Option Investor

Daily Newsletter, Tuesday, 12/21/2010

Table of Contents

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

Market Wrap

Ho, Ho, Ho!

by Jim Brown

Click here to email Jim Brown
Santa came early to the equity markets and he brought a stocking full of coal for the bears.

Market Statistics

The bears are having a hard time digesting the bullish trend in the markets. The rally began to break out of its nearly two weeks of consolidation where every minor uptick to resistance was seen as a bearish entry point for the shorts. Every downtick was seen as confirmation of their expectations. Those expectations were dealt another blow on Tuesday as the indexes eased over recent resistance to new multiyear highs.

The S&P stretched out its gains to close at 1254.64 and over the 1251.78 close on the day before Lehman failed. That is seen as a milestone for the market and one that has been watched closely. Some analysts believed a return to that level would give investors trapped in pre Lehman positions an opportunity to finally exit.

Just because the indexes moved slightly over recent resistance it is not time for the bulls to celebrate just yet. The gains were small and on very low volume. It is confirmation of the trend but without any serious conviction. With the indexes up around 20% since August there are plenty of reasons for a potential temporary decline in January. Until then the bulls will continue to celebrate their good fortune even if the celebrations are low key.

There was only one economic report today and it was strongly positive. The weekly Chain Store sales spiked +1.7% to push year over year growth to +4.2%. This was the strongest weekly gain sin five months. The ICSC said consumer spending appears to be accelerating. The ICSC survey showed 73.9% of holiday shopping had been completed compared to 70.9% in the prior week. However, it was below the 80.1% for this week in the year before the recession.

Despite the strong sales the ICSC is projecting December sales growth between 3.0% and 3.5%. They warn comparisons are turning more difficult and supporting factors like the change in the weather will be gone. Higher gasoline prices are also going to be a drag.

The ICSC is predicting the holiday shopping season overall will exceed expectations. They expressed surprise in the strength of spending given the weakness in the fundamentals like employment and shrinking real estate wealth.

Gasoline prices are hovering at $3.00 per gallon, a level we have not seen since October 2008. Prices are up 40-cents from year ago levels. That is roughly $8 more per 20 gallon fill-up. That $3 price is commonly seen as the tipping point for consumers. Under $3 and they will bite the bullet and continue to drive even though they may complain louder. Over $3 produces sticker shock with that 3 as the first number and consumers begin curtailing driving and cutting back on spending. Quite a few analysts believe the oil shock of 2008 was instrumental in creating the subprime crisis. Financially strapped consumers paying sometimes more than $4 per gallon started falling behind on their mortgage payments and the subprime crisis accelerated.

For the rest of the holiday shortened week there are still a lot of economic reports. The GDP on Wednesday is the most important although there are three housing reports as well. Consumer sentiment on Thursday could generate some market buzz if we see a sharp gain from the prior reading.

Economic Calendar

Making the news on Tuesday was the results of the 2010 census. Our population grew +9.7% since 2000 to 308.7 million. This was the slowest growth for any decade since the 1930s. The largest population growth was in the South followed by the West. Only Michigan and Puerto Rico saw a drop in population. Ten states saw growth of more than 15%. Nevada was the biggest gainer at +35%.

Population rate changes

In stock news Microsoft is rumored to be working on a Windows version to run on ARM chips. The ARM chips are made by Qualcomm, Texas Instruments and Samsung. Most tablets and smartphones run on ARM chips. It is not good news for Intel to have Windows available on other platforms. A Windows version for the ARM chip will allow Windows to run on competing tablets to the iPad and allow consumers to use a familiar interface. Tablet sales in 2011 are expected to be as many as 50 million and a Windows version could capture up to 20% of those sales. Windows tablets are expected to be cheaper than the iPad.

