Editor's Note:

The stock market remains a perilous place and investors are in a sell-first, ask questions later kind of mood.

We saw four stocks breakdown to new relative lows and hit our stop losses in what prove to be another volatile week.

-James


Closed Plays


CRS, EMN, SPW, and TEX all hit stop losses.


Play Updates


Cliffs Natural Resources - CLF - close: 67.64

Update 08/20: Whoa! CLF dropped almost 10 points in the last week. We had added this stock to our watch list to buy the dip at $74.00. Thursday's market sell-off saw shares of CLF gap open lower at $71.51, triggering our play. Now CLF is testing its lows from August 8th and 9th. A breakdown under current short-term support in the $67.50-67.00 area could signal a drop toward the $60.00 region. I am very concerned over CLF's relative weakness this past week. Yes, we did want to buy the dip but this has been a very sharp pull back and now CLF is threatening a breakdown.

We had listed a stop loss at $66.50. I am adjusting our stop loss to $64.95 given our new lower entry point at $71.51. Cautious traders may want to take the opposite tact and raise their stops closer to $67.00 instead.

I am not suggesting new positions at this time. Let's wait and see if CLF can bounce from here, which would produce a possible bullish double bottom pattern.

Earlier Comments:
The plan was to use small positions to limit our risk. Our targets are $89.00 and $99.00.

- Suggested (SMALL) Positions -
Aug 18, 2011 - entry price on CLF @ 71.51, option @ 4.25
symbol: CLF1221A85 2012 JAN $85 call - current bid/ask $ 3.70/ 3.85

- or -

Aug 18, 2011 - entry price on CLF @ 71.51, option @ 10.50*
symbol: CLF1319A90 2013 JAN $90 call - current bid/ask $ 8.60/ 9.05

08/18 *entry on 2013 Jan. $90 call is an estimate. Option did not trade on Thursday.

Chart of CLF:

Current Target: $89.00 and 99.00
Current Stop loss: 64.95
Play Entered on: 08/15/11
Originally listed on the Watch List: 08/13/11


EMC Corp. - EMC - close: 20.28

Update 08/20: Technology stocks have been getting hammered. This past week was another brutal one. If Thursday's market plunge wasn't bad enough shares of EMC also suffered a downgrade Thursday morning. Shares gapped open lower at $20.74 and then plunged to $19.84 that morning before recovering. Our buy-the-dip entry point at $20.25 was hit. If you missed it Thursday morning you got another chance on Friday.

EMC is now testing psychological, round number support at $20.00. More conservative traders may want to raise their stop toward the $19.84 low. Currently the newsletter has a stop loss at $18.90. Readers could buy this dip now but I'd prefer to wait and see if the S&P 500 index will bounce at 1120 or will it retest the 1100 level before making any new decisions here.

Earlier Comments:
The plan was to use small positions to limit our risk. Our first target is $25.75. Our second target is $28.50. Aggressive traders could aim higher.

- Suggested (SMALL) Positions -
Aug 18, 2011 - entry price on EMC @ 20.25, option @ 2.20
symbol: EMC1221A20 2012 JAN $20 call - current bid/ask $ 2.12/ 2.15

- or -

Aug 18, 2011 - entry price on EMC @ 20.25, option @ 1.80
symbol: EMC1319A25 2013 JAN $25 call - current bid/ask $ 1.65/ 1.79

Chart of EMC:

Current Target: $25.75 and 28.50
Current Stop loss: 18.90
Play Entered on: 08/18/11
Originally listed on the Watch List: 07/23/11


McDonalds Corp. - MCD - close: 87.23

Update 08/20: MCD was pretty content to consolidate sideways all week. Shares fid see some volatility on Thursday's market sell-off but the stock only dipped to its rising 50-dma. Traders bought that dip on Friday and MCD actually closed up on the week. I would be tempted to launch new positions here but readers may be better off to wait and see if the S&P 500 index bounces at 1120 or bounces at 1100 before initiating new positions.

Earlier Comments:
The plan was to use small positions to limit our risk. Our first target is $99.00.

