Editor's Note:

Wednesday turned out to be another ugly day in the market. Gold miners and energy names seemed to be the exception. We had several candidates get stopped out tonight.

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

Peabody Energy Corp. - BTU - close: 63.47 change: +0.54

Stop Loss: 61.75
Target(s): 69.75, 74.00
Current Option Gain/Loss: -59.8%, and -26.3%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
02/23 update: BTU bounced off the initial move lower this morning. It looks like technical support near the 50-dma might hold. After watching the S&P 500 test the 1300 level today I would be inclined to buy calls on BTU right here but more conservative traders may want to inch up their stop losses. 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: 100.02 change: -1.99

Stop Loss: 97.90
Target(s): 104.75, 107.50
Current Option Gain/Loss: -20.0%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
02/23 update: CAT is another industrial name that was hammered lower today. The stock opened at $101.91 and then dropped toward its 30-dma. Traders finally bought the dip at $98. That's a -7.5% correction from its recent high near $106. Believe it or not the up trend is still intact at the moment.

Our bullish play was triggered when CAT hit our entry point at $101.00 this morning. I would still consider new positions here; especially since our stop loss is at $97.90.

- Suggested Positions -

Long the March $105 calls (CAT1119C105) Entry @ $1.35

02/23 Triggered @ $101.00. Option @ 02/22 Still waiting for a dip to $101.00
02/12 Adjusted our trigger, targets, stop loss and strike price.

chart:

Entry on February 23 at $101.00
Earnings Date 04/21/11 (unconfirmed)
Average Daily Volume = 6.2 million
Listed on February 5th, 2010


Fastenal Co. - FAST - close: 60.96 change: -1.22

Stop Loss: 61.90
Target(s): 67.25
Current Option Gain/Loss: -70.5%, and -35.5%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
02/23 update: The correction continues for FAST and the stock has now seen a -5% decline. I cautioned readers last night to look for a dip into the $61-60 zone. I would use this dip as an entry point to buy calls or you could wait for a bounce.

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

02/23 New entry point @ 60.96. March $65 call @ 0.25, May $65 call @ $1.45
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


Nike Inc. - NKE - close: 86.19 change: -1.04

Stop Loss: 83.85
Target(s): 88.00, 91.50
Current Option Gain/Loss: + 30.6%, and + 42.5%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
02/23 update: NKE gave up -1.1% on Wednesday and I am still expecting a pull back toward the $85.00 area. Shares may actually dip toward the 100-dma near $84.00. Let's wait for NKE to near the $85 area before we consider buying the dip or buying the bounce.

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


Occidental Petrol. - OXY - close: 102.l4 change: -5.23

Stop Loss: 97.25
Target(s): 106.75, 109.75
Current Option Gain/Loss: Unopened
Time Frame: 4 to 6 weeks
New Positions: Yes, see Trigger

Comments:
02/23 update: OXY rallied this morning and hit $105 before paring its gains. I am still expecting a dip toward the $101-100 zone. Let's stick to our plan and wait for the dip. The trigger to buy calls is at $101.00. More nimble traders could try and time a dip near the $100.00 mark instead. I'm expecting the 50-dma near $97.50 to offer some support. If we are triggered at $101.00 our targets are $106.75 and $109.75.

Investors will want to take note that this is not without risk. OXY does a lot of oil and gas exploration across the U.S. and internationally. The company does do business in Bahrain and Yemen, which have been two hotspots for protests and violence in the last couple of weeks. You can see from the chart that headlines from these two countries really did not have an affect on OXY on the stock. Today's move lower appears to be a reaction to the market-wide event.

Trigger @ $101.00

- Suggested Positions -

Buy the March $105 calls (OXY1119C105) current ask $1.89

- or -

Buy the April $105 calls (OXY1116D105) current ask $3.25

Entry on February xxth at $ xx.xx
Earnings Date 04/28/11 (unconfirmed)
Average Daily Volume = 4.9 million
Listed on February 22nd, 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: + 11.1%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
02/23 update: TD is still holding up reasonably well. Shares lost -0.9% and look headed for the $78.00-77.50 zone. Wait for a dip or bounce in this area before considering new bullish positions. 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: 44.29 change: -1.57

Stop Loss: 42.99
Target(s): 49.75, 54.00
Current Option Gain/Loss: -41.8%
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: 79.81 change: -2.14

Stop Loss: 78.65
Target(s): 84.95, 87.25
Current Option Gain/Loss: -45.8%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
02/23 update: The UWM has seen a sharp correction back toward its rising 50-dma. This should be technical support and a bullish entry point.

