Option Investor

Daily Newsletter, Thursday, 3/24/2011

Table of Contents

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

Market Wrap

Bad News Fails To Halt Rally

by Jim Brown

Click here to email Jim Brown
The bad news bulls are back in charge with bad news having little impact on traders and dip buying back in force with the indexes clearly over high profile resistance.

Market Statistics

The S&P moved over resistance at 1300 and the NDX exploded over resistance at 2270 to close +41 points higher. Bad news out of Japan, Libya, Syria and Portugal failed to slow the advance. Demonstrators died in both Yemen and Syria as the governments continue to crackdown on protests. Coalition forces destroyed a Libyan fighter that had violated the no-fly zone. Instead of reacting to bad news traders focused on better than expected earnings and guidance and a sharp decline in weekly jobless claims as a reason to own stocks.

There were only a couple economic reports today and the first was the weekly Jobless Claims. Those filing unemployment claims for the first time declined to 382,000 from 387,000 in the prior week. That is not a big drop but it was enough to push the four-week moving average that eliminates the week-to-week volatility to 385,250 and the lowest level since September 2008. This is good news because it means employment conditions are improving. However, 8.77 million workers are still receiving benefits under the various programs.

On the flip side of the economic coin the Durable Goods Orders for February declined by -0.9% compared to a +2.7% gain in January. New orders were the culprit and fell to -0.9% from +3.6 in January. The durable goods numbers are coming in contrary to what we are seeing in the various other reports and suggests a timing problem with the data, possibly related to the blizzards in January and February. With the regional Fed surveys showing strong gains this report will likely rebound in March. In recent history there have only been four prior press conferences by the Fed chairman. In October 1979 Paul Volcker held a press conference to announce a rate increase. Greenspan spoke to the press in 1992 and Bernanke spoke at the National Press Club and took questions in February 2009 and again in February 2011. The Fed Chairman also appears in front of Congress twice a year to give an economic update but despite the questioning by panel members there are still scripted and on message appearances.

To say this was an unprecedented announcement by the Fed would be an understatement. The Fed has always, prior to Bernanke, been a backroom organization and the vast majority of the public has no clue what the Fed really does. For decades the analyst community and institutional traders have begged for more transparency by the Fed. Tell us what you are going to do and when and we can deal with it. The Fed has typically dealt in mysterious statements and Greenspan has admitted to creating Greenspeak where sentence structure and wording made it impossible to decipher exactly what he meant. Bernanke has resorted too much simplified announcements but still maintains phrases like "considerable period" to keep the market guessing.

By stepping out in front of a likely hostile group of reporters armed with pointed questions Bernanke could do wonders for the Fed's image OR it could be a disaster. The FOMC statements are still cleverly crafted and revised to reveal just the right amount of economic enthusiasm and guidance. In a press conference where Bernanke will be forced to speak without time to review his words for context and multiple meanings, he could get into trouble. However, if he answers forthrightly and honestly he could come across as just one of the guys and succeed in removing some of the hostility the public holds for the Fed.

The first press conference will be April 27th and you can bet there will be considerable volatility around that event. Here is the wildcard. Do you think he is going to hold the first one in April in order to better explain his reasons for making a directional change at that April meeting? Suppose the announcement contained an end to QE2 or an extension to QE2 and the press conference was scheduled to deal with the market impact. This makes the April 27th FOMC meeting even more anticipated or maybe feared so volatility could be huge.

Friday's economic events will include the final Q4 GDP revision and Consumer Sentiment. Complicating the day will be speeches from Fed heads Richard Fisher (Dallas), Narayana Kocherlakota (Minneapolis), Charles Evens (Chicago), Dennis Lockhart (Atlanta) and Charles Plosser (Philadelphia).

There was a flurry of stock news out today. Walgreens announced it was buying Drugstore.com (DSCM) for $409 million. This gives Walgreens access to 60,000 more products being sold online by Drugstore.com, Beauty.com and VisionDirect.com. DSCM had sales of $456 million in 2010 and employs 1,000 people. Walgreens had revenue of $67 million in the same period and operates 7,689 drugstores. DSCM shares rallied +113% on the news to $3.81.

