Editor's Note:

The stock market suffered one of its worst weeks in almost three years. We had five stocks hit our stop losses. One stock, Visa (V), hit our profit target.

If you think the stock market will bounce from its August lows, then this is a new entry point. If you believe we will see the market breakdown further then wait on new bullish positions and you may want to consider some put options to capture the next leg down.

-James


Closed Plays


BHI, CLF, IR, MDR, and WLT were closed.


Play Updates


Bank of America - BAC - close: 6.31

update 09/24: It was a ugly week for the stock market. Banks were big underperformers as investors worried about exposure to Europe. BAC suffered some bearish analyst comments and downgrades. The stock fell from the $7.00 area toward its August lows near $6.00. Last week I suggested readers wait for a dip near $6.00 as our next entry point. This is it!

I am suggesting new bullish positions now (see below) but we'll add a stop loss at $5.40. More aggressive traders may want to use a stop under $5.00. Bear in mind that a breakdown under $6.00 might signal a drop toward its 2009 lows in the $4.00-3.00 zone. You may want to use a tighter stop loss.

- Suggested Positions -
AUG 29, 2011 - entry price on BAC @ 8.10, option @ 0.57
symbol: BAC1221A10 2012 JAN $10 call - current bid/ask $ 0.13/ 0.15
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 $ 0.82/ 0.87
No stop loss on this position (at this time)


2nd Position, listed 09/24/11, opened on 09/26/11

SEP 26, 2011 - entry price on BAC @ -.--, option @ -.--
symbol: BAC1221A7.50 2012 JAN $7.50 call - current bid/ask $ 0.61/ 0.64

- or -

SEP 26, 2011 - entry price on BAC @ -.--, option @ -.--
symbol: BAC1319A10 2013 JAN $10 call - current bid/ask $ 0.82/ 0.87

09/24 adding 2nd position, stop loss at $5.40
09/03 no stop loss on this trade at this time.

Chart of BAC:

Current Target: $12.00-to-$15.00
Current Stop loss: 5.40
Play Entered on: 08/29/11
Originally listed in the New Plays 08/27/11


BMC Software - BMC- close: 38.85

update 09/24: BMC experienced a sharp pull back toward the bottom of its prior trading range and support near its August and September lows. We had plans to buy a dip at $40.25 but on September 22nd BMC gapped open lower at $39.74. Traders did buy the dip on Friday but I'm not convinced the pull back is over. If the stock market continues to drop then we should expect BMC to retest its August lows near $37.20. I am moving our stop loss down to $36.90.

I am hesitant to open new positions with the market perched preciously on the edge of support. Readers may want to jump in on a dip or a bounce near $37.50. Our targets are $46.50 and 49.75.

- Suggested Positions -
SEP 22, 2011 - entry price on BMC @ 39.74, option @ 2.05
symbol: BMC1221A45 2012 JAN $45 call - current bid/ask $ 1.25/ 1.70

- or -

SEP 22, 2011 - entry price on BMC @ 39.74, option @ 5.40
symbol: BMC1319A45 2013 JAN $45 call - current bid/ask $ 3.70/ 4.50

09/24 new stop loss @ 36.90
09/22 play opened at $39.74 (gap down)
09/17 adjusted entry point to buy the dip at $40.25, stop 37.40
09/17 adjusted option strikes to 2012 and 2013 Jan $45s.

Chart of BMC:

Current Target: $46.50, 49.75
Current Stop loss: 36.90
Play Entered on: 09/22/11
Originally listed on the Watch List: 08/20/11


Bristol Meyers Squibb - BMY - close: 30.89

update 09/24: BMY managed to post a gain for the week in spite of the widespread market losses. The stock tagged new multi-year highs on Wednesday at $31.78. Traders bought the dip at its simple 10-dma on Thursday's market sell-off. The low of $29.66 on Friday looks like a bad tick.

If the stock market breaks down under its August lows then BMY will likely be dragged lower as well. I would look for support in the $29-28 zone. If the stock market bounces from its August lows then readers may want to consider new positions in BMY on another bounce from the $30 level.

Earlier Comments:
BMY could have resistance in the $32.00-32.50 zone dating back to mid 2007. NOTE: BMY is not a very fast moving stock. We will need to be patient.

- Suggested Positions -
SEP 19, 2011 - entry price on BMY @ 30.53, option @ 1.20
symbol: BMY1319A35 2013 JAN $35 call - current bid/ask $ 1.42/ 1.51

09/16 Friday's close at $30.53 is our trigger to buy calls. Our entry will be Monday morning.