- Suggested (small) Positions -
Aug 15, 2011 - entry price on MCD @ 86.82, option @ 2.50
symbol: MCD1221A90 2012 JAN $90 call - current bid/ask $ 3.15/ 3.25

- or -

Aug 15, 2011 - entry price on MCD @ 86.82, option @ 3.90
symbol: MCD1319A95 2013 JAN $95 call - current bid/ask $ 4.45/ 4.65

Current Target: $99.00
Current Stop loss: 81.75
Play Entered on: 08/15/11
Originally listed in the New Plays 08/13/11


McDermott Int. Inc. - MDR - close: 11.87

Update 08/20: It was an ugly, ugly week for MDR. When investors start to worry about a new recession the volatile sectors like oil services get hit hard. MDR actually gapped open higher on Monday, August 15th. Then it spent the rest of the week crashing. By Friday's closing bell MDR had lost -21.7% from Monday's close. The stock settled right at the prior week's low. The intraday low on Friday was $11.79 and our stop loss was been at $11.75.

MDR is at the make it or break it point. Just in case shares see a Monday morning spike lower before reversing higher I am adjusting our stop loss to $11.49. Most of the damage has been done to our call options. I'd rather not see them get stopped out Monday morning only to have MDR rebound higher on us.

I am not suggesting new positions at this time. Nimble traders could buy calls if we see the S&P 500 index bounce from 1120 or the 1100 level midweek.

Earlier Comments:
The plan was to use small (half) positions to limit our risk and keep some cash in reserve in case we want to add to positions on a decline. Our long-term targets are $19.50 and $23.50 but the $18 level and $22 level could prove to be tough resistance.

- Suggested (small) Positions -
Aug 15, 2011 - entry price on MDR @ 14.67, option @ 2.15
symbol: MDR1221A15 2012 JAN $15 call - current bid/ask $ 0.80/ 0.90

- or -

Aug 15, 2011 - entry price on MDR @ 14.67, option @ 1.15
symbol: MDR1221A17.5 2012 JAN $17.50 call - current bid/ask $ 0.35/ 0.50

08/20/11 adjust stop loss to $11.49

Chart of MDR:

Current Target: $19.50, and $23.50
Current Stop loss: 11.49
Play Entered on: 08/15/11
Originally listed in the New Plays 08/13/11


Visa Inc. - V - close: 79.60

Update 08/20: Visa was a watch list candidate. Our plan was to buy calls on a the dip at $80.00. Shares gapped open lower on Thursday and dipped to $79.95, triggering our play. Friday saw shares spike even lower and hit $79.33 before bouncing back. I'm a little concerned that shares closed under $80.00 and the weekly chart shows a brand new bearish engulfing candlestick pattern. If the market's major indices continue to sink we can expect Visa's share price to drop toward the 200-dma and the August 9th low near $76. Therefore I am not suggesting new positions at this time.

Previously I suggested that cautious traders wait to buy a dip near the 200-dma. At this time I would prefer to buy calls on a bounce from the $76 area instead.

- Suggested (small) Positions -
Aug 18, 2011 - entry price on V @ 80.00, option @ 4.00
symbol: V1221A90 2012 JAN $90 call - current bid/ask $ 3.65/ 3.75

- or -

Aug 18, 2011 - entry price on V @ 80.00, option @ 7.75
symbol: V1319A100 2013 JAN $100 call - current bid/ask $ 6.75/ 7.65

Current Target: $94.00, and $99.00
Current Stop loss: 74.90
Play Entered on: 08/18/11
Originally listed on the Watch List: 08/13/11


Walter Energy Inc. - WLT - close: 74.15

Update 08/20: Our aggressive trade on WLT is not off to a very good start. Shares did rally on Monday but shares were hit hard in the market-wide sell-off on Thursday. By Friday's closing bell WLT was down -9% for the week. I warned readers that WLT was a volatile stock but that still hurts. Shares look like they are headed for the prior week's low and what should be support near $70.00.

I would wait for a dip near $70 or better yet a bounce off the $70 level before considering new bullish positions. We have a stop loss at $69.00.

Earlier Comments:
WLT can be a volatile stock so I do consider this an aggressive, higher-risk trade. We have a wide stop loss and the option we're using is very out of the money. We definitely want to keep our position size small. We'll start this trade with a stop loss at $69.00. Our upside targets are $97.75 and $129.00 (a very long-term target).

