Editor's Note:

News that Egyptian President Mubarak agreed to step down on Friday helped spur stocks to another new two-year high. Our CLH trade has been opened. I've adjusted the entry point strategy on CAT and FAST. Meanwhile COH and DCI have new stop losses.

-James

Current Portfolio:


CALL Play Updates

Caterpillar Inc. - CAT - close: 103.54 change: +2.94

Stop Loss: 97.90
Target(s): 104.75, 107.50
Current Option Gain/Loss: Unopened
Time Frame: 4 to 6 weeks
New Positions: Yes, see trigger

Comments:
02/12 update: Wow! CAT really outperformed on Friday. On Thursday night I mentioned we might want to buy a breakout past $101. Now I'm wishing we did. It's not a good idea to chase it now but broken resistance near $100.75-101.00 should be new short-term support. Let's raise our buy-the-dip trigger to $101.00 and raise our stop loss to $97.90. We'll adjust our targets to $104.75 and $107.50.

Trigger @ 101.00

Buy the March $105 calls (CAT1119C105) current ask $2.92

02/12 Adjusted our trigger, targets, stop loss and strike price.

chart:

Entry on February xxth at $ xx.xx
Earnings Date 04/21/11 (unconfirmed)
Average Daily Volume = 6.2 million
Listed on February 5th, 2010


Clean Harbors, Inc. - CLH - close: 92.70 change: +1.32

Stop Loss: 87.95
Target(s): 94.95, 99.00
Current Option Gain/Loss: + 8.3%
Time Frame: 12 days
New Positions: see below

Comments:
02/12 update: Our new play in CLH is off to a good start. Shares broke out from their trading range and above resistance near $92.00. Our trigger to buy calls was hit at $92.25. We have a stop loss at $87.95. I would still consider new positions now on the breakout.

Investors should note that the most recent data lists short interest at 11.3% of the very small 23.1 million-share float. That is a good recipe for a short squeeze higher. Please note that we'll plan on exiting ahead of the earnings on Feb. 23rd (still an unconfirmed date).

- Suggested Positions -

Long the March $95.00 call (CLH1119C95) Entry @ $1.80

chart:

Entry on February 11th at $92.25
Earnings Date 02/23/11 (unconfirmed)
Average Daily Volume = 181 thousand
Listed on February 10th, 2010


Coach Inc. - COH - close: 57.86 change: +0.25

Stop Loss: 54.40
Target(s): 58.25, 62.00
Current Option Gain/Loss: +66.6%, and +123.5%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
02/12 update: COH is still inching its way higher. The stock does look a little bit overbought here with the stock up seven days in a row. I am adjusting our first exit target from $58.50 down to $58.25. We'll move our stop loss higher to $54.40. Odds are pretty good that COH will see a pull back after hitting resistance near $58.50 and we could see another entry point on the dip. No new positions at this time. Keep in mind that the $60.00 level could end up being round-number, psychological resistance.

- Suggested Positions -

Long the 2011 March $55.00 calls (COH1119C55) Entry @ $2.10

- or -

Long the 2011 March $57.50 calls (COH1119C57.5) Entry @ $0.85

02/12: Adjusted 1st target to $58.25
02/12: New stop loss @ 54.40
02/08: New stop loss @ 53.49

chart:

Entry on February 7th at $55.35
Earnings Date 04/20/11 (unconfirmed)
Average Daily Volume = 4.1 million
Listed on January 31st, 2011


Costco Wholesale Corp. - COST - close: 75.04 change: +0.49

Stop Loss: 72.95
Target(s): 79.75
Current Option Gain/Loss: Unopened
Time Frame: 3+ weeks
New Positions: Yes, see Trigger

Comments:
02/12 update: I am a little surprised that COST did not see more strength today. Shares dipped to short-term support near $74 Friday morning but eventually worked its way higher and closed above round-number resistance at $75.00. This looks like a new bullish entry point right here. However, the current all-time high is $75.23. Aggressive traders could buy calls now. I am suggesting we stick to our plan and use a trigger at $75.50. If triggered our target is $79.75. We will plan to exit ahead of COST's early March earnings report. That gives us three or four weeks.

