Editor's Note:

The S&P 500 has rallied to a new 32-month high. Meanwhile we had two bullish targets hit on Friday. The winners were COH and NKE. JOYG is also looking strong although it has hit potential resistance near $100. It will be interesting to watch if stocks see profit taking after option expiration or a resumption of the uptrend since so many stocks have just been churning sideways the last few days.

Please note that I will be traveling the next several days for a week-long seminar. Play updates will be brief and we might see fewer new positions added to the newsletter. Fortunately we already have a pretty strong play list for the OI newsletter.

-James

Current Portfolio:


CALL Play Updates

Ashland Inc. - ASH - close: 60.90 change: -0.18

Stop Loss: 56.75
Target(s): 63.00, 67.00
Current Option Gain/Loss: +71.4%, and +25.4%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
02/19 update: Bulls were quick to buy the dip in ASH when it neared the $60 level on Friday afternoon. If you missed the pull back near $60.00 I would still consider new bullish positions now. However, if you're buying calls now you may want to raise your stop loss higher than the newsletter's, which is at $56.75. Our first profit target is $63.00. Our final exit target is $67.00.

The Point & Figure chart for ASH is bullish with a $83 target.

- Suggested Positions -

Long the March $60 calls (ASH1119C60) Entry @ $1.40

- or -

Long the April $60 calls (ASH1116D60) Entry @ $2.55

02/16 New stop loss @ 56.75, New 2nd target at $67.00

chart:

Entry on February 14th at $58.30
Earnings Date 04/27/11 (unconfirmed)
Average Daily Volume = 1.0 million
Listed on February 12th, 2010


Peabody Energy Corp. - BTU - close: 65.02 change: -1.02

Stop Loss: 61.75
Target(s): 69.75, 74.00
Current Option Gain/Loss: -35.5%, and -16.6%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
02/19 update: With option expiration on Saturday shares of BTU gravitated toward the nearest strike price, which happened to be the $65 level. The mid afternoon selling pulled BTU toward the 10-dma (shares hit $64.18) but the stock recovered by the closing bell. I would use this dip in BTU as a new entry point to buy calls. Our first exit target is $69.75.

The Point & Figure chart for BTU is bullish with an $80 target.

- Suggested Positions -

Long the March $70 calls (BTU1119C70) Entry @ $1.07

- or -

Long the June $70 calls (BTU1118F70) Entry @ $3.60

chart:

Entry on February 17th at $66.30
Earnings Date 04/21/11 (unconfirmed)
Average Daily Volume = 4.6 million
Listed on February 16th, 2010


Caterpillar Inc. - CAT - close: 105.86 change: +2.50

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:
02/19 update: Shares of CAT continue to outperform. On Friday the company announced stronger than expected global sales with North America leading the way (+58% sales growth). The stock rallied to new highs again. Naturally this is frustrating since CAT is rising without us. We keep trying to buy a dip and it's not happening. I still don't want to chase it today. We will leave our buy-the-dip entry point at $101.00 for the time being but I don't have a time frame for when we could get filled. We'll just have to wait for the next hiccup in this bullish trend. The top of CAT's bullish channel should be a signal for some consolidation but the stock isn't there yet.

Trigger @ 101.00

- Suggested Positions -

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: 93.18 change: -0.22

Stop Loss: 91.45
Target(s): 94.95, 99.00
Current Option Gain/Loss: +13.8%
Time Frame: 12 days
New Positions: see below

Comments:
02/19 update: Friday saw CLH pull back toward short-term support near its 10-dma and the $92.00 level, which as prior resistance is naturally new support. The late day bounce looks like a brand new entry point to buy calls. Unfortunately, our time is up. Since the U.S. markets are closed on Monday our plan is to close this position on Tuesday at the closing bell to avoid CLH's earnings on Wednesday.

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.

- Suggested Positions -

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

02/19 Prepare to exit on Tuesday (Feb. 22) at the close
02/17 New stop loss @ 91.45
02/16 New stop loss @ 88.45

chart:

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


Coach Inc. - COH - close: 58.28 change: +1.63

Stop Loss: 54.95
Target(s): 58.25, 62.00
Current Option Gain/Loss: +71.4%, and +123.5%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
02/19 update: Target achieved! I wish I could tell you what sent shares of COH almost straight up on Friday. The stock started off strong and barely paused midday. COH rallied past its recent resistance and hit new six-week highs at $58.28. Our first target to take profits was hit at $58.25 (options @ +69% and +117%). Unfortunately, I could not find any specific news behind the rally not that I'm complaining. The December 2010 highs near $58.50 should be resistance but given the strength of the rally on Friday COH could breakout sooner than expected. I am raising our stop loss to $54.95. More conservative traders may want to raise their stop even higher. Our final target is $62.00 but I expect the $60 level to act as a speed bump. No new positions at this time.

