Option Investor

Daily Newsletter, Tuesday, 10/26/2010

Table of Contents

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

Market Wrap

Still No Change

by Jim Brown

Click here to email Jim Brown
The markets continue to wait on the Fed and a peaceful year-end for mutual funds on Friday. All the bets have been placed and we are waiting for the Fed to turn over their cards.

Market Statistics

Currencies and economics continued to push stocks around but the movements were slight as funds protect their positions for year-end. Having the indexes at six-month highs for the mutual fund fiscal year end would be the perfect ending for fund managers trying to protect their bonuses. I suspect they will continue to try to pin the indexes to these levels for the rest of the week.

On the economic front the news was mixed with Consumer Confidence rising slightly to 50.2 from 48.5. Not a giant leap but at least in the right direction. However, the low level of confidence suggests holiday spending could be a problem. The expectations component led the gains with a +2.3 point move to 67.8 from 65.5.

Buying plans were flat with the exception of a -3.5 point drop in the percentage of people planning on buying a household appliance or big screen TV. Only 24.2% of respondents said they were considering a purchase. That is the lowest level since June.

On the positive side this was only the second improvement in an October in the last 20 years. The +13% stock market rally was credited with the improvement. More consumers said they expected the market to move higher over the next six months.

Consumer Confidence Chart

The Richmond Fed Manufacturing Survey rose back into positive territory at +5 from the September reading at -2. New orders rebounded from zero to 8.0 but backorders remained flat at -12. This is another in the string of regional Fed manufacturing surveys that has shown improvement even though it was only a minor gain. However, rising employment has been a theme in these reports. Employment in Richmond rose from -3 to +4 for a 7-point gain.

Richmond Fed Manufacturing Survey

There were a couple of home price reports but they did not tell us anything we did not already know. The Case-Shiller showed home prices declined in August by -0.3% for the 20-city index. This is a lagging report and we saw information on Friday that suggested the drop accelerated sharply in September with a -2.9% drop for Sept/Oct. It will be another month before Case Shiller reports those numbers.

The FHFA Purchase Only Home Price Index, also for August, showed prices declined -2.4% over August 2009. This was actually better than expected but still a negative trend. I doubt there is anyone in the country that was surprised housing prices are declining after the end of the homebuyer tax credit so the reports were ignored.

Tomorrow we will get the Mortgage Applications, Durable Goods, New Home Sales and oil and gas inventories. The big report for the week is still the GDP and regional ISMs on Friday.

Economic Calendar

The main focus for the market other than just counting down the minutes until the Fed meeting is still earnings. We have had some mixed results and some weak guidance but overall the picture is still positive. The most important earnings for Wednesday are from ADP. They process the payrolls for millions of workers across the country and that makes their guidance and commentary important.

Earnings Calendar

Broadcom (BRCM) reported earnings after the bell that more than tripled to 60-cents from 16-cents in the comparison quarter. Net of charges that rose to 74-cents and beat the 70-cent analyst estimate. Revenue increased +44%. Broadcom said both wired and wireless businesses posted solid growth. Broadcom raised guidance for revenue to $1.8-$1.9 billion for Q4 and that was more than the $1.75B analysts were expecting. Broadcom shares spiked more than 10% in after hours trading to hit $42.

Broadcom Chart

Silicon Image (SIMG) did even better than Broadcom with earnings of $60.5 beating the estimates of $49 million. Earnings per share were 18-cents and that beat estimates by a whopping 13-cents. They also raised guidance for Q4 and raised profit margin estimates to 55% to 56%. Shares rallied nearly 25% in after hours.

SIMG Chart

F5 Networks (FFIV) also beat the street with earnings of 79-cents compared to estimates of 71-cents. Revenue was up +10%. They raised their guidance significantly to 80-82 cents per share and analysts were only expecting 73-cents. FFIV rallied +$7 in after hours trading.

FFIV Chart

In the energy sector we start getting the earnings from the big guns on Wednesday with COP, on Thursday XOM and Friday CVX. Today we heard from the services sector again with National Oilwell Varco (NOV). The earnings did not show any giant gains and were flat with the comparison quarter but the shares were the second biggest gainer on the S&P. NOV beat the street slightly and the backlog was flat at $4.7 billion but the guidance was outstanding.

NOV has pending orders with Petrobras to outfit several DOZEN new rigs Petrobras is building. Now that Petrobras has their funding NOV expects these orders to tentative orders to go firm in the next month or so and add billions to its backlog for delivery in 2011 and 2012. We have been long NOV in the OilSlick newsletter in anticipation of this event.

