Editor's Note:

Actually we have less than three full trading days before the FOMC decision on Wednesday afternoon. Odds are pretty strong the market could see a sell-the-news reaction.

FYI: New trades for FSLR and MTL were opened on Friday.

Current Portfolio:


CALL Play Updates

Archer Daniels Midland Co. - ADM - close 33.32 change -0.13 stop 31.90*new*

Target(s): 34.15, 35.15, 35.95. and possibly higher
Key Support/Resistance Areas: 38.00, 34.15, 33.00, 32.00
Current Option Gain/Loss: +25.6%
Time Frame: 2 to 4 weeks
New Positions: No

Comments:
10/30 (James): Shares of ADM continue to consolidate sideways. The stock saw some volatility on Friday after Credit Suisse downgraded the stock on valuation concerns and yet the analyst kept their $37 price target. I agree with Scott that traders will want to consider an early exit on any strength next week. ADM is due to report earnings on Tuesday morning (Nov. 2nd) before the opening bell. Wall Street is looking for a profit of 75 cents a share. Holding over earnings is a higher-risk strategy so I am raising our stop loss to $31.90, just under the 50-dma (currently 32.32). FYI: The Point & Figure chart is very bullish with a long-term $53 target.

10/28: Our option position is performing very well considering the 40 cent gain from our entry point. I continue to be cautious and expect a broader market pullback, perhaps after the FOMC meeting week. Our immediate target is $34.15 which should give us another 30 cent gain in our option, which would represent 70%+ gains in the position. ADM reports earnings before the bell on Tuesday. I expect the report to be positive but the reactions to some of the positive earnings reports lately have not made sense. If you plan on holding positions I would use any strength in ADM between now and the earnings report as an opportunity to take at least a portion of your profits off of the table. This enables you to book a gain, reduces risk, and allows you to participate in further gains if the stock trades higher.

10/27: ADM hit our trigger to enter bullish positions at $33.05. We are long December $34.00 calls at 77 cents. The stock has solid support $33 down to $32 and I would view dips as buying opportunities. Since we were triggered on our lower entry I have added an immediate target of $34.15 and adjusted the more aggressive targets. If the stock breaks higher I suggest taking profits or tightening stops to protect them, especially considering the overbought broader market conditions.

Note: ADM reports earnings before the market opens on 11/2. The company has beaten earnings estimates in 3 of the past 4 quarters and I am expecting another surprise beat. Holding positions is a higher risk play so please consider using small position size.

Current Position: Long December $34.00 CALL, entry was at $0.77

Annotated Chart:

Entry on October 27, 2010
Earnings Date 11/2/2010 before market (confirmed)
Average Daily Volume: 5 million
Listed on October 25, 2010


ATP Oil & Gas Corp - ATPG - close 14.35 change +0.39 stop 13.75

Target(s): 16.10, 17.00, 17.90, and possibly higher
Key Support/Resistance Areas: 18.00, 17.00, 16.25, 14.75, 14.10
Current Gain/Loss: -37%
Time Frame: 1 to 3 weeks
New Positions: No

Comments:
10/30 (James): We remain very cautious on ATPG. The stock appeared to breakdown under support at the $14.00 level on Thursday. Fortunately, shares saw a strong bounce (+2.8%) on Friday but I would not buy it. The stock has been underperforming its peers in the oil sector. If the OIX oil index rolls over it will make it even tougher on ATPG to maintain its current share price. The situation could change soon with ATPG reporting earnings on Thursday, Nov. 4th before the opening bell. Wall Street expects a loss of 58 cents a share. Although I have to say ATPG's earnings report could be completely ignored if the market is moving on the FOMC announcement from Wednesday afternoon. I am not suggesting new positions and more conservative traders will want to strongly consider exiting ahead of the earnings report (or even the FOMC meeting).

10/28: The slide in ATPG continues and we are on the verge of getting stopped out. The stock has lost its 20-day and 200-day SMA's as well as a couple of support levels. It is do or die time or we will have to step aside and close the position. The bullish case of a descending wedge remains but the stock may headed for its 50-day SMA prior to breaking higher, which is below our stop.