Current Target: $33.50 and 35.75
Current Stop loss: 27.75
Play Entered on: 09/19/11
Originally listed on the Watch List: 09/10/11


EMC Corp. - EMC - close: 20.62

update 09/24: It was a painful week for EMC. The broader market lost -6.5% yet EMC gave up -9.4%. Shares fell toward support near the August lows. Speaking of the August lows, I'm concerned that EMC might actually dip to $19.85 before rebounding. I am moving our stop loss from $19.80 to $19.49. I realize we just raised it to $19.80 a week ago but trading is more art than science and I'd hate to see EMC dip into the $19.75 area only to bounce back.

If you believe the market will hold the August lows then this is a new bullish entry point. If not, and you believe the market will breakdown to new lows then wait. EMC could drop toward the next level of support near $18.00 on further market weakness.

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 $ 2.18/ 2.25

- or -

Aug 18, 2011 - entry price on EMC @ 20.25, option @ 1.80
symbol: EMC1319A25 2013 JAN $25 call - current bid/ask $ 1.89/ 2.17

09/24 new stop loss @ 19.49
09/17 new stop loss @ 19.80

Chart of EMC:

Current Target: $25.75 and 28.50
Current Stop loss: 19.49
Play Entered on: 08/18/11
Originally listed on the Watch List: 07/23/11


Kraft Foods Inc. - KFT - close: 33.72

update 09/24: We had planned to buy calls on the dip at $33.50 but KFT gapped open lower on Thursday at $32.71. Shares quickly rebounded and pared its gains by the close on Thursday. Unfortunately the stock did not see much follow through on Friday. Technically this looks like a bounce near support at the rising 200-dma. We picked KFT because it's a defensive stock. I would probably look for a new dip near $32.50 or a close over $34.50 before considering new positions.

NOTE: KFT is a very slow moving stock. It will take months to make any progress. Once a position is open readers may want to turn these into calendar spreads (a.k.a. vertical spreads).

- Suggested (SMALL) Positions -
Sep 22, 2011 - entry price on KFT @ 32.71, option @ 2.35
symbol: KFT1319A35 2013 JAN $35 call - current bid/ask $ 2.42/ 2.55

Chart of KFT:

Current Target: $38.00
Current Stop loss: 31.75
Play Entered on: 09/22/11
Originally listed on the Watch List: 09/17/11


Coca-Cola Co - KO - close: 67.42

update 09/24: Our trade on KO is finally open. Shares saw a big gap down on Thursday. The stock market's widespread plunge on Thursday's session pushed KO to 66.62 intraday before shares started to bounce. Our buy-the-dip entry point was hit at $67.00. While the long-term trend for KO is still higher the short-term outlook is cloudy. The 50-dma and the top of the gap down could be resistance. If the stock market continues to break down then we could see KO drop toward the $65-64 zone.

Shares of KO do not move very fast. I would wait on launching new positions and we can re-evaluate next week.

Earlier comments:
Remember, this is a slow-moving stock. It's going to take months for KO to make significant headway but the trend is up. Our plan is to keep positions small to limit our risk.

- Suggested Positions -
Sep 22, 2011 - entry price on KO @ 67.00, option @ 2.25
symbol: KO1221A70 2012 JAN $70 call - current bid/ask $ 2.24/ 2.32

- or -

Sep 22, 2011 - entry price on KO @ 67.00, option @ 3.00
symbol: KO1319A75 2013 JAN $75 call - current bid/ask $ 2.85/ 2.98

09/22/11 play opened at $67.00
09/17/11 stocks are showing strength. New entry point at $67.00, stop at $63.49
09/10/11 adjusted entry point to $64.50, stop loss to $61.45
09/03 adjusting buy-the-dip trigger to $66.50
09/03 removing the secondary entry point
08/27 Adding a secondary entry point to buy $75 calls if KO can close over $70.50. stop loss at $66.40.

Chart of KO:

Current Target: $80.00
Current Stop loss: 63.49
Play Entered on: 09/24/11
Originally listed on the Watch List: 08/13/11


McDonalds Corp. - MCD - close: 87.37

update 09/24: It was a volatile week for MCD. Shares produced a bearish reversal pattern Monday-through Wednesday but traders bought the dip on Thursday near the stock's rising 100-dma. Last week I suggested readers wait for a bounce in the $86-85 area as a new entry point. We got that bounce on Friday but the rally stalled near MCD's 50-dma. I am a little hesitant to launch new bullish positions. If the S&P 500 breaks down under the 1100 level then the market could be headed much, much lower. I would not be surprised to see MCD test support near $80 if the S&P500 breaks down. More conservative traders might want to raise their stops toward the $84 area. Currently our stop is at $79.50.

