Editor's Note:
I'm filling in for Scott tonight. My market outlook for the fourth quarter is bullish but I suspect this overbought market will roll over in the next several days. Look for traders to buy the dip in the second half of October. - James

More Trading Ideas:
There were several stocks that caught my eye this weekend.

CERN - this could be a bullish candidate but I would look for a pull back toward $81.00.
DE - DE has formed a bearish three-candlestick reversal pattern on its weekly chart. Look for a failed rally near $70.00 as a bearish entry point. DE should have support near $65.
FSLR - FSLR has rallied toward resistance near $150. Aggressive traders might consider bearish positions. I'm thinking this might be a bullish trade on a bounce from $130 again.
PCLN - After a rally from $175 to $360 shares of PCLN appear to be running out of gas. It's a very aggressive, high-risk trade but readers could speculate on a correction with some out of the money puts.
WLL - This oil stock looks bullish as it consolidates under $98.00. I'm watching for a breakout over $98.00 or another bounce near $94.00 as possible entry points.


NEW DIRECTIONAL CALL PLAYS

Volatility Index - VIX - close: 22.50 change: -1.20 stop: 20.85

Target(s): 26.00, 29.50
Key Support/Resistance Areas: 21.00, 24.00, 28.00, 30.00
Current Gain/Loss: +0.0%
Time Frame: 2 to 3 weeks
New Positions: Yes

Company Description:
The CBOE Volatility Index® (VIX®) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. Since its introduction in 1993, VIX has been considered by many to be the world's premier barometer of investor sentiment and market volatility.

Why We Like It:
I really like Scott's play on the VXX. The market is very overbought with the huge rally off its August lows. Now upward momentum has stalled and we're about to move into earnings season after a very weak third quarter. Volatility is almost guaranteed. I think options on the VIX might offer an even better trade than the VXX. I'm suggesting bullish positions now. We'll plan on taking profits at $26.00 and at $29.50. I do consider this somewhat aggressive so consider keeping your positions small. Traders will also want to keep in mind that VIX options don't expire on the same schedule as normal equity options but it shouldn't matter since our time frame is only two to three weeks.

Suggested Position:
Buy the October $25.00 calls (VIX1020J25) current ask $1.80
(these expire on Oct. 20th)

Annotated Chart:

Entry on October 4th at $ xx.xx
Earnings Date --/--/--
Average Daily Volume = n/a
Listed on October 2nd, 2010


NEW DIRECTIONAL PUT PLAYS

Alliant Techsystems - ATK - close: 73.73 change: -1.67 stop: 76.25

Target(s): 72.00, 70.50
Key Support/Resistance Areas: 76.00, 74.00, 72.00, 70.00
Current Gain/Loss: +0.0%
Time Frame: 1 to 2 weeks
New Positions: Yes

Company Description:
ATK is a premier aerospace and defense company with operations in 24 states, Puerto Rico and internationally, and revenues of approximately $4.8 billion (source: company press release or website)

Why We Like It:
The rally in this defense stock just failed at significant resistance near $76.00 and its simple 200-dma. Combine that with an overbought market that has seen its upward momentum stall and it looks like a good spot to speculate on some puts. Now the intermediate trend for ATK is still higher so we're only looking for a correction toward support. I'm suggesting bearish positions now. More cautious traders may want to wait for a little confirmation of Friday's bearish reversal pattern before initiating positions. I am targeting the 50-dma (currently $70.31).

Suggested Position:
Buy the November $70 puts (ATK1020W70) current ask $1.50

Weekly Annotated Chart:

Daily Annotated Chart:

Entry on October 4th at $ xx.xx
Earnings Date 11/11/10
Average Daily Volume = 310 thousand
Listed on October 2nd, 2010


Carbo Ceramics Inc. - CRR - close: 78.35 change: -2.65 stop: 80.25

Target(s): 74.25, 72.25
Key Support/Resistance Areas: 84.00, 82.00, 80.00, 78.00, 76.00, 74.00, etc.
Current Gain/Loss: +0.0%
Time Frame: 2 or 3 weeks
New Positions: Yes, see trigger

Company Description:
CARBO is the world's largest supplier of ceramic proppant for fracturing oil and gas wells; the provider of the world's most popular fracture simulation software; and a provider of fracture design and consulting services. The Company also provides a broad range of technologies for spill prevention, containment and countermeasures, along with geotechnical monitoring. (source: company press release or website)

Why We Like It:
10/02 (James): Oil service stocks have been surging on the strength in crude oil (oil has been moving on weakness in the dollar). Shares of CRR appeared to breakout from a consolidation pattern on September 28th but the rally reversed. Now shares are testing short-term support at $78.00 and the bottom of its previous trading range. The current failure also looks like a bearish double top pattern.

I am suggesting a trigger to open bearish positions at $77.75. If triggered we'll use a stop loss at $80.25. Our first target is $74.25. Our second target is $72.25.

Suggested Position:
Trigger @ 77.75

Buy the November $75 puts (CRR1020W75) current ask $3.10

Annotated Chart:

Entry on October 4th at $ xx.xx
Earnings Date 10/28/10 (confirmed)
Average Daily Volume = 226 thousand
Listed on October 2nd, 2010