Option Investor

Daily Newsletter, Thursday, 2/3/2011

Table of Contents

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

Market Wrap

Another Dip Bought

by Jim Brown

Click here to email Jim Brown
Another dip on Egypt violence and mixed earnings news was bought once again. The shallow dip despite the various bits of bad news was a key bullish indicator.

Market Statistics

The increasingly bad news from Egypt failed to hold the market down after retailers posted a big surprise for same store sales in January. Add in some positive economic spin from a Bernanke speech and the shallow dip was again bought to push the Dow to a new 2.5 year high.

Chain store sales for January were very strong with 4.8% growth compared to estimates in the +1.5% to 2% range. Most analysts had predicted a dismal January because of the number and severity of snowstorms during the month. Not only did sales come in much stronger than expected but the majority of companies reporting raised their guidance. Some of those chains were J.C. Penney, Kohl’s, Ross, TJX, Gap, Limited and Aeropostale

The spike in January sales at many chains was dramatic. The Limited (LTD) reported a 24% increase in sales compared to estimates of +6.9%. Part of that spike was due to the change in timing of a regular promotion that shifted sales into January. Zumiez (ZUMZ) saw sales rise +15.3% compared to 8.1% estimates. Dillards (DDS) saw gains of +6% compared to +1.3% estimates.

Overall sales rose +7.3% at apparel stores, +6% at luxury stores, +8.3% at wholesale clubs and +4.8% at drug stores. Chains said sales would have been even better but there was less clearance merchandise left over from strong December sales. Even with the lower inventory levels the chains estimated sales would have been 2% to 3% higher without the storms.

The excitement over the January sales was strong because January is normally the slowest month of the year. Good economic news is breaking out all over.

The ISM Nonmanufacturing Index rose to 59.4 from 57.1 and the highest level since 2005. The new orders component rose to 64.9 and a new historic high. The business activity component rose to 64.6 and also a historic high. Thirteen industry sectors reported business activity expansion in January.

The strong showing in both the ISM Manufacturing and ISM Services suggests the economy is transitioning into a mode that is self-sustaining. The employment component rose +1.9 points to 54.5 and the highest level in more than two years. Historically the services sector will produce faster employment growth than the manufacturing sector so a rebound in services is very positive.

ISM Services Chart

Weekly Jobless Claims declined from 457,000 to 415,000 last week and the drop was more than analysts expected. The prior week's surge was caused by a monster blizzard in the Northeast. This suggests next week's report could show another blip higher from the recent storm. The trend is still positive and moving lower. Within 2-3 weeks I would expect to see numbers under 400,000 on a routine basis.

The big report due out on Friday is of course the Non-Farm Payrolls. Official estimates are for a gain of +145,000 jobs. Given the severity of the recent storms the number of storms the actual number could be off the scale and a smaller than expected number should be ignored. January has the largest seasonal adjustment with a swing of more than three million jobs in play due to the termination of seasonal workers. Literally the number on Friday could be a major miss thanks to the storms. However, if the number is positive and in the consensus range it would be very bullish and suggests February could be a blowout month.

In the ADP report on Wednesday they predicted a gain of +187,000 jobs. TrimTabs.com is not publishing a number but calling instead for an "upside surprise." Breifing.com claims the consensus is +148,000 and their estimate is just slightly lower.

There will be a lot of noise surrounding the payroll report on Friday because of the annual benchmark revisions. Once a year in January the BLS tries to modify all their estimates for the year to match the actual data from the state employment agencies. This revision will be headline news all day on Friday.

The market got a boost from Bernanke in a speech in Washington. He was more bullish on employment and growth but he still does not believe the economy has reached enough momentum to be self-sustaining. He sees no reason to end the QE2 early AND left the door open to extending the QE program past June. This caught many analysts off guard because they were anticipating an early end to QE2 because of the accelerating economy. Bernanke said the outlook for growth, direction of the unemployment rate and inflation will be considered in making a decision to extend the QE program. Bernanke said the Fed would require a sustained period of significant job creation before the recovery could be considered self-sustaining. That pretty much guarantees the Fed will have a tough decision in June unless this recent acceleration in growth continues to gain speed.

