Option Investor

Daily Newsletter, Tuesday, 6/28/2011

Table of Contents

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

Market Wrap

Buy The Rumor

by Jim Brown

Click here to email Jim Brown
Traders have been covering shorts for the last two days on expectations Greece will vote to pass the required austerity measures needed to obtain the next $17 billion in funds to hold off a default in July.

Market Statistics

The Greek situation is very fluid with reporters claiming 151 votes for the required austerity and that is exactly the number needed with no room to spare. Four votes in the prime ministers party have already defected to the other side making it 151 for and 149 against austerity. I don't know what happens in the case of a tie but obviously this is going to be VERY close.

Last week the markets were pricing in a credit event or a default of some kind but that appears for the moment to be off the table. The final vote is not expected until Wednesday and there is another vote on the implementation of the austerity plan on Thursday. If both votes pass the pressure would ease on Greece at least for the time being. Their potential default on July 11th would go away. However, this is just one more chapter in the saga. Once past this hurdle the EU/ECB/IMF will begin discussing the next $140 billion bailout needed for 60 days from now. That one is "supposed" to be the final package that will get Greece through the next five years until their austerity plan reduces expenses and comes closer to balancing the budget. I am not holding my breath.

However, French banks offered to roll over their Greek debt and extend it for 30-years. If other foreign banks sign onto the same program the pressure will begin to ease. That is called kicking the can well down the road. It would be a long time before the potential sovereign debt default would come back to haunt us. This also allows those banks to write down that potentially uncollectible debt at a pace that will not be severely cripple their capital accounts.

The Greek economy is only $300 billion while the entire Eurozone is $16 trillion. This is a very minor piece of the Eurozone puzzle but it is viewed as the first of several problems that could eventually include Spain with a GDP of $1.46 trillion. Greece was the first domino to fall with Ireland, Italy, Portugal and Spain still in the early stages of the same problem.

Traders covered their shorts either voluntarily or involuntarily as a result of the market spike. It was not because the U.S. economics suddenly improved because they didn't improve. The Consumer Confidence for June dropped another three points to 58.5 and the lowest level since November. This was a decline from the May reading of 61.7. The cycle high was 72.0 in February. The biggest decline came in the expectations component, which declined from 76.7 to 72.4. The present conditions component only fell -2 points to 37.6.

Buying plans declined significantly with those planning on buying autos falling from 13.7% to 10.7% and homes from 5.5% to 3.7%. The decline in confidence was mostly from the older and higher-income consumers. Worry over the economy as they head into retirement is a major problem.

Analysts said confidence was actually a lot lower earlier in the month but improved significantly as the month progressed and gasoline prices declined. Falling home prices, higher gasoline, falling job numbers and all the problems overseas with the debt crisis and Arab spring are still weighing on confidence.

Consumer Confidence

There was a bit of positive news in the Richmond Fed Manufacturing Survey, which rose to +3.0 in June from a -6.0 in May. That is a significant +9 point gain and a return to expansion territory. This is well below the 25.0 cycle high back in February. New orders returned to positive territory at +1.0 from a sharp decline to -15.0 in May. Backorders improved slightly at -16.0 from -19.0 but just barely. However, both employment components declined. The average workweek fell into negative territory at -5.0 from a high of +20 back in January. The decline has been a steady 3-5 points a month. Even though the actual employment component declined from 14.0 to 12.0 it remained in double-digit expansion territory for the eighth consecutive month and that is the longest streak since the report's inception. In theory this suggests manufacturers are continuing to hire at a decent pace.

Richmond Fed Manufacturing Chart

The Richmond Survey was a definite improvement over the sharp decline in the Texas Manufacturing Survey to -17.5 in June from -7.4 in May. Those numbers were released on Monday.

The weekly Chain Store Sales came in much higher than expected with a +2.9% gain after a -0.7% decline in the prior week. There is a lot of noise in these numbers but every little bit of positive news helps.

The Case Shiller Home Price Index for April declined -4.0% compared to the prior reading of -3.6%. This is not a market mover. Everyone knows home prices are lower compared to last year so this is just confirmation of the continued decline.

The calendar for the rest of the week will be dominated by the Greek vote, which has been delayed until Wednesday. That could be a market mover if it does not go as planned. Back at home we have the three regional ISM and manufacturing reports on Thursday and then the national ISM on Friday as the second biggest event for this week.