- 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

02/19: New stop loss @ 54.95
02/18: 1st Target Hit @ 58.25. Options @ +69% and +117%
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: 75.43 change: +0.59

Stop Loss: 72.95
Target(s): 79.75
Current Option Gain/Loss: + 0.0%
Time Frame: six trading days
New Positions: Yes, see below

Comments:
02/19 update: COST showed some relative strength on Friday with a breakout and close above resistance at $75.00 and its old high of $75.23. The stock has not yet hit our trigger at $75.50 but it's close enough for me. I am suggesting we go ahead and buy calls now on this breakout. Our first target is $79.75. We will plan to exit ahead of COST's March 2nd earnings report. That only gives us about six trading days.

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

buy calls now!

- Suggested Positions -

Buy the March $75 calls (COST1119C75) current ask $1.82

02/19 New entry point. Buy calls now!

chart:

Entry on February 22nd at $ xx.xx
Earnings Date 03/02/11 (confirmed)
Average Daily Volume = 5.8 million
Listed on February 7th, 2010


Cognizant Technology - CTSH - close: 77.73 change: +0.85

Stop Loss: 74.45
Target(s): 84.50, 89.00
Current Option Gain/Loss: + 0.0%, and + 5.7%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
02/19 update: Our new bullish play on CTSH has been triggered. The stock was showing some relative strength on Friday and broke through resistance to close at new all-time highs. We had a trigger to launch bullish positions at $77.55. I would still consider new positions now. Our targets are $84.50 and $89.00. The Point & Figure chart for CTSH is bullish with a $105 target.

Play is open. Buy calls now!

- Suggested Positions -

Long the March $80 call (CTSH1119C80) Entry @ $0.95

- or -

Long the April $80 call (CTSH1116D80) Entry @ $1.75

02/18 CTSH hit our trigger to buy calls @ 77.55

chart:

Entry on February 18th at $77.55
Earnings Date 05/04/11 (unconfirmed)
Average Daily Volume = 2.4 million
Listed on February 15th, 2010


Eastman Chemical Co. - EMN - close: 95.41 change: -0.86

Stop Loss: 90.75
Target(s): 99.75, 104.00
Current Option Gain/Loss: + 0.0%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
02/19 update: I would not be too alarmed by EMN's relative weakness on Friday. The dip was probably a reflection of February option expiration. Shares moved toward the nearest strike price, which happened to be the $95.00 level. I am suggesting readers use the pull back as a new entry point to buy calls.

Our targets are $99.75 and $104.00. Expect the $100.00 level to initially act as overhead resistance. The Point & Figure chart for EMN is bullish with a $133 target.

- Suggested Positions -

Long the March $95 calls (EMN1119C95) Entry @ $2.65

02/17 EMN breaks out. Hits trigger to buy calls @ 94.60

chart:

Entry on February 17th at $94.60
Earnings Date 04/21/11 (unconfirmed)
Average Daily Volume = 946 thousand
Listed on February 14th, 2010


Fastenal Co. - FAST - close: 63.70 change: +0.61

Stop Loss: 61.90
Target(s): 67.25
Current Option Gain/Loss: + 0.0%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
02/19 update: FAST is refusing to dip for us. The stock has been consolidating sideways in the $63 area for about a week and a half. Traders did buy the intraday dip (near $63) and the stock closed at another new high. Instead of waiting for a dip to $61.65 I am adjusting our entry point strategy. We will go ahead and buy calls now, which is a much more aggressive and higher-risk trade. Since this is a higher-risk entry point we want to use very small positions (at least one half to one quarter your normal trade size). We will use a tighter stop loss. I'll set the stop loss at $61.90 and more conservative traders may want to use a stop loss near $62.50 instead. Remember, small positions! Our upside exit target is $67.25. Do not be surprised if the $65.00 mark offers a little resistance. Readers may want to keep in mind that the most recent data listed short interest at 11.4% of the 132 million-share float.

