Option Investor

Daily Newsletter, Thursday, 1/24/2013

Table of Contents

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

Market Wrap

Market Highs And Rotten Apples

by Thomas Hughes

Click here to email Thomas Hughes

I have to admit that after reading Apple's results, and seeing the state of Apple's share value when I got up this morning, I was a little worried about my bullish outlook on the markets. Apple's sharp drop to a 12 month low was nothing short of shocking. The stock has been in bear market territory for a two month now and last weeks early calls for a bottom had me thinking that just might be the case, but more on Apple later. The futures trading was not as I would have expected, with the mega drop in Apples shares. The tech sector and Nasdaq indexes did post some big losses but the broader S&P 500 and the Blue Chip Dow were basically flat and positive respectively.

Economic data in the form of flash PMI from Europe and Asia helped to relieve fears of further global weakness. Shares in both regions regained early losses and closed in the green. Adding to the hopes that the world recovery is still on track, and possibly gaining a wee bit of momentum was our own economic releases. Drops in unemployment claims have reached a new 5 year low and may be indicating a shift in the employment scene. Oil and energy prices trended higher today on the back of the positive data.

Earnings season continued to wear on today as well with close to 200 corporations reporting. The calendar was dominated once again by the financial sector with dozens of small regional operators providing results. Despite the bias toward the financials the day was dominated by well known big name stocks like Apple, Microsoft, Starbucks and Netflix. The reports are tending to be taken in a positive light and helped the the major indexes push on to new highs with the Nasdaq the one exception

The US Data

Today we got a new reading on Leading Indicators. I always think this is a funny indicator because it is last months reading. As an actual leading indicator I don't put much faith in it; as a look at the current month it is OK. In any case, the December reading of the Leading Indicators Index posted a gain of 0.5%. This is nearly a 3/4 point increase from the November reading of -0.2 and an indication that the start of 2013 saw an increase in GDP. However, looking back over the last half year there are as many contractions in the LDI as there are expansions though it does seem as if the bias is to the upside.

On the unemployment front initial claims for unemployment fell to a new 5 year low for the second week in a row. Initial claims fell from 5,000 from last weeks unrevised number and 35,000 from last years period to 330,000. The expectations were for a jump to 360,000. These numbers are still reflecting the heavy adjustments due to the holiday season and should be taken with a note of caution. The four week moving average also fell this week. The average dropped 8,250 to 351,750 and set a near five year low of its own. The last two weeks of declines may be indicating a shift in the unemployment scene or it may simply be seasonal volatility. Any lingering impact that could be associated with Hurricane Sandy and post holiday lay offs may be wearing off. It is also possible that hiring plans paused in the pre-Fiscal Cliff period may have been turned back on. The biggest drops in initial claims were in New York, Georgia, North Carolina and Alabama. If you recall from last week, these were among the states listed as having the biggest gains in claims. The biggest gains this week were in Texas, California and Florida. These states cited losses in service, retail, construction and maintenance jobs.

The downward trend in initial claims is transcribing itself into the continuing and total claims. Continuing claims dropped by 71,000 to 3.16 million from a revised 3.228 million. This is very nearly the second lowest number of continuing claims in several years and only about 30,000 above the low set two weeks ago. This table is showing an ongoing down trend in claims as well, even discounting the volatility present over the last four weeks. This should be seen in the current month's unemployment figures released next Friday.

Total claims fell by 214,000 to 5.66 but remains well above this years low and the above the elevated levels we saw in December. This is the only metric in unemployment that looks as if the trend has reversed. We need to keep in mind though that this number lags the initial claims by two weeks, making it three weeks old today. This could just be a spike related to Hurricane Sandy, Fiscal Cliff issues and the Holiday season. If so, it should continue to tick down in the coming weeks. Total claims may have increased importance next week because of this and the fact that we will also get Challenger, ADP, Non-Farm Payrolls, Unemployment and 4th Quarter GDP figures.

Around The World

The IMF has released a new estimate for 2013 world GDP. The estimate is down 0.1% from the previous 3.5% to 3.4%. They also estimated a 4.1% world GDP for 2014 based on expected improvement in Europe. This is marked improvement from 2012's 3.2% but hinges on continuing improvements in China and Europe.