Drugstore.com Chart

It was a tech rally day. Amazon rallied +$6 to $171 after William Blair upgraded the stock to outperform from market perform. The analyst said the company stood to gain significant market share and is doing well competitively against retailers like WalMart and Target. He said the proliferation of smartphones and mobile commerce has the potential to vastly increase price transparency for consumers, which would enhance the growth opportunity for Amazon. The demise of Borders Group is not hurting them either.

Most people don't realize that Amazon is a very strong provider of cloud computing through Amazon Web Services. They are not just a retailer. They are making it tough for other cloud companies to compete. For instance you can get a virtual server free for a YEAR just for signing up and there is no contract. After your free year they will bill you on a month-to-month pay as you go for your actual monthly usage. That is tough to compete with it you are trying to sell virtual servers at retail.

Amazon Chart

Red Hat (RHT) rallied 18% on better than expected earnings of 26 cents compared to estimates of 22-cents. Billings rose more than 30% as customers increased data center usage. This was the fastest rate of growth in 12 quarters. "People are renewing old infrastructure that could not afford to replace it before" according to the CFO. Red Hat raised its full year guidance to 94-96 cents and analysts were expecting 93-cents.

This is further evidence the economy is rebounding and there are better times ahead.

Red Hat Chart

Nvidia (NVDA) announced the GeForce GTX 590 video card, the fastest dual graphics card available today, and shares of the tech company gained +8%. The new card has 1024 Nvidia Cuda cores, 3GB of GDDR5 memory, 32 tessellation engines and over six billion transistors and includes 3D Vision technology. The card sales price is $699 for those gamers who want the absolute fastest and quietest card available. This card has been expected for sometime and the lack of an announcement has weighed on the stock.

Nvidia Chart

Not all the news was good. Best Buy (BBY) reported earnings of $1.98 per share that beat analysts estimates for $1.84 but the details were not good. Profits fell to $651 million from $779 million in the comparison quarter. Revenue in the U.S. declined -4% while international revenue rose +4%. The company said U.S. shoppers were not buying the new 3D and Internet enabled TVs. Sales of TVs and entertainment hardware fell but were offset to some extent by sales of tablet computers and mobile phones.

Best Buy Chart

Research in Motion (RIMM) reported earnings after the bell and they were not pretty. They beat on earnings by two cents but revenue was light by $80 million at $5.56 billion. That would not have been a big deal but they warned on earnings and revenue for the current quarter. Earnings guidance was $1.47 to $1.55 and analysts were expecting $1.65. Revenue guidance was $5.2 to $5.6 billion and analysts expected $5.64 billion. Gross margin was expected to decline to 41.5% from 44.5% due to a decline in the average selling price of phones. RIMM shares fell -10% to $57.40.

The company said it sold 14.9 million BlackBerry phones. RIMM said corporate clients were interested in buying "tens of thousands" of the new PlayBook tablet because they liked the architecture. RIMM also announced the PlayBook would run Android applications. RIMM is also transitioning to a new OS called QNX beginning in 2012 that will turn the BlackBerry into a "superphone." They claim carrier eagerness and interaction is extremely high and advance demand is exploding.

RIMM Chart

Oracle (ORCL) also reported earnings after the close and income rose +78% to $2.1 billion and 41-cents from $1.2 billion and 23-cents in the comparison quarter. Excluding items Oracle earned 54-cents and beat the street by 4-cents. Oracle predicted revenue slightly higher for the current quarter but earnings were forecast at 69-73 cents. Analysts were expecting 66-cents. New software license sales rose +30% to $2.2 billion. That was well above Oracle's own estimate of 10-20%. Former HP CEO Mark Hurd handled the conference call because Larry Ellison was on jury duty. Oracle shares rallied to $33.40 in after hours.

