Constellation Brands (STZ, $19.80, up $0.14) is set to report 1Q earnings Tuesday before the opening bell. Alcoholic beverage stocks have done well for the year despite a struggling economy and Constellation is expected to post good numbers after reporting a horrible 4Q due to write-downs.

The company’s CEO recently reaffirmed the company’s profit target for this fiscal year and Wall Street expects earnings to increase nearly 20% for 2009. Constellation’s fiscal year for 2009 ends next February which is why they are reporting 1Q earnings when most companies report 2Q earnings in July.

The company’s wine brands include Arbor Mist and Robert Mondavi and there is a difference of opinion on just how strong wine sales have been. Constellation’s joint venture with Crown Imports could pay big dividends as sales of Corona have heated up with the summer months.

However, investor’s aren’t expecting much of a move based on the options activity. The July 20 calls (STZGD, $0.70, up $0.04) have traded about 150 contracts. The July 17.50 puts (STZSW, $0.20, down $0.05) have traded a little over 200 contracts.

Rick Rouse
Rick@OptionsMentoring.com

As we head to lunch, the market is slightly higher but not by much. Meanwhile, Ford Motor (F, $4.80, down $0.18) shares fell to a low of $4.54 in early trading. General Motors (GM, $11.33, down $0.22) hit a low of $10.57. As you can see, both stocks are trading lower ahead of Tuesday’s June vehicle sales reports.

Wall Street is looking for double-digit percentage declines from both auto-manufacturers as gas prices continue to weigh on sales of SUV’s and overall inventory levels.

Certainly not good news but it is if you are in the Ford July 6 puts (FSI, $1.40, up $0.33). I have been touting them for over a week and they are up another 30% today. These options hit a high of $1.58 this morning which is over 200% higher than the $0.47 they were going for on 6/20 when I first mentioned them. Our stop was raised to $0.90 and you should go ahead and move it up to $1.25.

As for General Motors, the July 10 puts (GMSB, $0.59, up $0.12) are seeing swelled voume as nearly 10,000 contracts have traded. They hit a high of $0.82 this morning. GM is at 50-year lows and it’s quite possible the market takes it below $10 if the June sales are worse-than-expected.

Rick Rouse
Rick@OptionsMentoring.com

I had a feeling I would be talking about a lower market in the “weekly wrap-up” and my gut feeling proved me right. It was a terrible week for the market if you were bullish (although the Gold stocks did well) as the bears came out in force to push the Dow to its lowest level in nearly two years. Four words for you leading the debacle: Oil, Banks, Housing and the Dollar. These are the real “Four Horsemen” of the market right now.

This past week, the Dow plunged 496 points, or 4.2%, to finish at 11,346. The S&P 500 dropped 40 points, or 3%, to close at 1,278. The Nasdaq fell 91 digits to end at 2,315, a 3.8% decline. In case you are keeping score, in two weeks the Dow has lost over 900 points…

The focal point of the week was the FOMC meeting. The Fed did nothing meaning they will likely keep rates steady for the near-term. However, oil took center stage once again and higher gas prices are affecting a number of stocks in different sectors.

Nobody is buying new cars. Ford (F, $4.98, down $0.09) lost $0.83 for the week and General Motors (GM, $11.55, up $0.12) lost $2.24 with Friday’s 1% gain. And let’s not forget CarMax (KMX, $14.85, down $0.08) which continues to set new 52-week lows.

And what about the Restuarant stocks? Punished. Sonic (SONC, $14.42, down $0.11) is down nearly 50% from its 52-week high. Jack in the Box (JBX, $23.02, down $0.36) is down from a high of $36. McDonald’s (MCD, $56.50, up $0.05) has held up rather well but I’m really starting to like Sonic at these levels. I’m not sure on the options yet because I still think the stock could head lower although support is strong at $14. However, if Sonic can’t hold $14, it could be headed to $10. Write this one down and check it around Christmas as a lottery pick…The December 17.50 call (ZSQLW, $0.70, unchanged) will be worth at least $2.50 if Sonic can get back to $20. These are the farthest out options available right now for Sonic and if the stock is at $18.20 by 12/19/08, we break even. That might be asking a bit too much from the options but buying the stock at these levels could be worth it in a couple of years.