ARMH Chart

On the earnings front Nike reported earnings that rose +22% to 94-cents per share. That easily beat estimates of 88-cents. Revenue rose +10% to $4.8 billion. Unfortunately the company warned they would face some significant challenges to sales and margin. Nike shares were crushed for a $6 loss in after hours trading. Nike Chart

Red Hat shares also took a tumble after they reported earnings that were inline with estimates. Revenue was up +20% but shares were declining sharply in after hours.

Red Hat Chart

Chipmaker Xilinx (XLNX) warned tonight that revenue for the current quarter would fall 7-9% below the prior quarter. Prior forecasts were for a flat quarter to down -4%. Xilinx said sales to large wireless customers were weaker than expected. For the March quarter the company expects to return to sales growth. Shares sold off after the warning.

Xilinx Chart

Adobe was a big winner today with a +6% gain after posting better than expected earnings on Monday night. Adobe posted its first $1 billion quarter. The company said Apple's ban of flash on the iPad was having no impact on Adobe sales. The CEO said the explosion of devices competing with the iPad would push Adobe sales even higher in 2011.

Carnival Corp (CCL) hit a new 52-week high after raising 2011 guidance to between $2.90-$3.10 up from $2.47 in 2010. Analysts were expecting $2.94. The company said booking trends were improving and costs were stable. They are expecting fuel costs to increase but a strong booking season was expected to overcome that increase.

Meredith Whitney was on CNBC this afternoon defending her call on expected municipal bond defaults. Whitney said we could see $100-$150 billion in municipal bond defaults as a result of the decline in federal assistance to the states. State governments are already deep in debt and experiencing some major deficits. When the federal government stimulus handouts end next year Whitney believes the states will have to cut the umbilical cord to cities dependent on them for survival. It is simply not enough money flowing to cover everyone's debts.

Whitney's controversial call has drawn fire from at least a dozen high profile analysts and she is under pressure to support her claims. What I heard was a convincing argument but no real facts. I have had several readers email me over the last week asking what I thought about the potential for defaults. That is not really my market but I understand the points she is making. Unfortunately I think Whitney is trying to make a name for herself now that she has started her own company. It was just a couple months ago she was warning of the next big wave of bank losses and that did not come to pass. I believe she is trying to find a molehill she can turn into a mountain and restore her credibility. Time will tell.

Everywhere I look this week there are positive signs of an accelerating economy. For instance Chrysler announced tonight they were going to keep the Jeep Grand Cherokee manufacturing lines running full speed through year-end because of a backlog in orders. Normally the company shuts down vehicle production between Christmas and New Years. Current sales are so strong they can't afford to fall any further behind in manufacturing. That is a very positive in my view.

A check by one analyst found Wal-Mart to be out of stock online for 76% of the items checked and Amazon was out of stock on 40%. Monday was the last day for online shopping for Christmas delivery. The next round of emails you will get will be plugging the after Christmas sales. I reported earlier chain store sales increased the most in five months last week. You can't get in a mall parking lot and stores have to stay open well after their regular closing hours just to handle the traffic. The pent up demand from the last two years is exploding despite what Best Buy may be saying.

Amazon is on track to sell its eight millionth Kindle this week and Apple will sell its one millionth Apple TV. Tablet PCs are sold out everywhere and that is a high dollar item that did not even exist a year ago. Suddenly everyone has to own one at an average price of $700. That $700 price tag is more than the average family spends on all its holiday giving. It appears to me the consumers have declared an end to the recession despite the high unemployment.

Most consumers don't have the cushy job previously held by Annette Bongiorno. She was Bernie Madoff's secretary and it appears she skimmed off millions of dollars while helping Madoff conceal his ponzi scheme. She was arrested for her part in the scheme but released on $5 million bail. That bail was revoked on Friday after the court found out she had access to millions of dollars in secret accounts and she was deemed a flight risk. She also has multimillion dollar homes in New York and Florida. She worked as Madoff's secretary for 40-years. Her case is a prime example of pressing her gains long after she should have bailed from the company and retired. What secretary can own multiple luxury homes and have a reported $20 million in her private accounts? If she had quit five years ago she could probably have gotten a nice severance package for her silence and moved to Brazil or Monaco and lived very comfortably for the rest of her life. Sounds like she will be retiring to a federal country club but I doubt she will get a mint on her pillow every night.