Register for my OilSlick.com newsletter and receive free daily updates and commentary on the energy sector. Register here

NOV Chart

Ameritrade (AMTD) posted profits that declined by 27% in Q3 as a result of a dramatic decline in trading activity after the flash crash. The worry by the average retail trader after the flash crash has been persistent and funds continue to flow out of mutual funds. Investors are scared as they get close to retirement and Ameritrade said this was a challenge for the quarter although the trend had improved slightly towards the end of the quarter. The zero interest rate is also a challenge because Ameritrade can't profit from interest on funds in customer accounts. The only way they can profit today is by trading activity until those rates begin to rise and daily trading activity has been running -30% lower than 2009. AMTD posted earnings of 20-cents and below analyst estimates of 23-cents.

AMTD shares plunged on the news but recovered to positive territory after several brokers said made positive comments. AMTD finished the day flat.

The metals sector posted the biggest losers. AK Steel reported a loss of 54-cents compared to estimates for a 34-cent loss. Higher iron ore prices and weak steel selling prices eroded profits. Iron ore had a benchmark price that was 98.65% over the 2009 benchmark. This was significantly higher than the 65% increase AKS had expected. Weak demand continues to be a problem preventing steel companies from passing on price increases. AKS declined -4% on the news.

U.S. Steel (X) posted a Q3 loss of $51 million compared to the profit it forecast as recently as July. They said steel prices decline across the board and customers were decreasing inventory levels ahead of the slower building season over the winter months. This is consistent with comments from the other steel companies and it appears there is a bear market in the steel market. U.S. Steel declined -3% on the news.

Engine maker Cummins Inc (CMI) reported earnings of $1.33 after items and that missed estimates of $1.41. Despite the miss profits nearly tripled but it was on a +56% increase in overseas sales not U.S. sales. The U.S. market continues to be weak because of tighter Federal emission standards that pushed up the cost of engines and lowered performance. Before the new standards went into effect the engine makers saw companies buying up all the available inventory of the older style engines to use as future replacements. They are still fighting that excess inventory held by trucking companies. CMI shares are up over 100% in the last 12 months so profit taking on the miss was to be expected. CMI shares lost -6% on the news.

So far in the Q3 earnings cycle S&P reported that 210 companies have reported with an overall gain of 26.8% over Q3-2009. Over 179 companies have beaten estimates by an average of 58.7% while 28 companies have missed earnings by an average of -25.7%. IBM rescued the Dow from a -70 opening drop when they announced they were buying back an additional $10 billion in stock. That represents 6% of the outstanding shares. The new program will be added to $2.3 billion unspent in a prior $8 billion authorization. IBM said it was going to request authorization for another buyback at the April board meeting. IBM shares had opened a couple dollars negative and the news spiked the stock about $3 to $142 and rescued the Dow from its drop. The excitement faded as the day progressed and IBM closed up only 83-cents.

Research In Motion (RIMM) demoed their new PlayBook tablet at the Adobe developers conference and apparently it was a hit. Comments were "pretty impressive" and now some analysts are speculating it could actually take a bit out of the iPad market. The RIM CEO showed off the tablet for the first time and told onlookers "We are delivering a professional experience that you are used to seeing on your desktops and laptops. We are not trying to dumb down the Internet for a small mobile device." The tablet is aimed at business clients and appears to be suddenly attracting a lot of attention. RIMM gained +6% on the news.

RIMM Chart

The biggest competitor in the business space will be Cisco's professional tablet with high definition audio and video and will include Cisco's Telepresence product. That is a high-end video conferencing application. The tablet will run the Android OS and is expected to deliver in Q1.

Cisco Tablet

It was another boring day in the markets as investors and fund managers wait for the week to expire. Fund managers are hoping for a peaceful finish for October with the markets up +13% since August 31st. This would be the best possible outcome for fund managers to end the year on a high note. I would not be surprised to see one more attempt to spike the market on Wednesday and then hold it through Friday.

As we move into next week there is an entire list of things that could go wrong and I won't repeat them here again but suffice to say there is a possibility of a big vacuum next week. The Fed knows this too and I am hoping they pull one more rabbit out of their hat to keep the consumer sentiment positive. What they are doing is just a band-aid on the bigger problem but as stock traders we want to see them keep pushing stocks higher at least through year-end.

