Editor's Note:

It looks like the bulls have found a tough section in the Wall of Worry and nearly lost their foothold but managed to catch themselves near support. The combination of inflation fears/rate hikes in China, European debt woes, and a poor CPI data here in the U.S. was just too much for a market in correction mode.

We did see a couple of bullish candidates get stopped out but we had one bearish play hit our final target.

-James

Current Portfolio:


CALL Play Updates

Ansys, Inc. - ANSS - close: 47.56 change: -1.41

Stop Loss: 44.90
Target(s): 49.50,
Current Option Gain/Loss: Unopened
Time Frame: 4 to 6 weeks
New Positions: Yes, see trigger

Comments:
11/16: The market's widespread declines pushed ANSS to a -2.8% drop. Currently our plan is to buy calls on a dip at $46.75 but readers may want to wait and watch for a bounce from the $46.00 level before initiating positions instead.

Buy-the-dip trigger @ 46.75

Suggested Position: Buy the 2011 January $50.00 calls (ANSS1018L50)

Entry on November xxth at $ xx.xx
Earnings Date 02/24/11 (unconfirmed)
Average Daily Volume = 651 thousand
Listed on November 13th, 2010


Caterpillar - CAT - close: 80.37 change: -1.45

Stop Loss: 79.40
Target(s): 84.85, 89.50
Current Option Gain/Loss: -25.0% & -10.2%
Time Frame: 3 to 4 weeks
New Positions: Yes

Comments:
11/16: CAT held up reasonably well considering the declines in the DJIA today. Shares dipped to $79.70 at their worst levels of the session. If the DJIA or the S&P 500 see any follow through lower tomorrow I anticipate CAT hitting our stop loss at $79.40 and closing this play. Readers may want to wait a couple of days and see how the market behaves before considering new positions.

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.

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: 66.03 change: -1.49

Stop Loss: 64.75
Target(s): 71.50, 74.75
Current Option Gain/Loss: -21.9%
Time Frame: 4 to 6 weeks
New Positions: Yes

Comments:
11/16: CLF missed our stop loss today by the narrowest of margins. Commodity-related stocks were hammered thanks to a rally in the dollar and talk in China of fixing commodity prices. CLF gapped open lower at $66.00 and dipped to $64.76 before paring its losses. If you're feeling brave you could buy calls on this intraday bounce. However, if the market/dollar/commodity action today continues tomorrow then odds of us getting stopped out at $64.75 are very high.

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

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: 65.74 change: +0.26

Stop Loss: 62.90
Target(s): 69.00
Current Option Gain/Loss: +42.6%
Time Frame: 3 to 4 weeks
New Positions: Yes

Comments:
11/16: Rival Wal-Mart (WMT) reported earnings this morning. WMT's profits were inline with estimates but sales were light. Yet the company's stock was saved with a bullish earnings forecast looking forward. Shares of COST rallied on this news as well and COST briefly hit new highs. The trend is up and COST looks good but I suggest caution. If the market accelerates lower COST could be dragged down by overall market weakness.

Earlier Comments
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: 57.56 change: -0.99

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

Comments:
11/16: It looks like our patience might pay off. HUM is still correcting and lost -1.7% today. We are still waiting for a pullback toward $55.00. 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 53.33 change -1.01

Stop Loss: 52.90
Target(s): 57.50, 59.75
Current Option Gain/Loss: -60.0%
Time Frame: 6 to 8 weeks
New Positions: Yes

Comments:
11/16: Banking stocks were hit hard today and the IYF gave up -1.8% by the closing bell. This ETF briefly traded under technical support at its 50-dma and 200-dma. Actually the IYF has closed under the 200-dma, normally a bearish signal. The low today was $52.94, almost enough to hit our stop loss and close this trade. The $53 level looks like it could be short-term support. Given our stop loss at $52.90 aggressive traders could buy calls on this dip. My concern is that any follow through lower tomorrow will likely stop us out.

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: 80.51 change: -1.29

Stop Loss: 79.90
Target(s): 86.75, 89.50
Current Option Gain/Loss: -66.0%
Time Frame: 4 to 6 weeks
New Positions: Yes

Comments:
11/16: NKE fell -1.5% but selling stalled near its rising 50-dma. I believe traders want to buy this dip near support at $80.00 and its 50-dma but the market continues to fall tomorrow then we should expect to get stopped out. Aggressive traders could buy this dip to support but I'm more inclined to take a wait and see approach.

