Editor's Note:

It was a banner week for the financials. Plus the small caps have been showing relative strength. I would love to see a market dip so we could open new positions.

I have adjusted our entry point strategy on CSX. We moved the trigger on GS and updated a couple of stop losses.

-James

Current Portfolio:


CALL Play Updates

CH Robinson Worldwide Inc. - CHRW - close: 78.12 change: +0.36

Stop Loss: 72.90
Target(s): 74.90, 79.00
Current Option Gain/Loss: +221.7%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
12/11 update: CHRW recovered from some early morning profit taking to rally back above $78.00 but upward momentum fizzled and shares drifted sideways the rest of the day. Shares of CHRW remain overbought. I want to remind readers that when the pull back occurs, and it will happen eventually, our option values are going to implode. We will endure the decline because I expect CHRW to hit our target before January expiration. Of course readers could take profits early (like right now). Please note our new stop loss at $72.90. I am not suggesting new positions at this time. Our final target is $79.00.

Current Position:
Long the January $75.00 calls (CHRW1122A75) Entry @ $1.15

12/11: New stop loss @ 72.90
12/01: New Stop loss @ 71.90
12/01: First target hit @ $74.90 Exit all December calls: $0.95 (+111.1%)
12/01: First target hit, take profits on January calls: $ $2.00 (+73.9%)
11/27: New stop @ 70.75, new first target at $74.90

Chart:

Entry on November 22nd at $72.44
Earnings Date 02/03/11
Average Daily Volume = 1.1 million
Listed on November 18th, 2010


CSX Corp. - CSX - close: 64.10 change: +0.19

Stop Loss: 59.75
Target(s): 67.00, 69.50
Current Option Gain/Loss: + 0.0%
Time Frame: 6 to 8 weeks
New Positions: Yes, see below

Comments:
12/11 update: Railroad stocks continue to look strong. I am concerned that the sector (and the market) might not see a deep enough pull back and instead leave us waiting for the decline that never comes. Thus I'm adjusting our entry point strategy. Let's buy half of our position in CSX now at current levels. Then, if CSX sees a dip to $62.00 we'll buy our second half. Naturally you can adjust the size of your position depending on your own risk tolerance. Maybe for you buying 1/4 of your desire position is more appropriate. We'll keep our stop loss at $59.75 for now. The 40-dma and 50-dma have been technical support in the past so cautious traders could try a higher stop loss instead and place their stop under these moving averages. I am adjusting our targets to $67.00 and $69.50.

NOTE: I have adjusted our strike prices.

Buy Half Now and Half on a dip near $62.00.

Suggested Position: Buy the 2011 January $65 calls (CSX1122A65) current ask $1.73

- or -

Suggested Position: Buy the 2011 February $65 calls (CSX1119B65) current ask $2.51

12/11: New Entry Point Strategy. Buy half now.
12/11: New targets: 67.00, 69.50
12/02: New trigger @ 62.50.
12/01: New trigger @ 62.25, New stop @ 59.90, New targets.

Chart:

Entry on December 13th at $ xx.xx
Earnings Date 01/18/11 (unconfirmed)
Average Daily Volume = 5.9 million
Listed on November 23rd, 2010


CenturyLink, Inc. - CTL - close: 44.63 change: +0.48

Stop Loss: 41.95
Target(s): 44.90, 47.25
Current Option Gain/Loss: +200.0%
Time Frame: 6 to 8 weeks
New Positions: Yes, see below

Comments:
12/11 update: CTL has been a strong performer for us. The stock posted another gain and another new two-year high on Friday. The $45.00 level looks like potential resistance so we want to be ready to take some money off the table. The plan is to sell half of our position at $44.90. Cautious traders could exit now. If you're looking for a new entry point I'd wait for a dip or bounce near $43.50. I am adjusting our stop loss to $41.95.

FYI: Investors should know that CTL is currently involved with a $10.6 billion stock-swap merger with Qwest Communications (Q). The merger isn't supposed to be completed until the first half of 2011. The trend for both stocks is up and naturally looks very similar following the M&A announcement.

Current Position:
Long the 2011 January $45.00 calls (CTL1122A45) Entry @ 0.20

12/01: Adjusted secondary target to $49.00

Chart:

Entry on November 29th at $42x55
Earnings Date 02/22/11
Average Daily Volume = 3.0 million
Listed on November 27th, 2010


Express Scripts - ESRX - close: 54.76 change: +0.59

Stop Loss: 49.65
Target(s): 53.95, 57.25
Current Option Gain/Loss: +54.7%
Time Frame: 5 to 6 weeks
New Positions: Yes, see below

Comments:
12/11 update: ESRX posted another gains but shares are still bouncing around in the same $54-55 zone. While the trend of higher lows is bullish I'm still warning readers to be ready for a correction back towards $52.00. If you're looking for a new entry point I would prefer to initiate positions on a dip or a bounce near $53-52.

