Editor's Note:

Stocks bounced off their late morning lows but gains were fading lower into the afternoon.

FLS has been triggered. WHR is stopped out. I have removed SBUX.

Current Portfolio:


CALL Play Updates

Dover Corp - DOV - close: 63.50 change: +0.11

Stop Loss: 61.75
Target(s): 67.50
Current Option Gain/Loss: + 7.1%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/05/12: DOV managed a minor gain after traders bought the dip this morning. The value of the option did not change. Technical traders will note that the MACD on the daily chart has turned bearish suggesting momentum is waning. The stock seems stuck in the $62-64 zone. I am not suggesting new positions at this time.

- Suggested Positions -

Long 2013 Mar $65 call (DOV1316c65) entry $2.10

11/28/12 new stop loss @ 61.75
11/19/12 triggered @ 62.30

Entry on November 19 at $62.30
Average Daily Volume = 1.7 million
Listed on November 17, 2012


Flowserve Corp. - FLS - close: 141.21 change: +0.31

Stop Loss: 138.90
Target(s): 148.50
Current Option Gain/Loss: -11.1%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/05/12: FLS continued to rally and hit new multi-week highs. Our trigger to buy calls was hit at $141.50. I would still consider new positions now at current levels. FYI: The Point & Figure chart for FLS is bullish with a $153 target.

- Suggested Positions -

Long 2013 Jan $145 call (FLS1319a145) Entry $2.70

Entry on December 05 at $141.50
Average Daily Volume = 518 thousand
Listed on December 04, 2012


Home Depot - HD - close: 64.02 change: -0.22

Stop Loss: 62.90
Target(s): 69.50
Current Option Gain/Loss: -34.3%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
12/05/12: My concern with HD is growing. Shares spiked down this morning but traders bought the dip near last week's lows. The breakout above resistance near $65.00 is starting to look like a bull trap pattern. There is no change from my prior comments. Odds are good we could see HD pull back toward support near $62.00 and its 40 or 50-dma.

More conservative traders may want to raise their stops to limit their risk further. More aggressive traders might want to adjust their stops so it's under $62.00. I am not suggesting new positions at this time.

- Suggested Positions -

Long 2013 Jan $65 call (HD1319a65) entry $1.95

Entry on December 03 at $65.35
Average Daily Volume = 8.5 million
Listed on December 01, 2012


Ingredion Inc. - INGR - close: 65.94 change: +0.51

Stop Loss: 63.25
Target(s): 69.00
Current Option Gain/Loss: + 7.5%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/05/12: INGR continues to show relative strength and hit new highs today above $66. Readers may want to wait for a dip or a bounce near $65.00 as our next entry point.

- Suggested Positions -

Long 2013 Jan $65 call (INGR1319a65) entry $2.00

Entry on December 04 at $65.25
Average Daily Volume = 504 thousand
Listed on December 03, 2012


O'Reilly Automotive - ORLY - close: 91.38 change: -1.52

Stop Loss: 89.95
Target(s): 95.75
Current Option Gain/Loss: -60.5%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/05/12: The pullback in ORLY continues. The stock dipped to $90.74 intraday before paring its losses. We're three days into the week and right now the weekly chart is showing a bearish engulfing candlestick reversal pattern forming for this week. I am not suggesting new positions at this time.

- Suggested Positions -

Long DEC $95 call (ORLY1222L95) entry $1.90

Entry on November 20 at $92.05
Average Daily Volume = 1.8 million
Listed on November 19, 2012


Precision Castparts - PCP - close: 184.09 change: +2.37

Stop Loss: 179.75
Target(s): 188.00
Current Option Gain/Loss: +21.6%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/05/12: There was no follow through on the recent pullback in PCP. Instead shares reversed higher with a +1.3% gain as traders bought the dip near its 10-dma. The stock is once again challenging resistance near $185.00. Please note our new stop loss at $179.75.

I have listed the December calls but you might want to use the January calls instead.

