Ford (F) overall option implied volatility of 39 is near its 26-week average of 38, according to Track Data, suggesting nondirectional price movement.

JCPenney (JCP) announced better-than-expected cost controls and sales growth. Overall option implied volatility of 41 is near its 26-week average of 41, according to Track Data, suggesting nondirectional price movement.

Options Update is by Stock Specialist Paul Foster of theflyonthewall.com.

Barnes & Noble, the Gap, RadioShack, and Sears -- that may sound like the lineup at the local mall, but in fact they are just a few of the retailers scheduled to step into the earnings spotlight this week. Following last week's disappointing January retail sales numbers from the Commerce Department but strong fourth-quarter reports from Abercrombie & Fitch (ANF) and Nordstrom (JWN), the coming week will offer plenty more data on the sector for investors to mull over.

Walmart

Bentonville-based Walmart (WMT) offered free holiday shipping, closed its Moscow office and named a chief merchandising officer during its fourth quarter. Analysts surveyed by Thomson Reuters forecast earnings for that period to come to $1.31 per share, up from $1.17 in the same quarter of last year. The world's largest retailer also is expected to post revenues of $117.7 billion for the three months that ended in January. That's 3.5% more than a year earlier.

On Thursday, Dillard's (DDS) announced that it plans to form a wholly-owned real estate investment trust. The company will transfer some of its properties to the REIT and then lease back the properties from the entity. The company said that the move may enhance its ability to access debt or preferred stock and improve its liquidity.

The market is currently pricing REITs at rich valuations, and the transaction will allow Dillard's to better monetize its significant real-estate assets. By transferring these holdings into a publicly traded REIT, Dillard's should be able to unlock additional shareholder value. According to Craig Johnson, an analyst at Customer Growth Partners, "the sum of the parts can be greater than the sum of the whole."

JCPenney (JCP) January 32 and February 30 puts are active with total call volume of 18K calls, 10K puts. Pershing Square reported a 16.5% stake in the company on October 8th. Overall option implied volatility of 37 is below its 26-week average of 41 according to Track Data, suggesting decreasing price movement.

Amazon (AMZN) February put option implied volatility is at 38, July is at 37; near its 26-week average of 36 into Q4 EPS on January 27, suggesting slightly larger price movement.

Options Update is by Stock Specialist Paul Foster of theflyonthewall.com.

Analyst Upgrades

• Diamond Offshore (DO) to conviction buy from sell and Baker Hughes (BHI) to buy from neutral at Goldman.
• Frontier Communications (FTR) to outperform from market perform at Wells Fargo.
• Syntel (SYNT) to outperform from market perform at Wells Fargo, to buy from hold at Deutsche Bank and to buy from neutral at Janney Capital.
• Kulicke & Soffa (KLIC) and Fiserv (FISV) to outperform from perform at Oppenheimer.
• 3M (MMM) to neutral from underweight and Tyco (TYC) to overweight from neutral at JPMorgan.
• Collective Brands (PSS) and Nordstrom (JWN) to overweight from equal weight, as well as Foot Locker (FL) to equal weight from underweight, at Morgan Stanley.
• Amazon.com (AMZN) to buy from hold at Lazard Capital.
• Yamana Gold (AUY) to outperform from neutral at Credit Suisse.

JCPenney (JCP), first discussed here on April 13, 2009, at a price of $26.52, is set to record a memorable year, from a stock chart standpoint, with the close of 2010.

The stock rose to $33 then dropped in bear-hug fashion to about $19 this summer -- coming too close for comfort to the $17 sell/stop loss, before reversing and vaulting above $30 this autumn. The shares currently trade at/near $33, and given the gyrations, now may be a good time to consider taking some profits off the table with JCP.

Last week, Macy's (M) and JCPenney (JCP) kicked off the retail earnings season by posting better-than-expected earnings for the most recent quarter. Many more quarterly reports from retailers are due this week, and by and large expectations of analysts surveyed by Thomson Reuters are high.

Walmart (WMT), the king of retailers, is expected to buck the trend, though. Analysts anticipate that the Bentonville-based company will report that its third-quarter earnings grew only 6.7% year-over-year to 90 cents per share. During the three months that ended in October, Walmart announced an acquisition in South Africa and kicked-off the holiday shopping season, and revenue for that period is predicted to have risen 3.0% to $102.4 billion. Looking ahead to the fourth quarter, analysts so far expect sequential and year-over-year growth of both earnings and revenue. Walmart results have not fallen short of consensus estimates in the past five quarters.

