Editor's Note:

The market's third day of gains helped trigger several trades.

Our BRCM, CAT, QCOM, and FB trades have all been opened.

Current Portfolio:


CALL Play Updates

BRCM - Broadcom - close: 34.23 change: +0.33

Stop Loss: 32.45
Target(s): 38.50
Time Frame: 4-6 weeks
New Positions: see below

Comments:
08/07/12 update: Our BRCM trade is open. The stock rallied to a new six-week high and hit $34.83. Our trigger to buy calls was $34.75. Unfortunately, BRCM did give back most of its intraday gains. I would be cautious here. Readers may want to look for a new rally past $34.75 before initiating positions again.

- Suggested Positions -

Position: Nov $36.00 Call (BRCM1217K36) entry $1.80

08/07/12 triggered @ $34.75
08/06/12 adjust stop loss to $32.45

Entry on August 07 at $34.75
Average Daily Volume = 10 million
Earnings Oct-23rd
Listed on Aug 4, 2012


Caterpillar - CAT - close: 87.22 change: +0.87

Stop Loss: 84.90
Target(s): 91.50
Current Option Gain/Loss: - 2.1%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
08/07/12 update: Our brand new CAT trade has been opened.

Shares rallied to $88.32 intraday. Our trigger to buy calls was $87.25. I would still consider new positions now or nimble traders could try and buy a bounce in the $86.50-86.00 zone instead.

Earlier Comments:
I do consider this somewhat aggressive. CAT's recent earnings were strong and the company raised guidance but its stock price is probably still vulnerable to negative economic headlines. Furthermore the $90.00 level might be round-number resistance.

- Suggested (SMALL) Positions -

Long Sep $90 call (CAT1222I90) Entry $1.90

08/07/12 triggered @ $87.25

Entry on August 07 at $87.25
Average Daily Volume = 8.6 million
Listed on August 6, 2012


Dollar Tree - DLTR - close: 51.97 change: +0.98

Stop Loss: 49.45
Target(s): 54.50
Time Frame: exit prior to earnings on Aug. 16th
New Positions: see below

Comments:
08/07/12 update: Good news! DLTR displayed relative strength with a +1.9% gain and the stock appears to have broken the six-week trend of lower highs. Today's move looks like a new entry point but more conservative traders may want to wait for a rally past the 30-dma instead.

We do not want to hold over the earnings report on August 16th.

- Suggested Positions -

Position: Long Sept $52.50 Call (DLTR1222I52.5) @ $1.90

08/06/12 new stop loss @ 49.45, adjust time frame to exit prior to Aug. 16th earnings report

Entry on Aug 3rd at $ 51.42 (gap open)
Average Daily Volume = 1.5 million
Listed on Aug 2, 2012


Hess Corp. - HES - close: 49.42 change: +1.14

Stop Loss: 45.35
Target(s): 49.85
Current Option Gain/Loss: Aug47.5c:+121.9% & Sep47.5c: +63.3%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
08/07/12 update: HES also displayed relative strength today with a +2.3% gain and a breakout above its 100-dma. Now shares are knocking on potential round-number resistance at the $50.00 mark.

Cautious traders may want to take profits in the August call now since it's up +121%.

- Suggested Positions -

Long AUG $47.50 call (HES1218H47.5) Entry $1.05

- or -

Long SEP $47.50 call (HES1222I47.5) Entry $2.02

07/26/12 triggered on gap open higher at $46.65

Entry on July 26 at $46.65
Earnings Date 07/25/12
Average Daily Volume = 4.3 million
Listed on July 25, 2012


Qualcomm - QCOM - close: 61.34 change: +1.21

Stop Loss: 57.75
Target(s): 64.50
Time Frame: 4-6 weeks
New Positions: see below

Comments:
08/07/12 update: Our QCOM trade is now open. Shares hovered under the 100 and 150-dma this morning before finally pushing higher midday. The stock hit our trigger to buy calls at $60.51. If you missed it then consider waiting for a dip near $60.50 as your entry point.