Oracle Chart

The markets gapped open again this morning but within 30 minutes had given back most of its gains with the S&P coming within 20 cents of turning negative at 1297.74. The dip was immediately bought and the resulting rally continued to creep slowly higher for the rest of the day with the S&P closing right at 1310. Moving over 1300 was a critical indicator for the bulls. That suggests the bull market is back on track. However, there was no volume to confirm the move.

Volume across all exchanges managed only 7.1 billion shares. That was only slightly higher than the 6.9 billion on Wednesday but a little better than the lowest day of the year on Tuesday at 6.3 billion. Without volume the bears will continue to harbor hope for another decline.

We have to look at all the macro factors I pointed out last week. To update, the economy is improving. Japan did not turn into a nuclear wasteland and Qaddafi has been ineffective in combating the no-fly, no-drive coalition. Saudi did not have a revolution and continued negative news out of Yemen and Syria is falling on deaf ears. Oil prices at $105 and gas prices at $3.57 appear to be having a limited impact on demand.

To put it clearly for everyone, "All the bad news is already priced into the market."

I ran across a really funny article on Forbes about why bears refuse to give up on their views of an impending decline. Share this with your bearish friends. My Apologies to Bears

We are rapidly approaching the end of the calendar quarter. That means fund managers will be investing excess cash into equities and they will be receiving new retirement contributions to put to work. Hedge funds will be closing shorts that are not working and trying to get on the right side of the trend for their end of quarter updates. Unless we get another massive earthquake or some unexpected news on the currency crisis out of the Eurozone there is nothing on the horizon to push stocks lower. If you know of something that is not already known by the market, send me an email and I will share it with fellow readers.

Obviously it is a stock market and it can still go down for any reason at any time but I think today's close well over recent resistance is a positive message. S&P 1300 is now initial support and there is plenty of overhead resistance at various levels but the trend appears to be positive. Getting over 1330 would be very bullish but I doubt it will be a cakewalk.

Today's close at 1310 was exactly on downtrend resistance and the 30-day average. This should be a hurdle to further upward progress but I believe it will happen.

S&P Chart

Fortunately for market sentiment the Dow has already busted through the equivalent downtrend resistance and the 30-day average. The Dow is very close to key resistance at 12250-12275 and is only 1.8% from a new 52-week closing high. Last week would you have believed the Dow could rebound to only 221 points away from a new high in only six days? Good news is breaking out all over and I think those seeing the glass half full are in for some disappointment.

Dow Chart

The Nasdaq gapped over resistance at 2700 and never looked back. It came to rest at the converging resistance of the 30 and 50-day averages at 1242 and downtrend resistance from the February highs. After the bell today RIMM and Oracle reported earnings with RIMM declining over 10% and Oracle spiking +5%. Fortunately Oracle's market cap is $162 billion and RIMM's is $34 billion. They should more than equal out on their impact to the Nasdaq indexes. In fact Oracle's gain probably has the edge.

I would love to see another gap higher on the Nasdaq to get it over that converging resistance but I will take the breakout any way we can get it. This could be a tough battle. Nasdaq futures are up about seven points at 8:15 ET. Support on the Nasdaq composite is now 2725.

Nasdaq Chart

The Nasdaq 100 big cap index surged higher despite bad news for Google. Google gained nearly $5. The big caps appear to have shaken off the selling from last week and going into the end of the quarter they could outperform.

Nasdaq 100 Chart

The semiconductors had been depressed since before the Japanese quake. The breakout today over decent resistance was on improving news from Japan that plants had not been damaged as much as traders feared. This is very positive for the SOX and the Nasdaq.

Semiconductor Chart

The Russell surged ahead and while it only rose half as much as the Nasdaq in percentage terms it did breakout over the equivalent resistance levels. Russell stocks are not favorites of the window dressing crowd at quarter end. Funds typically favor the highly liquid big caps so they can exit quickly early in the next quarter. Small caps are seen as longer-term investments so the Nasdaq 100 should continue to outperform over the next week. However, any further move higher in the Russell will be a confirmation of the improving sentiment.

