perform maintenance on the device because it would have put BP farther behind schedule.

BP blamed its engineers and Transocean drillers on duty for not recognizing a flawed pressure test after the cement job by Halliburton. In hindsight the test clearly showed problems with the well but the conflicting readings prompted a decision by BP management to conclude there was a valve problem not a pressure problem and they accepted the results and told the crews to proceed with removing the drilling mud.

There were dozens of problems, short cuts and oversights that BP omitted from the 192-page report making it an obvious attempt to spread the blame and appear to the casual observer that all were equally guilty in the accident. You can read the report and view the video here: VIEW BP REPORT

Not surprisingly Transocean and Halliburton slammed BP for producing a "self serving" report that was full of errors and misrepresentations. Transocean immediately produced a press release that itemized five points that BP failed to mention that led directly to the disaster. Halliburton blasted the BP report saying it contained "substantial omissions and inaccuracies" and they would release their own analysis when it was completed.

Both Transocean and Halliburton reiterated that the existing contracts with BP fully indemnified them against any claims or damages. BP clearly can't claim gross negligence based on the flimsy accusations in their report because BP either approved or directed the work in advance. It appears that BP will be on the hook for the vast majority of the expenses. This was an excellent ploy by BP to gain public support and misdirect blame. 99% of the public will now believe it was a group problem not a BP problem.

BP shares rose +1.18 on the news and the public misconception that BP was not to blame. Unfortunately all future news after the relief well is completed will be negative for BP. Transocean shares rose $.69 and Cameron gained +$.67 because there was no smoking gun that pointed to their direct involvement. The big winner was Anadarko, a 25% owner in the well. APC gained +2.12 on the belief their risk for a share of the expenses had dwindled.

BP Chart

Goldman Sachs is about to be fined 20 million pounds ($30.9 Million) by the UK's financial regulator (FSA) for failing to disclose it was under investigation by the SEC. The FSA launched an investigation in April after the SEC surprised everyone with the fraud charges over the Abacus MBS. Specifically they claim Goldman failed to notify the FSA that Fabrice Tourre was under investigation. This follows a record fine of 33.2 million pounds against JP Morgan three months ago for failing to maintain client funds in segregated accounts. Goldman shares gained +2.33 for the day to $147.54.

Apple shares rallied +5 after UBS upped their price target to $350 from $340 and dramatically increased their earnings estimates for 2011. They raised the estimates from $16.62 to $18.09 claiming the iPad was gaining momentum and they saw no evidence it was impacting Mac demand. However, UBS said the iPad was adversely impacting the PC industry, specifically notebook PCs. UBS expects Apple to sell up to 26 million iPads in 2011. They said other vendors were scrambling to produce competing products but Apple had too big of a lead.

Barclay's Capital reiterated a buy rating with a price target of $340. Barclay's still expects a Verizon iPhone in the first quarter and a revised iPad with a front facing video camera for video-chat. Piper Jaffray reiterated its buy rating and $371 price target. The company said the biggest thing holding back iPhone sales was the "lack of availability on Verizon." In a recent survey of prospective buyers only 20% said they were reluctant because of the antenna issue. Four times as many people said they were reluctant because of AT&T and were waiting for a Verizon model. Piper Jaffray expects Apple to sell 11 million iPhones in Q3 and it would be more if they could make them faster.

Apple Chart

Costco (COST) caught an upgrade from Goldman Sachs to a buy from neutral saying the company's improving fundamentals and a likely increase in membership fees could boost results. Costco is currently on a hunt for cheap retail space in shopping malls compared to its standalone centers. The company is capitalizing on the 1.85 million square feet of vacancies created by the recession to open some additional storefront models. Costco could increase its stores to 480 by year-end, up from 408 at the end of 2009. Analysts believe this strategy could add to profits while reducing expenses. Costco shares have been on a rebound but they are heading into some strong resistance in the $60-$62 range.

Costco Chart

Companies are taking advantage of the downturn to do a little shopping on their own. They are shopping for cheap money in the form of long term paper. I reported on the century bonds in late August but the shorter term paper is also booming. Companies selling debt this week include HPQ, AXP, USB, GR, UNM, NBR and ATK. Even companies with less than prime credits are making good deals on debt sales. Alliant Tech Systems (ATK) sold $300 million in 10-year debt at 7%. That would have cost them 9% not too long ago. This cheap money is being used to pay off higher interest debt, fund expansion and make acquisitions. This will increase profits in the years ahead. The fact there is a flood of companies loading up on debt is bullish because it means they are no longer afraid of what the future holds. They are bullish on future prospects and this should be bullish for the market.