The markets are their best to irritate the bears. After nearly three weeks of consolidation this slow melt-up is torture for those trying to short the market. Every small tick higher looks like an invitation for a new short entry. For the bulls the slow pace of increases is like a painfully slow striptease. They want to speed up the act but are unable to do so. This leaves both the bulls and the bears frustrated at the lack of conviction.

Everybody better get used to the melt-up because odds are good it will continue. You may not have noticed but the gains today came despite continued bad news from Europe. There were more warnings of debt downgrades on Portugal and Spain and now there are news stories about the problems spreading to even stronger members of the EU community. The market completely ignored the news other than an increase in the value of the dollar. When stocks and commodities both rally over bad news and a strong dollar it is a good sign.

What we are seeing is a good old-fashioned asset allocation move. Money managers are rotating money out of bonds and back into stocks. They have become convinced the bond gains are over and more importantly there is no longer any reason to remain in the safety of bonds. Equities are expected to outperform in 2011 with a 20% to 25% rally if you believe Goldman Sachs and others. Nobody wants to be stuck in a 3% bond if equities are going to gain 20%. Of course those actual gains are a long way from guaranteed but getting better than 3% appears to be a done deal.

The S&P inched slowly higher but the keyword there is "higher." The S&P closed at a new two year high and higher than the close the day before Lehman collapsed. While that is not specifically a technical level it is definitely a psychological level. If we can add to gains from here it should increase conviction by the bulls.

The S&P is pressing uptrend resistance at 1255 but appears close to a breakout leading to a test of stronger resistance at 1270. Any gains from here just add gravy to the analyst predictions back in January of 1250 by year-end. Every point we move higher also drags a few more investors off the sidelines and into the market.

Initial support is now 1250 and target resistance 1270.

S&P Chart

After consolidating at 11,500 for more than a week the Dow managed to move slightly higher to close at levels not seen since September 2008. The intraday range on the Dow has been less than 100 points for the last 13 days. You have to go back to 1996 to see volatility that low. What we are seeing is a compression of the market spring and eventually this compressed volatility is going to explode. The only question will be in which direction?

Support on the Dow is 11,445 and target resistance is around 11,800.

Dow Chart

The Nasdaq chart is an ideal picture of the compressed volatility. On this 60 min chart note how each candle became increasingly shorter as the day progressed to the point where they were just ticks on the chart and no longer candles. This is evidence of two things. The first is a major battle between the bulls and bears but a battle that is being waged on very low volume. Bulls are steadily inching up the bids and the bearish resistance is slowly eroding.

We are seeing something that rarely occurs to this extent. Normally there are big swings as the opposing forces trigger their orders but this time the bears appear unable to pressure prices.

This volatility compression is going to eventually result in a major move. Resistance is 2675 and initial support at 2660.

Nasdaq Chart

The Russell is the strongest indicator we have of the bullish market conditions. Unlike the other indexes the Russell is clearly in breakout mode and this is clear evidence money managers are not afraid of an impending dip. They are no longer waiting for a dip as an entry point. They are buying small caps at new highs. This is very bullish.

Russell Chart

Despite a contingent of bears trying to pick a daily entry point at least one index has closed in positive territory 10 of the last 11 days. The markets are moving up on bad news and in the face of a potential bout of profit taking in early January. While there is no rampaging rally there is solid buying despite a daily dose of bad news from Europe.

I believe we are building up for a major market event in early January. For the rest of this week the trend should continue to be "slow melt-up" rather than a Santa rally. This is a bull market in search for conviction and so far has been unable to find it. There is just the right amount of bearish conversation to keep the pressure on but not enough to do any damage. The bulls, lacking a dip to buy, have to chase prices higher but they are not rushing the process. For those traders not fighting the tape it is has been a happy holiday season so far.

