10:00AM

Microsoft (MSFT, $29.95, down $1.85) dropped the ball on its latest earnings report and the stock is taking a hit. Shares are currently trading below $30 after the company reported that earnings per share fell from $0.50 to $0.47 on revenue of $14.45 billion. The numbers were slightly higher than Wall Street estimates of $0.44 a share on $14.4 billion in sales.

The company also issued guidance for the current quarter for a profit of $0.45 to $0.48 a share, which only matched Wall Street’s current view of $0.48. This and the fact that sales of its Windows software fell 24% to $4 billion are some of the reasons the stock is down 5%. Although this was a pretty solid quarter, earnings per share would have been worse if Microsoft hadn’t aggressively bought back its shares.

This leads us back to Yahoo (YHOO, $26.69, down $0.61). Microsoft reiterated in its conference call that it would not raise its bid for Yahoo but continued losses in Microsoft’s online division - which it plans to merge with Yahoo - swelled to $228 million from $171 million in the same period last year.

These results suggest that Microsoft could certainly use Yahoo but with a deadline of Saturday for a deal to get done, it’s looking more and more like Microsoft could walk away which is why Yahoo’s stock is feeling some heat.

Rick Rouse
Rick@OptionsMentoring.com

11:15AM

Chipotle Mexican Grill (CMG, $102.95, down $6.95) reported higher-than-expected profits for the quarter yesterday as new restaurant openings fueled higher sales. Income was $17.3 million/ $0.52 a share, up from $12.4 million/ $0.38 a share from Q107. Revenue came in at $305.3 million, up from $235.5 million. Wall Street had forecast $0.48 a share on $298.4 million in revenues.

The company beat by four cents and also reported a 10% increase in sales at stores open at least a year which is the true measure of growth. While most restaurants would be thrilled to be in the 7%-8% range given the current economic environment, Chipotle is posting double-digit growth. Wow. Impressive results to say the least but the stock is selling off hard today (-6%) and is down $12 from from my 4/22 blog.

The May 105 puts (CMGQA, $7.17, up $1.47) were profiled at $4.50 when I noticed the option activity building and are now up about 60%. Great return but this would have been a risky trade by buying only puts going into earnings, especially given the good results. However, people do it all the time. Some win, some lose but that’s the chances inexperienced option traders will take.

Why take chances like this when you can learn to trade options OUR way? We can teach you why trades like this could potentially damage your trading account and show you other unique ways to make money where your odds are way greater for success. Would you rather take a 50/50 chance on an option trade or do an option trade where your success rate is 90% or greater? Click here to learn more.

Rick Rouse
Rick@OptionsMentoring.com

6:00AM

Altria Group (MO, $22.30, up $0.25). The company spun-off Philip Morris (PM, $52.00, up $1.93) last month so this will be its first quarterly report without the tobacco business. The move was designed to separate the fast-growing international business from all the litigation and headaches associated with the tobacco industry. The company reports after the bell.

American Express Company (AXP, $44.38, up $0.41). Reports after the market closes. Financials have bounced back as of late but will the short-lived rally hold up?

Baidu.com (BIDU, $349.66, down $0.44). Baidu was flat yesterday and announces earnings after the market closes. Today could get volatile as traders place their bets on whether this stock is headed for $400 or back down to $300. The stock has gained 40 points in a week so we could get a huge move after the bell in either direction.

Potash (POT, $204.12, down $12.71). The stock was due for a pause and will announce earnings BEFORE the bell this morning. The May 200 calls (PYPEX, $17.70) were profiled at $6.40 and I told you to set higher stops on Monday when they reached this level if the stock continued to go up. The May 200 calls hit a high of $25 yesterday before selling off big-time. If you had used a “trailing” $2 stop, you would have been out at $23 as the stock started to fade. This is how you squeeze out extra profits in trades while at the same time protecting your gains.

Taser (TASR, $9.42, down $0.10). After hitting a 52-week high of nearly $20 back in October, Taser has been treading water at $10 for most of 2008. Not a good sign and the stock always brings legality issues with it. I just don’t trust this stock. The company announces earnings BEFORE the bell.

Rick Rouse
Rick@OptionsMentoring.com

Yahoo (YHOO, $28.54, down$0.01) posted better-than-expected earnings last night but the numbers fell short in what investors were hoping would be a blowout quarter. The company reported 1Q profits of $542 million, or $0.37 a share. The earnings were only a couple of pennies higher than what Wall Street had forecast and put any chance of Microsoft (MSFT, $30.25, down $0.17) raising its bid at slim and none. That was the case anyway as Microsoft had already said before Yahoo’s earnings release, regardless of the numbers, that it would not raise it bid.

Yahoo said it was still talking with both News Corp (NWS, $18.50, down $0.44) and Time Warner (TWX, $14.64, down $0.31) but Microsoft is their best deal going and the deadline is Saturday for Yahoo to accept. This should get interesting but I seriously doubt Microsoft raises its offer. In after-hours trading last night, Yahoo was down 15 cents while Microsoft was up 21 cents. No matter what happens, the big winner here is Google (GOOG, $550.00, up $17.21). Even if Microsoft is successful in acquiring Yahoo it will take 12-18 months for both companies to integrate and by then Google will have only gotten stronger. BTW, the May 500 calls (GOPEO, $60.80, up $16.40) were at $7.00 last Thursday.