The Dow closed at 11,169 and still in striking distance of a new high for the year this week but also far enough away to require some major momentum to make it happen. I doubt we will see +5, -5 moves the rest of the week. Eventually somebody is going to blink and we will get a decent move. Support is 11,100 and resistance 11,250 and that is the range I expect until the next news event.

Dow Chart - Daily

Dow Chart - 10 min

The S&P posted a whopping +0.02 point gain to close right on 1185 for the second consecutive gain. There is no reason to over analyze this because the technicals are clear. The 1185 level is showing some serious magnetism and fund managers are probably clinging to that level as a launch point for one last try to break 1200 before their October year-end. Support is 1180 making for one extremely tight range that will eventually see a jail break by next week. The only question is which direction the fugitives will run.

S&P-500 Chart

The Nasdaq is undergoing a classic pin job at 2500. If anyone ever has a doubt that fund mangers and market makers control the market they only need to look at the Nasdaq for the last two days. They have pinned it to 2500 and I suspect they will eventually move it over that level by a few points before Friday's close. The current resistance level is 2515-2520 and I fully expect that to be tested before the week is over and I believe they will try to close the week at that level. It would look great in all their year-end publications to be over the 2500 threshold and sitting at the high for the year.

It is going to be a tough job without any material tech earnings to provide motive power but hopefully the string of chip stock earnings after the bell today will lift the SOX and that give managers what they need to lift the Nasdaq.

Nasdaq Chart

In summary I believe managers will try to close the indexes at this level or slightly higher on Friday. Whether they wait until Friday or try it before the major economic reports is unknown. There is no magic formula for this week. It is simply a numbers game for the final windows dressing month of their fiscal year. The added quicksand factor is the unknown Fed announcement next week. That should keep volume low and volatility nonexistent. I am still in buy the dip mode long term but I would be overly cautious in holding longs past Friday's close.

Jim Brown

New Option Plays

Short Candidate

by Scott Hawes

Click here to email Scott Hawes


Illinois Tool Works - ITW - close 46.15 change -0.79 stop 47.83

Company Description:
Illinois Tool Works Inc. (ITW) is a multinational manufacturer of a diversified range of industrial products and equipment. The Company has approximately 840 operations in 57 countries, which are aggregated and organized into eight segments: Transportation, Industrial Packaging, Food Equipment, Power Systems and Electronics, Construction Products, Polymers and Fluids, Decorative Surfaces and All Other.

Target(s): 44.85, 44.15, 43.50
Key Support/Resistance Areas: 47.75, 46.10, 44.60, 44.00, 43.00
Time Frame: 2 to 3 weeks

Why We Like It:
Shareholders were unimpressed with ITW's earnings report on 10/19. The company narrowed guidance to the lower end of its range and the stock appears to be changing trends. Considering the overbought broader market conditions and the weakness being exhibited in ITW, I suggest readers initiate short positions in the stock on any bounces, or a break down below the stock's 200-day SMA and support near $46.00. Let's use a trigger of $46.40 on a bounce or $45.92 on a break down. Our initial stop will be $47.83 but it will be adjusted after the position is opened. Depending on our trigger, we are targeting more than a -$1 move lower, which will produce a nice gain if the set-up unfolds as expected.

Trigger: $46.40 or $45.92 Suggested Position: Buy December $45.00 PUT, current ask $1.20

Annotated chart:

Entry on October xx
Earnings: More than two months (unconfirmed)
Average Daily Volume: 4.5 million
Listed on October 26, 2010

In Play Updates and Reviews

Little Movement

by Scott Hawes

Click here to email Scott Hawes
Current Portfolio:

CALL Play Updates

Archer Daniels Midland Co. - ADM - close 33.37 change -0.34 stop 30.70

Target(s): 36.50, 37.95, and possibly higher
Key Support/Resistance Areas: 38.00, 34.15, 33.00, 32.00
Current Gain/Loss: Unopened
Time Frame: 2 to 4 weeks
New Positions: Yes, see entry point below

10/26: ADM traded down to $33.15 (within 10 cents of our trigger) this morning before bouncing. I expect the 20-day SMA to act as support which is currently rising and just under $33.00. We have a trigger of $33.05.

10/25: ADM has been consolidating around a key long term pivot area between $32 and $33 for the past 6 weeks. The stock has lots of support below and limited overhead resistance until $36.50. I suggest readers initiate long positions on a dip or a breakout. We'll use a trigger of $33.05 on a dip and $34.15 on a breakout. Our initial stop will be $30.70 and it will be adjusted once the position is opened.

