Medical device supplier Covidien Ltd. (COV), first discussed here on June 4, 2009 at a price of $35.65, continues to vector higher, taking out major, psychological resistance at $50 with ease.

Hence, if you haven't already, it's probably a good idea to to consider taking some profits off the table, if you're in at/near $35.65 with COV. Even so, those investors who can tolerate the risk can maintain their full position and go for an even bigger gain, as COV will likely test $60 in 2011.

Covidien's 2011 revenue will likely rise 6-8% in 2011, after a 4-6% growth rate in 2010, boosted by cost cuts and a prudent restructuring plan designed to concentrate on medical devices and imaging solutions. An emphasis on higher-margin devices adds to the positive story.

U.S. stock futures are higher this morning, as investors are awaiting earnings from Pfizer (PFE) and other major companies. Futures on the Dow Jones Industrial Average advanced 43 points to 11,883.00 and S&P 500 futures gained 6.60 points to 1,289.00. Nasdaq 100 futures climbed 14.50 points to 2,294.50.

U.S. stocks closed higher, with the blue-chip Dow industrials gaining 68.23 points or 0.58%.

The Institute for Supply Management's report on manufacturing activity for January and data on construction spending for December will be released at 10 a.m. ET.

The rally in the shares of medical device supplier Covidien (COV), which I first discussed here on June 4, 2009 at a price of $35.65, continued this autumn, with the shares winding their way toward $50.

Moreover, given the impressive 35% rise since the summer, those who bought in at roughly that $35 level may wish to consider taking some profits off the table. Even so, those investors who can tolerate the risk can maintain their full position and go for an even bigger gain, as COV will likely test $55 in 2011.

Analyst Upgrades

• Amgen (AMGN) to overweight from neutral at Piper Jaffray.
• Goodrich Petroleum (GDP) to outperform from market perform at Wells Fargo.
• Tutor Perini (TPC) to buy from neutral at UBS.
• Covidien (COV) to buy from neutral at Goldman.
• Sara Lee (SLE) and Comcast (CMCSA) to outperform from market perform at Bernstein.
• Research In Motion (RIMM) to outperform from sector perform at FBN Securities.

If you managed to take advantage of medical device supplier Covidien Ltd.'s (COV) dip, as noted in May, it proved to be a prudent move. Covidien, first discussed here on June 4, 2009 at a price of $35.65, appears to have found support at $35, and has recently moved back above $40.

Covidien's 2011 revenue will likely increase 6-8% in 2011, after a 4-6% growth rate in 2010. Further, cost cuts and a prudent restructuring plan designed to concentrate on medical devices and imaging solutions will aid the bottom line. An emphasis on higher-margin devices adds to the positive story.

Covidien (COV - option chain) shares are rising today after the company said last night said it expects sales to grow between 6 and 9 percent in 2011, in line with and slightly on the higher side of analysts' forecasts of 7 percent growth. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on COV.

COV opened this morning at $39.27. So far today the stock has hit a low of $39.02 and a high of $39.90. As of 12:20, COV is trading at $39.46 up $1.56 (4.1%). The chart for COV looks bullish and S&P gives COV a positive 4 STARS (out of 5) buy ranking.

Option traders appear to be setting up for a bullish move on Cypress Bioscience, Inc. (CYPB). Traders plowed into 1,305 new call option contracts -- 19.19 times the average volume -- on the stock on Friday. And we know that traders were eager to get into this trade because 100% of the trades came in on the ask price.

Cypress has been in a downtrend since hitting a high around $10.00 in July 2009. The stock closed Friday at $3.39, down 10.79% during the past month.

Analyst Upgrades

• Jefferies upgraded Computer Sciences (CSC) to buy from hold and raised its target to $53 from $47. The analyst said Computer Sciences' valuation has created one of the best LBO opportunities in several years and could provide a five year IRR of 25+%.
• Keefe Bruyette upgraded Comerica (CMA) to outperform from market perform, citing strength of the company's capital. The firm raised its target for shares to $44 from $43.
• RBC Capital upgraded Nokia (NOK) to outperform from sector perform and raised its price target to $14 from $12. The firm upgraded shares based on valuation, reduced execution risk on software development, and potential catalysts from new devices based on Symbian^3. RBS upgraded Nokia to buy from hold after the company named Stephen Elop as CEO.
• Allstate (ALL) was upgraded to buy from hold at Citigroup.
• Coca-Cola Enterprises (CCE) was upgraded to buy from neutral at BofA/Merrill.
• Moody's (MCO) was upgraded to overweight from neutral at Piper Jaffray.