European shares started the day in negative territory on the heels of Apple's overnight drop. Economic data from the region, coupled with news from China and our own data helped to lift shared into the close. Indexes in the UK, France and Germany all made minimum gains of 0.5%. What spurred the rally today was flash PMI data. The number, though still below the expansionary 50 level did make an improvement of nearly a full point to hit 48.2. Germany was the shining star of the group and posted numbers signifying an acceleration of expansion. The German PMI was reported as 53.6, up the previous report of 50.6. Other stories from the region included a planned September stress test for Eurozone banks and a defense of austerity plans from the UK.

The Euro traded to the upside today versus the dollar, nearly reaching the top of the two week range. The pair is in bullish mode and appears to be waving a flag at us, move signal supported by bullish indicator. I am maintaining my previous upside target of 3.5000 and adding a secondary upside target of 3.675. I derived this target by adding the height of the flagpole, which begins at the 1.3000 level, to today's price. An impending increase in US debt and continuing fiscal improvement in Europe should help to drive this trade.

Eur/USD daily

Asian shared ended mixed today despite a two year high in the flash PMI reading. The reading, 51.9, is expansionary and helps support the idea that the Chinese recovery is on track. On the downside, there is increasing chatter about the possibilities of further weakness in the region associated with housing and industrial production. The Nikkei was the strongest index in the region today, driven in part by the strong Chinese data and a volatile yen trade.

The USD/YEN has entered a period of high volatility. Price targets for the yen, inflation targets from the BOJ and a lack of increased stimulus are all having their affects. The yen trade rebounded today from near term support but was halted at long term resistance. Indicators are still bullish but the trade is definitely in a period of consolidation and will need to break above 90 to confirm this stance. The pair has been in this range for two weeks, ever since it first approached 90. A price pattern is forming but which one is unclear to me at this time. The longer term charts are very bullish but peaking and also suggesting a pause in the trend. If a breakout occurs this trade has long term targets of 95 and 100. Shorter term, support exists around 88.50,88 and 87.50.

USD/Yen daily

The Oil Index

Light Crude and Brent both traded to the upside today. Global GDP expectations, Chinese and European PMI as well as the positive US data helped lend support to the trade. At the same supply concerns in the US were alleviated somewhat with a unexpectedly large build in crude oil. Oil has been trending up for about 7 weeks and broke above the short and long term resistance of $95 a barrel just last week. The Oil Index has broken out of its multi-year, narrowing, trading range on the back of this uptrend in oil prices. ON the long term charts the index is bullish and is making a new high but it still faces long term resistance. Continuing signs of global improvement could help to increase oil demand outlook and support higher prices for the underlying commodity and the index itself.

Oil Index weekly

The Gold Index

Gold experienced some selling today and shed about 1%. This is the second drop from the $1700 level and has caused some of the pundits to speculate more technical selling is on the way. The potential for long term holders of gold to get out and redeploy their cash in other markets is present. If there is no expectation for gold to increase in price then there is no expectation to profit on it as an investment. The gold index is echoing this sentiment and dropping below its support lines. The index dropped below an up trend line to reach the long term support around 176. The technicals are bearish and suggest a drop below support could be on the way.

Gold Index daily

Earnings And Apple

The earnings calendar today, and this week, was very full. There were over 180 corporations reporting today alone. Tomorrow is light for reports considering the time of year but holds a couple of key reports. Next week the calendar is full again with even more companies reporting than this week. Tomorrow be on the look out for earnings from the likes Halliburton, Honeywell and Proctor&Gamble. As for today, aside from Apple, important releases on the list included Netflix, Union Pacific, Starbucks and Microsoft. The last two reporting after the bell. Netflix was able to post a stellar quarter and gave investors plenty of reason to drive the stock up over 40% on high volume. The online movie streamer and mail order video provider improved sales over the holiday and has gained new subscribers for its streaming services. Growth of subscribers is being linked to iPad and other tablets who provide a perfect platform for utilizing the service. Netflix posted EPS of $0.13 versus an expected loss of -$0.13. Today's jump opened quite a large gap in the price action so caution and time are needed to determine the best trade at this level.