Note: ADM reports earnings before the market opens on 11/2. The company has beaten earnings estimates in 3 of the past 4 quarters and I am expecting another surprise beat. Holding positions is a higher risk play so please consider using small position size.

Trigger: $33.05 or $34.15 Suggested Position: Buy December $34.00 CALL, current ask $1.16

Entry on October xx
Earnings Date 11/2/2010 before market (unconfirmed)
Average Daily Volume: 5 million
Listed on October 25, 2010

ATP Oil & Gas Corp - ATP - close 15.06 change +0.01 stop 13.75

Target(s): 16.10, 17.00, 17.90, and possibly higher
Key Support/Resistance Areas: 18.00, 17.00, 16.25, 14.75, 14.10
Current Gain/Loss: -5%
Time Frame: 1 to 3 weeks
New Positions: Yes

10/26: ATPG is consolidating above its 20-day and 200-day SMA's. The recent pullback has continues to be on lighter volume which is a bullish sign. I've lowered the first target by 10 cents to $16.10. I suggest taking profits or tightening stops to protect them if ATPG reaches our first target.

10/25: ATPG hit our higher trigger of $15.11 to launch bullish positions. The stock has support at $14.75 and $14.15. If we get a broader market correction I would look to these areas to consider opening new positions. My comments below remain the same.

10/23: ATPG broke out of resistance from August on heavy volume on 10/11 & 10/12. Over the past week and a half the stock has drifted lower on light volume (a bullish sign) right into the prior resistance from August, which should now act as support. At the same time the stock has formed a bullish descending wedge pattern that could produce a powerful move higher if it breaks out. Also notice the converging 20-day and 200-day SMA's providing further support, along with an upward trend line from its August lows. Finally, there is a gap to fill down near $14.30 which also sets up a good bullish entry point. I suggest we launch bullish positions using a breakout (at $15.11) or gap fill (at $14.30). We'll keep a tight initial stop at $13.75 and it will be adjusted after our entry is triggered.

Suggested Position: Long December $16.00 CALL, entry was at $1.00

Entry on October 25, 2010
Earnings Date 11/4/2010 (unconfirmed)
Average Daily Volume: 2.7 million
Listed on October 23, 2010

First Solar Inc. - FSLR - close 148.15 change +1.00 stop 135.95

Target(s): 145.00, 147.50, 149.75
Key Support/Resistance Areas: 137.50, 140.00, 145.00, 147.50, 150.00
Current Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see entry point below

10/26: FSLR reports earnings on Thursday after the bell. If the stock trades down to the rising 50-day SMA, upward trend line support, and prior resistance level I suggest we take advantage of the weakness. All of the areas are converging near $139 to $141. Let's raise the trigger to $141 and use a dip as a buying opportunity. I am reluctant to chase FSLR so if there is no dip we will most likely drop the play.

10/25: Not much has changed with FSLR. I expect FSLR to pullback to trend line support, its 50-day SMA, and prior resistance from July and April. This is where I suggest launching bullish positions and then target a move back towards its recent highs. I've pushed out the suggested call position to the December $155's. FSLR reports earnings on Thursday after the bell. Holding positions over earnings is a higher risk play. Readers may want to consider selling a further out of the money call to help better define risk. For example, buy the December $155 call and sell the December $160 or $165 call.

10/16: (James) Shares of FSLR have been marching higher after producing a huge (bullish) double bottom pattern with the lows in February and June. Now the stock has created a more bullish pattern of rally, consolidate, rally, consolidate. After two weeks of correcting traders are now buying the dip in FLSR near support in the $137-140 zone.

Aggressive traders could launch positions right now following Friday's bounce from $140. However, I suspect we'll see a better entry point on a minor dip this week. I'm suggesting we use a trigger at $142.50 to buy calls. If triggered we'll use a wide stop loss at $135.95 since FSLR can be so volatile (as an alternative more conservative traders could put their stop closer to $140). If triggered our first target is $145.00. Our second target is $147.50. Our final target is $149.75. More aggressive traders could aim for the $160 area. FYI: Investors should note that FSLR is due to report earnings on October 28th. Earnings reports can significantly raise our risk.

