Editor's Note:

The market's major indices were mostly sideways for the week as Washington failed to make progress on the fiscal cliff.

Our HUM trade was stopped out.

Current Portfolio:


CALL Play Updates

Dover Corp - DOV - close: 63.73 change: +0.30

Stop Loss: 61.75
Target(s): 67.50
Current Option Gain/Loss: +11.9%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/08/12: DOV is still consolidating sideways. The consolidation seems to be narrowing, which might suggest a breakout one way or the other soon. Right now the past of least resistance should be higher but DOV remains under resistance at the $64.00 level. 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

chart:

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


Energizer Holdings - ENR - close: 81.41 change: +1.01

Stop Loss: 78.40
Target(s): 84.50
Current Option Gain/Loss: - 5.5%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/08/12: Our new ENR trade is off to a good start. Shares gapped open higher at $80.76 and rallied to a new 2012 high with a +1.25% gain on Friday. Nimble traders may want to try and buy a dip in the $80.50-80.00 zone but there is not guarantee we'll see a dip. Our multi-week target is $84.50.

- Suggested Positions -

Long 2013 Jan $85 call (ENR1319a85) entry $0.90

chart:

Entry on December 07 at $80.76
Average Daily Volume = 784 thousand
Listed on December 06, 2012


Flowserve Corp. - FLS - close: 141.90 change: +0.51

Stop Loss: 138.90
Target(s): 148.50
Current Option Gain/Loss: - 5.5%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/08/12: Friday's early gains in FLS faded but shares still hit new four-week highs. I would consider new positions now but readers may want to look for a dip into the $141-140 zone as our next entry point to buy calls. FYI: The Point & Figure chart for FLS is bullish with a $153 target.

- Suggested Positions -

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

chart:

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


Home Depot - HD - close: 64.45 change: +0.11

Stop Loss: 62.90
Target(s): 69.50
Current Option Gain/Loss: -27.6%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
12/08/12: HD's performance this past week was disappointing. The stock essentially churned sideways although we're fortunate there was no follow through on the bearish reversal early in the week. I remain cautious here. Readers could use a rally past $65.00 as a new entry point.

- Suggested Positions -

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

chart:

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


Ingredion Inc. - INGR - close: 64.88 change: -0.86

Stop Loss: 63.90
Target(s): 69.00
Current Option Gain/Loss: -25.0%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/08/12: Hmm... INGR saw some profit taking on Friday and shares underperformed the market with a -1.3% decline. The stock paused at its 10-dma. A bounce back above $65.00 could be used as a new entry point. I am raising our stop loss to $63.90. More conservative traders may want to raise their stop closer to $64.50 instead.

- Suggested Positions -

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

12/08/12 new stop loss @ 63.90

chart:

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


O'Reilly Automotive - ORLY - close: 90.73 change: +0.05

Stop Loss: 89.95
Target(s): 95.75
Current Option Gain/Loss: -76.3%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/08/12: We still have two weeks left on our December options but it's not looking well for our ORLY trade. Shares underperformed all week with a failed rally on Monday at $95.00 and a pullback toward support near its 200-dma. Now prior short-term support at the 10-dma is likely new resistance. Last week's decline has painted a bearish engulfing candlestick reversal pattern on the weekly chart although it needs to see confirmation. I am not suggesting new positions at this time.

- Suggested Positions -

Long DEC $95 call (ORLY1222L95) entry $1.90

chart:

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


Precision Castparts - PCP - close: 183.55 change: +0.60

Stop Loss: 179.75
Target(s): 188.00
Current Option Gain/Loss: - 2.7%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/08/12: Traders bought the dip in PCP near its rising 10-dma again. Shares remain under resistance at $185.00. More conservative traders might want to tighten their stop loss. I am not suggesting new positions at this time.

- Suggested *Small* Positions -

Long DEC $185 call (PCP1222L185) Entry $1.85

12/05/12 new stop loss @ 179.75

chart:

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


Rockwell Automation - ROK - close: 80.39 change: +0.28

Stop Loss: 78.90
Target(s): 84.75
Current Option Gain/Loss: Unopened
Time Frame: 3 to 5 weeks
New Positions: Yes, see below

Comments:
12/08/12: ROK has spent the last couple of sessions churning sideways in the $79.50-80.50 zone. The stock looks poised to breakout higher but we are waiting for a new relative high before initiating positions.

I am suggesting a trigger to buy calls at $80.60 with a stop loss at $78.90. Our target is $84.75.

Trigger @ 80.60

- Suggested Positions -

buy the 2013 Jan $85 call (ROK1319a85)

chart:

Entry on December xx at $ xx.xx
Average Daily Volume = 1.0 million
Listed on December 05, 2012


Trimble Navigation - TRMB - close: 57.28 change: +0.55

Stop Loss: 53.40
Target(s): 59.75
Current Option Gain/Loss: +23.0%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/08/12: TRMB has extended its gains to three days in a row. Shares hit another new high on Friday. If you missed our entry point you may want to wait for a dip back toward the $56.25 area. Our target is only $59.75 but more aggressive traders could aim higher.

- Suggested Positions -

Long 2013 Jan $57.50 call (TRMB1319a57.5) entry $1.30

chart:

Entry on November 06 at $56.15
Average Daily Volume = 708 thousand
Listed on November 28, 2012


PUT Play Updates

InterOil Corp. - IOC - close: 52.18 change: +0.71

Stop Loss: 55.15
Target(s): 50.50
Current Option Gain/Loss: +55.5%
Time Frame: 3 to 5 weeks
New Positions: see below

Comments:
12/08/12: It was another ugly week for shares of IOC. The stock managed a +1.3% bounce on Friday but shares are now down four weeks in a row. We've been aiming for $50.50 but IOC is looking oversold here. Readers may want to go ahead and exit early now. I am not suggesting new positions. We will adjust our stop loss down to $55.15.

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

12/08/12 new stop loss @ 55.15
12/06/12 new stop loss @ 56.05
12/04/12 new stop loss @ 57.55
11/28/12 new stop loss @ 60.15

chart:

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


Range Resources - RRC - close: 64.68 change: +0.10

Stop Loss: 66.05
Target(s): 56.50
Current Option Gain/Loss: -25.0%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/08/12: RRC broke down through significant support to hit new three-month lows on Tuesday. Then the stock, like many in the energy sector, surged on Wednesday thanks to M&A news in the sector. RRC has spent the last couple of days churning sideways. I am not suggesting new positions at this time.

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.

chart:

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


Teradata Corp. - TDC - close: 58.19 change: -0.51

Stop Loss: 62.10
Target(s): 55.15
Current Option Gain/Loss: +39.5%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/08/12: It looks like the oversold bounce in TDC might already be running out of steam. Shares quickly reversed following the Friday morning attempt to rally. More conservative traders may want to adjust their stop loss lower. 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

chart:

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


CLOSED BEARISH PLAYS

Humana Inc. - HUM - close: 66.65 change: +1.46

Stop Loss: 66.51
Target(s): 60.25
Current Option Gain/Loss: -74.7%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/08/12: The healthcare sector was showing relative strength on Friday. HUM outperformed many of its peers with a +2.2% gain. I didn't see any specific news to account for this rally. Shares of HUM broke through resistance near $66 and its 10-dma. Our stop was hit at $66.51.

- Suggested Positions -

DEC $65 PUT (HUM1222x65) entry $1.98 exit $0.50 (-74.7%)

12/07/12 stopped out at $66.51

chart:

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