Russell 2000 Chart

I have a lot more confidence in the market today than I did on Tuesday. I view the breakout by the SOX, NDX and Nasdaq from prior congestion levels as very positive. With the end of the quarter just ahead and window dressing likely, I would not want to be short this market. I believe we have shifted back into buy the dip mode until proven wrong.

Jim Brown

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New Plays

Bouncing From Support

by James Brown

Click here to email James Brown


eBay Inc. - EBAY - close: 31.76 change: +1.09

Stop Loss: 29.49
Target(s): 34.90, 39.00
Current Gain/Loss: unopened
Time Frame: 4 to 6 weeks
New Positions: Yes, see trigger

Company Description

Why We Like It:
After a four-week correction shares of EBAY are finally bouncing from support near $30.00 and its 100-dma. The stock was outperforming today with a +3.5% gain and a close just over its 50-dma. Shares look ready to resume their longer-term up trend.

I am suggesting we wait for a little dip and buy EBAY at $31.25. If triggered at $31.25 we'll use a stop loss at $29.49. Our first target is $34.90. We do not want to hold over EBAY's late April earnings report.

Trigger @ 31.25

Suggested Position: Buy EBAY stock @ $31.25

- or -

Annotated chart:

Entry on March x at $xx.xx
Earnings Date 04/27/11 (unconfirmed)
Average Daily Volume: 10 million
Listed on March 24th, 2011

In Play Updates and Reviews

Triggered Plays

by James Brown

Click here to email James Brown

Editor's Note:
Ford (F), KLA-Tencor (KLAC), and Tesoro (TSO) all hit our bullish triggers to launch positions today.


Current Portfolio:

BULLISH Play Updates

ACI Worldwide Inc. - ACIW - close: 32.21 change: +0.10

Stop Loss: 29.75
Target(s): --.--, 34.75
Current Gain/Loss: + 8.7%
Time Frame: 6 to 8 weeks
New Positions: see below

03/24 update: Last night I suggested that readers take profits early and sell half of our position. ACIW opened at $32.25 this morning (+8.8%). Unfortunately gains were limited. Shares of ACIW have been consolidating sideways in a very tight range all week long. More conservative traders may want to raise their stops. No new positions at this time. Our final target is $34.75.

FYI: ACIW does have options but the spreads are very wide, which puts us at a significant disadvantage.

SMALL bullish positions

Current Position: Long ACIW stock @ $29.63

03/24 first exit was at $32.25 (+8.8%)
03/23 Sell half now! exit price at the open on 3/24
03/22 New stop loss @ 29.75, 1st Target adjusted to $32.85
03/19 New stop loss @ 29.35

Entry on February 25 at $29.63
Earnings Date 04/28/11 (unconfirmed)
Average Daily Volume: 122 thousand
Listed on February 24th, 2010

Dick's Sporting Goods Inc. - DKS - close: 39.98 change: +0.39

Stop Loss: 36.75
Target(s): 42.25, 44.50
Current Gain/Loss: +1.5%
Time Frame: 6 to 8 weeks
New Positions: see below

03/24 update: Traders continue to buy the dips in DKS and the stock is poised to breakout past the $40.00 level again. Given the market's strength readers might want consider opening small positions now at current levels or on a move above today's high ($40.24). I'm suggesting profit targets at $42.25 and $44.50.

FYI: The Point & Figure chart for DKS is bullish with a $65 target.

- Small Positions -

Current Position: Long DKS stock @ $39.39

- or -

Long the June $40 calls (DKS1118F40) Entry @ $2.35

Entry on March 21 at $39.39
Earnings Date 05/18/11 (unconfirmed)
Average Daily Volume: 1.6 million
Listed on March 19th, 2010

Ford Motor Co. - F - close: 15.04 change: +0.73

Stop Loss: 14.19
Target(s): 16.45, 17.45
Current Gain/Loss: - 0.0%
Time Frame: 6 to 8 weeks
New Positions: see below

03/24 update: There were headlines out today from research firm IHS Automotive who estimates that the Japan disaster could cut global automobile production by 30%. One might have expected shares of Ford to fall on this news. Yet it sounds like those hardest hit will naturally be the Japanese automakers. According to a Bloomberg article today Ford has yet to see any disruptions.

