Editor's Note:

The U.S. markets finally produced a gain to end a six-day decline. The rally on Friday looks like a typical oversold bounce to relieve some of the oversold conditions.

We did see both AMGN and WLK get triggered on Friday.

Current Portfolio:


CALL Play Updates

Amgen Inc. - AMGN - close: 76.96 change: +1.15

Stop Loss: 73.95
Target(s): 79.85
Current Option Gain/Loss: + 11.6%
Time Frame: exit prior to the July 26th earnings
New Positions: see below

Comments:
07/14/12 update: AMGN continued to show strength on Friday. The stock broke out to new highs and hit our trigger to buy calls at $76.35 along the way. Our target is $79.85. More aggressive traders could aim higher but we do not want to hold over the July 26th earnings report.

- Suggested Positions -

Long Aug $77.50 call (AMGN1218H77.5) Entry $1.42

07/13/12 triggered @ 76.35

chart:

Entry on July 13 at $76.35
Earnings Date 07/26/12 (confirmed)
Average Daily Volume = 5.3 million
Listed on July 12, 2012


Athenahealth, Inc. - ATHN - close: 81.84 change: -0.70

Stop Loss: 79.85
Target(s): 89.00
Current Option Gain/Loss: -35.0%
Time Frame: exit prior to earnings on July 19th
New Positions: see below

Comments:
07/14/12 update: Hmm... the relative weakness in ATHN on Friday is disappointing. The market produces a very widespread rally and ATHN fails to participate. That's not a good sign. We only have a few days left. ATHN is due to report earnings on July 19th, after the closing bell. We will plan to exit on the 19th at the close to avoid holding over the announcement.

NOTE: the spread on our option suddenly got a lot wider on Friday. Hopefully it will return to normal next week. The current bid/ask spread is $1.30/2.05.

- Suggested Positions -

Long Jul $85 call (ATHN1221G85) Entry $2.00

07/14/12 remember, we want to exit prior to earnings on the 19th
07/03/12 new stop loss @ 79.85

chart:

Entry on July 03 at $81.51
Earnings Date 07/19/12 (confirmed)
Average Daily Volume = 481 thousand
Listed on July 02, 2012


Dollar General - DG - close: 54.53 change: +0.53

Stop Loss: 53.45
Target(s): 59.50
Current Option Gain/Loss: -41.4%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
07/14/12 update: The action in DG on Friday was also disappointing. Shares did bounce from the $54.00 area but only managed a +0.9% gain on the session. The action this past week with the failed breakout and reversal lower is bearish. More conservative traders may want to just abandon ship now. I'm not suggesting new positions at this time.

- Suggested Positions -

long Aug $55 call (DG1218H55) Entry $2.05

07/14/12 looking at DG's performance this past week, the breakout to new highs looks like a bull trap. readers may want to exit early

chart:

Entry on July 11 at $55.51
Earnings Date 08/30/12 (unconfirmed)
Average Daily Volume = 3.8 million
Listed on July 10, 2012


Westlake Chemical Corp. - WLK - close: 55.08 change: +1.14

Stop Loss: 52.35
Target(s): 62.00
Current Option Gain/Loss: -10.7%
Time Frame: exit prior to earnings on August 2nd
New Positions: see below

Comments:
07/14/12 update: Our WLK is now open. On Thursday night we adjusted our entry point and Friday saw WLK surge +2.1%. Shares hit our new trigger to buy calls at $54.55. I would still consider new positions now but keep in mind that we want to exit prior to the company's earnings report on August 2nd.

- Suggested Positions -

Long Aug $60 call (WLK1218H60) Entry $1.12

07/13/12 trade triggered @ 54.55
07/12/12 adjusted the trigger to buy calls to $54.55, stop to 52.35
07/11/12 removed the July option

chart:

Entry on July 13 at $54.55
Earnings Date 07/31/12 (unconfirmed)
Average Daily Volume = 543 thousand
Listed on July 09, 2012


PUT Play Updates

FLIR Systems - FLIR - close: 18.77 change: +0.18

Stop Loss: 19.45
Target(s): 17.75
Current Option Gain/Loss: Jul20p: +26.3% & Aug19p: +23.0%
Time Frame: exit prior to the late July earnings report
New Positions: see below

Comments:
07/14/12 update: FLIR managed a +0.9% bounce but remains in a bearish pattern. The path of least resistance is down. Keep in mind that we only have a week, maybe two left on this trade. FLIR is due to report earnings some time in the July 20-27th range. We do not want to hold over the report.

