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Tuesday Wrap-Up

A significant late day rally saved the indexes and gave us (technically) another day of gains, albeit flat. Index consolidation at these levels is flat out exciting for the market’s future!

I am going to take a very rare position on DIA (Dow Index Trust) in anticipation of another major move up. The spread between the FEB $111s for $1.15 and the FEB $110 puts for $1.35 looks attractive as a 200 pt move in either direction over 40 days makes a profit. The puts will hold their value on a move up but the calls will quickly deteriorate on any downward move.

There is a lot of short pressure piling in on the QQQQs (Nasdaq Trust) but I am in no mood to short today.

Apple, not Microsoft, led the Nasdaq with Steve Jobs wowing the crowd at Mac World more so with sales announcements (a first) than with what turned out to be an impressive array of products. A real market rally has multiple leaders and we have AAPL, HPQ, TXN, MSFT, SNDK, RIMM, AMD, AMAT… trading leadership day after day. DELL has been a real laggard and should move soon.

Gold dropped as expected and while oil was flat, the oil sector was flying – I was very pleasantly surprised with my Haliburtons today!

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MTH was a sector outperformer and HOV came right up off a bad open. I made a typo this morning when I recommended BHI in the homebuilders instead of BHS, who had a great day but BHI is a great oil company so no biggie!

Lehman gave a massive upgrade to Haliburton (target $80) and 18 other oil companies, notably raising the following price targets:
KEGS – $19
NOV – $82
OII – $60
SLB – $124
TDW – $65
WFT – $49

I’m waiting for $65 oil before jumping back in here except for HAL, which I am not ready to sell yet (at least until tomorrow’s inventory).

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ATYT should go up but I will wait to see if it pulls back to the 50 dma of $16.50 with a buy at around $17 as it turns back up. I am almost confident enough in this move to buy the $17.50 puts while I wait but the premium is a bit high at .40 (.52 premium for 8 days).

COST has flatlined for the month but had a very impressive quarter so I think it’s just consolidating for a move up. I’m going to give it a quarter and take the April $45s for $6 but keeping an eye on it for a wrong turn.

Now that the auto show is over, so is this ridiculous GM euphoria. The stock hit the 50 dma of $22.50 like a GM car in a crash test. If the stock can’t push through this barrier soon it will be a great short again.

HD made a nice move buying Huges Supply (which kills me ’cause I have it on a post-it note from this weekend and forgot to trade it) and should start moving up from here. The FEB $42.50s look very nice at .85!

DNA increased income by 64% this quarter on 44% more revenue to finish the year up 54% but before you run out to buy you should probably wait for the pullback as the company said it will “only” grow at 35-45% next year. Even at 30% growth, this stock should be well over $100 so I will be looking for an entry point on this one.

On the flip side of that equation, TONS had a 41% decline in profits but analysts were looking for a more biblical disaster so the stock went up 8% – go figure…

CX looks like it will finally get that cement deal we’ve been looking for since November, expect new highs tomorrow but maybe it will be a “sell on the news” sort of thing. I’m more concerned with seeing how this will affect FRK and other US producers.

GLW continues to fly with the Jan $20s that we picked up for $1.60 on 12/9 now a clean double. Time to sell 1/2 and keep a tight stop on the rest as we are so close to expiration. Watch for LPL and Samsung earnings on Thursday for direction.

Tomorrow should be very interesting with oil inventories being the focus of the day.


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