The IWM has seen a similar correction back toward its rising 50-dma. This dip should be a new entry point to buy calls.

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: 22.13 change: +1.33

Stop Loss: N/A
Target(s): 22.50, 28.00
Current Option Gain/Loss: +12.5%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
02/23 update: Target achieved. The market's continued weakness pushed the VIX to a new relative high of $23.22 intraday, temporarily past the 200-dma. Our first target to take profits was hit at $22.50. I am not suggesting new positions at this time. Our final exit target is 28.00.

- Suggested Positions -

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

02/23 1st Target Hit @ 22.50, Option @ 2.35 (+46.8%)

Chart:

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


PUT Play Updates

Freeport-McMoran - FCX - close: 51.01 change: +0.63

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:
02/23 update: It looks like FCX might hold support near the $50 level. The market continues to drop but FCX eked out a bounce. The current trend is down but we don't want to open positions at this time. I'm going to keep FCX on the play list for another day or two and see if shares offer an entry point. No trigger yet. Let's just wait and see what happens.

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

Ashland Inc. - ASH - close: 56.67 change: -1.89

Stop Loss: 56.75
Target(s): 63.00, 67.00
Current Option Gain/Loss: -46.4%, and -41.1%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
02/23 update: It was not a good day for industrial names. ASH did not have any specific headlines today but shares underperformed the broader market indices. The stock fell to $55.79 intraday, which was more than enough to hit our stop loss at $56.75 closing our trade. The $55.00 level or the 50-dma might offer some support so readers may want to keep an eye on ASH at these levels.

March $60 calls (ASH1119C60) Entry @ $1.40, Exit @ $0.75 (-46.4%)

- or -

April $60 calls (ASH1116D60) Entry @ $2.55, Exit @ $1.50 (-41.1%)

02/23 Stopped out @ 56.75. Options @ -46.4%, -41.1%
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


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:
02/23 update: Retail stocks were hit pretty hard today and shares of COH underperformed its peers to make matters even worse. Selling was strong with a -3.8% decline and a breakdown past the 50-dma and potential support near $55. The stock hit our stop loss at $54.95 closing this trade. Our options quickly turned from being in the green to in the red.

- Suggested Positions -

2011 March $55.00 calls (COH1119C55) Entry @ $2.10, Exit @ $1.45 (-30.9%)

- or -

2011 March $57.50 calls (COH1119C57.5) Entry @ $0.85, Exit @ $0.50 (-41.1%)

02/23: Stopped out @ 54.95, Options @ -30.9% and -41.1%
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: 72.84 change: -1.05

Stop Loss: 72.95
Target(s): 79.75
Current Option Gain/Loss: -50.3%
Time Frame: six trading days
New Positions: see below

Comments:
02/23 update: Yesterday I discussed the issue that our stop loss might be too tight for a market that has suddenly turned a lot more volatile. Consumer-related names like COST continued to see selling. As I warned you last night COST did indeed hit our stop loss today. The stock did manage to pause at technical resistance near its 50-dma. Aggressive traders may want to buy calls again on a bounce from here at the 50-dma. I am watching for another close above the $74.00 or $75.00 levels before considering new positions.

March $75 calls (COST1119C75) Entry @ $1.61, Exit @ $0.80 (-50.3%)

02/23 Stopped out @ 72.95, Option @ -50.3%
02/22 COST opens at $75.11. Option @ $1.61
02/19 New entry point. Buy calls now!

Chart:

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: -60.0%, and -42.8%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
02/23 update: The NASDAQ Composite underperformed its major index rivals on Wednesday. That didn't help shares of CTSH. The stock gapped open lower at $75.04 and quickly fell toward short-term support near $74.50. The stock finally broke this level and hit our stop loss at $74.45 near lunchtime. Today's close under the 50-dma is definitely short-term bearish for CTSH.

