Editor's Note:

The banking sector rebounded for the second day in a row. Transports struggled a little bit. Our GS play looks stronger while our railroad candidates look vulnerable.

-James

Current Portfolio:


CALL Play Updates

Cummins Inc. - CMI - close: 109.12 change: +1.16

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:
12/20 update: Early morning gains in CMI faded but shares managed to bounce back into the green. Volume was light. The stock remains overbought and due for some profit taking but there is no guarantee shares will see a correction before yearend. 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)

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: 63.28 change: -0.38

Stop Loss: 59.75
Target(s): 67.00, 69.50
Current Option Gain/Loss: -42.8% and -29.3%
Time Frame: 6 to 8 weeks
New Positions: Yes, see below

Comments:
12/20 update: It was a disappointing day for the railroads and CSX lost almost 0.6%. Shares remain inside the $63-64 trading range. There is no change from my weekend comments. 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.

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: 45.96 change: +0.83

Stop Loss: 43.75
Target(s): 44.90, 47.25
Current Option Gain/Loss: +550.0%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
12/20 update: Traders were back in buying mode with shares of CTL. The stock outperformed the major indices with a +1.8% gain. Aggressive traders could buy call son the bounce and use a stop loss close to $45.00. I am not suggesting new positions at this time. 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

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


Cognizant Technology Solutions - CTSH - close: 72.30 change: -0.10

Stop Loss: 68.49
Target(s): 74.50, 79.00
Current Option Gain/Loss: Unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see trigger

Comments:
12/20 update: CTSH gapped open higher this morning but the gains faded. The stock's close in negative territory is short-term bearish. Odds favor a pull back toward the $70 area. I am suggesting a trigger to buy calls at $71.50. Our first target is $74.50. Our longer-term target is $79.00.
FYI: The Point & Figure chart for CTSH is forecasting a $93 price target.

Trigger to buy calls on the dip @ $71.50

- Suggested Positions -

Buy the 2011 January $75.00 calls (CTSH1122A75) current ask $1.10

- or -

Buy the 2011 April $75.00 calls (CTSH1116D75) current ask $3.70

Entry on December xxth at $ xx.xx
Earnings Date 02/09/11 (unconfirmed)
Average Daily Volume = 2.3 million
Listed on December 18th, 2010


Express Scripts - ESRX - close: 55.24 change: +0.33

Stop Loss: 51.25
Target(s): 53.95, 58.50
Current Option Gain/Loss: +57.1%
Time Frame: 5 to 6 weeks
New Positions: see below

Comments:
12/20 update: ESRX displayed relative strength on Monday. The stock broke out and closed above round-number, psychological resistance at the $55.00 mark. I have been suggesting that readers might want to wait for a move over $55.20 as a possible entry point so we got it! I am suggesting the February $55.00 calls. Our final exit target is $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

- or -

Second Position (small position):

Long the 2011 February $55.00 calls (ESRX1119B55) current ask $2.22

12/20: Suggested new positions with Feb. 55 calls.
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%)

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: 59.59 change: +0.05

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:
12/20 update: FAST is still struggling with resistance near $60.00. We wait to wait for a correction after hits huge December rally. Our plan is 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)

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: 93.56 change: +0.49

Stop Loss: 90.90
Target(s): 96.75, 99.75
Current Option Gain/Loss: -40.0% and -10.3%
Time Frame: 4 to 6 weeks
New Positions: Yes, see below

Comments:
12/20 update: Nothing has changed for us with FDX. The stock spent Monday in a narrow (almost $1.00) range. 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. If you prefer to see more strength then wait for FDX to close over $95 again. 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)

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: 166.05 change: +2.01

Stop Loss: 159.75
Target(s): 171.00, 179.50
Current Option Gain/Loss: + 3.6% and + 5.3%
Time Frame: 6 to 8 weeks
New Positions: Yes, see below

Comments:
12/20 update: GS delivered some relative strength with an early morning rally that continued to drift higher into the afternoon. GS posted +1.2% gain on low volume. I remain bullish on GS but traders may want to wait for another dip or bounce from the $164 level before initiating new positions. 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)

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: 144.51 change: -0.49

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:
12/20 update: IBM's sideways consolidation continues to narrow. A breakout one way or the other should be imminent. 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)

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: 36.99 change: +0.50

Stop Loss: 34.90
Target(s): 39.75
Current Option Gain/Loss: - 6.4% and - 5.3%
Time Frame: 6 to 8 weeks
New Positions: Yes, see below

Comments:
12/20 update: JNPR rallied to another new multi-year high, hitting $37.34 intraday. There is no change from my prior comments. I would still consider small positions today although if you're patient we might get a better entry point this week in the $36-35 zone. 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)

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: 69.65 change: -0.42

Stop Loss: 67.95
Target(s): 73.25
Current Option Gain/Loss: -34.2% and -40.0%
Time Frame: 6 to 8 weeks
New Positions: Yes, see below

Comments:
12/20 update: Defense stocks underperformed the rest of the market on Monday. LMT gave up -0.59% but remains inside the short-term $69.50-70.50 trading range. We can still launch new positions here but I would rather wait for a new relative high over $70.25 or $70.50.