Somanetics (SMTS) was the most advancing stock in the Nasdaq Wednesday morning, with shares up more than 31%, or nearly $6 to $24.85. Shares reacted to news that Covidien (COV) is buying Somanetics, acquiring all of the outstanding shares of Somanetics for $25.00 per share in cash, a 32% premium to Tuesday's close. Covidien will pay a total of $250 million, for a total transaction value of approximately $300 million.

Covidien, a drug and medical devices maker, is already the distributor for Somanetics' noninvasive diagnostic equipment called INVOS (In-Vivo Optical Spectroscopy) Cerebral/Somatic Oximeter in Europe, the Middle East and Africa. INVOS monitors patients and continuously measures blood oxygen levels in the brain and in the body to help detect and correct complications.

Analyst Upgrades

• UBS upgraded Potash (POT) to buy from neutral and raised its price target to $112 from $106. UBS raised its 2011 potash production estimates based on expectations for a tighter market and notes the potential for China to import substantial amounts of corn.
• BMO Capital upgraded Peabody Energy (BTU) to outperform from market perform. The firm, which has a $49 target on the stock, cites valuation for the upgrade.
• Janney Montgomery upgraded City Holding (CHCO) to buy from neutral with a $37 price target, citing the recent pullback in shares.
• Boston Scientific (BSX) was upgraded to sell from conviction sell at Goldman.
• Pegasystems (PEGA) was upgraded to buy from hold at Roth Capital.
• Wendy's/Arby's (WEN) was upgraded to buy from neutral at SunTrust.

The shares of medical device supplier Covidien Ltd. (COV), which I first wrote about on June 4, 2009 at a price of $35.65, have recently retreated far more than they should have (to about $41), given the company's 2010/2011 revenue outlook, and COV is obviously still favored here.

Look for Covidien's 2010 revenue to increase 3-5% in 2010, and 4-7% in 2011, boosted by cost cuts and a prudent restructuring to concentrate on medical devices and imaging solutions. An emphasis on higher-margin devices add to the positive story.

Medical device supplier Covidien Ltd. (COV), which I first wrote about on on June 4, 2009 at a price of $35.65, still looks like it has considerable upside, for the following reasons.

First, look for a 5-7% 2010 revenue increase with Covidien, aided by a decision to concentrate on medical devices and imaging solutions. Also, cost cuts and efforts to reduce the company's effective tax rate add to the positive story.

I'm reiterating my Buy rating for medical device supplier Covidien Ltd. (NYSE: COV), first recommended on June 4, 2009, at a price of $35.65. If you purchased Covidien then, you're up about 15%.

An aging U.S. population and the likelihood that U.S. public policy to universalize health care will lead to least 3-5 million more citizens per year for the next eight to ten years receiving regular health care services means one thing: it's a good time to be a medical supplier.

Analyst upgrades:

• Citigroup upgraded Talbots (NYSE: TLB) to Buy from Hold on expectations the company's sales and margins are at an inflection point. The firm expects comps to turn positive in the next six months and raised its target on shares to $9.50 from $5.
• JMP Securities believes that Apple's (NASDAQ: AAPL) incoming iPod product cycle, geographic expansion of iPhones, and market expansion led by new products will result in "significant" outperformance. The firm upgraded shares to Outperform from Market Perform and has a $200 target on the stock.
• Credit Suisse upgraded Tiffany (NYSE: TIF) to Outperform from Neutral citing productivity comps and gross margin upside, leading to potential upside to 2010 Street estimates. The firm raised its target to $45 from $20.
• Brady (NYSE: BRC) was upgraded to Buy from Hold at KeyBanc.
• Time Warner (NYSE: TWX) was upgraded to Conviction Buy from Neutral at Goldman.
• RadioShack (NYSE: RSH) was upgraded to Overweight from Equal Weight at Morgan Stanley.

Analyst upgrades

• Baird upgraded Con-Way (NYSE: CNW) and Old Dominion (NASDAQ: ODFL) to Outperform from Neutral due to the benefits of a likely bankruptcy of YRC Worldwide (NASDAQ: YRCW). Old Dominion's target was raised to $40 from $26 and Con-Way's was raised to $42 from $22.
• Citigroup upgraded Pride International (NYSE: PDE) to Hold from Sell as it believes higher valuation levels are warranted with the upcoming spin-off of Seahawk Drilling. Citi raised its target on shares to $25 from $18.
• Jesup & Lamont upgraded FedEx (NYSE: FDX) to Buy from Hold with a $63 target as it believes the worst is largely behind the company.
• Hewitt Associates (NYSE: HEW) was upgraded to Neutral from Underweight at JPMorgan.
• ArvinMeritor (NYSE: ARM) was upgraded to Buy from Neutral at Goldman.
• Abercrombie & Fitch (NYSE: ANF) was upgraded to Buy from Neutral at SunTrust.