Current Position: Long December $16.00 CALL, entry was at $1.00

Annotated Chart:

Entry on October 25, 2010
Earnings Date 11/4/2010 (unconfirmed)
Average Daily Volume: 2.7 million
Listed on October 23, 2010


First Solar Inc. - FSLR - close 137.68 change -13.47 stop 134.75 *new*

Target(s): 145.00, 147.50, 149.75
Key Support/Resistance Areas: 137.50, 140.00, 145.00, 147.50, 150.00
Current Gain/Loss: -19.7%
Time Frame: 3 to 4 weeks
New Positions: Yes, but look for a bounce

Comments:
10/30 (James): Bingo! Scott was right on the money expecting a post-earnings dip in FSLR. Shares gapped open at $139.15 (our new entry point). There was a brief bounce toward $142 but FSLR eventually settled under potential support near $140, under its 50-dma, and under the bottom of its bullish channel. All of those "unders" in the previous sentence make me a little nervous but there is a decent chance FSLR could fill the gap. Since we got a better than expected entry point (139.15 instead of 141.00) I'm adjusting our stop loss down to $134.75. More conservative traders may want to keep their stops tight and closer to the $136 level.

10/28: FSLR reported earnings today after the bell and the stock is down -$10 in afterhours trading as of the time of this writing. The report looked good to me as FSLR beat earnings by 9 cents, revenues were better than expected, and guidance was slightly above analysts' estimates. However, the company said they see some uncertainties in Europe which explains the weakness. The stock closed the extended session right at $141.00 to the penny which was my anticipated support level for the stock. I suggest we use the weakness to our advantage and open small positions tomorrow. This is a higher risk play so I suggest using smaller positions size. We are targeting a bounce and have close targets. If buyers step in these targets could be reached quickly so be ready to take profits.

Current Position: Long December $155 CALL, entry was at $2.48

Annotated Chart:

Entry on October 30th at $139.15
Earnings Date 10/28/10 (confirmed)
Average Daily Volume = 1.5 million
Listed on October 16th, 2010


Genco Shipping - GNK - close 16.55 change +0.17 stop 15.50

Target(s): 16.10 (hit), 16.80, 17.35, 17.95
Key Support/Resistance Areas: 18.25, 17.75, 16.90, 16.25, 15.75
Current Option Gain/Loss: -12.5%
Time Frame: 1 to 3 weeks
New Positions: No

Comments:
10/30 (James): GNK does have a steady, bullish trend of higher lows. However, shares don't move very fast and I would not open new positions ahead of the company's earnings report. GNK is due to report on November 3rd, after the closing bell. Wall Street is looking for a profit of 98 cents a share. Unfortunately, this report will be completely lost in the shuffle as the market tries to digest the FOMC decision earlier that afternoon. There is a chance that GNK's earnings could surprise given the sharp improvement in shipping rates back in August but in September and October prices leveled off.

10/27 & 10/28: GNK is forming a symmetrical triangle as prices are coiling. This is not good for option premium that expires 3 weeks from Friday. We need the stock to follow through higher and if it does I suggest readers use the opportunity to close positions or tighten stops to protect capital.

Current Position: Long November $17.00 CALL, entry was at $0.80

Note: Readers who want to give this more time to work may want to consider buying the JAN 2011 $17.50 CALLS

Annotated Chart:

Entry on October 12, 2010
Earnings 11/1/2010 (unconfirmed)
Average Daily Volume: 1.2 million
Listed on October 11, 2010


Humana Inc. - HUM - close: 58.29 change: +0.45 stop: 49.75

Target(s): 57.50, 60.00
Key Support/Resistance Areas: 50.00, 51.00, 53.50, 55.00
Current Gain/Loss: Unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see entry point below

Comments:
10/30 (James): Wow! The rally in HUM has been very impressive. Unfortunately, we're still sitting on the sidelines as spectators since the stock never pulled back. I think that's about to change. HUM is due to report earnings on November 1st (Monday) before the opening bell. Analysts expect a profit of $1.66 a share. Odds are very good HUM should see some profit taking on Monday. Plus, we're expecting a market-wide pull back on Wednesday and Thursday this week. While I'm tempted to raise the trigger to buy calls I am actually going to lower the trigger down to $53.00 (from 53.80).