If the Bernanke does want to continue a QE program in some form in June he is facing a tough room. There are three FOMC members who would likely vote against a new program on fears of stoking inflation. With that kind of resistance it could be political suicide to push the program through and then be held hostage by lawmakers when inflation finally roars into the picture. It will be interesting to see how Bernanke manages the transition from QE2 to QE3. Even more interesting will be watching him did the FOMC out of its monster $3 trillion hole before it can start raising rates. Actually real rates will be well ahead of the Fed funds rate since rates will rise once the Fed quits injecting money and rise again when the Fed starts selling those bonds it has accumulated.

Bill Gross was on CNBC after the Bernanke speech and he believes the Fed is not going to raise rates for at least 12 months because the unemployment rate will remain high until 2012.

Bernanke laid out the Fed's accomplishments through the QE2 program during his speech. "A wide range of market indicators supports the view that the Federal Reserve's securities purchases have been effective at easing financial conditions. For example, since August, when we announced our policy of reinvesting maturing securities and signaled we were considering more purchases, equity prices have risen significantly, volatility in the equity market has fallen, corporate bond spreads have narrowed, and inflation compensation as measured in the market for inflation-indexed securities has risen from low to more normal levels." Note that the first accomplishment listed was the rise in equity prices. Don't fight the Fed!

Evidently the message is getting out to investors. In the first three weeks in January U.S> equity funds saw inflows of $8.3 billion and global equity funds saw inflows of $7.7 billion. The markets are breakout to new highs and retail investors are moving back into the market. Investors are attracted to new market highs like moths to a flame.

The airline sector is not where returning investors should be putting new money. Since December 1st more than 52,742 flights have been cancelled due to weather or other events. That is 5% of the total of all scheduled flights. Canceled flights are expensive because they disrupt future schedules and take planes out of the schedule forcing cancellation of other flights not directly impacted by the weather. Those planes have to be reinserted back into the flight system before future schedules can be resumed. Airlines are already starting to warn about profit shortfalls and the winter is not over yet. One analyst thought the December cancellations would cost $100 million and the January cancellations could be even more expensive. Add in the rising cost of jet fuel and it is going to be a bad winter for the airlines.

Amex Airline Index Chart

In earnings news Estee Lauder (EL) posted higher than expected earnings due to robust sales during the holiday season. Earnings rose to $1.71 per share and beating estimates of $1.44. Estee Lauder raised guidance to between $3.40 and $3.60 for the full year compared to prior guidance of $2.90-$3.10. Shares of EL spiked +14% to $91.90.

Estee Lauder Chart

Coinstar (CSTR), the company behind the Redbox DVD kiosks, warned in January that earnings would be lower than expected. The stock was appropriately punished and traders began moving back into the stock last week in anticipation of a rebound with earnings. Bad idea!

Redbox reported earnings tonight that were inline with the lowered guidance but warned that Q1 earnings would also be lower due to higher inventory levels acquired for sales that did not materialize. Redbox agreed before the holidays to delay movie rentals for 28 days after a DVD title has been released. They removed older inventory early and purchased new titles but the demand never materialized. Now investors are left worrying if the 28-day rule is a killer for Redbox since online services have fewer restrictions. Why brave a blizzard to rent a couple DVDs when you can download the movies for just a few cents more?

Coinstar is now predicting earnings for Q1 of 15-25 cents and analysts were expecting 57-cents. That is going to hurt! CSTR shares dropped another $5 in after hours.

