Editor's Note:

It looks like the Santa Claus rally could be in trouble. The major indices have reversed from their midweek highs. The action in the S&P 500 index this past week looks like a short-term bearish reversal.

We have closed our ORLY trade. We want to close our DOV trade on Monday morning.

Current Portfolio:


CALL Play Updates

Abercombie & Fitch - ANF - close: 46.78 change: -0.12

Stop Loss: 44.49
Target(s): 49.85
Current Option Gain/Loss: -32.9%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/15/12: Stocks drifted lower on Friday and ANF was no exception. Shares look like they will retest short-term technical support at their 10-dma soon. The $46.00 level should also offer some short-term support. More conservative traders might want to raise their stop closer to $46.

Our short-term target is $49.85 since the $50.00 mark could be resistance. More aggressive traders may want to aim for the $53-55 zone instead.

- Suggested Positions -

Long 2013 Jan $50 call (ANF1319a50) entry $1.58

chart:

Entry on December 10 at $47.48
Average Daily Volume = 5.4 million
Listed on December 08, 2012


Celgene Corp. - CELG - close: 79.36 change: -0.48

Stop Loss: 77.95
Target(s): 84.50 & 87.50
Current Option Gain/Loss: - 44.3%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/15/12: CELG continues to pull back. The stock is now down three days in a row. More importantly I am concerned that the action this past week now looks like a failed rally pattern and bull trap pattern, especially on the weekly chart. Broken resistance near $80.00 should have offered stronger support and now CELG is under its 10-dma. The next level of support is $78.00. I am not suggesting new positions at this time. Traders need to be defensive here.

Earlier Comments:
I am setting two targets. We'll take money off the table at $84.50 and our final target will be $87.50.

- Suggested Positions -

Long 2013 Jan $82.50 call (CELG1319a82.5) entry $2.03

12/15/12 traders should be defensive. The action this past week looks like a failed rally or bull trap pattern.

chart:

Entry on December 11 at $81.46
Average Daily Volume = 3.0 million
Listed on December 10, 2012


Dover Corp - DOV - close: 63.85 change: -0.24

Stop Loss: 62.75
Target(s): 67.50
Current Option Gain/Loss: + 7.1%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/15/12: DOV continues to churn sideways. Unfortunately the stock has been moving sideways for weeks. There was no follow through on the breakout past resistance near $64.00. Now Friday's decline looks like a breakdown below its bullish channel (see chart below). It's possible the stock bounces off the 10-dma or 20-dma but we are going to close this play early. I am suggesting an early exit on Monday morning.

- Suggested Positions -

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

12/15/12 prepare to exit on Monday morning
12/11/12 new stop loss @ 62.75
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: 80.20 change: -0.80

Stop Loss: 79.40
Target(s): 84.50
Current Option Gain/Loss: -44.4%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/15/12: ENR's bullish breakout past major resistance at $80.00 is now in serious jeopardy. The stock reversed on Wednesday and shares are down three days in a row. The stock has pulled back to prior resistance and what should be new support at $80.00. A bounce here could be used as a new bullish entry point. I am raising our stop loss to $79.40.

- Suggested Positions -

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

12/15/12 new stop loss @ 79.40

chart:

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


Flowserve Corp. - FLS - close: 142.16 change: -0.14

Stop Loss: 138.90
Target(s): 148.50
Current Option Gain/Loss: -12.9%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/15/12: FLS held up reasonably well on Friday, closing almost unchanged on the session. Traders bought the dip at its 10-dma again. There is still a chance FLS could dip and retest the $140 level if the market breaks down further. I am not suggesting new positions 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

chart:

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


iShares Russell 2000 - IWM - close: 82.36 change: -0.05

Stop Loss: 81.20
Target(s): 86.00
Current Option Gain/Loss: -27.3%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/15/12: There wasn't much follow through lower in the IWM on Friday. The $82 level is holding up as support for now. Yet the intraday bounce reversed so I would remain cautious here. Readers may want to wait for a new close above $83.00 before considering new positions. More conservative traders could move their stop loss closer to the $82 level.

- Suggested Positions -

buy the 2013 Jan $84 call (IWM1319a84) current ask $1.17

12/11/12 triggered on the gap open higher at $83.11 (trigger was 82.85)

chart:

Entry on December 11 at $83.11
Average Daily Volume = 38 million
Listed on December 10, 2012


Linkedin Corp. - LNKD - close: 112.99 change: +1.00

Stop Loss: 109.00
Target(s): 117.50
Current Option Gain/Loss: +16.1%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/15/12: LNKD displayed some relative strength on Friday with a $1.00 gain. I was actually expecting a dip toward $110, which could still happen. Please note that I am raising our stop loss to $109.00.

Earlier Comments:
Our target is $117.50. More conservative traders may want to exit in the $114-115 zone instead since $115 might be resistance. LNKD can be volatile so I would use small positions to limit our risk.