The volatility around the Beige Book release increased volume slightly to 6.39 billion shares but that is still very low. Without any significant economics on Thursday and Friday I expect volume to decline. We really won't see a return to normal volume until next week when traders return to work. This light volume will either accentuate volatility or flatline due to a lack of motivating news. This makes the rest of the week hard to predict.

The market appears poised for a sell off. However, that may be misleading. The Beige Book did say continued growth but only slower. Slow growth is market positive. The increase in job openings in the JOLTS survey is also mildly bullish. If analysts start focusing on the glass half full or maybe one third full in this case then we could see some money start heading back into the market. I believe this will happen in October but how much sooner it may occur remains to be seen.

We still have the normal September/October portfolio reshuffling cycle and we don't know how much the last four months of volatility has impacted that process. It may be behind us for all we know.

That leaves us with a purely technical view of the market as the only indicator worth watching for the next three weeks. This is September and it pays to be careful.

On a technical basis the S&P is failing at the 1100 level and the 100-day average at 1104. It is failing after a monster short squeeze last week and even in a bullish period it should pause here to consolidate its gains. Since September is not normally bullish that makes the pause even more appealing to new shorts. If I were bearish today the failure at 1104 would appear to be a perfect opportunity to enter new shorts. A break below 1090 would be even more bearish and a break over 1105 would be bullish.

S&P-500 Chart

The Dow is giving us the same picture as the S&P with strong horizontal resistance that matches the 200-day average at 10,450. This is proving to be a tough barrier for the Dow and we will need some additional news event to push us through that level. A breakout on decent volume would be bullish and could easily run to 10,700 on short covering and performance chasing by funds in cash and hoping for some additional weakness in September. Support is 10,350 followed by 10,260.

Dow Chart

The Nasdaq was the surprising out performer today with the NDX gaining +1.27%. However, even with the Nasdaq Composite adding +20 points it could not break over the resistance at 2235. Apple and Google were the star performers while Microsoft and Intel lost ground. Intel and HPQ were downgraded by UBS to neutral. UBS said weaker than expected PC demand would require a minimum of a 15% price cut on processors and deeper discounts on higher end chips. UBS cut its price target on HPQ from $54 to $44.

Even with the continued downgrades on the PC sector the Nasdaq has performed relatively well over the last week and I still attribute that to short covering. If every analyst is cutting estimates of PC and chip demand and cutting price targets you would expect tech stocks to go down. Everyone had loaded up with shorts the prior week and paid the price in last week's rally. However, today's multiple downgrades of the PC/chip sector failed to depress techs. There is no reasonable answer other than still too many shorts. I do not believe funds have suddenly decided to load up on tech stocks at the beginning of September. Maybe the beginning of October but not today.

Resistance is 2235 and a break over that level targets the 200-day at 2272 followed by stronger resistance at 2300. Support is 2200 and a break there targets 2100.

Nasdaq Chart

In summary the indexes have stalled at resistance only one week into historically the worst month of the year. Tech stocks and chip demand are being downgraded daily and the economy is still growing but slowing. There is no bullish case for the rest of the week but that never kept the bulls, or in this case the shorts, from buying stocks and covering positions. Volume should remain low and we would be better off if they just closed the markets until next Monday. Sentiment is mixed and traders are confused. I recommend following the market with small bullish positions over S&P 1105 and bearish positions under 1090. This is a trading market not a buy and hold market. Be prepared for extreme volatility or extreme boredom for the rest of the week.

Jim Brown

New Option Plays

Basic Materials Play

by Scott Hawes

Click here to email Scott Hawes


Vale SA - VALE - close 27.43 change -0.13 stop 59.80

Company Description:
Vale S.A. is a metals and mining company. The Company is also a producer of iron ore and iron ore pellets. It also produces manganese ore, ferroalloys, bauxite, alumina and kaolin. It also produce aluminum, copper, coal, potash, cobalt, platinum group metals (PGMs) and other products. The Company operates large logistics systems in Brazil, including railroads, maritime terminals and a port, which are integrated with its mining operations. Directly and through affiliates and joint ventures, it has investments in the energy and steel businesses. Its principal nickel mines and processing operations are conducted by its wholly owned subsidiary Vale Inco Limited (Vale Inco), which has mining operations in Canada, Indonesia and New Caledonia.

