Option Investor

Daily Newsletter, Thursday, 6/30/2011

Table of Contents

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

Market Wrap

Right On Schedule

by Jim Brown

Click here to email Jim Brown
The end of quarter window dressing rally was right on schedule and helped by favorable votes in Greece, seriously oversold conditions, better economics and the need for balanced funds to sell bonds and buy stocks.

Market Statistics

Greece dropped off the geopolitical radar with the final vote to implement the required austerity measures. The vote and the guarantee of the next installment of the $157 billion in funds promised last year will probably be good for about two weeks calm. Around the second week of July the conversations will begin on the next bailout requirement estimated to be another $140 billion to support Greece for the next five years. Enjoy the relative calm while it lasts.

Also helping the markets sprint higher was a very unexpected improvement in the Chicago ISM report. The Chicago ISM, formerly the Chicago PMI, rose to 61.1 from 56.6 when analysts were expecting a decline to 55.0. The surprise gain was due to an upsurge in the Chicago area in auto manufacturing as the parts shortage from Japan finally eased. New exploded higher by +8 points to 61.2. Production also increased sharply by +10 points to 66.9. All the components are still well off their highs but it was an excellent start to an expected second half recovery. Inventories fell unexpectedly to a 10-month low! The -14.7 point drop was the third largest decline since the report began in 1946.

Chicago ISM Table (green = cycle high)

Chicago ISM Chart

The Kansas Fed Manufacturing Survey also exploded unexpectedly higher to 14.0 from 1.0 in May. Good news appears to be breaking out all over in the manufacturing sector. New orders rebounded a whopping +25 points to +10 from -15. Back orders rebounded +29 points from -19 to +10. Shipments rebounded by +33 points from -8 to +25 and the workweek component jumped +12 points to +9. This was a very strong report after two months of declines.

Kansas Fed Chart

The NY-ISM also posted a small gain rising from 534.0 to 535.3 but this was not as important since this report only slowed in Q2 and never declined.

On the negative side the weekly Jobless Claims were flat at 428,000 with only a decline of 1,000 since the prior week. With the manufacturing reports suddenly improving you would think the weekly claims would be declining. This is a subtle warning that regional reports don't impact the national employment picture. The Non-Farm Payrolls next Friday will be a key update that could sour the recent economic improvements. The prior reading for May was a gain of 54,000 and estimates are all over the map from 25,000 to 175,000 for June.

Jobless Claims

The calendar for Friday is highlighted by the national ISM Manufacturing Index. With the strong moves in the local ISMs on Thursday the expectations for Friday's report could have gotten out of hand. Officially the index is expected to decline to 52.0 from 53.5 but the whisper number has suddenly jumped to more than 55.0 and possibly unobtainable.

Economic Calendar

After the bell today news hit the wires that Treasury Secretary Tim Geithner was going to resign his position. He will be adding his name to a long list of administration officials heading for the exits ahead of the election cycle. This would be a relative short term for a Treasury Secretary. Analysts believe his exit now could be positive for the market because it would imply there are no significant problems on the horizon. With a highly contentious election cycle building there will be little happening in the fiscal policy dept for the next 18 months. The person close to Geithner and breaking the news said he would probably remain until after the debt ceiling problem is resolved then head for the exit. The futures did not react to the news. Later in the day Bill Clinton asked him directly if he was planning to leave and Geithner said he did not plan on leaving in the "foreseeable future." Obviously we don't know what his version of foreseeable might be.

In stock news Research in Motion (RIMM) spent the day turning back a revolt after a 1,700 word article critical to RIMM management appeared on the Boy Genius website. The open letter to RIMM ripped the BlackBerry maker for failing to focus on the user experience and developer relations and being too chummy with carriers. The letter said RIMM spent too much effort in developing phones based on carrier requests instead of trying to please the actual users. Another website said it had several more letters from other highly placed RIMM employees that would be posted soon. RIMM replied to the open letter on their BlackBerry Blog (HERE) and acknowledged problems with management, marketing and production but strongly disagreed with the "anonymous" letter. Although the story made the hourly headlines the share of RIMM posted a minor gain.

