Editor's Note:

I am concerned that the U.S. stock market is very short-term overbought with the +20% move from its October lows. Odds are growing every day that stocks will see some profit taking sooner rather than later.

Please note that I am suggesting we take some profits in our EMC and HPQ trades. Look for details in their individual updates.

-James


Closed Plays


None. No closed plays this week.


Play Updates


Allergan Inc. - AGN - close: 84.40

Comments:
10/29 update: AGN sold off midweek following its earnings report. The company reported on October 26th and beat estimates by 2 cents yet management guided lower for the next quarter. AGN fell from $87 down to $83 on this news. The stock market's widespread gains probably limited the downside. Now we are facing an overbought market that is due for some profit taking. This could pull AGN lower. I would expect a dip toward the 50-dma near $82 or a dip toward $80.00.

I am not suggesting new positions at this time. 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 $ 2.65/ 4.50

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: 7.35

Comments:
10/29 update: It turned out to be a very big week for financials. The news out of Europe helped fuel gains for this sector. BAC rallied almost +14% and broke out past its 50-dma and the 47.00 level. EU leaders did not just kick the can down the road they punted the can several months down the road and took the worst case scenario off the table. At least that is how stocks are reacting. It remains to be seen if Europe can follow through on their rescue plans. I would be tempted to buy calls again on a dip and bounce from its 50-dma.

- Suggested Positions -
AUG 29, 2011 - entry price on BAC @ 8.10, option @ 0.57
symbol: BAC1221A10 2012 JAN $10 call - current bid/ask $ 0.10/ 0.12
(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 $ 0.87/ 0.92
(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: 32.09

Comments:
10/29 update: It was a volatile week for BMY. On Wednesday shares dipped below short-term support at $32.00. Thursday morning the company reported earnings that beat estimates by three cents. Revenues were better than expected but management issued lackluster guidance. The stock spiked to a new high on Thursday only to drop on Friday in profit taking and some neutral analyst comments.

I do not see any changes from my prior comments. We've been expecting a pull back toward $30.00 for quite a while now. I would still expect a correction within BMY's longer-term up trend. 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 $ 1.46/ 1.57

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


Beazer Homes - BZH - close: 2.20

Comments:
10/29 update: BZH has made the leap from our watch list to our play list. The plan was to wait for a close over $2.05 and then buy the stock or buy call LEAPS the next day. Shares closed at $2.07 on Thursday. The stock opened at $2.12 on Friday morning and the 2013 January $2.50 call opened at $0.70.

I would still consider new positions now or you could wait for a dip back toward $2.00.

- Suggested Positions -

(stock position)
OCT 28, 2011 - entry price on BZH @ $2.12

(option position)
OCT 28, 2011 - entry price on BZH @ 2.12, option @ 0.70
symbol: BZH1319A2.5 2013 JAN $2.50 call - current bid/ask $ 0.65/ 0.80

10/28 trade begins: BZH opens @ $2.12
10/27 BZH meets our entry point requirement with a close over $2.05

Chart of BZH:

Current Target: $3.70
Current Stop loss: 1.57
Play Entered on: 10/28/11
Originally listed on the Watch List: 10/22/11


CB Richard Ellis - CBG - close: 18.98

Comments:
10/29 update: CBG delivered a very strong performance this past week. Our plan was to buy call options when CBG closed above $16.00. That happened on October 24th with a close at $16.74. Our trade opened on October 25th with CBG at $16.63 and the 2012 March $18 call opening at $1.80(estimate).

The stock continued to rally in spite of negative earnings. The company missed estimates by 2 cents but revenues were better than expected at $1.5 billion for the quarter. The company guided in line. Investors could have been betting on a disappointing quarter and the decent news probably sparked some short covering. The stock soared from Thursday's close of $17.12 to hit $19.61 intraday on Friday (a +14% move). The stock is up +24% for the week. I would expect some profit taking soon.

