Shares of General Electric (GE, $27.59, up $0.19) hit a 52-week low yesterday before rebounding to close in positive territory. The stock hit a new low of $27.20 and is now down 25% for the year. GE has been in a major downtrend since announcing crappy 1Q earnings back in April. The stock was at $36.75 before their April announcement and fell $4.70, or 12%, the day they reported on volume of 366 million shares.

The big issue with GE is that in mid-March it had reaffirmed previous 1Q and yearly earnings guidance before dropping the “disappointment bomb” on Wall Strret. Not only did GE miss 1Q earnings ($0.44 versus expectations of $0.51), they said full-year earnings would be well below what they had forecast.

GE gets half its profits from financial services unit, GE Capital, which was where earnings took a hit. Most figured GE had kept the subprime damage in check but when earnings were revealed this division accounted for $0.05 of the $0.07 on the miss. The company rarely misses its numbers and many on Wall Street were stunned at just how far off GE was from estimates.

GE makes a variety of energy products and that will be the key driver of earnings over the next few years. The company is enjoying double-digit growth from the Infrastructure division but other areas have been “soft”. GE is still treading water and it may be a little too early to put the toes in the water. The company will be reporting earnings in the next 2-3 weeks and all eyes will focused on their numbers.

Like I said before, I’m not ready to purchase any call options on the stock just yet but I am watching the 2009 January 30 calls (VGEAF, $1.25, up $0.10) and the 2010 January 30 calls (WGEAF, $2.67, up $0.10). It may take a quarter or two for the company to gain Wall Street’s trust back but this stock is getting pretty cheap. Besides trading at a five-year low, the stock is sporting a juicy 4.5% dividend.

GE’s price/earnings ratio is under 13 and its price/book value ratio is a little over 2x. These ratios often help determine whether a stock is undervalued or overvalued. The higher both are compared to other stocks means the stock could be overvalued. A lower P/E or P/B could be mean the stock is undervalued and that appears to be the case with GE right now. However, I still don’t believe the stock is out of the woods just yet and I will also be watching to see what GE says when it reports earnings in July.

Rick Rouse
Rick@OptionMentoring.com

Cooper Tire & Rubber (CTB, $7.92, down $0.37) delivered more bad news on Tuesday. The company said it is cutting 2Q production at its North American facilities, blaming lower tire demand and a possible shortage of raw materials. Cooper Tire was vague in its statement and did not say how much it was cutting production or where the cuts will take place. The cutback in production will cost the company up to $14 million.

This stock has been slammed and is now down roughly 75% from its 52-week high of $28.50. The sell-off in the stock accelerated in May on expectations that car sales would be weak and has continued through June. Cooper is suffering big-time from rising oil prices as petroleum is key to tire making and accounts for 60% of the products used in them. Over the past year, crude oil prices have more than doubled, from $55 a barrel to more than $135+ nowadays, which is affecting Cooper’s bottom line.

Last month, the company reported profits of $0.03 a share versus estimates of $0.10. Revenue for the quarter was $679 million, slightly less than the $680 million analysts had predicted. Yeah, it was a dismal quarterly report but there may be hope for Cooper.

The company reported sales in the International Tire Operations grew nearly 30% to $232 million due to increased volume and pricing. Cooper also repurchased 800,000 shares of its own stock for $14 million in Q1 and still has another $40 million set aside for additional buy-backs. And who’s to blame them? The fim has a book value of nearly $14 a share, meaning Cooper’s assets or an acquisition of the company would be worth this much. Of course there are many factors that make up a company’s book value but based on the share price, Cooper is trading for half its book value.

The biggest risk for the stock is rising raw material expenses which cost the company $6 million last quarter. These expenses represent a big risk for the company going forward (as if they already haven’t) and there’s no telling when Cooper will rebound. Certainly not anytime soon but with the China market representing the company’s next big area of growth, Cooper could be a stock worth holding over the next few years. There hasn’t been much action in the 2010 January 10 calls (YBGAB, $1.35) lately but they may also represent a good buying opportunity as well.

The aforementioned options do not expire for another 18 months and both the options and the stock could get cheaper in the weeks and months ahead. Let’s watch the stock over the summer and see how it reacts. By the time the fall and winter rolls around, which is traditionally Cooper’s strongest quarters, we should have a better idea of what lies ahead for the company.

Rick Rouse
Rick@OptionsMentoring.com

1:10PM EST

It looks like Microsoft (MSFT, $27.82, down $0.15) and Yahoo (YHOO, $22.43, up $0.98) are crying “wolf” again. Yahoo was getting spanked earlier in the session after a downgrade out of Thomas Weisel Partners. The stock was headed below $20 after the firm said Yahoo’s “outlook remains cloudy at best and potentially could worsen.” Well, it appears the sun came out quickly after the downgrade as reports have surfaced that both parties are back at the negotiating table.