Coinstar Chart

The Las Vegas Sands (LVS) posted a decent revenue increase for Q4 but it was still short of estimates. Revenue rose +57% to $2.02 billion but short of the $2.07 billion analysts expected. Earnings doubled to 42-cents and better than the 39-cent estimate. Most of the gains came from the Macau casino despite a run of bad luck at the tables. Margins fell from 21% to 13% as a string of lucky whales pocketed some major winnings. Fortunately the house always wins in the long run and those whales will probably end up giving most of it back over the coming months.

Chart of LVS

The problem in Egypt is rapidly escalating and the U.S. is now working with Egypt's new vice president, Omar Suleiman, on a plan to force Mubarak to leave immediately. Reportedly they are trying to work out a plan with Suleiman and the Egyptian military to force Mubarak to resign and immediately begin making some constitutional reforms in Egypt. Britain is also rumored to be involved in the talks.

The crackdown on Thursday on international media appears to be an attempt to cut off news to the outside world of what is expected to be even larger riots and demonstrations this weekend. Numerous reporters and photographers were beaten and their equipment destroyed by pro-government supporters. Several were hospitalized. The government accused the reporters of being sympathetic to anti-government demonstrators.

Other countries are flying their citizens out on chartered planes by the thousands. Egypt Air has been unable to find more than one-third of their flight crews and outgoing planes are packed. Many incoming passengers have been arrested for bringing in weapons of various sorts in anticipation of joining in the demonstrations.

I believe this problem is going to be solved with Mubarak's resignation in the very near future. It has to be solved or the demonstrations are going to become much more violent. The protestors are demanding Mubarak resign by Friday but I doubt that will happen.

I believe the rally to a new high on the worsening news from Egypt is yet another confirmation the bad news bulls are in control. The morning dip was very shallow and quickly bought. Investors are worried they are going to miss further gains and they are buying anything that looks like a dip.

The S&P rallied to close right at initial resistance at 1308 for the third consecutive day at this level. Wednesday's minor decline kept it close and the S&P is poised to breakout on good payroll numbers. The key will be holding any breakout gains.

The S&P has moved more sideways than vertical over the last month as it consolidated the December gains. Each move higher was followed by several days of backing and filling but the trend has been steadily higher. Eventually this will end with a steep bout of profit taking but you have to stick with the trend. Any dip remains a buying opportunity.

S&P-500 Chart

The Dow is creeping slowly higher and stretching its gains over 12,000 but the pace is very slow. The news events are being offset by economic events and the trend remains positive. Uptrend support is now 11,850 and the volatility from last Friday looks very out of place in the two-month trend.

Dow Chart

The Nasdaq is still lagging the Dow and S&P but the pressure is building. Over the month of January the Nasdaq built a base above 2675 and is ready to use that base for another move higher assuming there is not a news event that damages tech sentiment. We have already had several high profile events over the last couple weeks and none were successful in slowing the gains for more than a day or two. Resistance is 2760 and support 2675.

Nasdaq Chart

I continue to be amazed at how the markets are ignoring bad geopolitical news. The positive economics along with the Fed's QE2 program is providing a powerful reason to be long. I believe every dip is a buying opportunity and I know full well that eventually we will see some serious profit taking. That is how the market works. When that larger dip comes it will be an even better buying opportunity. Earnings and economics are both improving and the Fed is cheerleading from the sidelines. Go Ben!

Don't fight the Fed, buy the dips!

Jim Brown

Send Jim an email

New Option Plays

Wait for the Break

by James Brown

Click here to email James Brown

Editor's Note:

The jobs report on Friday morning will likely determine the market's direction tomorrow. With that in mind, here are a few stocks that caught my eye:

SHLD - I have mentioned Sears before and the stock just broke out past key resistance near $80.00

FFIV - This tech stock is starting to recover from its painful sell-off. The $120 level and the 100-dma might be short-term resistance but I would be tempted to buy calls on a dip near $116-115.

COST - This wholesaler just rallied to new two-year highs on strong January same-store sales.

