Editor's Note:

U.S. stocks suffered a week of profit taking. Yet the S&P 500 managed to hold support at the 50% retracement of the rally off its June lows. This coming week could be volatile as we are about to enter one of the busiest weeks of earnings season.

On Friday we saw DMND get triggered and NSC get stopped out.

-James

Current Portfolio:


CALL Play Updates

Agrium Inc. - AGU - close: 89.38 change: +0.71

Stop Loss: 85.90
Target(s): 94.00, 98.00
Current Option Gain/Loss: +14.8% & +30.8%
Time Frame: 4 to 5 weeks
New Positions: see below

Comments:
07/16 update: AGU ended the week consolidating sideways under resistance at the $90.00 level. A breakout past $90 would be very bullish as it would also cross through the multi-month trend of lower highs. I'd wait for a move past $90.50 before initiating new positions.

- Suggested Positions -

Long AUG $90 call (AGU1120H90) Entry @ $2.70

- or -

Long AUG $95 call (AGU1120H95) Entry @ $0.94

chart:

Entry on July 11 at $88.54
Earnings Date 08/03/11 (unconfirmed)
Average Daily Volume = 1.7 million
Listed on July 9, 2011


BJ's Restaurants, Inc. - BJRI - close: 53.99 change: -0.51

Stop Loss: 53.15
Target(s): 59.50
Current Option Gain/Loss: -43.3%
Time Frame: about one week
New Positions: see below

Comments:
07/16 update: Our BJRI trade is in trouble. The stock underperformed the market on Friday with a -0.9% loss. This follows the failed rally and bearish reversal on Thursday morning. Looking at the weekly chart the latest candle certainly looks like a potential top. Conservative traders may want to exit now. If there is any follow through lower on Monday we will likely get stopped out at $53.15. I am not suggesting new positions at this time. Earlier Comments:
The most recent data listed short interest at 21% of the 24 million-share float. This as an aggressive, higher-risk trade. I am suggesting we limit our risk with small positions. We do not want to hold over the Thursday, July 21st earnings report.

- Suggested (small) Positions -

Long AUG $55 call (BJRI1120H55) Entry @ $3.00

chart:

Entry on July 14 at $55.77
Earnings Date 07/21/11 (confirmed)
Average Daily Volume = 245 thousand
Listed on July 13, 2011


Caterpillar - CAT - close: 109.36 change: +1.78

Stop Loss: 106.40
Target(s): 114.00
Current Option Gain/Loss: +17.4%
Time Frame: Until the earnings report
New Positions: see below

Comments:
07/16 update: CAT spent the entire week churning sideways in the $106.50-110.50 range. Friday saw shares rebound off the lower end of the range and close up +1.6%. Earnings are coming up on July 22nd and CAT reports before the opening bell. We only have four trading days left. I would buy calls here but plan on exiting on Thursday at the closing bell. I am inching up our stop loss to $106.40.

- Suggested Positions -

Long Aug. $110 call (CAT11H110) entry @ 3.15

07/16 new stop loss @ 106.40
07/16 Plan on exiting on Thursday at the close if CAT does not hit our target
07/11 Triggered @ 107.50.
07/09 adjusted trigger to $107.50, stop to $105.95, target to $114.00

chart:

Entry on July 11 at $107.50
Earnings Date 07/22/11 (confirmed)
Average Daily Volume = 8.4 million
Listed on July 2, 2011


Cerner Corp. - CERN - close: 61.90 change: +0.10

Stop Loss: 61.45
Target(s): 64.75
Current Option Gain/Loss: +15.6%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
07/16 update: CERN managed to find support in the $61.60-61.50 zone for the second day in a row. There were dueling analyst recommendations on CERN today. JPM recommended taking profits in CERN while Goldman Sachs just placed CERN on their conviction buy list. I am not suggesting new positions at this time. A close over its 10-dma might change my mind on new entry points. Keep in mind we do not want to hold over the late July earnings report (July 28th).

- Suggested (small) Positions -

Long Aug. $62.50 call (CERN1120H62.5) Entry @ $1.60

07/09 new stop loss @ 61.45
07/08 Planned exit. July calls @ +125.0%
07/07 new stop loss @ 60.90
07/07 plan on exiting July calls on Friday at the close.
07/02 New stop loss @ 58.75
07/02 Cautious traders may want to exit the July calls now for a gain

chart:

Entry on June 29 at $60.76
Earnings Date 07/28/11 (unconfirmed)
Average Daily Volume = 624 thousand
Listed on June 28, 2011


Diamond Foods Inc. - DMND - close: 76.23 change: -1.07

Stop Loss: 72.75
Target(s): 79.50
Current Option Gain/Loss: - 4.4%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
07/16 update: Our trade on DMND has been opened. The stock was downgraded from a "buy" to a "hold" this morning. Shares plunged from $76 toward $74 on this news. The intraday low was $73.86. Our trigger to buy calls was hit at $74.25. Given the intraday bounce I would still buy calls now. FYI: The Point & Figure chart for DMND is bullish with a $90 target.

