Editor's Note:

December's option expiration Friday was a relatively quiet affair. I removed SHW as a bullish candidate. Our only put, EXPE, could be a drop following Friday's relative strength.

-James

Current Portfolio:


CALL Play Updates

Cummins Inc. - CMI - close: 107.96 change: -0.55

Stop Loss: 98.40
Target(s): 108.25 114.00
Current Option Gain/Loss: Unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see trigger

Comments:
12/18 update: CMI has spent the last couple of days churning sideways. Shares remain short-term overbought with the rally from $95 to $110 over the last four weeks. The stock should find some support near $105 and near $100. I'm suggesting we wait to buy calls on a dip at $102.50.

We want to start with small positions! Consider only buying half your normal position size. Just in case the correction pulls CMI toward the 50-dma we want to have some cash on the sidelines to double down near the 50-dma.

Trigger @ $102.50

- Suggested Position -
Buy the 2011 January $105 calls (CMI1122A105)

- or -

Buy the 2011 March $110 calls (CMI1119C110)

Chart:

Entry on December xxth at $ xx.xx
Earnings Date 02/02/11 (unconfirmed)
Average Daily Volume = 1.8 million
Listed on December 11th, 2010


CSX Corp. - CSX - close: 63.66 change: -0.29

Stop Loss: 59.75
Target(s): 67.00, 69.50
Current Option Gain/Loss: -23.4% and -14.9%
Time Frame: 6 to 8 weeks
New Positions: Yes, see below

Comments:
12/18 update: It was a quiet expiration Friday. CSX bounced from its rising 20-dma again but failed to breakout from this two-week consolidation sideways. This is starting to look like a bull-flag consolidation pattern. Depending on your risk tolerance you could wait for the breakout or wait to buy the next dip near $63.00-62.00. I would suggest, if starting new positions, that you start small.

- Current Positions - (We only have a small position open)

Buy the 2011 January $65 calls (CSX1122A65) Entry @ $1.75

- or -

Buy the 2011 February $65 calls (CSX1119B65) Entry @ $2.49

12/13: CSX opened at $64.39
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 $64.39
Earnings Date 01/18/11 (unconfirmed)
Average Daily Volume = 5.9 million
Listed on November 23rd, 2010


CenturyLink, Inc. - CTL - close: 45.13 change: -0.31

Stop Loss: 43.75
Target(s): 44.90, 47.25
Current Option Gain/Loss: +325.0%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
12/18 update: CTL continues to see a very normal correction after its mid-December gains. The stock seems to have found some short-term support near $45.00 but the $44.00 level should offer stronger support. If you're looking for new positions I would be tempted to buy calls on another dip or bounce from the $44 area. We have a stop loss at $43.75. Our final target to exit is $47.25.

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

12/14: New stop loss @ 43.75
12/13: First Target Hit @ $44.90, option @ $0.85 (+325%)
12/01: Adjusted secondary target to $49.00

Chart:

Entry on November 29th at $42.55
Earnings Date 02/22/11
Average Daily Volume = 3.0 million
Listed on November 27th, 2010


Express Scripts - ESRX - close: 54.91 change: +0.30

Stop Loss: 51.25
Target(s): 53.95, 58.50
Current Option Gain/Loss: +50.0%
Time Frame: 5 to 6 weeks
New Positions: see below

Comments:
12/18 update: ESRX has spent most of the last two weeks in the $54-55 zone. After closing near the $55 strike price on expiration Friday the stock looks sufficiently rested for another leg higher. ESRX did manage to tag new all-time highs intraday at $55.18. If you're looking for new positions I would be tempted to buy calls (small positions only) on a move over $55.20. Please note that I am moving our final exit target from $57.25 to $58.50.

FYI: The point & figure chart for ESRX is forecasting a very bullish, long-term target of $80.

We currently only have half a position open.

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

12/18: Adjusted final exit target to $58.50
12/16: New stop loss @ 51.25
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: 59.54 change: +0.36

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:
12/18 update: FAST drifted higher but failed to breakout past round-number resistance (and strike price) at $60.00. Shares remain very short-term overbought given the December rally from $54. We are still waiting for a correction and want to buy calls on a dip at $56.00. Conservative traders could wait for a dip closer to $55 or $54 before launching positions.