Shares in Apollo Group (APOL) were highly volatile after the close. Profits for the quarter beat the street at $1.51 per share compared to estimates of $1.33. However, the profits came from price increases rather than rising enrolment. Overall enrolment fell -40.3% and those pursuing a degree declined by -16.4%. Apollo said in the wake of increased government regulation on the sector they had begun giving prospective students a three week orientation program designed to weed out students who would likely drop out before completing the program. Since most of their students use government loan programs to finance their schooling the high drop out rate after the three weeks hurt their enrollment numbers and the amount of funds received from the government. Shares of APOL traded between $41.50 and $47.50 in after hours after closing at 43.68.

Darden Restaurants (DRI) also posted profits of 99-cents for the quarter compared to 80-cents in the year ago period. Analysts were expecting $1.00. Profits rose +19% thanks to an upsurge in visit and spending by U.S. consumers. Same store sales rose +3.8% at Red Lobster, +6% at Longhorn, +5.3% at Capital Grill, Bahama Breeze and Seasons 52. Oilve Garden was flat. The CEO said the first month of their current quarter was off to a really good start and they planned to accelerate new store opening to 80-90 net new restaurants for the year. They also announced an increase in the quarterly dividend from 32-cents to 43-cents. Shares fell about 50-cents in after hours.

Shares of Visa (V) and MasterCard (MA) lost some of their luster today after a monster spike on Wednesday when the Fed approved a higher card swipe fee. The Fed approved a 21-cent swipe fee compared to the expectations for a cut all the way down to 12-cents. Mastercard rallied about $30 on Wednesday to $310 but gave back -$8.36 today. Visa rallied about $12 on Wednesday and gave back -$2.31 today. I am sure investors will take those kinds of gains every day.

MasterCard Chart

The four-day slide in the dollar failed to support commodities today. Oil finished with a small gain but gold and silver were basically flat. Apparently traders are not expecting this decline to continue. Corn and wheat were crushed after an inventory report found 11% more corn in inventory than previously expected. Just yesterday corn was up sharply for the second day after reports of wet fields in the Midwest had prevented corn from being planted. In the commodity sector you live by the spike and die on the dips. There always seems to be something knocking them around.

Silver Chart

The markets this week have seen their biggest four-day gain in ten months. There are multiple reasons for the sudden rally. The first would probably be the resolution of the problem in Greece. They kicked the can down the road a couple more weeks and there is no immediate threat of a sovereign debt default. That cloud has passed for the time being.

The markets were very oversold after declining for almost two complete months. When the Dow appeared to find a bottom at 11,900 and tested it twice it gave the all clear to the window dressers to buy the dip for quarter end. The positive events in Greece simply provided the timing on when the rally should begin.

Bonds had risen almost daily since April 8th and were very overbought. For those balanced funds that must hold a specific percentage each in bonds and stocks had seen their bond holdings increase significantly in relation to stocks over the last two months. They had to bring these back into balance by quarter end. Once it appeared that Greece would be resolved the asset allocation changes began.

Ten Year Bond Yield Chart

I would like to think the rally would continue but I have nearly zero expectations of that happening. June quarter end rallies typically see some profit taking by the second week in July. The markets have gone from severely oversold to strongly overbought in only four days. Key resistance levels have been broken but I would hesitate to suggest anyone buy this rally today. We need to wait for the normal July weakness or at least until this sprint runs out of momentum.

The S&P blew through 1300 and then past the 100-day average at 1316. This four day gain will likely run out of steam next week as the window dressers take some money back out of the market. Fund managers want to appear smart and be fully invested at quarter end when stocks are moving higher. Once past the quarter end they can take some profits on those EOQ gains and increase cash positions for new opportunities in the weeks ahead.

The S&P did punch through some strong resistance but there is even stronger resistance ahead at 1330-1350. The odds are very good we will see a decent dip before moving much higher. If the economics continue to improve that could derail any selling but we are still facing what could be a rocky earnings season that begins in two weeks. Support next week should be back in the 1295-1300 range.