Economic Calendar

In stock news Nike (NKE) soared +8.28 after reporting better than expected numbers on Monday night. Nike said sales in the U.S. rose by +15% in a weak economy. This was very unexpected given the price Nike gets for its shoes. The company raised revenue estimates for 2015 to $28-$30 billion compared to prior estimates of $27 billion. They reaffirmed their goal of $12 billion in cumulative free cash flow from 2011 through 2015. Earnings released on Monday night were $1.24 per share compared to estimates of $1.16.

Nike Chart

Microsoft (MSFT) spiked into the clouds after announcing their 22-year old Office product was going to be offered as a cloud product. Microsoft was one of the major reasons the Dow and Nasdaq had two really good days. Microsoft's Outlook, Excel, Sharepoint, etc will now be available as a cloud application with prices based on usage. Basic Outlook email will cost $2 a month and a standard business package for $6. Advanced offerings could cost up to $27 per month. Google charges a flat $50 per user per year for its Web-based Google Apps product with email, calendars, word processing and other applications. Microsoft will host the applications and the user data on monster server farms in multiple data centers.

The move puts Microsoft into direct competition with Google but in this case Microsoft has a head start even though they are late to the cloud party. Google has 40 million users of the Google Apps suite. Comscore estimates Microsoft has 750 million Office users worldwide so a very fertile environment for moving existing customers to the cloud and creating a new monthly revenue source.

Microsoft Chart

Google (GOOG) rallied +$11 after announcing a new feature called Google+ that is a direct attack on Facebook. Basically Google+ allows you to put your friends and contacts into different groups on their Facebook like product. By grouping contacts you can allow each group access to different parts of your profile. For instance the pictures of your children may only be visible to people in the family group. Business contacts would not see your family posts, etc. Facebook actually has these features but they are troublesome to implement. Google is trying to chip away at the 750 million Facebook users.

Google Chart

Apple has finally strung a week of gains together to close at $335 after hitting a low of $310 last week. The downtrend is still not broken but Apple has been getting some good press and Google has been getting bad press. If you have money to throw at a big tech into quarter end that meant Apple was the preferred vehicle. Analysts are starting to upgrade iPad estimates again and we are getting closer to iPhone 5 so it appears the buyers have finally found a level they were comfortable with.

Apple Chart

The anticipation of a positive vote in Greece and avoidance of a sovereign debt default pushed the euro higher and the dollar lower and that was positive for oil prices and precious metals. Gold eased back over $1500 but not by much. The lack of a debt default would be negative for short-term gold prices.

Crude oil prices would be helped by a resolution to the crisis and a return to business as usual in Europe. Maybe not in Greece but the rest of Europe might calm down and return to slow growth if the crisis is resolved.

U.S. WTI crude rallied more than $2 after testing support at $90 for three consecutive days. In overnight trading it is up to $93.11 and rising. Brent rallied to $108.85 from its low at $102 on Monday. In after hours trading it has broken $109. There is no surprise here. The IEA news produced a knee jerk reaction and that news has passed. The fact the IEA felt they had to release oil for only the third time in history is confirmation enough that there are serious supply problems on the horizon. Ignore these facts at your own risk.

U.S. WTI Crude Chart

Brent Crude Chart

The S&P rallied +16 points today and stretched its two gain to +33 points with a close at 1296. That is just a point over critical resistance at 1295 so in reality it stopped at resistance. With the Greek vote scheduled at 5:AM ET on Wednesday this would be the perfect plate for a sell the news event. The vote has already been priced in after the big gains for the last two days. Until the S&P moves convincingly over 1300 we should remain cautious.

I was expecting an end of quarter window dressing event this week and the short squeeze from Friday's oversold conditions help to accelerate the buying so far this week. Ideally we would have a minor sell the news event on Wednesday after a positive vote and then have traders buy that dip for a final end of quarter move higher. Historically that June close carries over into the first week of July and then the selling returns.

I wrote last weekend there were some worries brewing about how strong Q2 earnings would be given the consumer dip in May. The Nike earnings and revenue increase in Q2 suggests there may not have been as much of a spending strike as previously expected. I read to articles this week suggesting earnings would still be strong and possibly in the +18% range. If that is the case any dip in early July could be brief. If we were to see any further improvement in the economics we might skip a July dip. There are lots of variables still in play so it is too hard to predict that today. However, analysts almost unanimously expect a year-end rally as economics begin to accelerate later in the year. That acceleration obviously remains to be seen.