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: 93.07 change: -1.15

Stop Loss: 90.90
Target(s): 96.75, 99.75
Current Option Gain/Loss: -31.2% and -9.7%
Time Frame: 4 to 6 weeks
New Positions: Yes, see below

Comments:
12/18 update: The lack of follow through on Thursday's rally is a little bit disappointing but not super surprising. Shares of FDX continues to consolidate sideways inside the bull-flag pattern. The stock opened at $94.23 and then faded toward its 20-dma. One Wall Street firm raised their price target to $105. Another raised their target to $120. Coincidentally the P&F chart is forecasting a $119 target.

On Thursday night I suggested we open calls positions but only use small positions to limit our risk. I would still consider (small) positions now. My preferred entry point would be a dip or bounce near $90 but FDX may not provide one this year. Our first target to take profits is $96.75. Our second target is $99.75.

- Suggested Positions (only small positions so far) -

Buy the 2011 January $100 call (FDX1122A100) Entry @ $0.80

- or

Buy the 2011 April $100 call (FDX1116D100) Entry @ $2.96

12/17: FDX opens at $94.23 - our entry point.
12/16: Adjusted Entry - initiate small positions now (@ Friday's open)

Chart:

Entry on December 17th at $94.23
Earnings Date 12/16/10 (confirmed)
Average Daily Volume = 2.1 million
Listed on November 29th, 2010


Goldman Sachs - GS - close: 164.04 change: -0.42

Stop Loss: 159.75
Target(s): 171.00, 179.50
Current Option Gain/Loss: - 9.4% and - 2.2%
Time Frame: 6 to 8 weeks
New Positions: Yes, see below

Comments:
12/18 update: I am surprised at the relative weakness in GS on Friday. Most of the financial sector trended higher. Shares of GS opened lower at $163.92 and settled with a very minor loss. Overall I don't see any changes from my prior comments. On Thursday night I suggested readers open small positions instead of waiting for a dip toward $163 or lower. Shares happened to trade near $163 anyway. If the market happens to reverse lower then GS should find some support near $162 and $160. However, the banking stocks actually look poised to bounce. I would still consider small bullish positions at current levels. Our first target is $171.00. Our second, longer-term target is $179.50.
FYI: The Point & Figure chart for GS is forecasting a very bulilsh $224 long-term target.

- Suggested Positions (only small positions so far) -

Buy the 2011 January $170 calls (GS1122A170) Entry @ $2.75

- or -

Buy the 2011 April $175 calls (GS1116D175) Entry @ $5.27

12/17: GS opened at $163.92
12/16: Adjusted Entry - initiate small positions now (@ Friday's open)

Chart:

Entry on December 17th at $163.92
Earnings Date 01/18/11 (unconfirmed)
Average Daily Volume = 7.2 million
Listed on December 2nd, 2010


International Business Machines - IBM - close: 145.00 change: +0.45

Stop Loss: 142.99
Target(s): 149.90, 157.50
Current Option Gain/Loss: Unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see trigger

Comments:
12/18 update: Friday was another quiet day for IBM. Shares hovered sideways and closed right on the $145.00 strike price. You could say IBM was "pinned" to $145.00 for expiration. Now that December expiration is over IBM should be free to move and I'm expecting a breakout higher. I'm suggesting a trigger to buy calls at $146.75. FYI: The Point & Figure chart on IBM is forecasting a long-term target of $196.

Breakout Trigger @ $146.75

- Suggested Positions -

Buy the 2011 January $150 calls (IBM1122A150)

- or -

Buy the 2011 April $155 calls (IBM1116D155)

Chart:

Entry on December xxth at $ xx.xx
Earnings Date 01/18/11 (unconfirmed)
Average Daily Volume = 4.7 million
Listed on December 14th, 2010


Juniper Networks - JNPR - close: 36.49 change: -0.21

Stop Loss: 34.90
Target(s): 39.75
Current Option Gain/Loss: -16.6% and -12.0%
Time Frame: 6 to 8 weeks
New Positions: Yes, see below

Comments:
12/18 update: JNPR did not see a lot of action on Friday. Shares gapped open at $36.91 only to reverse and shares closed down -0.5%. On Thursday I suggested readers go ahead and start small bullish positions at current levels instead of waiting for a dip back toward $35.00. I would still consider small positions today although if you're patient we might get a better entry point this coming week. Our first target is $39.75.