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

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


Monsanto Co. - MON - close: 65.18 change: +0.58

Stop Loss: 59.89
Target(s): 67.25, 69.85
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see trigger

Comments:
12/20 update: The rally in MON continues with shares outperforming the major indices. There is no change from my weekend comments. Aggressive traders may want to consider new positions now. I am suggesting we wait for a dip and use a trigger to buy calls at $63.25. Cautious traders could wait and hope for a dip closer to $62 as their entry point. Thursday's low was $59.93 so I'm suggesting a stop loss at $59.89. If triggered our first target is $67.25. Our second target is $69.85.
FYI: The Point & Figure chart for MON just broke out past descending resistance and is forecasting a $74 price target.

Buy-the-dip Trigger @ 63.25

- Suggested Positions -

Buy the 2011 January $65.00 calls (MON1122A65) current ask $2.22

- or -

Buy the 2011 April $65.00 calls (MON1116D65) current ask $4.65

Entry on December xxth at $ xx.xx
Earnings Date 01/06/11 (confirmed)
Average Daily Volume = 4.9 million
Listed on December 18th, 2010


Nike Inc. - NKE - close: 90.27 change: +0.22

Stop Loss: 87.40
Target(s): 89.50, 92.50
Current Option Gain/Loss: +115.8%
Time Frame: 4 to 6 weeks
New Positions: no

Comments:
12/20 update: Tomorrow is our last day for this trade on NKE. The company reports earnings after the closing bell on Tuesday. I am suggesting we take profits at the close tomorrow to avoid holding over earnings. More aggressive traders will want to consider holding over the announcement.

This morning shares of NKE spiked to a new high on news that an analyst firm had raised their price target on NKE to $100. FYI: Currently our final target to exit is $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%)

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: 74.09 change: -0.03

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:
12/20 update: The energy sector was trading higher today but OII spent the session consolidating sideways. There is no change from my prior comments. 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)

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: 69.97 change: +0.63

Stop Loss: 66.25
Target(s): 72.50, 78.25
Current Option Gain/Loss: -23.3% and -12.7%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
12/20 update: RIG saw a little bit of a bounce (+0.9%) but volume was light on Monday. Shares are hovering near their rising 30-dma and near the $70.00 mark. I would still consider new bullish positions at current levels but keep your position size small to limit your risk. 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%)

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: 90.90 change: -0.28

Stop Loss: 89.75
Target(s): 96.25, 99.75
Current Option Gain/Loss: -48.0% and -26.1%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
12/20 update: UNP is drifting closer and closer toward round-number, psychological support near $90.00 and potential technical support at the 50-dma. I would wait for UNP to break through the short-term trendline of lower highs before initiating new 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

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: 72.74 change: -0.32

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:
12/20 update: UPS dipped lower on light volume. We are waiting for a pull back toward support near $70.00. Our trigger to buy calls is 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)

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: 78.90 change: +0.10

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:
12/20 update: UTX spiked higher on Monday morning but the gains quickly faded. There is no change from my weekend comment. 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)

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: 45.50 change: -0.56

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:
12/20 update: Right on cue shares of VMC are correcting. 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)

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: 88.57 change: +0.35

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:
12/20 update: XEC sold off late this morning but managed a nice round back into positive territory by the closing bell. Aggressive traders might want to consider small bullish positions now with a tight stop. Officially the newsletter still has our trigger at $84.00 but we might reconsider buying a dip near $85.00.

Trigger @ 84.00

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

- or - Buy the 2011

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: 26.90 change: +0.07

Stop Loss: 27.75
Target(s): 25.10, 24.25
Current Option Gain/Loss: -41.6%
Time Frame: 2 to 3 weeks
New Positions: No

Comments:
12/20 update: EXPE continued to bounce but looks like it could encounter some resistance in the $27.00-27.50 zone with the 40 and 50-dma. I am still very wary here and more conservative traders may want to exit early. We do not want to open new bearish positions.

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

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