Editor's Note:

Investors need to exercise caution here!

The U.S. market's major indices look vulnerable and have formed not one but two different technical bearish sell signal. These signals have not been triggered or confirmed yet but they do not bode well if you're bullish on stocks (or call LEAPS). Readers will want to reconsider their stop loss placement and may want to consider scaling back positions to limit risk.

-James


Closed Plays


None. No closed plays this week.


Play Updates


Bank of America - BAC - close: 6.98

update 09/10: The sell-off on Tuesday pushed BAC to an intraday low of $6.80. The situation in Europe and the FHFA lawsuit could keep the pressure on BAC. I'm repeating my comments from last week. Readers might do well to wait for a dip or a bounce near the $6.00 level (near the August lows) as our next entry point to buy long-term call options.

- Suggested Positions -
AUG 29, 2011 - entry price on BAC @ 8.10, option @ 0.57
symbol: BAC1221A10 2012 JAN $10 call - current bid/ask $ 0.29/ 0.31
No Stop on this position (at this time)

- or -

AUG 29, 2011 - entry price on BAC @ 8.10, option @ 1.50
symbol: BAC1319A10 2013 JAN $10 call - current bid/ask $ 1.16/ 1.27
No stop loss on this position (at this time)

09/03 no stop loss on this trade at this time.

Current Target: $12.00-to-$15.00
Current Stop loss: --.--
Play Entered on: 08/29/11
Originally listed in the New Plays 08/27/11


Baker Hughes Inc. - BHI - close: 56.79

update 09/10: BHI has been consolidating sideways in a neutral pattern of higher lows and lower highs. Shares did test support near $55.00 on Tuesday. Now I am concerned that further market weakness could push BHI toward its August lows near $53.00. I would wait for a dip or a bounce near $53.00 before considering new bullish positions. If the $53 level breaks then BHI is looking at a drop toward support near $50.00.

Earlier Comments:
The plan was to keep our position size small. Our long-term targets are $67 and $74. I do want to caution traders that one of our biggest risks is probably news that BHI will make an acquisition. If BHI does purchase another company, then shares of BHI could gap open lower on us, which is another reason to keep our position size small.

- Suggested Positions -
AUG 29, 2011 - entry price on BHI @ 57.62, option @ 3.85
symbol: BHI1221A65 2012 JAN $65 call - current bid/ask $ 3.50/ 3.60

- or -

AUG 29, 2011 - entry price on BHI @ 57.62, option @ 7.00
symbol: BHI1319A70 2013 JAN $70 call - current bid/ask $ 6.70/ 6.95

Current Target: $67.00 and 74.00
Current Stop loss: 52.40
Play Entered on: 08/29/11
Originally listed in the New Plays 08/27/11


Cliffs Natural Resources - CLF - close: 76.63

update 09/10: It was a rocky week for CLF. Shares fell to $73.30 on Tuesday. Yet rallied to $81.46 on Wednesday. I am concerned that CLF could be forming a bear-flag pattern, much like the major indices. A breakdown under $72.00 might forecast a multi-week drop the $55-50 zone. More conservative traders will want to consider raising their stop loss toward $70 or toward the $72 area. The newsletter is going to keep our stop under the August low for now. If you're really feeling cautious then exit now to lock in a gain!

I am not suggesting new positions at this time.

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 $ 6.95/ 7.10

- or -

Aug 18, 2011 - entry price on CLF @ 71.51, option @ 10.50*
symbol: CLF1319A90 2013 JAN $90 call - current bid/ask $13.10/13.45

09/03 look for a dip toward $75.00
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: 21.29

update 09/10: Not much has changed for EMC. The market's sell-off on Tuesday saw EMC hit an intraday low of $20.59. This stock is still consolidating sideways inside a neutral pattern of lower highs and higher lows, at least for now. If the market continues to sink then we can expect EMC to retest support near $20.00. I would wait for a dip or a bounce near the $20.00 level before considering new bullish positions. We have a stop loss at $18.90. Cautious traders may want to raise it close to the August low of $19.84.

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 $ 2.73/ 2.77

- or -

Aug 18, 2011 - entry price on EMC @ 20.25, option @ 1.80
symbol: EMC1319A25 2013 JAN $25 call - current bid/ask $ 2.06/ 2.26

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: 85.03

update 09/10: Ouch! MCD had been churning between technical support at its 40-dma and resistance at $90.00. That changed on Friday. Before the opening bell on Friday the company reported August same store sales growth of +3.5. According to an AP article, this was MCD's 100th consecutive month of same-store sales growth. However, analysts had been expecting +4.9% growth.

The disappointment saw shares of MCD gap open lower at $86.29 and plunge to $83.65 intraday. Shares hit their 100-dma before trimming its losses. If the stock market's major indices looked healthier I would use this dip in MCD as a new entry point. However, right now the market looks vulnerable. I am not suggesting new positions at this time.

I am actually moving our stop loss from $81.75 to $79.50. If the market breaks down then MCD will likely drop toward support near $80.00 and its 200-dma. More conservative traders may want to make the opposite move and raise their stop toward Friday's low instead. If we see it, a bounce from $80 would be a new bullish entry point.

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 $ 2.35/ 2.45

- or -

Aug 15, 2011 - entry price on MCD @ 86.82, option @ 3.90
symbol: MCD1319A95 2013 JAN $95 call - current bid/ask $ 3.95/ 4.15

09/10/11 adjusted stop loss down to $79.50
09/03/11 look for a dip toward the 50-dma

Current Target: $99.00
Current Stop loss: 79.50
Play Entered on: 08/15/11
Originally listed in the New Plays 08/13/11


McDermott Int. Inc. - MDR - close: 13.24

update 09/10: MDR is still trading sideways in a range. I would expect this stock to retest its lows near the $12.00-11.60 zone if the market continues to retreat. A rebound off the $12.00 area can be used as a new entry point but readers may want to buy the 2013 calls instead of the 2012s.

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/ 0.60

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: 86.35

update 09/10: Visa managed to close with a gain for the week but shares remain under resistance in the $89-90 zone. If the market sells off then V might retest support near $80 or its 200-dma. I would prefer to launch new positions on a bounce near $80.

- Suggested (small) Positions -
Aug 18, 2011 - entry price on V @ 80.00, option @ 4.00
symbol: V1221A90 2012 JAN $90 call - current bid/ask $ 5.90/ 6.05

- or -

Aug 18, 2011 - entry price on V @ 80.00, option @ 7.75
symbol: V1319A100 2013 JAN $100 call - current bid/ask $ 8.90/ 9.30

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: 88.22

update 09/10: Wow! It was a big week for WLT. Tuesday the stock drifted lower toward $75.00. Yet Wednesday the stock surged +30% intraday to $97.30 thanks to speculation WLT was a takeover candidate. There was a Bloomberg article that suggested Anglo American might consider buying WLT in a deal worth $120 a share.

WLT almost hit our first target at $97.75. After a +13.6% gain for the week and the market looking vulnerable more conservative traders may want to think about taking some money off the table now. I am not suggesting new positions at this time. We will raise our stop loss to $73.50.

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. 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 $ 9.75/11.50

- or -

Aug 15, 2011 - entry price on WLT @ 82.82, option @ 14.05
symbol: WLT1319A100 2013 JAN $100 call - current bid/ask $14.50/17.60

09/10/11 new stop loss @ 73.50

Current Target: $97.75 and $129.00
Current Stop loss: 73.50
Play Entered on: 08/15/11
Originally listed in the New Plays 08/13/11