- Suggested *Small* Positions -

Long DEC $185 call (PCP1222L185) Entry $1.85

12/05/12 new stop loss @ 179.75

Entry on November 29 at $182.04
Average Daily Volume = 762 thousand
Listed on November 28, 2012


Pharmacyclics Inc. - PCYC - close: 53.59 change: -0.96

Stop Loss: 51.45
Target(s): 56.50
Current Option Gain/Loss: - 40.2%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/05/12: Yesterday's pullback continued today and PCYC gave up -1.75%. More conservative traders may want to inch their stop losses higher. I am not suggesting new positions at this time.

Earlier Comments:
I do consider this a more aggressive, higher-risk trade. Anytime you trade a biotech stock it can be a high-risk trade since you never know when a negative headline could send the stock crashing.

- Suggested *Small* Positions -

long Dec $55 call (PCYC1222L55) entry $3.60

12/03/12 new stop loss @ 51.45
11/20/12 new stop loss @ 49.65
11/19/12 trade opened with PCYC's gap open higher @ 52.21

Entry on November 19 at $52.21
Average Daily Volume = 1.0 million
Listed on November 17, 2012


Trimble Navigation - TRMB - close: 56.07 change: +1.15

Stop Loss: 53.40
Target(s): 59.75
Current Option Gain/Loss: Unopened
Time Frame: 3 to 6 weeks
New Positions: Yes, see below

Comments:
12/05/12: TRMB displayed relative strength today with a +2.0% gain but the rally stalled at resistance near $56.00 again. We are waiting for a bullish breakout higher.

I am suggesting small bullish positions if TRMB can trade at $56.15 or higher. If triggered our short-term target is $59.75.

Trigger @ 56.15

- Suggested Positions -

buy the 2013 Jan $57.50 call (TRMB1319a57.5)

Entry on November xx at $ xx.xx
Average Daily Volume = 708 thousand
Listed on November 28, 2012


PUT Play Updates

Humana Inc. - HUM - close: 65.06 change: -0.08

Stop Loss: 66.51
Target(s): 60.25
Current Option Gain/Loss: -36.8%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/05/12: HUM hit a new low for the week near $64.50 before recovering. The 10-dma remains overhead resistance.

- Suggested Positions -

Long DEC $65 PUT (HUM1222x65) entry $1.98

Entry on November 28 at $64.20
Average Daily Volume = 3.0 million
Listed on November 27, 2012


InterOil Corp. - IOC - close: 54.35 change: +1.85

Stop Loss: 57.55
Target(s): 50.50
Current Option Gain/Loss: + 5.5%
Time Frame: 3 to 5 weeks
New Positions: see below

Comments:
12/05/12: After a big decline yesterday IOC managed to recoup most of its losses with a +3.5% bounce today. The bounce did stall at what should be round-number resistance near $55.00 this afternoon. That doesn't mean the bounce is over. The next resistance is probably the 10-dma near $56.40. I am not suggesting new positions at this time.

I want to remind readers that this is a more aggressive, higher risk trade. IOC is volatile and has a high amount of short interest.

*Small positions* - Suggested Positions -

Long DEC $55 PUT (IOC1222x55) entry $2.70

12/04/12 new stop loss @ 57.55
11/28/12 new stop loss @ 60.15

Entry on November 21 at $58.50
Average Daily Volume = 790 thousand
Listed on November 20, 2012


Range Resources - RRC - close: 64.61 change: +1.40

Stop Loss: 66.05
Target(s): 56.50
Current Option Gain/Loss: -16.6%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/05/12: RRC started the day with a spike higher. Shares opened at $63.72 and surged to $65.00 before pausing. I suspect this sudden strength is a reaction to the M&A news that Freeport was buying PXP and MMR. Suddenly investors were wondering who else might be a takeover target. I would wait for a new drop in RRC under $65.00 before considering new bearish positions.

