Editor's Note:

The market's early rally faded on news that Standard & Poor's might downgrade all 17 nations in the euro zone.

I am removing ALXN from the play list. The trade did not open. We do want to go ahead and take profits on our December calls on the ORLY play.

-James

Current Portfolio:


CALL Play Updates

Caterpillar - CAT - close: 96.85 change: +0.56

Stop Loss: 95.45
Target(s): 107.00
Current Option Gain/Loss: Unopened
Time Frame: 3 to 6 weeks
New Positions: Yes, see below

Comments:
12/05 update: CAT spent the day churning sideways under resistance at $98.00. The stock managed a minor gain that erased Friday's equally minor decline. There is no change from my weekend comments.

I am suggesting we buy calls with a trigger to open positions at $98.55. If triggered we'll use a stop loss at $95.45. Our target is $107.00.

Trigger @ 98.55

- Suggested Positions -

buy the 2012Jan $100 call (CAT1221A100)

Entry on December xx at $ xx.xx
Earnings Date 01/26/12 (unconfirmed)
Average Daily Volume = 8.1 million
Listed on December 03, 2011


Edwards Lifesciences - EW - close: 65.24 change: +0.25

Stop Loss: 63.25
Target(s): 69.50
Current Option Gain/Loss: Dec$65c: - 2.5% & Jan$70c: -11.7%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/05 update: EW produced an "inside day". Essentially it was a day of indecision by traders. I will repeat my comments from this weekend that EW looks like it's ready to dip towards $64.00 or the simple 10-dma. I am not suggesting new positions at this time.

More conservative traders may want to exit early now to avoid or limit any losses.

- Suggested Positions -

Long DEC $65 call (EW1117L65) Entry $1.95

- or -

Long 2012Jan $70 call (EW1221A70) Entry $1.70

12/03 new stop loss @ 63.25
11/30 new stop loss @ 61.95
11/28 trade opened. EW gapped higher at $63.97
11/26 trade still not open. Adjusting stop loss to $59.90
11/23 still not open
11/22 not open yet

Entry on November 28 at $63.97
Earnings Date 02/02/12 (unconfirmed)
Average Daily Volume = 1.2 million
Listed on November 21, 2011


Family Dollar Stores - FDO - close: 59.20 change: +0.50

Stop Loss: 56.75
Target(s): 64.00
Current Option Gain/Loss: Unopened
Time Frame: 3 to 6 weeks
New Positions: Yes, see below

Comments:
12/05 update: FDO continues to churn sideways. shares managed to hit $59.99 midday before paring its gains. I am suggesting readers wait for a dip to $58.00 to open bullish positions. I am suggesting January calls.

Earlier Comments:
We want to keep our position size small because the spreads on the options below are getting wide, making this trade more risky.

buy the dip Trigger @ 58.00 (small positions)

- Suggested Positions -

buy the JAN $60 call (FDO1221A60)

12/03/11 Adjust buy-the-dip trigger to $58.00
12/03/11 new stop loss @ 56.75
11/30 New strategy to account for FDO's bullish breakout higher. We want to use a trigger at $58.50 to open bullish positions with a stop at $56.45. New target is $64.00. I've updated our option strikes.
11/26 new strategy. buy a dip at $54.50, stop loss @ 53.75. Keep positions small because option spreads are wide.
11/22 not open yet

Entry on November xx at $ xx.xx
Earnings Date 01/04/12 (unconfirmed)
Average Daily Volume = 1.0 million
Listed on November 21, 2011


JB Hunt Transport Services - JBHT - close: 46.03 change: +0.34

Stop Loss: 44.75
Target(s): 48.25
Current Option Gain/Loss: +14.6%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
12/05 update: The transportation average is just barely pushing past resistance at the 5,000 level and technical resistance at its 200-dma. If the transport sector can build on this move it will be bullish for stocks and help JBHT move higher. JBHT did gain +0.7% but the stock was off its best levels of the session. No new positions at this time.

Earlier Comments:
Our multi-week target is $48.25. JBHT doesn't move super fast so give yourself time for the trade to work. FYI: The Point & Figure chart for JBHT is bullish with a $63 target.