ILMN - Shares have a nice strong up trend. ILMN looks like it's coiling for another breakout higher.

PCAR - This truck maker has been crushed recently. Now shares are bouncing from an intraday dip near round-number support at $50.00. I would be tempted to buy calls now with a tight stop under today's low (49.70) and exit on a bounce near $54.00.

- James


Wynn Resorts - WYNN - close: 119.40 change: +0.53

Stop Loss: 117.40
Target(s): 129.00, 135.00
Current Option Gain/Loss: Unopened
Time Frame: 4 to 6 weeks
New Positions: Yes, see TRIGGER

Company Description

Why We Like It:
The long-term trend for WYNN is up but shares have spent the last four weeks consolidating sideways under resistance in the $121 area. I suspect that if the jobs report comes in positive tomorrow we could see WYNN breakout higher. I am suggesting a trigger to launch bullish positions at $122.00. If triggered our targets are $129.00 and $134.50.

FYI: Tonight, rival Las Vegas Sands (LVS) reported earnings that beat estimates but missed on the revenue number. Shares of LVS are down sharply after hours. Shares of WYNN were also trading lower near $117. We'll have to wait and see how stocks react to the jobs data tomorrow and then re-evaluate. For now, use a trigger to buy calls at $122.00.

Trigger @ $122.00

- Suggested Positions -

Buy the March $130 calls (WYNN1119C130)

Annotated Chart:

Entry on February xxth at $ xx.xx
Earnings Date 02/24/11 (unconfirmed)
Average Daily Volume = 2.0 million
Listed on February 3rd, 2010

In Play Updates and Reviews

Gold Miners Rally

by James Brown

Click here to email James Brown

Editor's Note:

The market recovered from its morning lows with gold miners leading the bounce as gold hits two-week highs. Overall it was a relatively quiet day for the newsletter.


Current Portfolio:

CALL Play Updates

Coach Inc. - COH - close: 54.20 change: +0.34

Stop Loss: 52.49
Target(s): 58.50, 62.00
Current Option Gain/Loss: Unopened
Time Frame: 4 to 6 weeks
New Positions: Yes, see trigger

02/03 update: Several big retailers reported stronger than expected same-store sales in January even though the market feared a miss due to weather. The RLX retail index gained +1.2%. Shares of COH added +0.6% and it looks like this stock is coiling for a breakout past resistance near $55 soon.

I am suggesting a trigger to buy calls at $55.35. If triggered we'll target a move to $58.50 and $62.00 but keep in mind that the $60.00 level could end up being round-number, psychological resistance.

Trigger @ $55.35

- Suggested Positions -

Buy the 2011 March $55.00 calls (COH1119C55)

- or -

Buy the 2011 March $57.50 calls (COH1119C57.5)

Entry on February xxth at $ xx.xx
Earnings Date 04/20/11 (unconfirmed)
Average Daily Volume = 4.1 million
Listed on January 31st, 2011

Compass Minerals - CMP - close: 93.82 change: -1.20

Stop Loss: 89.85
Target(s): 94.75, 99.00
Current Option Gain/Loss: + 56.0%, and +45.0%
Time Frame: a few days
New Positions: See below

02/03 update: We only have three trading days left. CMP reports earnings on Feb. 8th after the closing bell and we do not want to hold over the announcement. Thus more conservative traders may want go ahead and exit now. Currently our stop is $89.85. Readers may want to inch their stops higher.

