Editor's Note:

It was another very volatile day of trading in the stock market. The Dow Industrial Average saw its +260-point rally this morning reverse into a -306 point drop from its highs and then reverse again +188 points.

That's a very tough market to trade. Sometimes investors would rather exit than get run over in all this cross traffic. We saw CERN, DLTR, HANS, and WFM all get stopped out. On the positive side our CAT put play did hit our first target.

-James

Current Portfolio:


CALL Play Updates

Celgene Corp. - CELG - close: 62.93 change: +0.53

Stop Loss: 61.75
Target(s): 69.00
Current Option Gain/Loss: -20.9%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
09/29 update: As we expected, shares of CELG tested support near $62.00 and bounced. The low today was $61.84 but traders bought the dip near $62 multiple times. Technically this looks like a new entry point to buy calls but I will point out that the MACD indicator on the daily chart is nearing a new sell signal. Readers may want to keep any new positions pretty small.

Please note our new stop loss at $61.75

- Suggested Positions -

Long OCT $65 call (CELG1122J65) Entry $1.53

09/29 new stop loss @ 61.75
09/27 new stop loss @ 61.25

Entry on September 26 at $63.03
Earnings Date 10/27/11 (unconfirmed)
Average Daily Volume = 4.0 million
Listed on September 22, 2011


Check Point Software - CHKP - close: 53.41 change: -0.18

Stop Loss: 50.80
Target(s): 55.75 , 57.75
Current Option Gain/Loss: -16.6%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
09/29 update: The stock market's afternoon swoon lower pushed CHKP to support near $52.00 and its 200-dma. The intraday low was $51.83. The late day bounce could be used as a new bullish entry point to buy calls but I would keep positions small and probably raise the stop toward $51.80. Officially we'll keep the stop at $50.80 tonight.

- Suggested Positions -

Long OCT $55 call (CHKP1122J55) Entry $1.80

09/26 trade opened.

Entry on September 26 at $53.00
Earnings Date 10/20/11 (unconfirmed)
Average Daily Volume = 1.6 million
Listed on September 20, 2011


Hewlett Packard - HPQ - close: 23.78 change: +0.59

Stop Loss: 21.45
Target(s): 29.50
Current Option Gain/Loss: +21.9%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
09/29 update: The headlines for HPQ today were dominated over a growing "war of words" between the Autonomy CEO and Oracle (ORCL). Oracle claims that Autonomy came to them first to buy the company but ORCL turned them down because Autonomy was overvalued at $6 billion. Why is this relevant? HPQ is currently under contract to buy Autonomy for more than $11.5 billion. The story did not seem to affect trading of HPQ shares today but you have to wonder if activist shareholders will try and kill the deal or will the new HPQ CEO Meg Whitman scuttle the deal. I'm sure there is a breakup fee but it has to be less than the $6 billion difference that Autonomy wanted from Oracle and what HPQ is paying.

Just looking at the chart of HPQ today the stock looks poised to bounce. I would be tempted to buy calls here but readers may want to raise their stop closer to $22.00 or even closer to the $23.00 level to really limit your risk.

- Suggested Positions -

Long 2012 Jan. $24 call (HPQ1221A24) Entry $2.14

09/27 new stop loss @ 21.45

Entry on September 23 at $22.52
Earnings Date 11/21/11 (unconfirmed)
Average Daily Volume = 26.6 million
Listed on September 22, 2011


Watson Pharmaceuticals - WPI - close: 70.91 change: +0.30

Stop Loss: 69.75
Target(s): 74.75, 78.50
Current Option Gain/Loss: Oct$75: -35.0% & NOV$75: -21.4%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
09/29 update: WPI dipped to short-term support near $70.00 and its 10-dma. The late afternoon bounce from this level looks like a bullish entry point. However, I would only consider new positions if both WPI and the S&P500 index both open positive tomorrow and I would keep positions small. This is a very volatile market!

The low today was $69.88. Our stop is at $69.75.

- Suggested Positions -

Long OCT $75 call (WPI1122J75) Entry $1.00

- or -

Long NOV $75 call (WPI1119K75) Entry $2.10

09/27 new stop loss @ 69.75

Entry on September 26 at $71.26
Earnings Date 11/01/11 (confirmed)
Average Daily Volume = 1.4 million
Listed on September 24, 2011


PUT Play Updates

Caterpillar Inc. - CAT - close: 75.39 change: +0.31

Stop Loss: 80.25
Target(s): 73.50, 70.50
Current Option Gain/Loss: +36.5%
Time Frame: 2 to 3 weeks
New Positions: see below

Comments:
09/29 update: Target achieved. CAT gapped open higher, fell to $73.20 intraday, and then reversed back into positive territory. Our first target to take profits was hit at $73.50. At the moment I would be concerned that if the broader market continues to bounce tomorrow that we could see CAT challenge the $79-80 zone. Wait for a new failed rally under $80 before considering new positions.

- Suggested Positions -

Long OCT $75 PUT (CAT1122V75) Entry $2.93

09/29 1st target hit at $73.50. option bid $5.00 (+70.6%)

chart:

Entry on September 28 at $78.13
Earnings Date 10/24/11 (unconfirmed)
Average Daily Volume = 11.2 million
Listed on September 27, 2011


Flowserve Corp. - FLS - close: 78.60 change: +0.70

Stop Loss: 82.75
Target(s): 71.00, 66.00
Current Option Gain/Loss: Oct$75: +18.0% & Nov$70: +21.4%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
09/29 update: The stock market's morning strength pushed FLS to gap open higher at $80.23 but the rebound failed at $81.41. Shares then fell more than -3% from its intraday highs but still managed to post a gain for the session. Overall I don't see any changes from my prior comments. The gap higher helped us by knocking down the put prices for our entry point.