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 15.53 change -0.19

Stop Loss: 14.80
Target(s): 16.75, 17.75
Current Option Gain/Loss: -42.8%
Time Frame: 6 to 8 weeks
New Positions: Yes

Comments:
11/16: VIP held up pretty well today considering the turmoil across the international markets. I would still be tempted to buy calls on dips (or better yet bounces) near $15.25 or its rising 30-dma. 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: 104.01 change: -2.24

Stop Loss: 110.25
Target(s): 100.50
Current Option Gain/Loss: +24.1%
Time Frame: 3 to 4 weeks
New Positions: Maybe

Comments:
11/16: LZ slipped to a new two-week low and shares did not see that much of a bounce late in the session. I don't see any changes from my prior comments. 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


Oceaneering Intl. Inc. - OII - close: 68.03 change: -0.58

Stop Loss: 71.05 *new*
Target(s): 64.50, 62.25
Current Option Gain/Loss: +17.2%
Time Frame: 3 to 4 weeks
New Positions: Yes

Comments:
11/16: Warning! The market plunged toward support and commodities were hammered. Yet OII only lost -0.8%? That's not a good sign for this put play. I am not suggesting new positions at this time. I am lowering our stop loss to $71.05. More conservative traders may want to exit early or move their stops toward $70.00.

Current Position: Long the December $65.00 puts (OII1018x65) Entry @ $1.45

Entry on November 15th at $69.21
Earnings Date 02/17/11
Average Daily Volume = 1.0 million
Listed on November 13th, 2010


Research In Motion - RIMM - close: 56.29 change: -1.49

Stop Loss: 60.25
Target(s): 55.05, 53.00
Current Option Gain/Loss: +0.00%
Time Frame: 1 to 2 weeks
New Positions: Yes

Comments:
11/16: Declines in RIMM are not a surprise but the gap down at the open (57.28) affected our entry point. Shares managed to hug support near $56.00 for most of the afternoon. I remain short-term bearish and don't see any changes from my Monday night comments.

Current Position: Long the December $55 puts (RIMM1018X55) Entry @ $2.53

Entry on November 16th at $57.28
Earnings Date 12/16/10
Average Daily Volume = 17.6 million
Listed on November 15th, 2010


CLOSED BULLISH PLAYS

Baidu, Inc. - BIDU - close: 103.60 change: -5.20

Stop Loss: 106.49
Target(s): 119.75, 124.50
Current Option Gain/Loss: -51.5% and -38.9%
Time Frame: 4 to 5 weeks
New Positions: Maybe

Comments:
11/16: BIDU tagged new highs three days ago but seeing a -9% drop in the Shanghai stock market is finally prompting some profit taking in this momentum stock. The Chinese Shanghai index lost -5.2% on Friday and lost another -4% today as investors fear an interest rate hike will slow down the economy too much. BIDU gapped open at $108.00 this morning and plunged -4.7% to break several layers of short-term support. Our stop loss was hit at $106.49 closing this trade. Keep an eye on the $100 mark and its 50-dma for potential support. If the $100 level fails look for a drop toward the rising 100-dma.

Closed Position: Long the 2010 December $120 calls (BIDU1018L120) Entry @ $2.99, exit near $1.45 (-51.5%)
- or -
Closed Position: Long the 2011 January $120 calls (BIDU1122A120) Entry @ $5.65, exit near $3.45 (-38.9%)

11/16 Stopped out @ 106.49

Chart:

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


Macerich Co. - MAC - close: 43.12 change: -2.25

Stop Loss: 43.75
Target(s): 49.75, 54.00
Current Option Gain/Loss: -73.8%
Time Frame: 4 to 5 weeks
New Positions: Yes

Comments:
11/16: REIT stocks were big underperformers on Tuesday with the average REIT stock down -3%. MAC's decline was worse with a -4.9% drop. Shares fell through potential support in the $45-44 level along with the 50-dma. The stock hit our stop loss at $43.75.

Closed Position: Long the December $50 calls (symbol:MAC1018L50) Entry @ $0.65, Exit @ $0.17 (-73.8%)
11/16 Stopped out @ 43.75, option @ 0.17 (-73.8%)

Chart:

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


CLOSED BEARISH PLAYS

Millicom Intl. - MICC - close: 90.24 change: -2.28

Stop Loss: 98.25
Target(s): 92.50, 90.25
Current Option Gain/Loss: +20.4%
Time Frame: 3 to 4 weeks
New Positions: No

Comments:
11/16: Target achieved! After days of consolidating sideways the market declines today were enough to push MICC lower. The stock dipped to support near $90.00. Our final target to take profits was at $90.25. The trade is closed. The $90.00 level should be significant support and aggressive traders may want to consider buying calls with a very, very tight stop loss. On the other hand a breakdown and close under the 200-dma would be very bearish.

Closed Position: Long December 2010 $90 puts (MICC1018X90)
Entry @ $2.45 , Exit @ $2.95 (+20.4%)

11/16 Target hit @ 90.25, option @ 2.95 (+20.4%)
11/08 Target hit @ 92.50, option @ 2.85 (+16.3%)

Chart:

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