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 $ 3.35/ 3.45

- or -

Aug 15, 2011 - entry price on MCD @ 86.82, option @ 3.90
symbol: MCD1319A95 2013 JAN $95 call - current bid/ask $ 5.05/ 5.25

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


NVIDIA Corp. - NVDA - close: 13.79

update 09/24: It was a painful week for stocks (one of the worst since 2008) and shares of NVDA underperformed with a -10.8% drop for the week versus -6.5% for the S&P 500. At its lowest levels on Thursday the stock was down -14.2% for the week. This pull back in NVDA has essentially filled the gap from September 7th. Aggressive traders could buy calls now. Personally, I would prefer to wait for a new close over $14.50 before considering new bullish positions.

- Suggested (small) Positions -
SEP 14, 2011 - entry price on NVDA @ 15.62, option @ 2.40
symbol: NVDA1221A15 2012 JAN $15 call - current bid/ask $ 1.46/ 1.51

- or -

SEP 14, 2011 - entry price on NVDA @ 15.62, option @ 4.25
symbol: NVDA1319A15 2013 JAN $15 call - current bid/ask $ 3.05/ 3.30

Current Target: $19.75
Current Stop loss: 12.25
Play Entered on: 09/15/11
Originally listed on the Watch List: 09/10/11


Visa Inc. - V - close: 90.08

update 09/24: Target achieved, but more on that in a moment. Visa fell less than a dollar for the week. Traders bought the dip on Thursday near its 50-dma. The stock outperformed on Friday with a +2% rally and a close over potential resistance at $90.00. On September 20th this stock rallied to $94.75. Our first target was hit at $94.50. The bid on the 2012 Jan $90 call was at $9.80 (+145.0%) and the bid on the 2013 Jan $100 call was at $11.10 (+43.2%). Two days later the stock was testing the $86 level thanks to the very sharp, market-wide plunge.

If you believe the market will hold its August lows then this might be a new entry point in Visa but if you buy calls now be sure to tighten your stop loss. Speaking of stops, we are moving our stop loss to $84.45. I'd rather get stopped out earlier and save some money to reconsider new positions on a dip near $80 and its 200-dma if the market breaks down further.

- Suggested (small) Positions -
Aug 18, 2011 - entry price on V @ 80.00, option @ 4.00
symbol: V1221A90 2012 JAN $90 call - current bid/ask $ 7.70/ 8.00

- or -

Aug 18, 2011 - entry price on V @ 80.00, option @ 7.75
symbol: V1319A100 2013 JAN $100 call - current bid/ask $10.85/11.45

09/24 new stop loss at $84.45
09/20 1st target hit at $94.50
bid 2012 Jan $90 call @ $9.80 (+145%)
bid 2013 Jan $100 call @ $11.10 (+43.2%)
09/17 new stop loss @ 81.45. Readers may want to take some profits here with the 2012 calls up +87.5%
08/27 new stop loss at $77.00

Chart of V:

Current Target: $94.50, and $99.00
Current Stop loss: 84.45
Play Entered on: 08/18/11
Originally listed on the Watch List: 08/13/11


CLOSED Plays


Baker Hughes Inc. - BHI - close: 49.61

update 09/24: Many of the commodity-related stocks were crushed this past week and the oil service stocks were no exception. BHI was hammered for a -16% loss last week as it broke down from its pennant-shaped consolidation pattern. Our stop loss would have been hit on September 22nd but BHI actually gapped open lower at $51.63. Our stop was $52.40. The play was closed immediately. Our plan was to keep our position size small to limit our risk.

- Suggested Positions -
AUG 29, 2011 - entry price on BHI @ 57.62, option @ 3.85
symbol: BHI1221A65 2012 JAN $65 call, exit $1.71 (-55.5%)

- or -

AUG 29, 2011 - entry price on BHI @ 57.62, option @ 7.00
symbol: BHI1319A70 2013 JAN $70 call, exit $4.35 (-37.8%)

09/22 stopped out on gap open lower at $51.63 (stop was 52.40)

Chart of BHI:

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: 57.84

update 09/24: CLF mines iron ore and coal. A sharp increase in worry over a global economic slow down plus news that two different coal miners lowered their guidance this past week produced a crushing blow for the sector. Shares of CLF just fell off a cliff with a drop of -29% from last Friday's close to Thursday's close. This Friday's +4.8% gain is an oversold/dead-cat bounce.