The move in CBG has been so fast that I am suggesting we go ahead and take some money off the table now. We will sell half of our March $18 calls at the open on Monday to lock in a gain. We'll raise our stop loss up to $15.75. We will also adjust our final target from $20.00 to $21.50.

NOTE: CBG does not have LEAPS. We are using the 2012 March calls.

- Suggested Positions -
OCT 25, 2011 - entry price on CBG @ 16.63, option @ 1.80
symbol: CBG1217C18 2012 MAR $18 call - current bid/ask $ 2.70/ 3.10

10/29 Plan on selling half at the open on Monday to lock in a gain.
new stop loss @ 15.75
adjusted final target from $20.00 to $21.50

Chart of CBG:

Current Target: $21.50
Current Stop loss: 15.75
Play Entered on: 10/25/11
Originally listed on the Watch List: 10/15/11


Computer Sciences Corp. - CSC - close: 32.44

Comments:
10/29 update: The market's big move on Thursday pushed CSC past resistance at $31.00. Shares actually gapped higher and rallied past its 100-dma to close at $32.81 on Thursday. Our plan was to wait for CBG to close over $31.00 and then buy calls the next morning. Our trade was opened on Friday morning. Readers may want to wait for a dip back toward $31.00, which should be new support and buy calls there. Actually you might want to wait until after we see CSC's earnings report on November 9th and wait to see how the market reacts to their numbers and then consider an entry point.

- Suggested Positions -
OCT 28, 2011 - entry price on CSC @ 32.37, option @ 3.30
symbol: CSC1319A35 2013 JAN $35 call - current bid/ask $ 3.60/ 4.10

Chart of CSC:

Current Target: $39.00
Current Stop loss: 27.75
Play Entered on: 10/28/11
Originally listed on the Watch List: 10/22/11


Cisco Systems - CSCO - close: 18.56

Comments:
10/29 update: The stock market's big rally on Thursday lifted CSCO out of its trading range. Our plan was to buy calls on a dip at $16.65 or a close over $17.75. Thursday saw CSCO close at $18.44. Our trade was launched on Friday with CSCO at $18.28. Unfortunately, CSCO does look short-term overbought. Readers may want to wait for a dip back toward the $17.75-17.50 zone, which should be support. As an alternative you might want to wait until after CSCO reports earnings on November 9th and wait to see how the market reacts to their Q3 results.

NOTE: We are adjusting our stop loss to $16.40.

Overall CSCO appears to have formed a significant bottom and the action this past week is a breakout past resistance. Our long-term target is $21.75.

- Suggested Positions -
OCT 28, 2011 - entry price on CSCO @ 18.28, option @ 1.68
symbol: CSCO1319A20 2013 JAN $20 call - current bid/ask $1.78/1.80

10/29/11 new stop loss @ 16.40
10/28/11 stock opens at $18.28
10/27/11 CSCO meets our entry requirement: close at $18.44
10/22/11 Added entry to buy a close over $17.75
10/15/11 We are adjusting our entry point. Wait for a dip to $16.65
10/14/11 CSCO hit our entry point requirement for a close over $17.50.

Chart of CSCO:

Current Target: $21.75
Current Stop loss: 16.40
Play Entered on: 10/28/11
Originally listed on the Watch List: 10/08/11


EMC Corp. - EMC - close: 25.03

Comments:
10/29 update: EMC continues to march higher. The stock added another dollar and has closed near potential round-number resistance at the $25.00 level. I am suggesting we go ahead and exit the remainder of our 2012 January calls on Monday at the opening bell. Currently the bid on the 2012 Jan. $20 calls is up to $5.15 (+134%). We will also sell half of our 2013 Jan. $25 calls at the open on Monday. The current bid for these options is at $3.35 (+86.1%). I am removing our exit target of $25.75 since we're taking profit now and we'll adjust our final target on the 2013 calls down to $27.50.