Netflix daily

Union Pacific, the nations largest railroad operator, posted EPS of $2.19 and beat expectations. This is a 4% rise in profits and a record quarter for the company. 2012 was also a record year. Despite the improvement and earnings beat the stock still traded to the downside. High volume and a bearish engulfing pattern appeared on the chart today and may be signaling a time for long term investors in the stock to take profits. In the report a strong portfolio of customers plus increased pricing helped to achieve the gains despite weakness in the coal and grain markets. That weakness could be the cause for today's bearish price action.

Union Pacific daily

Starbucks was expected to improve on last quarters earnings of $0.46 and post EPS of $0.57. Judging by the price action today I would say that the markets were expecting a miss, or at least some negative guidance. The stock traded down, losing 0.3%. The actual release posted earnings in line with estimates. The company stands firm on its 2013 guidance which is slightly below estimates. The company also reported that strong sales in China were offsetting other economic issues. The stock trade up in the after hours.

Starbucks daily

Microsoft also reported after the bell. The expectations were for a gain of $0.22 cents over last quarter for an EPS of $0.75. Price action in this stock suggested an expectation of positive results but the move was capped by the resistance of last fall's open window. Actual results were EPS of $0.76 on revenue of $21.46 billion, up from $0.78 per share on revenue of $20.89 billion. Revenue missed estimates and shares fell in the after hours.

Microsoft daily

Apple shares took a beating today after releasing its earnings after the bell yesterday. Despite posting record revenue the company did not meet expectations and failed to inspire confidence with weak guidance. Earnings per share was inline with the general run of expectations but slowing iPhone sales, which account for 56% of revenue, had an impact on overall performance. The company reported sales of iPhones reaching 47.8 million in the quarter, only slightly lower than consensus estimates. The slowing sales and weak guidance caused the stock to drop more than 10% overnight and kept pressure on the stock all day.

We already knew, from a variety of sources, that iPhone sales were on the decline. Sales figures from early in the quarter and the recent reports of a near shut down of parts production are only two of them. Speculation abounds as to whether Apple can reclaim its lost power. One article I read today gives evidence of growing support of the phones and the potential for long term sales and conversions. One fact the article cited was that 20% of iPhone sales in the quarter were users switching from Android, up from 9% in the previous comparable quarter. This, plus the ongoing popularity of iPhone 4's, is leading to new sales of later iPhone editions coming down the pipe. In the statements and conference call Tim Cook said that sales of iPhones 4's remained strong and Verizon said that sales of later models were less than half of all iPhone activations in the quarter. The iPhone is being viewed as an entry vehicle to the iPhone world, one that is expected to lead to future sales for the company. Based on this Apple is still a great long term investment but the near term remains hindered by bear market conditions.

The stock had lost about $60 overnight and that carried through into the start of today's US session. Volumes were incredibly high and, at least in the early part of the day, biased to buyers of the stock. Average daily volume was surpassed in the first 45 minutes of trading and reached twice daily by 2:00 PM. The long term charts show a breakdown of a head and shoulders reversal pattern as well as break below the long term moving average. The stock is oversold at this level and momentum is waning. On the daily charts are painting a similar picture. Today's drop opened a large bearish window and the early rebound was capped at the resistance of the aforesaid up trend line. If buyers don't step in soon this stock could move all the way back down to $400.

Apple daily

The Indexes

The futures trades were mixed this morning, and far better than I would have expected based on the Apple situation. However, the Dow was positive and the S&P was only barely negative. The Nasdaq was the one exception and with good reason. After the opening the markets were able to push higher and the S&P was even able to make a new intraday high. The Nasdaq regained most of its 20 point opening loss and barely made it into positive territory before falling back under the pressure of falling Apples. The tech index still above long term support and long term technicals look good for at least a retest of the ten year highs set in September.

Nasdaq daily

The S&P 500 made some small gains today. Buyers and sellers were basically balanced as the markets digested earnings and economic reports. The index turned positive soon after the open, brushed up against the 1500 round number resistance, broke through and made a new high. Later in the day trading turned negative for a time but regained the positive side of yesterday's close before the bell today. The long upper and lower shadows on today's candle are evidence of the markets indecision. Technicals on the daily charts are showing me a market that is overbought with bullish but divergent momentum. This, plus the near term round number resistance and the long legged lead me to think the market is ready for a short breather and possible pullback to support.

