Editor's Note:

A few of our long-term LEAPS candidates are breaking out to new all-time highs. Overall it was another bullish week for stocks. Earnings news has been positive thus far. We saw HSY and KBH make the jump from our watch list to active trade list.

-James


Closed Plays


None. No closed plays this week.


Play Updates


Allergan Inc. - AGN - close: 88.38

Comments:
10/22 update: It turned out to be a bullish week for AGN. The stock managed to convincingly breakout past resistance near $86 and close at new all-time highs. The Point & Figure chart's bullish breakout buy signal looks even stronger now and is suggesting a long-term target of $109. Even though the stock looks strong here I would hesitate to launch new positions at the moment. AGN is due to report earnings on Wednesday morning (Oct. 26th) before the market's opening bell. Analysts are expecting a profit of 90 cents a share. With the stock at all time highs there could be an urge to sell the news and book profits by shorter-term traders.

I am very tempted to raise our stop loss but we'll leave it at $79.45 for now. More conservative traders may want to up their stop toward $82 or may be towards $83.75 instead. Our long-term target is $99.00.

Earlier Comments:
Option spreads are wide for these LEAPS. We want to keep our position size pretty small to limit our risk.

- Suggested Positions -
OCT 17, 2011 - entry price on AGN @ 85.46, option @ 5.10
symbol: AGN1319A100 2013 JAN $100 call - current bid/ask $ 5.60/ 6.20

10/22/11 Earnings are coming up. Readers might want to consider raising their stop loss. We are keeping ours at $79.45.

Current Target: $99.00
Current Stop loss: 79.45
Play Entered on: 10/17/11
Originally listed on the Watch List: 09/24/11


Bank of America - BAC - close: 6.46

Comments:
10/22 update: As a sector most of the financials are higher this week but it's been a rocky few days with big ups and downs. Investors are reacting to every rumor and headline out of Europe regarding the summit. BAC did report earnings on the 18th. The results were much better than expected at 56 cents a share versus estimates of 22 cents. That helps explain the big pop in BAC shares on the 18th. Yet the stock was unable to breakout past resistance at the simple 50-dma all week long.

Meanwhile the situation in Europe will have big implications for the banking sector. BAC is likely to see big swings depending on the success or failure of EU leaders to get some sort of comprehensive plan in place. I'm a little reluctant to launch new positions here. Investors might want to consider waiting for a close over $7.00 before evaluating new positions.

- Suggested Positions -
AUG 29, 2011 - entry price on BAC @ 8.10, option @ 0.57
symbol: BAC1221A10 2012 JAN $10 call - current bid/ask $ 0.08/ 0.09
(no stop loss on this position)

- or -

AUG 29, 2011 - entry price on BAC @ 8.10, option @ 1.50
symbol: BAC1319A10 2013 JAN $10 call - current bid/ask $ 0.76/ 0.79
(No stop loss on this position)

10/03/11 Sept. 26th position stopped out at $5.75.
2012 Jan. $7.50 call @ 0.48 (-27.2%)
2013 Jan. $10 call @ 0.74 (-26%)
10/01 raising our stop loss on the Sep. 26th position to $5.75
09/24 adding 2nd position, stop loss at $5.40
09/03 no stop loss on this trade at this time.

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


Bristol Meyers Squibb - BMY - close: 32.56

Comments:
10/22 update: BMY spent the week consolidating sideways and yet shares are still inside their narrow bullish channel. That could change. The company is due to report earnings on October 27th, before the opening bell. Wall Street expects a profit of 58 cents a share. I remain concerned that BMY could see profit taking back down toward the $30.00 level. More conservative traders may want to take profits now.

I am not suggesting new positions at this time. We have two exit targets. One at $33.50 and a longer-term target at $35.75.

Earlier Comments:
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 $ 2.00/ 2.06

10/22/11 BMY is due to report earnings this week on Oct. 27th. Readers may want to take profits now or prior to the report.
10/08/11 new stop loss @ 29.40
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: 29.40
Play Entered on: 09/19/11
Originally listed on the Watch List: 09/10/11


EMC Corp. - EMC - close: 24.03

Comments:
10/22 update: It was our plan to sell at least half of our 2012 January calls on Monday at the open. These calls opened with a bid of $3.55 (+61.3%). A day later EMC reported earnings, beat estimates by one cent and guided higher. The stock gapped open higher on Tuesday and rallied toward resistance near $24 and its 100-dma. EMC spent the rest of the week digesting gains and consolidating sideways.

I am not suggesting new positions at this time. Please note that we will raise our stop loss to $21.40.

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 $ 4.40/ 4.50

- or -

Aug 18, 2011 - entry price on EMC @ 20.25, option @ 1.80
symbol: EMC1319A25 2013 JAN $25 call - current bid/ask $ 3.15/ 3.25

10/22/11 new stop loss @ 21.40
10/17/11 sold half of 2012 calls @ open, bid $3.55 (+61.3%)
10/15/11 Plan to Sell Half of our 2012 calls ASAP
10/08/11 new stop loss @ 19.85
09/24 new stop loss @ 19.49
09/17 new stop loss @ 19.80

Current Target: $25.75 and 28.50
Current Stop loss: 21.40
Play Entered on: 08/18/11
Originally listed on the Watch List: 07/23/11


Hewlett-Packard - HPQ - close: 25.38

Comments:
10/22 update: It was our plan to sell at least half of our 2012 calls on Monday at the open. These calls opened with a bid of $4.10 (+52.4%).