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Jim Brown

New Plays

Buying Financials

by James Brown

Click here to email James Brown


Morgan Stanley - MS - close: 26.86 change: +0.60

Stop Loss: 25.49
Target(s): 29.85, 31.85
Current Gain/Loss: + 0.0%
Time Frame: 6 to 8 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
The financial sector is starting to show leadership again. While we could buy another bank or an ETF like the XLF, which is on the rise, I want to look at MS. Shares of MS have been consolidating sideways for months and could play catch up once it breaks out from this trend of lower highs. Thus buying MS right now is a little bit aggressive since it has yet to truly breakout but it looks close. Tuesday's close over the 200-dma is a positive step in the right direction. The recent bounce from the 50-dma near $25.50 allows for a clearly defined stop loss.

I am suggesting bullish positions now. Our first target is $29.85. Readers might also want to check out shares of JPM as a bullish candidate since JPM has a very similar pattern.

Open Positions Now @ Current Levels

Suggested Position: Buy MS stock @ current levels

- or -

Buy the 2011 January $27.50 calls (MS1122a27.50) current ask $0.55

- or -

Buy the 2011 April $27 calls (MS1116D27) current ask $1.65

Annotated chart:

Entry on December 22 at $xx.xx
Earnings Date 01/20/11 (unconfirmed)
Average Daily Volume: 12.2 million
Listed on December 21st, 2010

In Play Updates and Reviews

Alcoa Scores

by James Brown

Click here to email James Brown

Editor's Note:
Alcoa hit one of our exit targets with today's rally toward $15.00. I have adjusted our entry point on JBHT and updated a couple of stop losses.

Please note that I have corrected the format for our plays. Previously our play entries had the line "Current Option Gain/Loss" when they were supposed to say "Current Gain/Loss". This has been corrected. Some of our plays do have options but we don't calculate the gain/loss on a daily basis.


Current Portfolio:

BULLISH Play Updates

Alcoa Inc - AA - close: 14.77 change: +0.21

Stop Loss: 13.45
Target(s): 14.95, 15.95
Current Gain/Loss: +12.9%
Time Frame: 8 to 10 weeks
New Positions: see below

12/21 update: Target achieved. AA continues to rally with the stock up four days in a row. The stock hit $14.99 intraday. Our first target to take profits was hit at $14.95. I am not suggesting new bullish positions at this time. AA should find support near $14.50 and near $14.00. More conservative traders may want to raise their stops. Our final target is $15.95.

Current Position: Long AA stock @ 13.18

12/21: 1st Target Hit @ 14.95 (+13.4%)


Entry on November 16 at $13.18
Earnings Date 01/10/11 (unconfirmed)
Average Daily Volume: 26.1 million
Listed on November 6th, 2010

Automatic Data Processing - ADP - close: 46.85 change: +0.08

Stop Loss: 45.95
Target(s): 49.75, 52.50
Current Gain/Loss: unopened
Time Frame: 10 to 12 weeks
New Positions: Yes, see trigger

12/21 update: ADP is still churning sideways under resistance near $47.00. I am suggesting a trigger to open bullish positions at $47.25. If triggered we'll use a stop loss at $45.95. Our first target is $49.75. While the trend is up ADP doesn't move super fast so this could take several weeks.
FYI: The Point & Figure chart for ADP is forecasting a bullish price target of $66.00.

Buy-the-breakout Trigger @ $47.25

Suggested Position: Buy ADP stock @ $47.25

- or -

Buy the 2011 February $50.00 call (ADP1119B50)

*Note: just because the Feb. $50 calls are cheap don't go overboard and buy too many. They're cheap for a reason. ADP may not hit $50 by Feb. expiration.