- Suggested Positions -

Long the 2011 February $95.00 calls (CMP1119B95) Entry @ $1.25

- or -

Long the 2011 March $95 calls (CMP1119C95) Entry @ $2.00

02/03 New stop loss @ 89.90
02/01 Target Hit @ 94.75. Feb. call @ $2.50 (+100%)
Mar. call @ $3.30 (+65%)
02/01 New stop loss @ 89.85

Entry on January 28th at $91.00
Earnings Date 02/08/11 (confirmed)
Average Daily Volume = 210 thousand
Listed on January 27th, 2010

FactSet Research Systems - FDS - close: 101.36 change: -0.32

Stop Loss: 95.75
Target(s): 99.90, 103.50
Current Option Gain/Loss: + 89.6%, and +207.1%
Time Frame: 2 to 3 weeks
New Positions: see below

02/03 update: FDS is still digesting gains and could be vulnerable to a drop back toward the $98 area. Currently our final exit target is $103.50 but I would seriously consider an early exit right here. I am not suggesting new positions at this time.

Small Positions

Long the 2011 February $95 call (FDS1119B95) Entry @ $2.90

- or -

Long the 2011 February $100 call (FDS1119B100) Entry @ $0.70

02/02 Consider locking in gains now (Options @ +124% and +242%)
01/29 Consider an Early Exit now!
01/27 New stop loss @ 95.75
01/27 1st Target Hit @ 99.90. Feb. $95 call @ $4.25 (+46.5%)
01/27 1st Target Hit @ 99.90. Feb. $100 call @ $1.45 (+107%)

Entry on January 25th at $96.64
Earnings Date 03/16/11 (unconfirmed)
Average Daily Volume = 181 thousand
Listed on January 24th, 2010

Perrigo Co. - PRGO - close: 71.58 change: -1.18

Stop Loss: 69.90
Target(s): 79.00
Current Option Gain/Loss: -44.9%
Time Frame: 4 to 6 weeks
New Positions: see below

02/03 update: PRGO is still slipping lower and is nearing support near the $70 area. This looks like a bullish entry point to buy the dip but more conservative traders might want to wait for some strength. The plan was to use small positions to limit our risk. Our target is $79.00.
The Point & Figure chart for PRGO is bullish with an $85 target.

- Small Positions to Limit our Risk -

Long the March $75 calls (PRGO1119C75) Entry @ $2.18

Entry on February 2nd at $73.61
Earnings Date 02/01/11 (confirmed)
Average Daily Volume = 915 thousand
Listed on February 1st, 2010

CBOE Market Volatility Index - VIX - close: 16.69 change: -0.61

Stop Loss: N/A
Target(s): 24.00, 28.00
Current Option Gain/Loss: -31.2%
Time Frame: 4 to 6 weeks
New Positions: see below

02/03 update: Volatility is contracting again. I would be VERY tempted to launch new positions again if the VIX nears the 2010 and 2011 lows near 15.50. The short-term trend is now down. More conservative traders will want to consider an early exit now to preserve capital. I am not suggesting new positions at this time.

We have two targets to take profits at 24.00 and at 28.00.

- Suggested Positions -

Long the 2011 March $22.50 calls (VIX1116C22.5) Entry @ $1.60

Entry on January 26th at $17.00
Earnings Date --/--/--
Average Daily Volume =
Listed on January 25th, 2010

PUT Play Updates

Advance Auto Parts Inc. - AAP - close: 62.48 change: +0.87

Stop Loss: 65.05
Target(s): 60.25, 58.00
Current Option Gain/Loss: + 50.0%
Time Frame: 6 trading days
New Positions: see below

02/03 update: AAP produced a bit of a bounce after yesterday's big drop. We only have four trading days left so I'm a little reluctant to open new positions.

We want to exit ahead of the earnings announcement. The Point & Figure chart for AAP is bearish with a $52 target.

- Suggested Small Positions -

Long the 2011 Feb. $60.00 puts (AAP11N60) Entry @ $0.50

02/02 New stop loss @ 65.05

Entry on February 1st at $64.22
Earnings Date 02/09/11 (unconfirmed)
Average Daily Volume = 1.0 million
Listed on January 31st, 2011

BorgWarner Inc. - BWA - close: 65.72 change: -0.02

Stop Loss: 70.10
Target(s): 63.50, 60.25
Current Option Gain/Loss: +19.7%, and +20.0%
Time Frame: 3 to 4 weeks
New Positions: see below

02/03 update: Hmm... be careful here. We're down to our last four days before we have to exit in front of earnings. BWA dipped to $64.22 intraday but the bounce back this afternoon makes this look like a short-term bottom. I am somewhat reluctant to open new positions with just a few days left. Our targets are $63.50 and $60.25. FYI: The Point & Figure chart for BWA has turned bearish.

