Editor's Note:

The U.S. stock market's rally seems to have stalled on Thursday. That's not necessarily a bad thing. It's normal for stocks to move two steps forward, one step back. Rallies need to rest sometimes. Although you could easily argue that the major market indices are overbought given their nearly non-stop rally in January. This would be a good time to look at your stop loss placement again.

Our ESRX and FLS trades have been opened. I am suspending our DLTR trade until we can re-evaluate it again this weekend.

Current Portfolio:


CALL Play Updates

Berkshire Hathaway Inc. - BRK.B - close: 79.66 change: -0.19

Stop Loss: 77.45
Target(s): 83.50
Current Option Gain/Loss: - 2.2%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
01/26 update: BRK.B didn't quite have enough gas to rally past resistance at $80 thanks to a generally down market. Traders did buy the dip near $79 this afternoon and BRK.B was bouncing higher into the close.

Our multi-week target is $83.50. We do not want to hold over the late February earnings report.

- Suggested Positions -

Long Feb $80 call (BRKB1218B80) entry $0.90

01/25/12 new stop loss @ 77.45
01/18/12 triggered at $78.75
01/14/12 adjusted entry point strategy to use a trigger @ 78.75
01/13/12 BRK.B gapped lower, negating our entry point. Trade did not open.

Entry on January 18 at $78.75
Earnings Date 02/27/12 (unconfirmed)
Average Daily Volume = 4.4 million
Listed on January 12, 2012


Cognizant Technology - CTSH - close: 71.23 change: -0.54

Stop Loss: 68.75
Target(s): 76.50
Current Option Gain/Loss: -11.7%
Time Frame: exit prior to the Feb. 8th earnings
New Positions: see below

Comments:
01/26 update: CTSH spiked to $72.48 before reversing lower and erasing most of yesterday's gains. Shares should see short-term support near $70 and its 200-dma.

Our target is $76.50. We do not want to hold over the Feb. 8th earnings report. FYI: The Point & Figure chart for CTSH is bullish with an $85 target.

- Suggested Positions -

Long Feb $75 call (CTSH1218B75) Entry $0.85

01/24/12 trade opened at $71.05

Entry on January 24 at $71.05
Earnings Date 02/08/12 (confirmed)
Average Daily Volume = 2.3 million
Listed on January 21, 2012


Dollar Tree Inc. - DLTR - close: 83.66 change: -1.68

Stop Loss: 83.75
Target(s): 89.75
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
01/26 update: Hmm... it's been three days in a row and our DLTR trade has not been opened yet. Shares opened lower and plunged -1.9%. The relative weakness is troubling as is the close under $84.00. Since we're still sitting on the sidelines I am suggesting some patience here. I am putting DLTR on suspension. We will keep DLTR on the newsletter another day but I am not suggesting any new positions tomorrow. We just want to wait and watch how DLTR performs on Friday and then re-evaluate this weekend.

No Entry Strategy for DLTR tomorrow. Just wait and watch.

01/26/12 still not open. We want to step back and observe tomorrow. No entry on Friday, Jan. 27th.
01/25/12 still not open
01/24/12 trade did not open. try again.

Entry on January xx at $ xx.xx
Earnings Date 02/22/12 (unconfirmed)
Average Daily Volume = 1.2 million
Listed on January 23, 2012


Express Scripts, Inc. - ESRX - close: 52.36 change: -0.12

Stop Loss: 49.95
Target(s): 57.00
Current Option Gain/Loss: - 2.5%
Time Frame: exit prior to February earnings
New Positions: see below

Comments:
01/26 update: Our new trade on ESRX has been opened. Both the stock and the S&P 500 met our entry requirements. Shares of ESRX traded to an high of $52.80 before pulling back. If the market is positive at the open tomorrow I would still consider new positions. More nimble traders might want to try and buy a dip near the rising 10-dma instead.

Earlier Comments:
This stock could see more short covering. The most recent data listed short interest at almost 17% of the 482 million-share float. FYI: The Point & Figure chart for ESRX is bullish with a $75 target.

