Editor's Note:
I am filling in for Scott this weekend. - James

Current Portfolio:

CALL Play Updates

Cameron International - CAM - close 36.84 change -0.70 stop 35.45

Target(s): 40.50, 42.00, 43.95
Key Support/Resistance Areas: 45.00, 42.50, 41.00, 38.75, 36.00
Option Current Gain/Loss: -50.0%
Time Frame: Several weeks
New Positions: maybe

8/21 I don't see any changes from my Thursday comments. The stock is down three days in a row and down there weeks in a row. Short-term the trend is down. Wait and watch for a bounce from support near $36.00 before considering new bullish positions. If crude oil continues to fall then CAM will struggle.

8/19 Worries about the economy slowing down too fast (which means less demand for oil) pushed oil prices lower. A bounce in the dollar didn't help. Meanwhile big names like BP and RIG were slipping lower as the Congress held a meeting with scientists over the clean up for the oil spill in the Gulf of Mexico. The OIX oil index slipped to a new relative low while the OSX oil services index fell toward Monday's low. Shares of CAM held up pretty well and are still out performing much of the sector. Unfortunately the rally is in jeopardy if the market continues to slip. Readers may want to wait for another bounce from support near $36.00 befoer considering new positions.

8/14: CAM was caught in the middle of the drama of the Gulf of Mexico oil spill. The stock has been beaten down because they built the blow out preventer (BOP) on the Horizon well. However, the BOP was heavily modified by RIG/BP so they don't really have any exposure to the damages. CAM is world's largest seller and manufacturer of BOP's so any new rules from the government means a lot of new business for Cameron. And the company recently reported over a $1 billion in new orders. I suggest we capitalize on the gaining momentum and initiate long positions now. Our stop $35.45 which is below Thursday's low, and the 50-day SMA. At a minimum I'm looking for CAM to retest its recent swing high and possibly charge up to its 52-week highs if the broader market cooperates.

Current Position: Long September $40.00 CALL, entry was $0.95

Annotated Chart:

Entry on August 16, 2010
Earnings Date 11/3/2010 (unconfirmed)
Average Daily Volume: 4.6 million
Listed on August 14, 2010

FMC Technologies, Inc - FTI - close 61.63 change -0.66 stop 58.25

Target(s): 65.25 (hit), 67.00, 68.75
Key Support/Resistance Areas: 69.00, 65.50, 62.40, 59.00
Option Current Gain/Loss: -22.7%
Time Frame: Several weeks
New Positions: No

8/21: It is starting to look like FTI is forming a bearish double top under the $65-66 level. More conservative traders may want to raise their stops toward $59.00 or $59.50. Personally I would keep my stop under the 200-dma near $59.23 but if the S&P 500 continues to sink then FTI will probably hit our stop!

8/19: During the session FTI followed the market lower and posted a -2.2% decline and closed under its simple 30-dma. Overall nothing to exciting. I am somewhat concerned with the failed rally on Tuesday near resistance in the $65 area. However, FTI should still have support near $60 and its 200-dma. After the closing bell tonight FTI announced it had received a $36 million deal with Total Exploration & Production Angola.

8/14: This is another play on the Gulf oil spill as FTI stands to benefit from new regulations in underwater robotics. The company reported solid earnings results in July and this past week's dip is a buying opportunity. The stock is maintaining an upward trend line while the broader market has not, which is a sign of overall relative strength. I believe FTI should easily retest its recent swing high which is just above our first target of $65.25. Our more aggressive target is $67.00 but if the broader market is strong FTI could even make a run at its YTD highs. Our stop is $58.25 which is below the upward trend line and the 200-day and 50-day SMA's. I see some potential in this trade and am going to push the suggested option out to October, but that doesn't mean we can't take quick profits should FTI break higher soon.

Current Position: Long October $70.00 CALL, entry was at $1.10

Annotated Chart:

Entry on August 16, 2010
Earnings 10/27/2010 (unconfirmed)
Average Daily Volume: 1.5 million
Listed on August 14, 2010

Human Genome Sciences - HGSI - close 27.20 change +0.61 stop 24.65

Target(s): 27.20 (hit), 27.70, 28.20, 29.20
Key Support/Resistance Areas: 29.80, 28.24, 27.80, 26.80, 25.00
Option Current Gain/Loss: +21%
Time Frame: Several weeks
New Positions: Yes

8/21: HGSI outperformed on Friday with a +2.2% gain thanks to a rumor that GlaxoSmithKline (GSK) might buy HGSI. With all the merger news last week we were bound to see some rumors resurface. The trend off the July lows is still up but HGSI is facing tough resistance near $28 and its 200-dma. If you're looking for a new entry point I would wait for another bounce from $25.00 or a close over $28.00.