Suggested Position:

Trigger to buy calls @ $141.00

BUY the December $155 calls

Entry on October xxth at $ xx.xx
Earnings Date 10/28/10 (unconfirmed)
Average Daily Volume = 1.5 million
Listed on October 16th, 2010

Genco Shipping - GNK - close 16.30 change -0.14 stop 15.50

Target(s): 16.10 (hit), 16.80, 17.35, 17.95
Key Support/Resistance Areas: 18.25, 17.75, 16.90, 16.25, 15.75
Current Option Gain/Loss: -50.0%
Time Frame: 1 to 3 weeks
New Positions: Yes

10/26: GNK gapped lower, surged in the morning, and then sold off late. The end result was that yesterday's gap higher was closed, however, today was the second consecutive topping tail candle printed. There is support near $16.20 to $16.25, the 50-day SMA at $16.00, and an upward trend line. As long as the stock stays above these areas it is bullish. I suggest readers use strength as an opportunity to close positions or tighten stops to protect capital.

10/25: GNK broke out higher today and appears to be trying to put in a higher low. I've adjusted the targets slightly and suggest readers use any further strength as an opportunity to close positions or tighten stops to protect capital.

10/23: GNK is stuck between its 50-day SMA (below) and 20-day SMA (above). There is resistance at current levels but if GNK can break above today's highs we will have a good chance of reaching our next target. However, I am concerned about the overbought broader market conditions so I suggest readers use strength to consider exiting positions, or tightening stops.

Current Position: Long November $17.00 CALL, entry was at $0.80

Note: Readers who want to give this more time to work may want to consider buying the JAN 2011 $17.50 CALLS

Entry on October 12, 2010
Earnings 11/1/2010 (unconfirmed)
Average Daily Volume: 1.2 million
Listed on October 11, 2010

Humana Inc. - HUM - close: 57.21 change: -0.25 stop: 49.75

Target(s): 57.50, 60.00
Key Support/Resistance Areas: 50.00, 51.00, 53.50, 55.00
Current Gain/Loss: Unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see entry point below

10/26: HUM is simply not pulling back. The company reports earnings on Monday before the bell. I suspect the earnings report will be good which may cause the stock to continue higher, however, if there is a sell off I suggest using the dip as a buying opportunity. Our trigger is $53.80.

10/23 & 10/25: HUM looks extremely bullish here and it is probably because money is rotating into this defensive sector. If HUM pulls back to $53.80 I suggest launching new positions. However, HUM reports earnings next Monday (11/1) so holding positions over the report is a higher risk situation. Readers may want to consider selling a further out of the call to help better define risk, similar to the suggestion in the FSLR play above. The play release from last weekend is below.

10/16: (James) Check out the HMO healthcare index. Investor sentiment for the healthcare sector has changed. Fears about the healthcare reform seem to have faded and now the sector is breaking out to new three-year highs. HUM is helping lead the way. Shares have been very strong this past week with a rally toward the top of its bullish channel. We want to hop on board but wait for a better entry point.

I am suggesting readers use a trigger to buy calls at $52.50. More cautious traders could look for a dip closer $51.00 but I don't think we'll see HUM pullback that low. If we are triggered at $52.50 I'm suggesting a stop loss at $49.75. Our first target is $54.90. Our second target is $57.25. Our third, longer-term target is $59.00. Time frame is six to eight weeks. Technical traders will note that the P&F chart is bullish with a $66 target. FYI: HUM is due to report earnings on November 1st. We normally want to avoid holding over earnings but I would make an exception for HUM.

Suggested Position:

Trigger to buy calls at $53.80

BUY the 2011 January $55 calls.

Entry on October xxth at $ xx.xx
Earnings Date 11/01/10 (confirmed)
Average Daily Volume = 2.1 million
Listed on October 16th, 2010

Jeffries Group, Inc - JEF - close 23.67 change -0.36 stop 22.75

Target(s): 25.10, 25.75
Key Support/Resistance Areas: 25.85, 25.25, 24.25, 23.50, 23.00
Current Gain/Loss: -4.5%
Time Frame: 3 to 4 weeks
New Positions: Yes

10/26: After breaking out on 10/20 JEF has retraced all of the gains and is finding support near its 50-day SMA, which is also at a support level of $23.50. I view this dip as a buying opportunity with a tight stop below. The pullback over the past three days looks like a bull flag to me.

10/25: JEF bounced back today but is struggling at its 200-day SMA. $23.50 offers solid support. My comments from the weekend remain valid.

10/23: JEF printed a bearish engulfing candlestick on Friday and I doubt the stock will be able to swim against the current of a broader market correction, should a correction happen. The stock gapped higher on Thursday and then Friday it retraced the gain and closed the gap. The 50-day SMA and prior resistance is just below near $23.50. The stock and price action look good to me but we are likely going to need the market to continue its march higher. For now, I continue to view dips as buying opportunities.