Our first target is $71.00. Our secondary, more aggressive target is $66.00.

- Suggested Positions -

Long OCT $75 PUT (FLS1122V75) Entry $2.50

- or -

Long NOV $70 PUT (FLS1119W70) Entry $2.80

Entry on September 29 at $80.23
Earnings Date 10/26/11 (unconfirmed)
Average Daily Volume = 721 thousand
Listed on September 28, 2011


Regal-Beloit - RBC - close: 49.04 change: +1.09

Stop Loss: 51.55
Target(s): 43.50, 40.50
Option Gain/Loss: (wide spreads) Oct$45: -30.0% & Nov$45: -30.4%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
09/29 update: Thursday proved to be a rocky day for RBC. Shares gapped open at $49.01, dipped back to a new 52-week low at $47.47, before bouncing all the way back to where it started the session near $49.00. Overall I don't see any changes from my prior comments but readers may want to wait for a new failed rally near $51.00 or $50.00 before initiating new positions.

Warning! The option spreads are a little wide. We want to keep our position size small to limit our capital at risk.

- Suggested Positions - (small positions)

Long OCT $45 PUT (RBC1122V45) Entry $1.00

- or -

Long NOV $45 PUT (RBC1119W45) Entry $2.30

Entry on September 29 at $49.01
Earnings Date 11/02/11 (unconfirmed)
Average Daily Volume = 456 thousand
Listed on September 28, 2011


CLOSED BULLISH PLAYS

Cerner Corp. - CERN - close: 70.49 change: +0.13

Stop Loss: 69.50
Target(s): 74.90, 78.50
Current Option Gain/Loss: -41.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
09/29 update: CERN managed to eke out a small gain but the intraday volatility was too much. Shares dipped to $68.52 this afternoon. Our stop loss was hit at $69.50.

- Suggested Positions -

OCT $75 call (CERN1122J75) Entry $1.95, Exit $0.90 (-53.8%)

09/29 stopped out at $69.50
09/27 new stop loss @ 69.50

chart:

Entry on September 27 at $72.79
Earnings Date 10/27/11 (unconfirmed)
Average Daily Volume = 1.6 million
Listed on September 26, 2011


Dollar Tree Inc. - DLTR - close: 75.28 change: -1.28

Stop Loss: 74.75
Target(s): 79.75, 82.50
Current Option Gain/Loss: Oct$77.50: -55.5% & Nov$80: -31.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
09/29 update: Another extremely volatile day of trading in the markets helped kill our DLTR trade. Shares dipped to $73.35 intraday. Our stop loss was $74.75. After Tuesday's reversal lower I would hesitate to launch new bullish positions.

NOTE: It was a pretty ugly day for the October call. Ouch!

Earlier Comments:
09/28 - NOTE: Readers might want to consider an early exit right now. Even though DLTR held up today the broader market looks very vulnerable. Traders may want to cut their losses early.

- Suggested Positions -

OCT $77.50 call (DLTR1122J77.5) Entry $2.70, Exit $1.20 (-55.5%)

- or -

NOV $80.00 call (DLTR1119K80) Entry $2.90, Exit $2.00 (-31.0%)

09/29 stopped out at $74.75
09/27 new stop loss @ 74.75, DLTR showing relative weakness today

chart:

Entry on September 26 at $76.51
Earnings Date 11/17/11 (unconfirmed)
Average Daily Volume = 1.7 million
Listed on September 24, 2011


Hansen Natural Corp. - HANS - close: 88.32 change: -0.98

Stop Loss: 86.90
Target(s): 94.75, 99.00
Current Option Gain/Loss: -57.1%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
09/29 update: HANS is already a volatile stock. The market volatility today only made things worse. Shares dipped to $86.70 this afternoon. That was just enough to hit our stop loss (86.90).

Earlier Comments:
This stock can be volatile so we do want to keep our position size small.

- Suggested Positions - (Small Positions)

Long OCT $95 call (HANS1122J95) Entry $3.50 exit $1.50 (-57.1%)

09/29 stopped out at $86.90
09/27 new stop loss @ 86.90

chart:

Entry on September 27 at $92.17
Earnings Date 11/03/11 (unconfirmed)
Average Daily Volume = 1.5 million
Listed on September 26, 2011


Whole Foods Market - WFM - close: 67.07 change: -3.02

Stop Loss: 67.45
Target(s): 73.00, 77.50
Current Option Gain/Loss: OCT$70: -35.5% & NOV$72.50: -20.7%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
09/29 update: I could not find any specific news to explain WFM's relative weakness. The stock underperformed with a -4.3% plunge. Shares hit new two-week lows today. The breakdown under support near $68 and its trendline of higher lows is bearish. Now the failed rally earlier this week is starting to look like a bearish double top pattern.

Earlier Comments:
09/28 - More conservative traders may just want to abandon ship now. I am not suggesting new positions at this time.

- Suggested Positions - (Small Positions)

OCT $70 call (WFM1122J70) Entry $3.18, exit $2.05 (-35.5%)

- or -

NOV $72.50 call (WFM1119K72.5) Entry $4.10, exit $3.25 (-20.7%)

09/29 stopped out at $67.45
09/27 new stop loss @ 67.45
09/26 new stop loss @ 65.90

chart:

Entry on September 26 at $69.10
Earnings Date 11/02/11 (unconfirmed)
Average Daily Volume = 2.2 million
Listed on September 22, 2011