Editor's Note:

The stock market has reversed lower on big volume. We had two bullish plays get stopped out. One bullish play was triggered. One of our bearish trades hit an exit target.

-James

Current Portfolio:


CALL Play Updates

Compass Minerals - CMP - close: 90.92 change: -1.29

Stop Loss: 87.75
Target(s): 94.75, 99.00
Current Option Gain/Loss: -12.0%, and -14.2%
Time Frame: 3 to 4 weeks
New Positions: See below

Comments:
01/29 update: Our new bullish play in CMP is now open. Shares hit our trigger to buy calls on the dip at $91.00 on Friday but I'm not sure we want to be bullish anymore. The stock market appears to have created a significant bearish reversal on Friday, sparked by the unrest in Egypt.

Technically CMP still looks like a bullish candidate here but I would be very reluctant to launch new positions. Even the strongest stocks can decline if the market is correcting lower. We have a stop loss at $87.75. More conservative traders might want to consider a stop closer to $90.00 instead. Our targets are $94.75 and $99.00.

- Suggested Positions -

Long the 2011 February $95.00 calls (CMP1119B95) Entry @ $1.25

- or -

Long the 2011 March $95 calls (CMP1119C95) Entry @ $2.00

Chart:

Entry on January 28th at $91.00
Earnings Date 02/08/11 (confirmed)
Average Daily Volume = 210 thousand
Listed on January 27th, 2010


FactSet Research Systems - FDS - close: 99.66 change: -0.12

Stop Loss: 95.75
Target(s): 99.90, 103.50
Current Option Gain/Loss: +41.3%, and +107.1%
Time Frame: 2 to 3 weeks
New Positions: see below

Comments:
01/29 update: Shares of FDS held up pretty well on Friday. The stock just hovered near the $100 level while the rest of the market turned lower. This relative strength is encouraging but I would not open new positions at this time. As a matter of fact more conservative traders will want to seriously consider a complete exit of bullish positions.

We can look for FDS to find short-term support at $98 and $96. Our final target is $103.50.

Small Positions

Long the 2011 February $95 call (FDS1119B95) Entry @ $2.90

- or -

Long the 2011 February $100 call (FDS1119B100) Entry @ $0.70

01/29 Consider an Early Exit now!
01/27 New stop loss @ 95.75
01/27 1st Target Hit @ 99.90. Feb. $95 call @ $4.25 (+46.5%)
01/27 1st Target Hit @ 99.90. Feb. $100 call @ $1.45 (+107%)

chart:

Entry on January 25th at $96.64
Earnings Date 03/16/11 (unconfirmed)
Average Daily Volume = 181 thousand
Listed on January 24th, 2010


CBOE Market Volatility Index - VIX - close: 20.04 change: +3.89

Stop Loss: N/A
Target(s): 24.00, 28.00
Current Option Gain/Loss: + 9.3%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
01/29 update: The unrest in Egypt sparked a sell-off across the market and the volatility index soared to a +24% gain. If the situation doesn't calm down before Monday we could easily see the VIX spiked toward the 200-dma near 23. I'm somewhat reluctant to open new positions after such a big move but our first target is the 24.00 level.

Officially we're listing this play without a stop loss but more conservative traders may want to consider a stop loss under the recent lows near $15.30. We have two targets to take profits at 24.00 and at 28.00.

- Suggested Positions -

Long the 2011 March $22.50 calls (VIX1116C22.5) Entry @ $1.60

chart:

Entry on January 26th at $17.00
Earnings Date --/--/--
Average Daily Volume =
Listed on January 25th, 2010


PUT Play Updates

Cognizant Technology Solutions - CTSH - close: 71.63 change: -1.54

Stop Loss: 75.25
Target(s): 70.25, 68.00
Current Option Gain/Loss: +23.0%
Time Frame: exit ahead of earnings
New Positions: see below

Comments:
01/29 update: CTSH broke down under short-term support and briefly traded under its simple 50-dma before paring its losses. The stock closed with a -2.1% loss. More conservative traders may want to lower their stop loss. I would wait for a new failed rally in the $73 area before considering new bearish positions. The low on Friday was $70.63. Our first target is $70.25. Our secondary target is $68.00. We still want to avoid holding over earnings. That only gives us a few trading days (earnings are Feb. 7th).