We currently only have half a position open.

Current Position:
Long the 2011 January $52.50 calls (ESRX1122A52.5) Entry @ $2.10

12/07: Exit the December calls. option @ $2.01 (+64.7%)
12/01: First Target Hit @ $53.95. Dec's @ $2.20 (+80.3%). Jan's @ $3.10 (+47.6%)

Chart:

Entry on November 18th at $51.81
Earnings Date 02/24/11
Average Daily Volume = 4.3 million
Listed on November 17th, 2010


Fastenal Co. - FAST - close: 59.17 change: +0.90

Stop Loss: 53.75
Target(s): 59.75, 62.50
Current Option Gain/Loss: Unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see trigger

Comments:
12/11 update: FAST is still showing relative strength. The stock posted a +1.5% gain on Friday. Yet after a two-day consolidation near $58 shares still look overbought here. Don't chase it! We want to launch bullish positions on a dip at $56.00. Conservative traders could wait for a dip closer to $55 or $54 before launching positions. If triggered our first target is $59.75.

FYI: FAST announced a special, one-time cash dividend of 42-cents on November 18th and all of the option strikes have been adjusted for this 42-cent dividend.

Trigger @ 56.00

Suggested Positions:
Buy the 2011 January $54.58 calls (FAST1122A54.58)

- or -

Buy the 2011 February $59.58 calls (FAST1119B59.58)

Chart:

Entry on December xxth at $ xx.xx
Earnings Date 01/19/11 (unconfirmed)
Average Daily Volume = 880 thousand
Listed on December 8th, 2010


FedEx Corp. - FDX - close: 93.98 change: -0.11

Stop Loss: 87.75
Target(s): 94.75, 99.00
Current Option Gain/Loss: Unopened
Time Frame: 4 to 6 weeks
New Positions: Yes, see below

Comments:
12/11 update: Once again traders bought the dip near FDX's rising 10-dma. FDX looks poised to rally higher but I am reluctant to chase it here because the company is due to report earnings on December 16th (next Thursday). Holding over an earnings report is a high-risk event. We will keep our trigger at $91.00 (or lower) until after we see the market's reaction to FDX's earnings. I did move the stop to $87.75 should we get triggered.

Suggested Position: TRIGGER @ $91.00

Buy the 2011 January $90.00 call (FDX1122A90) current ask $4.85

- or

Buy the 2011 April $95 call (FDX1116D95) current ask $5.00

Chart:

Entry on December xxth at $ xx.xx
Earnings Date 12/16/10 (confirmed)
Average Daily Volume = 2.1 million
Listed on November 29th, 2010


Goldman Sachs - GS - close: 168.47 change: +2.02

Stop Loss: 157.45
Target(s): 169.75, 177.00
Current Option Gain/Loss: Unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see trigger

Comments:
12/11 update: Ever since GS' spike higher on Dec. 2nd there has been almost zero profit taking. Shares saw a brief reversal on the seventh but the stock has been surging higher thanks in part to widespread strength in the financials. The $170 level has been resistance in the past so we certainly do not want to open positions now. I will raise our trigger to buy the dip to $163.00 and we'll raise our stop loss to $157.45. I have updated our option strikes.

Trigger @ 163.00 <- new trigger

Suggested Positions:
Buy the 2011 January $170 calls (GS1122A170)

- or -

Buy the 2011 April $175 calls (GS1116D175)

Chart:

Entry on December xxth at $ xx.xx
Earnings Date 01/18/11 (unconfirmed)
Average Daily Volume = 7.2 million
Listed on December 2nd, 2010


W.W. Grainger Inc. - GWW - close: 133.67 change: +1.32

Stop Loss: 124.75
Target(s): 129.90, 138.50
Current Option Gain/Loss: +120.0%
Time Frame: 4 to 6 weeks
New Positions: Yes, see below

Comments:
12/11 update: GWW has spent the last few days bouncing around the $131-134 zone. I am reluctant to chase it here since shares look overbought. If the market sees any sort of pull back then GWW should correct toward the $130-128 zone. I'd prefer to launch new positions on a dip near $128. Our final target remains $138.50.

FYI: The stock could see a little short squeeze since the most recent data listed short interest at more than 5% of the 58.5 million share float (which isn't very big as far as floats go). FYI: The Point & Figure chart is bullish with a $140 target.