Target(s): 28.80, 29.25, 29.70
Key Support/Resistance Areas: To Follow
Time Frame: 1 to 3 weeks

Why We Like It:
VALE is an international basic materials producer. Demand is increasing from emerging markets and various other developed countries whose economies are growing at a more rapid pace than in the US. RBC cut VALE to sector perform in the pre-market on 9/2 and the stock has lost about -5% since. However, VALE is maintaining two upward trend lines and bounced hard off its 50-day SMA on Monday. I suggest we use the weakness to our advantage by initiating long positions if VALE trades to $27.25. Our stop will be $25.80 with our primary targets near the stock's August highs. NOTE: I have chosen a further out of the money call than normal to reduce risk on the trade should the stock break lower.

Suggested Position: Buy November $29.00 CALL, current ask $0.62, estimated ask at entry $0.55

Annotated daily chart:

Entry on September xx
Earnings 10/28/10 (unconfirmed)
Average Daily Volume: 17 million
Listed on September 8, 2010

In Play Updates and Reviews

Stocks Recover From Tuesday's Sell-off

by Scott Hawes

Click here to email Scott Hawes
Current Portfolio:

CALL Play Updates

ConocoPhillips - COP - close 54.32 change +0.66 stop 52.30

Target(s): 56.20, 57.25, 58.25
Key Support/Resistance Areas: 58.50, 57.00, 53.00 to 53.50
Current Gain/Loss: -6%
Time Frame: 1 to 3 weeks
New Positions: Yes

9/8: COP rebounded today after yesterday's sell-off and has held above its 50-day SMA, while also closing above all other major moving averages. I've adjusted our targets down slightly. If our $57.25 target is reached the profit projection is +53%.

9/7: We are long November COP calls as the stock hit our trigger in early trading. Oil sold off today on the back of a better than +1% rally in the US Dollar. We are going to be right or right out of this trade. COP is sitting on its 50-day SMA and also has solid support down to $53.00. If this support is broken we'll step aside. New positions can be opened with tight stops below. Our official stop has been lowered just underneath the 200-day SMA.

9/4: Whether you believe the economy is improving or not, Oil companies should do well with the slimmest prospects of economic growth. Even if that growth is at a slower pace at least it is not a contracting scenario we've been dealing with throughout August. Technically, COP has made a series of higher lows and is now above all of its moving averages. I would like to see some retracement of last weeks gains which I think will be bought. I suggest readers initiate long positions on weakness in the stock, using a trigger of $54.70 which is near Friday's lows and above the 20-day SMA. More nimble traders could consider buying a breakout over Friday's highs or wait for a larger retracement to the $54.00 area. But I'm not so sure we are going to get it prior to the stock advancing higher. I am looking for a $2 to $3 move higher and if triggered our profit projection for the first two targets is +55% and +80%. Our stop is $52.85.

Suggested Position: Buy November $57.50 CALL, entry was at $1.05

Entry on September xx
Earnings 10/28/2010 (unconfirmed)
Average Daily Volume: 8.9 million
Listed on September 4, 2010

Int'l Business Machines - IBM - close 126.08 change +0.13 stop 121.90

Target(s): 127.75, 129.90
Key Support/Resistance Areas: 132.00, 128.00, 127,00, 123.00
Current Gain/Loss: +0%
Time Frame: 1 to 2 weeks
New Positions: Yes

9/8: IBM is maintaining an upward intraday trend line that began on 8/31 and is also testing the backside of a broken intraday downtrend line that began on 8/31. There is support at current levels and any broader market strength should get IBM moving towards our targets.

9/7: IBM closed near Friday's lows which was a gap higher from Thursday. If the stock does not bounce here it could be headed to $124.60 area. New positions can be considered now or on any further weakness.

9/4: Today's gain in IBM takes some of the sting out of our loss in AAPL. IBM is approaching our first target of $127.75 but we my experience a pullback early this week. Any pullback to the $126.50 to $126.25 area could be considered for new positions. However, if IBM goes higher first I suggest being quick to take profits.

Current Position: Long October $130.00 CALL, entry was $1.50

Entry on September 1, 2010
Earnings 10/18/2010 (unconfirmed)
Average Daily Volume: 5.5 million
Listed on August 28, 2010

iShares Russell 2000 - IWM - close 63.48 change +0.37 stop 59.80

Target(s): 66.50, 67.75
Key Support/Resistance Areas: To Follow
Time Frame: 2 to 4 weeks

9/8: We are waiting for our trigger of $62.50 to enter long positions in IWM. We are going to need a strong down day which could come at anytime, perhaps after tomorrow's jobless claims report. I suggest being ready to take advantage of the dip. My comments from bellow remain the same. Note: I incorrectly listed the wrong November strike price in the play release last night. It has been corrected and I apologize for the error.

