Editor's Note:

A dramatic morning sell-off reversed higher intraday with the S&P 500 bouncing off its 200-dma again. On a very short-term basis this looks like a "higher low" for the major indices and could inspire more buying. I would take a very defensive approach to the market right now and readers may want to consider scaling back positions on both bullish and bearish trades.

-James

Current Portfolio:


CALL Play Updates

Forest Labs Inc. - FRX - close: 39.89 change: -0.09

Stop Loss: 36.75
Target(s): 39.00, 42.50
Current Option Gain/Loss: +150.0%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
06/23 update: The morning sell-off in FRX wasn't that bad and shares were climbing back toward $40 by the closing bell. The trend is up but FRX remains overbought. I am not suggesting new positions at this time.

- Suggested Positions -

Long the August $37 call (FRX1120H37) Entry @ $1.40

06/21 new stop loss @ 36.75
06/20 new stop loss @ 35.75
06/13 1st target hit @ $39.00. August $37 call @ $2.85 (+103.5%)
06/11 New stop loss @ 34.90
06/10 Planned exit of June $37 call. exit $1.10 (+69.2%)
06/09 Prepare to exit the June calls on June 10th at the close
06/04 new stop loss @ 34.45
05/28 New stop loss @ 33.75

Entry on May 20th at $35.29
Earnings Date 07/21/11 (unconfirmed)
Average Daily Volume = 3.2 million
Listed on May 19th, 2011


PUT Play Updates

Becton, Dickinson and Company - BDX - close: 85.68 change: -0.71

Stop Loss: --.--
Target(s): 80.50
Current Option Gain/Loss: - 80.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
06/23 update: BDX spiked lower and briefly traded through the bottom of its recent trading range only to bounce back and recoup a large chunk of its losses. I am not suggesting new positions at this time.

- Suggested (SMALL) Positions -

Long July $80 put (BDX1116S80) Entry @ $0.50

06/22 The bid for our option has vanished. I am removing our stop loss on this trade.

Entry on June 13th at $84.95
Earnings Date 07/28/11 (unconfirmed)
Average Daily Volume = 1.0 million
Listed on June 11th, 2011


Cognizant Technology - CTSH - close: 72.10 change: +0.44

Stop Loss: 73.05
Target(s): 68.00, 65.25
Current Option Gain/Loss: -28.5% & -25.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
06/23 update: Warning! After yesterday's failed rally at resistance CTSH should have been showing a lot more weakness today. Instead shares gapped open lower at 470.75 and eventually rallied back above the $72 level to close in positive territory. The stock remain sunder technical resistance at its 200-dma but today was way too much relative strength to make me comfortable here. I am not suggesting new positions at this time. More conservative traders may want to exit immediately.

- Suggested (SMALL) Positions -

Long July $70 PUT (CTSH1116S70) Entry @ $1.75

- or -

Long Aug $67.50 PUT (CTSH1120T65.7) Entry @ $2.50

Entry on June 23 at $70.75
Earnings Date 08/03/11 (unconfirmed)
Average Daily Volume = 1.3 million
Listed on June 22, 2011


Diamond Offshore Drilling, Inc. - DO - close: 68.05 change: -0.65

Stop Loss: 70.55
Target(s): 64.50, 62.50
Current Option Gain/Loss: -27.2% & -38.2%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
06/23 update: Crude oil plunged on news of a coordinated release of oil from several SPR's around the world. Oil stocks initially sold off but DO managed a bounce from support near $66. The big intraday rebound concerns me. I would hesitate to launch new positions tonight. What is really frustrating is the big spike down in oil and oil stocks sent put prices soaring higher and our new entry in the July $67.50 puts was up over $1.00 this morning at $2.46 (it was $1.31 yesterday).

Earlier Comments:
Our targets are $64.50 and $62.50. FYI: Traders should note that the most recent data listed short interest at more than 14% of the float. That does raise the risk of a short squeeze should the stock suddenly find strength.

- Suggested Positions -

Long July $67.50 PUT (DO1116S67.5) entry @ $2.09

- Second Position -

Long July $67.50 PUT (DO1116S67.5) Entry @ $2.46

06/22 failed rally at $70 is a new entry point. add 2nd position
06/15 new stop loss @ 70.55
06/13 new stop loss @ 71.55

Entry on June 8th at $68.91
Earnings Date 07/21/11 (unconfirmed)
Average Daily Volume = 1.8 million
Listed on June 7th, 2011


Public Storage - PSA - close: 108.77 change: -2.92

Stop Loss: 113.55
Target(s): 107.50
Current Option Gain/Loss: +14.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
06/23 update: PSA gapped open lower at $110.08 and spiked down toward $108 before paring its losses. The trend is down but now the stock might try and "fill the gap". I would wait for a bounce toward the $111.00-111.50 area before considering new positions. Our target is $107.50. More aggressive traders could aim lower but that would require PSA to breakdown under its simple 200-dma (which is certainly possible, especially if the S&P 500 breaks down under 1260 or 1250.

