Editor's Note:

After yesterday's fears of a bearish reversal there was no follow through lower today. The up trend continues.

-James

Current Portfolio:


CALL Play Updates

Caterpillar - CAT - close: 82.46 change: +0.55

Stop Loss: 79.40
Target(s): 84.85, 89.50
Current Option Gain/Loss: +12.1%
Time Frame: 3 to 4 weeks
New Positions: Yes

Comments:
11/10: Traders were in a buy-the-dip mood on Wednesday after the dollar pulled back from its intraday highs. CAT slipped to $81.30 before bouncing for a small gain. I don't see a lot of changes from my prior comments. Readers could launch positions now or wait for a better entry point near $80.50 but there is no guarantee CAT will pull back that low.

Earlier Comments
Our first target is $84.85. We want to exit the majority of our position here. We'll set a secondary target at $89.50 but again I warn you the $85 level should be tough resistance. FYI: The P&F chart is bullish with a $118 target.

Current Position: Long the December $85 calls (symbol: CAT1018L85)
Entry @ $1.40

Entry on November 9th at $ 81.75
Earnings Date 01/27/11
Average Daily Volume = 7.7 million
Listed on November 6th, 2010


Cliffs Natural Resources - CLF - close: 70.06 change: +1.23

Stop Loss: 64.75
Target(s): 71.50, 74.75
Current Option Gain/Loss: Unopened
Time Frame: 4 to 6 weeks
New Positions: Yes, see trigger

Comments:
11/10: Hmm... commodity stocks reversed higher intraday with the rest of the market. Yesterday I lowered our trigger to buy calls from $68.00 to $67.00. After seeing today's intraday bounce in CLF I have to wonder if that was the right move or not. CLF dipped to $67.37, just under its 10-dma and rallied sharply back toward the $70.00 level. There was definitely no confirmation of Tuesday's bearish reversal pattern. More aggressive traders may want to go ahead and consider bullish positions now. I'm focusing on the dollar. The dollar is still climbing in spite of its pull back from today's intraday highs. If the dollar continues to climb I suspect that CLF will pull back. We'll keep the trigger at $67.00 for now.

Earlier Comments
We'll use a stop loss at $64.75. Our upside targets are $72.00 and $74.75.

Trigger to buy calls @ $67.00

Suggested Position: Buy the 2010 December $70.00 CALL

Entry on November XX
Earnings Date 02/17/11
Average Daily Volume = 4.3 million
Listed on November 1, 2010


Costco Wholesale - COST - close: 64.45 change: +0.23

Stop Loss: 62.90
Target(s): 69.00
Current Option Gain/Loss: -10.6%
Time Frame: 3 to 4 weeks
New Positions: Yes, see trigger

Comments:
11/10: Shares of COST are still holding at support near $64.00 and its 30-dma. The intraday bounce today looks like a new entry point to buy calls on this stock. It is noteworthy that rival BJ's Wholesale Club (BJ) surged more than +12% intraday on news it was putting itself up for sale after it received a takeover offer from a private firm. BJ is the third largest wholesaler behind COST and Wal-Mart's Sam's Club. I didn't hear any speculation that COST might be a buyer. At least no one has suggested it thus far. I do want to warn you that if COST were to make an offer to buy BJ's then shares of COST could drop significantly on that kind of announcement. I don't expect this to happen but it's a possibility. Remember, we want to keep our position size small to limit our risk.

Current Position: December $65.00 calls (symbol: COST1018L65)
Option Entry @ $1.50

Entry on November 8th at $64.50
Earnings Date 12/09/10
Average Daily Volume = 3.4 million
Listed on November 6th, 2010


Humana Inc. - HUM - close: 59.65 change: +0.53

Stop Loss: 51.75
Target(s): 59.75
Current Option Gain/Loss: Unopened
Time Frame: 4 to 6 weeks
New Positions: Yes

Comments:
11/10: It looked like the long, overdue correction in HUM had started this morning but traders bought the dip near short-term support at $58.00 and HUM added +8% by the close. I still don't want to chase it here. There is no change from my previous comments.

Earlier Comments
We want to wait for a dip and use a trigger at $55.25 to buy calls. Aggressive traders may want to consider puts while we wait since we're expecting such a big correction. If HUM hits our bullish trigger at $55.25 we'll use a stop loss at $51.75.

