Editor's Note:

The major indices ran out of steam near resistance. Most of the market experienced some profit taking following recent gains.

The U.S. market looks poised for more weakness tomorrow morning. Nimble traders may want to consider buying calls on a dip near support in their favorite stocks.

-James

Current Portfolio:


CALL Play Updates

Abercrombie & Fitch - ANF - close: 73.47 change: +0.47

Stop Loss: 67.45
Target(s): 77.25
Current Option Gain/Loss: Unopened
Time Frame: 2 to 3 weeks
New Positions: Yes, see below

Comments:
10/25 update: Our new trade on ANF is not open yet. The S&P 500 opened flat and ANF opened down before rising toward the $75.00 level. It looks like the stock market might be poised for some profit taking tomorrow. We will adjust our entry point strategy on ANF. The new plan is to buy a dip at $70.25 with a stop loss at $67.45.

I am labeling this as an aggressive trade. ANF can be a volatile stock and we have a wide stop loss. I would launch small bullish positions tomorrow but only if both ANF and the S&P 500 index both open positive. Please note we do not want to hold over the mid November earnings report. Our exit target is $77.25.

FYI: Traders will want to take note of the fact that the most recent data listed short interest at 8% of the 85.8 million share float. Plus, the Point & Figure chart for ANF is bullish with a $98 target.

buy-a-dip at $70.25, stop loss $67.45

- Suggested Positions -

buy the NOV $75 call (ANF1119K75)

Entry on October xx at $ xx.xx
Earnings Date 11/16/11 (unconfirmed)
Average Daily Volume = 2.1 million
Listed on October 24, 2011


Bed Bath & Beyond Inc. - BBBY - close: 61.02 change: -1.21

Stop Loss: 58.90
Target(s): 64.75
Current Option Gain/Loss: -26.6%
Time Frame: 2 to 4 weeks
New Positions: see below

Comments:
10/25 update: BBBY hit some profit taking today with a -1.9% decline. Shares look headed for the $60.00 level, which should offer some round-number support. If you're looking for a new entry point I'd wait for a dip or a bounce near $60.00.

*Small Positions*- Suggested Positions -

Long NOV $62.50 call (BBBY1119K62.5) Entry $1.50

Entry on October 14 at $61.00
Earnings Date 12/21/11 (unconfirmed)
Average Daily Volume = 3.4 million
Listed on October 12, 2011


Costco Wholesale - COST - close: 83.23 change: -1.25

Stop Loss: 83.75
Target(s): 97.50
Current Option Gain/Loss: Unopened
Time Frame: 4 to 8 weeks
New Positions: Yes, see below

Comments:
10/25 update: COST also experienced some profit taking today. Shares fell under short-term support at $84.00 and closed near its lows for the session. Nimble traders may want to consider buying calls on a dip near $82.00 with a relatively tight stop loss.

At the moment our plan is to buy calls at $86.50. However, if we do see COST find support or bounce near $82.00 we'll probably update our entry point strategy tomorrow.

Earlier Comments:
If triggered at $86.50 we'll use a stop loss at $83.75. Our multi-week exit target is $97.50. Cautious traders will want to consider an exit near $90 or $94 instead. Keep positions small.

Trigger @ $86.50 (small positions)

- Suggested Positions -

buy the NOV $85 call (COST1119K85)

- or -

buy the 2012 Jan $90 call (COST1221A90)

Entry on October xx at $ xx.xx
Earnings Date 12/07/11 (unconfirmed)
Average Daily Volume = 2.9 million
Listed on October 22, 2011


iShares China 25 index ETF - FXI - close: 34.73 change: -0.55

Stop Loss: 32.95
Target(s): 39.50
Current Option Gain/Loss: Unopened
Time Frame: 3 to 6 weeks
New Positions: Yes, see below

Comments:
10/25 update: Our trade on the FXI is not open yet. The S&P 500 opened flat and FXI opened down. There is now a good chance that the FXI might fill the gap with a dip toward the $33.50 area. Nimble traders may want to consider buying a dip or a bounce near this level.

Given the U.S. stock market's decline today and what could be a negative open tomorrow morning, we are going to take a more cautious approach to new positions. I am temporarily removing the newsletter's entry point to buy calls on the FXI and we'll re-evaluate tomorrow.

No Entry Point Tonight. Wait and Watch. We will re-evaluate tomorrow.

Entry on October xx at $ xx.xx
Earnings Date --/--/--
Average Daily Volume = 30 million
Listed on October 24, 2011


Goldman Sachs - GS - close: 100.44 change: -3.54

Stop Loss: 97.95
Target(s): 114.00
Current Option Gain/Loss: -41.8%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
10/25 update: Ouch! Financial stocks were some of the worst performers on Tuesday. News that the EU finance ministers had canceled their meeting tomorrow does not bode well. Suddenly there is no chance for a comprehensive solution to the problems in Europe happening tomorrow.