- Suggested Positions -

Long 2012JAN $45 call (JBHT1221A45) Entry $2.05

12/03/11 new stop loss @ 44.75. More aggressive traders may want to leave their stop under $44.00 instead
11/30/11 new stop loss @ 42.45
11/29/11 triggered at $44.35

Entry on November 29 at $44.35
Earnings Date 01/30/12 (unconfirmed)
Average Daily Volume = 1.0 million
Listed on November 22, 2011


NetApp, Inc. - NTAP - close: 37.54 change: +1.00

Stop Loss: 34.95
Target(s): 39.50
Current Option Gain/Loss: +39.4%
Time Frame: 3 to 5 weeks
New Positions: see below

Comments:
12/05 update: NTAP rallied to technical resistance near its 50-dma (near $38.25) late this morning. Shares did fade lower but even with the pull back off its highs NTAP outperformed the market with a +2.7% gain. I am not suggesting new positions with NTAP sitting just under resistance.

Earlier Comments:
I do consider a more aggressive trade. We want to keep our position size small to limit risk. FYI: Readers should note that there is a risk that NTAP might make an acquisition soon. There are rumors floating around that NTAP could buy Quantum (QTM) or CommVault (CVLT) in an effort to better compete with rival EMC. If NTAP does make a bid for either company typically shares of the buyer go down while shares of the target go up.

- Suggested Positions - (small positions)

Long JAN $35 call (NTAP1221A35) Entry $2.51

12/03/11 new stop loss @ 34.95

Entry on November 29 at $35.82
Earnings Date 02/16/12 (unconfirmed)
Average Daily Volume = 9.2 million
Listed on November 28, 2011


O'Reilly Automotive - ORLY - close: 79.53 change: +2.50

Stop Loss: 74.90
Target(s): 84.00
Current Option Gain/Loss: Dec$75c: +64.2% & Jan$80c: +46.6%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/05 update: Some positive analyst comments helped ORLY rally to new all-time highs. Shares hit $80.67 before paring its gains and the stock settled with a +3.2% advance at the close. Please note we're making some strategy changes. We are moving our final target from $82.50 to $84.00 but this only applies to the January calls. I am suggesting we exit our December calls at the open tomorrow morning to lock in a gain. I am not suggesting new positions at this time.

- Suggested Positions -

Long DEC $75 call (ORLY1117L75) Entry $2.80
(prepare to exit tomorrow at the open)

- or -

Long JAN $80 call (ORLY1221A80) Entry $1.50*

12/05/11 Strategy change: Exit the December calls tomorrow at the open. Move the exit target for the January calls from $82.50 to $84.00.
12/03/11 new stop loss @ 74.90
11/28/11 ORLY gapped open higher at $76.96, which was above our trigger to buy calls at $76.15.
*Jan $80 call did not trade today. Entry price is an estimate.

Entry on November 28 at $76.96
Earnings Date 02/16/12 (unconfirmed)
Average Daily Volume = 1.0 million
Listed on November 26, 2011


Phillip Morris Intl. - PM - close: 75.87 change: +0.40

Stop Loss: 73.75
Target(s): 78.50
Current Option Gain/Loss: +100.8%
Time Frame: 6 to 9 weeks
New Positions: see below

Comments:
12/05 update: Hmm... that's the second time in three days that PM has seen the rally fail near the $77.00 level. Readers may want to consider an early exit now to lock in a gain, especially with our call +100%. I am not suggesting new positions at this time.

Earlier Comments:
Our multi-week target is $78.50. FYI: The Point & Figure chart for PM is bullish with a $95 target.

- Suggested Positions -

Long 2012 Jan $75 call (PM1221A75) Entry $1.12

12/05 Call is up +100%, readers may want to exit now!
12/03 new stop loss @ 73.75
11/30 new stop loss @ 71.40
11/23 adjusted stop loss to $69.49
11/22 trade opened. PM opened at $72.11

Entry on November 22 at $72.11
Earnings Date 02/09/12 (unconfirmed)
Average Daily Volume = 7.3 million
Listed on November 19, 2011


Boston Beer Co. Inc. - SAM - close: 103.91 change: +1.40

Stop Loss: 98.75
Target(s): 109.50
Current Option Gain/Loss: + 9.7%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/05 update: SAM gapped higher and then spent most of the session oscillating on either side of the $104.00 level. I am not suggesting new positions at this time.

Earlier Comments:
Our exit target is $109.50. More aggressive traders may want to aim higher. FYI: The Point & Figure chart for SAM is bullish with a $117 target. NOTE: The most recent data listed short interest at 20% of SAM's extremely small 8.3 million-share float. That's definitely a recipe for a short squeeze.

