Editor's Note:

Investors will want to trade defensively. Keep your position size small to limit your risk.

- James



New Watch List Entries

BMY - Bristol-Meyers Squibb

NVDA - NVIDIA Corp.

ROST - Ross Stores


Active Watch List Candidates

BMC - BMC Software

EXXI - Energy XXI

IR - Ingersoll-Rand

LTD - Limited Brands Inc

KO - Coca-Cola Co

MOS - Mosaic Co.

RRC - Range Resources


Dropped Watch List Entries

ESV and MMR



New Watch List Candidates:


Bristol Meyers Squibb - BMY - close: 29.16

Company Info

BMY is a major drug company. Investors tend toward big, blue cap defensive names like BMY when the market gets volatile. That's one reason why shares are trading near three-year highs. The stock has failed twice at resistance near $30.00 but it still has a bullish trend of higher lows, suggest it could see a breakout soon.

The high on Thursday was $30.14. I am suggesting we launch bullish positions if we see BMY close over $30.25. If triggered we'll use a stop loss at $27.75. Nimble traders could look to buy another bounce near $26 if we see one.

NOTE: BMY is not a very fast moving stock. We will need to be patient.

Breakout trigger: close over $30.25

BUY the 2013 Jan. $35 call (BMY1319A35)

Chart of BMY:

Originally listed on the Watch List: 09/10/11


NVIDIA Corp. - NVDA - close: 13.88

Company Info

NVDA issued positive earnings guidance last week. The stock popped higher on the news and closed over technical resistance at its 50-dma. Shares have been surprisingly resistant to profit taking since the announcement. No one seems to be in a rush to sell. Given the company's bullish outlook I am seriously tempted to buy calls on NVDA right here. However, even bullish stocks tend to go down if the market sells off.

I am suggesting two different entry points. We will try and buy a dip at $13.25 with a stop loss at $11.49, which is under the August low. Cautious traders could wait and hope for a dip into the $12.50-12.00 zone instead as your entry point. Alternatively, if we see NVDA close over $15.00 we'll buy calls then with a stop loss at $12.25, which is under Tuesday's low.

Buy-the-Dip trigger: $13.25 (or a close over $15.00)

BUY the 2012 Jan. $15 call (NVDA1221A15)

- or -

BUY the 2013 Jan. $15 call (NVDA1319A15)

Chart of NVDA:

Originally listed on the Watch List: 09/10/11


Ross Stores Inc. - ROST - close: 74.09

Company Info

If the stock market breaks down further we could see ROST drop toward its long-term trendline of support. We want to be ready to take advantage of the sell-off and buy the dip. I am suggesting we launch small bullish positions on a dip at $67.50 with a stop loss at $64.00.

Buy-the-Dip trigger: $67.50

BUY the 2012 Jan $75 call (ROST1221A75)

- or -

BUY the 2013 Jan $75 call (ROST1319A75)

Chart of xxx:

Originally listed on the Watch List: 09/10/11


Active Watch List Candidates:



BMC Software - BMC- close: 38.46

update 09/10: BMC is still churning sideways in the $37-42 range. We're expecting a drop toward support near $35.00. I am adjusting our buy-the-dip entry point to $35.00 (from 35.50) and moving our stop loss to $33.75.

As an alternative readers may want to consider bullish positions if BMC can close above the $40.00 or $41.50 levels.

Buy-the-Dip trigger: $35.00

BUY the 2012 Jan $40 call (BMC1221A40)

- or -

BUY the 2013 Jan $40 call (BMC1319A40)

Originally listed on the Watch List: 08/20/11


Ensco Plc. - ESV - close: 49.24

update 09/10: We remain long-term bullish on the energy sector but I am removing ESV as a LEAPS candidate, at least for now. If the market breaks down we can watch for a test of support near $40.00.

Trade Never Opened.

Originally listed on the Watch List: 07/30/11


Energy XXI - EXXI - close: 23.88

update 09/10: EXXI is another energy stock that has been consolidating sideways. I am adjusting our buy-the-dip trigger to the $20.50 level and moving our stop loss to $19.45. If EXXI breaks down under psychological support near $20 then it's probably headed for $17.50 or $15.00. Aggressive traders could use a dip near $22 or $21 instead as their entry point.

