Editor's Note:

Any progress from the latest EU summit was widely panned by analysts but investors were in the mood to buy stocks anyway.

We did see EW hit our stop loss on Friday thanks to a volatile morning.

Don't forget that normal December options expire after this coming Friday (16th).

-James

Current Portfolio:


CALL Play Updates

Caterpillar - CAT - close: 95.97 change: +3.05

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:
12/10 update: CAT saw a pretty strong bounce on Friday (+3.2%) recouping a good chunk of last week's losses. Shares stalled right near the $96.00 level, which was the bottom edge (support) of its short-term $96-98 trading range. We don't want to buy calls with CAT at resistance especially since the $98 level and the simple 200-dma remain overhead resistance as well.

We still think CAT offers opportunity if shares can breakout past the $98.00 level. We will leave our trigger to open bullish positions at $98.55.

Trigger @ 98.55

- Suggested Positions -

buy the 2012Jan $100 call (CAT1221A100)

12/10/11 No change to our strategy. Use a trigger to buy calls at $98.55
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.

chart:

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: 55.05 change: +1.21

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:
12/10 update: CBE saw an oversold bounce on Friday with a +2.2% gain. Shares appear to be rebounding near a trend line of higher lows. Yet we don't want to buy calls yet. CBE still has resistance at its simple 200-dma near $56.50 and last week's high at $56.85.

It is worth noting that Bloomberg published a list on Friday of stocks with the largest increase in short interest from Nov. 15th to Nov. 30th. The short interest in CBE surged from 2.2 million shares to 5.3 million. We need to keep in mind that CBE has a float of 156.7 million shares. Given an average daily volume of 3.7 million that's less than two days worth of short interest. If the stock can hit new relative highs it could definitely see some short covering, which could accelerate any gains.

More aggressive traders could buy Friday's bounce with a tight stop under Thursday's low. I am suggesting we stick to our original plan and wait for CBE to hit 57.05 as our entry point to buy calls.

Trigger @ 57.05

- Suggested Positions -

buy the Jan $60 call (CBE1221A60)

12/10/11 We will keep our trigger to buy calls @ 57.05
12/08/11 We will re-evaluate our entry point strategy this weekend and make adjustments or drop CBE as a candidate.

chart:

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


Family Dollar Stores - FDO - close: 57.86 change: +0.12

Stop Loss: 56.75
Target(s): 64.00
Current Option Gain/Loss: - 32.1%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/10 update: I am urging caution with our FDO trade. The stock failed to fully participate in the stock market's rebound on Friday. The S&P 500 index gained +1.6% but FDO only gained +0.2%. At this point readers may want to wait for a rally past $58.50 or $59.00 before considering new bullish positions.

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

chart:

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: 27.90 change: +0.24

Stop Loss: 27.20
Target(s): 32.00
Current Option Gain/Loss: -31.2%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/10 update: HPQ made headlines on Friday with news the company would make its webOS mobile operating system an open source platform. This new failed to lift the stock price. HPQ rebounded off the bottom of its $27.50-28.50 trading range but rolled over again late in the day. Shares settled up +0.8%.

Nimble traders could try and buy dips near $27.50. I suggest most readers wait for a new breakout past $28.65.

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.

chart:

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: 38.01 change: +0.91

Stop Loss: 36.25
Target(s): 39.50
Current Option Gain/Loss: +49.4%
Time Frame: 3 to 5 weeks
New Positions: see below

Comments:
12/10 update: NTAP managed to outperform the wide market with a +2.4% gain. Yet shares remain under technical resistance at their 50-dma. I am not suggesting new positions at this time. We will try and reduce our risk by raising the stop loss to $36.25.

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

12/10/11 new stop loss @ 36.25
12/08/11 new stop loss @ 35.75, more conservative traders may want to exit immediately.
12/03/11 new stop loss @ 34.95

chart:

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: 81.04 change: +2.12

Stop Loss: 76.90
Target(s): 84.00
Current Option Gain/Loss:(Dec$75c: +61.4%)& Jan$80c: +86.6%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/10 update: ORLY outperformed the market on Friday with a +2.6% gain and a new record high. More conservative traders may want to exit early now to lock in a gain. We are raising our stop loss to $76.90. Cautious traders might want to consider a stop closer to the $78 level instead. I am not suggesting new positions at this time.

- Suggested Positions -

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

12/10/11 new stop loss @ 76.90
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.

chart:

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: 75.58 change: +1.02

Stop Loss: 73.75
Target(s): 78.50
Current Option Gain/Loss: + 66.0%
Time Frame: 6 to 9 weeks
New Positions: see below

Comments:
12/10 update: Wall Street continues to love the high-dividend stocks. PM weathered last week's volatility relatively well. Shares saw a bounce back to short-term resistance near $76.00 on Friday. 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

chart:

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: 103.97 change: +3.91

Stop Loss: 98.75
Target(s): 109.50
Current Option Gain/Loss: + 4.8%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/10 update: SAM was showing some relative strength on Friday with a strong rebound off round-number support at the $100 level. The stock rallied +3.9% on Friday and closed near its highs for the session. I wouldn't chase it here.

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

chart:

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: 65.17 change: +1.09

Stop Loss: 63.25
Target(s): 69.50
Current Option Gain/Loss: Jan$65: -42.0% & Jan$70c: -39.1%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/10 update: Our WSO is open. Shares rallied to a new multi-month high on Friday at $65.98. Our trigger to buy calls was hit at $65.55. WSO did pull back from its session highs but still managed a +1.7% gain. If both WSO and the S&P 500 index opened positive on Monday then I would still consider new positions here.

