Editor's Note:

NKE rallies to a new all-time high ahead of its earnings report tonight. Our plan was to exit and take profits at the closing bell. Things could change by tomorrow morning but not holding over earnings seems to have been the smart move as NKE is down -4% after hours.

-James

Current Portfolio:


CALL Play Updates

Cummins Inc. - CMI - close: 111.19 change: +2.07

Stop Loss: 108.75
Target(s): 112.75 114.75
Current Option Gain/Loss: Unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see trigger

Comments:
12/21 update: The stock market melt up continues. Odds of us seeing CMI hit $102.50 any time soon are probably not that great. Shares just rallied another +1.8% to close above potential resistance at $110. I am adjusting our entry point strategy. Instead of waiting for a dip to $102.50 we'll move our buy-the-dip entry point to $110.25. We'll also move the stop loss to $108.75. CMI remains overbought and due for some profit taking thus buying calls near $110 is a high-risk trade in my book. I am suggesting small positions to limit our risk! Our new targets are $112.75 and $114.75.

Trigger @ $110.25 (SMALL POSITIONS ONLY)

- Suggested Position -
Buy the 2011 January $115 calls (CMI1122A115)

- or -

Buy the 2011 March $115 calls (CMI1119C115)

12/21: New entry point @ $110.25, New stop @ 108.75, New option strikes.

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: 63.99 change: +0.71

Stop Loss: 59.75
Target(s): 67.00, 69.50
Current Option Gain/Loss: -28.5% and -17.6%
Time Frame: 6 to 8 weeks
New Positions: Yes, see below

Comments:
12/21 update: CSX is still consolidating sideways but shares act like they are ready to breakout higher soon. More conservative traders might want to raise their stop loss closer to the $62 area. I don't see any other changes from my prior comments. If you do open new positions I would buy the February calls.

- 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: 46.80 change: +0.84

Stop Loss: 43.75
Target(s): 44.90, 48.00
Current Option Gain/Loss: +875.0%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
12/21 update: CTL surged another +1.8% to new two-year highs. We have been aiming for a final exit at $47.25 but I'm inching our exit up to $48.00 given CTL's relative strength. Hopefully this act of greediness doesn't come back to bite us in the behind. The option is currently up +875%. I am not suggesting new positions at this time.

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

12/21: Adjusted final target to $48.00
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: 72.85 change: +0.55

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:
12/21 update: CTSH hovered sideways on Tuesday. We're still looking for a dip back toward our trigger 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: 54.72 change: -0.52

Stop Loss: 51.25
Target(s): 53.95, 58.50
Current Option Gain/Loss: +32.3% and -16.2%
Time Frame: 5 to 6 weeks
New Positions: see below

Comments:
12/21 update: After hitting new highs on Monday ESRX saw some relative weakness today. Traders did buy the dip near the short-term trend of higher lows but the stock posted a -0.9% decline. 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: 59.87 change: +0.28

Stop Loss: 53.75
Target(s): 59.95, 62.50
Current Option Gain/Loss: Unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see trigger

Comments:
12/21 update: FAST is still consolidating under resistance near $60.00. The narrowing consolidation would suggest the stock is ready to breakout soon. Even if FAST did breakout past $60.00 I wouldn't buy it. The stock is too overbought. I will adjust our entry point. We'll use a dip at $56.75 as our entry point to buy calls.

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 @ 56.75

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

- or -

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

12/21: Adjusted entry point trigger from 56.00 to 56.75

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: 93.69 change: +0.13

Stop Loss: 90.90
Target(s): 96.75, 99.75
Current Option Gain/Loss: -47.5% and -10.8%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
12/21 update: Our options in FDX are going to die of boredom! Shares have not moved following its earnings report. Readers may want to wait for a new relative high (maybe over 94.50 or over 95.00) before initiating new positions. 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: 168.23 change: +2.18

Stop Loss: 159.75
Target(s): 171.00, 179.50
Current Option Gain/Loss: +32.7% and +19.5%
Time Frame: 6 to 8 weeks
New Positions: Yes, see below

Comments:
12/21 update: Financial stocks were some of the best performers today. On a percentage basis GS actually underperformed the banks but the stock is looking stronger. Shares are nearing recent resistance in the $170-171 area. Our first target to take some money off the table is at $171.00. I am not suggesting new positions at current levels.
FYI: The Point & Figure chart for GS is forecasting a very bullish $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: 145.74 change: +1.23

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:
12/21 update: IBM is bouncing back toward the top of its range. The stock looks poised to breakout soon. 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: 37.61 change: +0.62

Stop Loss: 34.90
Target(s): 39.75
Current Option Gain/Loss: +19.2% and + 6.6%
Time Frame: 6 to 8 weeks
New Positions: Yes, see below

Comments:
12/21 update: The strength in technology today allowed JNPR to rally +1.6% and close at new multi-year highs. If you're looking for a new entry point I'd probably wait for a dip near $36.00. 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: 69.80 change: +0.15

Stop Loss: 67.95
Target(s): 73.25
Current Option Gain/Loss: -37.1% and -40.0%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
12/21 update: The rally in defense stocks underperformed that of the major market indices. Shares of LMT are still churning sideways in the $69.50-70.30 zone. We can still launch new positions here but I would rather wait for a new relative high over $70.35 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: 66.30 change: +1.12

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:
12/21 update: The rally in MON continues. The stock is now up four days in a row. We don't want to chase it but I will adjust our trigger to buy the dip from $63.25 to $64.25. 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.

