Editor's Note:

Stocks see widespread declines as the world reacts to rising violence across the Mideast and North Africa. SCHN hit our trigger to buy the dip. CLH was a planned exit. EMN and QSII were stopped out.

REMINDER: I am away from the office this week for a seminar. Play updates will be brief and we might see fewer new positions added to the newsletter.

-James

Current Portfolio:


CALL Play Updates

Ashland Inc. - ASH - close: 58.56 change: -2.34

Stop Loss: 56.75
Target(s): 63.00, 67.00
Current Option Gain/Loss: - 7.1%, and -15.6%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
02/22 update: ASH plunged at the open like most stocks on Tuesday morning. The stock found some support in the $58.00-58.50 zone. I would use this dip as an entry point or you could take a wait and see approach. The mid February low near $57.35 could be support and I could see traders waiting for ASH to test or bounce from the $57.35 area before initiating new bullish positions. 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

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: 62.93 change: -2.09

Stop Loss: 61.75
Target(s): 69.75, 74.00
Current Option Gain/Loss: -65.4%, and -33.6%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
02/22 update: Our BTU trade is not doing so hot. Shares actually tried to rally on Tuesday morning but failed at recent resistance near the $66 area. I'm a little more cautious on buying this dip and would actually hesitate. I'd rather wait to see if BTU is going to bounce or will it break down under the small cloud of key moving averages near this level. 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

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: 102.01 change: -3.85

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:
02/22 update: Believe it or not we are still not triggered on CAT. Shares lost -3.6% but only hit $101.53 at its worst levels on Tuesday. Aggressive traders may want to jump in now. I'm suggesting we stick to our plan and wait for CAT to hit $101.00. More conservative traders could wait for a dip closer to the $100.00 mark instead. If the $100 level fails I think our next entry point is buying calls on a dip near $96 and its rising 50-dma.

Trigger @ 101.00

- Suggested Positions -

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

02/22 Still waiting for a dip to $101.00
02/12 Adjusted our trigger, targets, stop loss and strike price.

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


Coach Inc. - COH - close: 56.36 change: -1.92

Stop Loss: 54.95
Target(s): 58.25, 62.00
Current Option Gain/Loss: +21.4%, and + 17.6%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
02/22 update: COH saw a quick bounce off the morning gap lower but the rebound faded and shares lost -3.2%. The stock could be facing a pull back toward the $56-55 zone and technical support near the 50-dma. I would wait for that dip (or a bounce near the 50-dma) before opening new positions.

- 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

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: 73.89 change: -1.54

Stop Loss: 72.95
Target(s): 79.75
Current Option Gain/Loss: -31.6%
Time Frame: six trading days
New Positions: see below

Comments:
02/22 update: Over the weekend I suggested that readers go ahead and buy calls on COST given its bullish breakout higher. Then the Libya news broke and a gap down at the open would have been beneficial and provided a lower entry point. Unfortunately COST didn't actually see that much of a gap down. The stock opened at $75.11, rallied back toward its high and then reversed. Naturally this is a short-term bearish development and we have a relatively tight stop loss at $72.95. There is a very good chance that COST will hit our stop loss tomorrow. If that happens I would look for a dip or bounce near $72 before considering new bullish positions or wait for the next close over $75.00 again. (Don't forget that we don't have a lot of time before we exit ahead of the earnings report!) No new positions today.

Long the March $75 calls (COST1119C75) Entry @ $1.61

02/22 COST opens at $75.11. Option @ $1.61
02/19 New entry point. Buy calls now!

Entry on February 22nd at $75.11
Earnings Date 03/02/11 (confirmed)
Average Daily Volume = 5.8 million
Listed on February 7th, 2010


Cognizant Technology - CTSH - close: 75.55 change: -2.18

Stop Loss: 74.45
Target(s): 84.50, 89.00
Current Option Gain/Loss: -52.6%, and -31.4%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
02/22 update: CTSH gave up -2.8% and appears headed for the $75.00 level. Wait for the dip to $75.00 or a bounce from $75.00 before initiating new bullish positions. Our targets are $84.50 and $89.00. The Point & Figure chart for CTSH is bullish with a $105 target.

- 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

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


DineEquity, Inc. - DIN - close: 57.29 change: -1.52

Stop Loss: 54.90
Target(s): 64.00, 68.50
Current Option Gain/Loss: -19.5%
Time Frame: 7 trading days
New Positions: see below

Comments:
02/22 update: DIN actually held up pretty well. The stock did not see a lot of volatility this morning and didn't really turn lower until late in the day. I would probably wait for a dip into the $56.00-55.00 zone and then buy calls. I don't see any other changes from my prior comments.

Investors should take note that the most recent data (although not really very recent any more) listed short interest in DIN at 29% of the 14.9 million-share float. The combination of very high short interest and an extremely low float is definitely a recipe for a short squeeze.

We only have a few days. DIN is due to report earnings on March 3rd and we do not want to hold over the announcement.

