Editor's Note:

In addition to tonight's new plays I would keep an eye on CAT, RIMM, and XEC.

CAT's upward momentum has stalled and shares are ripe for some profit taking. CAT should find some support in the $72-70 zone, which is where I would look for a bullish entry point. Nimble traders could buy puts under $76.00 to catch a short-term move.

RIMM has seen a sharp move higher following the breakout over resistance near $50.00. I suggest looking for a dip back toward $52-51 as a potential bullish entry point with a stop under $50.00.

XEC has been showing relative strength. Traders can put this one on their watch list. A dip back toward the 50-dma or the $71-70 zone could be a new bullish entry point. You need to be aware that earnings are due out on November 3rd.

- James


Volatility Index - VIX - close: 21.20 change: +0.32 stop: 17.45

Target(s): 24.90, 29.00
Key Support/Resistance Areas: 18.00, 21.00, 25.00, 30.00
Current Option Gain/Loss: +0.00%
Time Frame: Two or Three weeks
New Positions: Yes

Company Description:
The CBOE Volatility Index (VIX) is a key measure of market expectations of near-term volatility conveyed by S&P 500Ã’ stock index option prices. Since its introduction in 1993, VIX has been considered by many to be the world's premier barometer of investor sentiment and market volatility.With historical data back to 1990, the VIX Index reached its all-time intraday high of 89.53 on October 24, 2008. In the first half of 2009, CBOE VIX options had an average daily volume of 96,185 contracts (33,023 puts and 63,162 calls for a 0.52 put/call ratio) and period-end open interest of 1,764,113 options.

Why We Like It:

Stocks have been climbing for weeks on expectations the Federal Reserve will launch a new round of quantitative easing. Expectations are too high and odds are very strong that no matter what Ben Bernanke says on Wednesday that the market will see a sell-the-news reaction. Obviously a market sell-off will help push the VIX higher.

I am suggesting new bullish positions now but nimble traders could try and launch positions anywhere in the $19-23 zone. The key here is to make sure you have your bullish position open before the FOMC announcement on Wednesday afternoon. Personally I would want to do it on Monday morning but you could wait until Tuesday afternoon before the election results are out.

The VIX moves fast. I am suggesting our first target to take profits at 24.90. Our second target is 29.00. We'll use a relatively wide stop loss at 17.45. Keep in mind that VIX options do not expire on the normal expiration schedule.

Suggested Position(s)

-Take your pick-

BUY the November 22.50 calls (VIX1017K22.5, expires 11/17/2010) ask $1.30
BUY the November 25.00 calls (VIX1017K25, expires 11/17/2010) ask $0.75

BUY the December 25.00 calls (VIX1022L25, expires 12/22/2010) ask $2.45

Annotated Chart:

Entry on November 1st at $ xx.xx
Earnings Date --/--/--
Average Daily Volume = xxx million
Listed on October 30th, 2010


Millicom Intl. - MICC - close: 94.60 change: -0.13 stop: 98.25

Target(s): $90.25, and the 200-dma
Key Support/Resistance Areas: 98.00, 96.00, 92.00, 90.00
Current Gain/Loss: +0.00%
Time Frame: Three weeks
New Positions: Yes,

Company Description:
Millicom International Cellular S.A. is a global telecommunications group with mobile telephony operations in 14 countries in Asia, Latin America and Africa. It also operates cable and broadband businesses in five countries in Central America. The Group's mobile operations have a combined population under license of approximately 266 million people. (source: company press release or website)

Why We Like It:
The long-term trend for MICC is bullish but short-term the bulls have lost their focus. MICC has a bearish double top formed in the last six weeks and now shares are failing at the 50-dma in what almost looks like a bear flag pattern. I am suggesting we buy puts now to capture a move toward its long-term trendline. Then we can think about switching directions and buying calls.

I would open positions now. However, you could wait and try and time your entry point on a bounce near $96.00. There is some support near $92.00 but our first target is $90.25.

Suggested Position:
BUY the 2010 November $90 puts (MICC1020W90) ask $1.55 (expires in 3 weeks)

- or

BUY the 201 December $90 puts (MICC1018X90) ask $2.95

Daily Annotated Chart:

Weekly Annotated Chart:

Entry on November 1st at $ xx.xx
Earnings Date 02/01/11
Average Daily Volume = 490 thousand
Listed on October 30th, 2010

VMWare Inc - VMW - close: 76.46 change: -0.11 stop: 80.25

Target(s): 72.25, 68.50
Key Support/Resistance Areas: 80.00, 78.65, 75.00, 72.00, 200-dma
Current Gain/Loss: +0.00%
Time Frame: 3 to 4 weeks
New Positions: Yes

Company Description:
VMware delivers virtualization and cloud infrastructure solutions that enable IT organizations to energize businesses of all sizes. With the industry leading virtualization platform -- VMware vSphereâ„¢ -- customers rely on VMware to reduce capital and operating expenses, improve agility, ensure business continuity, strengthen security and go green. With 2009 revenues of $2 billion, more than 190,000 customers and 25,000 partners, VMware is the leader in virtualization which consistently ranks as a top priority among CIOs (source: company press release or website)

Why We Like It:
VMW has seen an incredible two-year fun but it appears that the upward momentum has reversed. The stock started selling off days ahead of its earnings report. When VMW reported on Oct. 18th shares gapped down again. Now traders are selling into strength and VMW has a bearish trend of lower highs and lower lows. I do think VMW could be a bullish candidate again but it might take a correction toward $70 or its 200-dma before shares find any real support. In the meantime the short-term trend is down.

I am suggesting bearish positions now. We'll use a stop at $80.25 but more conservative traders might be able to get away with a stop close to $79.00. Our first target is $72.25. Our secondary target is $68.50 (or the 200-dma, whichever VMW its first).

Suggested Position:

BUY the November $75.00 put (VMW1020W75) ask $2.35 (expires in 3 weeks)

- or -

BUY the December $70.00 put (VMW1018X70) ask $2.10

Annotated Chart:

Entry on November 1st at $ xx.xx
Earnings Date 01/25/11
Average Daily Volume = 4.5 million
Listed on October 30th, 2010