Editor's Note:

The global markets shuddered and quaked on Friday morning thanks to the lack of progress in Washington. Fortunately the selling really wasn't that bad but it may not be over yet.

We did see our CELG trade get stopped out.

FYI: The market is only open half a day on Monday (closes at 1:00 p.m. ET) and the U.S. markets are closed on Tuesday for the Christmas holiday. We will not be publishing any updates on Monday or Tuesday.

From our family to yours, we wish you a Merry Christmas. See you on Wednesday, December 26th.

Current Portfolio:


CALL Play Updates

Affiliated Managers Group - AMG - close: 131.38 change: -0.92

Stop Loss: 128.95
Target(s): 139.00
Current Option Gain/Loss: +61.9%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
12/22/12: I checked three different quote feeds and they all said that the intraday low on AMG was $129.78. That means our new trade has not been stopped out. Shares gapped opened lower this morning with the market's widespread weakness, spiked lower and then recovered. The option gapped down significantly providing a much better entry point. The stock's recovery limited weakness to a -0.69% loss. If both the S&P 500 and AMG opened positive on Monday I would still consider new positions here. Due to the gap down, we got a better entry point so I am adjusting our stop loss to $128.95. FYI: The Point & Figure chart for AMG is bullish with a $147 target.

- Suggested *SMALL* Positions -

Long March $135 call (AMG1316c135) entry $2.10

12/22/12 adjust stop loss to $128.95
12/21/12 trade opened on gap down at $130.54

chart:

Entry on December 21 at $13.54
Average Daily Volume = 271 thousand
Listed on December 20, 2012


American Tower Corp. - AMT - close: 76.77 change: -0.49

Stop Loss: 75.40
Target(s): 79.85 & 82.00
Current Option Gain/Loss: -23.0%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/22/12: The stock market's decline on Friday morning seemed to short circuit AMT's rally. Fortunately traders bought the dip and pared its losses. Readers may want to look for a new rally above $77.00 before initiating positions.

We have two targets. Our first target to take profits is at $79.85. Our second, more aggressive target is $82.00 but AMT will have to rally past potential resistance at $80.00 first. FYI: The Point & Figure chart for AMT is bullish with a triple-top breakout buy signal and an $88 target.

- Suggested Positions -

Long 2013 Jan $77.50 call (AMT1319a77.5) entry $1.30*

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

chart:

Entry on December 18 at $77.05
Average Daily Volume = 1.7 million
Listed on December 15, 2012


Abercombie & Fitch - ANF - close: 47.37 change: -1.18

Stop Loss: 45.85
Target(s): 49.85
Current Option Gain/Loss: -28.4%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/22/12: Hmm... ANF has broken down from its inside day pattern. That is short-term bearish but it looks like traders were buying the dip near its rising 10-dma, which has been support in recent weeks. I wouldn't panic yet.

- Suggested Positions -

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

12/18/12 new stop loss @ 45.85

chart:

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


Canadian Pacific Railway - CP - close: 101.72 change: -0.91

Stop Loss: 99.40
Target(s): 109.00
Current Option Gain/Loss: - 28.0%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/22/12: Like many stocks on Friday shares of CP gapped open lower. The stock spent the rest of the session consolidating sideways. Readers can choose to look for a dip back into the $101-100 zone as an entry point or look for a new relative high.

Our plan was to use small positions to limit our risk.

NOTE: CP will begin trading ex-dividend on Dec. 26, 2012. The quarterly cash dividend should be about 35.5 cents.

- Suggested *SMALL* Positions -

Long Jan $105 call (CP1319a105) entry $1.25

12/21/12 trade opened on gap down at $101.46

chart:

Entry on December 21 at $101.46
Average Daily Volume = 961 thousand
Listed on December 20, 2012


Energizer Holdings - ENR - close: 80.71 change: -0.40

Stop Loss: 79.40
Target(s): 84.50
Current Option Gain/Loss: -61.1%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/22/12: ENR fell toward its recent lows in the $79.60 area but shares managed to trim its losses and close back above round-number support/resistance at the $80.00 mark. The simple 10-dma has become new short-term resistance so readers may want to wait for a rally past this moving average before launching new positions.

- 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: 144.25 change: -2.04

Stop Loss: 141.85
Target(s): 148.50
Current Option Gain/Loss: + 1.8%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/22/12: Traders were in a mood to sell stocks on Friday morning. Given FLS' gains over the last several weeks the profit taking could have been a lot worse. Fortunately traders bought the dip near FLS' rising 10-dma. I am not suggesting new positions at current levels. FYI: The Point & Figure chart for FLS is bullish with a $153 target.

NOTE: FLS should begin trading ex-dividend on Dec. 27th. The quarterly cash dividend should be about 36 cents.

- Suggested Positions -

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

12/20/12 new stop loss @ 141.85
12/18/12 new stop loss @ 139.95

chart:

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


Green Mountain Coffee Roasters - GMCR - close: 41.11 change: -1.48

Stop Loss: 39.20
Target(s): 47.50
Current Option Gain/Loss: -19.4%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/22/12: After three days of strong gains GMCR hit some profit taking on Friday. The stock gapped open lower and closed with a -3.4% decline. Shares could see a dip toward likely short-term support at the 10-dma or the $40.00 level. Readers may want to wait for a bounce before considering new bullish positions.

Earlier Comments:
GMCR could see a short squeeze. The most recent data listed short interest at 43% of GMCR's 120 million share float. The $45.00 could be round-number resistance but we will target a move to $47.50. GMCR can be a very volatile stock. I do consider this a more aggressive, higher-risk trade. Let's keep our position size small to limit our risk.