More conservative traders may want to just take profits now!

*NOTE: There seems to be something wrong with the July $20 put option quotes. One source lists the ask at $2.70. Another source lists the bid/ask spread at $0.10/1.70. (at Thursday's close it was $1.30/1.55).

- Suggested Positions -

Long Jul $20 PUT (FLIR1221S20) Entry $0.95

- or -

Long Aug $19 PUT (FLIR1218T19) Entry $0.65

*07/14/12 can't get a good quote on the July 20 put. This is an estimate.
07/12/12 new stop loss @ 19.45
07/11/12 odd bid/ask spread on the July $20 puts affecting our P/L.

chart:

Entry on July 02 at $19.56
Earnings Date 07/20/12 (unconfirmed)
Average Daily Volume = 1.7 million
Listed on June 30, 2012


Fossil, Inc. - FOSL - close: 67.98 change: +1.66

Stop Loss: 70.05
Target(s): 60.50
Current Option Gain/Loss: -21.1%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
07/14/12 update: I warned readers on Thursday that FOSL looked poised to bounce. I said look for a bounce to $68 or $70. Sure enough, FOSL rebounded to $68 (a +2.5% gain). A failure here or near the $70.00 level can be used as a new bearish entry point.

FYI: The Point & Figure chart for FOSL is bearish with a $54 target.

- Suggested Positions -

Long Aug $60 PUT (FOSL1218T60) Entry $2.60
07/12/12 FOSL has produced a one-day bullish reversal pattern.

chart:

Entry on July 11 at $65.99
Earnings Date 08/07/12 (unconfirmed)
Average Daily Volume = 1.3 million
Listed on July 10, 2012


Illinois Tool Works - ITW - close: 50.75 change: +0.71

Stop Loss: 51.65
Target(s): 45.50
Current Option Gain/Loss: -39.4%
Time Frame: exit prior to the July 24th earnings report
New Positions: see below

Comments:
07/14/12 update: ITW is seeing a short-term correction of the most recent drop that began on Tuesday. The close above the June 28th low near $50.35 is arguably short-term bullish. However, the stock should encounter resistance in the $51-52 zone. We have a stop loss at $51.65. More aggressive traders may want to put their stop above $52.00 instead. Wait for this bounce to roll over before launching new trades. Our target is $45.50 but we'll plan to exit prior to the July 24th earnings report.

- Suggested Positions -

Long Aug $50 PUT (ITW1218T50) Entry $1.90

07/12/12 triggered @ 49.75

chart:

Entry on July 12 at $49.75
Earnings Date 07/24/12 (confirmed)
Average Daily Volume = 3.4 million
Listed on July 11, 2012


J.C.Penney Co. - JCP - close: 20.02 change: -0.02

Stop Loss: 21.35
Target(s): 19.50, 15.50
Current Option Gain/Loss: +32.5%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
07/14/12 update: JCP continues to look weak as it hovers near the $20 level. The fact that shares did not bounce on Friday is a good sign for the bears. Readers may want to take profits now and re-start new positions on a bounce near $21.50ish.

Our first target is the 2010 lows near $19.50. Our second much more aggressive target is $15.50. FYI: The Point & Figure chart for JCP is bearish with a $7.00 target.