S&P 500 daily

The long term charts are bullish. MACD and Stochastic are both bullish and indicating a rising market. MACD is on the rise and stochastic is extremely overbought. A pullback on the daily charts to 1475 would do a lot to alleviate the overbought conditions and allow the index to move higher. On this chart 1500 looks fairly inconsequential so any resistance at this level will likely be short lived, provided the earnings season and economic data don't do an immediate about face. The next likely spot for significant resistance is at the all time highs around 1565.

S&P 500 weekly

The VIX is still at +5 year lows. The markets, at least in the near term, are not too scared. Earnings are OK, there have been some significant misses that have dominated the news but there have been even more earnings beats. The theme this quarter is not the one of rampant “upside surprises” I thought it could be but it has provided some nice, and reassuring, news from the corporate sector. The strength of the businesses, if not the strength of earnings, is what I believe will be driving the markets higher and help the S&P 500 reach a new all time high.

VIX daily

This week we have seen the markets reach new highs. Price action in the major indexes since the first of the year has been impressive and a consolidation is due. Right now it looks like the 1500 level could be the top of the consolidation range. Next week is reason enough for the markets to take a break. The calendar is stacked so full reports and releases that there is no way to put them in a chart or table that would fit in this posting. On the earnings front there are at least as many releases as we got this week, if not more. As for the economy we have another host of reports,around 40, that range from our regular weekly reportings on unemployment claims to monthly reports from Challenger and ADP as well as non farm payrolls, an FOMC rate decision, Q4 advance GDP figures, auto sales and housing.

Tomorrow is rather light. There are about 2 dozen earnings reports and only one economic release, New Home Sales. I don't expect any of this to have the strength to continue the uptrend, in fact, Microsoft's report may add further pressure to stocks and help with the pullback I have speculated on above.

Until then, remember the trend!

Thomas Hughes

New Plays

No Participation

by James Brown

Click here to email James Brown


DuPont Fabros Tech. - DFT - close: 23.66 change: -0.59

Stop Loss: 24.15
Target(s): 21.00
Current Gain/Loss: unopened

Entry on January -- at $--.--
Listed on January 24, 2012
Time Frame: exit PRIOR to earnings on Feb. 6th
Average Daily Volume = 753 thousand
New Positions: Yes, see below

Company Description

Why We Like It:
DFT is a real estate investment trust (REIT) that focuses on large-scale data center facilities. It looks like the big oversold bounce that began last November has finally failed at resistance near $25.00 and its simple 200-dma. The stock is rolling over into a new bearish trend of lower highs.

There is potential support near $23.50 and its 50-dma. That's why I am suggesting a trigger to open small bearish positions at $23.40. If triggered our target is $21.00. If you are willing to hold over the earnings report you could aim lower. I am suggesting small positions because there is already a lot of bearish investors in the stock. The most recent data listed short interest at 22% of the 62.2 million share float.
FYI: The Point & Figure chart for DFT is bearish with a $10.00 target.

Trigger @ 23.40 *Small Positions*

Suggested Position: short DFT stock @ (trigger)

Annotated chart:

In Play Updates and Reviews

A Mixed Session on Wall Street

by James Brown

Click here to email James Brown

Editor's Note:
The Russell 2000 inched higher, the S&P 500 stalled, the Transports hit new highs, and the NASDAQ declined. It was definitely a mixed session on Wall Street but overall the tone of trading was mostly bullish.

We did close trades on CTRP, PPO, and THO today. ABG and HIG were both triggered.

Current Portfolio:

BULLISH Play Updates

Asbury Automotive Group - ABG - close: 34.22 change: -0.37

Stop Loss: 33.40
Target(s): 38.50
Current Gain/Loss: - 2.9%

Entry on January 24 at $35.25
Listed on January 23, 2012
Time Frame: Exit PRIOR to earnings on Feb. 19th
Average Daily Volume = 275 thousand
New Positions: see below

01/24/13: ABG is not off to a very impressive start. The rally higher this morning was impressive but momentum reversed at $35.50 and shares gave it all back. Our trade was opened at $35.25 but I would not suggest new positions at current levels.

We are planning to exiting prior to the Feb. 19th earnings report.

Please note that we do want to keep our position size small to limit our risk.