(small positions) - Suggested Positions -

Long 2013 Jan $45 call (GMCR1319a45) entry $1.18

chart:

Entry on December 19 at $41.35
Average Daily Volume = 8.3 million
Listed on December 18, 2012


iShares Russell 2000 - IWM - close: 84.19 change: -0.35

Stop Loss: 81.95
Target(s): 86.00
Current Option Gain/Loss: +46.1%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/22/12: The IWM gapped open lower but managed a pretty decent rebound off the $83.00 level (near the 10-dma). The big bounce was encouraging. Yet I am not suggesting new positions at this time.

- Suggested Positions -

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

12/18/12 new stop loss @ 81.95
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: 114.11 change: -1.55

Stop Loss: 111.40
Target(s): 119.00
Current Option Gain/Loss: +19.3%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/22/12: LNKD held up pretty well. Shares briefly traded beneath their simple 10-dma but managed to recover by day's end. The pullback may not be over yet. LNKD is facing a couple of levels of overhead resistance. I am not suggesting new positions at current levels.

Earlier Comments:
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

12/18/12 new stop loss @ 111.40
12/17/12 adjust exit target to $119.00
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: 75.71 change: -1.44

Stop Loss: 73.75
Target(s): 79.85
Current Option Gain/Loss: + 9.0%
Time Frame: 3 to 5 weeks
New Positions: see below

Comments:
12/22/12: No surprise but LULU gapped open lower on Friday thanks to the market's big decline that morning. Shares of LULU are still holding above what should be short-term support near $75.00 and its 10-dma. More conservative traders might want to raise their stop loss. I am not suggesting new positions at this time.

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

12/20/12 new stop loss @ 73.75
12/17/12 new stop loss @ 72.95, adjust exit to $79.85

chart:

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


Monsanto Co. - MON - close: 92.55 change: +0.01

Stop Loss: 89.95
Target(s): 99.50
Current Option Gain/Loss: Unopened
Time Frame: exit prior to Jan 8th.
New Positions: Yes, see below

Comments:
12/22/12: MON managed to weather the market's storm on Friday pretty well. The stock managed to close virtually unchanged and almost hit new highs intraday. I don't see any changes from my prior comments.

The Nov. 29th high was $93.00. I suspect that if MON can breakout we could see it run to round-number resistance at the $100.00 mark. I am suggesting we use small positions and buy calls when MON hits $93.05. If triggered our target is $99.50.

NOTE: This is a short-term trade. We do not want to hold over the January 8th earnings report.

Trigger @ $93.05 *Small Positions*

- Suggested Positions -

buy the 2013 Jan $95 call (MON1319a95) current ask $1.19

chart:

Entry on December xx at $ xx.xx
Average Daily Volume = 2.2 million
Listed on December 19, 2012


Netflix, Inc. - NFLX - close: 91.34 change: -2.16

Stop Loss: 89.45
Target(s): 99.75
Current Option Gain/Loss: -48.4%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/22/12: NFLX continues to disappoint. I warned readers about the bearish reversal pattern created on Wednesday. NFLX has continued to pullback. I suspect Friday's -2.3% decline was exacerbated by the market's widespread weakness. A pullback to the simple 10-dma is pretty normal for many stocks in a bullish up trend. The selling in NFLX stalled near its 10-dma. The short-term trend is down. The larger trend is still up. NFLX should have support at $90.00. I am not suggesting new positions at this time.

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


Vulcan Materials - VMC - close: 52.26 change: -0.99

Stop Loss: 50.85
Target(s): 58.50
Current Option Gain/Loss: -47.8%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/22/12: VMC hit some profit taking on Friday with a -1.8% decline. The selling did seem to pause when VMC hit its 20-dma. Yet the pullback may not be over yet. I am not suggesting new positions at current levels. Look for the next level of support at the $51.00 mark.

Earlier Comments:
Our target is $58.50. The $60.00 level looks like resistance. FYI: The Point & Figure chart for VMC is bullish with a long-term $70 target.

- Suggested Positions -

Long 2013 Jan $55 call (VMC1319a55) entry $1.15

chart:

Entry on December 18 at $53.00
Average Daily Volume = 870 thousand
Listed on December 17, 2012


Watson Pharma. - WPI - close: 90.85 change: +0.65

Stop Loss: 88.20
Target(s): 94.85
Current Option Gain/Loss: + 0.0%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/22/12: WPI was showing relative strength on Friday. Traders quickly bought the dip on Friday morning near $89.00, near its simple 10-dma, and the stock reversed higher. Shares managed to breakout and close at new all-time, record highs. This move looks like a new bullish entry point to buy calls.

- Suggested Positions -

Long 2013 Jan $90 call (WPI1319a90) entry $2.00*
*option entry price is an estimate since the option did not trade at the time our play was opened.

chart:

Entry on December 19 at $90.50
Average Daily Volume = 730 thousand
Listed on December 18, 2012


PUT Play Updates

Currently we do not have any active put trades.


CLOSED BULLISH PLAYS

Celgene Corp. - CELG - close: 79.70 change: -0.32

Stop Loss: 78.45
Target(s): 84.50 & 87.50
Current Option Gain/Loss: - 65.5%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/22/12: The stock market's sharp decline on Friday was too much for shares of CELG. The stock spiked lower and hit our stop loss at $78.45 before trimming its losses. I would remain cautious on CELG with the stock underneath the $81 level.

- Suggested Positions -

2013 Jan $82.50 call (CELG1319a82.5) entry $2.03 exit $0.70 (-65.5%)

12/21/12 stopped out at $78.45
12/18/12 new stop loss @ 78.45
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