Chipotle Mexican Grill (CMG, $113.15, down $5.13) fell another two bucks after I talked about what McDonald’s (MCD, $58.35, down $0.32) earnings could mean for Chipotle. The May 105 puts (CMGQA, $4.50, up $1.30) were active yesterday.

Intrepid Potash (IPI, $50.40, up $18.40) zoomed nearly 58% in its first day of trading. The stock opened at $65.00. This brings me to a point about IPO’s. Even though our focus is on options, if you`re try to buy an IPO on its first day of trading…Don`t place a pre-opening “market order”. Some people probably did yesterday morning and were filled at the open at $65. They are looking at nearly a 25% loss. Intrepid seems too “hot” right now not to trade higher and yesterday’s call of a 50% gain was on point. The stock is not “optionable” right now meaning you can’t buy calls or puts. Probably in 30 days options will begin to trade. Of course, all of this did indeed mean good news for Potash (POT, $214.83, up $6.04). The stock is on F-I-R-E!!! The May 200 calls (PYPEX, $24.70, up $3.80) were profiled a little over a week ago at $6.40 and are now up three-fold. Nice.

Oh yeah. Airline stocks got hit hard…again. You can’t say I didn’t warn you: AMR Corp (AMR, $7.02, down $1.18), Delta (DAL,$6.80, down $1.40) and Northwest (NWA, $7.47, down $1.59) all fell 15%-17%. In less than two weeks AMR has dropped from $9.48 to $7.02, Delta was at $10.01 and now sits at $6.80 and Northwest from $10.96 to $7.47. Folks, that’s a 30% fall from grace and the scary thing for the Airline sector is it may not be over.

As you can see, some stocks are doing rather well despite economic pressures while others are folding like a cheap lawn-chair. Our option mentoring program will show you how you don’t care if a stock goes up or down - it’s a Non-Directional trade! In fact, you’ll still make money if the stock moves up 20% or down 20% from where you entered. If you would like to learn more about these strategies then take advantage of our free Monthly Cash Flow Video DVD Seminar by clicking here.

Rick Rouse
Rick@OptionsMentoring.com

There’s quite a few big-time names reporting today and you can expect they will have an impact on the market.

Amazon.com, (AMZN, $79.60, down $0.58). After beating estimates for a few quarters on its way to $100 a share, Amazon could face an uphill battle if earnings are only in-line.

Anheuser-Busch Companies (BUD, $47.40, down $0.77). The King of Beers could disappoint Wall Street as profits might come up short with rising commodity costs. What’s good for Potash is bad for Anheuser-Bush as the price of corn and other commodities used to make beer have just exploded over the past 12 months.

Apple (APPL, $160.20, down $7.96). By far, Apple will be the most closely watched stock. Look for stronger Mac sales and a drop in iPods sold. Of course, Apple is famous for pulling a rabbit out of the hat so anything is possible here.

Chipotle (CMG, $113.15, down $5.13). The burrito chain could either surprise Wall Street or say that rising food costs or other factors had an affect on their bottom line. It’s a coin-flip.

Delta Air Lines (DAL, $6.80, down $1.40). If it couldn’t get any worse, Delta drops 17% the day before it reports earnings. And get this, it could cost us more to fly in the future…one Airline CEO recently stated that they would have to up prices 15%-20% just to break even!

F5 Networks (FFIV, $21.31, down $0.62). This once high-flier is challenging its 52-week low of $17.70 after trading to a 52-week high of $46.94.

Philip Morris International (PM, $50.07, down $0.56). Barron’s likes the U.S. tobacco stocks.

Qualcomm (QCOM, $41.55, down $1.07). Does anyone remember the analyst who gave the stock a $1,000 price target back in 1999? Was it Prince? No, it was actually a broker at PaineWebber.

United Parcel Service (UPS, $71.90, down $0.62). What can Brown do for Wall Street is the big question today.

Rick Rouse
Rick@OptionsMentoring.com

McDonald’s (MCD, $58.31, down $0.37) reported earnings this morning and despite overall good numbers the stock is trading lower. The company said earnings grew 24% as net income reached $946 million, or $0.81 a share, helped by strong international sales. However, investors focused on the fact that sales fell slightly in March at U.S. restaurants opened at least a year. In pre-market activity, McDonald’s was trading at $60 but opened at $57.94.

It was interesting to hear what McDonald’s had to say because Chipotle Mexican Grill (CMG, $115.00, down $3.28) announces earnings Wednesday after the bell. It was McDonald’s who made an initial minority investment in Chipotle back in 1998 and at one point it had a controlling interest of 92%.

Chipotle went public in January 2006 at $22 a share and closed at $44 on its first day of trading. Although McDonald’s has fully divested its investment in Chipotle, at some point one has to wonder is Chipotle really worth $115 a share?

That’s for the market to decide but either way the stock is poised to make a big move one way or the other. Chipotle is nesting right below its 100-day moving average and just above its 200-day moving average. The stock hit a high of $155 on December 31 but has been in a downtrend ever since hitting a low of $90 in March.