Suggested Position:

Trigger to buy calls at $53.00 <-- new trigger!

BUY the 2011 January $55 calls.

Annotated Chart:

Entry on November xxth at $ xx.xx
Earnings Date 11/01/10 (confirmed)
Average Daily Volume = 2.1 million
Listed on October 16th, 2010


PUT Play Updates

Fastenal Co. - FAST - close: 51.48 change: +0.12 stop: 53.40

Target(s): 51.20 (hit), 50.25, 49.65, 48.25, maybe lower
Key Support/Resistance Areas: 55.00, 52.00, 50.00, 48,00,
Current Option Gain/Loss: -25%
Time Frame: 3 to 4 weeks
New Positions: Maybe

Comments:
10/30 (James): Scott is right. We have three weeks left before November options expire and the time decay is going accelerate. If you are looking for a new entry point I'd wait for another failed rally under $53.00 and then use December options. On a very short-term basis FAST has found support near its 100-dma three days in a row. A breakdown under this level would be great news for us but I wouldn't be surprised to see a bounce soon.

10/28: Not much has changed from my comments below. FAST is barely hanging on to its 50-day SMA. If the stock breaks below $50.85 we should reach easily our second target of $50.25. Readers should begin to exit positions as we have options that expire in November and time decay will start to erode our premium.

Current Position: Long November $50.00 PUT, entry was at $1.00

Annotated Chart:

Entry on October 18, 2010
Earnings Date 10/12/10
Average Daily Volume = 1.0 million
Listed on October 16, 2010


Illinois Tool Works - ITW - close 45.68 change -0.24 stop 47.83

Target(s): 44.85, 44.15, 43.50
Key Support/Resistance Areas: 47.75, 46.10, 45.50, 44.60, 44.00, 43.00
Current Gain/Loss: +4.16%
Time Frame: 2 to 3 weeks
New Positions: Yes

Comments:
10/30 (James): The post-earnings, oversold bounce has failed. The new trend for ITW seems to be down. Shares are hovering near short-term support at $45.50 and a drop under this level could be used as a new entry point to buy puts. If the market corrects I wouldn't be surprised to see ITW hit the $42-41 zone.

10/26: Shareholders were unimpressed with ITW's earnings report on 10/19. The company narrowed guidance to the lower end of its range and the stock appears to be changing trends. Considering the overbought broader market conditions and the weakness being exhibited in ITW, I suggest readers initiate short positions in the stock on any bounces, or a break down below the stock's 200-day SMA and support near $46.00. Let's use a trigger of $46.40 on a bounce or $45.92 on a break down. Our initial stop will be $47.83 but it will be adjusted after the position is opened. Depending on our trigger, we are targeting more than a -$1 move lower, which will produce a nice gain if the set-up unfolds as expected.

Current Position: Long December $45.00 PUT, entry was at $1.20

Annotated Chart:

Entry on October 27, 2010
Earnings: More than two months (unconfirmed)
Average Daily Volume: 4.5 million
Listed on October 26, 2010


Mechel OAO - MTL - close 23.55 change +0.72 stop 24.60 *new*

Target(s): 22.30, 21.25, 20.25
Key Support/Resistance Areas: 24.25, 24.00, 23.60
Current Gain/Loss: +0.00%
Time Frame: 1 to 3 weeks
New Positions: Yes

Comments:
10/30 (James): Our new play on MTL is now open! The stock rallied from the bottom of its current range and tagged the 200-dma on Friday. MTL hit our trigger to buy puts (December $23 strike). If you missed the entry point I would still consider new positions now. Or you could wait for a bounce closer to what should be resistance near $24.00 and MTL's 50-dma. I am suggesting we move our stop loss to $24.60.

