Editor's Note:
There was no conviction behind the bounce this morning and stocks rolled over late in the session. Our ERTS trade has been stopped out. I am suggesting we exit our EXPE June calls now.

-James

Current Portfolio:


BULLISH Play Updates

Cheesecake Factory Inc. - CAKE - close: 29.63 change: +0.01

Stop Loss: 28.95
Target(s): 33.95, 37.00
Current Gain/Loss: - 6.0%
Time Frame: 8 to 10 weeks
New Positions: see below

Comments:
06/07 update: There is no change from my prior comments on CAKE. The early morning bounce failed at short-term resistance. I'm still expecting a dip to the 200-dma. Wait for a bounce before considering new positions.

Earlier Comments:
Keep in mind that CAKE doesn't move very fast (at least not normally) so we'll need some patience for this trade to work. FYI: The Point & Figure chart for CAKE is bullish with a $59 target.

Current Position: Long CAKE stock @ $31.53

- or -

Long the July $33 call (CAKE1116G33) Entry @ $0.75

06/04 More conservative traders may want to exit early. We are expecting a drop to the 200-dma.

Entry on May 20 at $31.53
Earnings Date 07/21/11 (unconfirmed)
Average Daily Volume: 1.0 million
Listed on May 19th, 2011


Dr. Pepper Snapple Group - DPS - close: 40.17 change: +0.10

Stop Loss: 38.95
Target(s): 44.90
Current Gain/Loss: - 0.2%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/07 update: DPS produced a minor bounce this morning but spent most of the day sliding sideways in a very narrow range. There is no change from my prior comments.

Earlier Comments:
You could argue the stock is short-term oversold after a two-week drop and with the stock at support near $40.00 this could be used as a new bullish entry point. However, I'm concerned with the weakness in the market's major averages. Readers may want to wait for the market to find a bottom or wait for DPS to bounce back above its simple 10-dma before initiating new positions. We have a stop at $38.95. More conservative traders may want to use a stop closer to $40 instead.

Current Position: Long DPS stock @ $40.25

- or -

Long Aug $45 call (DPS1120H45) Entry @ $0.30

06/04 new stop loss @ 38.95

Entry on June 3 at $40.25
Earnings Date 07/28/11 (unconfirmed)
Average Daily Volume: 2.1 million
Listed on May 14th, 2011


Ecolab Inc. - ECL - close: 54.10 change: +0.22

Stop Loss: 51.90
Target(s): 57.00, 59.90
Current Gain/Loss: + 1.4%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
06/07 update: ECL spent Tuesday's session drifting sideways near $54.00 and its 10-dma. There is no change from my earlier comments. I would expect ECL to correct toward support near $53.00. No new positions at this time.

Current Position: Long ECL stock @ 53.35

- or -

Long July $55 call (ECL1116G55) Entry @ $0.60

06/04 new stop loss @ 51.90

Entry on May 26 at $53.35
Earnings Date 07/26/11 (unconfirmed)
Average Daily Volume: 1.5 million
Listed on May 18th, 2011


Expedia Inc. - EXPE - close: 26.93 change: -0.70

Stop Loss: 26.70
Target(s): 27.75, 29.75
Current Gain/Loss: + 4.0%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
06/07 update: Bullish analyst comments on EXPE this morning helped the stock gap open higher. Unfortunately the rally failed and shares quickly sold off. EXPE closed on its low for the session and that doesn't bode well for tomorrow. As a matter of fact it would not take much for EXPE to hit our stop loss at $26.70.

I am suggesting we close our June $25 calls immediately. More conservative traders may want to exit all of their bullish position snow. I am not suggesting new positions at this time.