Same thing can’t be said with the Financial stocks. You just can’t trust them no matter how low they are getting. A few are getting so cheap that they are trading for less than half of their book value. Wachovia (WB, $16.22, down $0.70) has a book value of $36 although I really don’t trust that number. It’s getting to the point where Wachovia is getting attractive enough for someone to buy and a nice premium could come. But when? Will a bid come at these levels or will Wachovia keep drifting lower and then a bid for $16 comes? Or will Wachovia dilute shareholder value by raising money and offering more shares? Is bankruptcy a possibility? Do you really trust Merrill Lynch (MER $32.70, down $0.35) with a looming $3-$5+ billion mortgage-related write-down coming when it releases earnings? Merrill has a 52-week high of $89. Keep an eye on the July 32.50 puts (MERSA, $2.16, up $0.05) which were pretty active Friday.

Turning back to oil, OPEC’s president said oil could hit $150 or $170 a barrel this summer. Duh. It closed at a record high of $142 a barrel on Friday. That might now be as high as the $200 some have predicted but either way this is getting absurd and has been for quite some time. Gas at $5? We just recently hit an average of $4 a gallon and now they are saying it could go up another 20% in a month or two? Yikes.

It’s tough to say how this will all shake out but with so many negaitives surrounding the market and no major catalysts in site, we could see a lower market heading into the holiday weekend.

Rick Rouse
Rick@OptionsMentoring.com

Gold stocks are making a run today as oil continues higher while the market heads lower. The Dow (11,316, down 137) is down triple-digits once again and Gold continues to thrive as investors seek a safe haven. The precious metal is up $16 to $931 an ounce. Here’s a few stocks and call options that we can follow over the next few weeks. The group below has performed extremely well this week:

Barrick Gold (ABX, $45.44, up $2.40)
July 45 call (ABXGI, $2.10, up $1.05, or 100%)

Goldcorp (GG, $46.73, down $2.39)
July 47.50 call (GGGT, $1.80, up $0.95, or 100%)

Gold Fields (GFI, $12.57, up $0.65)
July 12.50 call (GFIGV, $0.60, up $0.25, or 71%)

Newmont Mining (NEM, $52.88, up $0.70)
July 55 call (NEMGK, $0.94, up $0.10, or 12%)

The pressure of higher oil (now at $142!) and a lower dollar could give Gold the fuel it needs to make a trip to $1,000 an ounce. I mentioned in my Market Commentary last night that nothing looks good except maybe Gold and that’s holding true today. Like I said, things are getting cheap and it will soon be time to jump on the Financial stocks and other sectors that have been scolded. In one or two years from now the right LEAP options could do very well.

Rick Rouse
Rick@OptionsMentoring.com

Anheuser-Busch (BUD, $62.54, up $1.19) is rejecting InBev’s $46 billion bid and gave a forecast of higher 2008 and 2009 earnings that were above Wall Streets’ estimates. The stock had hit a 52-week high earlier in the session after BUD detailed its plan to make the company more valuable than the $65 per share offer it rejected from InBev.

The company expects 2008 earnings to increase in the low double-digits which exceeded estimates of 8%. In it’s confrence call with investors, BUD also reiterated that the InBev bid undervalued the company and that it would not sell its packaging business or its SeaWorld and Busch Gardens theme parks.

I’m glad BUD rejected the deal but I’m a little disappointed on how the shares have reacted. The big sell-off in the market yesterday didn’t have much of an impact on the stock but after news surfaced that InBev was going “hostile” with its bid, BUD’s stock price should have gone up in response. But the market debacle overshadowed everthing as the stock finished $0.35 lower and well below the $65-a-share offer price.

Rick Rouse
Rick@OptionsMentoring.com

Wow. Talk about a beating. Research In Motion (RIMM, $123.46, down $18.88) got one yesterday, falling 13%, after the market digested its earnings report. The stock peaked as high as $148 just a week ago, and has now fallen to its lowest level in two months. The stock was down another $1.26 in after-hours trading to $122.00.