*Small Positions* - Suggested Positions -

Long Jan $115 call (LNKD1319a115) Entry $3.10

12/15/12 new stop loss @ $109.00

chart:

Entry on December 10 at $110.25
Average Daily Volume = 1.8 million
Listed on December 08, 2012


Lululemon Athletica - LULU - close: 74.55 change: -0.22

Stop Loss: 71.70
Target(s): 79.00
Current Option Gain/Loss: - 3.0%
Time Frame: 3 to 5 weeks
New Positions: see below

Comments:
12/15/12: LULU continues to consolidate sideways between prior resistance at $74.00, which is now new short-term support, and the $75.00-75.50 area. The market looks weak so I am cautious when it comes to launching new traders here but nimble traders could buy a new dip or bounce near the $74.00 mark.

Earlier Comments:
LULU could see a short squeeze that lifts it toward $80.00. The most recent data listed short interest at 20% of the 101 million share float.

FYI: The Point & Figure chart for LULU is bullish with an $88 target.

- Suggested Positions -

Long 2013 Jan $75 call (LULU1319a75) entry $3.30

chart:

Entry on December 12 at $74.25
Average Daily Volume = 2.1 million
Listed on December 11, 2012


Netflix, Inc. - NFLX - close: 93.30 change: +0.74

Stop Loss: 89.45
Target(s): 99.75
Current Option Gain/Loss: + 0.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/15/12: NFLX continues to rally and bucked the market's general malaise on Friday. Shares opened at $92.67 and rallied toward the $95 level before paring its gains. If we're lucky NFLX might see a dip into the $92-90 zone that we can use as a new entry point. I am still expecting short covering to fuel a rally toward $100.

Earlier Comments:
NFLX can be a volatile stock so I do consider this a more aggressive, higher-risk trade and we will want to keep our position size small. Target is $99.75.

- Suggested Positions - *Small Positions*

Long 2013 Jan $100 call (NFLX1319a100) entry $3.88

chart:

Entry on December 14 at $92.67
Average Daily Volume = 1.1 million
Listed on December 13, 2012


Precision Castparts - PCP - close: 184.20 change: +1.16

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:
12/15/12: Traders bought the dip in PCP on Friday morning but the bounce stalled at prior resistance near $185.00. I remain cautious on this trade and readers may want to raise their stop loss. I am not suggesting new positions at this time.

Don't forget that we have the December calls. That means we only have five trading days left.

- 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: 82.25 change: +0.24

Stop Loss: 78.90
Target(s): 84.75
Current Option Gain/Loss: + 5.0%
Time Frame: 3 to 5 weeks
New Positions: see below

Comments:
12/15/12: ROK is still holding up pretty well. Most of the market was pulling back the last couple of days yet ROK is still hovering near its relative highs. If you're looking for a new entry point readers may want to wait for a dip or a bounce near the rising 10-dma as an entry point. If ROK sees any profit taking the $80 level should offer some support.

- Suggested Positions -

Long 2013 Jan $85 call (ROK1319a85) entry $1.00*

*option entry price is an estimate since the option did not trade at the time our play was closed.

chart:

Entry on December 10 at $80.60
Average Daily Volume = 1.0 million
Listed on December 05, 2012


PUT Play Updates

Tiffany & Co - TIF - close: 58.09 change: +0.57

Stop Loss: 60.05
Target(s): 52.50
Current Option Gain/Loss: -19.1%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
12/15/12: Hmm... after three days of failing at resistance near $58.00 shares of TIF were suddenly showing strength on Friday morning. Shares closed at $58.09 so I would hardly call it a convincing breakout. Plus there is still likely overhead resistance at its 150-dma near $59.00 and then the $60.00 level. Yet I am not suggesting new positions at this time.

NOTE: TIF will begin trading ex-dividend on Dec. 18th. The dividend will be 32 cents.

Our target is $52.50. Although I want to caution you that the $55.00 level is potential support. The Point & Figure chart for TIF is bearish with a $51 target.

- Suggested Positions -

long Jan $55 PUT (TIF1319m55) entry $1.15

chart:

Entry on December 10 at $57.75
Average Daily Volume = 2.3 million
Listed on December 08, 2012


CLOSED BULLISH PLAYS

O'Reilly Automotive - ORLY - close: 89.48 change: -1.31

Stop Loss: 89.95
Target(s): 95.75
Current Option Gain/Loss: -86.8%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/15/12: ORLY has not been acting very healthy. After the failed rally on Wednesday at $95 and Thursday's follow through lower we decided on Thursday night that it would be best to close positions on Friday morning. ORLY gapped down at $90.52 and then broke support near $90 and its 200-dma.

- Suggested Positions -

DEC $95 call (ORLY1222L95) entry $1.90 exit $0.25 (-86.8%)

12/14/12 closed on Monday morning
12/13/12 prepare to exit at the open tomorrow!

chart:

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