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Wall Street's Monday Lunch Options

Chris Tyler, Optionetics.com
January 24, 2011

In front of this week’s flood of influential earnings and economic data, bulls are biting once more into the increasingly hot solar sector and little else Monday. As of 10:45 the SP-500 (SPY) is up 0.20% after the slightest of weekly detours from a 21-week cycle.

In an otherwise quiet Monday, the solar arena (TAN, SPWRA, JASO, YGE and TSL) is sizzling once again and continuing to display relative strength fireworks in 2011 after a technically modest showing last year. Behind today’s bid in the group, Goldman Sachs put shares of Naz’ 100 component First Solar (FSLR) on its influential Conviction Buy List.

According to analysts from Goldman, solar-panel manufacturers “will avoid a hard landing” in 2011 and should see growth of 13%. They expect an increase in demand for photovoltaic generators driven by lower panel costs, government clean power mandates and companies installing panels according to a Bloomberg report.

Intraday, shares of FSLR are up 4.55% and testing intermediate highs set back in late October. The potential breakout is from a first-stage base due to the severe nature of its corrective move from its prior highs which allows for a “reset” of its count according to rules laid out from the likes of Investor’s Business Daily.

In sympathy, shares of leader-of-late LDK Solar (LDK) are up 8.75%, while Canadian Solar (CSIQ) and Suntech Power (STP) have put together gains of about 4.50% each but still contained by short consolidation patterns in the right side of their respective larger bases.

On that sometimes accurate heat-seeking option front, bulls in FSLR are concentrating their efforts in the February and March near and out-of-the money calls.

Total contract volume in FSLR has surpassed 19,000 compared to an average daily count of 14,000. Premiums are bid near range highs and above fair value across all statistical volatility time frames. A quick inspection of the board suggests long outrights, diagonals and / or rolls in the Feb 165 call and March 160 call are likely targets of today’s order flow. First Solar reports after the close on February 17.

Elsewhere on the corporate front and closer to largely absent headline drivers this morning, Intel (INTC) shares are up 1.10% on heavier-than-normal volume after the Dow component and world’s largest semi outfit announced a 15% quarterly dividend hike and beefed up its buyback program by $10.0B.

Fellow Dow constituent McDonald’s (MCD) is shedding a mild -0.65% layer of fat off shareholder value in Monday’s first half following its earnings report.

The global fast food chain operator announced in-line top and bottom-line results without a spicy side of guidance. In turn and despite a technical correction of about 11% over the past few weeks, McDonald’s has failed to deliver a Happy Meal for bulls.

In other reports, Oil & Gas outfit Halliburton (HAL) is up about 1.50% after its five cent profit beat on earnings of $0.68 per share and better-than-expected sales beat which generated revenues of $5.2B compared to estimates of $4.87B.

Intraday, shares of HAL remain wedged within an eight-week long handle-like base that’s found support by way of the 50SMA.

Lastly, Naz’ 100 component Steel Dynamics (STLD) is off fractionally by -0.75% after announcing its narrow top and bottom-line miss. The company reported profits of $0.07 per share compared to Street estimates of $0.08. Sales grew by nearly 30% but revenues of $1.53B did fall slightly shy of views calling for $1.59B.

On call, Steel Dynamic’s management said given a positive end to its quarter they “anticipate a substantially improved first quarter” across-the-board and will provide quantitative guidance in March. Technically, bulls haven’t given up on shares either as evidenced by its nice but slightly deep cup-shaped base of the past year and one now offering up a handle some four weeks in-the-making.

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