I would expect EMC to find resistance in the $25.00-25.50 zone near its 200-dma. We should expect a pull back soon. No new positions at this time.

Please note our new stop loss at $22.20 near the 50-dma.

Earlier Comments:
The plan was to use small positions to limit our risk.

- Suggested (SMALL) Positions -
Aug 18, 2011 - entry price on EMC @ 20.25, option @ 2.20
symbol: EMC1221A20 2012 JAN $20 call - current bid/ask $ 5.15/ 5.30

- or -

Aug 18, 2011 - entry price on EMC @ 20.25, option @ 1.80
symbol: EMC1319A25 2013 JAN $25 call - current bid/ask $ 3.35/ 3.45

10/29/11 Plan to sell the rest of our 2012 Jan $20 calls on Monday at the open. Also plan to sell half of our 2013 Jan $25 calls on Monday at the open.
10/29/11 new stop loss @ 22.20
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: final target for 2013 calls @ $27.50
Current Stop loss: 22.20
Play Entered on: 08/18/11
Originally listed on the Watch List: 07/23/11


Corning Inc. - GLW - close: 15.31

Comments:
10/29 update: It was a very bullish week for GLW with a rally from $13.74 to $15.31 (+11.4%). Our plan was to buy call LEAPS when GLW closed over $14.00. That happened on October 24th with GLW closing at $14.29. The stock opened on October 25th at $14.27. The stock continued to rally and the market's big move higher on Thursday lifted GLW past its 100-dma.

GLW is arguably short-term overbought. I would expect a dip back toward the $14.50-14.00 zone. I'd wait for a dip back toward $14 before considering new bullish positions.

- Suggested Positions -
OCT 25, 2011 - entry price on GLW @ 14.27, option @ 2.05
symbol: GLW1319A15 2013 JAN $15 call - current bid/ask $2.57/2.64

Chart of GLW:

Current Target: $18.00
Current Stop loss: 12.85
Play Entered on: 10/25/11
Originally listed on the Watch List: 10/22/11


Hewlett-Packard - HPQ - close: 27.94

Comments:
10/29 update: HPQ delivered another strong week. Traders bought the dip near its 20-dma on Wednesday and the stock rallied to $28.57 intraday on Friday. We have been aiming for the $29.50 level. Yet after the market's meteoric rise in October I am suggesting we go ahead and exit our 2012 Jan. $22.50 calls now instead of waiting for HPQ to hit $29.50. Currently the bid on these calls is up to $5.95 (+121.1%) and we'll plan to exit on Monday morning. I am also suggesting we take profits in the 2013 calls and sell half of our position. Current bid on the 2013 Jan. $25 calls is at $6.05 (+61.3%).

HPQ is short-term overbought. I would expect a pull back toward the $26.50-26.00 area, which should be support. Since we are taking profits now we will adjust our final target for the rest of our 2013 calls from $29.50 to $32.50.

I am raising the stop loss on our 2013 call position to $23.90.

FYI: HPQ is due to report earnings in about three weeks.

- 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 $ 5.95/ 6.10
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 $ 6.05/ 6.25
Stop Loss @ 23.90

10/29/11 new stop loss on 2013 calls at $23.90
10/29/11 prepare to exit remainder of 2012 position on Monday @ open
prepare to sell 1/2 (half) of 2013 position on Monday at open
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

Chart of HPQ:

Current Target: 2013 call target: 32.50
Play Entered on: 09/26/11
Originally listed in New Plays: 09/24/11


Hershey Co. - HSY - close: 57.45

Comments:
10/29 update: Last week I cautioned readers that HSY might disappoint in its earnings report on October 27th. HSY did not disappoint but investors were obviously unhappy with the results. The company delivered a profit of 84 cents a share on revenues of $1.62 billion for the quarter. These were both in-line with Wall Street's numbers. Guidance was only in-line and management did have some cautious comments on the price of commodities (obviously a significant cost for HSY). The stock plunged from $60 to $57 on this news and hit an intraday low of $56.40 on Friday. The move is a significant show of relative weakness considering the market's strength late in the week.