- Suggested Positions -

Long Feb $52.50 call (ESRX1218B52.5) Entry $2.00

Entry on January 26 at $52.67
Earnings Date 02/16/12 (unconfirmed)
Average Daily Volume = 6.6 million
Listed on January 25, 2012


Flowserve Corp. - FLS - close: 108.72 change: -0.04

Stop Loss: 105.45
Target(s): 114.50
Current Option Gain/Loss: Feb $110c: -15.1% & Apr$115c: -10.0%.
Time Frame: 3 to 4 weeks
New Positions: , see below

Comments:
01/26 update: FLS closed virtually unchanged on the session with a 4-cent loss. Yet that does not tell you the whole story. The stock gapped open higher and spiked to $110.66 before reversing in the first 30 minutes of trading. Traders did buy the dip near $108 this afternoon but the intraday reversal is potentially bearish. Our trade is open but I would be very cautious on launching new positions.

I am setting our target at $114.50 but cautious traders may want to exit at $112.00 instead. FYI: The Point & Figure chart for FLS is bullish with a $139 target.

- Suggested Positions -

Long FEB $110 call (FLS1218B110) Entry $2.59

- or -

Long APR $115 call (FLS1221D115) Entry $4.00

01/26/12 trade opened on FLS' gap open higher at $109.21.
01/25/12 adjusted entry point strategy to buy calls when FLS hits $109.05, and use a stop loss at $105.45

Entry on January 26 at $109.21
Earnings Date 02/23/12 (unconfirmed)
Average Daily Volume = 400 thousand
Listed on January 21, 2012


Starwood Hotel & Resorts - HOT - close: 53.74 change: -1.03

Stop Loss: 52.40
Target(s): 57.50
Current Option Gain/Loss: +46.1%
Time Frame: exit prior to earnings
New Positions: see below

Comments:
01/26 update: It was not a good day for HOT. Shares gave up -1.8% in what is probably normal, healthy profit taking. Fortunately, the plan was to sell at least half of our position at the open this morning. The bid on our Feb. $52.50 calls opened down at $2.95 (was $3.20 last night).

I am suggesting caution here. Today's move in HOT is technically a bearish engulfing candlestick pattern, which is potentially a one-day bearish reversal signal. I am not suggesting new positions at this time.

Don't forget that we plan to exit prior to the Feb. 2nd earnings.

- Suggested Positions -

Long Feb $52.50 call (HOT1218B52.5) entry: 1.67

01/26/12 sold half @ the open. Bid was $2.95 (+76.6%)
01/25/12 prepare to sell half at the open tomorrow morning. bid on our call is currently at $3.20 (+91.6%). We will adjust the exit target on the remainder of our position to $57.50
01/25/12 new stop loss @ 52.40
01/24/12 new stop loss @ 51.45
01/18/12 new stop loss @ $49.75
01/13/12 Triggered on a dip at $51.00
01/10/12 initial entry point did not work. New strategy: buy a dip at $51.00.

Entry on January 13 at $51.00
Earnings Date 02/02/12 (confirmed)
Average Daily Volume = 2.4 million
Listed on January 09, 2012


iShares Russell 2000 ETF - IWM - close: 79.18 change: -0.09

Stop Loss: 75.45
Target(s): 82.50
Current Option Gain/Loss: + 7.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
01/26 update: The IWM spike to a new relative high this morning but shares reversed under resistance near $80. I would not be surprised to see a little more profit taking tomorrow as well. I am not suggesting new positions at this time.

Earlier Comments:
You may want to consider a stop closer to the 10-dma instead (currently 75.95). Our multi-week target is $82.50. Keep in mind the $80.00 level might offer some overhead resistance. FYI: The Point & Figure chart for IWM is bullish with a $90 target.