Open VERY small bullish positions now!

- Suggested Positions -

Buy the March $65 calls (FAST1119C65) current ask $0.95

- or -

Buy the May $65 calls (FAST1121E65) current ask $2.50

02/19 Adjusted entry point. Buy calls now. Very small positions
02/12 New trigger @ 61.55, new stop loss @ 59.40

chart:

Entry on February 22nd at $ xx.xx
Earnings Date 04/12/11 (unconfirmed)
Average Daily Volume = 1.0 million
Listed on February 8th, 2010


Joy Global Inc. - JOYG - close: 100.03 change: +1.96

Stop Loss: 93.75
Target(s): 97.25, 104.50
Current Option Gain/Loss: +83.1%, and +58.9%
Time Frame: 3 weeks
New Positions: see below

Comments:
02/19 update: Target achie...oops... wait. JOYG surged again with a +2% rally toward the $100 level. Originally our final exit target was $99.85. However, we recently upped our final exit to $104.50 thanks to news that JOYG would be added to the S&P 500 index. The stock hit $100.58 on Friday and closed near the $100.00 strike price in time for the February option expiration. More conservative traders may want to take profits now anyway.

JOYG looks a little bit overbought here so it might be time for a little profit taking. I would hate to see it but JOYG could dip toward its 10-dma near $95 and still remain in its up trend. I am raising our stop loss to $93.75. No new bullish positions at this time. On a short-term basis JOYG should have some support near $98 and $96.

- Suggested Positions -

Long the March $95 calls (JOYG1119C95) Entry @ $3.85

- or -

Long the April $100 calls (JOYG1116D100) Entry @ $3.46

02/19 New stop loss @ 93.75
02/17 New stop loss @ 91.75
02/17 1st Target Exceeded on Gap Higher. Options @ +50.6% and +41.6%
02/16 New stop loss @ 89.45

chart:

Entry on February 14th at $94.44
Earnings Date 03/02/11 (unconfirmed)
Average Daily Volume = 1.4 million
Listed on February 12th, 2010


Nike Inc. - NKE - close: 88.82 change: +2.78

Stop Loss: 83.85
Target(s): 88.00, 91.50
Current Option Gain/Loss: +115.3%, and +131.9%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
02/19 update: Target achieved. NKE surged throughout the session. Actually if you look at the intraday chart the action looks a lot like the move in COH. Bulls were hot for consumer names or someone was trying to cover their shorts ahead of expiration. NKE really outperformed with a +3.2% gain. The stock hit our first exit target at $88.00. Shares look a little bit overbought here so I would expect some profit taking early next week. I am not suggesting new positions at this time.

Currently our final exit target is $89.90, just over $1.00 away. I am going to adjust our final exit to $91.50. The December high was $92.49.

- Suggested Positions - (Small Positions Only!)

Long the March $85 calls (NKE1119C85) Entry @ $2.09

- or -

Long the April $90 calls (NKE1116D90) Entry @ $0.94

02/19 Adjusted final target to $91.50
02/18 1st Target Hit @ 88.00. March $85 call @ 3.75 (+79.4%)
02/18 1st Target Hit @ 88.00. April $90 call @ 1.80 (+91.4%)

chart:

Entry on February 15th at $85.25
Earnings Date 03/17/11 (unconfirmed)
Average Daily Volume = 2.2 million
Listed on February 9th, 2010


PACCAR Inc. - PCAR - close: 52.65 change: +0.24

Stop Loss: 49.95
Target(s): 53.45
Current Option Gain/Loss: +28.5%
Time Frame: 2 to 3 weeks
New Positions: see below

Comments:
02/19 update: PCAR continues to consolidate sideways and appears stock between short-term support at its 10-dma and overhead resistance at its 20-dma. I am not suggesting new bullish positions at this time. More conservative traders may want to take profits now and exit. Currently our final exit target is $53.45 but more aggressive traders could aim higher.

Open Small Positions Now

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

02/17 Planned Exit for February calls @ close: $2.60 (+73.3%)
02/16 New stop loss @ 49.95
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


Quality Systems Inc. - QSII - close: 79.39 change: +0.18

Stop Loss: 77.95
Target(s): 84.90, 89.00
Current Option Gain/Loss: -64.7%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
02/19 update: The selling pressure on Friday was not enough to break down through the bottom of QSII's trading range. Nimble traders may want to consider buying this intraday bounce, especially with our stop loss at $77.95. Keep in mind I would consider this a somewhat more aggressive entry point given some of the deterioration we've seen in QSII's technical indicators. Momentum traders can wait for QSII to breakout to new highs. If we do not see QSII produce some follow through higher on Tuesday (since Monday is a holiday) then we will consider an early exit!