9/7: I believe any further weakness in the Russell 2000 and broader market present buying opportunities for an early fall rally and into the mid-term elections, of which will probably result in gridlock in Washington which is generally good for equities. Fund managers will begin reallocating their portfolios and cash on the sidelines should be put to work. Let's use a trigger of $62.50 to initiate long positions in IWM which is near the 38.2% retracement from the lows on 8/24 to the highs on 9/3. Our initial stop will be $59.80. Our targets are near the June and July highs.

Suggested Position: Buy November $65.00 CALL, current ask $2.54, estimated ask at entry $2.15

Entry on September xx
Earnings N/A (unconfirmed)
Average Daily Volume: 60 million
Listed on September 7, 2010

NVIDIA Corp. - NVDA - close 10.32 change +0.33 stop 9.15

Target(s): 10.75, 11.35, 11.80
Key Support/Resistance Areas: 11.85, 11.45, 11.00, 10.25, 10.00 9.45
Current Gain/Loss: +1.3%
Time Frame: 1 to 2 weeks
New Positions: Yes

9/8: NVDA hit our breakout trigger to enter long positions. The stock has now officially printed a higher high which confirms the higher low made last week. The stock has closed above its 50-day SMA and its 20-day SMA is rising. We also have an upward trend line as a good reference point to manage the trade going forward. I think pullbacks can be bought for readers who do not have open positions. $10.00 is a solid support level but I'm not convinced NVDA will trade there unless broader market weakness surfaces in earnest, which is certainly a possibility.

9/7: We are waiting to be triggered in NVDA. The stock closed above its 50-day SMA for the first time since 4/15. If the market rebounds tomorrow we will most likely get triggered on the breakout.

9/4: In my opinion the odds of the broader market going higher are greater than it going lower, although there will probably be a pullback so the bulls can regain their energy. As such, I think NVDA can be bought and I suggest readers initiate long positions using a trigger of $9.72 (just above the 20-day SMA and today's low) or a breakout at $10.30 (above the 8/23 high). Ideally, it would be nice to get the lower price as I have been advocating in recent updates but either has the potential to produce a nice winning trade. Our new stop will be $9.15 initially. I've updated the targets and the play release from 8/28.

9/1 & 9/2: More nimble traders may want to consider bullish positions in NVDA now as the stock is almost 7% below our plan to buy it on a breakout. Officially we will wait for the breakout but if that doesn't happen in soon the play will most likely be dropped.

Suggested Position: Buy October $10.00 CALL with a trigger of $9.72 or $10.30, current ask $0.54

Entry on August xx
Earnings 11/4/2010 (unconfirmed)
Average Daily Volume: 23.5 million
Listed on August 28, 2010

Rackspace Hosting, Inc - RAX - close 20.43 change +0.36 stop 17.95

Target(s): 20.75(hit), 21.30, 21.95, 23.00
Key Support/Resistance Areas: 23.50, 21.40, 20.00, 19.50, 19.00, 18.00
Current Gain/Loss: +14%
Time Frame: 3 to 5 weeks
New Positions: Yes

9/8: RAX double bottomed with yesterday's lows and closed almost +2% higher on the day. We are looking for a continuation of the recent move higher and if the broader market cooperates I'm looking for RAX to hit our 2nd target of $21.30 and possibly $21.95 this week. As these targets approach be ready to take profits or tighten stops to protect them.

9/7: RAX drifted lower all day and broke an intraday trend line. However, RAX closed above the pivotal $20.00 support level and also has all of its major moving averages below. New positions can be considered now, especially on any further weakness. The next level of support below $20.00 is near $19.50.

9/4: RAX consolidated gains today and finished relatively flat after selling off early in the session. New positions can be considered on pullbacks. I've added a $21.95 target and I think this will get hit later this week after a possible dip early.

9/2: This marks the second time our first target has been hit. My comments from remain the same. Also, if tomorrow's employment report is bad readers should consider closing positions.