- Suggested (small) Positions -

Long AUG $75 call (DMND1120H75) Entry @ $2.25

07/15 triggered at $74.25
07/14 Adjusted entry point to $74.25 and stop to $72.75

chart:

Entry on July 15 at $74.25
Earnings Date 10/05/11 (unconfirmed)
Average Daily Volume = 237 thousand
Listed on July 11, 2011


Joy Global - JOYG - close: 97.31 change: +1.90

Stop Loss: 89.75
Target(s): 102.00
Current Option Gain/Loss: Unopened
Time Frame: 3 to 6 weeks
New Positions: Yes, see trigger

Comments:
07/16 update: On Thursday JOYG look poised to crash back toward $90. Yet on Friday shares whipsawed higher again. In the Thursday night newsletter I had adjusted our entry point strategy to buy calls at $92.00 with a stop at $89.75. We will keep the entry point and stop unchanged tonight. However, aggressive traders willing to handle a little more risk may want to consider buying calls right now. You could argue that after a week of churning sideways JOYG is poised to breakout of this consolidation. I would keep positions small.

Trigger @ $92.00 (Small Positions)

- Suggested Positions - Buy the Aug $95 call (JOYG1120H95)

07/16 Aggressive traders may want to buy calls now instead
07/14 Adjusted strategy. New trigger @ 92.00, stop @ 89.75
07/11 relist this play with a trigger at $93.00 and stop @ 91.40

07/11 JOYG hit our trigger at $96.00 (actually $95.97) and then hit our stop at $94.75. The option opened at $2.32 (ask) and we were stopped out at $2.20 (bid) for a loss of -5.1% We were fortune this loss was not larger!

07/09 Adjusted trigger to $96.00, stop to $94.75, target to $102.00, and option strike to Aug. $100 call.

chart:

Entry on June xx at $ xx.xx
Earnings Date 08/31/11 (unconfirmed)
Average Daily Volume = 1.9 million
Listed on June 30, 2011


Panera Bread Co. - PNRA - close: 130.24 change: -0.36

Stop Loss: 128.35
Target(s): 138.50, 144.00
Current Option Gain/Loss: -13.2%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
07/16 update: PNRA underperformed the market on Friday. Shares are hovering near the bottom of its $129-133 trading range. I would still be tempted to buy calls now. More conservative traders may want to wait for a new breakout past $133.00 instead. A new high could spark some serious short covering.

We do not want to hold over the late July earnings report.

Don't forget that PNRA has significant short interest and could see a short squeeze higher. FYI: The most recent data listed short interest at 8.6% of the small 28.2 million-share float.

- Suggested Positions -

Long AUG $135 call (PNRA1120H135) Entry @ $3.40

07/13 option back to breakeven (+0.0%)
07/12 new stop loss @ 128.35

chart:

Entry on July 11 at $130.61
Earnings Date 07/26/11 (unconfirmed)
Average Daily Volume = 337 thousand
Listed on July 9, 2011


Starbucks Corp. - SBUX - close: 39.80 change: +0.67

Stop Loss: 37.75
Target(s): 44.00
Current Option Gain/Loss: unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Comments:
07/16 update: SBUX displayed relative strength on Friday with a strong bounce from the $39.00 level. The stock closed with a +1.7% gain. If we see shares close over $40.00 I might be tempted to buy it with a stop just under $39.00. Otherwise we will keep our buy-the-dip trigger at $38.50. We do not want to hold positions over the late July earnings report.

Trigger @ $38.50

- Suggested (Small) Positions -

buy the AUG $40.00 call (SBUX1120H40)

07/12 adjust trigger to $38.50
07/11 Our first attempt at a call play on SBUX did not pan out. Shares opened lower at $39.98 and then hit our relatively tight stop loss at $39.45. The option opened at $1.49 (ask) and we were stopped out at $1.22 (bid)for an -18% loss.
We are reloading this trade with a buy-the-dip trigger at $38.75.

chart:

Entry on July xx at $ xx.xx
Earnings Date 07/28/11 (unconfirmed)
Average Daily Volume = 6.8 million
Listed on July 9, 2011


CLOSED BULLISH PLAYS

Norfolk Southern - NSC - close: 73.91 change: -0.13

Stop Loss: 73.40
Target(s): 79.75
Current Option Gain/Loss: -25.6%
Time Frame: up until its earnings report.
New Positions: see below

Comments:
07/16 update: The long-term trend for the railroad stocks is higher but short-term they seem to be struggling a bit. NSC dipped to $73.07 intraday. Our stop loss was hit at $73.40. I would keep NSC on your watch list for another entry point.

- Suggested (SMALL) Positions -

Aug. $75 call (NSC11H75) Entry @ $1.95, exit $1.45 (-25.6%)

07/15 stopped out @ 73.40
07/14 readers may want to exit early
07/13 the option is back to breakeven. readers could exit here.
07/12 NSC has broken support at $74. Readers may want to exit early
07/11 triggered @ 74.50
07/09 new stop loss @ 73.40. Small positions!
07/06 adjusted entry trigger to $74.50 and stop to 71.75

chart:

Entry on July 11 at $74.50
Earnings Date 07/27/11 (unconfirmed)
Average Daily Volume = 2.3 million
Listed on July 2, 2011