Current Position: Long EXPE stock @ 25.85

- or -

June $25 call (EXPE1118F25) Entry @ $1.20, exit 1.85 (+54.1%)

- or -

Long the July $27 call(EXPE1116G27) Entry @ $0.95

06/07 Exit our June $25 calls. bid @ $1.85 (+54.1%)
06/04 consider an early exit, especially if you have the June calls. Currently the bid on the June $25 call is $2.45 (+104%).
06/01 new stop loss @ 26.70
05/31 new stop loss @ 26.25
05/21 New stop loss @ 25.40
05/20 1st Target Hit @ 27.75 (+7.3%), June $25 call @ $2.70 (+125%), July $27 call @ $1.40 (+47.3%)

Entry on May 18 at $25.85
Earnings Date 07/28/11 (unconfirmed)
Average Daily Volume: 5.5 million
Listed on May 17th, 2011


Kansas City Southern - KSU - close: 55.44 change: -0.39

Stop Loss: 54.70
Target(s): 59.75, 62.50
Current Gain/Loss: - 1.6%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
06/07 update: KSU underperformed its peers in the railroad industry with a -0.6% loss. I'm not surprised. We've been looking for a drop toward $55.00 and its 50-dma. I am not suggesting new positions at this time.

Current Position: Long KSU stock @ $56.39

- or -

Long the June $60 call (KSU1118F60) Entry @ $0.53

06/01 New stop loss @ 54.70

Entry on May 19 at $56.39
Earnings Date 07/27/11 (unconfirmed)
Average Daily Volume: 1.0 million
Listed on May 18th, 2011


Rosetta Resources - ROSE - close: $45.52 change: +0.45

Stop Loss: 44.75
Target(s): 54.00
Current Gain/Loss: - 3.8%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
06/07 update: Oil prices have not been reacting to weakness in the U.S. dollar and some analyst believe that might be bearish for oil. If oil does retreat it could have a bearish impact on oil stocks. Currently ROSE doesn't look too healthy and if there is any follow through lower for the major indices tomorrow we will likely get stopped out at $44.75. I am not suggesting new positions at this time.

-Small Bullish Positions-

Current Position: Long ROSE stock @ $47.35

- or -

Long July $50 call (ROSE1116G50) Entry @ $1.95

06/04 new stop loss @ 44.75

Entry on May 26 at $47.35
Earnings Date 08/08/11 (unconfirmed)
Average Daily Volume: 967 thousand
Listed on May 25th, 2011


BEARISH Play Updates

Aon Corp. - AON - close: 51.63 change: +0.14

Stop Loss: 52.75
Target(s): 46.50
Current Gain/Loss: - 0.0%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
06/07 update: It was a volatile day for AON. The stock broke through resistance near $52.00 but the rally failed at resistance near $52.50 and its 50-dma. This move actually looks like a new bearish entry point. We'll keep our stop loss at $52.75 but more conservative traders may want to inch their stop toward today's high (near $52.50). An alternative entry point would be to wait for a breakdown under short-term support near $51.00 and the 100-dma.

Earlier Comments:
Our target is the $46.50 level. I would expect some support near $50.00 and the 100-dma so don't be surprised to see an initial bounce near this area. NOTE: The option spreads on AON are a little wide. Conservative traders may not want to play the options.

(small positions only)

Current Position: short AON stock @ 51.61

- or -

Long the June $50 PUT (AON1118R50) entry @ $0.45

05/31 New stop loss @ 52.75
05/23 gap down entry @ 51.61

Entry on May 23 at $51.61
Earnings Date 07/29/11 (unconfirmed)
Average Daily Volume: 1.7 million
Listed on May 21st, 2011


AO Smith Corp. - AOS - close: 39.70 change: -0.10

Stop Loss: 42.05
Target(s): 36.00, 33.00
Current Gain/Loss: + 0.5%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
06/07 update: AOS tried to rally but couldn't get past resistance near $40.00 and its 200-dma. I would consider new positions at current levels. Our targets are $36.00 and $33.00.

FYI: The Point & Figure chart for AOS is bearish with a $33 target. Traders should also note that the most recent data listed short interest at 5% of the relatively small 38.2 million share float. That does raise the risk for a possible short squeeze and explains the volatile rallies in this stock.

NOTE: AOS does have options but the spreads appear too wide for us to trade them.

Current Position: short AOS stock @ $39.92

Entry on June 6 at $39.92
Earnings Date 07/20/11 (unconfirmed)
Average Daily Volume: 312 thousand
Listed on June 4th, 2011


Ford Motor Co. - F - close: 13.95 change: +0.04

Stop Loss: 15.15
Target(s): 13.25
Current Gain/Loss: + 3.1%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
06/07 update: The early morning rally in Ford failed and shares spent the day churning near $14.00. The trend is down but I'm not suggesting new positions at current levels. Currently our target is $13.25. I would keep our position size small to limit our risk.