March $80 call (CTSH1119C80) Entry @ $0.95, Exit @ $0.38 (-60%)

- or -

April $80 call (CTSH1116D80) Entry @ $1.75, Exit @ $1.00 (-42.8%)

02/23 Stopped out @ 74.45, Options @ -60% and -42.8%
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


DineEquity, Inc. - DIN - close: 54.99 change: -2.30

Stop Loss: 54.90
Target(s): 64.00, 68.50
Current Option Gain/Loss: -54.3%
Time Frame: 7 trading days
New Positions: see below

Comments:
02/23 update: Our DIN play didn't last very long. Anything related to consumers was hit pretty hard on Wednesday. DIN gave up -4% by the close and hit $54.39 intraday. Our stop loss was hit at $54.90. On a short-term basis DIN might have additional support in the $52.50-50.00 zone so it might be worth adding to your watch list.

March $60 calls (DIN1119C60) Entry @ $2.30, Exit @ $1.05 (-54.3%)

Chart:

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


Joy Global Inc. - JOYG - close: 93.04 change: -3.48

Stop Loss: 93.75
Target(s): 97.25, 104.50
Current Option Gain/Loss: - 6.4%, and -10.4%
Time Frame: 3 weeks
New Positions: see below

Comments:
02/23 update: Ouch! JOYG was hit pretty hard with a -5.6% decline intraday. The low was $91.05. That means the stock has seen a two-day (intraday) correction around -9%. Our stop loss was hit at $93.75 within the first five minutes of trading this morning. JOYG could still offer an opportunity to buy calls on a dip near $90.00 and its rising 50-dma but if you do, I would try and play with a tight stop loss to limit your risk. Remember, JOYG is being added to the S&P 500 but earnings are coming up as well and I would not want to hold over earnings.

- Suggested Positions -

March $95 calls (JOYG1119C95) Entry @ $3.85, Exit @ $3.60 (-6.4%)

- or -

April $100 calls (JOYG1116D100) Entry @ $3.46, Exit @ $3.10 (-10.4%)

02/23 Stopped out @ 93.75, Options @ -6.4% and -10.4%
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


Lear Corp. - LEA - close: 104.83 change: -5.11

Stop Loss: 107.45
Target(s): 114.95, 119.00
Current Option Gain/Loss: -36.8%, and -33.3%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
02/23 update: LEA followed many of the industrial names lower. After performing relatively well on Tuesday they plunged -4.6% today. Our stop loss was hit at $107.45. Shares are now hovering near technical support at the 50-dma.

March $115 calls (LEA1119C115) Entry @ $1.90, Exit @ $1.20 (-36.8%)

- or -

Jun $120 calls (LEA1118F120) Entry @ $3.90, Exit @ $2.60* (-33.3%)

02/23 Stopped out. Options @ -36.8% and -33.3%
*The June $120 call did not trade today. This is an estimate.

Chart:

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


PACCAR Inc. - PCAR - close: 49.84 change: -1.17

Stop Loss: 49.95
Target(s): 53.45
Current Option Gain/Loss: -57.1%
Time Frame: 2 to 3 weeks
New Positions: see below

Comments:
02/23 update: The correction in PCAR has accelerated lower and shares hit new relative lows today. Shares hit our stop loss at $49.95.

March $55 call (PCAR 1119C55) Entry @ $0.35, Exit @ 0.15 (-57.1%)

02/23 Stopped out @ 49.95, Option @ -57.1%
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


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

Stop Loss: 61.45
Target(s): 68.75
Current Option Gain/Loss: -52.7%, and -33.3%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
02/23 update: The correction in SCHN continues. As I feared yesterday shares of SCHN hit our stop loss at $61.45. Support near $60 held up so far so readers may want to keep SCHN on their watch list.

March $65 calls (SCHN1119C65) Entry @ $1.80, Exit @ $0.85 (-52.7%)

- or -

May $65 calls (SCHN1121E65) Entry @ $4.20, Exit @ $2.80 (-33.3%)

02/23 Stopped out. Options @ -52.7% and -33.3%
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