Entry on December xx at $xx.xx
Earnings Date 01/26/11 (unconfirmed)
Average Daily Volume: 2.8 million
Listed on December 16th, 2010

Alaska Air Group - ALK - close: 59.06 change: +1.39

Stop Loss: 54.90
Target(s): 59.75, 64.00, (option exit 61.75)
Current Gain/Loss: + 8.5%
Time Frame: 8 to 9 weeks
New Positions: see below

12/21 update: ALK outperformed the market on Tuesday with a +2.4% gain. While the $60.00 level is probably round-number, psychological resistance I am suggesting we adjust our exit target on the January calls. Time decay has eaten into our call values. Conservative traders will want to exit near $60.00 anyway just to recapture their original capital (if that's your plan then you could exit now). We still want to sell part of our stock position at $59.75 but we'll move our target on the calls to $61.75. By moving the exit target out we are raising the risk on the option trade. We'll set a secondary, longer-term exit target on the rest of our ALK stock at $64.00. I am not suggesting new positions at this time.

Current Position: Long ALK stock @ $54.91

- or -

Long the 2011 January $60 calls (symbol: ALK1122A60) entry @ $1.60

12/21: First target is 59.75, adding second target at $64 for ALK stock.
12/21: Adjusting our only exit target on the calls to $61.75.

Entry on November 22 at $54.91
Earnings Date 01/27/11 (unconfirmed)
Average Daily Volume: 331 thousand
Listed on November 20th, 2010

Popular Inc. - BPOP - close: 2.94 change: +0.05

Stop Loss: 2.75
Target(s): 3.40, 3.95
Current Gain/Loss: - 2.0%
Time Frame: 12 to 16 weeks
New Positions: see below

12/21 update: Banks were some of the best performers today. BPOP rose +1.6% but I remain cautious on this stock. I'd rather wait for a new close over the $3.00 mark before considering new positions.

Current Position: Long BPOP stock @ $3.00

- or -

Long the 2011 April $3.00 calls (BPOP1116D3) Entry @ $0.34

12/18: New stop loss @ 2.75

Entry on December 14 at $ 3.00
Earnings Date 01/20/11 (unconfirmed)
Average Daily Volume: 11.7 million
Listed on December 11th, 2010

Citigroup Inc. - C - close: 4.74 change: +0.03

Stop Loss: 4.49
Target(s): 5.00, 5.35
Current Gain/Loss: + 0.2%
Time Frame: 10 to 12 weeks
New Positions: see below

12/21 update: Uh-oh! Banks were some of the strongest performers on Tuesday. Yet Citigroup only added +0.6%. The action on the daily chart almost looks like a short-term top forming. I would expect a correction back toward the $4.65-4.60 zone. Wait to launch new positions there. This remains an aggressive, higher-risk trade. I am suggesting that readers keep their position size small to limit their risk.

Current Position: Long Citigroup stock @ $4.73

- or -

Long the 2011 March $5.00 calls (C1119C5) Entry @ $0.20

Entry on December 20 at $ 4.73
Earnings Date 01/18/11 (confirmed)
Average Daily Volume: 688 million
Listed on December 18th, 2010

Companhia Brasileira de Distribuicao - CBD - close: 41.78 change: +0.86

Stop Loss: 37.90
Target(s): 44.95, 49.00
Current Gain/Loss: + 3.8%
Time Frame: 10 to 12 weeks
New Positions: see below

12/21 update: CBD is showing a little relative strength today with a +2.1% gain. The stock is nearing resistance at the $42.00 level. I am not suggesting new positions at this time. Please note our new stop loss at $37.90.

Current Position: Long CBD stock @ $40.25

12/21 New stop loss @ 37.90

Entry on November 23 at $40.25
Earnings Date 03/02/11 (unconfirmed)
Average Daily Volume: 608 thousand
Listed on November 20th, 2010

Check Point Software Technologies - CHKP - close: 45.78 change: +0.14

Stop Loss: 43.95
Target(s): 47.25, 49.75
Current Gain/Loss: + 1.5%
Time Frame: 8 to 10 weeks
New Positions: Yes, see below

12/21 update: It was a quiet day for CHKP with the stock moving sideways in a narrow range. I would still consider initiating new positions on dips near $45.00. Our first target is $47.25. Our second, longer-term target is $49.75. This could take several weeks. Investors will have to decide whether or not they are willing to hold over CHKP's earnings in late January.