Although these two companies operate independently, they are still tied to the hip by the U.S. consumer. McDonald’s has done a great job with its $1 menu and Chipotle seems to be the rage when it comes to quality fast-food. However, with food prices continuing to rise it will be interesting to see how Chipotle controls and manages these costs. If they disappoint Wall Street with earnings then the May 105 puts (CMGQA, $4.49, up $1.29), which are up 40% today, could continue to get some action.

Rick Rouse
Rick@OptionsMentoring.com

Every now and then an IPO (initial public offering) comes along that you know the minute it becomes public the demand is going to be strong. Some IPO’s go on to be huge winners like Chipotle (CMG, $118.28), Google (GOOG, $537.79) and Mastercard (MA, $236.00). Intrepid Potash (Ticker Symbol: IPI) is set to make its debut TODAY and only time will tell if it can match the returns of the those IPO’s. However, judging by the demand for fertilizer stocks in general, I wouldn’t be surprised if Intrepid gains 50% or even doubles on its first day of trading.

The company has raised the size and expected price range of the offering twice in the last week. Intrepid originally had priced the offering of 24 million shares at $24-$26. Then it was 30 million shares priced between $27-$29. Now the offering is 30 million shares at $32 a share. This puts proceeds at $960 million.

Intrepid had sales of $213 million in 2007, while earnings came in around $30 million. Once the stock does trade it will already carry a high multiple but investors are looking at what future earnings will be especially with the price of potash expected to approach $1000 per metric ton by the end of the year. It’s about $500 per metric ton right now.

Potash inventories remain low and the product is close to being sold out by all major world suppliers. Add China to the mix and you now have an even bigger market competing for a scarce commodity.

Of course all of this should mean good news for Potash (POT, $208.79, up $4.12) and the May 200 calls (PYPEX, $20.90, up $2.90) I profiled at $6.50 a contract. If Intrepid does as well as I think it is going to do, Potash should benefit as well.

Rick Rouse
Rick@OptionsMentoring.com

I said yesterday before the market closed to be aware of Netflix (NFLX, $39.32, up $0.76) going into earnings. I mentioned the stock could fall victim to the classic “buy the rumor, sell the news” event and that is what appears to be transpiring. Despite reporting the company’s biggest increase in subscribers for a quarter (764,000 to 8.24 million total) the stock was down 14%, or $5.50, to $33.82 in after-hours trading last night.

Netflix reported earnings of $13.4 million, or $0.21 cents a share, on revenues of $326 million. That was the first problem. Although the company matched estimates many analysts were figuring in a higher number that would exceed expectations. Secondly, Netflix said it anticipates only 60,000 to 260,000 more customers will sign up during the current quarter and they trimmed a penny off the upper end of its full-year guidance. Certainly not a catastrophe, but its something that was viewed as a negative.

The May 40 calls (QNQEH, $2.85, up $0.51) opened at $2.20 and traded as high as $3.30 when the stock reached $40.63. Nimble traders that were able to get in-and-out did well. Otherwise, if you held the calls overnight you will be feeling the pain when the market opens this morning. Here again is another example of buying options ahead of a company’s earnings announcement. Sure, there is money to be made trading options around situations like this but often times it can lead to disaster if you’re not careful.

Rick Rouse
Rick@OptionsMentoring.com

Apple (AAPL, $164.37, up $3.36) has added 15 points over the past week and is set to report earnings Wednesday. Expect continued improvement with Mac sales while a continuing decline in iPods is expected. The option chains are full of action as people place their bets on where Apple will end up after it reports. Given the current market environment Apple could move 10%-15% after they report. The May 175 calls (APVEO, $5.85, up $1.85) are up nearly 50% as over 12,000 contracts have traded so far. The calls opened at $3.85.

Microsoft (MSFT, $30.39, up $0.39) reports earnings Thursday. Yahoo (YHOO, $28.40, down $0.03) on Tuesday. This is going to get exciting. If Yahoo misses while Microsoft shines, then we could see Yahoo drop will Microsoft rallies. The deadline for Yahoo to accept the deal is fast approaching and we should know something by the end of the week. If Yahoo surpasses earnings estimates then it could also force Microsoft to raise its bid although the company has repeatedly said it wouldn’t. The Microsoft July 30 calls (MSQGF, $2.05, up $0.25) are now up roughly 15% since they were profiled.

Netflix (NFLX, $40.00, up $1.44) is having a good day so far. The stock is up ahead of earnings and the May 40 calls (QNQEH, $3.00, up $0.65) are active. They opened the session at $2.20. If you took a position before earnings be careful of the classic “buy the rumor, sell the news” reaction. Netflix’s earnings history has been erratic at times so protect your profits.

Potash (POT, $209.00, up $4.33) continues its surge. The May 200 calls (PYPEX, $21.00, up $3.00) were mentioned at $6.50 a contract and are up over 200%. If you haven’t set stops already, set them in the $15-$16 range. You can adjust along the way if the stock continues higher throughout the week.

Rick Rouse
Rick@OptionsMentoring.com