I do want to warn you that EXXI can be a volatile stock so keep your position size small.

FYI: EXXI does have 2013 January calls but the spreads are way too wide.

Buy-the-Dip trigger: $20.50 *new trigger*

BUY the 2012 Jan $25 call (EXXI1221A25)

Originally listed on the Watch List: 08/27/11


Ingersoll-Rand - IR - close: 32.27

update 09/10: IR held up reasonably well considering the market's poor performance. A breakdown under the $32.00-31.50 level probably means IR will test the $30.00 level. I am concerned that with the market's major indices poised for declines that we might actually see IR test its August lows instead. Thus we're moving our buy-the-dip trigger from $30.00 to $28.00 and our stop loss to $26.40.

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

Buy-the-Dip trigger: $28.00 *new trigger*

BUY the 2012 Jan $35 call (IR1221A35)

- or -

BUY the 2013 Jan $35 call (IR1319A35)

Originally listed on the Watch List: 09/03/11


Coca-Cola Co - KO - close: 69.37

update 09/10: Investors are cautious and they're turning to defensive names like KO. The stock hit new relative highs on Thursday. Yet even KO will sell off if the market breaks down. I am adjusting our trigger lower. We'll use a buy-the-dip trigger at $64.50 and a stop loss at $61.45, which is under the March 2011 low.

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.

Buy-the-Dip trigger: $64.50 *new trigger*

BUY the 2012 Jan. $70 call (KO1221A70)

- or -

BUY the 2013 Jan. $70 call (KO1319A70)

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.

Originally listed on the Watch List: 08/13/11


Limited Brands, Inc. - LTD - close: 36.60

update 09/10: LTD managed to post a gain for the week but shares did not break the bearish trend of lower highs. I do not see any changes from my prior comments. We're still look for a retest of its August lows. More conservative traders may want to wait and use a trigger closer to $30.00 to launch positions. We'll start with a stop loss at $29.45.

Buy-the-Dip trigger: $32.50

BUY the 2012 Jan $35 call (LTD1221A35)

- or -

BUY the 2013 Jan $40 call (LTD1319A40)

Originally listed on the Watch List: 08/27/11


McMoRan Exploration Co. - MMR - close: 11.93

update 09/10: I remain long-term bullish on MMR but I'm growing less convinced that the $10.00 level will hold up as support if the market melts down. We are removing MMR from the watch list but I would keep it on your personal radar screen.

Trade Never Opened.

Originally listed on the Watch List: 07/23/11


Mosaic Co. - MOS - close: 69.97

update 09/10: MOS only lost 3 cents for the entire week. That's a decent show of strength. At the moment I do not see any changes from our prior comments. We are waiting for a breakout and want to buy calls at $75.50. Alternatively readers may want to consider buying calls on a dip or a bounce near the $60.00 level instead and use a stop loss under the August low at $55.70

Earlier Comments:
MOS has rallied toward resistance in the $74-75 area. I am suggesting we buy calls if MOS hits $75.50 with a stop loss at $67.45. It's a wide stop but MOS can be a volatile stock. We'll use the $80/$85 calls. FYI: Just in case MOS retreats lower then we'll be watching for a possible entry point on a dip in the $60-55 area instead (and we'll use lower option strikes).

Buy-the-breakout trigger: $75.50

BUY the 2012 Jan $80 call (MOS1221A80)

- or -

BUY the 2013 Jan $85 call (MOS1319A85)

Originally listed on the Watch List: 09/03/11


Range Resources Corp. - RRC - close: 62.80

update 09/10: RRC is holding up reasonably well. Yet if the market sells off it could easily see a correction toward $55 or its 200-dma. I do not see any changes from my prior comments. The plan is to buy calls at $55.00. Readers may want to wait and buy a bounce from this level instead. If triggered we'll use a stop loss at $51.50.

Buy-the-Dip trigger: $55.00

BUY the 2012 Jan $60 call (RRC1221A60)

- or -

BUY the 2013 Jan $60 call (RRC1319A60)

Originally listed on the Watch List: 08/20/11