NOTE - Readers need to know that MON is due to report earnings on January 6th. Holding over the report would be a high-risk event.

Buy-the-dip Trigger @ 64.25 <-- new trigger

- 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


Oceaneering International - OII - close: 74.16 change: +0.07

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:
12/21 update: OII isn't moving much. Shares are just drifting 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


Panera Break Co. - PNRA - close: 105.04 change: -0.38

Stop Loss: 103.90
Target(s): 109.95, 114.00
Current Option Gain/Loss: Unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see trigger

Comments:
12/21 update: Oh wow! I am very surprised by the action in PNRA today. The market surges to new two-year highs and PNRA actually posted a loss. This stock traded sideways in a very narrow range. Is the rally actually over? I still think a breakout over $107 works as an aggressive entry point.

I am suggesting we use a trigger to launch bullish positions at $107.15. If triggered our first, short-term target is $109.90. Our second, longer-term target is $114.00. This is an aggressive trade so we want to keep our position size small. FYI: The Point & Figure chart is very bullish with a $131 target.

Breakout Trigger @ $107.15

- Suggested Positions - (small positions) -

Buy the 2011 January $110 (PNRA1122A110)

- or -

Buy the 2011 February $115 (PNRA1119B115)

Entry on December xxth at $ xx.xx
Earnings Date 02/10/11 (unconfirmed)
Average Daily Volume = 389 thousand
Listed on December 20th, 2010


Transocean Ltd. - RIG - close: 69.58 change: -0.39

Stop Loss: 66.25
Target(s): 72.50, 78.25
Current Option Gain/Loss: -33.5% and -25.5%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
12/21 update: Oil service stocks did not see much participation in the stock market rally on Tuesday. Shares of RIG certainly underperformed. The stock is hugging technical support at its rising 30-dma. Volume remains light. I would still consider new bullish positions at current levels but keep your position size small to limit your risk. Readers may want to tighten their stop loss toward the 50-dma or the $68 area. 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: 92.06 change: +1.16

Stop Loss: 89.75
Target(s): 96.25, 99.75
Current Option Gain/Loss: -35.5% and -13.3%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
12/21 update: Railroad stocks were rebounding higher today and UNP delivered a +1.2% gain. This move does break the short-term trend of lower highs. Readers can use this bounce to launch new bullish positions (I would pick the Feb. $95 calls).

- 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

12/21/10: UNP provides another entry point.
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: 72.88 change: +0.14

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:
12/21 update: It was a quiet day for UPS. There is no change from my prior comments. 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: 79.35 change: +0.45

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:
12/21 update: UTX is still trying to breakout higher but resistance at $79.50 is holding it back. I have been talking about changing our entry point to buy a breakout. My biggest concern is that UTX has resistance in the $81-82 zone from its 2007 highs. We might reconsider if UTX can close over $79.50. If that does happen we'll probably use a tighter stop loss near $78.00. At the moment our entry point is at $77.10.
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: 45.51 change: +0.01

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:
12/21 update: VMC spent the day trading sideways. 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: 89.51 change: +0.94

Stop Loss: 84.75
Target(s): 89.90, 94.25
Current Option Gain/Loss: Unopened
Time Frame: 4 to 6 weeks
New Positions: Yes, see below

Comments:
12/21 update: XEC is inching closer and closer to resistance at $90.00. I would rather not chase it here. We will raise our buy-the-dip entry point to $86.50 and raise our stop loss to $84.75 since shares do have support near $85.00. We want to keep our position size pretty small to limit our risk.

Trigger @ 86.50 <-- new trigger

Suggested Position:
Buy the 2011 January $90 calls (XEC1122A90)

- or - Buy the 2011 February $90 calls (XEC1119B90)

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: 27.19 change: +0.29

Stop Loss: 27.75
Target(s): 25.10, 24.25
Current Option Gain/Loss: -58.3%
Time Frame: 2 to 3 weeks
New Positions: No

Comments:
12/21 update: EXPE has rallied all the way back to resistance near $27.50-27.60. This level of resistance held again and the pull back from its intraday highs looks like another failed rally. However, I would not consider new bearish positions at this time. If EXPE breaks above this level these puts are going to implode in value (not that there is much value left).

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


CLOSED BULLISH PLAYS

Nike Inc. - NKE - close: 92.30 change: +2.03

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:
12/21 update: NKE surged higher on big volume ahead of its earnings report. The stock almost hit our final target at $92.50. The high today was $92.49. It was our plan to exit at $92.50 or at the close today to avoid holding over the earnings announcement. The January $85 calls closed with a bid of $7.85 (+182.3%).

A lot of people think NKE could rally toward the $100 level. Yet it looks like shares are trading down -4% after hours as investors react to the earnings news. NKE delivered a profit of 94 cents a share, which was six cents better than expected.

(Second position) Closed Position:
Long the January $85.00 CALLS (symbol:NKE1122A85) Entry @ $2.78, exit @ $7.85 (+182.3%)

12/21/10 Exit at the close. option @ $7.85 (+182.3%)
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