Suggested Position:

Trigger to buy calls at $55.25

BUY the 2011 January $55 calls.

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


iShares DJ Financial ETF - IYF - close 55.53 change +0.64

Stop Loss: 53.40
Target(s): 57.50, 59.75
Current Option Gain/Loss: -10.0%
Time Frame: 6 to 8 weeks
New Positions: Yes

Comments:
11/10: After yesterday's underperformance the banking stocks were actually some of the better performers on Wednesday. The banking sector indices were up about +1.6% and the IYF trailed them with a +1.1% gain. Traders were buying the dip again near $54.50ish. I would seriously consider buying calls on this bounce!

Earlier Comments
Our first target is $57.50. Our second, longer-term target is $59.75.

Current Position: Long the December $55.00 CALLS, entry @ $2.00

Entry on November 9th @ 55.00
Earnings Date N/A (unconfirmed)
Average Daily Volume: 1.0 million
Listed on November 4, 2010


Nike Inc. - NKE - close: 83.88 change: +0.68

Stop Loss: 79.90
Target(s): 87.25
Current Option Gain/Loss: Unopened
Time Frame: 4 to 6 weeks
New Positions: Yes, see trigger

Comments:
11/10: Uh-oh! NKE looks ready to run away from us. There was no follow through on yesterday's dip and traders quickly bought the morning lows near $82.80. There market did not see any follow through on yesterday's bullish reversal so I am suggesting an alternative entry point. This is more aggressive so we want to keep our positions small. The new plan is to buy calls on a dip to $83.00 and we'll use a stop loss at $81.80. Our first target is $86.75 and our second target is $89.50.

Trigger to buy calls @ 83.00 <-- New Trigger

Suggested Position: Buy the December $85.00 CALLS (symbol:NKE1018L85)

Annotated Chart:

Entry on November xxth at $ xx.xx
Earnings Date 12/21/10
Average Daily Volume = 2.3 million
Listed on November 6th, 2010


VimpelCom Ltd - VIP - close 15.71 change -0.18

Stop Loss: 14.80
Target(s): 16.75, 17.75
Current Option Gain/Loss: -19.0%
Time Frame: 6 to 8 weeks
New Positions: Yes

Comments:
11/10: VIP provided us another entry point today. Yesterday I said look for a dip into the $15.50-15.25 zone. This morning VIP slipped to $15.48 before bouncing. FYI: VIP is due to report earnings around Nov. 24th.

Current Position: December $15.00 CALLS, Entry @ $1.05

Entry on November 8, 2010 @ 15.60
Earnings Date 11/24/2010 (unconfirmed)
Average Daily Volume: 3.5 million
Listed on November 3, 2010


PUT Play Updates

Lubrizol Corp. - LZ - close: 109.27 change: +1.59

Stop Loss: 110.25
Target(s): 100.50
Current Option Gain/Loss: -27.5%
Time Frame: 3 to 4 weeks
New Positions: Maybe

Comments:
11/10: Warning! The lack of follow through on the stock market's bearish reversal from yesterday is a very bad sign for this new put play on LZ. Traders bought the dip at LZ's 50-dma and the stock has bounced back toward resistance near $110.00. Aggressive traders could use this as a new entry point. I am suggesting readers wait for this bounce to roll over again before considering new positions.

Current Position: Long the December $105 puts (symbol:LZ1018X105)
Entry @ $2.90

Entry on November 10th at $107.68
Earnings Date 02/03/11 (unconfirmed)
Average Daily Volume = 525 thousand
Listed on November 9th, 2010


Millicom Intl. - MICC - close: 93.45 change: +0.29

Stop Loss: 98.25
Target(s): 92.50, 90.25
Current Option Gain/Loss: + 2.0%
Time Frame: 3 to 4 weeks
New Positions: No

Comments:
11/10: MICC broke down to new relative lows under support near $92.00 this morning. Unfortunately the market's reversal higher pulled MICC higher too. There is short-term resistance near $94 and again at $96.00. I'm not suggesting new positions at this time. An oversold bounce could easily carry MICC to the $96 level.

FYI: We still have our final target at $90.25.

Current Position: Long December 2010 $90 puts (MICC1018X90)
Entry @ $2.45

11/08 Target hit @ 92.50, option @ 2.85 (+16.3%)

Entry on November 1, 2010
Earnings Date 02/01/11
Average Daily Volume = 490 thousand
Listed on October 30th, 2010