The Point & Figure chart for COST is bullish with an $88 target.

Trigger @ 75.50

- Suggested Positions -

Buy the March $75 calls (COST1119C75) current ask $1.71

chart:

Entry on February xxth at $ xx.xx
Earnings Date 03/02/11 (confirmed)
Average Daily Volume = 5.8 million
Listed on February 7th, 2010


Donaldson Company, Inc. - DCI - close: 60.70 change: +0.79

Stop Loss: 58.45
Target(s): 62.50, 64.75
Current Option Gain/Loss: +11.1%
Time Frame: just a few days
New Positions: see below

Comments:
02/12 update: Bingo! This is the sort of move we have been looking for out of DCI. Shares rallied past resistance at $60.00 and held it. If you missed the entry point on Thursday we got another entry on Friday. Unfortunately we don't have much time. DCI is due to report earnings on Wednesday, Feb. 16th before the opening bell. That only gives us two days. Now lately we've been seeing a lot of earnings-fueled rallies (think WFMI and WYNN) but there have also been some post-earnings disasters (think CSCO). The newsletter will exit ahead of the report.

Please note I'm raising the stop loss to $58.45.

(Small Positions) - Suggested Positions -

Long the 2011 March $60 calls (DCI1119C60) Entry @ $1.80

02/12 New stop loss @ 58.45
02/10 Time frame for this trade has changed!
02/10 Bullish Trigger hit @ 60.35
02/05 Switched from puts to calls. Trigger @ 60.35

chart:

Entry on February 10th at $60.35
Earnings Date 02/23/11 (unconfirmed)
Average Daily Volume = 208 thousand
Listed on January 31st, 2011


Fastenal Co. - FAST - close: 63.36 change: +0.45

Stop Loss: 58.70
Target(s): 64.75, 67.25
Current Option Gain/Loss: Unopened
Time Frame: 4 to 6 weeks
New Positions: Yes, see Trigger

Comments:
02/12 update: I checked two different sources and both said that FAST was up +45 cents on Friday. Yet if you look at the charts, the stock closed at $63.41 on Thursday, saw a gap down Friday morning, and did not make it back into positive territory. The stock should be down -5 cents. At any rate FAST remains short-term overbought and due for some profit taking. We've been waiting for a dip to $61.00. I will raise that trigger to $61.55 and raise our stop loss to $59.40. Our targets are $64.75 and $67.25. FYI: The Point & Figure chart for FAST is bullish with a $73 target. Readers may want to keep in mind that the most recent data listed short interest at 11.4% of the 132 million-share float.

Trigger @ 61.55

- Suggested Positions -

Buy the March $60 calls (FAST1119C60) current ask $3.30

- or -

Buy the March $65 calls (FAST1119C65) current ask $0.75

02/12 New trigger @ 61.55, new stop loss @ 59.40

chart:

Entry on February xxth at $ xx.xx
Earnings Date 04/12/11 (unconfirmed)
Average Daily Volume = 1.0 million
Listed on February 8th, 2010


Nike Inc. - NKE - close: 86.21 change: -0.58

Stop Loss: 83.85
Target(s): 88.00, 89.90
Current Option Gain/Loss: Unopened
Time Frame: 4 to 8 weeks
New Positions: Yes, see Trigger

Comments:
02/12 update: We have been looking for a dip in shares of NKE but when it happens against the grain and the market is climbing that's when NKE's relative weakness is worrisome. I would still buy calls on a dip at $85.25 but we should keep our position size small to limit our risk. If triggered we'll use a stop loss at $83.85. Our targets are $88.00 and $89.90.

Trigger @ $85.25

- Suggested Positions - (Small Positions Only!)