*Small positions*

current Position: Long ABG stock @ $35.25

Acorda Therapeutics - ACOR - close: 29.46 change: +0.92

Stop Loss: 27.25
Target(s): 31.00
Current Gain/Loss: + 3.4%

Entry on January 22 at $28.50
Listed on January 19, 2012
Time Frame: 3 to 4 weeks
Average Daily Volume = 417 thousand
New Positions: see below

01/24/13: ACOR soared to another new 52-week high with today's +3.2% gain. The stock is nearing what could be round-number resistance at the $30.00 level. Do not be surprised to see an initial pullback on the first test of the $30.00 mark.

current Position: long ACOR stock @ $28.50

Autodesk Inc. - ADSK - close: 37.60 change: +0.74

Stop Loss: 35.95
Target(s): 39.95
Current Gain/Loss: +0.9%

Entry on January 18 at $37.25
Listed on January 17, 2012
Time Frame: Exit prior to earnings in late February
Average Daily Volume = 1.9 million
New Positions: see below

01/24/13: An analyst upgrade this morning helped push ADSK toward the $38.00 level. The stock settled the session with a +2.0% gain. I am not suggesting new positions at this time.

current Position: Long ADSK stock @ $37.25

Ball Corp. - BLL - close: 46.52 change: +0.00

Stop Loss: 44.80
Target(s): 48.40
Current Gain/Loss: + 6.1%

Entry on November 06 at $43.85
Listed on November 3, 2012
Time Frame: exit prior to earnings on Jan. 31st
Average Daily Volume = 687 thousand
New Positions: see below

01/24/13: Hmm... that's two days in a row that BLL has closed virtually unchanged. That makes me cautious. More conservative traders may want to exit early. I am not suggesting new positions. We are planning to exit prior to the earnings report on January 31st.

current Position: Long BLL stock @ $43.85

01/17/13 new stop loss @ 44.80
01/05/13 adjusting the exit target to $48.40
01/02/13 new stop loss @ 44.40, adjust target to $47.00
12/20/12 new stop loss @ 43.85
12/12/12 new stop loss @ 43.45
11/24/12 new stop loss @ 43.25
11/17/12 new stop loss @ 42.55
11/06/12 triggered @ 43.85

Computer Sciences Corp. - CSC - close: 42.42 change: +0.37

Stop Loss: 39.95
Target(s): 44.90
Current Gain/Loss: + 0.5%

Entry on January 22 at $42.60
Listed on January 15, 2012
Time Frame: Exit prior to earnings on Feb. 5th
Average Daily Volume = 1.4 million
New Positions: see below

01/24/13: CSC followed the market higher this morning and managed to outperform the S&P 500 with a +0.8% gain on the day. More conservative traders might want to inch their stops higher.

current Position: long CSC stock @ $42.60

01/22/13 trade opened on gap higher @ $42.60

Changyou.com Ltd. - CYOU - close: 31.74 change: -0.07

Stop Loss: 29.95
Target(s): 34.75
Current Gain/Loss: + 4.9%

Entry on January 10 at $30.25
Listed on January 09, 2012
Time Frame: Exit PRIOR to earnings on Feb. 4th
Average Daily Volume = 166 thousand
New Positions: see below

01/24/13: Traders bought the dip in CYOU intraday near short-term technical support at its rising 10-dma.

Please note, if CYOU does not hit our exit target at $34.75 in time, we will plan on exiting prior to the company's earnings report on February 4th.

Earlier Comments:
I do consider this an aggressive, higher-risk trade. CYOU can be a volatile stock. Thus we want to limit our position size to reduce our exposure.

*Small Positions*

current Position: Long CYOU stock @ $30.25

- (or for more adventurous traders, try this option) -

Long Feb $30 call (CYOU1316B30) entry $1.90

01/22/13 new stop loss @ 29.95
01/16/13 new stop loss @ 29.45
01/15/13 new stop loss @ 28.75

Gulfport Energy - GPOR - close: 41.71 change: +0.45

Stop Loss: 38.45
Target(s): 44.50
Current Gain/Loss: + 1.7%

Entry on January 22 at $41.02
Listed on January 19, 2012
Time Frame: 4 to 6 weeks
Average Daily Volume = 1.0 million
New Positions: see below

01/24/13: GPOR garnered some bullish analyst comments today. Yet the stock seems to be struggling with resistance in the $42.50 area. I am not suggesting new positions at this time.