At this point I am cautious on HSY. The long-term trend is still higher but I'm not suggesting new positions at this time. Please note that I am moving our stop loss down to $55.40, which is underneath the simple 200-dma.

- Suggested (SMALL) Positions -
Oct 19, 2011 - entry price on HSY @ 60.57, option @ 3.90
symbol: HSY1319A65 2013 JAN $65 call - current bid/ask $ 1.50/ 2.42

10/29/11 adjust stop loss to $55.40, under 200-dma
10/27/11 reports earnings that are in-line with estimates
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

Current Target: $67.00 & 74.00
Current Stop loss: 55.40
Play Entered on: 10/19/11
Originally listed on the Watch List: 09/17/11


KB Home - KBH - close: 7.47

Comments:
10/29 update: It was a rocky week for KBH. The stock traded in big swings between the $7.10 and $8.00 range. The simple 100-dma seems to be overhead resistance while traders were buying the dip at the rising simple 10-dma. Short-term I am concerned the market is overbought and due for a pull back. This could weigh heavily on the homebuilders. I would not be surprised to see KBH dip back toward the $6.50 area. I am not suggesting new positions at this time. 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 $ 1.06/ 1.20

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

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: 35.40

Comments:
10/29 update: KFT has not made much progress. The stock market is soaring and delivered one of its best monthly gains ever. Yet KFT has been churning sideways for two weeks in a row. Investors might be waiting for earnings. KFT's earnings are Wednesday, November 2nd, after the market's closing bell. Analysts are expecting a profit of 55 cents a share.

I am not suggesting new positions in front of the earnings report. Readers may want to consider launching new positions on a close over resistance at $36.00 (although you'll want to consider a higher exit target).

More conservative traders might want to consider a higher stop loss prior to the earnings report just in case KFT misses badly and the stock tanks on the news.

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 $ 2.90/ 3.10

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


Limited Brands, Inc. - LTD - close: 43.89

Comments:
10/29 update: LTD is another watch list graduate. The plan was to buy calls when TLD closed above $43.50. That happened on October 24th with a close at $43.79. Shares opened the next day at $43.70 and the option opened at $4.25 (this is an estimate, the option didn't trade at that time). The stock continued to rally. On Thursday, during the market's big move higher, LTD hit a new record high of $45.45 intraday. Shares hit some profit taking on Friday.

Now the market looks overbought. I would not be surprised to see LTD dip back toward the $42 area. Readers may want to wait for another bounce from the $42 region before considering new bullish positions. Our long-term target is the $54.00 level. We have a stop loss at $37.90. The plan was to keep our position size small.

- Suggested (SMALL) Positions -
Oct 25, 2011 - entry price on LTD @ 43.70, option @ 4.25
symbol: LTD1319A50 2013 JAN $50 call - current bid/ask $ 3.70/ 3.90

10/25/11 trade begins when LTD opens at $43.70
10/24/11 closed at $43.79, meets our entry point requirement
10/15/11 New Strategy: buy a close over $43.50, stop 37.90
10/01/11 adjusted stop loss to $32.90, if triggered
09/24/11 new trigger @ 35.50, updated 2013 option strike
09/17/11 new trigger @ 37.50, updated option strikes.

Chart of LTD:

Current Target: $54.00
Current Stop loss: 37.90
Play Entered on: 10/25/11
Originally listed on the Watch List: 08/27/11


Ross Stores Inc. - ROST - close: 87.57

Comments:
10/29 update: Hmm... the trading in ROST last week was rather disappointing. Shares did hit new all-time highs but they spent much of their time churning sideways on either side of the $88 level. You could argue that the rally in ROST is losing steam. I would expect some profit taking soon. Look for a dip back toward the $85-83 zone. 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 $ 5.30/ 5.60

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