Current Position: Long CHKP stock @ $45.10

- or -

Long the 2011 April $45.00 calls (CHKP1116D45) Entry @ $2.55

Entry on December 20 at $45.10
Earnings Date 01/26/11 (unconfirmed)
Average Daily Volume: 1.4 million
Listed on December 18th, 2010

City National Corp. - CYN - close: 61.81 change: +1.01

Stop Loss: 54.75
Target(s): 60.00, 64.00
Current Gain/Loss: unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see trigger

12/21 update: Strength in the banks pushed CYN to a +1.6% gain but the stock remains under short-term resistance at $62. There is no change from my prior comments. If CYN doesn't begin to correct lower soon I'll drop it as a candidate.

Trigger @ $57.00

Suggested Position: buy CYN stock @ $57.00

- or -

Buy the 2011 February $60 calls (cyn1119B60)*

*Caution: most of the option spreads on CYN seem a little too wide. I consider the options a more aggressive trade. You may want to keep your position size small.

Entry on December xx at $xx.xx
Earnings Date 01/27/11 (unconfirmed)
Average Daily Volume: 223 thousand
Listed on December 4th, 2010

FLIR Systems Inc. - FLIR - close: 29.00 change: +0.18

Stop Loss: 27.40
Target(s): 30.90, 33.00
Current Option Gain/Loss: unopened
Time Frame: 10 to 12 weeks
New Positions: Yes, see trigger

12/21 update: The rally in FLIR continues. Believe it or not we are still sitting on the sidelines. Our trigger to launch positions is at $29.10 and FLIR only hit $29.09 today. If the rally continues then odds are good FLIR will hit our trigger tomorrow. Aggressive traders may want to open positions now. FLIR doesn't move super fast but our targets are $30.90 and $33.00.

Breakout Trigger @ $29.10

Suggested Position: Buy FLIR stock @ $29.10

- or -

Buy the 2011 April $30.00 calls (FLIR1116D30) current ask $1.35

Entry on December xx at $xx.xx
Earnings Date 02/10/11 (unconfirmed)
Average Daily Volume: 1.6 million
Listed on December 18th, 2010

JB Hunt Transport Services - JBHT - close: 40.33 change: +0.89

Stop Loss: 38.75
Target(s): 43.50, 46.75
Current Option Gain/Loss: + 0.0%
Time Frame: 10 to 12 weeks
New Positions: Yes, see below

12/21 update: JBHT was showing relative strength on Tuesday. Shares rallied +2.2% and closed back above round-number resistance at $40.00. Instead of waiting for the dip toward support near $38.00 I am suggesting we go ahead and launch small positions now on today's rally. This is a much more aggressive entry point so we want to keep our position sizes small. I'm raising our stop loss to $38.75. Our first target is $43.50.

Open Small Positions Now

Suggested Position: Buy JBHT stock @ current levels

- or -

Buy the 2011 February $40 calls (JBHT1119B40) current ask $1.90

12/21 New Entry Point - Launch Positions Now (open of 12/22)


Entry on December 22 at $xx.xx
Earnings Date 01/28/11 (unconfirmed)
Average Daily Volume: 1.2 million
Listed on December 13th, 2010

Microsoft Corp. - MSFT - close: 28.07 change: +0.26

Stop Loss: 25.70
Target(s): 27.45, 29.00
Current Gain/Loss: + 9.8%
Time Frame: 10 to 12 weeks
New Positions: see below

12/21 update: MSFT was showing relative strength on Tuesday and managed to close over resistance near $28.00. I would not launch new positions at these levels. The stock is short-term overbought!