- Suggested Positions -

Long the March $60 calls (DIN1119C60) Entry @ $2.30

Entry on February 22nd at $57.98
Earnings Date 03/03/11 (confirmed)
Average Daily Volume = 150 thousand
Listed on February 19th, 2010


Fastenal Co. - FAST - close: 62.18 change: -1.52

Stop Loss: 61.90
Target(s): 67.25
Current Option Gain/Loss: -47.0%, and -17.7%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
02/22 update: FAST tried to rally off the initial gap down but shares failed at their recent highs. This does look like a short-term bearish reversal. I would expect a dip towards the $61-60 zone. Wait for that dip or a bounce from this zone before considering new bullish positions. Now obviously that presents a problem for us since we just adjusted our entry point strategy on Saturday before this Libya mess sparked a sell-off and set our stop loss at $62.90. I am going to raise our risk on this trade and move our stop loss to $59.90 but I would not open new positions until we see a dip into the $61-60 zone.

Readers may want to keep in mind that the most recent data listed short interest at 11.4% of the 132 million-share float.

- Suggested Positions -

Long the March $65 calls (FAST1119C65) Entry @ $0.85

- or -

Long the May $65 calls (FAST1121E65) Entry @ $2.25

02/22 Entry @ 62.99, NEW STOP @ $59.90
02/19 Adjusted entry point. Buy calls now. Very small positions
02/12 New trigger @ 61.55, new stop loss @ 59.40

Entry on February 22nd at $62.99
Earnings Date 04/12/11 (unconfirmed)
Average Daily Volume = 1.0 million
Listed on February 8th, 2010


Joy Global Inc. - JOYG - close: 96.52 change: -3.51

Stop Loss: 93.75
Target(s): 97.25, 104.50
Current Option Gain/Loss: +27.2%, and +15.6%
Time Frame: 3 weeks
New Positions: see below

Comments:
02/22 update: Concerns that rising oil prices will slow down the global economy and a rise in the U.S. dollar pushed prices of commodities lower. This had a big impact on shares of JOYG. Of course the stock was already a little overbought and due for some profit taking. Shares lost -3.5% and the profit taking may not be over yet. I would not be surprised to see a dip closer to the $95 area. No new positions at this time but nimble traders may want to buy a dip or bounce near $95.00.

- 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

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


Lear Corp. - LEA - close: 109.94 change: -1.98

Stop Loss: 107.45
Target(s): 114.95, 119.00
Current Option Gain/Loss: -15.7%, and - 2.5%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
02/22 update: Shares of LEA held up pretty well on Tuesday. The stock opened at $110.78 and didn't see a lot of volatility. There is probably a good chance that LEA will dip toward its rising 30-dma around the $108 area so if you're patient I would look for new bullish positions there.

Readers need to take note that LEA has a 2-for-1 stock split coming up and will start trading adjusted for the split on March 18th. When the split occurs, instead of having one $120 call contract you'll have two $60 call contracts with a new symbol and an adjusted value. FYI: The Point & Figure chart for LEA is bullish with a $140 target.

- Suggested Positions -

Long the March $115 calls (LEA1119C115) Entry @ $1.90

- or -

Long the Jun $120 calls (LEA1118F120) Entry @ $3.90

Entry on February 22nd at $110.78
Earnings Date 05/05/11 (unconfirmed)
Average Daily Volume = 747 thousand
Listed on February 19th, 2010


Nike Inc. - NKE - close: 87.23 change: -1.59

Stop Loss: 83.85
Target(s): 88.00, 91.50
Current Option Gain/Loss: + 60.2%, and + 71.2%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
02/22 update: NKE seemed to be fighting the decline all day long. Shares eventually lost -1.8% versus the S&P 500's -2.0%. I would be tempted to launch bullish positions again on a dip into the $86-85 zone.

Our final exit target is $91.50.

- 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%)

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: 51.01 change: -1.64

Stop Loss: 49.95
Target(s): 53.45
Current Option Gain/Loss: -42.8%
Time Frame: 2 to 3 weeks
New Positions: see below

Comments:
02/22 update: Yuck! The move in PCAR looks ugly with a -3.1% decline. Shares have been struggling with their 20-dma and PCAR failed there again. I would expect this stock to retest support near $50.00 again. I am not suggesting new bullish positions at this time. Currently our final exit target is $53.45 but more aggressive traders could aim higher.

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

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


Schnitzer Steel Industries - SCHN - close: 62.39 change: -2.52

Stop Loss: 61.45
Target(s): 68.75
Current Option Gain/Loss: -47.2%, and -26.1%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
02/22 update: Our play on SCHN has been triggered. Resource and material names were hit hard on Tuesday. SCHN lost -3.88%. Our trigger to buy the dip was hit at $63.75. SCHN is now testing what should be short-term support near $62. Yet I'm not sure it will hold. Right now we have a stop loss at $61.45. More conservative traders may want to inch theirs higher. Aggressive traders willing to take the risk may want to lower their stop loss to underneath the $60.00 mark. If the market sell-off continues tomorrow I would expects us to get stopped out at $61.45.

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.