Small Positions!

Current Position: Short F stock @ $14.40

- or -

Long July $15 PUT (F1116S15) Entry @ $0.90

Entry on May 25 at $14.40
Earnings Date 07/21/11 (unconfirmed)
Average Daily Volume: 57 million
Listed on May 24th, 2011


Honeywell Intl. - HON - close: 56.85 change: -0.60

Stop Loss: 60.15
Target(s): 54.00 & 200-dma
Current Gain/Loss: + 1.3%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
06/07 update: The action on HON was bearish today. Shares failed at resistance near $58 and its 100-dma and closed near its lows for the session.

Earlier Comments:
We do want to keep our position size small to limit our risk. Our targets are $54.00 and the simple 200-dma.

- Small Positions -

Current Position: short HON stock @ 57.65

- or -

Long July $55 PUT (HON1116S55) Entry @ $0.75

Entry on June 2 at $57.65
Earnings Date 07/22/11 (unconfirmed)
Average Daily Volume: 4.1 million
Listed on June 1st, 2011


St. Jude Medical - STJ - close: 48.80 change: +0.76

Stop Loss: 51.05
Target(s): 47.00, 45.75
Current Gain/Loss: + 4.3%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
06/07 update: Right on cue STJ produced an oversold bounce. The rebound stalled at short-term resistance near its 10-dma but that doesn't mean the bounce is over yet. We might see another entry point for bearish positions on a failed rally near $50 soon. I am not suggesting new positions at this time.

Earlier Comments:
We wanted to keep our position size small (about half or less than a normal trade) to limit our risk.

(Small Positions)

Current Position: Short STJ stock @ 51.00

- or -

Long the June $50 PUT (SJT1118R50) Entry @ $1.00

06/04 New stop loss @ 51.05, added second target at $45.75
05/23 New stop loss @ 52.26

Entry on May 20 at $51.00
Earnings Date 07/21/11 (unconfirmed)
Average Daily Volume: 2.6 million
Listed on May 16th, 2011


Target Corp. - TGT - close: 47.06 change: -0.30

Stop Loss: 50.15
Target(s): 45.15
Current Gain/Loss: unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see trigger

Comments:
06/07 update: Hmm... I'm starting to wonder if today was the entry point we were waiting for. Our plan is to launch bearish positions on an oversold bounce at $48.50. TGT did bounce today but it failed at $48.00 and quickly reversed. Aggressive traders may want to consider launching positions now. The newsletter will stick to our original plan and wait for a bounce at $48.50. If triggered we'll use a stop loss at $50.15. Our first target is $45.15. FYI: The Point & Figure chart for TGT is bearish with a $43 target.

Trigger @ 48.50

Suggested Position: short TGT stock @ 48.50

- or -

buy the July $47 PUT (TGT1116S47) current ask $1.24

Entry on June x at $xx.xx
Earnings Date 08/18/11 (unconfirmed)
Average Daily Volume: 7.1 million
Listed on June 4th, 2011


CLOSED BULLISH PLAYS

Electronic Arts Inc. - ERTS - close: 23.35 change: -0.45

Stop Loss: 23.45
Target(s): 26.25, 28.00
Current Gain/Loss: - 4.0%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
06/07 update: Our aggressive trade on ERTS has been stopped out. We recently raised our stop loss over concerns with ERTS' recent pull back. The correction accelerated lower this morning with a spike down to $23.08. Our stop loss was hit at $23.45 closing this trade. I would keep ERTS on your watch list. A bounce from $22 and/or its 50-dma might be a new bullish entry point.

Earlier Comments:
I am suggesting that we keep our position size small to limit our risk.

- Small Positions -

closed Position: Long ERTS stock @ $24.44, exit 23.45 (-4.0%)

- or -

July $25 call (ERTS1116G25) Entry @ $0.90, exit $0.42 (-53.3%)

06/07 stopped out @ $23.45 (-4.0%), Option @ -53.3%
06/04 New stop @ 23.45

chart:

Entry on June 1 at $24.44
Earnings Date 08/02/11 (unconfirmed)
Average Daily Volume: 5.8 million
Listed on May 31st, 2011