S&P Chart

The Dow really powered ahead with strength in CAT, UTX, MMM, CVX, BA, COM, PG and IBM. It was a broad based rally with only BAC, MCD, TRV and PFE closing fractionally negative, all on news. The Dow closed over the February resistance high but just below the early April resistance. This would be a good spot for the Dow to pause and without window dressing on Friday I would be surprised at additional gains.

Support should be well back at 12,250.

Dow Chart

The Nasdaq was the relative laggard even though it gained more than 1% on Thursday. It failed to reach strong resistance at 2800 although it did move out of some heavy congestion. Google posted better than an $8 gain but Apple and NetFlix were the laggards.

I am neutral on the Nasdaq. There are far too many conflicting forces at work and July is not normally a strong month for tech stocks. PC sales are slowing and earnings guidance could be weak. Like the other indexes I expect some short-term weakness by the second week in July.

Nasdaq Chart

The Russell was the weakest index on Thursday with a gain of less than 1%. However, it came very close to decent resistance at 830 and it did move over the 100-day average. Small caps should be done with the reconstitution event from last week and we can use them for a sentiment indicator again next week. We need to be careful the index does not form a head and shoulders here with lasting implications.

Russell 2000 Chart

I would not be entering long positions on Friday. The end of quarter window dressing is over but there should still be some money flowing into funds from retirement contributions. By the end of next week that will end and managers will be raising cash for buying opportunities throughout the earnings cycle. Be patient and wait for the dip.

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New Plays

Refill Please

by James Brown

Click here to email James Brown

Editor's Note:

I was going to suggest buying a dip in Frontier Oil Corp. (FTO) but the company's merger with Holly Corp. (HOC) is supposed to be final on Friday so there could be some unexpected volatility when the two companies (and stocks) merge into one. I would certainly keep it on your watch list.

I also want to keep an eye on CSX, a railroad stock. A rally past its all-time high near $26.75 could be a new entry point, especially after a three-month consolidation.

- James


Dr. Pepper Snapple - DPS - close: 41.93 change: +0.52

Stop Loss: 39.40
Target(s): 46.00
Current Gain/Loss: unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see trigger

Company Description

Why We Like It:
I want to take another swing at DPS. The long-term chart for this stock looks very bullish. Shares have quickly recovered from its breakdown just over one week ago and now the move looks like a double bottom. Volumes have been rising on the current rally. The rally just tested its all-time highs set in May. I would expect a short-term dip next.

I am suggesting we launch positions at $41.25 with a stop loss at $39.40. Normally I would avoid holding over earnings but I am tempted to hold over DPS' late July earnings report. Our multi-week target is $46.00.

Trigger @ $41.25

Suggested Position: buy DPS stock @ $41.25

- or -

buy the Aug. $40 call (DPS1120H40)

Annotated chart:

Weekly chart:

Entry on July x at $xx.xx
Earnings Date 07/28/11 (unconfirmed)
Average Daily Volume: 1.8 million
Listed on June 30, 2011

In Play Updates and Reviews

Powering Through Resistance

by James Brown

Click here to email James Brown

Editor's Note:
The stock market's end of quarter rally has been exceptional and bears are definitely running for cover. We are seeing several stocks rally through very significant resistance.

Today's session was strong enough to stop us out of ETN, F, HON, IR, and XRX.


Current Portfolio:

BULLISH Play Updates

Cheesecake Factory Inc. - CAKE - close: 31.37 change: -0.08

Stop Loss: 28.95
Target(s): 33.95, 37.00
Current Gain/Loss: - 0.5%
Time Frame: 8 to 10 weeks
New Positions: see below

06/30 update: With the stock market's major averages surging higher four days in a row it is disappointing to see CAKE stall and fail near resistance at $32.00. CAKE just failed there again today and looks poised to correct back toward the $31-30 zone. More conservative traders will want to consider an early exit now. If nothing else you may want to free up the cash so you have it available to play something that is actually moving!

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

06/30 consider the opportunity cost of staying in CAKE. maybe you should exit early
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: 56.38 change: +1.06

Stop Loss: 53.45
Target(s): 57.00, 59.90
Current Gain/Loss: + 5.6%
Time Frame: 6 to 8 weeks
New Positions: see below

06/30 update: ECL delivered a strong session. Shares rallied 1.9% and broke out to new highs. Our first target is $57.00 but cautious traders may want to take profits now. I am raising our stop loss to $53.45.