In other news J.D. Power and Associates upgraded their 2011 sales forecast for Ford from 10.5 million to 10.6 million vehicles. Shares of Ford surged on the news today and rocketed to a +5% gain on strong volume. The breakout past short-term resistance at $14.80 and the $15.00 mark is bullish. Our trigger to open bullish positions was hit at $15.05.

Our play is open but readers might want to look for a dip near $14.80 before initiating new positions. Our targets are $16.45 and $17.45.

Current Position: Long F stock @ $15.05

- or -

Long the April $15 calls (F1116D15) Entry @ $0.33


Entry on March 24 at $15.05
Earnings Date 04/21/11 (unconfirmed)
Average Daily Volume: 82 million
Listed on March 15th, 2010

Gildan Activewear - GIL - close: 31.78 change: -0.18

Stop Loss: 29.70
Target(s): 34.85, 38.00
Current Gain/Loss: + 4.7%
Time Frame: 6 to 8 weeks
New Positions: see below

03/24 update: Thursday was another quiet day for GIL. Shares bounced around the $31.50-32.00 area. I am not suggesting new positions at this time.

Current Position: long GIL stock @ 30.35

- or -

Long the April $30 call (GIL1116D30) Entry @ $1.60

03/19 New stop loss @ 29.70
03/08 Triggered $ 30.35
03/01 Adjusted buy-the-dip trigger to $30.35
03/01 Adjusted stop loss to $28.99

Entry on March 8 at $30.35
Earnings Date 05/12/11 (unconfirmed)
Average Daily Volume: 634 thousand
Listed on February 28th, 2010

Jos. A Bank Clothiers Inc. - JOSB - close: 46.40 change: +0.40

Stop Loss: 44.75
Target(s): 49.85, 52.25
Current Gain/Loss: + 0.8%
Time Frame: 4 to 6 weeks
New Positions: see below

03/24 update: JOSB continues to bounce after testing support near $45.00 yesterday. I am not suggesting new positions at these levels.

FYI: The most recent data listed short interest at almost 25% of JOSB's 27.3 million-share float. There is definitely room for some short covering here. Plus, the Point & Figure chart for JOSB is bullish with a $62 target.

- Small Bullish Positions -

Current Position: Long JOSB stock @ $45.99

- or -

Long the April $50 calls (JOSB1116D50) Entry @ $0.95

Entry on March 7 at $45.99
Earnings Date 03/30/11 (unconfirmed)
Average Daily Volume: 355 thousand
Listed on March 5th, 2010

KLA-Tencor - KLAC - close: 47.19 change: +1.07

Stop Loss: 44.95
Target(s): 49.90
Current Gain/Loss: + 1.1%
Time Frame: 3 to 4 weeks
New Positions: see below

03/24 update: Thankfully we did not have to wait very long for KLAC to hit our trigger. A stronger than expected earnings report from Micron (MU) launched the semiconductor sector higher. Shares of KLAC opened higher at $46.58 and quickly hit our trigger to buy it at $46.65. If you missed that entry point KLAC dipped toward $46.00 again before rebounding to a +2.3% gain. Shares stalled just under their 30-dma. We might see another entry point near $46.50 on a dip tomorrow. Our target is $49.90.

