Editor's Note:

The rally in stocks stalled and started to fade after a 100-point rebound in the S&P 500 index. Friday's high of 1171 is a 97-point rally off the market's Tuesday low. What are the odds that stocks will see a little profit taking early next week?

-James

Current Portfolio:


CALL Play Updates

Alexion Pharmaceuticals - ALXN - close: 65.18 change: -0.46

Stop Loss: 61.75
Target(s): 67.90
Current Option Gain/Loss: +32.5%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
10/08 update: Traders bought the dip in ALXN near $63.50 and its rising 20-dma on Friday morning. While the stock rallied off its intraday low it struggled with short-term resistance at $66.00. I am somewhat concerned that stocks could falter on Monday morning. We are raising our stop loss up to $61.75. More aggressive trades may want to leave their stop under $60.00. I am not suggesting new positions at this time.

- Suggested Positions -

Long OCT $65 call (ALXN1122J65) Entry $2.00

10/08 new stop loss @ 61.75

chart:

Entry on October 05 at $63.16
Earnings Date 10/20/11 (unconfirmed)
Average Daily Volume = 1.8 million
Listed on October 04, 2011


Check Point Software - CHKP - close: 56.01 change: -0.44

Stop Loss: 53.45
Target(s): 55.75 , 57.75
Current Option Gain/Loss: +30.5%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
10/08 update: The rally in CHKP seemed to run out of steam at the top of its gap down (resistance) near $56.50-57.00). I am not suggesting new bullish positions at this time. We do not want to hold over CHKP's earnings report on October 18th. More conservative traders may want to exit now. Our final target is currently $57.75. I'm leaving our stop at $53.45 but you might want to consider raising your stop loss closer to the $55.00 level.

- Suggested Positions -

Long OCT $55 call (CHKP1122J55) Entry $1.80

10/06 new stop loss @ 53.45
10/06 1st target hit at $55.75
bid on Oct. $55 call @ 2.30 (+27.7%)
10/03 testing support near $51.00, consider an early exit
10/01 readers may want to consider an early exit now.
09/26 trade opened.

chart:

Entry on September 26 at $53.00
Earnings Date 10/18/11 (confirmed)
Average Daily Volume = 1.6 million
Listed on September 20, 2011


Hewlett Packard - HPQ - close: 24.88 change: -0.17

Stop Loss: 21.45
Target(s): 29.50
Current Option Gain/Loss: +54.2%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
10/08 update: HPQ produced a +15% bounce off its Tuesday lows and shares finally saw a little bit of profit taking on Friday (-0.6%). I would not be surprised to see a pull back toward $24.00 again. Nimble traders could try buying calls on a new bounce from $24.00 or the $23.50 area.

Earlier Comments:
I am not suggesting new positions at this time. More conservative traders may want to take a little money off the table. The next level of resistance for HPQ is the $26.25-26.50 zone.

- Suggested Positions -

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

09/27 new stop loss @ 21.45

chart:

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


Sears Holding - SHLD - close: 62.12 change: -1.39

Stop Loss: 59.45
Target(s): 69.75
Current Option Gain/Loss: Oct$65 -36.9% & Nov $67.50: -24.7%
Time Frame: 2 to 4 weeks
New Positions: see below

Comments:
10/08 update: SHLD lost -2.1% on Friday but our trade was opened with both SHLD and the S&P500 opening positive. SHLD opened at $64.13 and rallied to short-term resistance at $65.00 before pulling back.

It certainly looks like the stock formed a bottom in the $55-60 zone. Investors are betting the company will see stronger returns as SHLD starts leasing more real estate. Meanwhile, SHLD is expanding their reach with some of their better known brands. You may have noticed that you can find the "Craftsman" brand of tools in non-Sears retailers.

Short-term it looks like SHLD could dip toward $60.00. I would use a pull back near $60 as a new entry point if you didn't open positions on Friday. We are going to adjust our strategy and move the stop loss to $59.45 and our target to $69.75.

Earlier Comments:
It's worth noting that the Point & Figure chart on SHLD has reversed higher and is now pointing to an $83 target. FYI: The most recent data listed short interest at 47% of the float.

- Suggested Positions -

Long OCT $65 call (SHLD1122J65) Entry $2.41

- or -

Long NOV $67.50 call (SHLD1119K67.5) Entry $3.35

10/08 new stop loss @ 59.45, new target 69.75

chart:

Entry on October 7 at $64.13
Earnings Date 11/17/11 (unconfirmed)
Average Daily Volume = 644 thousand
Listed on October 06, 2011


United Technologies - UTX - close: 71.46 change: +0.48

Stop Loss: 66.80
Target(s): 74.50
Current Option Gain/Loss: +30.3%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
10/08 update: UTX outperformed the major indices with a +0.6% gain on Friday. Unfortunately the rally did stall at technical resistance near the 50-dma. I would expect a pull back on Monday. Wait for a bounce before considering new positions. More conservative traders might want to raise their stop loss tonight (maybe towards 68.75).

NOTE: We do not want to hold over UTX's earnings report on Oct. 19th.

- Suggested Positions -

Long OCT $70 call (UTX1122J70) Entry $2.24

chart:

Entry on October 05 at $69.61
Earnings Date 10/19/11 (confirmed)
Average Daily Volume = 6.3 million
Listed on October 04, 2011


PUT Play Updates

None. Currently there are no active put plays.