10/28: I was hoping for a bounce up towards MTL's 200-day SMA but it doesn't appear we are going to get it as the stock is hanging out in a bear flag. Let's lower the trigger to $23.30 which is near today's highs. My comments from the play release below remain valid.

10/27: The steel sector has come under pressure as earnings and guidance have failed to impress investors. MTL finds itself in a bear flag and is consolidating under its 200-day SMA, while its 50-day and 20-day SMA's are just overhead. Conservative traders will want to see the stock break below $22.25 before launching bearish positions. However, considering the overbought broader market conditions initiating positions on a bounce sets up a very good risk reward trade. There is solid resistance in the $23.60 to $24.20 area so I suggest launching bearish positions at $23.55 (lowered to $23.30). Our stop will be above the 20-day SMA at $24.47 (which is rolling over and declining). If triggered our first two targets are -5% and -9% lower.

Current Position: Long December $23.00 PUT, entry was at $1.30

Annotated Chart:

Entry on October 30
Earnings Date: More than two months (unconfirmed)
Average Daily Volume: 2.1 million
Listed on October 27, 2010


PNC Financial - PNC - close 53.90 change +0.26 stop NONE

Target(s): 53.00, 52.10, 51.05 (hit), 50.35
Key Support/Resistance Areas: 54.50, 53.50, 50.50, 49.50, 48.75, 47.00
Current Gain/Loss: -80%
Time Frame: 1 to 2 weeks
New Positions: Neutral

Comments:
10/30 (James): The larger trend for PNC is certainly down but the breakout over its 50-dma several days ago concerns me. I would hesitate to launch new positions with PNC trading above $52.50 (or even $52.00). We're expecting a market-wide correction soon and believe PNC will bet testing new lows for the year before November is done. Keep in mind we only have three weeks left before November options expire. If we see a new entry point I suggest the December or January puts.

10/27 & 10/28: Not much has changed from my comments below. PNC closed near its lows of the day while the broader market closed near its highs. We are looking for dip to close positions and salvage as much premium as possible, however, this may have to wait until next week's elections and FOMC announcement on Wednesday.

10/26: PNC closed flat in the day. Our position is deep out of the money and we are waiting to see if the stock corrects with the broader market, which we will use as an opportunity to close positions. The stock is holding an upward trend line that began from last week's lows. If it breaks the next support levels are $53.00 and $52.10. I doubt our option value is going increase a significant amount, but recovering 20 to 30 cents is certainly in the cards.

10/25: I do not see many changes from my comments below. PNC lost -1.3% today and printed a bearish dark cloud cover candle pattern which indicates a decline is imminent. Let's see if we get a healthy broader market correction see how far we can ride this lower.

Current Position: Long November $48.00 PUT, entry was at $1.26

Annotated Chart:

Entry on September 30, 2010
Earnings: 10/21/2010 (unconfirmed)
Average Daily Volume: 5 million
Listed on September 29, 2010


CLOSED BULLISH PLAYS

Jeffries Group, Inc - JEF - close 23.93 change -0.07 stop 22.75

Target(s): 25.00, 25.75
Key Support/Resistance Areas: 25.85, 25.25, 24.25, 23.50, 23.00
Current Gain/Loss: -4.5%
Time Frame: 3 to 4 weeks
New Positions: Yes

Comments:
10/30 (James): I am suggesting an early exit for JEF. On Thursday Scott also suggested that readers consider a potential exit. My concerns are JEF's bearish trend of lower highs. If the stock already has a bearish pattern what will it do when the market corrects lower (we hope) on Wednesday or Thursday this week? Therefore we want to exit now. You can keep JEF on your watch list in case the stock ever closes over $25.25 again. CLOSED POSITION: Long December $24.00 CALL, entry @ $1.10, exit @ $1.05 (-4.5%)

Annotated Chart:

Entry on October 29, 2010
Earnings Date 1/20/11 (unconfirmed)
Average Daily Volume: 1.1 million
Listed on October 19, 2010