Intra-Week Update - April 1st, 2009CRM $32.69 -0.04 --Salesforce.comIt was a very volatile day for CRM. The stock gapped open and plunged to the $30.00 mark (-8.3%) before bouncing all the way back to nearly unchanged on the session. What caused the sudden spike lower? A Goldman Sachs (GS) analyst placed CRM on the company's "conviction sell" list due to concerns that CRM would not be able to meet Wall Street's earnings estimates. I have to admit the analyst might have a point. It was only yesterday that the Gartner Industry Group came out with their forecast for a very dismal 2009 in technology spending. Gartner expects tech spending to fall 4%. How bad is that? When the Internet bubble burst in the stock market in 2001 tech spending only fell 2.1%. The Goldman analyst believes that CRM would have to post an average of +20% year-over-year growth in each of the next four quarters, which is significantly above the fourth quarter's 16% growth (source: AP article). It's almost a guarantee that the first quarter of 2009 was worst than the fourth quarter. We may have to buy a short-term put to protect our position when CRM's earnings roll around May 21st. Where is CRM technically? The sell-off this morning pushed the stock to $30.00, which was round-number support. This support level was also underpinned by the stock's 50-dma and closely followed by the 100-dma and 40-dma. Plus, the $30.00 level happened to be the 61.8% Fibonaaci retracement of CRM's February-March rally. I was expecting CRM to bounce from $30.00, which is why we put our entry point there. The rebound is encouraging but it was also expected. The short-term trend in CRM is down. Odds are pretty good that CRM may retest the $30.00 region. Our entry point to buy LEAPS on CRM was the $30.00-28.00 zone. If you missed it this morning I think we might get another chance in the next week or two. The LEAPS we suggested were the 2010 $40.00 calls (ODK-AH) and the 2010 $45.00 calls (ODK-AI). The $40 LEAPS did not trade today but their current ask is $4.30. The $45 LEAPS opened at $2.00, hit $1.90 and bounced back to $2.68. It's probably a safe bet that our entry point was around $2.00 since shares of CRM gapped open and plunged to $30.00 in the first five minutes of trading. Now that the play is open our target to exit is $50.00. We have a stop loss at $24.90.
Use the 2010 CALL LEAPS (entry point @ $30.00 on CRM)
BUY CALL LEAP 2010 $40.00 strike (ODK-AH)
Chart of CRM
HES $55.48 +1.28 --HESS Corp.It was no surprise this morning that the Energy Department's latest weekly inventory report on oil supplies showed another build. Yet investors sold the news anyway. Crude oil fell under $48.00 a barrel before the stock market's rebound lifted commodities along with equities. The weakness in oil and stocks this morning pushed shares of HES to an intraday low of $52.43. We were suggesting that investors buy LEAPS on HES on a dip into the $52.50-50.00 zone. Our trade is now open. However, I don't see a need to rush in. Yes, it's true that HES looks short-term oversold with the drop from $66 to $52.50. The stock could (and probably should) bounce from here but the Q1 earnings season is fast approaching and the stock market in general could be heading into a hefty correction, which could take HES lower. The $50.00 level looks like decent support so more patient traders may just want to wait for a dip closer to $50.00. Speaking of earnings HES is due to report around the very end of April. We'll have to see how other energy stocks are performing with their energy announcements. It might be prudent for us to buy a short-term put to protect our bullish position. This will be some to consider as we approach earnings. The option I suggested was the 2010 $70.00 LEAP call (WHS-AN). This call traded at $7.30 and closed about 20 cents higher on the day. Now that the play is open our upside target on HES is the $80-85 zone. We have a stop loss at $49.00.
Use the 2010 CALL LEAPS
BUY CALL LEAP 2010 $70.00 strike (WHS-AN)
Chart of HES
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