Buy the March $85 calls (NKE1119C85) current ask $3.70

- or -

Buy the April $90 calls (NKE1116D90) current ask $1.76

chart:

Entry on February xxth at $ xx.xx
Earnings Date 03/17/11 (unconfirmed)
Average Daily Volume = 2.2 million
Listed on February 9th, 2010


PACCAR Inc. - PCAR - close: 52.52 change: +1.05

Stop Loss: 49.45
Target(s): 53.45
Current Option Gain/Loss: +83.3%, and +57.1%
Time Frame: 2 to 3 weeks
New Positions: see below

Comments:
02/12 update: As expected the oversold bounce in PCAR continues. The stock outperformed today with a +2.0% gain. Shares produced a small victory with a close over the 10-dma. Currently the 100-dma is at $53.50 so I am adjusting our final exit target to $53.45. More aggressive traders could aim higher and aim for the 30 or 50-dma instead. I am not suggesting new positions at this time.

Prior Comments:
This should be a short-term trade. Aggressive traders could use February calls. I'm listing both February and March. Just remember that Februarys expire soon. Note: A lot of the option strikes are odd. PCAR must have had some sort of dividend.

Open Small Positions Now

Long the February $49.70 call (PCAR1119B49.7) Entry @ $1.50

- or -

Long the March $55 call (PCAR 1119C55) Entry @ $0.35

02/12 Adjusted our final exit target to $53.45

chart:

Entry on February 7th at $50.60
Earnings Date 04/20/11 (unconfirmed)
Average Daily Volume = 2.9 million
Listed on February 5th, 2010


The Toronoto-Dominion Bank - TD - close: 79.65 change: +0.92

Stop Loss: 75.90
Target(s): 84.00, 89.00
Current Option Gain/Loss: +18.5%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
02/12 update: Financial stocks were showing relative strength on Friday. Shares of TD opened at $78.89 and rallied toward round-number resistance at $80.00. I would still consider new positions here or you could wait for a dip toward $78. Our targets are $84 and $89. We will plan to exit ahead of the early March earnings report (unconfirmed date).

FYI: The Point & Figure chart for TD is bullish with a $98 target.

- Suggested Positions -

Long the March $80.00 call (TD1119C80) Entry @ $1.35

chart:

Entry on February 11th at $78.89
Earnings Date 03/03/11 (unconfirmed)
Average Daily Volume = 583 thousand
Listed on February 10th, 2010


CBOE Market Volatility Index - VIX - close: 15.69 change: -0.40

Stop Loss: N/A
Target(s): 24.00, 28.00
Current Option Gain/Loss: -53.1%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
02/12 update: Our VIX play is not looking too hot. Egyptian President Mubarak's decision to step down should cool emotions in the Mideast and relieve some concern in the markets. Of course the VIX has been trading very low so U.S. investors have not been concerned for days. The VIX is nearing its 52-week low and could breakdown into another leg lower.

Once again I am suggesting that more conservative traders consider an early exit. Or you could keep this trade as some sort of hedge against a sudden market decline but bear in mind that this option expires on March 16th. I am not suggesting new positions at this time.

Earlier Comments:
Just because the VIX bounced near the 15.00-15.50 level in the past doesn't mean it can go crashing through it but this would be a good area to speculate on a rebound. I will point out that between 2005 and 2006 the VIX was pretty much dead, limping along the 10.00 area for two years.

- Suggested Positions -

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

chart:

Weekly chart:

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


PUT Play Updates

Google Inc. - GOOG - close: 624.50 change: + 8.06

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:
02/12 update: GOOG has broken out over resistance near the $620 level. The next obstacle for the bulls is the $640 area. There is no change from my prior comments. Our strangle trade is dead in the water and has very little hope before February expiration.

No new strangle positions at this time.

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

STRANGLE #2 (February) initial cost $15.10, currently: $0.25 (-98.3%)

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

- AND -

2011 February $580 put (GOOG1119N580) 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: 82.07 change: +0.88

Stop Loss: --.--
Target(s): 75.00
Current Option Gain/Loss: -100.0%
Time Frame: 1 to 2 weeks
New Positions: see below

Comments:
02/12 update: I've been talking about buying calls on the IWM for the past few days. I think it's time to follow up on that suggestion. Our put play has been dead for a while now and we're just riding it out through February expiration. I'm not going to bother with a chart since we'll add a chart to the bullish IWM play. No new bearish positions at this time.

Small Position only

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

02/03 Remove the stop loss
01/29 New stop loss @ 80.25

No Chart necessary

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