Shares of retailer JCPenney (JCP) were lower Friday despite a strong Q3 report, as investors are focusing on the revenue miss rather than the earnings beat or its upbeat outlook.

Despite investor reaction, I have a feeling that JCP is going to enjoy some positive action in the future. Will the stock approach the $80 range from 2007? No. But I could see a solid fourth-quarter report and holiday season becoming the catalyst to a push past the $35 region and possibly near $40.

In the world of retail, JCPenney (JCP) has shown it resilience in a highly competitive sector.

The company said its third-quarter earnings increased 63%, as reported in the Wall Street Journal (subscription required). Net profit came in at $44 million or 19 cents per share, up from $27 million or 11 cents per share a year earlier. Total sales edged up 0.2% to $4.19 billion. Same-store sales rose 1.9%. Shoes and men's apparel were the strongest categories.

This week, JCPenney (JCP), Kohl's (KSS) and Macy's (M) are the first of the major retailers to report results for the most recent quarter.

Macy's launched an American Express credit card and increased its mobile presence during the fiscal fourth quarter. The analysts surveyed by Thomson Reuters forecast Macy's earnings for that period come to three cents per share, which compares to a net loss of three cents per share in the same period of last year. The Cincinnati-based department store operator is expected to post revenue of $5.6 billion for the three months that ended in October, which is 5.2% more than a year earlier. For the full year, the forecast calls for earnings of $1.50 per share (+6.7%) and $8.2 billion in revenue (+4.3%). Macy's earnings results have been better than expected in recent quarters by a penny or a few per share.

You have got to admit that JCPenney (JCP) has been one heck of an interesting stock. Look at the one-year chart. In a short time, the shares have gone from a 52-week low to almost returning to the 52-week high. Simply amazing.

Back in the middle of August, Trey Thoelcke recorded the dip to the nadir. Bad guidance was the culprit. Continuing the narrative, Joseph Lazzaro wrote a bullish piece on the retailer in the latter part of September. And then, on October 8, Brent Archer came up with an option strategy to take advantage of news reporting a significant stock stake in the business taken on by Pershing Square Capital.

Analyst Upgrades

• JPMorgan upgraded Smith Micro (SMSI) to overweight from neutral and raised its price target to $15 from $9, citing the release of a WiFi iPad with MiFi from Verizon and Apple.
• Jefferies upgraded Whole Foods (WFMI) to buy from hold and raised its price target to $45 from $36, citing checks that indicate sales are accelerating and the company has been focused on expense control.
• Wells Fargo upgraded Ensco (ESV) and raised its price target to $54 to $56 from $46 to $47, citing valuation, the lifted deepwater drilling ban and higher oil prices.
• Gran Tierra Energy (GTE) was upgraded to buy from hold at Wunderlich, citing the company's Moqueta oil discovery as well as other near-term exploration opportunities, and raised its price target to $12.50 from $7.00.
• Chico's FAS (CHS) was upgraded to buy from hold at KeyBanc and set a $13 price target.
• UR-Energy (URE) was upgraded to buy from hold at KeyBanc.

JCPenney (JCP - option chain) shares are rising today on news that Bill Ackman's Pershing Square Capital reported in an SEC filing that it has taken a 16.5% share of JCP. On the heels of yesterday's September sales increase, the future is looking a little brighter for JCP. 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 JCP.

JCP opened Friday morning at $32.24. In morning trading the stock hit a low of $32.14 and a high of $33.88. As of 11:10, JCP was trading at $33.05 up $1.41 (4.5%). The chart for JCP looks neutral and S&P gives JCP a neutral 3 STARS (out of 5) hold ranking.

DSW Inc. (DSW) has come off its 52-week high of $33.49. The chart shows that the stock has been trending downward since April. One could argue that it is basically following the market and its current bearish tendencies. But what about the fundamentals? What do they say?

The footwear entity, whose related companies include Collective Brands (PSS) and J.C. Penney Company, Inc. (JCP), reported net income of 52 cents per share for the second quarter. Last year at this time, the business made 17 cents per share.

JCPenney (JCP) fell to a new 52-week low of $20.20 Friday morning after its second-quarter results included weaker-than-expected full-year earnings estimates.

JCPenney said growth of store and Internet sales, as well as tightly controlling expenses, resulted in record-level gross margins for the period. Earnings totaled $14 million, or 6 cents per share, in the quarter, compared to a loss of $1 million, or break-even per share, in the same quarter of last year. Analysts' estimates were topped by a penny per share.