The Point & Figure chart for QSII is bullish with a $119 target.

- Suggested Positions -

Long the March $85 calls (QSII1119C85) Entry @ $0.85

02/19 Consider buying calls on this intraday bounce with a tight stop. March $80 calls ask @ $2.00 and March $85 @ $0.45

chart:

Entry on February 14th at $80.75
Earnings Date 05/31/11 (unconfirmed)
Average Daily Volume = 202 thousand
Listed on February 12th, 2010


Schnitzer Steel Industries - SCHN - close: 64.91 change: +0.03

Stop Loss: 61.45
Target(s): 68.75
Current Option Gain/Loss: Unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see Trigger

Comments:
02/19 update: SCHN did not make a lot of progress on Friday and I'm not surprised. It was the last day before February options expired and shares of SCHN gravitated to the closest strike price, which was the $65.00 mark. Maybe now that expiration is over we will see SCHN dip a little bit.

I am suggesting we buy calls on a dip at $63.75. We'll start with a stop at $61.45. Our first target is $68.75, just under the January highs. We will consider adding a secondary target down the road.

FYI: Readers will be interested to note that SCHN most recent data listed short interest at 5% of the very small 18.3 million-share float. Now I don't think this data is up to date but the stock's very small float might contribute to any potential short squeeze.

Trigger @ 63.75

- Suggested Positions -

Buy the March $65 calls (SCHN1119C65) current ask $2.00

- or -

Buy the May $65 calls (SCHN1121E65) current ask $4.50

chart:

Entry on February xxth at $ xx.xx
Earnings Date 04/07/11 (unconfirmed)
Average Daily Volume = 250 thousand
Listed on February 17th, 2010


The Toronoto-Dominion Bank - TD - close: 81.35 change: -0.57

Stop Loss: 76.90
Target(s): 84.00, 89.00
Current Option Gain/Loss: + 74.4%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
02/19 update: Hmm.... TD hit some profit taking on Friday. Shares actually produced a bearish engulfing reversal candlestick pattern but these patterns normally need to see some confirmation. I would expect a pull back toward the $80.00 level and possibly the $78 area. Conservative traders may want to take profits now! No new positions at this time. 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

02/16 New stop loss @ 76.90

chart:

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


Proshares Ultra(long) Russell 2000 - UWM - close: 48.34 change: +0.12

Stop Loss: 42.99
Target(s): 49.75, 54.00
Current Option Gain/Loss: +12.7%
Time Frame: 6 to 8 weeks
New Positions: see below

Small Positions - UWM Position -

Long the April $48 calls (UWM1116D48) Entry @ $2.75

02/14 UWM opened at $46.90. Option opened @ $2.75

UWM chart:

iShares Russell 2000 - IWM - close: 83.35 change: +0.09

Stop Loss: 78.65
Target(s): 84.95, 87.25
Current Option Gain/Loss: +15.1%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
02/19 update: The up trend for the small cap Russell 2000 index and its associated ETFs (UWM and IWM) continues. I do want to warn readers that we're starting to see the momentum stall just a little and some of the oscillators are at overbought levels. It's probably time for a little dip. The problem is a little dip might produce some big swings in the UWM options, but that's what we get for playing a double-long ETF (wanted to warn you early).

I remain bullish but we want to wait for a dips to consider new entry points. It is worth noting that the old highs for the IWM ETF are near $85, which might be resistance.

Small Positions - IWM Position -

Long the April $84 calls (IWM1116D84) Entry @ $1.92

02/14 IWM opened @ 82.11. Option opened @ 1.92

IWM chart:

UWM Entry on February 14th at $46.90
IWM Entry on February 14th at $82.11
Listed on February 12th, 2010


CBOE Market Volatility Index - VIX - close: 16.43 change: -0.16

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:
02/19 update: I remain very cautious on the VIX. The "fear gauge" is still trading near multi-year lows. There is a growing possibility that the VIX will breakdown and close under "support" near the 15.00 level.

Two weeks ago I suggested (again) 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:

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