Current Position: Long MSFT stock @ 25.55

- or -

Buy the 2011 January $25.00 calls (symbol: MSFT1122A25) Entry @ $1.39

12/18/10 new stop @ 25.70
12/14/10 Target hit @ 27.45 (+7.4%), option @ $2.55 (+83.4%)
12/11/10 New stop @ 25.45
11/29/10 New stop @ 24.70

Entry on November 17 at $25.55
Earnings Date 01/27/11 (unconfirmed)
Average Daily Volume: 68.4 million
Listed on November 15th, 2010

Mylan, Inc. - MYL - close: 21.21 change: +0.01

Stop Loss: 19.70
Target(s): 21.90, 22.90
Current Gain/Loss: unopened
Time Frame: 12 to 14 weeks
New Positions: Yes, see trigger

12/21 update: MYL spent the day in a narrow range. I am suggesting we launch bullish positions on a dip at $20.65. The December 13th low was $19.79. I'm suggesting a stop loss at $19.70. The most recent data listed short interest at 12% of the 287 million-share float. Any significant rallies could fuel some short covering.
FYI: The Point & Figure chart for MYL is bullish with a $33 target.

Trigger to buy-the-dip @ $20.65

Suggested Position: Buy MYL stock @ $20.65

- or -

Buy the 2011 April $20.00 calls (MYL1116D20)

Entry on December xx at $xx.xx
Earnings Date 02/24/11 (unconfirmed)
Average Daily Volume: 9.0 million
Listed on December 20th, 2010

Starbucks Corp. - SBUX - close: 32.86 change: -0.07

Stop Loss: 30.75
Target(s): 34.75
Current Gain/Loss: unopened
Time Frame: 8 to 10 weeks
New Positions: Yes, see trigger

12/21 update: SBUX underperformed the market's major averages but traders bought the dip intraday. Currently our trigger to initiate bullish positions is at $31.75 but we might want to raise that trigger to $32.00 to better align with SBUX's rising bullish channel.

FYI: SBUX is currently in a legal battle with Kraft Foods (KFT) over distribution of SBUX's ground coffee brand but investors seem to be ignoring it.

Trigger @ $31.75

Suggested Position: Buy SBUX stock @ $31.25

- or -

Buy the 2011 January $32.00 call (SBUX1122A32)
Buy the 2011 April $33.00 call (SBUX1116D33)

Entry on December xx at $xx.xx
Earnings Date 01/20/11 (unconfirmed)
Average Daily Volume: 7.1 million
Listed on December 8th, 2010

Sara Lee Corp - SLE - close: 17.53 change: -0.16

Stop Loss: 15.75
Target(s): 17.00, 17.90
Current Gain/Loss: +11.8%
Time Frame: 10 to 12 weeks
New Positions: no

12/21 update: It was a quiet day for SLE with shares churning sideways in a very narrow range near the $17.50 level. Please note that I am raising our stop loss to $15.75, just above our entry point. I am not suggesting new positions at this time.

Current Position: Long SLE stock @ $15.68

- or -

Long the 2011 April $15.00 calls (SLE1116D15) Entry @ $1.35

12/21/10 New stop loss @ 15.75
12/18/10 New stop @ 15.45, New final target @ 19.75
12/17/10 Target Hit @ 17.00 (+8.4%), option @ $2.00 (+48.1%)

Entry on December 8 at $15.68
Earnings Date 02/03/11 (unconfirmed)
Average Daily Volume: 7.6 million
Listed on December 7th, 2010

Sony Corp. - SNE - close: 36.24 change: +1.05

Stop Loss: 34.40
Target(s): 37.75, 39.75
Current Gain/Loss: unopened
Time Frame: 10 to 12 weeks
New Positions: Yes, see trigger

12/21 update: Big gains in the Asian markets helped SNE to a +2.9% gain. We need to adjust our entry point strategy if we want to hop on board. I am suggesting we move our buy-the-dip trigger to $35.60 and we'll move our stop loss to $34.40.

