Editor's Note:

The U.S. market experienced a widespread sell-off with every sector posting losses. The S&P 500 index gave up -2.1% with what looks like a reversal at resistance near 1265 and its 200-dma.

Is investor sentiment turning sour? Or are investors just nervous about tomorrow's EU summit? It will be headlines out of Europe tomorrow that determine market direction for the next few days.

-James

Current Portfolio:


CALL Play Updates

Caterpillar - CAT - close: 92.92 change: -1.97

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:
12/08 update: CAT continues to retreat. Today saw shares close under the 10, 20 and 30-dma. Nimble traders might want to consider buying a dip near $92.00 or the $90.00 level. Currently our trigger to open positions remains at $98.55. We will re-evaluate our entry point strategy after we witness the market's and CAT's performance on Friday.

Trigger @ 98.55

- Suggested Positions -

buy the 2012Jan $100 call (CAT1221A100)

12/08/11 CAT continues to slip. We will re-evaluate our entry point strategy this weekend and make adjustments or drop CAT as a candidate.

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


Cooper Industries - CBE - close: 53.84 change: -1.64

Stop Loss: 54.65
Target(s): 62.50
Current Option Gain/Loss: Unopened
Time Frame: 3 to 6 weeks
New Positions: Yes, see below

Comments:
12/08 update: CBE has seen a sharp two-day pull back thanks to the market's current weakness. The stock is testing technical support at several moving averages near the $54 area right now. Currently our trigger to open positions is at $57.05 but we'll re-evaluate our entry point strategy this weekend.

Trigger @ 57.05

- Suggested Positions -

buy the Jan $60 call (CBE1221A60)

12/08/11 We will re-evaluate our entry point strategy this weekend and make adjustments or drop CBE as a candidate.

Entry on December xx at $ xx.xx
Earnings Date 01/25/12 (unconfirmed)
Average Daily Volume = 3.7 million
Listed on December 06, 2011


Edwards Lifesciences - EW - close: 63.82 change: -0.99

Stop Loss: 63.25
Target(s): 69.50
Current Option Gain/Loss: Dec$65c: -51.2% & Jan$70c: -44.1%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/08 update: EW delivered a morning gap down and spent the rest of the session churning on either side of the $64.00 level. Today's close under the 10-dma is not bullish and the stock has struggled with a trend of lower highs since the reversal on December 2nd. More conservative traders may want to consider an early exit. We have a stop loss at $63.25.

- 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: 57.74 change: -0.48

Stop Loss: 56.75
Target(s): 64.00
Current Option Gain/Loss: - 25.0%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/08 update: FDO initially tried to bounce this morning but the stock peaked at $59.20 and closed at its lows for the session, down -0.8%. I would expect FDO to test the $57.00 area tomorrow. Nimble traders could buy a dip or a bounce near $57.00. We are leaving our stop loss at $56.75.

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.

(small positions) - Suggested Positions -

Long JAN $60 call (FDO1221A60) Entry $1.40

12/07/11 trade opened at $58.00 trigger
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 December 07 at $58.00
Earnings Date 01/04/12 (unconfirmed)
Average Daily Volume = 1.0 million
Listed on November 21, 2011


Hewlett-Packard Co. - HPQ - close: 28.41 change: +0.23

Stop Loss: 27.20
Target(s): 32.00
Current Option Gain/Loss: -27.5%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/08 update: It was not a good day for bulls in HPQ. The stock managed to breakout to new relative highs this morning only to reverse lower. Unfortunately shares managed to hit $28.67 before reversing and closing near the bottom of its multi-day trading range near $27.50. Our trigger to buy calls was hit at $28.65.

Please note we are raising our stop loss up to $27.20.

Earlier Comments:
This is an aggressive entry point. The top of the August gap down near $29.50 could be resistance. Plus HPQ could find round-number resistance at $30.00 and technical resistance at the 150-dma, simple 200-dma and exponential 200-dma all above in the $30.00-34.00 zone. Thus we want to keep our position size small to limit our risk. FYI: The Point & Figure chart for HPQ is bullish with a $41 target.

(small positions) - Suggested Positions -

Long 2012Jan $30 call (HPQ1221A30) Entry $0.80

12/08/11 HPQ broke out past resistance, hit our trigger at $28.65, and promptly reversed lower to close near the bottom of its recent trading range.

Entry on December 08 at $28.65
Earnings Date 02/22/12 (unconfirmed)
Average Daily Volume = 22.4 million
Listed on December 05, 2011


NetApp, Inc. - NTAP - close: 37.10 change: -0.62

Stop Loss: 35.75
Target(s): 39.50
Current Option Gain/Loss: +27.4%
Time Frame: 3 to 5 weeks
New Positions: see below

Comments:
12/08 update: NTAP faded lower and closed down -1.6%. There is a growing chance that we'll see NTAP retest the $36.25-36.00 zone. Please note we are raising our stop loss up to $35.75. I am not suggesting new positions at this time. More conservative traders may want to exit immediately to lock in a gain.

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

12/08/11 new stop loss @ 35.75, more conservative traders may want to exit immediately.
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: 78.92 change: -0.10

Stop Loss: 76.40
Target(s): 84.00
Current Option Gain/Loss: Dec$75c: +61.4% & Jan$80c: +23.3%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/08 update: Profit taking in ORLY today was pretty mild. While the trend is up that doesn't mean ORLY is immune to any widespread market declines. I am raising our stop loss to $76.40. More conservative traders may want to exit early now to lock in a gain. I am not suggesting new positions at this time.