Current Position: Long ECL stock @ 53.35

- or -

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

06/30 new stop loss @ 53.45
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

Interpublic Group - IPG - close: 12.50 change: +0.32

Stop Loss: 11.25
Target(s): 13.20
Current Gain/Loss: + 2.7%
Time Frame: 4 to 6 weeks
New Positions: see below

06/30 update: After yesterday's lackluster session IPG was showing some relative strength today. The stock rallied +2.6% and closed at new two-month highs. I probably would not chase it here. Wait for a pull back. Broken resistance at $12.00 should be new support. Readers might want to consider a higher stop loss.

Our plan was to keep our position size small. 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 -

Current Position: Long IPG stock @ $12.17

- or -

Long Aug $12.00 call (IPG1120H12) Entry @ $0.85

Entry on June 29 at $12.17
Earnings Date 07/28/11 (unconfirmed)
Average Daily Volume: 7.5 million
Listed on June 28, 2011

Macy's Inc. - M - close: 29.24 change: +0.48

Stop Loss: 27.45
Target(s): 29.90, 32.25
Current Gain/Loss: + 3.3%
Time Frame: 6 to 8 weeks
New Positions: see below

06/30 update: Macy's was outperforming its peers in the retail sector on Thursday. The stock rallied +1.6% and closed above short-term resistance at $29.00. I don't see any changes from my prior comments. Readers may want to wait for another dip near $28.00 before launching new positions. 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: 18.99 change: +0.18

Stop Loss: 16.90
Target(s): 19.25, 22.00
Current Gain/Loss: +12.9%
Time Frame: 6 to 8 weeks or more
New Positions: see below

06/30 update: NANO hit some volatility this morning with a spike down to $18.25 but the stock recovered. If you haven't taken any profits yet you will want to do so now. Our final target is $22.00 but the $20.00 level could be significant overhead resistance. Please note our new stop loss at $16.90 I am not suggesting new positions at this time.

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

Current Position: Long NANO stock @ $16.82

06/30 new stop loss @ 16.90
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: 51.58 change: +0.04

Stop Loss: 48.75
Target(s): 54.75
Current Gain/Loss: + 0.6%
Time Frame: 3 to 4 weeks
New Positions: see below

06/30 update: Healthcare stocks are some of the best performers in the second quarter and yet the rally has stalled for this group in the last couple of days. The HMO index was negative on Thursday. UNH barely closed in positive territory after churning sideways all day. At this point I'd probably wait for a dip or a new bounce from $50.00 before initiating new positions.

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: 51.30 change: +0.61

Stop Loss: 52.05
Target(s): 47.00
Current Gain/Loss: + 0.6%
Time Frame: 6 to 8 weeks
New Positions: see below

06/30 update: The oversold bounce in AON this week has erased two weeks worth of losses. The close over resistance at $51.00 is short-term bullish for AON but the rally stalled under its 50-dma. We have a stop at $52.05 but more conservative traders may want to exit early anyway. I am not suggesting new positions at this time.

(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

Kohl's Corp. - KSS - close: 50.01 change: -0.42

Stop Loss: 51.75
Target(s): 47.50, 45.25
Current Gain/Loss: - 0.4%
Time Frame: 6 to 8 weeks
New Positions: see below

06/30 update: KSS continues to underperform. Shares lost -0.8% versus a +0.5% gain for the RLX retail index and a +1.0% gain for the S&P 500. 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: 35.49 change: +0.28

Stop Loss: 36.05
Target(s): 33.65, and 30.50
Current Gain/Loss: - 0.2%
Time Frame: 4 to 6 weeks
New Positions: see below

06/30 update: Thursday ended up being a quiet session for MAR with the stock churning sideways. Shares remain under resistance at $36.00 and our stop 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: 16.45 change: +0.08

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

06/30 update: SCHW has been stuck under resistance at the $16.50 level for almost four weeks. Yet today shares managed to trade above this level intraday and hit $16.58. If our trade had been opened we would have been stopped out.