- Suggested Positions (very small positions only!) -

Long the 2011 February $70.00 PUT (CTSH1119N70) Entry @ $1.30

01/24 CTSH opened at $73.13. Put option opened at $1.30 01/22 Moved from call candidate to put play.

chart:

Entry on January 24th at $73.13
Earnings Date 02/07/11 (confirmed)
Average Daily Volume = 1.8 million
Listed as a PUT on January 22nd, 2010


Decker's Outdoor Corp. - DECK - close: 74.41 change: -2.21

Stop Loss: 80.25
Target(s): 70.50, 65.50
Current Option Gain/Loss: +20.7%, and +12.5%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
01/29 update: Bingo! Right on cue DECK rolled over. Of course the civil unrest in Egypt inspire market sell-off may have had something to do with it. I would still consider new positions here.

Our targets are $70.50 and $65.50. The Point & Figure chart for DECK is bearish with a $65 target.

- Suggested Positions -

Long the 2011 February $75.00 PUTS (DECK1119N75) Entry @ $2.65

- or -

Long the 2011 March $75.00 PUTS (DECK1119O75) Entry @ $4.80

01/27 DECK hit our trigger to buy puts at $77.00

chart:

Entry on January 27th at $77.00
Earnings Date 02/24/11 (unconfirmed)
Average Daily Volume = 1.5 million
Listed on January 20th, 2010


Google Inc. - GOOG - close: 600.99 change: -15.80

Stop Loss: n/a
Target(s): n/a
Current Option Gain/Loss: see below
Time Frame: 1 month
New Positions: No

THIS IS A STRANGLE TRADE (not a simple put play)

Comments:
01/29 update: The bounce in GOOG has failed at resistance near $620. Now shares are testing round-number, psychological support near the $600 mark. A breakdown from here could accelerate the profit taking. If you look at the weekly chart GOOG has definitely formed a failed rally/bearish reversal pattern. The good news is that stocks normally fall faster than they climb. I am not suggesting new strangle trades at this time but aggressive traders might consider buying puts.

STRANGLE TRADE: Buy an out of the money CALL and PUT

STRANGLE #2 (February) initial cost $15.10, currently: $2.45 (-83.7%)

2011 February $680 call (GOOG1119B680) Entry @ $6.20

- AND -

2011 February $580 put (GOOG1122N580) Entry @ $8.90

01/22: Exit the January strangle at the open.

chart:

Entry on January 20th at $626.77
Earnings Date 01/20/11 (unconfirmed)
Average Daily Volume = 3.4 million
Listed on January 19th, 2010


iShares Russell 2000 Index - IWM - close: 77.41 change: -1.94

Stop Loss: 80.25
Target(s): 75.00
Current Option Gain/Loss: -47.8%
Time Frame: 1 to 2 weeks
New Positions: see below

Comments:
01/29 update: The bounce in the small cap index is rolling over. This looks like a new entry point to buy puts. I am lowering our stop loss to $80.25. Right now our target is $75.00 but I'm tempted to move the target down to $74.00.

Small Position only

Long the 2011 February $77 puts (IWM1119N77) Entry @ $1.65

01/29 New stop loss @ 80.25

chart:

Entry on January 20th at $78.14
Earnings Date --/--/--
Average Daily Volume = 38 million
Listed on January 19th, 2010


Monsanto Co. - MON - close: 71.54 change: -2.14

Stop Loss: 75.51
Target(s): 69.00, 66.00
Current Option Gain/Loss: +46.0%, and +36.2%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
01/29 update: The unrest in Egypt and many parts of the world has been fed by rising food costs and inflation in food prices. There was talk this weekend that investors should look at fertilizer names as potential bullish investments as governments try to relieve food price pressures. Of course this is probably a longer-term phenomenon. Short-term MON is likely to trade lower with the broader market.

I would use today's move as a new entry point to buy puts. Our targets are $69.00 and $66.00.