- Suggested (small) Positions -
Aug 15, 2011 - entry price on WLT @ 82.82, option @ 6.65
symbol: WLT1221A100 2012 JAN $100 call - current bid/ask $ 4.30/ 4.50

- or -

Aug 15, 2011 - entry price on WLT @ 82.82, option @ 14.05
symbol: WLT1319A100 2013 JAN $100 call - current bid/ask $10.10/12.40

Current Target: $97.75 and $129.00
Current Stop loss: 69.00
Play Entered on: 08/15/11
Originally listed in the New Plays 08/13/11


CLOSED Plays


Carpenter Technology - CRS - close: 43.68

Update 08/20: We were unprepared for the volatility in CRS this past week. The plan was to buy the dip at $46.00. The stock gapped open lower at $46.07 on Thursday and closed the same day at $44.32, under potential support at $45.00 and its 200-dma. Friday saw a breakdown to a new multi-month low and shares hit $43.23 Friday morning. We had listed a stop loss at $43.40 so our new trade has already been stopped out. CRS is flirting with a bearish breakdown under its long-term up trend.

NOTE: CRS does not have long-term LEAPS. We will have to use the 2012 March calls.

- Suggested (small) Positions -
Aug 18, 2011 - entry price on CRS @ 46.00, option @ 4.10
symbol: CRS1217c50 2012 MAR $50 call - exit $3.70 (-9.7%)

08/19 CRS hit our stop loss at $43.40 on Friday morning
08/18 CRS hit our trigger to buy calls at $46.00.

Chart of CRS:

Current Target:
Current Stop loss: 43.40
Play Entered on: 08/18/11
Originally listed on the Watch List: 08/13/11


Eastman Chemical Co. - EMN - close: 76.00

Update 08/20: EMN is another casualty to the market's volatility last week. We had EMN on our watch list to buy calls on a dip at $81.00. The stock gapped down at the open on Thursday at $80.34, triggering our play. Shares continued to fall and closed Thursday at $77.41 after hitting a low of $76.67. The previous week the low was $76.88. The selling pressure continued on Friday and EMN hit our stop loss at $76.00. This is a breakdown under EMN's long-term trendline of what should have been support.

- Suggested (small) Positions -
Aug 18, 2011 - entry price on EMN @ 80.34, option @ 5.00*
symbol: EMN1221A90 2012 JAN $90 call - exit $3.10 (-38%)

08/19 EMN hit our stop loss at $76.00
08/18 *entry price is an estimate. option did not trade that day.
08/18 EMN gapped open lower at $80.34, under our trigger of $81.00, opening our trade.

Chart of EMN:

Current Target:
Current Stop loss: 76.00
Play Entered on: 08/18/11
Originally listed on the Watch List: 08/13/11


SPX Corp. - SPW - close: 50.06

Update 08/20: SPW is another example of the carnage in this market. What appeared to be support from August 8th-11th in the $52.50-52.00 zone did not even slow SPW down on Thursday's sharp market-wide decline. Our stop loss at $51.90 was hit on Thursday morning within the first hour of trading. By Friday's closing bell SPW lost another -11% for the week.

NOTE: SPW does not have LEAPS so we're playing the March $60 and $65 calls.

- Suggested (small) Positions -
Aug 15, 2011 - entry price on SPW @ 57.22, option @ 6.25
symbol: SPW1217C60 2012 MAR $60 call - Exit $3.75* (-40%)

- or -

Aug 15, 2011 - entry price on SPW @ 57.22, option @ 4.25
symbol: SPW1217C65 2012 MAR $65 call - Exit $2.75* (-34.2%)

08/18/11 stopped out at $51.90.
* options did not trade on Thursday. These are estimates.

Chart of SPW:

Current Target: $64.75, and 72.50
Current Stop loss: 51.90
Play Entered on: 08/15/11
Originally listed in the New Plays 08/13/11


Terex Corp. - TEX - close: 13.69

Update 08/20: Our aggressive trade on TEX has been stopped out. The bounce from the August 9th low proved to be nothing but a speed bump on the way down. TEX failed at its 10-dma on Monday and plunged lower the rest of the week. By Friday's closing bell TEX had lost another -19% and broke down below what should have been support at $15.00. Our stop loss was hit at $14.45 on Thursday, August 18th.

- Suggested (small) Positions -
Aug 15, 2011 - entry price on TEX @ 17.11, option @ 1.45
symbol: TEX1221A20 2012 JAN $20 call - Exit $0.73 (-49.6%)

- or -

Aug 15, 2011 - entry price on TEX @ 17.11, option @ 3.40
symbol: TEX1319A20 2013 JAN $20 call - Exit $2.15 (-36.7%)

08/18/11 stopped out at $14.45

Chart of TEX:

Current Target: $24.75
Current Stop loss: 14.45
Play Entered on: 08/15/11
Originally listed in the New Plays 08/13/11