Earlier Comments:
Our multi-week target is $44.50. Keep in mind that GPOR doesn't move super fast and we will plan to exit prior to its late February earnings report.

current Position: long GPOR stock @ $41.02

Hartford Financial Services Group - HIG - close: 24.39 chg: -0.17

Stop Loss: 23.75
Target(s): 27.50
Current Gain/Loss: - 1.7%

Entry on January 23 at $24.80
Listed on January 22, 2012
Time Frame: exit PRIOR to earnings on Feb. 4th
Average Daily Volume = 4.6 million
New Positions: see below

01/24/13: The action in HIG today was disappointing. The stock broke out to a new 52-week high and hit our trigger at $24.80. Unfortunately shares reversed and underperformed the market with a -0.69% decline. Nimble traders could buy another dip or a bounce near $24.00. Right now I would wait for a new high above $24.85 as an alternative entry point.

We only have a couple of weeks for this trade to work as we do not want to hold over the Feb. 4th earnings report.

current Position: Long HIG stock @ $24.80

Coal ETF - KOL - close: 25.25 change: -0.31

Stop Loss: 24.85
Target(s): 29.85
Current Gain/Loss: - 3.3%

Entry on January 08 at $26.10
Listed on January 07, 2012
Time Frame: 6 to 8 weeks
Average Daily Volume = 190 thousand
New Positions: see below

01/24/13: I am starting to worry about the KOL ETF again. Shares have underperformed the market two days in a row. Today left KOL testing last week's lows and its 200-dma. I am not suggesting new positions. More conservative traders may want to exit early now.

Suggested Position: Long the KOL (etf) @ $26.10

- (or for more adventurous traders, try this option) -

Long APR $27 call (KOL1320D27) entry $1.03

01/12/13 new stop loss @ 24.85

North American Palladium - PAL - close: 1.63 change: -0.11

Stop Loss: 1.35
Target(s): 2.45
Current Gain/Loss: - 1.2%

Entry on January 14 at $ 1.65
Listed on January 12, 2012
Time Frame: 8 to 9 weeks
Average Daily Volume = 2.8 million
New Positions: see below

01/24/13: Precious metal-related stocks hit some profit taking today and PAL was not immune. Shares fell -6.3% and closed on their lows for the session. I am not suggesting new positions at current levels.

current Position: long PAL stock @ $1.65

Sonic Corp. - SONC - close: 11.38 change: -0.10

Stop Loss: 10.45
Target(s): 12.75
Current Gain/Loss: + 2.1%

Entry on January 14 at $11.15
Listed on January 12, 2012
Time Frame: 8 to 9 weeks
Average Daily Volume = 658 thousand
New Positions: see below

01/24/13: SONC is starting to see a little profit taking with a -0.8% pullback today. Shares could see additional weakness tomorrow. After the closing bell tonight the company announced that its president, Scott McLain, will resign at the end of March 2013. The current Chairman and CEO, Cliff Hudson, will assume the title of President.

I would look for support near the $11.00 level.

Earlier Comments:
Our multi-week target is $12.75. We may have to be patient to give SONC time to get that far. FYI: The Point & Figure chart for SONC is bullish with a $15.50 target.

current Position: Long SONC stock @ $11.15

BEARISH Play Updates

K12, Inc. - LRN - close: 19.17 change: -0.33

Stop Loss: 20.60
Target(s): 16.25
Current OPTION Gain/Loss: -27.5%
Entry on January 15 at $18.90
Listed on January 14, 2012
Time Frame: Exit prior to earnings on Feb. 5th
Average Daily Volume = 221 thousand
New Positions: see below

01/24/13: There was no follow through on yesterday's bounce in LRN. Readers might want to consider new positions on a new relative low under $18.65.

long Feb $20 PUT (LRN1316n20) entry $2.00*

*01/15/13 our entry point on the option is an estimate. There were a few trades at $1.80 this morning before LRN hit our entry point.