- Suggested Positions -

Long Feb $80 call (IWM1218B80) Entry $1.14

01/19/12 IWM gapped open higher at $78.13

Entry on January 19 at $78.13
Earnings Date --/--/--
Average Daily Volume = 40 million
Listed on January 18, 2012


iShares Transportation - IYT - close: 94.59 change: +0.45

Stop Loss: 91.40
Target(s): 98.50
Current Option Gain/Loss: Jan$95c: - 100% & Feb$95c: + 6.8%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
01/26 update: The transportation ETF continues to post gains although shares closed well off their highs. The IYT spiked to $95.65 this morning, but resistance near $95.00 held up, which was evident on the mid afternoon bounce.

I am not suggesting new positions at this time.

- Suggested Positions -

Long Feb $95 call (IYT1218B95) entry $1.45
target 98.50

01/21/22 new stop loss @ 91.40
01/21/12 January $95 calls have expired.
01/12/12 new stop loss @ 89.45
01/07/12 new stop loss @ 88.75
01/03/12 IYT gapped open higher at $91.20, above our trigger at $90.75

Entry on January 03 at $91.20
Earnings Date --/--/--
Average Daily Volume = 582 thousand
Listed on December 22, 2011


Laboratory Corp. - LH - close: 91.06 change: -0.72

Stop Loss: 87.90
Target(s): 94.75
Current Option Gain/Loss: + 76.6%
Time Frame: up to the Feb. 10th earnings report.
New Positions: see below

Comments:
01/26 update: LH could not escape the generally widespread profit taking today. Shares reversed near short-term resistance at $92.00 and closed down -0.7%. Look for a bounce near $90 or the 10-dma near $89.00 as a new bullish entry point.

It was our plan to go ahead and sell half of our Feb. $90 calls at the open this morning. Unfortunately the option opened down significantly at $2.85, down from $3.30 last night. The bid on our calls opened at $2.65 (+76.6%).

We do not want to hold positions over the Feb. 10th earnings report. Our target is the $94.75 mark. FYI: The Point & Figure chart for LH is bullish with a $105 target.

- Suggested Positions -

Long Feb $90 call (LH1218B90) Entry $1.50

01/26/12 sold half @ the open, bid @ $2.65 (+76.6%)
01/25/12 sell half at the open tomorrow. Bid on the Feb. $90 call is at $3.10 (+106%).
01/25/12 new stop loss @ 87.90
01/24/12 rival DGX delivers a strong earnings report
01/23/12 trade triggered at $89.00
01/21/12 new stop loss at $86.90. Still waiting for LH to hit our entry point at $89.00.

Entry on January 23 at $89.00
Earnings Date 02/10/12 (confirmed)
Average Daily Volume = 564 thousand
Listed on January 10, 2012


Lufkin Industries - LUFK - close: 74.27 change: -2.02

Stop Loss: 73.40
Target(s): 82.00
Current Option Gain/Loss: - 38.9%
Time Frame: up to the Feb. 9th earnings report.
New Positions: see below

Comments:
01/26 update: Ouch! Oil and energy stocks were hammered lower today. LUFK traded at $76.35 this morning and then plunged to a -2.6% decline. The low today was $73.74. Any follow through tomorrow and we could get stopped out at $73.40. I am concerned since today's move is technically a bearish engulfing candlestick (reversal) pattern. I am not suggesting new positions at this time.

Our target is $82.00 but we want to exit prior to the Feb. 9th earnings report. FYI: The Point & Figure chart for LUFK is bullish with an $85 target.

- Suggested Positions -

Long Feb $80 call (LUFK1218B80) Entry $2.95

01/25/12 triggered @ 76.60

Entry on January 25 at $76.60
Earnings Date 02/09/12 (confirmed)
Average Daily Volume = 300 thousand
Listed on January 24, 2012


Mohawk Industries - MHK - close: 63.36 change: -0.38

Stop Loss: 61.75
Target(s): 67.50
Current Option Gain/Loss: -53.6%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
01/26 update: MHK continues to churn sideways. I am growing more cautious on this stock. More conservative traders may want to exit early. We are raising our stop loss to $61.75. I am not suggesting new positions at this time.

