Chris Tyler, Optionetics.com
January 10, 2011

Bulls find profit-taking “no big deal” compared to Monday’s top M&A headline supports as Europe’s sovereign debt fears re-emerge as focus “No. #1!!” As of 11:05 ET the SP-500 (SPY) is off -0.40% in slightly less VIX’ing behavior as bulls put on some protective gear.

Just when investors thought it was safe to go back in the water and maybe take a swim across-the-pond, response Monday to the ECB tossing Debt PIIGS constituent Portugal a “temporary lifeline” by purchasing its bonds, according to Reuters, has gone less-than-ducky with bulls in the broader market.

In those sometimes intertwined markets of influence, the EUR/USD is actually showing a slight bid intraday after initial weakness sent the currency pair to marginal four month lows. At the same time, the US Dollar (UUP) has reversed its opening role as the leading go-to ticker for more risk averse audiences as shares come under modest pressure by -0.25% within a bullish “W” pattern.

Searching for other lame duck catalysts why every day can’t be an offensive drive and touchdown, bulls could still be quacking over Friday’s disappointing still laboring jobs front. A weekend blurb by a top IMF official warning the US better get all its proverbial ducks in order with regards to cutting the deficit or face the wrath of “crushing debt service” may also have some bulls rethinking risk this morning.

Separately, China’s markets finished with percentage losses to kick off the trading week despite announcing its economy grew nearly 10% during 2010 with domestic retail sales growth of 18.5% a key driver.

Officials tried to back up the report with positive comments of the country having the “confidence, conditions and capability to maintain long-term stable and fast economic growth” but to little avail with the Shanghai Composite down -1.66%.

For its part, the US listed FTSE/Xinhua China 25 Index (FXI) is off -1.10% for a third day of losses below 50SMA resistance and despite the latest round of untiring trader talk of China leading the global economy out of its doldrums.

Stateside, corporate reports in front of tonight’s unofficial kick-off to earnings season courtesy of the Tab Lite Alcoa Bulls Bowl (AA) have been spirited but failed to impact the market’s typical of late cheering section.

In the spotlight, utilities giant “DUcKE Energy” (DUK) announced its plans to purchase rival Progress Energy (PGN) for $13.7B, barring some regulatory red tape. The deal represents a premium of about 6.5% over the shares value of the last 20 trading days but is looking a bit less ducky for bulls compared to Friday’s whimsical flight higher, with PGN off -2.15%.

According to company spokespersons and bean counters in the know, should the merger clear with regulators it would be accretive in its first year and make Duke the largest utility operator in the country with approximately 7.1M customers.

Separately and also on the M&A front, DuPont (DD) intends to buy Danish food ingredient and enzyme outfit Danisco for $5.8B and assumption of $500M in existing debt.

The deal is expected to close during the second quarter should be accretive in 2012 and negatively impact 2011 earnings by about $0.30 - $0.45. Intraday, shares of DD are off -2.50% but bouncing back handily back through the 50SMA by ever-hungry bulls in volatile trade.

In sector news, upwardly revised and above views revenue guidance from LDK Solar (LDK) has ignited a 16% bid underneath its previously left-out-in-the-cold shares. By the numbers, the company now sees Q4 revenues of $870M - $910M compared to current Street estimates of $741.85M on above views wafer and module shipments, as well as polysilicon and cell production.

Technically, Monday’s gap move above 50SMA resistance finds LDK in the right side of a slightly deep weekly cup shaped base. For other bullishly-inclined home-gamers, shares are simply ing a stiff nine week long pullback into 100SMA support within an existing uptrend.

In sympathy, shares of Suntech (STP), SunPower (SPWRA), Jinko Solar (JKS) and ReneSola (SOL), and are displaying fireworks of 4.70% to 7.00%. Naz’ 100 behemoth First Solar (FSLR) and liquidly-traded Trina Solar (TSL) are each up about 2%, while former hotties Str Hldgs (STRI), Yingli Green (YGE) and MEMC (WFR) are tacking on non-sizzling gains of 0.25% - 0.95%.

Finally and in those sometimes accurate heat-seeking option markets, instigator LDK has seen more than 22,000 contracts change hands versus its daily haul of 9,600 with calls commanding favor by a margin of 2.5-to-1.0 over puts on mixed, range bound but bid implieds near 68% for at-the-monies.

Most popular, the surrounding money January 11 and 12.5 calls account for nearly 35% of today’s volume. With larger open interest in both strikes and two weeks left in the January contract, one likely popular and smarter way to continue playing the offensive line for bulls already having scored the proverbial touchdown is to roll into the higher strike for what likely amounts to as a nice-sized credit.

Chris Tyler
Senior Staff Writer & Options Strategist
Optionetics.com ~ Your Options Education Site