- Suggested Positions -

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

12/08/11 new stop loss @ 76.40, more conservative traders may want to exit early.
12/06/11 Planned exit Dec. calls at the open. The Bid on the Dec. $75 call was $4.52 (+61.4%)
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: 74.56 change: -1.02

Stop Loss: 73.75
Target(s): 78.50
Current Option Gain/Loss: + 37.5%
Time Frame: 6 to 9 weeks
New Positions: see below

Comments:
12/08 update: An analyst downgrade today helped send shares of PM lower. The stock broke down under the $75.00 level and posted a -1.3% decline. I have been warning readers that PM might see a correction into the $74-73 area. We have a stop loss at $73.75 to limit any losses. More conservative traders may want to exit early now. 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: 100.06 change: -1.25

Stop Loss: 98.75
Target(s): 109.50
Current Option Gain/Loss: -51.2%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/08 update: Shares of SAM spiked down to $98.88 this morning before leveling off and consolidating sideways near the $100 level the rest of the session. Our stop loss is at $98.75 so the trade is still open but if the market drops again tomorrow then odds are good we'll see SAM hit our stop loss. On the other hand if the S&P 500 opens positive then I would use this dip to $100 in SAM as a new bullish entry point.

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 02 at $102.00
Earnings Date 03/08/12 (unconfirmed)
Average Daily Volume = 72.3 thousand
Listed on December 01, 2011


Watsco Inc. - WSO - close: 64.08 change: -1.01

Stop Loss: 63.25
Target(s): 69.50
Current Option Gain/Loss: Unopened
Time Frame: 3 to 6 weeks
New Positions: Yes, see below

Comments:
12/08 update: Our new play on WSO is not open yet. Shares climbed to $65.49 before reversing lower today. I don't see any significant changes from my prior comments. I am suggesting a trigger to open bullish positions at $65.55. Our target is $69.50. FYI: The Point & Figure chart for WSO is bullish with an $80 target.

NOTE: Readers may want to keep positions small. The spreads on the Jan $65 call just widened significantly.

Trigger @ 65.55

- Suggested Positions -

buy the Jan $65 call (WSO1221A65)

- or -

buy the Jan $70 call (WSO1221A70)

Entry on December xx at $ xx.xx
Earnings Date 02/14/12 (unconfirmed)
Average Daily Volume = 227 thousand
Listed on December 07, 2011


PUT Play Updates

SPDR S&P 500 ETF - SPY - close: 123.95 change: -2.78

Stop Loss: 127.55
Target(s): 120.50
Current Option Gain/Loss: +26.2%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/08 update: After three days of failing to breakout past resistance near 1265 and its simple 200-dma the S&P 500 index (and the SPY) has started correcting lower. The SPY lost -2.1% and is approaching the top of the November 30th gap.

I am not suggesting new positions at this time.

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: 45.29 change: -1.69

Stop Loss: 48.01
Target(s): 42.75
Current Option Gain/Loss: Dec$45p: +100.0% & Jan$45P: +35.7%
Time Frame: 2 to 4 weeks
New Positions: see below

Comments:
12/08 update: TMO underperformed the market with a -3.6% drop today. Don't be surprised if we see TMO bounce near its November lows near $44.40ish. Please note our new stop loss at $48.01.

Readers may want to consider taking profits on the December $45 puts, which have already doubled (+100%).

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
(less than 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: 61.06 change: -0.92

Stop Loss: 64.25
Target(s): 56.00
Current Option Gain/Loss: Dec$60p: - 0.0% & Jan$60p: + 5.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/08 update: WPI spent the session fading from $62 to $61 to close at new three-month lows. I would still consider new positions now.

Earlier Comments:
There is potential support at $60.00 but I am aiming for the $56.00 level.

- Suggested Positions -

Long DEC $60 PUT (WPI1117X60) Entry $0.80
(less than 2 weeks left for Decembers)

- or -

Long JAN $60 PUT (WPI1221M60) Entry $2.00

Entry on December 07 at $61.75
Earnings Date 02/14/12 (unconfirmed)
Average Daily Volume = 1.5 million
Listed on December 03, 2011


Market Neutral Play Updates

iShares Russell 2000 ETF - IWM - close: 72.36 change: -2.32

Stop Loss: n/a
Target(s): TBD
Current Option Gain/Loss: +13.7%
Time Frame: up to December options expiration
New Positions: Must Be Opened on Thursday 12/08

Comments:
12/08 update: The IWM opened lower at $73.90 and spent the rest of the day marching lower thanks to growing concerns about headlines from the EU summit tomorrow. Thursday was our chance to open positions prior to the summit. We are not suggesting new positions.

Just a reminder, December options expire after December 16th.

- Market Neutral Strangle - cost: 2.04 value: 2.32 (+13.7%)

Long DEC $77 call (IWM1117L77) Entry $0.58, current bid/ask $0.24/0.26

- Also Buy the -

Long DEC $73 put (IWM1117X73) Entry $1.46, current bid/ask $2.08/2.14

Entry on December 08 at $73.90
Earnings Date --/--/--
Average Daily Volume = 61 million
Listed on December 07, 2011