Earlier Comments:
Our target is $67.50 but we do not want to hold over the February earnings report. More aggressive traders could aim higher.

Investors will be interested to note that the most recent data listed short interest at 5% of the 57 million share float. That's not excessive but it's a bit high and could boost any new gains as bears cover their shorts. FYI: The Point & Figure chart for MHK is bullish with a $90 target.

- Suggested Positions -

Long Feb $65 call (MHK1218B65) Entry $2.48

01/26/12 new stop loss @ 61.75
01/17/12 MHK gapped open higher at $63.99

Entry on January 17 at $63.99
Earnings Date 02/21/12 (unconfirmed)
Average Daily Volume = 621 thousand
Listed on January 14, 2012


Northrop Gruman - NOC - close: 59.32 change: -0.27

Stop Loss: 58.75
Target(s): 64.00
Current Option Gain/Loss: -52.9%
Time Frame: up to NOC's early February earnings report.
New Positions: see below

Comments:
01/26 update: Profit taking in NOC was relatively mild today. Shares bounced near the $59.00 area again. I am cautious on this stock at the moment. We do not want to open new positions at this time. There was a typo in my update yesterday. Our stop loss is at $58.75. Don't forget that we plan to exit prior to the Feb.1st earnings report. FYI: The Point & Figure chart for NOC is bullish with a $71 target.

- Suggested Positions -

Long Feb $60 call (NOC1218B60) Entry $1.70

01/21/12 new stop loss @ 58.75

Entry on January 19 at $60.34
Earnings Date 02/01/12 (confirmed)
Average Daily Volume = 1.5 million
Listed on January 18, 2012


Omnicom Group - OMC - close: 46.74 change: +0.07

Stop Loss: 45.45
Target(s): 49.00
Current Option Gain/Loss: +19.4%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
01/26 update: OMC displayed some relative strength today with a +0.1% gain. If you look at the intraday chart OMC seems like it wants to move higher. If the market opens positive tomorrow I would be tempted to buy calls again.

Our target is $49.00. We do not want to hold over the mid February earnings report. FYI: The Point & Figure chart for OMC is bullish with a $64 target.

- Suggested Positions -

Long Feb $45 call (OMC1218B45) entry $1.80

01/19/12 new stop loss @ 45.45, readers may want to take profits now (+66%)
01/18/12 new stop loss @ 44.75

Entry on January 12 at $45.75
Earnings Date 02/14/12 (unconfirmed)
Average Daily Volume = 1.6 million
Listed on January 11, 2012


PVH Corp. - PVH - close: 76.94 change: -0.66

Stop Loss: 74.75
Target(s): 83.50
Current Option Gain/Loss: Feb77.50c: -35.4% & Mar$80c: -35.2%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
01/26 update: Ouch! PVH experienced some minor profit taking with a dip toward short-term support at its rising 10-dma. That's not so bad but it seems like the options got hammered lower today. I am not suggesting new positions at this time.

Earlier Comments:
The plan was to keep our position size small to limit risk. FYI: The Point & Figure chart for PVH is bullish with a $92 target.

- Suggested Positions - (small positions)

Long Feb $77.50 call (PVH1218B77.5) Entry $2.40

- or -

Long Mar $80 call (PVH1217C80) Entry $2.55

01/24/12 trade triggered at $77.60
01/23/12 trade still not open
new entry point strategy to use a trigger at $77.60, stop loss at $74.75
01/21/12 trade not open yet. try again.

Entry on January 24 at $77.60
Earnings Date 03/28/12 (unconfirmed)
Average Daily Volume = 867 million
Listed on January 19, 2012


Teva Pharmaceuticals - TEVA - close: 45.45 change: -0.64

Stop Loss: 44.40
Target(s): 49.50
Current Option Gain/Loss: -16.6%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
01/26 update: TEVA is still consolidating sideways in the $46-45 area. Look for a new bounce off the $45.00 mark before considering new positions.