- Suggested Positions -

Position: Oct $62.50 Call (QCOM1222J62.5) entry $1.70

08/07/12 triggered @ 60.51

Entry on August 07 at $60.51
Average Daily Volume = 1.5 million
Listed on Aug 4, 2012


PUT Play Updates

Akamai Technologies - AKAM - close: 36.34 change: +0.52

Stop Loss: 36.75
Target(s): 32.00
Time Frame: 2-4 weeks
New Positions: see below

Comments:
08/07/12 update: The U.S. stock market has produced a widespread three-day rally. I am not surprised that AKAM is not cooperating with us. Shares are slowly inching higher and displayed some relative strength today with a +1.4% gain. If there is any follow through tomorrow then odds are good we'll see AKAM hit our stop loss at $36.75. More conservative traders may want to exit early now.

- Suggested Positions -

Position: Long Sept $34 PUT (AKAM1222U34) @ $1.53

08/02/12 triggered @ $34.85

Entry on Aug 2nd at $ 34.85
Average Daily Volume = 3.0 million
Listed on July 30, 2012


FB - Facebook - close: 20.72 change: -1.20

Stop Loss: 23.25
Target(s): 17.00
Time Frame: 2-4 weeks
Current Option Gain/Loss: + 3.4%
New Positions: see below

Comments:
08/07/12 update: Our Facebook trade is now open.

The initial push higher this morning failed and the stock appears to have created a one-day bearish reversal pattern. Our trigger to buy puts was hit at $20.95. I would still consider new positions now or if you're feeling cautious then wait for a new low under $19.80. We have a stop loss at $23.25. More conservative traders could tighten their stop closer to today's high instead (22.45).

Earlier Comments:
Facebook has turned into the stock everyone loves to hate. Facebook has 674 million shares outstanding as of Friday. On August 15th another 268 million shares will see their lockup expire and become available for trading. That is 40% additional shares. If you were an investor or employee and you watched your shares decline from $35 to $20 ahead of your lockup expiration you are probably just waiting for an opportunity to sell. Another factor is that taxes are due on the awarded shares regardless of whether they are sold. That means employees have a big tax bill and they have not been able to sell those shares to pay the taxes. That is an additional incentive to pull the trigger on at least part of their position on August 15th.

Facebook has hundreds of detractors and they seem to be racing each other trying to put a lower price target on the stock. Mark Hulbert was on CNBC on Friday with a $13.80 price target based on a bunch of different metrics.

Facebook also has the various lawsuits over the IPO including the valuation and the various claims made about users and revenue in the days leading up to the IPO. There are plenty of clouds and no real catalysts to pump up the stock.

Facebook said expenses grew by 60% in Q2 and they would grow faster in Q3/Q4. That means earnings will decline.

I am recommending a September option with plans to exit (some time) after the August 15th share lock up expiration.

Suggested Positions

current position: Sept $20 PUT (FB1220U20) entry $1.45

08/07/12 triggered @ 20.95
08/06/12 adjust entry trigger to $20.95

Entry on August 07 at $20.95
Average Daily Volume = 80.0 million
Listed on August 5, 2012


iShares Russell 2000 ETF - IWM - close: 79.94 change: +0.72

Stop Loss: 81.25
Target(s): 75.75
Time Frame: 2-4 weeks
New Positions: Yes, see below

Comments:
08/07/12 update: Hmm... what should we do with the IWM here? Today's gain outperformed the big cap indices. Plus, today's rally looks like a bullish breakout above the five-week trend of lower highs. Yet we still don't trust the move here.

Aggressive traders may want to consider buying calls on a rally past today's high ($80.57). We are actually expecting this rally to fail. Tonight we're adjusting our trigger to buy puts up to $78.90.

Earlier Comments:
We are reinitiating the IWM put because I think the short squeeze gains are unsustainable. The Russell has the worst chart of the major indexes and has rebounded the least on a relative basis.

Entry Trigger: buy puts at $78.90

- Suggested Positions -

Buy Oct $78 PUT (IWM1220V78)

08/07/12 adjust trigger to buy puts up to $78.90

Entry on Unopened XX at $ XX.XX
Average Daily Volume = 60.0 million
Listed on August 5, 2012