Yesterday was a bad day for RIMM and only time will tell if current support will hold at the $120 level. I mentioned on Wednesday that the stage was set for a big, big move either way and we got just that. If you played a strangle option trade with the two options I mentioned then you now have a decent profit. The July 130 puts (RULSV, $9.85, up $5.93) were the big winner as they easily more than doubled from an entry price of $3.90.

The July 150 calls (RULGJ, $0.40, down $5.00) fell over 90% but here is the beauty of this trade once again. The entry price for both contracts came in around $9.30, $3.90 for the puts and $5.40 for the calls. The puts are worth $9.85 and the calls are worth $0.40 so the value of the two is $10.35. This gives us nearly a 10% profit in one day. Ten contracts would have made you over $1,000 in one day.

With RIMM trading lower in after-hours, here’s the plan. Since the puts are now deep in-the-money, they will move dollar for dollar if RIMM keeps going lower. We can close the puts today and bank those profits which would guarantee at least 10%. We would keep the call options open since they are nearly worthless but have the chance to rebound if RIMM can make a furious comeback over the next few weeks. We have created a risk free opportunity to make even more money if RIMM rebounds. Even if these calls expire worthless a 10% gain is a guarantee. That might not sound like much but if you can make 10% a day or even in a week then you are well ahead of the game. I’m not sure where RIMM will open this morning but let’s hope it continues lower then hope for a big rally by July 18 which is when the July options expire. [Note: Apple (AAPL, $168.26, down $9.13) fell 5% in sympathy yesterday]

Rick Rouse
Rick@OptionsMentoring.com

It was a nasty day for the market as all three major indexes took a major blow by falling an average of 3%. A wave of bad news hit Wall Street like a tsunami as oil topped the $140 level and could ultimately be the straw that breaks the market’s back. The Dow lost a whopping 358 points to finish at 11,453. The Nasdaq fell nearly 80 points and closed at 2,321. The S&P skidded 38 points and ended the session at 1,283.

Three weeks ago I mentioned if the Dow fell below 12,000 it could lead to a test of 11,750 and if that was broken, we could fall even further. Here we are. I said the S&P 500 would need to fall to 1,325 then 1,275 for the bears to start coming out in force. Here they are on the doorstep. For the Nasdaq I mentioned 2,375 was support followed by 2,275. As you can see, the Nasdaq could be a train wreck waiting to happen.

If you are a regular reader of the blog, you will know that I’ve been bearish for quite some time. There are a few stocks and sectors that have done well over the past few months and it has clearly been a task to find stocks that are going up when everything is sinking. However, people are making money by being short the market. There aren’t many stocks or sectors that look good right now to go long now, except maybe gold, but there will be.

A lot of stocks have been punished to the point to where they look not cheap but “dirt” cheap. There will come a time when it will be worthwhile to start thinking about going long and LEAP call options could provide us with an excellent chance of making some big money. But not yet. July will be a pivitol month for the market and you can bet there will be plenty of fireworks.

Rick Rouse
Rick@OptionsMentoring.com

General Motors (GM, $11.46, down $1.35) is at a 50-year low. Yes, that’s right, GM is at multi-decade lows after Goldman Sachs (GS, $178.97, down $4.68) downgraded the stock to a “conviction sell” saying the company may have to raise capital to shore up its balance sheet.

The stock is down 10% and got as low as $11.21. GM has lost a whopping 75% from its 52-week high of $43.20. Goldman went on to say that the auto market conditions are likely to keep deteriorating and that GM is burning through its cash. If GM needs to raise cash, it would most likley cut the company’s dividend which currently yields 7.6%.

The auto makers are in a world of hurt and I have been mentioning them a lot lately, especially Ford Motor (F, $5.04, down $0.20). The July 6 puts (FSI, $1.08, up $0.24) were trading for $0.47 last Friday when I mentioned if Ford fell below $5 within the next month, these puts will be worth at least $1.00. Bingo.

