Editor's Note:

An earnings warning from Dow-component Caterpillar (CAT) helped spark a market-wide sell-off on Tuesday.

Our SPW trade was stopped out.

Current Portfolio:


CALL Play Updates

Alexion Pharma. - ALXN - close: 113.90 change: +0.98

Stop Loss: 109.40
Target(s): 118.50
Current Option Gain/Loss: +55.4%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
09/25/12: ALXN continues to show strength. Shares hit another new high at $116.42 midday. Unfortunately the stock started to succumb to the market's widespread weakness this afternoon. I still expect a dip toward the $112-110 area. I am not suggesting new positions at current levels.

Our multi-week target is $118.50. FYI: The Point & Figure chart for ALXN is bullish with a $124 target.

- Suggested Positions -

Long Oct $115 call (ALXN1220j115) Entry $2.83

09/20/12 new stop loss @ 109.40
09/15/12 new stop loss @ 107.75

Entry on September 10 at $110.72
Average Daily Volume = 905 thousand
Listed on September 08, 2012


Commvault Sys. - CVLT - close: 55.81 change: -0.34

Stop Loss: 53.90
Target(s): 59.85
Current Option Gain/Loss: -31.4%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
09/25/12: CVLT dipped again toward what should be support near $55.00. At this point I would wait for a bounce off this level before considering new bullish positions.

Our exit target is $59.85. More aggressive traders could aim higher.

- Suggested Positions -

Long Oct $60 Call (CVLT1220j60) Entry $1.24

Entry on September 20 at $56.07
Average Daily Volume = 427 thousand
Listed on September 19, 2012


DSW Inc. - DSW - close: 65.05 change: -0.68

Stop Loss: 64.40
Target(s): 72.50
Current Option Gain/Loss: Oct70c: -80.0% & 2013jan$70c: -34.5%
Time Frame: exit prior to Oct 16th.
New Positions: see below

Comments:
09/25/12: DSW failed near the $66.80 area for the second time in three days. The stock retreated toward $65.00. If there is any follow through lower tomorrow we could see DSW hit our stop at $64.40. I am not suggesting new positions at this time.

We will tentatively aim for $72.50 but I suspect the $70.00 level might offer some resistance. More conservative traders may want to exit in the $69.50-70.00 zone. We will plan on closing positions prior to Oct. 16th.

- Suggested Positions -

Long Oct $70 call (DSW1220j70) Entry $0.50

- or -

Long 2013 Jan $70 call (DSW1319a70) Entry $2.75

Entry on September 24 at $66.45
Average Daily Volume = 353 thousand
Listed on September 22, 2012


EQT Corp. - EQT - close: 57.09 change: -0.81

Stop Loss: 55.95
Target(s): 63.00
Current Option Gain/Loss: -59.0%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
09/25/12: EQT followed the markets lower on Tuesday and closed down -1.39%. We should expect a dip toward last week's low if this weakness continues. I am not suggesting new positions at this time.

- Suggested Positions -

Long Oct $60 call (EQT1220j60) Entry $0.61

Entry on September 24 at $ xx.xx
Average Daily Volume = 1.0 million
Listed on September 22, 2012


McDonald's Corp. - MCD - close: 92.86 change: -0.85

Stop Loss: 89.90
Target(s): 98.00
Current Option Gain/Loss: -26.0%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
09/25/12: I cautioned readers yesterday to expect a pullback in MCD. The stock failed at resistance near $94.00 again and produced a bullish engulfing candlestick reversal pattern. I would look for a dip near $92.00 at a minimum now.

Earlier Comments:
This is an aggressive, higher-risk trade. There is still additional resistance at the simple 200-dma, the $94.00 level, and another trend line of lower highs. We want to use small positions to limit our risk.

- Suggested (SMALL) Positions -

Long Oct $92.50 call (MCD1220j92.5) entry $2.00

09/22/12 I suspect MCD will see a pullback here.

Entry on September 19 at $93.24
Average Daily Volume = 4.7 million
Listed on September 18, 2012


Whole Foods Market - WFM - close: 98.26 change: -1.82

Stop Loss: 98.25
Target(s): 107.50
Current Option Gain/Loss: Unopened
Time Frame: 3 to 5 weeks
New Positions: Yes, see below

Comments:
09/25/12: WFM came close but it did not hit our trigger to buy calls this morning. Shares failed at $100.50 and then reversed to a -1.8% decline.

We will leave our strategy unchanged. I am suggesting a trigger to buy calls at $100.55 with a stop loss at $98.25. Our target is $107.50.

Trigger @ 100.55

- Suggested Positions -

buy the Oct $105 call (WFM1220j105)

Entry on September xx at $ xx.xx
Average Daily Volume = 1.3 million
Listed on September 24, 2012


Watson Pharmaceuticals - WPI - close: 83.16 change: -0.18

Stop Loss: 82.75
Target(s): 88.50
Current Option Gain/Loss: -45.1%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
09/25/12: WPI tried to rally but failed near $84.50 again. Shares look poised to break support near $83.00 and if that happens WPI will likely hit our stop loss at $82.75. I am not suggesting new positions.

FYI: The Point & Figure chart for WPI is bullish with a long-term $105 target.

- Suggested Positions -

Long Oct $85 call (WPI1220j85) Entry $1.55

Entry on September 20 at $84.25
Average Daily Volume = 1.0 million
Listed on September 19, 2012


PUT Play Updates

Currently we do not have any active put trades.


CLOSED BULLISH PLAYS

SPX Corp. - SPW - close: 64.50 change: -2.67

Stop Loss: 66.45
Target(s): 74.50
Current Option Gain/Loss: -66.6%
Time Frame: 4 to 5 weeks
New Positions: see below

Comments:
09/25/12: SPW broke down through multiple layers of potential support today with a -3.9% plunge. Our stop loss was hit at $66.45.

- Suggested Positions -

Oct $70 call (SPW1220j70) Entry $1.95 exit $0.65* (-66.6%)

09/25/12 stopped out at $66.45
*option exit price is an estimate since the option did not trade at the time our play was closed.
09/21/12 triggered on gap open higher at $69.52. Trigger was $69.25.

chart:

Entry on September 21 at $69.52
Average Daily Volume = 622 thousand
Listed on September 20, 2012