I warned readers a week ago if you were feeling cautious to lock in a gain. We were planning to raise the stop to $72.20 if CLF could close over $80.00 but it did not happen. Our stop loss was hit on September 21st at $67.00. The plan was to use small positions to limit our risk.

- Suggested (SMALL) Positions -
Aug 18, 2011 - entry price on CLF @ 71.51, option @ 4.25
symbol: CLF1221A85 2012 JAN $85 call exit $2.65 (-37.6%)

- or -

Aug 18, 2011 - entry price on CLF @ 71.51, option @ 10.50*
symbol: CLF1319A90 2013 JAN $90 call exit $7.25 (-30.9%)

09/21 stopped out at $67.00.
09/17 if CLF closes over $80.00 then move stop to $72.20
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.

Chart of CLF:

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


Ingersoll-Rand - IR - close: 31.00

update 09/24: Our new trade on IR did not last very long. The stock was on our watch list with a plan to buy the dip at $33.00 and use a stop loss at $31.00. Shares gapped open lower at $32.97 on September 21st. Unfortunately the very next day (Thursday) shares of IR gapped open lower again but this time at $30.53. With our stop at $31.00 the play was closed immediately. Readers may want to consider new bullish positions if we see IR dip and bounce from the $27.00 level.

We do want to keep our position size small to limit our risk.

- Suggested (SMALL) Positions -
Sep 21, 2011 - entry price on IR @ 32.97, option @ 2.50*
symbol: IR1221A35 2012 JAN $35 call exit $1.90 (-24.0%)

- or -

Sep 21, 2011 - entry price on IR @ 32.97, option @ 3.20
symbol: IR1319A40 2013 JAN $40 call exit $2.95 (- 7.8%)

09/22 play closed on gap down at $30.53, stop was 31.00
09/21 play opened at $32.97 on gap down
*option did not trade, this is an estimate
09/17 adjusted strategy to buy the dip at $33.00, stop loss @ 31.00, new option strikes as well

Chart of IR:

Current Target:
Current Stop loss: 31.00
Play Entered on: 09/21/11
Originally listed on the Watch List: 09/03/11


McDermott Int. Inc. - MDR - close: 11.17

update 09/24: Industrial names were hammered lower last week on growing concerns of a global economic slowdown. MDR fell -23% for the week and broke down to new 52-week lows. Shares hit our stop loss at $11.49 on September 22nd.

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.

- Suggested (small) Positions -
Aug 15, 2011 - entry price on MDR @ 14.67, option @ 2.15
symbol: MDR1221A15 2012 JAN $15 call Exit $0.40 (-81.3%)

- or -

Aug 15, 2011 - entry price on MDR @ 14.67, option @ 1.15
symbol: MDR1221A17.5 2012 JAN $17.50 call Exit $0.30*(-73.9%)

09/22/11 stopped out at $11.49
*option did not trade. this is an estimate
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


Walter Energy Inc. - WLT - close: 64.50

update 09/24: Ouch! It was an extremely ugly week for WLT. The stock fell from $82.19 on Friday a week ago to $61.00 at its intraday low on Thursday this past week. That's a -25.7% plunge. Just three weeks ago WLT was trading near $97, which makes this correction a -37% drop. The story behind WLT's big drop was an earnings warning. Management lowered their guidance for Q3 and Q4 of this year.

We had a stop loss at $73.50 but on September 20th it closed at $75.00 and September 21st the company warned and shares opened at $64.39, closing our trade immediately. You could argue that WLT has produced a bear-flag pattern and if that's true then the sell-off is not over. The bear flag would suggest a target near $40.00.

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.

- Suggested (small) Positions -
Aug 15, 2011 - entry price on WLT @ 82.82, option @ 6.65
symbol: WLT1221A100 2012 JAN $100 call Exit $2.15 (-67.6%)

- or -

Aug 15, 2011 - entry price on WLT @ 82.82, option @ 14.05
symbol: WLT1319A100 2013 JAN $100 call Exit $6.50 (-53.7%)

09/21/11 stopped out on gap down at $64.39
09/10/11 new stop loss @ 73.50

Chart of WLT:

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