The key for Wednesday is the Greek vote in the morning and the S&P resistance at 1295 and 1300. A move over 1300 could generate some additional short covering.

S&P 500 Chart

The Dow stopped just short of resistance at 12,200 but had a decent two-day rebound on short covering and the gains in Microsoft, IBM, Exxon, Chevron and Caterpillar. Dow 12,200 is a key resistance level and the dead stop ahead of the vote makes this a perfect spot for a sell the news event. It also sets up a perfect spot to really squeeze the shorts if some better than expected news should appear. If the Plunge Protection Team (PPT) is paying attention they could break the market out of its recent range with a very small application of funds.

The Dow and S&P both had a double test of their support and they could be primed to move higher. The oversold conditions have not been completely eliminated and I am sure there were plenty of shorts setting up at the resistance close for that sell the news event.

Dow Chart

The Nasdaq broke out of its resistance at 2700 that correlated to the S&P at 1300 and Dow at 12,200. The Nasdaq 2700 level was broken solidly with a +41 point gain to 2729. That close cleared congestive resistance and was a clear breakout of the consolidation pattern from last week. The next higher resistance will be the 100-day average at 2760, which is also the resistance high from January. I like the gains in the big techs and the positive trends over the last several days. This is more than likely part of the end of quarter window dressing along with a bit of short covering. Time will tell.

Nasdaq Chart

The Russell is looking really strong with a solid move above last week's consolidation pattern. However, some of the gains this week are undoubtedly from funds catching up with the Russell reconstitution on Friday. As funds bring their portfolios back into alignment with the Russell indexes it requires buying of the new stocks added to the index on Friday and that pushes the index higher.

The Russell broke out of its downtrend channel and now has resistance at 820. If this move continues it would be very bullish regardless of the reason. The Russell should also benefit from end of quarter window dressing.

Russell Chart

Wednesday is going to be critical for the rest of the week. The Greek vote is scheduled at noon Greek time, 5:AM ET. Greek citizens are planning on surrounding Parliament on Wednesday morning to prevent members from getting to the Parliament meeting to vote. Police have been fighting demonstrators all day and the crowds on Wednesday are expected to be very large. The potential for violence is huge. How that will impact the vote, if at all, is unknown. With only one vote separating the two sides anything is possible. However, Greek leaders know they have no choice. If they do not approve it there will be no money and Greek will default on payments within two weeks. They can't borrow from the market and the ECB/IMF said they would not provide any loans in the future if Greece does not pass the austerity measures and ends up in default. They have given Greece an ultimatum and the citizens in the streets don't really understand the consequences.

I do expect a sell the news event but hopefully it will be light. The vote priced in but end of quarter window dressing ahead of the holiday weekend should still be active. I would buy a dip for a trade but barring unforeseen events I still expect further weakness by the end of next week.

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New Plays

Advertising Breakout

by James Brown

Click here to email James Brown

Editor's Note:

just window dressing but whatever it is the short-term trend is now up. Technology stocks are getting most of the love these days. You could pretty much throw a dart at a board of NASDAQ-100 components and come up with something that looks poised to rally, although there are plenty you probably don't want to chase after.

In addition to tonight's new candidate here are a few stocks on my radar screen:

MDT - shares are still trying to bounce after testing its 200-dma last week. A move past $39.25 might be a short-term entry point for bullish positions.

SYMC - this tech stock was showing strength today and closed above its 50-dma. The multi-month trend is still a bullish one.

S - Sprint has pulled back to psychological support near the $5.00 level. I would consider it an aggressive trader but you could buy the bounce with a stop under $5.00 and a multi-week target of $6.00.

FTO and HOC have very similar charts. These two mid-continent refiners are able to buy crude oil at WTI prices and sell the refined product at Brent prices, which expands their profit margins. Both have seen a very strong bounce in the last two days and both look poised to rally further.

APOL - this stock is bouncing from technical support at its 50 and 200-dma. Today's bounce or a move past $43.50 could be used as a new bullish entry point.

FAST - shares have rallied to new all-time highs. I wouldn't chase it. Wait for a pull back.

SBUX - The stock has broken through resistance at $38.00 after weeks of consolidating sideways. How far will the rally go? Can it breakout past the next level of resistance at $40.00?