(small positions) - Suggested Positions -

Long JAN $105 call (SAM1221A105) Entry $2.05

12/03/11 new stop loss @ 98.75
12/02/11 trade triggered at $102.00

Entry on December xx at $ xx.xx
Earnings Date 03/08/12 (unconfirmed)
Average Daily Volume = 72.3 thousand
Listed on December 01, 2011


PUT Play Updates

SPDR S&P 500 ETF - SPY - close: 126.22 change: +1.36

Stop Loss: 127.55
Target(s): 120.50
Current Option Gain/Loss: - 1.8%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/05 update: Our speculative put play on the overbought condition in the SPY is on the verge of getting stopped out. The market rallied again this morning until enthusiasm wanted thanks to headlines that the S&P rating agency might put all 17 euro-zone nations on credit watch negative for a potential downgrade. It's a surprise that stocks still managed to close in positive territory.

The high today for the SPY was $127.18. We have a stop loss at $127.55. More aggressive traders may want to inch their stop higher so it's just above $128.00 instead.

Earlier Comments:
We want to keep our position size small to limit our risk.

- Suggested Positions -

Long 2012Jan $120 PUT (SPY1221M120) Entry $2.67

12/02/11 trade opened at $126.12 (gap higher), trigger was 126.00

Entry on December 02 at $126.12
Earnings Date --/--/--
Average Daily Volume = 224 million
Listed on November 30, 2011


Thermo Fisher Scientific - TMO - close: 46.78 change: +0.24

Stop Loss: 48.25
Target(s): 42.75
Current Option Gain/Loss: Dec$45p: +11.1% & Jan$45P: + 0.0%
Time Frame: 2 to 4 weeks
New Positions: see below

Comments:
12/05 update: TMO gapped open higher at $47.10 but the rally stalled, twice, near $47.40. This is a new lower high within a short-term pattern of lower highs. The gap higher and the time decay provided a much lower price on our December $45 puts. These have less than two weeks left.

Bigger picture TMO looks poised to roll over again and hit new lows. On a shorter time frame you could argue that TMO is forming a bull-flag pattern.

I would still consider new positions now at current levels. Our target is $42.75. FYI: The Point & Figure chart for TMO is bearish with a $41 target.

- Suggested Positions -

Long DEC $45 put (TMO1117X45) Entry $0.45
(about 2 weeks left for Decembers)

- or -

Long JAN $45 put (TMO1221M45) Entry $1.40

12/05/11 TMO gapped open higher at $47.10

Entry on December 05 at $47.10
Earnings Date 02/01/12 (unconfirmed)
Average Daily Volume = 3.5 million
Listed on December 03, 2011


Watson Pharmaceuticals - WPI - close: 63.26 change: +0.40

Stop Loss: 64.25
Target(s): 56.00
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Comments:
12/05 update: WPI consolidated sideways in a narrow range underneath its 200-dma. There is no change from my weekend comments.

I am suggesting we use a trigger to buy puts at $61.75 with a stop loss at $64.25. There is potential support at $60.00 but I am aiming for the $56.00 level.

Trigger @ $61.75

- Suggested Positions -

buy the DEC $60 PUT (WPI1117X60)
(aobut 2 weeks left for Decembers)

- or -

buy the JAN $60 PUT (WPI1221M60)

Entry on December xx at $ xx.xx
Earnings Date 02/14/12 (unconfirmed)
Average Daily Volume = 1.5 million
Listed on December 03, 2011


CLOSED BULLISH PLAYS

Alexion Pharmaceuticals - ALXN - close: 65.10 change: -1.88

Stop Loss: 67.40
Target(s): 74.75 or 79.00
Current Option Gain/Loss: Unopened
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/05 update: ALXN continues to contract lower. Shares underperformed the wider market today. The stock looks poised to retest support in the $63-60 zone. It could be a while before we see ALXN breakout past resistance at $70.00. I am removing it from the play list with the trade unopened. Our trigger was $70.55. I would keep an eye on technical support near the 200-dma.

Trigger @ $70.55 (Small Positions)

Trade Did Not Open

12/05/11 chose to drop ALXN as a candidate.

chart:

Entry on December xx at $ xx.xx
Earnings Date 02/09/12 (unconfirmed)
Average Daily Volume = 1.1 million
Listed on December 01, 2011