We had set our stop at $0.70 and you should now raise the stop to $0.90. Ford could continue lower if “capitulation” sets in. I love using that word. Capitulation is when investors “give up” any previous gains in a stock price or sell it for a loss in an effort to get out of it and into something less risky. True capitulation involves extremely high volume and sharp declines and although that’s not quite the case with Ford, it could be happening in the market right now.

It is said that after capitulation selling, there are great bargains to be had. The belief is that investors who wanted to get out of the market or a stock have sold and prices that, theoretically, will reverse and bounce off their lows. In other words, some market vets believe that true capitulation is the sign of a bottom. We may not be at a capitulation point just yet but there is “blood in the streets”.

Rick Rouse
Rick@OptionsMentoring.com

It’s hard to please Wall Street. In a much anticipated earnings announcement, Research In Motion (RIMM, $142.34, up $1.86) failed to impress analysts and the stock is being taken out to the wood shed in after-hours trading. Shares have fallen $12.40, or 9%, as the stock has dipped below the $130 mark. Ouch!

The company announced incredible earnings but still fell short of expectations. RIMM reported revenue of $2.24 billion, up nearly 20% from $1.88 billion in the previous quarter and doubling the $1.08 billion RIMM reported in the same quarter of last year. Wall Street had penciled in revenues of $2.27 billion. Strike One.

RIMM earned $482.5 million, or $0.84 cents per share versus $223.2 million, or $0.39, compared to the same period a year earlier. Analysts were expecting slightly higher earnings of $0.85 a share. Strike Two.

The big pitch RIMM wiffed on was its outlook. For the current quarter, RIMM predicted revenue of $2.55-$2.65 billion and earnings of $0.84-$0.89 a share. Wall Street was expecting revenue of $2.43 billion but earnings of $0.90 for the quarter. I had mentioned RIMM should beat earnings but a spike in expenses and the decline in gross margins caused the company to “miss” expectations. Gross margin for the quarter fell to 50.7% from 51.8%, versus the same quarter a year ago. News that the BlackBerry Bold is likely to be delayed from late July to early August didn’t help matters either. Strike Three.

It’s too bad RIMM is selling off in after-hours because the stock could have a big impact on what the market does on Thursday, especially the Nasdaq. The market has been trending lower and it could only be a matter of time before the other shoe falls. The bulls are hungry for good news so that a trend reversal can take place. But the bears have been in control since May. As the saying goes “the trend is your friend”. Right now, the trend remains lower.

The two options I mentioned this morning, the July 150 calls (RULGJ, $5.45, unchanged) and the July 130 puts (RULSV, $3.92, down $0.93), are going to see a big change in their price when the market opens in the morning. Together, these two options would have been the perfect strangle trade for a gain in the 10%-20% range if things hold up.

Rick Rouse
Rick@OptionsMentoring.com

Research In Motion (RIMM, $139.00, down $1.48) is trading slightly lower ahead of its 1Q earnings release after the bell today. The company is expected to post earnings of $0.85 a share, more than double the profits of $0.39 versus last year’s quarterly comparisons. Wall Street is expecting sales to come in around $2.3 billion.

RIMM hit an all-time high of $148 last week and is down about $10 since. The stock has always been a big mover following an earnings announcement but this time could be even bigger. The stage is set for either a huge rally or a big sell-off. The bet from this camp says RIMM easily beats estimates today.

Option investors are placing huge bets on the BlackBerry maker but the key will be what the company says about its growth. There is plenty of room for RIMM to grow as the company only has a 1% share of the cell phone market. The wild card will be a slowdown in IT spending by businesses but corporations seem to be adapting the new smart phones because of their capabilities. Any hints of a slowdown could send the stock significantly lower.

I think the stars are aligned just right for RIMM and I’d almost be willing to take a chance on the July 150 calls (RULGJ, $4.45, down $1.05) which are down 20% today. They could represent a good entry point for a one-day all-or-nothing trade. However, it really is hard to say where RIMM goes from here. The July 130 puts (RULSV, $5.00, up $0.15) can be used as a hedge in case RIMM disappoints Wall Street.

Rick Rouse
Rick@OptionsMentoring.com