- James


Interpublic Group - IPG - close: 12.08 change: +0.42

Stop Loss: 11.25
Target(s): 13.20
Current Gain/Loss: + 0.0%
Time Frame: 4 to 6 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
Shares of this advertising agency are breaking out through the top of its trading range with resistance near $12.00 and its 100-dma. The stock has now broken the multi-month trend of lower highs. This looks like a bullish entry point to hop on board. However, we want to keep our position size small. The market could see a sell-the-news reaction to the vote in Greece even if the vote passes. Furthermore after a +3.6% gain in one day IPG might see a little pull back.

I'm suggesting small bullish positions now. Our stop feels a little wide at $11.25 but it's under the 200-dma. Our first target is $13.20 near the 2011 highs. FYI: We do not want to hold over the late July earnings report.

- small positions -

Suggested Position: buy IPG stock @ current levels

- or -

buy the Aug $12.00 call (IPG1120H12) current ask $0.85

Annotated chart:

Entry on June 29 at $xx.xx
Earnings Date 07/28/11 (unconfirmed)
Average Daily Volume: 7.5 million
Listed on June 28, 2011

In Play Updates and Reviews

NANO hits our first target

by James Brown

Click here to email James Brown

Editor's Note:
Shares of NANO continue to soar and shares hit our first target today. Meanwhile the stock market is still bouncing on what is presumably end of quarter window dressing. If this rally continues we could see some bearish plays get stopped out.


Current Portfolio:

BULLISH Play Updates

Cheesecake Factory Inc. - CAKE - close: 31.80 change: +0.52

Stop Loss: 28.95
Target(s): 33.95, 37.00
Current Gain/Loss: + 0.8%
Time Frame: 8 to 10 weeks
New Positions: see below

06/28 update: It's been a while but our CAKE play is finally back in positive territory. My only concern is the dwindling volume on this rally. Shares are approaching prior resistance in the $32.00 area. Meanwhile technical support at the simple 200-dma has risen to $29.72. We will raise our stop loss to $29.65. I am not suggesting new positions at this time.

Earlier Comments:
Keep in mind that CAKE doesn't move very fast (at least not normally) so we'll need some patience for this trade to work. FYI: The Point & Figure chart for CAKE is bullish with a $59 target.

Current Position: Long CAKE stock @ $31.53

- or -

Long the July $33 call (CAKE1116G33) Entry @ $0.75

06/28 New stop loss @ 29.65
06/09 CAKE is bouncing from the 200-dma as expected.
06/04 More conservative traders may want to exit early. We are expecting a drop to the 200-dma.

Entry on May 20 at $31.53
Earnings Date 07/21/11 (unconfirmed)
Average Daily Volume: 1.0 million
Listed on May 19th, 2011

Ecolab Inc. - ECL - close: 55.06 change: +0.51

Stop Loss: 52.45
Target(s): 57.00, 59.90
Current Gain/Loss: + 3.2%
Time Frame: 6 to 8 weeks
New Positions: see below

06/28 update: ECL rallied another +0.9% and closed above the $55.00 level. Shares are nearing its all-time highs set two weeks ago. I am not suggesting new positions at this time.

Current Position: Long ECL stock @ 53.35

- or -

Long July $55 call (ECL1116G55) Entry @ $0.60

06/18 new stop loss @ 52.45
06/04 new stop loss @ 51.90

Entry on May 26 at $53.35
Earnings Date 07/26/11 (unconfirmed)
Average Daily Volume: 1.5 million
Listed on May 18th, 2011

Macy's Inc. - M - close: 28.73 change: +0.58

Stop Loss: 27.45
Target(s): 29.90, 32.25
Current Gain/Loss: + 1.5%
Time Frame: 6 to 8 weeks
New Positions: see below

06/28 update: Macy's is off to a good start. Shares opened at $28.30 and rallied to a +2% gain. The MACD indicator on the daily chart has created a new buy signal. I don't see any changes from my Monday night comments. We want to keep our M positions small to limit our risk.