Currently the plan is to launch bearish positions at $15.60. We're going to reconsider a new entry point this weekend but we'll likely just remove SCHW as a candidate. The stock has gone nowhere the last four weeks.

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: 47.68 change: +0.07

Stop Loss: 50.05
Target(s): 47.00, 45.25
Current Gain/Loss: + 6.5%
Time Frame: 6 to 8 weeks
New Positions: see below

06/30 update: The bounce in STJ is slowing and shares underperformed the market on Thursday. I don't see any changes from my prior comments. The stock looks like it wants to fill the gap, which means rising toward the $48.70 area. 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


Eaton Corp. - ETN - close: 51.45 change: +1.30

Stop Loss: 50.50
Target(s): 42.50
Current Gain/Loss: - 6.0%
Time Frame: 3 to 6 weeks
New Positions: see below

06/30 update: ETN was a sharp outperformer this morning with a surge to $51.71. The breakout past its 50-dma sparked some short covering and ETN hit our stop loss at $50.50 early this morning.

Current Position: short ETN stock @ $47.62, exit $50.50 (-6.0%)

- or -

July $47.50 PUT (ETN1116S47.5) Entry @ $1.40 , exit $0.05 (-96.4%)

- or -

Aug. $45 PUT (ETN1120T45) Entry @ $1.50, exit $0.50 (-66.6%)

06/30 stopped out @ 50.50 (-6.0%), options @ -96.4% & -66.6%
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: 13.79 change: +0.37

Stop Loss: 13.85
Target(s): final target @ 12.55
Current Gain/Loss: + 3.8%
Time Frame: 6 to 8 weeks
New Positions: see below

06/30 update: Ford broke out past resistance near $13.50 and quickly surged to the next level of resistance at $14.00 before paring its gains. Our stop loss was hit at $13.85. The plan was to keep our position size small to limit our risk.

Small Positions!

Current Position: Short F stock @ $14.40, exit 13.85 (+3.8%)

- or -

July $15 PUT (F1116S15) Entry @ $0.90, exit $1.20 (+33.3%)

06/30 stopped out @ 13.85
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: 59.59 change: +0.97

Stop Loss: 59.05
Target(s): 54.00
Current Gain/Loss: - 2.4%
Time Frame: 6 to 8 weeks
New Positions: see below

06/30 update: The accelerated oversold bounce in HON continued and shares broke through resistance near $59.00 and its 50-dma. Our stop loss was hit 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, exit 59.05 (-2.4%)

- or -

July $55 PUT (HON1116S55) Entry @ $0.75, exit 0.10 (-86.6%)

06/30 stopped out @ 59.05 (-2.4%), option @ -86.6%
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: 45.41 change: +1.49

Stop Loss: 45.25
Target(s): 40.25, 37.50
Current Gain/Loss: - 4.7%
Time Frame: 3 to 5 weeks
New Positions: see below

06/30 update: The stock market's powerful rally was enough to push IR up through significant resistance at $45.00 and its simple and exponential 200-dma. Our stop loss was hit at $45.25.

Earlier comments:
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, exit 45.25 (-4.7%)

- or -

AUG. $40 PUT (IR1120T40) Entry @ $0.90, exit $0.50 (-44.4%)

06/30 stopped out @ 45.25 (-4.7%), option @ -44.4%


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

Xerox Corp. - XRX - close: 10.41 change: +0.16

Stop Loss: 10.40
Target(s): 9.25, 9.00
Current Gain/Loss: - 4.7%
Time Frame: 4 to 5 weeks
New Positions: see below

06/30 update: XRX has been trading consistently under a trendline of lower highs since last December! Yet today the market's rally was strong enough to actually push XRX through this major resistance in addition to technical resistance at its 100-dma and its exponential 200-dma. Our stop loss was hit at $10.40.

Our plan was to keep positions sizes small to limit our risk.

- small positions -

Current Position: short XRX stock @ 9.93, exit 10.40 (-4.7%)

- or -

Aug $9.00 PUT (XRX1120T9) Entry @ $0.20, exit 0.07 (-65%)

06/30 stopped out @ $10.40 (-4.7%), option @ -65%


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