Editor's Note:

The stock market is oversold here. When the bounce does show up, and it will sooner or later, it will probably be a very sharp, powerful rebound. We are trying to reduce our risk by lowering our stop losses on some of our put plays.

Meanwhile CMI actually exceeded our exit target.

Current Portfolio:


CALL Play Updates

We currently do not have any active call trades.


PUT Play Updates

Baxter Intl. - BAX - close: 50.06 change: -0.11

Stop Loss: 51.51
Target(s): 48.00
Current Option Gain/Loss: Jun$50p: +36.6% & Jul50p: +17.4%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
06/04 update: BAX didn't see much progress either way today. The stock is hovering near round-number, psychological support at the $50.00 level. If the stock was going to bounce this is a good spot for one to show up. For that reason readers may want to go ahead and take profits right now. I am not suggesting new positions at this time.

- Suggested Positions -

Long Jun $50 PUT (BAX1216R50) Entry $0.66

- or -

Long Jul $50 PUT (BAX1221S50) Entry $1.55

06/02/12 new stop loss @ 51.51
05/31/12 triggered at $50.95

Entry on May 31 at $50.95
Earnings Date 07/19/12 (unconfirmed)
Average Daily Volume = 2.4 million
Listed on May 29, 2012


Rockwell Collins Inc. - COL - close: 49.09 change: -0.18

Stop Loss: 50.55
Target(s): 45.50
Current Option Gain/Loss: + 2.3%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
06/04 update: COL continues to drift lower. The stock underperformed the market's major indices today. Nimble traders might want to use bounces near resistance at $50.00 as their entry point.

- Suggested Positions -

Long Jul $50 PUT (COL1221S50) Entry $2.10

Entry on June 04 at $49.50
Earnings Date 07/19/12 (unconfirmed)
Average Daily Volume = 1.1 million
Listed on June 02, 2012


E.I. du Pont de Nemours - DD - close: 47.02 change: -0.19

Stop Loss: 48.51
Target(s): 44.25
Current Option Gain/Loss: - 7.5%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
06/04 update: The situation with DD is similar. The stock dipped to new relative lows and then bounced this afternoon. Nimble traders could use bounces into the $47.50-48.00 zone as a new bearish entry point since $48.00 should be resistance.

- Suggested Positions -

Long Jul $45 PUT (DD1221S45) Entry $1.32

Entry on June 04 at $47.19
Earnings Date 07/24/12 (unconfirmed)
Average Daily Volume = 5.0 million
Listed on June 02, 2012


Goldman Sachs Group - GS - close: 91.00 change: -1.64

Stop Loss: 94.25
Target(s): 88.50
Current Option Gain/Loss: Jun$90p: +35.5% & Jul90p: +22.3%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
06/04 update: Financial stocks continue to sink as worries over Europe linger. GS fell to $90.55 intraday and closed with a -1.7% decline. The $90.00 level might offer some support so cautious traders will want to seriously consider taking profits near $90.00. We are worried that the market is so oversold it will see a big relief rally soon and even though the trend is down GS could surge. We're trying to limit our risk by keeping our stop loss tight. Tonight we're moving the stop loss to $94.25.

Earlier Comments:
I do consider this an aggressive, higher-risk trade. GS can be a volatile stock. Plus, shares are nearing a potential trend line of support dating back to late 2008 (see weekly chart). FYI: The Point & Figure chart for GS is bearish with a $58 target.

- Suggested Positions - (Small Positions)

Long Jun $90 PUT (GS1216R90) Entry $1.80

- or -

Long Jul $90 PUT (GS1221S90) Entry $4.25

06/04/12 new stop loss 94.25
Readers may want to take profits near the $90.0 mark
05/31/12 triggered at $93.90

Entry on May 31 at $93.90
Earnings Date 07/17/12 (unconfirmed)
Average Daily Volume = 5.5 million
Listed on May 30, 2012


McDonald's Corp. - MCD - close: 86.32 change: -0.39

Stop Loss: 88.25
Target(s): 85.25
Current Option Gain/Loss: Jun$90p: +15.6% & Jul87.50P: +16.8%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
06/04 update: MCD fell to the $86 level before trying to bounce and it didn't get very far. The stock does look pretty oversold here so we are trying to reduce our risk by keeping the stop loss tight(er). Tonight we're moving the stop loss to $88.25.

I am not suggesting new positions at this time.

- Suggested Positions -

Long Jun $90 PUT (MCD1216R90) Entry $3.20

- or -

Long Jul $87.50 PUT (MCD1221S87.5) Entry $2.50

06/04/12 new stop loss @ 88.25
06/01/12 new stop loss @ 88.75
06/01/12 MCD gaps open lower at $87.47, affecting our entry price

Entry on June 01 at $87.47 (gap down)
Earnings Date 07/23/12 (unconfirmed)
Average Daily Volume = 6.1 million
Listed on May 31, 2012


Reliance Steel - RS - close: 45.99 change: -0.09

Stop Loss: 46.75
Target(s): 42.50
Current Option Gain/Loss: + 6.1%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
06/04 update: RS saw an intraday drop to $44.81 before bouncing back and almost eliminating its losses for the session. Shares look poised to bounce back toward the $47-48 zone. We want to avoid losing capital on a big oversold bounce so we're moving our stop loss down to $46.75. More aggressive traders will want to keep their stop above $47.00 since the $47.00 level should new short-term resistance.

- Suggested Positions -

Long JUN $48 PUT (RS1216R48) Entry $2.45

06/04/12 new stop loss @ 46.75
06/02/12 new stop loss @ 47.75

Entry on May 23 at $47.79
Earnings Date 07/26/12 (unconfirmed)
Average Daily Volume = 534 thousand
Listed on May 22, 2012


CLOSED BEARISH PLAYS

Cummins Inc. - CMI - close: 91.68 change: -1.88

Stop Loss: 98.25
Target(s): 92.50
Current Option Gain/Loss: +145.1%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
06/04 update: Target exceeded!

Shares of CMI were downgraded this morning before the open. That produced a gap down at $92.00 and a spike to $89.44 before CMI trimmed its losses. Our exit target was $92.50 so the open at $92.00 closed our trade.

- Suggested Positions -

Jun $95 PUT (CMI1216R95) Entry $1.55 exit $3.80 (+145.1%)

06/04/12 target exceeded. exit at $92.00
06/02/12 new stop loss @ 98.25
Readers may want to take profits now (+138.7%)
05/31/12 CMI seems to be testing the long-term trend line of higher lows
05/29/12 CMI gapped open higher at $100.67

chart:

Entry on May 29 at $100.67
Earnings Date 07/31/12 (unconfirmed)
Average Daily Volume = 2.7 million
Listed on May 26, 2012