- small positions -

Current Position: Long M stock @ $28.30

- or -

Long July $29 call (M1116G29) Entry @ $0.56

- or -

(a bit longer-term)
Long Aug. $30 call (M1120H30) Entry @ $0.85

Entry on June 28 at $28.30
Earnings Date 08/10/11 (unconfirmed)
Average Daily Volume: 8.6 million
Listed on June 27, 2011

Nanometrics Inc. - NANO - close: 19.40 change: +1.09

Stop Loss: 16.49
Target(s): 19.25, 22.00
Current Gain/Loss: +15.3%
Time Frame: 6 to 8 weeks or more
New Positions: see below

06/28 update: Target achieved. NANO continues to soar. Shares added +5.9% on top of yesterday's +8.6% rally. Our first target was hit at $19.25 (+14.4%). Volume has been above average on this rally, which is normally a good signal. The $20.00 level could be round-number resistance. I would expect the rally to stall near $20 and there is a good chance NANO will see some profit taking after tagging this level. Please note that I am raising our stop loss to $16.49. Our second and final target remains the $22.00 level.

FYI: NANO does have options but the spreads are so wide I wouldn't trade them.

Current Position: Long NANO stock @ $16.82

06/28 First Target hit @ 19.25 (+14.4%)
06/28 New stop loss @ 16.49


Entry on June 13 at $16.82
Earnings Date 08/04/11 (unconfirmed)
Average Daily Volume: 467 thousand
Listed on June 11th, 2011

UnitedHealth Group Inc. - UNH - close: 51.77 change: +0.74

Stop Loss: 48.75
Target(s): 54.75
Current Gain/Loss: + 1.0%
Time Frame: 3 to 4 weeks
New Positions: see below

06/28 update: The HMO healthcare index rallied to a new all-time high this afternoon. UNH is getting close to its 52-week high. I would still consider new bullish positions here at current levels.

We do not want to hold over the July 19th earnings report.

- small positions -

Suggested Position: Long UNH stock @ $51.25

- or -

Long July $50 call (UNH1116G50) Entry @ $2.07

Entry on June 24 at $51.25
Earnings Date 07/19/11 (confirmed)
Average Daily Volume: 7.9 million
Listed on June 23, 2011

BEARISH Play Updates

Aon Corp. - AON - close: 49.73 change: +0.44

Stop Loss: 52.05
Target(s): 47.00
Current Gain/Loss: + 3.6%
Time Frame: 6 to 8 weeks
New Positions: see below

06/28 update: As expected AON is bouncing back toward round-number resistance at $50.00. Aggressive traders could use this as a new entry point but you might want to consider a tighter stop loss. At the moment our target is $47.00 but we may have to adjust it down the road to stay above the 200-dma.

(small positions only)

Current Position: short AON stock @ 51.61

06/18 adjusted exit target to $47.00
06/16 planned exit, June $50 put @ +11.1%
06/16 new stop loss @ 52.05
05/31 New stop loss @ 52.75
05/23 gap down entry @ 51.61

Entry on May 23 at $51.61
Earnings Date 07/29/11 (unconfirmed)
Average Daily Volume: 1.7 million
Listed on May 21st, 2011

Allegheny Technologies - ATI - close: 61.63 change: +2.52

Stop Loss: 62.05
Target(s): 52.75, 50.50
Current Gain/Loss: unopened
Time Frame: 4 to 6 weeks
New Positions: Yes, see trigger

06/28 update: ATI is seeing a big bounce today. Shares are challenging the top of its recent trading range near $62.00. A breakout past the $62.00-62.50 area would be bullish but bulls should be concerned with overhead resistance near $65.00 and its 50 and 100-dma.

Currently our plan is unchanged. We have a trigger to launch bearish positions a $57.40. We do not want to hold over the late July earnings report.

Trigger @ $57.40

Suggested Position: Short ATI stock @ $57.40

- or -

buy the July $55 PUT (ATI1116S55) current ask $1.60

06/22 FYI: ATI did produce an alternative entry point with a failed rally near $62.00. Aggressive traders may want to launch positions now. The newsletter will keep our trigger at $57.40.

Entry on June x at $xx.xx
Earnings Date 07/27/11 (unconfirmed)
Average Daily Volume: 1.9 million
Listed on June 18th, 2011

Eaton Corp. - ETN - close: 49.47 change: +1.24

Stop Loss: 50.50
Target(s): 42.50
Current Gain/Loss: - 3.8%
Time Frame: 3 to 6 weeks
New Positions: see below

06/28 update: The oversold bounce in ETN continues. Shares added +2.5% and closed above resistance at $49.00. Shares are nearing additional resistance at the simple 200-dma and the $50.00 level. The 50-dma has declined to $50.37 so I am lowering our stop loss to $50.50. Readers may want to wait for ETN to produce a reversal before launching new positions.

