Editor's Note:

The U.S. markets manage another weekly gain. We saw three candidates hit our triggers on Friday. BWA, JLL and SHW are now open trades. I've removed CVLT from the newsletter, which did not open.

Current Portfolio:


CALL Play Updates

BorgWarner Inc. - BWA - close: 81.21 change: -0.70

Stop Loss: 78.75
Target(s): 89.00
Current Option Gain/Loss: -38.7%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
02/18 update: BWA's performance on Friday was a bit disappointing. Shares gapped open higher at $82.49 and rose to $82.84 before reversing lower. The stock underperformed the major indices with a -0.8% decline. At the moment this looks like a potential failed rally at resistance. I would suggest waiting for a new bounce off the $80.00 level or a new rise past $82.85 before initiating new positions.

We had a trigger to buy calls at $82.35 and Friday's gap higher triggered our play.

Earlier Comments:
A breakout would mean new record highs and could produce a some short covering in BWA. The most recent data listed short interest at 14% of the 108 million share float. FYI: The Point & Figure chart for BWA is bullish with a $108 target.

- Suggested Positions -

Long Mar $85 call (BWA1217C85) Entry $1.55

02/17/12 trade opened on BWA's gap open higher at $82.49

chart:

Entry on February 17 at $82.49
Earnings Date 04/30/12 (unconfirmed)
Average Daily Volume = 1.3 million
Listed on February 16, 2012


Caterpillar, Inc. - CAT - close: 113.95 change: -0.01

Stop Loss: 111.95
Target(s): 119.75
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Comments:
02/18 update: CAT continues to drift sideways. The stock was showing relative weakness on Friday morning but recovered to close virtually unchanged for the session. CAT remains under resistance at the $115.00 level.

I am suggesting a trigger to open bullish positions in CAT at $115.25. If triggered we'll use a stop loss at $111.95. Our initial target is $119.75. It's possible that the 2011 high near $116.50 could be resistance but I doubt it, not after CAT spent the last two weeks building up steam for a new leg higher.

FYI: The Point & Figure chart for CAT is bullish with a $165 target.

Trigger @ 115.25

- Suggested Positions -

buy the Mar $120 call (CAT1217C120)

chart:

Entry on February xx at $ xx.xx
Earnings Date 04/26/12 (unconfirmed)
Average Daily Volume = 7.5 million
Listed on February 14, 2012


Capital One Financial - COF - close: 48.83 change: -0.46

Stop Loss: 47.75
Target(s): 54.75
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Comments:
02/18 update: COF underperformed the market on Friday. Shares spent most of the day drifting sideways in the $48.80-49.00 zone. Currently we're waiting for shares to breakout past resistance near $50.00. I am suggesting a trigger to buy calls at $50.25. I am suggesting we keep our position size small to limit our risk. Our multi-week exit target is $54.75.

Trigger @ $50.25 (small positions)

- Suggested Positions -

buy the Mar $50 call (COF1217C50)

chart:

Entry on February xx at $ xx.xx
Earnings Date 04/23/12 (unconfirmed)
Average Daily Volume = 6.4 million
Listed on February 15, 2012


Dollar Tree - DLTR - close: 89.35 change: +1.59

Stop Loss: 86.95
Target(s): 90.00
Current Option Gain/Loss:(Feb$87.5c:+130.0%) & Mar$87.5c: +47.8%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
02/18 update: DLTR displayed relative strength on Friday with a +1.8% gain. Shares are nearing what could be round-number resistance at the $90.00 level. Plus, we're almost out of time with only one day left prior to DLTR's earnings (since Monday is a market holiday).

I am suggesting we exit positions on Tuesday at the closing bell. However, just in case we will raise our stop loss to $86.95. I'll also adjust our exit target to $90.00.

(small positions) - Suggested Positions -

Long Mar $87.50 call (DLTR1217C87.5) entry $2.30

02/18/12 prepare to exit on Tuesday. new stop loss @ 86.95. New exit target at $90.00, or exit at the closing bell
02/14/12 scheduled close for the Feb. $87.50 calls at the closing bell tonight. bid on the call option was $1.15 (+130%).
02/13/12 prepare to exit our Feb. calls at the close tomorrow
02/09/12 trade opened
02/04/12 Only open small (half-sized) positions if DLTR hits our entry point at $86.75

chart:

Entry on February 09 at $86.75
Earnings Date 02/22/12 (unconfirmed)
Average Daily Volume = 1.1 million
Listed on February 02, 2012


Jones Lang LaSalle - JLL - close: 83.04 change: -0.37

Stop Loss: 79.95
Target(s): 89.50
Current Option Gain/Loss: -16.6%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
02/18 update: We need to be careful here. JLL displayed some follow through on Friday morning with a rise to $84.09 but the gains didn't last and shares closed in negative territory. Suddenly we are facing what might be a bull-trap pattern with a head fake above resistance at the top of its trading range.

Our trade was opened at $83.75 but I am not suggesting new positions at this time. Wait for a new rally past $84.00 before considering new positions. FYI: The Point & Figure chart for JLL is bullish with a $105 target.