Current Position: Long KLAC stock @ $46.65

- or -

Long the April $45 calls (KLAC1116D45) Entry @ $2.85


Entry on March 24 at $46.65
Earnings Date 04/28/11 (unconfirmed)
Average Daily Volume: 2.5 million
Listed on March 23rd, 2011

NVIDIA Corp. - NVDA - close: 19.23 change: +1.42

Stop Loss: 16.85
Target(s): 19.95, 21.75
Current Gain/Loss: + 5.7%
Time Frame: 4 to 8 weeks
New Positions: see below

03/24 update: The strength in chip stocks helped fuel strong gains in NVDA. The stock broke out past the $18.00 level and its 100-dma and eventually settled with a +7.9% gain on the session. I wouldn't chase it here. NVDA might provide a dip into the $18.50-18.25 area, which is where we might want to consider new bullish positions.

Our first target to take profits is at $19.95. Our second target is $21.75.

Prior Comments:
This is a very speculative, higher-risk trade. Remember to keep your positions small to limit your risk.

- small bullish positions -

Current Position: long NVDA stock @ $18.19

- or -

Long the April $20 calls (NVDA1116D20) Entry @ $0.72

Entry on March 14 at $18.19
Earnings Date 05/12/11 (unconfirmed)
Average Daily Volume: 35 million
Listed on March 12th, 2010

Polycom Inc. - PLCM - close: 49.50 change: +0.44

Stop Loss: 46.90
Target(s): 54.85,
Current Gain/Loss: - 1.3%
Time Frame: 6 to 8 weeks
New Positions: see below

03/24 update: PLCM spent the day bouncing around the $49-50 zone. There is no change from my prior comments. More conservative traders might want to raise their stops closer to the $48.00 level, which should be short-term support. Our upside target is $54.85. I would be tempted to aim higher but we want to exit ahead of the late April earnings report.

FYI: The Point & Figure chart for PLCM is bullish with a $75 target.

- Small Bullish Positions -

Current Position: Long PLCM stock @ $50.18

- or -

Long the May $52.50 calls (PLCM1121E52.5) Entry @ $2.00

03/23 Entry price on the May $52.50 call is an estimate.

Entry on March 23 at $50.18
Earnings Date 04/21/11 (unconfirmed)
Average Daily Volume: 967 thousand
Listed on March 22nd, 2011

Patterson-UTI Energy Inc. - PTEN - close: 27.44 change: +0.07

Stop Loss: 25.95
Target(s): 31.50, 34.00
Current Gain/Loss: unopened
Time Frame: 4 to 6 weeks
New Positions: Yes, see trigger

03/24 update: PTEN is still churning sideways above the $27.00 level. There is no change from my prior comments. We are still waiting for PTEN to breakout past $28.00. Our trigger to open bullish positions is at $28.25 so we're still sitting on the sidelines.

Prior Comments:
The $30.00 mark might offer some resistance but I'm targeting a climb to $31.50 and the $34.00 levels.

Trigger @ 28.25

Suggested Position: buy PTEN stock @ 28.25

- or -

Buy the May $30 calls (PTEN1121E30) current ask $0.90

Entry on March x at $xx.xx
Earnings Date 04/28/11 (unconfirmed)
Average Daily Volume: 2.8 million
Listed on March 17th, 2010

Southwestern Energy Co. - SWN - close: 43.06 change: +0.55

Stop Loss: 37.95
Target(s): 44.85
Current Gain/Loss: unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see trigger

03/24 update: SWN is now up ten days in a row. Shares will see a pull back eventually. I would not chase it here!

I am suggesting we launch bullish positions on a dip at $40.25 since broken resistance at $40.00 should be new support. More conservative traders might want to wait and hope for a dip closer to the $39.00 area. If we are triggered at $40.25 we'll use a stop loss at $37.95. Our firs target is $44.85.

FYI: The Point & Figure chart for SWN recently broke out past resistance and is now signaling a bullish target of $51.