Shares of GS fell -3.4% and dropped toward round-number support at $100.00. If both GS and the S&P 500 index open positive tomorrow, then I would consider new bullish positions but I doubt that will happen. We have a stop loss at $97.95. More conservative traders might want to consider a tighter stop loss.

Earlier Comments:
We want to keep our position size small to limit our risk. Our target is $114.00. More conservative traders may want to exit near $110 instead.

(Small Positions) - Suggested Positions -

Long NOV $110 call (GS1119K110) Entry $1.84

Entry on October 24 at $102.65
Earnings Date 10/18/11 (confirmed)
Average Daily Volume = 8.2 million
Listed on October 22, 2011


iShares Transportation ETF - IYT - close: 85.75 change: -1.93

Stop Loss: 82.45
Target(s): 90.00
Current Option Gain/Loss: - 2.3%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
10/25 update: The transportation averages gave up -2.2%. The IYT managed an intraday bounce near $85 this morning. The $85.00 level is the first line of defense for the bulls. The next level of short-term support would be the simple 10-dma near $84.25. More conservative traders might want to raise their stop loss closer to the $84.00 level.

Nimble traders could try and buy calls on a dip or a bounce near $84.25 (10-dma).

Earlier Comments:
Readers will want to keep our position size small since the transports are short-term overbought given the huge bounce from its October lows.

(small positions)

- Suggested Positions -

Long NOV $87 call (IYT1119K87) Entry $2.15

10/22 new stop loss @ 82.45
10/21 Gap higher entry @ 85.33

Entry on October 21 at $85.33
Earnings Date --/--/--
Average Daily Volume = 662 thousand
Listed on October 18, 2011


Rockwell Automation - ROK - close: 64.60 change: -3.80

Stop Loss: 62.40
Target(s): 71.75
Current Option Gain/Loss: -30.3%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
10/25 update: ROK was a big underperformer today with a -5.5% decline. I didn't see any specific news or catalyst behind the stock's relative weakness. The close under $65.00 is definitely short-term bearish. More conservative traders may want to consider an early exit now or at least consider raising your stop loss. We are raising our stop loss to $62.40.

Earlier Comments:
Let's keep our position size small. Our exit target is $71.75. FYI: The Point & Figure chart for ROK is bullish with a $91 target.

(Small Positions)- Suggested Positions -

Long NOV $70 call (ROK1119K70) Entry $1.65

10/24 new stop loss @ 62.40

Entry on October 24 at $66.62
Earnings Date 11/08/11 (confirmed)
Average Daily Volume = 1.7 million
Listed on October 22, 2011


SPX Corp. - SPW - close: 52.73 change: -2.69

Stop Loss: 51.75
Target(s): 57.75
Current Option Gain/Loss: - 5.5%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
10/25 update: Be careful here with SPW. The stock has completely erased yesterday's gain with today's -4.8% decline. The move suddenly looks like a potential bull-trap pattern. The next level of support should be $52.00 and if that level fails we'll be stopped out at $51.75. I'd wait for a bounce from $52 before considering new bullish positions.

Earlier Comments:
This is an aggressive trade so we want to keep our position size small. FYI: The Point & Figure chart for SPW is bullish with a $78 target.

(Small Positions)- Suggested Positions -

Long NOV $55 call (SPW1119K55) Entry $1.80

10/24 new stop loss @ 51.75
10/20 trade opened at $51.80
10/19 Trade still not open. Try again.
10/18 New entry point on this bounce. See entry details above
10/17 Trade not open. Remove entry point for 24 hours, then re-evaluate.

Entry on October 20 at $51.80
Earnings Date 11/02/11 (confirmed)
Average Daily Volume = 701 thousand
Listed on October 15, 2011


PUT Play Updates

Currently we do not have any active put trades.


Market Neutral Play Updates

iShares Russell 2000 ETF - IWM - close: 71.36 change: -2.06

Stop Loss: n/a
Target(s): To Be Determined
Current Option Gain/Loss: - 5.7%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
10/25 update: After yesterday's bullish breakout it was disappointing to see the small caps give back so much of their gains. The IWM fell -2.8%. The $71.00 area "should" be short-term support but there is no guarantee stocks will bounce.

We are not suggesting new positions at this time.

FYI: A strangle involves buying both an out of the money call (OTM call) and an out of the money put (OTM put). The expectation is that the underlying equity (IWM in this case) will move enough to make one side profitable and cover the entire position and then some.

- Strangle Position cost: 4.55 current value: 4.29 (-5.7%)

Out-of-the-Money Call option:
Long NOV $72 call (IWM1119K72) Entry $2.30, current bid $2.53

- and -

Out-of-the-Money Put option:
Long NOV $68 put (IWM1119W68) Entry $2.25, current bid $1.76

Entry on October 21 at $70.57
Earnings Date --/--/--
Average Daily Volume = 89 million
Listed on October 20, 2011