- Suggested Positions -

Long Mar $85 call (JLL1217C85) Entry $2.40

chart:

Entry on February 17 at $83.75
Earnings Date 04/26/12 (unconfirmed)
Average Daily Volume = 518 thousand
Listed on February 16, 2012


3M Co. - MMM - close: 87.56 change: -0.09

Stop Loss: 86.45
Target(s): 94.00
Current Option Gain/Loss: Unopened
Time Frame: 3 to 6 weeks
New Positions: Yes, see below

Comments:
02/18 update: MMM saw a brief rally past $88.00 but gains faded. Shares remain inside the $86.70-88.25 trading range. We are waiting on a breakout higher. Currently I am suggesting a trigger to buy calls when MMM trades at $88.50 or higher. More conservative traders may want to wait for MMM to actually close over $88.50 before considering bullish positions.

Earlier Comments:
The $90 level could be round-number resistance but we're setting our exit target at $94.00. FYI: The Point & Figure chart for MMM is bullish with a $109 target.

Breakout Trigger (buy calls) @ $88.50

- Suggested Positions -

buy the MAR $90 call (MMM1217C90)

02/09/12 removed the February call.

chart:

Entry on February xx at $ xx.xx
Earnings Date 04/26/12 (unconfirmed)
Average Daily Volume = 3.4 million
Listed on February 07, 2012


Sherwin-Williams - SHW - close: 100.32 change: +0.58

Stop Loss: 97.45
Target(s): 104.75
Current Option Gain/Loss: - 2.3%
Time Frame: 3 to 5 weeks
New Positions: see below

Comments:
02/18 update: SHW displayed some relative strength on Friday with a +0.5% gain. The stock was trading under resistance near $100 all day long until a late afternoon surge pushed it higher. Our trigger to buy calls was hit at $100.25.

- Suggested Positions -

Long Mar $100 call (SHW1217C100) Entry $2.10

chart:

Entry on February xx at $ xx.xx
Earnings Date 04/23/12 (unconfirmed)
Average Daily Volume = 1.0 million
Listed on February 14, 2012


S&P Oil ETF - XES - close: 38.67 change: +0.43

Stop Loss: 36.90
Target(s): 43.00
Current Option Gain/Loss:(Feb37c: -48.1%) & Mar36c: +10.2%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
02/18 update: Oil and energy stocks were showing some relative strength. The XES rallied to new multi-month highs with a +1.1% gain on Friday. I am raising our stop loss to $36.90.

Earlier Comments:
The option spreads on the XES a bit wide, which makes this a higher-risk trade. I am suggesting we keep our position size small to limit our risk. Our multi-week exit target is $43.00.

(small positions) - Suggested Positions -

Long Mar $36 call (XES1217C36) Entry $2.45

02/18/12 new stop loss @ $36.90
02/14/12 exited Feb. calls at the close: bid @ $0.70 (-48.1%)
02/13/12 prepare to exit our Feb. $37 calls at the closing bell tomorrow.

chart:

Entry on February 06 at $37.75
Earnings Date --/--/--
Average Daily Volume = 177 thousand
Listed on February 04, 2012


Oil & Gas Exploration ETF - XOP - close: 60.52 change: +0.17

Stop Loss: 56.45
Target(s): 63.00
Current Option Gain/Loss: Mar$60c: +33.5% & Jun$60c: +15.8%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
02/18 update: The XOP just posted its fifth gain in a row. Trading was a little choppy on Friday. Traders bought the dip near $60.00 late Friday morning. The XOP is arguably short-term overbought. Don't be surprised to see a dip near its rising 10-dma. FYI: The Point & Figure chart for XOP is bullish with a $74 target.

- Suggested Positions -

Long Mar $60 call (XOP1217C60) Entry $1.70

- or -

Long Jun $60 call (XOP1216F60) Entry $4.10

chart:

Entry on February 14 at $58.75
Earnings Date --/--/--
Average Daily Volume = 3.8 million
Listed on February 13, 2012


PUT Play Updates

Currently we do not have any active put trades.


CLOSED BULLISH PLAYS

CommVault Systems - CVLT - close: 54.71 change: +0.22

Stop Loss: 49.75
Target(s): 58.50
Current Option Gain/Loss: Unopened
Time Frame: 3 to 6 weeks
New Positions: Yes, see below

Comments:
02/18 update: CVLT continues to drift higher. The stock's relative strength is a positive but shares look overbought. I don't want to chase it here. We've been waiting for a pullback that hasn't shown up yet. I am removing CVLT from the newsletter but would definitely keep this stock on your watch list.

buy-a-dip trigger @ 51.50

Our Trade Did Not Open.

02/18/12 removed CVLT from the newsletter. Our trade did not open
02/09/12 trade did not open (barely). Adjust entry point strategy to buy a dip at $51.50, stop loss $49.75

chart:

Entry on February xx at $ xx.xx
Earnings Date 05/10/12 (unconfirmed)
Average Daily Volume = 531 thousand
Listed on February 08, 2012