Multi-Fineline Electronix - MFLX - close: 15.39 change: -0.10

Stop Loss: 15.55
Target(s): 12.65
Current Gain/Loss: unopened

Entry on January -- at $--.--
Listed on January 23, 2012
Time Frame: exit PRIOR to earnings on Feb. 7th
Average Daily Volume = 108 thousand
New Positions: Yes, see below

01/24/13: MFLX continues to sink and that's a good sign given the market's up trend. The recent slide has certainly slowed. We are considering the idea of launching positions now. However, for the moment the plan remains the same - wait for a breakdown under support at $15.00. I am suggesting a trigger to open bearish positions at $14.85. If triggered our target is $12.65.

NOTE: We may have to abandon this play early, since we normally do not hold over a company's earnings report and MFLX is scheduled to report on Feb. 7th.

Trigger @ 14.85 *Small Positions*

Suggested Position: short MFLX stock @ (trigger)

Questcor Pharmaceuticals - QCOR - close: 25.51 change: -0.06

Stop Loss: 26.25
Target(s): 20.50
Current Gain/Loss: unopened

Entry on January -- at $--.--
Listed on January 15, 2012
Time Frame: exit prior to earnings in late February
Average Daily Volume = 1.8 million
New Positions: Yes, see below

01/24/13: QCOR continues to look bearish but the stock is just not moving. We may lose patience. There is no change from my prior comments on QCOR.

I am suggesting a trigger to open bearish positions at $24.90. If triggered our target is $20.50.

Please note: that short interest on QCOR is significant. The most recent data listed short interest at 50% of the 54.7 million-share float. It might be easier and safer* to buy put options on QCOR instead of trying to short the stock.

*By using puts you can limit your risk to the cost of your initial investment of the put price.

Trigger @ 24.90

Suggested Position: short QCOR stock @ (trigger)

- (or for more adventurous traders, try this option) -

buy the Feb $25 PUT (QCOR1316n25)


Ctrip.com Intl. - CTRP - close: 22.70 change: -0.89

Stop Loss: 22.75
Target(s): 27.00
Current Gain/Loss: - 0.1%

Entry on January 07 at $23.93
Listed on January 05, 2012
Time Frame: Exit prior to earnings on Jan 31st
Average Daily Volume = 2.1 million
New Positions: see below

01/24/13: We were lucky with our CTRP exit today. The plan was to close positions at the open this morning. The stock gapped open higher at $23.91 before rolling over and plunging to a -3.7% decline.

*Small Positions*

closed Position: Long CTRP stock @ $23.93 exit $23.91 (-0.1%)

01/24/13 planned exit
01/23/13 prepare to exit tomorrow morning
01/22/13 CTRP is displaying relative weakness and created a one-day bearish reversal pattern (that needs confirmation).
01/07/13 trade opened on gap higher at $23.93. trigger was 23.85


Polypore Intl. - PPO - close: 40.28 change: +0.16

Stop Loss: 39.95
Target(s): 47.00
Current Gain/Loss: - 4.0%

Entry on January 16 at $42.06
Listed on January 15, 2012
Time Frame: exit prior to earnings on Feb. 20th
Average Daily Volume = 542 thousand
New Positions: see below

01/24/13: After yesterday's underperformance in PPO we decided to close positions at the open this morning. The stock opened at $40.37.

Earlier Comments:
I am suggesting small positions to limit our risk.

*Small Positions*

closed Position: long PPO stock @ $42.06 exit $40.37 (-4.0%)

01/24/13 planned exit
01/23/13 prepare to exit at the open tomorrow


Thor Industries - THO - close: 42.39 change: +1.82

Stop Loss: 38.85
Target(s): 44.50
Current Gain/Loss: + 0.7%

Entry on January 09 at $40.15
Listed on January 08, 2012
Time Frame: 6 to 8 weeks
Average Daily Volume = 647 thousand
New Positions: see below

01/24/13: Today is a nice example of Murphy's Law at work. THO had been underperforming the last few days. We decided last night to exit positions at the open this morning. The stock opens at $40.43 and then soars to a +4.4% gain and a new multi-week high. I don't see any company-specific news behind the show of strength although the transportation index hit new highs today.

closed Position: Long THO stock @ $40.15 exit $40.43 (+0.7%)

01/24/13 planned exit
01/23/13 prepare to exit at the open tomorrow
01/12/13 new stop loss @ 38.85