- Suggested Positions -

Long the March $65 calls (SCHN1119C65) Entry @ $1.80

- or -

Long the May $65 calls (SCHN1121E65) Entry @ $4.20

02/22 SCHN hit our trigger to buy calls @ 63.75.

chart:

Entry on February 22nd at $63.75
Earnings Date 04/07/11 (unconfirmed)
Average Daily Volume = 250 thousand
Listed on February 17th, 2010


The Toronoto-Dominion Bank - TD - close: 80.18 change: -1.17

Stop Loss: 76.90
Target(s): 84.00, 89.00
Current Option Gain/Loss: + 25.9%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
02/22 update: TD is holding up okay with shares dipping toward psychological support near $80. If this level fails then watch for a dip near $78. I'm still bullish on the stock but you may want to wait and buy a bounce. 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

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: 45.86 change: -2.48

Stop Loss: 42.99
Target(s): 49.75, 54.00
Current Option Gain/Loss: -21.8%
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

iShares Russell 2000 - IWM - close: 81.21 change: -2.14

Stop Loss: 78.65
Target(s): 84.95, 87.25
Current Option Gain/Loss: -20.3%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
02/22 update: If you're watching the UWM I would use a dip near the $45-44 zone as a new bullish entry point. Keep an eye on the 50-dma.

If you're watching the IWM then use dips near $80 as our entry point to launch bullish positions. Readers may want to raise their stops closer to the 50-dma.

Small Positions - IWM Position -

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

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

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: 20.80 change: +4.37

Stop Loss: N/A
Target(s): 22.50, 28.00
Current Option Gain/Loss: + 9.3%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
02/22 update: Rising geopolitical tensions and news reports of the Libyan air force bombing citizens in Tripoli sent volatility rocketing higher. The VIX gapped open at 19.46 and rallied to a new two-month high with a +26.5% gain. Do you think this is a one-day event in the stock market? If so then today is a good time to sell your calls. I suspect the VIX could hit its 200-dma near 22.75. We will adjust our first target to take profits to 22.50. Our final, secondary target is still at 28.00. You may want to sell 50% to 75% of your position at 22.50.

- Suggested Positions -

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

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


PUT Play Updates

Freeport-McMoran - FCX - close: 50.38 change: -2.57

Stop Loss: 56.55
Target(s): 50.25, 46.50
Current Option Gain/Loss: Unopened
Time Frame: 3 to 6 weeks
New Positions: Yes, see trigger

Comments:
02/22 update: It looks like we were too late for the put trade in FCX. Maybe if the geopolitics over the weekend had not deteriorated so fast then we could have had a chance to buy puts on a bounce. Unfortunately, the huge spike in oil prices is creating worries that global demand for other commodities will slow as rising fuel prices slows down the economy.

We do not want to chase the drop in FCX. The $50 level should be psychological support but I would not buy calls here either. Let's give it a day or two and see if shares produce a failed rally at overhead resistance and then we'll reconsider put positions.

We temporarily have no entry point as we wait and watch to see what FCX does next.

Trigger @ ??.??

- Suggested Positions -


Entry on February xxth at $ xx.xx
Earnings Date 04/21/11 (unconfirmed)
Average Daily Volume = 14.4 million
Listed on February 19th, 2010


CLOSED BULLISH PLAYS

Clean Harbors, Inc. - CLH - close: 91.87 change: -1.31

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:
02/22 update: The market's worst sell-off in six months was not great timing for our CLH trade. Our plan was to exit this trade on Tuesday at the close to avoid holding over earnings tomorrow. CLH ended the day down -1.4%.

March $95.00 call (CLH1119C95) Entry @ $1.80, Exit @ 1.55 (-13.8%)

02/22 Planned Exit. Option @ $1.55 (-13.8%)
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


Eastman Chemical Co. - EMN - close: 90.51 change: -4.90

Stop Loss: 90.75
Target(s): 99.75, 104.00
Current Option Gain/Loss: -62.2%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
02/22 update: Ouch! EMN was hammered for a -5.1% loss on Tuesday. This is likely due to the huge spike in oil prices and oil is a big component in chemical production. Nimble traders may want to consider buying calls again if EMN can bounce from the $90 level. Our stop loss was hit at $90.75 so our play is closed.

- Suggested Positions -

March $95 calls (EMN1119C95) Entry @ $2.65

02/22 EMN stopped out @ 90.75 (Libya News). Option @ $1.00 (-62.2%)
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


Quality Systems Inc. - QSII - close: 78.05 change: -1.34

Stop Loss: 77.95
Target(s): 84.90, 89.00
Current Option Gain/Loss: -82.3%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
02/22 update: The worst market decline in six months could not have happened at a worst time for our QSII play. Shares were testing key support near the $78 area last week. The stock didn't actually break this support until later Tuesday afternoon but our stop loss was hit at $77.95. I'd keep QSII on your watch list for a dip near the $75.00 area, which should also be support.

e March $85 calls (QSII1119C85) Entry @ $0.85, Exit @ $0.15 (-82.3%)

02/22 Stopped out. Option @ $0.15 (-82.3%)
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