Use small positions to limit our risk.

- (small positions) -

Long the Feb. $65 PUTs (BWA1119N65) Entry @ $1.42

- or -

Long the Mar. $65 PUTs (BWA1119O65) Entry @ $2.25

02/02 New stop loss @ 70.10

Entry on January 31st at $67.77
Earnings Date 02/10/11 (confirmed)
Average Daily Volume = 2.0 million
Listed on January 29th, 2010

Citrix Systems - CTXS - close: 65.18 change: -0.60

Stop Loss: 67.65
Target(s): 60.10, 58.00
Current Option Gain/Loss: -68.4%, and -40.0%
Time Frame: 2 to 3 weeks
New Positions: Yes, see below

02/03 update: Traders bought the dip in CTXS again. I would be tempted to wait for a close under $64.00 before initiating new positions. Previously I suggested that readers buy half their position at the start and if we see another failed rally near $66 then we can buy our second half. Our targets are $60.10 and $58.00.

- (small positions) -

Long the Feb. $60 PUTs (CTXS1119N60) Entry @ $0.95

- or -

Long the Mar. $60 PUTs (CTXS1119O60) Entry @ $2.00

Entry on January 31st at $63.43
Earnings Date 01/26/11
Average Daily Volume = 3.2 million
Listed on January 29th, 2010

Donaldson Company, Inc. - DCI - close: 58.72 change: -0.02

Stop Loss: 60.35
Target(s): 52.75, 50.50
Current Option Gain/Loss: Unopened
Time Frame: 4 to 6 weeks
New Positions: Yes, see trigger

02/03 update: DCI managed another bounce at technical support with its rising 50-dma. There is no change from my prior comments.

If this stock can breakout past $60.00 we will want to consider buying call options instead. For now the plan is to buy puts with a trigger to initiate positions at $57.45. If triggered we'll aim for a drop to $52.75 and $50.50. I would keep your position size small to limit our risk.

Trigger @ 57.45 (Small Positions)

- Suggested Positions -

Buy the 2011 March $55 puts (DCI1119O55)

Entry on February xxth at $ xx.xx
Earnings Date 02/23/11 (unconfirmed)
Average Daily Volume = 208 thousand
Listed on January 31st, 2011

Google Inc. - GOOG - close: 610.15 change: - 1.85

Stop Loss: n/a
Target(s): n/a
Current Option Gain/Loss: see below
Time Frame: 1 month
New Positions: No

THIS IS A STRANGLE TRADE (not a simple put play)

02/03 update: GOOG is hovering near the $610 level. I don't see any changes from my prior comments. No new strangle positions at this time.

STRANGLE TRADE: Buy an out of the money CALL and PUT

STRANGLE #2 (February) initial cost $15.10, currently: $1.85 (-87.7%)

2011 February $680 call (GOOG1119B680) Entry @ $6.20

- AND -

2011 February $580 put (GOOG1119N580) Entry @ $8.90

01/22: Exit the January strangle at the open.

Entry on January 20th at $626.77
Earnings Date 01/20/11 (unconfirmed)
Average Daily Volume = 3.4 million
Listed on January 19th, 2010

iShares Russell 2000 Index - IWM - close: 79.73 change: -0.30

Stop Loss: --.--
Target(s): 75.00
Current Option Gain/Loss: -98.1%
Time Frame: 1 to 2 weeks
New Positions: see below

02/03 update: I really debated on whether or not we should exit our IWM put play tonight. It certainly looks like the market wants to run higher from here. Unfortunately, if we did "exit" here we're not saving anything. Our put option has almost evaporated to nothing (currently bidding 3 cents). At this point the play is a loss. I'm suggesting we let it ride at this point and remove our stop loss. We still have two weeks left and anything could happen. So at this point, no stop loss and no new put positions. Nimble traders may want to consider buying calls on a move past $80.00 or $80.70.