- Suggested Positions -

Long Aug $20 PUT (JCP1218T20) Entry $1.20

07/12/12 new stop loss @ 21.35
07/10/12 triggered @ 21.30

chart:

Entry on July 10 at $21.30
Earnings Date 08/08/12 (unconfirmed)
Average Daily Volume = 9.3 million
Listed on July 03, 2012


Sohu.com Inc. - SOHU - close: 38.99 change: -0.63

Stop Loss: 41.75
Target(s): 35.25
Current Option Gain/Loss: July40p: + 3.4% & Aug37.50p: +10.8%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
07/14/12 update: Friday was a good day for SOHU bears. The bounce reversed near resistance at $40.00. This looks like a new entry point for bearish positions.

We will want to keep our position size small to limit our risk because the most recent data listed short interest at 23% of the small 29.6 million-share float. FYI: The Point & Figure chart for SOHU is bearish with a $32 target.

*Small Positions* - Suggested Positions -

(July options expire after July 20th)
Long Jul $40 PUT (SOHU1221S40) entry $1.45

- or -

Long Aug $37.50 PUT (SOHU1218T37.5) entry $1.85

07/11/12 triggered @ 39.65

chart:

Entry on July 11 at $39.65
Earnings Date 07/30/12 (unconfirmed)
Average Daily Volume = 634 thousand
Listed on July 09, 2012


WABCO Holdings - WBC - close: 49.43 change: +0.84

Stop Loss: 50.05
Target(s): 44.00 & 41.00
Current Option Gain/Loss: -48.6%
Time Frame: exit prior to the July 27th earnings report
New Positions: see below

Comments:
07/14/12 update: WBC is really not cooperating with us. Thursday's breakdown to new relative lows quickly reversed higher. The bounce continued on Friday. I suggested readers to look for resistance near $50.00. So far that level is holding. Wait for this rebound to rollover before launching new positions.

We'll set our first target at $44.00 and our second target at $41.00.

- Suggested Positions -

Long Aug $45 put (WBC1218T45) Entry $1.85

07/12/12 triggered at $47.40

chart:

Entry on July 12 at $47.40
Earnings Date 07/27/12 (confirmed)
Average Daily Volume = 648 thousand
Listed on July 11, 2012


Weight Watchers Intl. - WTW - close: 49.64 change: -0.18

Stop Loss: 50.75
Target(s): 42.00
Current Option Gain/Loss: Jul47.50p: -81.8% & Aug45p: -32.8%
Time Frame: exit prior to the early August earnings report
New Positions: see below

Comments:
07/14/12 update: WTW's performance on Friday is encouraging if you're bearish. The market produced a big bounce and yet WTW struggled to get past resistance near $50.00. More conservative traders might want to adjust their stops toward Friday's high near $50.23. A failed rally near $50.00 could be used as a new bearish entry point.

FYI: The most recent data does list short interest at 10% of the small 26.6 million share float. That raises the risk of a short squeeze but lately the any short covering has failed at the 10 or 20-dma.

NOTE: July options expire after July 20th.

- Suggested Positions -

Long Jul $47.50 PUT (WTW1221S47.5) Entry $1.10

- or -

Long Aug $45 PUT (WTW1218T45) Entry $2.01

chart:

Entry on July 09 at $48.28
Earnings Date 08/02/12 (unconfirmed)
Average Daily Volume = 764 thousand
Listed on July 07, 2012


Youku Inc. - YOKU - close: 18.92 change: +0.42

Stop Loss: 21.25
Target(s): 16.00
Current Option Gain/Loss: +16.1%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
07/14/12 update: The oversold bounce in YOKU struggled with resistance near its May 21st low near $19.50. I don't see any changes from my prior comments. Shares should also have resistance near $20.00 and its 10-dma. Readers may want to adjust their stop loss closer to the $20 level. A failed rally near $20 or the 10-dma can be used as a new bearish entry point.

FYI: We want to keep our position size small because YOKU already has a high amount of short interest. The most recent data listed short interest at almost 19% of the 50.2 million share float and that raises the risk of a short squeeze higher.

*Small Positions* - Suggested Positions -

Long Aug $19 PUT (YOKU1218T19) Entry $1.55

07/10/12 triggered @ 19.90

chart:

Entry on July 10 at $19.90
Earnings Date 08/08/12 (unconfirmed)
Average Daily Volume = 1.3 million
Listed on July 02, 2012