Current Position: Buy December $21.00 CALL, entry was at $1.40

Entry on August 25, 2010
Earnings 11/9/2010 (unconfirmed)
Average Daily Volume: 1.75 million
Listed on August 25, 2010

Stillwater Mining - SWC - close 14.69 change -0.04 stop 13.55 *NEW*

Target(s): 16.30, 16.95, 17.65
Key Support/Resistance Areas: 14.40 to 14.70
Current Gain/Loss: -20%
Time Frame: 1 to 3 weeks
New Positions: Yes

9/8: SWC is consolidating recent gains and is maintaining an upward trend line that began on 8/25. The stock has strong support all the way down to the $14.00 level. We're looking for SWC to find support soon and make another higher high.

9/7: SWC sold off and closed its gap higher from Thursday to Friday. The stock closed above its key support level of $14.40 to $14.70 and is maintaining an upward trend line since 8/25. New positions can be considered at current levels. I've moved the stop to just below the 20-day SMA.

9/4: We are long SWC as of today's open. The stock opened at our trigger and we are looking for a continued move higher. Readers may want to consider opening new positions on pullbacks, perhaps around $14.75. This would fill the gap higher today. Considering the impressive run in SWC over the past 4 days a pullback should be expected.

Current Position: Long October $15.00 CALL, entry was at $1.20

Entry on September 3, 2010
Earnings 11/4/2010 (unconfirmed)
Average Daily Volume: 1.62 million
Listed on September 2, 2010

PUT Play Updates

Abercrombie & Fitch - ANF - close 34.49 change -0.08 stop 35.65 *NEW*

Target(s): 35.05 (hit), 34.60 (hit), 34.20, 33.55
Key Support/Resistance Areas: 38.20, 37.25, 32.75, 34.00, 30.50
Current Gain/Loss: -10%
Time Frame: Several weeks
New Positions: No

9/8: ANF came within 9 cents of our $34.05 target so this has been raised to $34.20. ANF posted its lowest since 7/21 on Wednesday and the stock looks ready to make another leg down, but we are going to need to see broader market weakness. I suggest readers continue to use weakness to close positions or tighten stops. I've lowered the stop $35.55 and adjusted the final two targets.

9/7: I've lowered the stop in ANF to $36.20 and added a target of $33.25. I suggest readers continue to use weakness to close positions or tighten stops. 9/4: My comments from below remain valid. Sellers stepped in again when ANF tried to move higher and the stock closed near its lows. The chart looks terrible but ANF should benefit from a strong broader market so I urge readers to be cautious. We don't want to be swimming against the current. I'm expecting some market weakness early this week and suggest readers use it to tighten stops or close positions to protect capital. I've narrowed the targets significantly.

9/2: There is obviously a big seller of ANF which makes me think the sell-off could continue in the stock. However, tomorrow is a wild card so I urge readers to be cautious with positions if the broader market rally continues. I've tightened the stop and adjusted the targets.

Current Position: Long October $34.00 PUT, entry was at $2.10

Entry on August 25, 2010
Earnings: 11/11/10 (unconfirmed)
Average Daily Volume: 3.5 million
Listed on August 24, 2010

United Technologies - UTX - close 68.77 change +0.49 stop 69.11

Target(s): 67.70, 67.25, 66.80
Key Support/Resistance Areas: 69.00, 68.50 67.50, 66.50, 64.75,
Current Gain/Loss: -39%
Time Frame: 1 to 2 weeks
New Positions: No

9/8: We need UTX to break below $68.25 and if it does we should get a quick pullback which I'm suggesting we use to close positions or tighten stops to protect capital. I've adjusted the immediate targets up just a tad. Our stop is in the right place which could get hit on any further strength tomorrow.

9/7: UTX came within 2 cents of our immediate target in early trading. My comments from below remain the same. I'm suggesting we use weakness to close positions or tighten stops to protect capital.

9/4: UTX closed just below its 20-day and 50-day SMA's. I'm expecting the stock to turn back lower here but I don't think the selling will last long so I suggest readers begin to look for a exit. We have to respect this week's turnaround in the market and use weakness to close positions, even if that means a loss. I've provided three near term targets readers should use to consider closing positions or tightening stops as they approach.

9/1: We got filled at the higher trigger in UTX so we are now long October $65 puts for $1.60. Considering the turnaround in equities today I suggest readers use caution in this position. I've narrowed the targets to account for the higher fill and suggest readers consider taking profits or tightening stops to protect them at these levels.

Current Position: Long October $65.00 PUT, entry was at $1.60

Entry on September 1, 2010
Earnings: 10/20/10 (unconfirmed)
Average Daily Volume: 4.4 million
Listed on August 31, 2010