- Suggested Positions (only small positions so far) -

Buy the 2011 January $38.00 calls (JNPR1122A38) Entry @ $0.78

- or -

Buy the 2011 April $40.00 calls (JNPR1116D40) Entry @ $1.50
12/17: JNPR opens at $36.91
12/16: Adjusted Entry - initiate small positions now (@ Friday's open)

Chart:

Entry on December 17th at $36.91
Earnings Date 01/25/11 (unconfirmed)
Average Daily Volume = 5.5 million
Listed on December 11th, 2010


Lockheed Martin Corp. - LMT - close: 70.07 change: -0.30

Stop Loss: 67.95
Target(s): 73.25
Current Option Gain/Loss: -17.1% and -20.0%
Time Frame: 6 to 8 weeks
New Positions: Yes, see below

Comments:
12/18 update: LMT opened at $70.28 and dipped toward its 30-dma before paring its losses. I would still consider new bullish positions in the $69.00-70.50 zone. The stock is in the process of breaking out from a five-week consolidation range. We'll use a stop loss at $67.95. More conservative traders might be able to get away with a stop closer to $69.00. Our exit target is $73.25. Readers may want to keep their position size small to limit their risk.

- Suggested Positions -

Buy the 2011 January $70.00 calls (LMT1122A70) Entry @ $1.75

- or -

Buy the 2011 March $75.00 calls (LMT1119C75) Entry @ $1.00

Chart:

Entry on December 17th at $70.28
Earnings Date 01/27/11 (unconfirmed)
Average Daily Volume = 1.7 million
Listed on December 16th, 2010


Nike Inc. - NKE - close: 90.05 change: +0.82

Stop Loss: 87.40
Target(s): 89.50, 92.50
Current Option Gain/Loss: +108.6%
Time Frame: 4 to 6 weeks
New Positions: no

Comments:
12/18 update: NKE continues to show relative strength. The stock climbed toward $90 and then hovered there at this strike price for December's expiration. The company is due to report earnings on Tuesday, Dec. 21st after the closing bell. Shares are trading at all-time highs so the risk of some post-earnings profit taking is very real. I am suggesting that we exit positions on Tuesday at the closing bell to avoid holding over the announcement. With just two days left we will raise our stop loss to $87.40. If by some stroke of luck that NKE spikes higher in the next two days we will lower our final exit target to $92.50.

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

12/18/10 New stop loss @ $87.40, New exit target @ 92.50
12/16/10 New stop loss $85.75
12/13/10 Target Hit @ $89.64 (gap higher), option @ $5.51 (+98.2%)
12/13/10 New stop loss $83.90
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: 74.12 change: +0.32

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:
12/18 update: I remain bullish on the oil services sector but neither the OSX oil services index or shares of OII have been moving much. Looking at OII it seems that traders have been selling into strength. The stock is developing a short-term trend of lower highs. Friday is a new two-year closing high I remain somewhat cautious. We will keep our trigger at $70.25 to buy the dip. However, I am leaning more towards a breakout entry point higher. If OII can close over $75.00 we will reconsider our entry point strategy.

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: 69.34 change: +0.03

Stop Loss: 66.25
Target(s): 72.50, 78.25
Current Option Gain/Loss: -28.8% and -17.2%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
12/18 update: Hmm... the lack of strength in RIG on Friday is somewhat concerning. Investors may be feeling cautious after a U.S. judge ordered RIG to turn over its safety records for the Deepwater Horizon oil rig that exploded and sank in the Gulf of Mexico this past April. This is the rig that was under contract by BP and started the Gulf oil spill. Legally RIG's liability seems pretty limited given its contracts with BP but the U.S. wants to examine the safety records to see if what happened on the Horizon is an isolated event or a system-wide problem. Personally, I'm still bullish on RIG and would use this dip this past week as an entry point but cautious traders could decide to keep their position size limited. I've got our stop loss at $66.25. You could raise yours closer to the 50-dma currently at $67.24. Our final target is $78.25.