Current Position: short ETN stock @ $47.62

- or -

Long July $47.50 PUT (ETN1116S47.5) Entry @ $1.40

- or -

Long Aug. $45 PUT (ETN1120T45) Entry @ $1.50

06/28 new stop loss @ 50.50

Entry on June 23 at $47.62
Earnings Date 07/20/11 (unconfirmed)
Average Daily Volume: 3.8 million
Listed on June 22, 2011

Ford Motor Co. - F - close: 13.33 change: -0.13

Stop Loss: 13.85
Target(s): final target @ 12.55
Current Gain/Loss: + 7.4%
Time Frame: 6 to 8 weeks
New Positions: see below

06/28 update: Ford failed to participate in the market's rally on Tuesday. Instead shares retreated with a -0.9% decline. While this is good news for the bears I would not launch new positions here. More conservative traders may want to lower their stop.

The plan was to keep our position size small to limit our risk.

Small Positions!

Current Position: Short F stock @ $14.40

- or -

Long July $15 PUT (F1116S15) Entry @ $0.90

06/16 new stop loss @ 13.85
06/13 New stop loss @ 14.26. Final target at $12.55
06/13 Take Profits Now! Ford @ 13.14 (+8.75%), Option @ $1.89 (+110%)
06/11 new targets at $12.75 and TBD.
06/11 new stop loss @ 14.55
06/08 new stop loss @ 15.01

Entry on May 25 at $14.40
Earnings Date 07/21/11 (unconfirmed)
Average Daily Volume: 57 million
Listed on May 24th, 2011

Honeywell Intl. - HON - close: 58.38 change: +1.59

Stop Loss: 59.05
Target(s): 54.00
Current Gain/Loss: - 1.2%
Time Frame: 6 to 8 weeks
New Positions: see below

06/28 update: Warning! HON has broken out above key resistance at $58.00 and its 100-dma. More conservative traders may want to abandon ship and exit early right now. I am not suggesting new positions at this time. If there is any follow through tomorrow HON could hit our stop loss at $59.05.

Earlier Comments:
We do want to keep our position size small to limit our risk.

- Small Positions -

Current Position: short HON stock @ 57.65

- or -

Long July $55 PUT (HON1116S55) Entry @ $0.75

06/18 new stop @ 59.05

Entry on June 2 at $57.65
Earnings Date 07/22/11 (unconfirmed)
Average Daily Volume: 4.1 million
Listed on June 1st, 2011

Ingersoll-Rand - IR - close: 43.60 change: +0.07

Stop Loss: 45.25
Target(s): 40.25, 37.50
Current Gain/Loss: - 0.9%
Time Frame: 3 to 5 weeks
New Positions: see below

06/28 update: IR managed a minor gain but shares really failed to participate in the market's rally. Instead IR spent the day churning near the $43.60 level. I am still tempted to launch bearish positions here but given the stock market's current rally I would hesitate.

Our targets are $40.25 and $37.50. More aggressive traders could aim lower but we do not want to hold over the late July earnings report. FYI: The Point & Figure chart for IR is bearish with a $33 target.

NOTE: IR's August options do not have much volume or open interest. Prices could be erratic.

- small positions -

Current Position: short IR stock @ $43.21

- or -

Long AUG. $40 PUT (IR1120T40) Entry @ $0.90

Entry on June 27 at $43.21
Earnings Date 07/25/11 (unconfirmed)
Average Daily Volume: 3.0 million
Listed on June 25, 2011

Kohl's Corp. - KSS - close: 50.72 change: +0.50

Stop Loss: 51.75
Target(s): 47.50, 45.25
Current Gain/Loss: - 1.8%
Time Frame: 6 to 8 weeks
New Positions: see below

06/28 update: Friday's plunge to a new relative low in KSS is starting to feel like a bear trap. Shares bounced for the second day in a row but the rally today lagged behind the S&P 500 and the RLX retail index. KSS should have short-term resistance near $51.70. We have a stop at $51.75. I am not suggesting new positions at this time.

The plan was to keep our position size small to limit our risk. FYI: The Point & Figure chart for KSS is bearish with a $43 target.