Our target is $49.50 but we'll plan to exit prior to the earnings report in early February. FYI: The Point & Figure chart for TEVA is bullish with a $57 target.

(Small Positions)- Suggested Positions -

Long Feb $45 call (TEVA1218B45) entry $1.50

01/25/12 new stop loss @ 44.40
01/18/12 TEVA has rebounded. Use it as a new entry point.
01/17/12 Be careful. TEVA hit our trigger and reversed to close back under $45.00

Entry on January 17 at $45.25
Earnings Date 02/08/12 (unconfirmed)
Average Daily Volume = 5.9 million
Listed on January 14, 2012


TJX Companies - TJX - close: 67.95 change: -0.01

Stop Loss: 66.49
Target(s): 68.50
Current Option Gain/Loss:(Jan$65c: +85.0%) & Feb$65c: +82.8%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
01/26 update: TJX held up pretty well today. Shares rallied to $68.44 this morning. All we needed was another six cents to hit our exit target at $68.50. Readers will want to seriously consider an early exit right now to lock in gains. I am raising our stop loss up to $66.49 in case the market corrects lower tomorrow. I am not suggesting new positions at this time.

Earlier Comments:
On January 5th, management announced a 2-for-1 stock split payable on February 2nd, 2012.

- Suggested Positions -

Long Feb $65 call (TJX1218B65) Entry $1.75

01/26/12 new stop loss @ 66.49, Consider taking profits now!
01/18/12 adjusted exit target to $68.50
01/18/12 closed Jan $65 calls @ $1.85 (+85.0%)
01/17/12 prepare to exit January calls at close tomorrow
01/17/12 new stop loss @ 64.75
01/12/12 new stop loss @ 63.75
01/07/12 readers may want to take profits now (Jan$65call +90%, Feb$65call +57%)
01/05/12 new stop loss @ 63.25, TJX announced strong same-store sales and a 2:1 split.
12/31/11 new stop loss @ 62.75

Entry on December 22 at $64.10
Earnings Date 02/23/12 (unconfirmed)
Average Daily Volume = 2.7 million
Listed on December 21, 2011


PUT Play Updates

Abercrombie & Fitch - ANF - close: 45.88 change: -0.96

Stop Loss: 46.05
Target(s): 40.00 or 37.00
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Comments:
01/26 update: More aggressive traders may want to consider new bearish positions on ANF right now following today's reversal and what looks like a new lower high. Personally, I'd rather wait for a new breakdown to relative lows. At the moment our plan is unchanged.

I am suggesting a trigger to buy puts at $43.40 (new relative low). I am listing two different targets. I'd look to exit at $40.00 or $37.00. Keep in mind the $40.00 level could offer some round-number support. FYI: The Point & Figure chart for ANF is very bullish with a long-term $12 target.

Trigger @ 43.40

- Suggested Positions -

buy the Feb $43 PUT (ANF1218N43)

Entry on January xx at $ xx.xx
Earnings Date 02/15/12 (unconfirmed)
Average Daily Volume = 2.9 million
Listed on January 23, 2012


Deckers Outdoor Corp. - DECK - close: 82.35 change: -0.55

Stop Loss: 85.25
Target(s): 77.00
Current Option Gain/Loss: -20.9%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
01/26 update: Selling pressure in DECK today wasn't that bad and that makes me nervous. More conservative traders may want to lower their stops closer to the $84.00 level or just consider an early exit instead. I am not suggesting new positions at this time.

Earlier Comments:
Our target is $77.00. We want to keep our position size small because any unexpected rally might spark some short covering. The most recent data listed short interest at 14% of the relatively small 37.1 million-share float.

(Small Positions) - Suggested Positions -

Long FEB $80 PUT (DECK1218N80) Entry $3.10

01/25/12 DECK is not cooperating. Readers may want to exit immediately.

Entry on January 23 at $82.75
Earnings Date 02/23/12 (unconfirmed)
Average Daily Volume = 2.0 million
Listed on January 21, 2012