Editor's Note:

After the market's big bounce this past week I am concerned that stocks could be vulnerable to profit taking, especially with so many economic reports due out this coming week. There is no telling what headline could spark the next sell-off. I do believe that the August lows have formed a significant bottom but readers may want to avoid launching new positions until after we see the market's reaction to the jobs report due out on Friday.

-James


Closed Plays


None. No closed plays this week.


Play Updates


Cliffs Natural Resources - CLF - close: 76.60

update 08/27: The market's big bounce this past week helped fuel a nine-point rally in CLF. Shares managed to close above resistance at the $75.00 level on Friday. It certainly looks like CLF has built a bullish double bottom in August. The next challenge for bulls will be overhead resistance near $80 and above that the 200-dma.

Nimble traders might want to try and buy a dip or a bounce in the $73-71 zone. Otherwise, I would wait until after we see the market's reaction to the jobs data on Friday.

We will adjust our stop loss again. The August 19th low was $67.50. We'll move our stop loss to $67.00.

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 $ 6.30/ 6.50

- or -

Aug 18, 2011 - entry price on CLF @ 71.51, option @ 10.50*
symbol: CLF1319A90 2013 JAN $90 call - current bid/ask $12.10/12.70

08/27 new stop loss @ 67.00
08/20 adjusted stop loss to $64.95.
08/18 *entry on 2013 Jan. $90 call is an estimate. Option did not trade on Thursday.

Current Target: $89.00 and 99.00
Current Stop loss: 67.00
Play Entered on: 08/15/11
Originally listed on the Watch List: 08/13/11


EMC Corp. - EMC - close: 21.61

update 08/27: EMC managed to outpace the rebound in the NASDAQ with a +6.5% gain this past week. Yet in spite of the big bounce EMC is just now testing short-term technical resistance at the 10-dma. That tells you just how oversold the stock was. EMC still has short-term resistance at the top of its August 18th gap down near $22.50.

In the news this past week EMC has increased its stock buyback program from $1.5 billion to $2.0 billion. Meanwhile the stock was downgraded but the news didn't have any significant impact.

Given our long-term time frame on EMC I would still consider new positions here but I strongly suspect we might get another opportunity to buy a dip in the $21-20 zone again before next weekend. Readers will want to wait for the dip or buy calls on the bounce.

Earlier Comments:
The plan was to use small positions to limit our risk. Our first long-term 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 $ 2.84/ 2.91

- or -

Aug 18, 2011 - entry price on EMC @ 20.25, option @ 1.80
symbol: EMC1319A25 2013 JAN $25 call - current bid/ask $ 1.91/ 2.12

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: 89.93

update 08/27: MCD hit new all-time highs this last week as shares flirted with a breakout past the $90.00 level. Traders bought the dip at MCD's rising 10-dma on Friday morning. I would be tempted to launch new positions here. However, there is a good chance one of the economic reports this coming week could spark some market-wide profit taking. Readers may want to wait for another dip into the $88.00-86.00 zone before launching new long-term positions.

Conservative traders might want to use a stop loss closer to the $84.50 area.

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 $ 4.15/ 4.25

- or -

Aug 15, 2011 - entry price on MCD @ 86.82, option @ 3.90
symbol: MCD1319A95 2013 JAN $95 call - current bid/ask $ 5.35/ 5.65

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: 13.18

update 08/27: Whew! MDR gave us a scare this past week. We escaped by the skin of our teeth. Tuesday morning saw a dip to $11.52 before shares reversed higher to post a +6.5% gain by Tuesday's closing bell. Our stop loss is $11.49. For the week MDR is up +11% and off its Tuesday low the stock is up +14%. You could certainly argue MDR is very short-term overbought here.

Shares have been very volatile. Friday alone saw a 7.5% trading range. It does look like MDR has put in a double bottom with its August lows. I would be tempted to buy call LEAPS now. However, instead of buying LEAPS now I'd probably look for another dip near $12.25-12.00. MDR is still facing potential short-term resistance near $14.00. Conservative traders may just want to wait and see how the market reacts to this coming Friday's jobs report before initiating new positions.

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 later. 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 $ 1.15/ 1.25

- or -

Aug 15, 2011 - entry price on MDR @ 14.67, option @ 1.15
symbol: MDR1221A17.5 2012 JAN $17.50 call - current bid/ask $ 0.50/ 0.65

08/20/11 adjust stop loss to $11.49

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: 85.85

update 08/27: The rebound in Visa outpaced the market. The S&P500 is up +4.7% for the week but Visa is up +7.8%. Shares are still struggling to get past resistance in the $86-87-88 zone. It does look like Visa is building a bullish pattern of higher lows. Investors have to decide if they're willing to buy Friday's bounce and use a tighter stop loss or wait for a close over resistance at $88 or even resistance at $90.00. The $90 level was a top for the stock back in July. On the other hand we have to weigh the odds on another market pull back should any of the economic reports coming out this week disappoint. If you're patient we could see Visa retest the $82-80 level and I'd much rather buy a bounce from $80.

We will go ahead and raise our stop loss to $77.00. Cautious traders may want to put theirs closer to last Friday's low near $79.60 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 $ 5.70/ 5.85

- or -

Aug 18, 2011 - entry price on V @ 80.00, option @ 7.75
symbol: V1319A100 2013 JAN $100 call - current bid/ask $ 8.25/ 8.85

08/27 new stop loss at $77.00

Current Target: $94.00, and $99.00
Current Stop loss: 77.00
Play Entered on: 08/18/11
Originally listed on the Watch List: 08/13/11


Walter Energy Inc. - WLT - close: 79.04

update 08/27: WLT rallied almost five points for the week. After the low on Monday (71.73) the stock had a consistent trend of higher lows and higher highs. Friday's close over the 10-dma is short-term bullish but there is still resistance at the top of the August 18th gap down near $83.00.

We face a similar conundrum here in WLT. Long-term this is probably a great entry point. Yet short-term the stock could easily retest the $75-70 zone on some disappointing economic data. We are facing a heavy week of economic reports so it might pay off to wait and look for another dip (anywhere in the $75-70 zone). Cautious traders will naturally want to wait and buy the bounce. Meanwhile, this past week there were rumors that WLT was a takeover target but it didn't seem to have much affect on the stock price.

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 $ 5.05/ 5.25

- or -

Aug 15, 2011 - entry price on WLT @ 82.82, option @ 14.05
symbol: WLT1319A100 2013 JAN $100 call - current bid/ask $10.60/12.70

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