FYI: The Point & Figure chart for WSO is bullish with an $80 target. NOTE: Readers may want to keep positions small, the spreads on WSO have widened significantly.

- Suggested Positions - These options are suffering from wide spreads!

Long Jan $65 call (WSO1221A65) Entry $3.45*

- or -

Long Jan $70 call (WSO1221A70) Entry $1.15*

*12/09/11 entry prices are estimates. options did not trade at the time WSO hit our entry point.

chart:

Entry on December 09 at $65.55
Earnings Date 02/14/12 (unconfirmed)
Average Daily Volume = 227 thousand
Listed on December 07, 2011


PUT Play Updates

Check Point Software - CHKP - close: 54.68 change: +1.75

Stop Loss: 56.11
Target(s): 48.00
Current Option Gain/Loss: -45.8%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/10 update: The stock market's widespread gains on Friday made it a tough day for bearish plays. CHKP opened higher at $53.29 and rallied past resistance near $54.00 to close up +3.3%. The close over its simple 200-dma is also a technically bullish development. I am not suggesting new positions at this time. More conservative traders may want to lower their stop loss.

Earlier Comments:
There is potential support near $51.00 but we're aiming for the $48.00 level. More aggressive traders could aim lower. FYI: The Point & Figure chart for CHKP is bearish with a $46 target.

(Small Positions) - Suggested Positions -

Long Jan $50 PUT (CHKP1221M50) Entry $1.20

chart:

Entry on December 09 at $53.29
Earnings Date 01/30/12 (unconfirmed)
Average Daily Volume = 1.7 million
Listed on December 08, 2011


SPDR S&P 500 ETF - SPY - close: 126.05 change: +2.10

Stop Loss: 127.55
Target(s): 120.50
Current Option Gain/Loss: -18.7%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/10 update: The SPY managed to recoup more than 2/3rds of Thursday's decline with a +1.7% gain on Friday. The S&P 500 index is still trading under resistance at 1265 and the SPY is still trading under a bearish trendline of lower highs. Odds would suggest the index will roll over but a breakout would be very bullish. Look for this bounce to stall or roll over as our next entry point for puts.

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

chart:

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


Thermo Fisher Scientific - TMO - close: 45.64 change: +0.35

Stop Loss: 48.01
Target(s): 42.75
Current Option Gain/Loss: Dec$45p: + 11.1% & Jan$45P: +10.7%
Time Frame: 2 to 4 weeks
New Positions: see below

Comments:
12/10 update: TMO dipped to new two-week lows at $44.65 before bouncing on Friday morning. Technically Friday's rebound almost looks like a short-term bullish reversal pattern. That's dangerous for our December puts. Those same December puts that were up +100% on Thursday are now down to just +11%. If the bounce in TMO continues next week these will turn negative.

I am not suggesting new positions at this time.

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

chart:

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: 61.52 change: +0.46

Stop Loss: 64.25
Target(s): 56.00
Current Option Gain/Loss: Dec$60p: -43.7% & Jan$60p: -10.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/10 update: Positive analyst comments on Friday morning helped WPI gapped open higher. Shares spiked to $62.61 intraday before fading back under short-term resistance at the $62.00 level. WPI spent the rest of the session drifting sideways. I would still consider new positions now at current levels.

Keep in mind that December options expire in five trading days.

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
(only 5 trading days left for Decembers)

- or -

Long JAN $60 PUT (WPI1221M60) Entry $2.00

chart:

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: 74.54 change: +2.18

Stop Loss: n/a
Target(s): TBD
Current Option Gain/Loss: -41.1%
Time Frame: up to December options expiration
New Positions: Must Be Opened on Thursday 12/08

Comments:
12/10 update: The IWM almost completely erased Thursday's decline with a big bounce on Friday. This small cap ETF rallied +3.0% and closed right under resistance near $75.00, its 150-dma, and its trendline of lower highs.

We need the market to pick a direction and move. Any more sideways back and forth is going to kill this strangle trade. I am not suggesting new positions at this time.

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

- Market Neutral Strangle - cost: 2.04 value: 1.20 (-41.1%)

Long DEC $77 call (IWM1117L77) Entry $0.58, current bid/ask $0.46/0.49

- Also Buy the -

Long DEC $73 put (IWM1117X73) Entry $1.46, current bid/ask $0.74/0.77

chart:

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


CLOSED BULLISH PLAYS

Edwards Lifesciences - EW - close: 64.53 change: +0.71

Stop Loss: 63.25
Target(s): 69.50
Current Option Gain/Loss: Dec$65c: -69.2% & Jan$70c: -47.0%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/10 update: EW reaffirmed its earnings guidance on Friday morning. It looks like investors were unsure of how to interpret this data even though guidance was in-line with analysts estimates. The stock opened higher and spike toward $65.50 before immediately plunging to $62.69 only to reverse again. It was a volatile Friday morning. Our stop loss was hit at $63.25.

- Suggested Positions -

DEC $65 call (EW1117L65) Entry $1.95 exit $0.60 (-69.2%)

- or -

2012Jan $70 call (EW1221A70) Entry $1.70 exit $0.90 (-47.0%)

12/09 stopped out at $63.25
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

chart:

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