- Small Positions-

Current Position: short KSS stock @ $49.80

- or -

Long July $47.50 put (KSS1116S47.5) Entry @ $0.75

Entry on June 13 at $49.80
Earnings Date 08/11/11 (unconfirmed)
Average Daily Volume: 4.1 million
Listed on June 11th, 2011

Marriott Intl. Inc. - MAR - close: 35.57 change: +1.49

Stop Loss: 36.05
Target(s): 33.65, and 30.50
Current Gain/Loss: - 0.5%
Time Frame: 4 to 6 weeks
New Positions: see below

06/28 update: MAR rallied +4.3%. Surprised? I hope not. I've been warning readers to expect a bounce and I suggested we watch the $35.00 level or the 50-dma. MAR surged to the 50-dma and paused. We have a stop loss at $36.05. I'm not suggesting new positions at this time.

Current Position: Short MAR stock @ $35.39

- or -

Long July $33 PUT (MAR1116S33) Entry @ $0.60

06/21 readers may want to exit July options now
06/18 new stop loss @ 36.05
06/13 1st Target Hit @ $33.65 (+4.9%), Option @ 0.90 (+50%)
06/13 New stop loss @ 36.55
06/11 Adjusted exit targets to $33.65 and 30.50

Entry on June 8 at $35.39
Earnings Date 07/13/11 (unconfirmed)
Average Daily Volume: 3.7 million
Listed on June 7th, 2011

Charles Schwab - SCHW - close: 15.98 change: +0.17

Stop Loss: 16.55
Target(s): 14.00
Current Gain/Loss: unopened
Time Frame: 3 to 6 weeks
New Positions: Yes, see trigger

06/28 update: We are still sitting on the sidelines with SCHW. The plan is to launch bearish positions at $15.60. More conservative traders may want to use a trigger at $15.49 instead. If triggered we'll use a stop loss at $16.55. Our first target is $14.00 but we do not want to hold over the mid July earnings report.

Keep our position size small!

Trigger @ 15.60 (small positions)

Suggested Position: short SCHW stock @ $15.60

- or -

Buy the July $15.00 PUT (SCHW1116S15)

Entry on June x at $xx.xx
Earnings Date 07/18/11 (unconfirmed)
Average Daily Volume: 10.2 million
Listed on June 13th, 2011

St. Jude Medical - STJ - close: 46.86 change: +0.72

Stop Loss: 50.05
Target(s): 47.00, 45.25
Current Gain/Loss: + 8.1%
Time Frame: 6 to 8 weeks
New Positions: see below

06/28 update: STJ is still trying to bounce from support near $46 and its exponential 200-dma. We can expect shares to try and fill the gap. That means a bounce back toward the $48.65 area. I am thinking about lowering our stop down to $49.05 soon. I'm not suggesting new positions at this time. More conservative traders may want to exit early now.

Earlier Comments:
We wanted to keep our position size small (about half or less than a normal trade) to limit our risk.

(Small Positions)

Current Position: Short STJ stock @ 51.00

06/25 Adjusted final target to $45.25
06/23 1st target exceeded. Gap down at $46.50 (+8.8%)
06/23 new stop loss @ 50.05
06/16 exit June $50 put @ $1.95 (+95%)
06/15 prepare to exit our June $50 puts on Thursday at the close
06/04 New stop loss @ 51.05, added second target at $45.75
05/23 New stop loss @ 52.26

Entry on May 20 at $51.00
Earnings Date 07/21/11 (unconfirmed)
Average Daily Volume: 2.6 million
Listed on May 16th, 2011

Xerox Corp. - XRX - close: 10.09 change: +0.22

Stop Loss: 10.40
Target(s): 9.25, 9.00
Current Gain/Loss: - 1.6%
Time Frame: 4 to 5 weeks
New Positions: see below

06/28 update: Uh-oh! XRX has rallied back above the $10.00 level and back above its 50-dma. The only consolation for the bears is that volume was very light. We are still in danger that XRX might try and breakout from its multi-month bearish trend. Currently we have a stop loss at $10.40, just above technical resistance at the 100-dma. More conservative traders may want to limit their risk and use a tighter stop loss instead. I am not suggesting new positions at this time. Our plan was to keep positions sizes small to limit our risk. We do not want to hold over the late July earnings report.

- small positions -

Current Position: short XRX stock @ 9.93

- or -

Long Aug $9.00 PUT (XRX1120T9) Entry @ $0.20

Entry on June 27 at $ 9.93
Earnings Date 07/21/11 (unconfirmed)
Average Daily Volume: 11.7 million
Listed on June 25, 2011