HPQ posted a small loss for the week. Shares experienced some volatility as investors reacted to different earnings reports across the week. I am surprised that HPQ did not see stronger weakness following the disappointing report from rival IBM. The good news tonight is that HPQ has rallied back above the $25.00 level and closed back above its simple 50-dma.

I am not suggesting new positions at this time. HPQ remains under resistance near the $26.50 level.

- Suggested (SMALL) Positions -
Short(er)-Term Trade
Sep 26, 2011 - entry price on HPQ @ 22.59, option @ 2.69
symbol: HPQ1221A22.5 2012 JAN $22.50 call - current bid/ask $ 4.10/ 4.20
Stop Loss @ 22.85

- or -

Longer-term Trade
Sep 26, 2011 - entry price on HPQ @ 22.59, option @ 3.75
symbol: HPQ1319A25 2013 JAN $25 call - current bid/ask $ 4.80/ 4.90
Stop Loss @ 21.40

10/17/11 Planned exit, sell 1/2 of 2012 position, bid @ 4.10 (+52.4%)
10/15/11 new stop loss for the 2012 position @ 22.85
10/15/11 Plan to sell 1/2 of 2012 calls on Monday
10/08/11 new stop loss (both positions) at $21.40

Current Target: $29.50
Play Entered on: 09/26/11
Originally listed in New Plays: 09/24/11


Hershey Co. - HSY - close: 60.26

Comments:
10/22 update: We have been waiting for an entry point on HSY for a long time. After weeks of flirting with a breakout past resistance at $60.00 the stock finally did it. Our plan was to open bullish positions if shares could close over $60.25. The stock closed at $60.55 on October 18th. Our trade opened the next day with HSY opening at $60.57 and our options opening at $3.90. We have a stop loss at $55.90. More conservative traders may want to raise their stop closer to the rising 100-dma or even the trendline of higher lows that began in August (see chart below).

In previous watch list updates I suggested that more conservative traders wait for a close over $61.00 before initiating positions. You may want to wait for that close if you're still looking for an entry point. There is always a chance that HSY disappoints when they report earnings and the company is due to report on October 27th. The announcement will be prior to the market open. Analysts are expecting a profit of 84 cents a share. I will note that the Point & Figure chart is bullish and is currently suggesting a long-term target of $80.00. I am suggesting that we take profits at $67.00 and at $74.00.

- Suggested (SMALL) Positions -
Oct 19, 2011 - entry price on HSY @ 60.57, option @ 3.90
symbol: HSY1319A65 2013 JAN $65 call - current bid/ask $ 2.99/ 3.85

10/19/11 HSY opens at $60.57, option opens @ 3.90
10/18/11 HSY meets our entry requirement with a close over $60.25

Chart of HSY:

Current Target: $67.00 & 74.00
Current Stop loss: 55.90
Play Entered on: 10/19/11
Originally listed on the Watch List: 09/17/11


KB Home - KBH - close: 6.68

Comments:
10/22 update: It was a big week for many housing stocks. KBH rallied from $6.68 to $7.53 for a +12.7% gain. Nimble traders saw an even bigger move from the 50-dma near 6.19 to $7.53 (+21%). Our plan was to buy call LEAPS when KBH closed above resistance at $7.00. The stock did so on October 18th with a close at $7.02. Shares opened at $7.17 the next morning and our 2013 $10 call opened at $1.25 on the 19th. At this point I would wait for a new bounce from $7.00 or the $6.50 level before considering new bullish positions.

Earlier Comments:
If there is a breakout the stock could see a short squeeze. The most recent data listed short interest at 52% of the 65 million-share float.

- Suggested Positions -
(Stock Position)
Oct 19, 2011 - entry price on KBH @ 7.17

- or -

(Option Position)
Oct 19, 2011 - entry price on KBH @ 7.17, option @ 1.25
symbol: KBH1319A10 2013 JAN $10 call - current bid/ask $ 1.19/ 1.31

10/19/11 Trade opens. KBH opens @ 7.17, option @ 1.25
10/18/11 KBH meets our entry requirement with a close above $7.00

Chart of KBH:

Current Target: $9.90
Current Stop loss: 5.95
Play Entered on: 10/19/11
Originally listed on the Watch List: 10/15/11


Kraft Foods Inc. - KFT - close: 35.20

Comments:
10/22 update: KFT closed virtually unchanged on the week. The stock has been consolidating sideways inside the $34.50-35.50 zone. A breakout past $35.50 would be bullish but I would not launch new positions at this time.

Keep in mind that KFT is due to report earnings on November 2nd.

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 $ 3.10/ 3.25

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


Ross Stores Inc. - ROST - close: 87.21

Comments:
10/22 update: After several days of consolidating sideways in the $83-85 zone shares of ROST finally broke out to new all-time highs on Friday. Please note that we are raising our stop loss from $77.00 to $79.25. I am not suggesting new positions at this time.

- Suggested Positions -
Oct 11, 2011 - entry price on ROST @ 84.36, option @ 5.30
symbol: ROST1319A100 2013 JAN $100 call - current bid/ask $ 6.20/ 6.50

10/22/11 new stop loss @ 79.25
10/15/11 adjusted stop loss to $77.00
10/11/11 ROST opened at $84.36
10/10/11 ROST closed above $83, our requirement to open the trade
10/08/11 adjusted option strike to 2013 Jan. $100 call
10/01/11 new strategy: buy a close over $83.00
09/24/11 new trigger at $73.00, stop 69.50
09/17/11 new trigger at $76.50, stop @ 71.40, new strikes.

Current Target: $99.00
Current Stop loss: 79.25
Play Entered on: 10/11/11
Originally listed on the Watch List: 09/10/11