Small Position only

Long the 2011 February $77 puts (IWM1119N77) Entry @ $1.65

02/03 Remove the stop loss
01/29 New stop loss @ 80.25

Entry on January 20th at $78.14
Earnings Date --/--/--
Average Daily Volume = 38 million
Listed on January 19th, 2010

Kohl's Corp. - KSS - close: 51.06 change: +0.31

Stop Loss: 52.25
Target(s): 47.00, 45.50
Current Option Gain/Loss: Unopened
Time Frame: 3 weeks
New Positions: Yes, see trigger

02/03 update: Analysts were expecting KSS to report +2.4% same-store sales growth in January. The company only hit +1.4%. That's why shares underperformed the retail sector. I don't see any changes from my prior comments.

I am suggesting a trigger to buy puts at $49.75. If triggered we'll use a stop loss at $52.25. Our exit targets are $47.00 and $45.50. We want to close this trade before KSS reports earnings in late February. I'm suggesting March puts but more aggressive traders could use February puts. Let's keep our position size small.

Trigger @ 49.75

- Suggested Small Positions -

Buy the March $50 PUT (KSS1119O50) current ask $1.40

Entry on February xxth at $ xx.xx
Earnings Date 02/24/11 (confirmed)
Average Daily Volume = 4.9 million
Listed on February 2nd, 2010

Panera Bread Co. - PNRA - close: 98.93 change: +1.05

Stop Loss: 100.05
Target(s): 95.15, 91.00
Current Option Gain/Loss: -52.6%
Time Frame: 3 weeks
New Positions: see below

02/03 update: We've only got five trading days left on this trade but we may not make it. The oversold bounce has reached round-number resistance at the $100 level. All it would take is an intraday spike higher to hit our stop and close this trade. I am not suggesting new positions at this time.

- Suggested Positions - (small positions)

Long the 2011 February $95 PUTS (PNRA1119N95) Entry @ $2.85

01/29 New stop loss @ 100.05
01/28 1st Target Hit @ 95.15, option @ $3.20 (+12.2%)
01/26 New stop loss @ 100.55, target adjusted from 95.50 to 95.15

Entry on January 24th at $97.96
Earnings Date 02/10/11 (unconfirmed)
Average Daily Volume = 364 thousand
Listed on January 22nd, 2010


Decker's Outdoor Corp. - DECK - close: 79.61 change: +3.06

Stop Loss: 80.25
Target(s): 70.50, 65.50
Current Option Gain/Loss: -66.0%, and -37.5%
Time Frame: 3 to 4 weeks
New Positions: see below

02/03 update: It's time to hit the escape button on DECK. Several major retailers reported better than expected January same-store sales today. The news fueled consumer discretionary stocks and DECK was one of them with a +4% rally as shares broke through resistance near the $78 level. Today's rally did pause at round-number resistance at $80.00 but I don't expect it will hold. I'm suggesting an early exit now to cut our losses.

- Suggested Positions -

2011 February $75.00 PUTS (DECK1119N75) Entry @ $2.65, Exit $0.90 (-66%)

- or -

2011 March $75.00 PUTS (DECK1119O75) Entry @ $4.80, Exit $3.00 (-37.5%)

02/03 Exit Early. Options at -66% and -37.5%
01/27 DECK hit our trigger to buy puts at $77.00


Entry on January 27th at $77.00
Earnings Date 02/24/11 (unconfirmed)
Average Daily Volume = 1.5 million
Listed on January 20th, 2010