Editor's Note:

Traders were taking profits after a week's worth of gains on Friday. Small caps underperformed again.

We closed our WLK trade at the open on Friday.

Current Portfolio:


CALL Play Updates

Costco Wholesale - COST - close: 95.61 change: -0.34

Stop Loss: 93.95
Target(s): 99.75
Current Option Gain/Loss: -25.0%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
07/21/12 update: Hmm... has the rally in COST run out of steam? The stock has spent the last three days churning sideways in the $95.00-96.50 zone. Broken resistance near $95.00 is holding up as support for now. The larger trend remains bullish. Readers may want to wait for a new rally past $96.50 before initiating positions or buy this dip near $95 with a tighter stop loss.

FYI: The Point & Figure chart for COST is bullish with a $116 target.

- Suggested *SMALL* Positions -

Long AUG $97.50 call (COST1218H97.5) Entry $0.96

chart:

Entry on July 18 at $95.68
Earnings Date 10/11/12 (unconfirmed)
Average Daily Volume = 2.0 million
Listed on July 17, 2012


Mohawk Industries - MHK - close: 72.55 change: +0.00

Stop Loss: 69.75
Target(s): 78.50
Current Option Gain/Loss: + 5.8%
Time Frame: exit prior to the Aug. 2nd earnings
New Positions: see below

Comments:
07/21/12 update: MHK spent Friday's session churning sideways above the $72.00 level. The stock closed unchanged on the day. MHK still looks bullish given the breakout this last week past resistance near $70.50. Readers can buy calls now or wait for a dip into the $71.00-70.50 zone as a new entry point.

There is potential resistance at the May highs (near $75.00) but we're aiming for $78.50. FYI: The Point & Figure chart for MHK is bullish with an $85 target.

- Suggested Positions -

Long Aug $75 call (MHK1218H75) Entry $1.70

chart:

Entry on July 20 at $72.07
Earnings Date 08/02/12 (unconfirmed)
Average Daily Volume = 408 thousand
Listed on July 19, 2012


PetSmart, Inc. - PETM - close: 68.87 change: -0.68

Stop Loss: 67.75
Target(s): 74.75
Current Option Gain/Loss: Unopened
Time Frame: exit prior to the mid August earnings report
New Positions: Yes, see below

Comments:
07/21/12 update: PETM followed the market lower on Friday. Shares gapped down and dipped toward $68 before paring its losses. The larger trend still looks bullish and we're waiting for a breakout past resistance near $70.00.

I am suggesting a trigger to buy calls at $70.25. Our target is $74.75.

Trigger @ 70.25

- Suggested Positions -

Buy the Aug $70 call (PETM1218H70)

chart:

Entry on July xx at $ xx.xx
Earnings Date 08/15/12 (unconfirmed)
Average Daily Volume = 1.0 million
Listed on July 18, 2012


PUT Play Updates

Pharmacyclics Inc. - PCYC - close: 49.99 change: +0.29

Stop Loss: 51.05
Target(s): 45.05
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Comments:
07/21/12 update: PCYC spent Friday drifting sideways under the $50.00 level and its 30-dma. We are still waiting for some follow through on its current short-term bearish trend.

I am suggesting puts if PCYC confirms this breakdown. Thursday's low was $48.53. We'll use a trigger at $48.40. Our target is $45.05 but readers could aim for the simple 50-dma instead (currently near $42). FYI: The most recent data listed short interest at 11% of the 45 million-share float.

Trigger @ 48.40

- Suggested Positions -

buy the Aug $45 PUT (PCYC1218T45)

chart:

Entry on July xx at $ xx.xx
Earnings Date 09/12/12 (unconfirmed)
Average Daily Volume = 1.8 million
Listed on July 19, 2012


CLOSED BULLISH PLAYS

Westlake Chemical Corp. - WLK - close: 58.08 change: -0.71

Stop Loss: 52.35
Target(s): 62.00
Current Option Gain/Loss: +16.0%
Time Frame: exit prior to earnings on August 2nd
New Positions: see below

Comments:
07/21/12 update: On Thursday night we decided it would be best to exit our WLK position early and close positions on Friday morning to try and lock in a gain. The stock gapped open lower at $57.89 and settled on its 100-dma with a -1.2% drop for the day.

Unfortunately the option plunged from a bid/ask spread of $2.00/2.20 on Thursday night to open at $1.30/1.50.

- Suggested Positions -

Aug $60 call (WLK1218H60) Entry $1.12 exit $1.30 (+16.0%)

07/20/12 closed at the open
07/19/12 prepare to exit at the open tomorrow
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