Trigger @ $35.60 <-- new trigger

Suggested Position: Buy SNE stock
- or -
Buy the 2011 APRIL $35 calls (SNE1116D35)

12/21 New trigger @ 35.60, New stop @ 34.40

Entry on December xx at $xx.xx
Earnings Date 02/03/11 (unconfirmed)
Average Daily Volume: 888 thousand
Listed on November 23rd, 2010

Trimble Navigation - TRMB - close: 40.28 change: +0.31

Stop Loss: 36.40
Target(s): 41.00, 43.00
Current Option Gain/Loss: unopened
Time Frame: 8 to 10 weeks
New Positions: Yes, see trigger

12/21 update: TRMB is trying to bounce but volume has been very low. I'm about ready to drop TRMB from our play list. We don't want to buy it at current levels. The nearest support appears to be the $38 area.

Trigger @ $38.50

Suggested Position: Buy TRMB stock @ $38.50

- or -

Buy the 2011 February $40.00 calls (TRMB1119B40) current ask $2.35

Entry on December xx at $xx.xx
Earnings Date 02/02/11 (unconfirmed)
Average Daily Volume: 435 thousand
Listed on December 4th, 2010

Ternium S.A. - TX - close: 43.07 change: +1.96

Stop Loss: 35.85
Target(s): 43.00, 45.00
Current Gain/Loss: unopened
Time Frame: 12 to 14 weeks
New Positions: Yes, see trigger

12/21 update: Can I have buyer's remorse for NOT buying a stock? TX has refused to pull back. Shares surged again today and hit new highs above the April 2010 high. The stock remains short-term overbought. We don't want to chase it. Right now I'm looking at raising our entry point toward the $40 area but we'll keep it at $38.25 for now. The $43 level should be resistance so maybe TX will see a correction soon.

Buy-the-Dip Trigger @ $38.25

Suggested Position: Buy TX stock

Note: TX does have options but the spreads are horrendously wide so I'm not suggesting any calls on this trade.

Entry on December xx at $xx.xx
Earnings Date 02/23/11 (unconfirmed)
Average Daily Volume: 295 thousand
Listed on December 14th, 2010

Wells Fargo & Co - WFC - close: 30.82 change: +0.72

Stop Loss: 28.49
Target(s): 29.25, 31.90
Current Gain/Loss: +14.6%
Time Frame: 10 to 12 weeks
New Positions: see below

12/21 update: Strength in the banking sector helped WFC delivered a +2.3% gain. Shares closed at new multi-month highs. I am raising our stop loss to $28.49. Currently our final exit target is $31.90 but aggressive traders could aim high (given enough time).

Current Position: Long WFC stock @ $26.88

- or -

Long the 2011 January $27.50 call (WFC1122A27.5) Entry @ $1.16

12/21: New stop loss @ 28.49
12/09: New stop loss @ $27.90
12/08: Target Hit $29.25 (+8.8%), Option @ $2.30 (+98.2%)

Entry on November 30 at $26.88
Earnings Date 01/19/11 (unconfirmed)
Average Daily Volume: 32.7 million
Listed on November 29th, 2010

World Wrestling Entertainment - WWE - close: 14.47 change: +0.17

Stop Loss: 13.75
Target(s): 14.95, 16.40
Current Gain/Loss: + 2.6%
Time Frame: 10 to 12 weeks
New Positions: see below

12/21 update: WWE managed to outperform the S&P 500 with a +1.1% gain. There is no change from my prior comments. I would still consider new bullish positions in the $14.30-14.00 area.

Suggested Position: Long WWE stock @ $14.10

- or -

Buy the 2011 April $15.00 calls (WWE1116D15), entry @ $0.45

*Note: The call options on WWE have very large spreads, making them a higher-risk trade.

Entry on December 13 at $14.10
Earnings Date 02/10/11 (unconfirmed)
Average Daily Volume: 242 thousand
Listed on December 9th, 2010