Earlier Comments:
I do consider this an aggressive, higher-risk trade. RRC can be volatile and there has been takeover chatter in the past. We want to keep our position size small to limit our risk.

- Suggested *Small* Positions -

buy the 2013 Jan $60 PUT (RRC1319m60) entry $1.20*

*option entry price is an estimate since the option did not trade at the time our play was closed. The first trade on Dec. 5th was at $1.00.

Entry on December 05 at $63.72
Average Daily Volume = 1.5 million
Listed on December 04, 2012


Sears Holding - SHLD - close: 41.21 change: -1.67

Stop Loss: 44.05
Target(s): 40.25
Current Option Gain/Loss: -12.0%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/05/12: The trading gods are smiling on us with SHLD's relative weakness. There was no follow through on the recent bounce. The stock has reversed into a new relative low. The intraday low was $40.70. We are aiming to exit at $40.25 but readers may want to exit early now.

Unfortunately the option spreads have not improved and remain ridiculously too wide. I am not suggesting new positions.

- Suggested Positions -

Long 2013 Jan $45 PUT (SHLD1319m45) entry $2.15

12/03/12 new stop loss @ 44.05
12/01/12 new stop loss @ 45.25
11/28/12 triggered

Entry on November 28 at $45.75
Average Daily Volume = 1.2 million
Listed on November 26, 2012


Teradata Corp. - TDC - close: 57.94 change: -0.16

Stop Loss: 62.10
Target(s): 55.15
Current Option Gain/Loss: +58.1%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/05/12: TDC spiked down to $56.10 this morning before bouncing back and recovering most of its losses. Today's move almost looks like a one-day bullish reversal pattern so be careful here. I would expect a bounce back toward the $59-60 area. Readers may want to take profits now. I am not suggesting new positions at this time.

Our target is $55.15. More aggressive traders could aim a lot lower. The Point & Figure chart for TDC is bearish with a $44 target.

- Suggested Positions -

Long 2013 Jan $55 PUT (TDC1319m55) entry $0.86

Entry on December 03 at $60.00
Average Daily Volume = 2.2 million
Listed on December 01, 2012


CLOSED BULLISH PLAYS

Starbucks Corp. - SBUX - close: 50.79 change: -0.33

Stop Loss: 49.95
Target(s): 55.85
Current Option Gain/Loss: Unopened
Time Frame: 3 to 6 weeks
New Positions: Yes, see below

Comments:
12/05/12: It was investor day for SBUX and the stock displayed some volatility. Initially SBUX gapped higher but was immediately sold and shares dipped under $50.00 before recovering. The action is short-term bearish. Our trade has not opened yet and I am removing SBUX as a candidate. We'll look at it again if shares challenge resistance near $52.00 in the future.

FYI: At its conference today SBUX said they plan to open 1,500 new stores in the U.S. over the next five years, which would put their total at 12,600. SBUX is planning to open +2,000 new stores worldwide over the next two years, which would put the grand total at close to 20,000 stores.

trade did not open.

12/05/12 trade did not open. removed SBUX from the newsletter

chart:

Entry on November xx at $ xx.xx
Average Daily Volume = 8.1 million
Listed on November 29, 2012


Whirlpool Corp. - WHR - close: 98.62 change: -1.80

Stop Loss: 99.40
Target(s): 108.50
Current Option Gain/Loss: -41.3%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/05/12: It was a bearish day for WHR. The stock started the session weak with a breakdown under $100 and quickly hit our stop at $99.40. A midday bounce higher failed at $100 and WHR rolled over. The next test of support is the bottom of its bullish channel near $97.50.

- Suggested *Small* Positions -

Long 2013 Jan $105 call (WHR1319a105) entry $3.75 exit $2.20*(-41.3%)

12/05/12 stopped out at $99.40
*option exit price is an estimate since the option did not trade at the time our play was closed.

chart:

Entry on November 26 at $101.89
Average Daily Volume = 1.3 million
Listed on November 24, 2012