Current Position:
Long the 2011 January $130 calls (GWW1122A130) Entry @ $2.50

12/02: First target hit @ 129.90, option @ $4.10 (+64%)
12/02: New stop loss @ 124.75, New final target at $138.50

Chart:

Entry on November 24th at $126.75
Earnings Date 01/25/11 (unconfirmed)
Average Daily Volume = 567 thousand
Listed on November 22nd, 2010


Humana Inc. - HUM - close: 56.51 change: +0.43

Stop Loss: 54.40
Target(s): 59.75, 64.00
Current Option Gain/Loss: -26.3%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
12/11 update: HUM briefly broke through the bearish trend of lower highs but the rally faded by the closing bell. I remain cautious on launching new positions. A close over Friday's high (57.11) could change my mind on buying calls again. A close under $56.00 would be bearish even though $55.00 should also offer some support. More conservative traders may want to consider a tighter stop loss.

Current Position:
Long the 2011 January $55 calls (HUM1122A55) Entry @ $3.80

12/08/10 New stop @ 54.40
11/22/10 New stop @ 53.75
11/22/10 New (2nd) target at $64.00

Chart:

Entry on November 18th at $55.05
Earnings Date 11/01/10 (confirmed)
Average Daily Volume = 2.1 million
Listed on October 16th, 2010


Nike Inc. - NKE - close: 87.80 change: +0.33

Stop Loss: 83.49
Target(s): 89.50, 94.50
Current Option Gain/Loss: +56.4%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
12/11 update: Friday was uneventful for NKE. Shares continue to chop sideways. Keep in mind that we have just seven trading days before NKE is due to report earnings. Conservative traders do not want to hold over this event! Tonight we are raising our stop loss to $83.49 since the $84.00 level should be support. I would be tempted to initiate new call positions on a dip into the $85-84 area but cautious traders may want to wait and buy the bounce.

We want to sell half our of January position at $89.50.

(Second position) Current Position:
Long the January $85.00 CALLS (symbol:NKE1122A85) Entry @ $2.78

12/11/10 New stop loss $83.49
12/07/10 Exit the December calls, option @ $2.25 (+95.6%)
12/01/10 New stop loss @ 82.45
11/30/10 Readers may want to exit December options early for a gain
11/30/10 Entry on January calls @ $2.78
11/29/10 Buy the bounce from $84.00
11/24/10 Target hit @ 86.75, Dec. option @ $2.60 (+126%)

Chart:

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


Oceaneering International - OII - close: 71.71 change: -1.19

Stop Loss: 67.75
Target(s): 74.80, 79.75
Current Option Gain/Loss: Unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see trigger

Comments:
12/11 update: OII underperformed on Friday thanks to a downgrade from Wells Fargo. Keep in mind that Credit Suisse just upgraded OII a couple of days ago. If you look at the weekly chart on OII the action this past week looks like a potential top. If shares hit our trigger to buy calls at $70.25 readers may want to start with small positions and then slowly build up to a normal position size. Currently our plan is unchanged. Use a trigger at $70.25.

Trigger to buy @ $70.25

Suggested Position: Buy the 2011 January $75 calls (OII1122A75)

- or -

Suggested Position: Buy the 2011 April $75 calls (OII1116D75)

Chart:

Entry on December xxth at $ xx.xx
Earnings Date 02/17/11 (unconfirmed)
Average Daily Volume = 584 thousand
Listed on December 4th, 2010


Transocean Ltd. - RIG - close: 72.23 change: +0.94

Stop Loss: 66.25
Target(s): 72.50, 78.25
Current Option Gain/Loss: +44.0%
Time Frame: 4 to 6 weeks
New Positions: Yes, see below

Comments:
12/11 update: RIG set a new six-month closing high with Friday's +1.3% gain. Shares look poised to rally from here. The $75.00 level is the next level of resistance but I'm going to optimistically raise our final exit target from $74.90 to $78.25. The gap down from last April started at $78.50. We'll raise our stop loss to $66.25, keeping it under the 50-dma. If you're looking for a new entry point I would prefer to buy a dip near $68.50.

- Current Position -
Long the 2011 January $70.00 calls (RIG1122A70) Entry @ $2.95

12/11/10 New target 78.25, new stop loss $66.25
12/03/10 Target hit @ $72.50, option @ $4.95 (+67.7%)

Chart:

Entry on November 30th at $68.18
Earnings Date 02/24/11 (unconfirmed)
Average Daily Volume = 6.3 million
Listed on November 29th, 2010


Sherwin-Williams Co. - SHW - close: 77.76 change: +0.26

Stop Loss: 73.75
Target(s): 79.90
Current Option Gain/Loss: Unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see trigger

Comments:
12/11 update: SHW tagged a new five-month high on Friday. I don't see any changes from my Thursday night comments so I'm reposting them here:

SHW's breakout past $74 back in November was significant. The stock has since broken the bearish trend of lower highs. As investors anticipate greater economic improvement in 2011 they could push SHW back toward its all-time highs near $80. I am suggesting we wait for a dip to $76.10 and buy calls on the pull back. If triggered we'll use a stop loss at $73.75. Our first target is $79.90.
FYI: The Point & Figure chart is bullish and currently forecasts a $92 target.