Suggested Position: Long December $24.00 CALL, entry was at $1.10

Entry on October 29, 2010
Earnings Date 1/20/11 (unconfirmed)
Average Daily Volume: 1.1 million
Listed on October 19, 2010

Sears Holdings Corp - SHLD - close 76.30 change +0.58 stop 72.48 *NEW*

Target(s): 78.85, 81.50, 85.00, 88.00
Key Support/Resistance Areas: 90.00, 85.00, 82.00, 75.30, 73.00
Current Gain/Loss: -22%
Time Frame: 3 to 4 weeks
New Positions: Yes

10/26: SHLD gapped lower this morning but the weakness was short lived as the stock was immediately bought, gaining +0.77% on the day. The stock remains in an upward channel and is hanging out at its recent highs. If the broader market holds up SHLD should easily trade towards our targets.

10/25: SHLD reversed course today, but the stock did not take out Friday's lows. I've raised the stop to $72.48 and added $78.85 as a target and suggest readers begin to tighten stops if we head that direction. $75.30 is solid support area.

10/23: Readers may want to keep an eye on $78.90 as a potential exit target. This is near highs from Thursday and should produce a +15% gain. Consider tightening stops if we get up there. Friday was the highest closing price the stock has seen since 6/17 so momentum is on our side, but we are going to need help from the broader market and retail sector, which has been performing extremely well lately.

Suggested Position: Long December $80.00 CALL, entry was at $3.40

Entry on October 21, 2010
Earnings Date 11/18/10 (unconfirmed)
Average Daily Volume = 831,000
Listed on October 16th, 2010

PUT Play Updates

Fastenal Co. - FAST - close: 52.50 change: -0.12 stop: 54.25

Target(s): 51.20, 50.10, 48.25, maybe lower
Key Support/Resistance Areas: 55.00, 52.00, 50.00, 48,00,
Current Gain/Loss: -40%
Time Frame: 3 to 4 weeks
New Positions: Yes

10/26: Fast is struggling at its 20-day SMA and downtrend line that began on 10/11. A trip to the 50-day SMA seems inevitable which will also tag our first target. Time decay is starting to concern me with November options so I suggest we use weakness to close positions and/or tighten stops to protect capital.

10/25: FAST gapped higher again today and it was met with immediate selling as the stock sold off the entire day. My comments below remain the same.

10/23: FAST gapped higher on Friday and it was immediately sold into. The stock has yet to trade above its highs from the past two weeks and closed below its 20-day SMA which is starting roll over. If we get a more meaningful broader market correction FAST should quickly head towards our targets which is when we want to be exiting positions or tightening stops.

10/21: Fast has bounced up to its 20-day SMA from below and has yet to take out highs from the past two weeks. We are most likely going to need a more meaningful healthy broader market correction for the position to get back into positive territory.

Current Position: Long November $50.00 PUT, entry was at $1.00

Entry on October 18, 2010
Earnings Date 10/12/10
Average Daily Volume = 1.0 million
Listed on October 16, 2010

PNC Financial - PNC - close 54.00 change -0.00 stop NONE

Target(s): 53.00, 52.10, 51.05 (hit), 50.35
Key Support/Resistance Areas: 54.50, 53.50, 50.50, 49.50, 48.75, 47.00
Current Gain/Loss: -80%
Time Frame: 1 to 2 weeks
New Positions: Yes

10/26: PNC closed flat in the day. Our position is deep out of the money and we are waiting to see if the stock corrects with the broader market, which we will use as an opportunity to close positions. The stock is holding an upward trend line that began from last week's lows. If it breaks the next support levels are $53.00 and $52.10. I doubt our option value is going increase a significant amount, but recovering 20 to 30 cents is certainly in the cards.

10/25: I do not see many changes from my comments below. PNC lost -1.3% today and printed a bearish dark cloud cover candle pattern which indicates a decline is imminent. Let's see if we get a healthy broader market correction see how far we can ride this lower.

10/23: PNC just keeps going like the energizer bunny. We have gotten destroyed on this play and our option premium has almost evaporated. Keeping a stop in place now doesn't make a lot of sense to me. I would rather hold the position and ride it lower if the market corrects between now and expiration, which is three full trading weeks. Our opportunity to close positions was late last week when PNC was at the $51.00 level. Let's see what happens in the coming days and we'll continue to monitor the developments.

Current Position: Long November $48.00 PUT, entry was at $1.26

Entry on September 30, 2010
Earnings: 10/21/2010 (unconfirmed)
Average Daily Volume: 5 million
Listed on September 29, 2010