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

- Second Position -
Long the 2011 February $75.00 calls (RIG1119B75) Entry @ $1.80

12/17/10 Entry on Feb. calls @ $1.80
12/16/10 New Entry Point (buy February calls) - buy the dip.
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


Union Pacific - UNP - close: 91.18 change: -1.11

Stop Loss: 89.75
Target(s): 96.25, 99.75
Current Option Gain/Loss: + 0.0% and +0.0%
Time Frame: 4 to 6 weeks
New Positions: Yes, see below

Comments:
12/18 update: UNP dipped to its rising 40-dma again and once again traders bought the dip but the rebound wasn't very convincing. On Thursday I suggested we open new positions on the bounce but there wasn't any follow through. I do think we are at risk of getting stopped out if the market sees any significant sell-off. Cautious traders may want to wait for UNP to break the short-term trend of lower highs before considering new bullish positions (look for a move over $92.25).

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

Second Position
Buy the 2011 February $95 calls (UNP1119B95) Entry @ $2.33

12/17/10: Entry on Feb. calls @ $2.33
12/16/10: New Entry point: buy February calls
12/16/10: New stop loss @ 89.75

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: 73.06 change: -0.70

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:
12/18 update: There was no follow through on the rally from Thursday. We are still waiting for a dip in UPS. For the moment we'll leave our trigger at $70.25 but I'm looking at raising our buy-the-dip trigger toward $72.25.

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: 78.80 change: -0.22

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:
12/18 update: Currently we have a buy the dip entry point at $77.10 on UTX. Aggressive traders may want to consider a breakout trigger to buy calls above $79.50 or the $80.00 mark. Look for support near $76.00 and its 50-dma.
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


Vulcan Materials Co. - VMC - close: 46.06 change: -1.27

Stop Loss: 39.95
Target(s): 47.75
Current Option Gain/Loss: Unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see trigger

Comments:
12/18 update: VMC surged to new six-month highs this past week. Yet at the same time the stock appears to have formed a short-term top. Currently we're expecting a correction. Right now our trigger is to buy a dip at $43.75 but readers may want to bump that to above the $44.00 level and its simple 200-dma.

Trigger @ $43.75

Suggested Position: Buy the 2011 January $45 calls (VMC1122A45)

- or -

Buy the 2011 February $45 calls (VMC1119B45)

Chart:

Entry on December xxth at $ xx.xx
Earnings Date 02/07/11 (unconfirmed)
Average Daily Volume = 1.5 million
Listed on December 13th, 2010


Cimarex Energy Co. - XEC - close: 88.22 change: -0.18

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:
12/18 update: XEC spiked to a new all-time high of $88.49 on Friday morning but failed to hold these gains. While I'm bullish on oil service stocks we want to be patient when it comes to new positions. Currently our buy the dip entry point is at $84.00 but we might want to adjust that higher. Shares found support near $85.00 last week. Wait to see if XEC bounces at $85.00 again before we re-evaluate our entry point strategy.

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: 26.83 change: +0.85

Stop Loss: 27.75
Target(s): 25.10, 24.25
Current Option Gain/Loss: -16.6%
Time Frame: 2 to 3 weeks
New Positions: No

Comments:
12/18 update: Warning! EXPE was showing way too much relative strength on Friday. The stock broke out above its 100-dma again. While there is overhead resistance at the 50-dma and the $27.60 level I am suggesting that more conservative traders go ahead and exit now. We do not want to open new bearish positions.

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


CLOSED BULLISH PLAYS

Sherwin-Williams Co. - SHW - close: 82.02 change: +0.05

Stop Loss: 74.85
Target(s): 79.90, 84.00
Current Option Gain/Loss: Unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see trigger

Comments:
12/18 update: Sadly I think we missed the bullish entry point in SHW. The stock looks way too overbought to buy calls but given its relative strength I don't want to buy puts either. I'm removing SHW as a candidate but will keep it on my watch list. Broken resistance near $80 and the $78-77 zone could offer some support. Our trade never opened.

Chart:

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