Volume in the Yahoo July 22.50 calls (YHQGX, $0.80, up $0.03) is picking up steam and could easily double on the news. They were trading for 55 cents before the rumor broke. Be careful because there are conflicting reports saying there is no deal in place. The July 22.50 puts (YHQSX, $1.50, down $0.23) are also active and could get some heavy action as traders line up on both sides of the fence.

Rick Rouse
Rick@OptionsMentoring.com

Reliance Steel & Aluminum (RS, $75.10, up $1.62) is trading higher after boosting its 2Q guidance by 35% citing “larger and faster-than-expected increases in carbon steel product prices.” The company raised its earnings forecast to $2.00-$2.10 a share, way up from its previous forecast of $1.50-$1.60. Wall Street was expecting a profit of $1.64.

Here’s another stock that has Wall Street guessing. If you’ll notice, the Street was expecting Reliance to come in below expectations and over the past few weeks analysts have been downgrading the stock. One research firm recently lowered its rating on the stock from “Outperform” to “Sector Perform” with a $65 price target. Wrong. The stcok is at $75.

The company is scheduled to report earnings on 7/17 and is capitalizing on price increases while at the same time, expanding gross margins. Those two combinations will certainly help any company’s bottom line. Reliance has also been busy on the acquisition front. The company has agreed to buy PNA Group Holding, a steel service center group owned by Platinum Equity, for $1 billion.

The stock hit a high of $78.31 right out of the gate but as you can see the news is kinda wearing off. Before today’s news, Reliance had traded higher 6-out-of-the-last-7 sessions. The July 75 calls (4.40, up $1.24) traded as high as $5.80 when the market opened but have since faded as well. That’s the risk of buying options at the open and buying options with no limit price. The first 30 minutes of trading can be overblown and treacherous and option traders who bought at the high have lost 20% right off the bat.

The revised forecast was certainly good news for those of you who noticed Reliance’s uptrend before the announcement. The stock’s move from $66 to $76 has gone unnoticed by many on Wall Street but today’s news has woke them up.

Rick Rouse
Rick@OptionsMentoring.com

United Parcel Service (UPS, $63.48, down $2.78) came out this morning and said that 2Q earnings would be below expectations citing higher fuel prices and a sluggish U.S. economy. The company lowered earnings to $0.83-$0.88 a share for the quarter, down from a previous estimate of $0.97-$1.04.

This was hardly a surprise as the announcement comes less than a week after FedEx’s (FDX, $78.99, down $1.13) earnings miss. UPS said package volume is down and that demand for its higher-priced air delivery services have been hit harder than a Mike Tyson left hook. UPS could continue to pass higher fuel surcharges onto its customers to recoup higher fuels costs but that will not help the stock in the short-term. Oil was at $138 last I checked and shows no signs of breaking a higher trend.

I mentioned FedEx on 6/17 and 6/18 in the blog that the stock was nearing its 52-week low and could continue lower. The June 90 puts have since expired but provided a 100% return for some lucky option traders. I also profiled the July 80 puts (FDXSP, $3.14, up $0.59) at $1.59 and they have also pretty much doubled. If you are in the July puts, set stop at $2.75.

These are two great companies with great track records. However, all great stocks go through “cycles” and this one particular cycle is hammering FedEx and UPS right now. This is what makes the market so great if you know how to trade to the downside. Most people think if the market is going down that you can’t make money investing. Their big question and mystery is “how can you make money when a stock is going down?”. And you know what my answer always is? “By buying puts”.

These stocks will eventually rebound but it may take 6-12 months. In the meantime, enjoy the returns the puts are providing and keep raising your stops to protect your profits.

Rick Rouse
Rick@OptionsMentoring.com

The futures are pointing to a lower opening this morning. There are a lot of stories making the rounds today, some good, some bad. The market has had some rough sledding of late and last week’s sell-off took the Dow below 12,000 for the first time since mid-March.

Housing remains weak, and oil continues to rise, two combinations that have dealt a big blow to the economy and investor enthusiasm. The dollar remains stuck in neutral and the Fed needs to do something. Now. Former U.S. Federal Reserve Chairman, Alan Greenspan, went on record this morning saying the U.S. economy was “on the brink” of a recession and that the chances of the economy falling into recession were more than 50%. Yikes.

The Fed is beginning a two-day meeting to determine whether to change its key federal funds rate or keep it on hold and we can expect some sort of market moving news on Wednesday. Some wish the Fed’s next move would be to cut interest rates, but that such a move is probably not going to happen. With today’s lower opening, it is clear the market will be anxious and nervous at the same time about what the Fed will say tomorrow.

One talking head says if the Fed gets it right from here on out, the Dow will rally 2,000 points to 14,000. That is a pretty bold statement but either way we’ll find out something at 2:15PM on Wednesday.

Rick Rouse
Rick@OptionsMentoring.com

First Solar (FSLR, $288.00, up $19.78) made a nice move today after an analyst raised the stock’s price target to $335 from $280 and said the company is on track for a super quarter. Three factors he cited for raising his price target were: Malaysia adding roughly $30 million to the company’s 2Q revenue, the exchange rate and a resolution of solar incentives in Spain. He also mentioned that First Solar could announce a big U.S. contract in the next week or two.