- Suggested Positions -

Long the 2011 February $70 PUT (FDS1119N70) Entry @ $1.00

- or -

Long the 2011 March $70 PUT (FDS1119O70) Entry @ $1.85

01/29 MON is offering a new entry point to buy puts.

chart:

Entry on January 26th at $73.00
Earnings Date 03/31/11 (unconfirmed)
Average Daily Volume = 6.2 million
Listed on January 24th, 2010


Panera Bread Co. - PNRA - close: 94.86 change: -2.28

Stop Loss: 100.05
Target(s): 95.15, 91.00
Current Option Gain/Loss: +19.2%
Time Frame: 3 weeks
New Positions: see below

Comments:
01/29 update: Target achieved. PNRA broke down to new multi-week lows and closed under potential support at its 100-dma and the $95.00 mark. Our first target to take profits was hit at $95.15. Our final target is the $91.00 level but more aggressive traders might want to consider aiming for the 200-dma. I am adjusting our stop loss lower to $100.05. I am not suggesting new positions at this time. We'll wait for the next failed rally.

- Suggested Positions - (small positions)

Long the 2011 February $95 PUTS (PNRA1119N95) Entry @ $2.85

01/29 New stop loss @ 100.05
01/28 1st Target Hit @ 95.15, option @ $3.20 (+12.2%)
01/26 New stop loss @ 100.55, target adjusted from 95.50 to 95.15

chart:

Entry on January 24th at $97.96
Earnings Date 02/10/11 (unconfirmed)
Average Daily Volume = 364 thousand
Listed on January 22nd, 2010


CLOSED BULLISH PLAYS

Deere & Co. - DE - close: 88.91 change: -2.07

Stop Loss: 87.99
Target(s): 94.75, 99.50
Current Option Gain/Loss: Unopened
Time Frame: 2 to 3 weeks
New Positions: Yes, see trigger

Comments:
01/29 update: The market's morning spike higher on Friday pushed DE to $91.89 but shares quickly rolled over. The market appears to have finally reversed. I am dropping DE as a bullish candidate. Shares never hit our trigger to open positions at $92.10.

Trade never opened!

chart:

Entry on January xxth at $ xx.xx
Earnings Date 02/16/11 (confirmed)
Average Daily Volume = 3.3 million
Listed on January 26th, 2010


FedEx Corp. - FDX - close: 90.48 change: -3.88

Stop Loss: 91.75
Target(s): 99.90, 104.75
Current Option Gain/Loss: -42.9%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
01/29 update: Ouch! I've been warning readers that a breakdown or a rally in FDX was imminent. The market sell-off on Friday produced a -4.1% decline in FDX and the stock broke through several layers of support. Our stop loss was hit at $91.75. Our call was trading near $1.25. Our plan was to keep our positions small to limit our risk.

- Suggested Positions (only small positions so far) -

2011 April $100 call (FDX1116D100) Entry @ $2.96, exit @ $1.25 (-57.7%)

01/28: Stopped out. Option @ $1.25 (-57.7%)
01/22: January options have expired (-100%)
01/13: New targets for the April calls (99.90 and 104.75)
01/12: New stop loss @ 91.75
01/08: New exit strategy for January calls. Try to exit at 40 cents or more.
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


Research In Motion - RIMM - close: 60.15 change: -1.83

Stop Loss: 59.90
Target(s): 64.75, 67.50
Current Option Gain/Loss: -63.5%, and -48.9%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
01/29 update: The market-wide profit taking was too much for RIMM. Shares eventually broke down under the $60.00 level before the closing bell and hit our stop loss at $59.90. Shares also closed under technical support at their 50-dma.

- Suggested Positions -

2011 Feb. $62.50 calls (RIMM1119B62.5) Entry @ $2.47, exit $0.90 (-63.5%)

- or -

2011 March $65.00 calls (RIMM1119C65) Entry @ $2.35, exit $1.20 (-48.9%)

01/28: Stopped out. Feb call @ 0.90 (-63.5%), Mar call @ 1.20 (-48.5%)
01/13: New stop @ 59.90
01/13: 1st Target Hit @ 64.75. Feb. call @ $4.00 (+61.9%) Mar. call @ $3.75 (+59.5%)
01/12: New stop loss @ 58.45

chart:

Entry on January 6th at $61.00
Earnings Date 03/31/11 (unconfirmed)
Average Daily Volume = 9.9 million
Listed on January 5th, 2010