Buy-the-Dip Trigger @ $40.25

Suggested Position: Buy SWN stock @ 40.25

- or -

Buy the June $42 calls (SWN1118F42) current ask $2.53

Entry on March x at $xx.xx
Earnings Date 04/28/11 (unconfirmed)
Average Daily Volume: 6.9 million
Listed on March 19th, 2010

Tesoro Corp - TSO - close: 26.02 change: +0.53

Stop Loss: 23.95
Target(s): 29.90
Current Gain/Loss: - 0.5%
Time Frame: 4 to 6 weeks
New Positions: see below

03/24 update: The late afternoon rally in TSO was just enough to hit our trigger at $26.15. The trade is open. I would still consider new positions now with the stock at $26.00. An alternative entry would be to wait for a rally past the March 14th high of $26.72.

Given the stock's recent volatility over the last month or so I would consider this a higher-risk trade. Keep your position size small. FYI: The most recent data listed short interest in TSO at more than 13% of the stock's 141 million-share float. A breakout past resistance could spark another short squeeze.

Current Position: Long TSO stock @ 26.15

- or -

Long the May $27.00 calls (TSO1121E27) Entry @ $1.60


Entry on March 24 at $26.15
Earnings Date 04/25/11 (unconfirmed)
Average Daily Volume: 8.2 million
Listed on March 21st, 2010

Weyerhaeuser Co. - WY - close: 24.33 change: -0.17

Stop Loss: 23.40
Target(s): 27.25, 29.25
Current Gain/Loss: - 1.4%
Time Frame: 4 to 6 weeks
New Positions: see below

03/24 update: WY has been underperforming the last couple of days. I'd wait for a new bounce from $24.00 or the 50-dma before considering new bullish positions. The simple 50-dma, which should be technical support, has risen to $23.70. I am raising our stop loss to $23.40.

Prior Comments:
Keep your positions small to limit your risk.

Suggested Position: long WY stock @ $24.68

- or -

Long the July $25 calls (WY1116G25) Entry @ $1.64

03/24 New stop @ 23.40

Entry on March 16 at $24.68
Earnings Date 04/29/11 (unconfirmed)
Average Daily Volume: 6.4 million
Listed on March 15th, 2010

BEARISH Play Updates

Lennar Corp. - LEN - close: 19.87 change: +0.12

Stop Loss: 20.25
Target(s): 16.75
Current Gain/Loss: - 2.0%
Time Frame: 1 to 2 weeks
New Positions: see below

03/24 update: Once again I will repeat my earlier comments that there is no reason for LEN shares to be bouncing with new home sales in the U.S. plunging to all time record lows. However, price is king and right now LEN looks poised to breakout over resistance near $20.00 and its 50-dma. More conservative traders may want to exit early now. If we don't see some relative weakness out of LEN soon I will seriously consider an early exit. A breakout past $20.00 could spark a short squeeze!

FYI: I do want to point out that the most recent data listed short interest on LEN at 21% of the 159 million-share float. That is a high amount of short interest and raises the risk of a short squeeze although we are certainly not expecting a short squeeze with the market in decline.

- Small Bearish Positions -

Current Position: short LEN stock @ 19.47

- or -

Long the April $19 puts (LEN1116P19) Entry @ $0.80

Entry on March 17 at $19.47
Earnings Date 03/24/11 (unconfirmed)
Average Daily Volume: 4.3 million
Listed on March 16th, 2010

Overseas Shipholding Group - OSG - close: 31.70 change: +0.30

Stop Loss: 33.55
Target(s): 27.75, 25.25
Current Gain/Loss: + 1.5%
Time Frame: 8 to 9 weeks
New Positions: see below

03/24 update: OSG is still trying to bounce and gained +0.9%. The stock is hovering under short-term resistance near $32.00. While the trend for OSG is down the bullishness in the broader market could make this bearish play a challenging trade for us. Readers might want to tighten their stops.

Our plan was to use small positions to limit our risk. The P&F chart is forecasting a $25 target.

- Small Bearish Positions -

Current Position: Short OSG stock @ $32.20

- or -

Long the April $30 PUTS (OSG1116P30) Entry @ $0.75

03/16 New stop loss @ 33.55

Entry on March 11 at $32.20
Earnings Date 05/04/11 (unconfirmed)
Average Daily Volume: 705 thousand
Listed on March 10th, 2010