Trigger @ $76.10

Suggested Positions:

Buy the 2011 January $75.00 calls (SHW1122A75)

- or -

Buy the 2011 March $80.00 calls (SHW1119C80)

Chart:

Entry on December xxth at $ xx.xx
Earnings Date 01/26/11 (unconfirmed)
Average Daily Volume = 675 thousand
Listed on December 9th, 2010


Union Pacific - UNP - close: 92.64 change: -0.16

Stop Loss: 87.90
Target(s): 96.25, 99.75
Current Option Gain/Loss: + 19.0%
Time Frame: 4 to 6 weeks
New Positions: Yes, see below

Comments:
12/11 update: UNP dipped toward its 20-dma near $91.50 before traders bought the pull back. I have been suggesting readers use a decline into the $92-90 zone as an entry point. I would still consider new positions in that range although traders may want to buy February calls. More conservative traders might want to consider a tighter stop loss.

- Current position -
Suggested Position:
Buy the 2011 January $95 calls (UNP1122A95) Entry @ $1.52

Chart:

Entry on November 30th at $89.83
Earnings Date 01/20/11
Average Daily Volume = 2.9 million
Listed on November 20th, 2010


United Parcel Service - UPS - close: 72.89 change: -0.15

Stop Loss: 66.85
Target(s): 74.75, 78.50
Current Option Gain/Loss: Unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see below

Comments:
12/11 update: UPS saw a minor pullback after Thursday's show of strength. There is no change from my prior comments. Transports have been strong but they're arguably a little bit overbought. UPS should have support near broken resistance at $70.00. Currently our plan is to buy calls on a dip at $70.25 but I might reconsider if UPS bounces near $71.00 again.

Trigger @ 70.25

Suggested Position:
Buy the 2011 January $70.00 call (UPS1122A70)

- or -

Buy the 2011 April $75.00 call (UPS1116D75)

Chart:

Entry on December xxth at $ xx.xx
Earnings Date 02/01/10 (unconfirmed)
Average Daily Volume = 3.9 million
Listed on December 6th, 2010


United Technology Corp. - UTX - close: 78.40 change: +0.77

Stop Loss: 73.90
Target(s): 81.50, 84.75
Current Option Gain/Loss: Unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see trigger

Comments:
12/11 update: Before the opening bell on Friday UTX was trading near $76.70 but the stock opened around $78.50. Thus we are still sitting on the sidelines waiting for an entry point. Currently our plan is to buy calls on a dip at $77.10. Cautious traders could wait for a pull back closer to $76.00 or even $75.00.
FYI: The Point & Figure chart is bullish with a $91 target for UTX.

Trigger to buy calls @ $77.10

Suggested Position: Buy the 2011 January $80 calls (UTX1122A80)

- or -

Suggested Position: Buy the 2011 February $80 calls (UTX1119B80)

Chart:

Entry on December xxth at $ xx.xx
Earnings Date 01/26/11 (unconfirmed)
Average Daily Volume = 3.2 million
Listed on December 4th, 2010


Cimarex Energy Co. - XEC - close: 85.74 change: -0.54

Stop Loss: 79.85
Target(s): 87.40, 89.90
Current Option Gain/Loss: Unopened
Time Frame: 4 to 6 weeks
New Positions: Yes, see below

Comments:
12/11 update: XEC is slowly correcting after hitting new highs earlier in the week. Shares have found some short-term support near $85.00 but we want to see a dip to $84.00. Aggressive traders could launch positions now. I'm suggesting we stick to the plan and wait for the dip to $84.00. Cautious traders could wait for a dip closer to $82 instead.

Trigger @ 84.00

Suggested Position:
Buy the 2011 January $85 calls (XEC1122A85)

- or - Buy the 2011

Chart:

Entry on December xxth at $ xx.xx
Earnings Date 02/17/11 (unconfirmed)
Average Daily Volume = 907 thousand
Listed on December 1st, 2010


PUT Play Updates

Expedia Inc. - EXPE - close: 27.44 change: +0.27

Stop Loss: 27.75
Target(s): 25.10, 24.25
Current Option Gain/Loss: -33.3%
Time Frame: 2 to 3 weeks
New Positions: No

Comments:
12/11 update: I am about ready to give up on EXPE as a put play. There has been no follow through on the bearish reversal from Dec. 7th. Now shares are challenging technical resistance at the 50-dma. A breakout above this moving average would probably send it past resistance near $27.60 and hit our stop loss at $27.75. I am not suggesting new positions at this time. Cautious traders will want to consider an early exit now!

Current Position: Buy the 2011 January $25 Put (EXPE1122M25) Entry @ $0.60

Chart:

Entry on December 8th at $26.88
Earnings Date 02/10/11 (unconfirmed)
Average Daily Volume = 2.5 million
Listed on December 7th, 2010