Editor's Note:

Stocks appear to be correcting after a multi-month rally. This is both healthy and normal. However, the correction may not be over yet. We do want to buy the dip on stocks near support but consider scaling into positions a little at a time and then add to them as stocks rebound.

-James

Current Portfolio:


CALL Play Updates

Baidu, Inc. - BIDU - close: 110.64 change: -3.46

Stop Loss: 106.49 *new*
Target(s): 119.75, 124.50
Current Option Gain/Loss: -16.7% and -14.1%
Time Frame: 4 to 5 weeks
New Positions: Maybe

Comments:
11:13: Uh-oh! BIDU looked so strong on Thursday with the breakout to new highs. Unfortunately, investors overseas were a little panicked that China might raise interest rates to stave off inflation. The Chinese Shanghai stock market sank -5% on Friday. BIDU was pulled lower by declines back home and the stock reversed. Shares of BIDU opened at $112.97 (our entry) and dipped toward its rising 20-dma before paring its losses. The low today was $107.82. Given our lowered entry point I am adjusting our stop loss to $106.49 just to give BIDU some room to move. However, there is no way to know if the Chinese markets will continue to plunge on Monday. Readers may want to wait on launching new positions in BIDU. There is some speculation that the Chinese government could announce a policy change over the weekend. Our risk now is that BIDU actually gaps open lower on any unexpected news.

Current Position: Long the 2010 December $120 calls (BIDU1018L120) Entry @ $2.99
- or -
Current Position: Long the 2011 January $120 calls (BIDU1122A120) Entry @ $5.65

Entry on November 12th at $112.97
Earnings Date 02/09/11
Average Daily Volume = 13 million
Listed on November 11th, 2010


Caterpillar - CAT - close: 81.04 change: -1.40

Stop Loss: 79.40
Target(s): 84.85, 89.50
Current Option Gain/Loss: -16.4%
Time Frame: 3 to 4 weeks
New Positions: Yes

Comments:
11:13: Shares of CAT dipped toward round-number support at $80.00 on Friday. This looks like a new bullish entry point to buy calls. I'm adding a new position for the newsletter at current levels. We have a stop loss at $79.40 so if CAT breaks down from here we should be out quickly.

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

Double Down
New Position: Buy the December $85 calls (CAT1018L85), current ask $1.17

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: 67.52 change: -2.53

Stop Loss: 64.75
Target(s): 71.50, 74.75
Current Option Gain/Loss: + 6.1%
Time Frame: 4 to 6 weeks
New Positions: Yes

Comments:
11:13: Commodity names were swept up in the market-wide profit taking on Friday. CLF dipped to $67.00 at its low, which happens to be our entry point to buy calls. If you missed the entry point I would still consider positions now or there is a chance we see more market declines on Monday and CLF could dip toward $66.00, which I would use as an entry point.

Earlier Comments
Stop loss is at $64.75. Our upside targets are $72.00 and $74.75.

Current Position: Long the 2010 December $70.00 CALL, Entry @ $2.42

Annotated Chart:

Entry on November 12th @ 67.00
Earnings Date 02/17/11
Average Daily Volume = 4.3 million
Listed on November 1, 2010


Costco Wholesale - COST - close: 65.20 change: -0.15

Stop Loss: 62.90
Target(s): 69.00
Current Option Gain/Loss: +15.3%
Time Frame: 3 to 4 weeks
New Positions: Yes

Comments:
11:13: COST is still holding up pretty well. Shares only lost 15 cents on Friday's market decline. If COST sees another pull back I would use dips near $64.00 as new entry points. Look for technical support at the 40-dma. We want to keep our position size small to limit our risk. FYI: The Point & Figure chart is very bullish with an $88 target.

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: 59.20 change: -0.77

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

Comments:
11:13: There is no change from my prior comments. HUM's recent bounce from $58 hags reversed and shares look poised to correct lower. I'm suggesting we use a trigger to buy calls at $55.25. More aggressive traders could buy puts now and try to scalp the move lower. 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 54.21 change -0.87

Stop Loss: 52.90 *new*
Target(s): 57.50, 59.75
Current Option Gain/Loss: -40.0%
Time Frame: 6 to 8 weeks
New Positions: Yes

Comments:
11:13: Financials have been volatile this week. The IYF continues to correct lower and shares stalled near $54.00. The $54 level was prior resistance for several months so it should be decent support. I would use this dip as a new entry point to buy calls. Please note I'm adjusting the stop loss to $52.90.

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


Macerich Co. - MAC - close: 45.73 change: -1.04

Stop Loss: 43.75
Target(s): 49.75, 54.00
Current Option Gain/Loss: -46.1%
Time Frame: 4 to 5 weeks
New Positions: Yes

Comments:
11:13: REIT stocks were not immune to the market's turmoil on Friday. MAC closed under short-term support near $46.00 and the stock could be headed for its 50-dma near $44.40. I am raising the risk on this trade by raising the stop loss to $43.75. Wait for a bounce before considering new positions in MAC.

Earlier Comments
Our first target is $49.75. Our second target is $54.00 but that's probably wishful thinking on my part.

Current Position: Long the December $50 calls (symbol:MAC1018L50) Entry @ $0.65

Entry on November 11th at $ 46.48
Earnings Date 02/10/11 (unconfirmed)
Average Daily Volume = 1.2 million
Listed on November 10th, 2010


Nike Inc. - NKE - close: 82.62 change: -1.05

Stop Loss: 79.90
Target(s): 86.75, 89.50
Current Option Gain/Loss: -21.7%
Time Frame: 4 to 6 weeks
New Positions: Yes

Comments:
11:13: Hmm... looks like I should have stuck to my guns and waited for that dip to $82 like we wanted. NKE slipped toward support near $82 before paring its losses into the close. I would use this dip on Friday as a new entry point to buy calls. Stop loss @ 79.90. More conservative traders may want to use a slightly higher stop.

Current Position: Long the December $85.00 CALLS (symbol:NKE1018L85) Entry @ $1.15

Entry on November 11th at $83.00
Earnings Date 12/21/10
Average Daily Volume = 2.3 million
Listed on November 6th, 2010


VimpelCom Ltd - VIP - close 15.46 change -0.11

Stop Loss: 14.80
Target(s): 16.75, 17.75
Current Option Gain/Loss: -33.3%
Time Frame: 6 to 8 weeks
New Positions: Yes

Comments:
11:13: VIP slipped and is testing support near the $15.20-15.25 zone again. This should be a new bullish entry point but I suspect VIP will hit $15.00 soon. Wait for the dip or buy calls on the bounce. 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: 105.40 change: -1.69

Stop Loss: 110.25
Target(s): 100.50
Current Option Gain/Loss: +13.8%
Time Frame: 3 to 4 weeks
New Positions: Maybe

Comments:
11:13: The market's decline was the perfect environment for LZ to continue its correction. Shares are rolling over under resistance at $110. I would consider new bearish positions now. You may want to keep your position size small to limit your risk.

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: 92.90 change: -0.22

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:
11:13: Hmmm... the lack of weakness in MICC on Friday is somewhat surprising. The entire market is sinking and yet MICC can't drop through short-term support near $92.00. That's a concern. I'm not suggesting new positions at this time. The path of least resistance still appears to be down.

FYI: Our final target is $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