- Suggested (SMALL) Positions -

Long July $110 PUT (PSA1116S110) Entry @ $2.50

Entry on June 23 at $110.08
Earnings Date 08/04/11 (unconfirmed)
Average Daily Volume = 765 thousand
Listed on June 22, 2011


Transocean Ltd. - RIG - close: 61.57 change: -0.51

Stop Loss: 66.15
Target(s): 58.00, 55.25
Current Option Gain/Loss: - 3.7%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
06/23 update: Weakness in oil and oil service stocks pushed RIG toward support near $60.00 but shares bounced again. I am growing concerned that RIG could be setting up for a larger oversold bounce back toward the $64-65 area. I am not suggesting new positions at this time.

We wanted to keep our position size small to limit our risk.

- Suggested (SMALL) Positions -

Long July $60 puts (RIG1116S60) Entry @ $1.32

06/20 RIG has hit $60. Cautious traders may want to take profits now (option @ +68%). The newsletter's target is $58.00

Entry on June 13th at $63.32
Earnings Date 08/04/11 (unconfirmed)
Average Daily Volume = 4.3 million
Listed on June 11th, 2011


SanDisk Corp. - SNDK - close: 42.88 change: +0.34

Stop Loss: 45.05
Target(s): 40.50, 36.00
Current Option Gain/Loss: - 10.0% & - 33.3%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
06/23 update: SNDK displayed relative strength with a bounce back into positive territory. More conservative traders may want to use today's action as an exit signal and get out now. I am not suggesting new positions at this time.

Our targets are $40.50 and $36.00, given enough time. FYI: The P&F chart for SNDK is bearish with a $30 target.

- Suggested Positions -

Long July $42.00 PUT (SNDK1116S42) Entry @ $1.10

- or -

Long July $40.00 PUT (SNDK1116S40) Entry @ $0.69

06/18 new stop loss @ 45.05
06/08 New stop loss @ 46.25

Entry on June 6th at $44.31
Earnings Date 07/21/11 (unconfirmed)
Average Daily Volume = 5.8 million
Listed on June 4th, 2011


T.Rowe Price Associates - TROW - close: 57.08 change: -0.45

Stop Loss: 62.05
Target(s): 55.25
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see Trigger

Comments:
06/23 update: TROW has spiked lower toward prior support near $56.00 and bounced. Odds are we will drop this stock as a candidate tomorrow (the weekend newsletter). Our plan to launch bearish positions near resistance at $60 is not going to happen any time soon.

Trigger @ 60.00

- Suggested Positions -

buy the July $60 PUT (TROW1116S60)

Entry on June xxth at $ xx.xx
Earnings Date 07/26/11 (unconfirmed)
Average Daily Volume = 2.0 million
Listed on June 13th, 2011


CLOSED BULLISH PLAYS

SPDR Gold ETF - GLD - close: 150.99 change: +0.23

Stop Loss: 147.40
Target(s): 155.00, 159.75
Current Option Gain/Loss: -55.4% & -46.6%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
06/23 update: A sharp bounce in the U.S. dollar this morning sent commodities plunging. While the dollar pared its gains and commodities bounced off their lows the damage was done. The GLD had gapped open lower at $148.67 and then dipped under support at its 50-dma and hit our stop loss at $147.40. The GLD hasn't even touched its 50-dma for almost four months so today's action was definitely out of the ordinary.

- Suggested SMALL Positions -

July $150 call (GLD1116G150) Entry @ $2.74, exit $1.22 (-55.4%)

- or -

Aug. $155 call (GLD1120H155) Entry @ $2.25, exit $1.20 (-46.6%)

06/23 stopped out @ 147.40, Options @ -55.4% & -46.6%

chart:

Entry on June 22 at $151.01
Earnings Date --/--/--
Average Daily Volume = 12.2 million
Listed on June 21, 2011


CLOSED BEARISH PLAYS

Walter Energy, Inc. - WLT - close: 114.04 change: +4.08

Stop Loss: 115.50
Target(s): 100.50
Current Option Gain/Loss: -24.0% & -11.3%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
06/23 update: Yesterday WLT gave us a perfect entry point with a failed rally under resistance. Yet today WLT has produced a dramatic reversal. The stock gapped open lower at $107.66 and then sprinted higher, especially in the last hour of trading. WLT closed above yesterday's high and closed above key resistance at its exponential 200-dma and above its simple 200-dma. Now shares look poised to rally past $115.00 and hit our stop loss at $115.50.

I am suggesting we abandon ship immediately to cut our losses early. The intermediate trend for WLT is still bearish but we can wait for a failed rally near $120 or the 100-dma before considering new positions.

- Suggested Positions -

July $105 PUT (WLT1116S105) Entry @ 2.00, exit $1.52 (-24%)

- or -

Sept. $100 PUT (WLT1117U100) Entry @ 4.85, exit $4.30 (- 11.3%)

06/23 WLT is reversing. Exit early. Options @ -24% & -11.3%

chart:

Entry on June 22 at $112.00
Earnings Date 07/27/11 (unconfirmed)
Average Daily Volume = 2.0 million
Listed on June 18th, 2011