The stock made a nice 7% move for the day but that’s nothing new. First Solar is one of those rare stocks capable of making a 50-point move in a day let alone a week. In fact, the stock is up 50 points since hitting a low of $233 on 6/10…

The company is expected to announce earnings sometime in July but I haven’t confirmed the exact date, yet. We should know something soon and it’s always risky to play options around earnings. However, since we have about a month before earnings actually come out, buying the July contracts now shouldn’t be as risky as buying them the day before the earnings announcement.

Still, because the stock is so volatile, I normally stay away from plays like this one. There’s just too much risk. First Solar hit a high if $317 on 5/14 and quickly fell 64 points by 5/28. That would have been a huge hit to take if you had been long the May or June calls.

This time may be different though. Usually when a stock makes the types of moves First Solar has made, the stock will go back and “fill in some gaps” before resuming its uptrend. It’s too early to tell if First Solar is ready to challenge its highs or if it does, will the stock fade again? For what it’s worth, the July 300 calls (HJQGA, $13.70, up $6.20) were up over 80% on the news. They opened at $9.40 and hit a high of $13.90.

Rick Rouse
Rick@OptionsMentoring.com

Research in Motion (RIMM, $144.28, down $0.28) is trading lower as we head to lunch despite an analyst raising his price target on the shares to $156 from $124. The stock opened nearly $2 higher from Friday’s close but has given back those gains.

The analyst went on to say that RIMM continues to gain market share even as the overall handset market performs “sluggishly.” The company unveiled its latest BlackBerry model, the Bold, last month and it continues to gain market share. The phone is expected to compete directly with Apple’s (AAPL, $172.14, down $3.13) iPhone which hits shelves 7/11.

RIMM is benefiting in the short-term until the release of the iPhone as the “awareness” for smartphones continues to gain in popularity. RIMM’s stock is showing a little more momentum than Apple’s stock at the moment but both companies have positioned themselves ahead of the competition.

Keep an eye on RIMM’s July 150 calls (RULGJ, $6.45, down $0.65). They opened the session at $8.10 and hit a high of $8.30 before slipping to current levels. That’s a 20% swing in just a few hours. If the market can get back on it’s feet in the short-term then RIMM may have a shot at challenging its 52-week high of $148. That’s a big “if” and these calls could get cheaper if market sentiment continues to dampen.

Rick Rouse
Rick@OptionsMentoring.com

Standard & Poor’s Ratings Services lowered its corporate credit ratings for three U.S. automakers today. Chrysler, Ford Motor (F, $5.37, down $0.44) and General Motors (GM, $13.19, down $0.60) were placed on “CreditWatch” with negative implications as S&P evaluates the damage being done by the slowdown in the auto industry.

Ford is getting a double whammy this morning as analysts cut their earnings estimates on the company following Friday’s news that the company was cutting vehicle production and is delaying the fall launch of the F-150 pickup truck by a couple of months. Ford is burning through cash and the road ahead will be bumpy. Although Chrysler and GM have not revealed their expectations for cash use, Ford plans to use more than $16 billion of cash over the next 18 months to adjust to these tough economic conditions.

Ford’s stock took a 7% hit Friday and is taking another 7% hit today. The June 6 puts have expired but the July 6 puts (FSI, $0.78, up $0.24) continue to see some action. They were trading for $0.47 on Friday and I mentioned if Ford falls below $5 within the next month, these puts will be worth at least $1.00. Today’s 50% gain “puts” us halfway there. Set stops at $0.70 if you managed to pick some of these up. Ford’s low is $4.95. So far, so good…

Rick Rouse
Rick@OptionsMentoring.com

Ford Motor (F, $5.88, down $0.44) said it will delay the launch of the new F-150 pickup and will cut back other truck production as slumping auto sales and the focus for smaller, more fuel-efficient vehicles comes into play.

The company also cut its sales forecast to 15 million cars and trucks, down from its previous projection of 15.5 million vehicles, roughly. Ford is facing the music but there is only so much the company can do in the short-term.

Sure, Ford plans to ramp up production for more small cars and fuel-efficient vehicles but there’s still the inventory of a growing number of SUV’s and trucks that people are not buying and are trading in when they do buy. They are also rapidly losing their resell values.

Today’s news was perfect timing for those who bought the June 6 puts (FRI, $0.14, up $0.12) which expire today. They are up a whopping 600% as the options quickly turned in-the-money with the stock’s 7% decline today. This is not a 52-week low for Ford ($4.95 is) but there is signifcant volume in the July 6 puts (FSI, $0.47, up $0.18) as well. If Ford falls below $5 within the next month, these puts will be worth at least $1.00, a double on top of today’s 60% gain.

Rick Rouse
Rick@OptionsMentoring.com