8/19: HGSI displayed some relative strength with a minor gain. The stock actually gapped open higher this morning but gave back most of the rally as the wider market declined. The moved was fueled by positive news on one of its Lupus drug treatments. Here is an excerpt from their press release today:

Human Genome Sciences, Inc. and GlaxoSmithKline PLC (GSK) today announced that the U.S. Food and Drug Administration (FDA) has granted a priority review designation to BENLYSTA® (belimumab) as a potential treatment for systemic lupus erythematosus (SLE). A priority review designation is granted to drugs that, if approved, offer major advances in treatment or provide a treatment where no adequate therapy exists.

I am a little bit concerned that the rally stalled under resistance near $28.00 and its 200-dma but then again the market wasn't very cooperative either. If you're looking for a new position consider waiting for another bounce from the $25 area.

8/18: HGSI was up big early in the day but gave back most of the gains late in the day. The candlestick printed today does not look pretty but the bullish case for HGSI remains in tact. Today's high was just about the same as on 7/26 which created a head and shoulders pattern of sorts. But I think the selling will be short lived and expect HGSI to move back up towards its recent highs, and possibly print new ones. I've added $27.70 as a target, which is just below the 200-day SMA, and suggest readers either take profits at this level or tighten stops to protect them. A move to this level should produce a +50% gain.

Current Position: Long September $28.00 CALL, entry was at $0.90

Annotated Chart:

Entry on August 13, 2010
Earnings Date N/A (unconfirmed)
Average Daily Volume: 2.9 million
Listed on August 12, 2010

Monsanto Co. - MON - close 57.73 change +0.56 stop 55.75

Target(s): 63.75, 65.90,
Key Support/Resistance Areas: 66.00, 62.30, 58.50, 56.00
Option Current Gain/Loss: -12.1%
Time Frame: 1 to 3 weeks
New Positions: Maybe, see details below

8/21: As of Thursday it looked like MON was in trouble but shares managed a +0.9% rally and outperformed the rest of the market on Friday thanks to some news out of Brazil. I remain cautious on this name, especially given the weakness in the broader market. Here is an excerpt from MON's press release on Friday morning:

Monsanto Company confirmed that at yesterday's National Technical Biosafety Committee (CTNBio) meeting in Brazil, the committee approved Monsanto's Bt Roundup Ready 2 Yield® soybean product for planting in Brazil. This is an important step toward the Brazilian commercialization of the first biotechnology trait Monsanto has developed specifically for a non-U.S. market.

8/19: Fertilizer names have been popular this week with the potential BHP/POT merger brewing. Unfortunately, traders were in the mood to take profits today. shares of MON gave up 3% and closed near its 30 and 100-dma. I am cautious on this name today. Some of the short-term indicators make me nervous. If you are looking for a new bullish positions I would suggest waiting for a bounce from the $56.00 level first.

8/18: The agriculture sector is heating up and gaining momentum. Farmers want and need to grow more food to keep up with demand, especially from emerging markets. Many potash companies have seen significant gains in recent weeks because potash levels need to be replenished in farmland soil. MON is a downstream play in this space as they provide the seeds and herbicides to actually grow the crops. I also believe this stock and sector can do well in a down market. Technically, MON has been beaten down but is now showing signs of life. The stock is forming a bull pennant above its 20-day and 100-day SMA's and a key pivot level for the stock dating all the back to early 2007. I suggest readers take advantage of the gaining momentum and initiate long positions now. I'm looking for MON to make a run up towards its 200-day SMA and prior support area near $66.00, both of which are above our immediate targets (which are +6% and +10% higher). Our initial stop will be $55.75.

Current Position: Long October $62.50 CALL, entry was at $1.65

Annotated Chart:

Entry on August 19, 2010
Earnings Date 10/6/2010 (unconfirmed)
Average Daily Volume: 7.2 million
Listed on August 18, 2010

SPDR Gold Trust - GLD - close 119.97 change -0.42 stop 115.95

Target(s): 121.25, 123.00, 125.00
Key Support/Resistance Areas: 123.00, 119.10, 118.00, 116.00
Option Current Gain/Loss: +17.7%
Time Frame: Several weeks
New Positions: No

8/21: Gold ran into some profit taking on Friday. That's not too surprising since the GLD looks a bit overbought with the rally from late July. Longer-term we're still bullish on this ETF but short-term I would wait for a pull back before considering new positions. The GLD should find short-term support near $118 and $116.

8/19: The worse than expected weekly jobless claims and the shockingly bad Philly Fed manufacturing number today continues to raise worries over the pace of the economic rebound. Investors are still seeking "safety" in bonds and gold although there are plenty of analysts who would not call gold a "safe haven" play. The shiny metal continues to see bullish momentum and the GLD eked out another gain. This ETF is arguably short-term overbought. I'm not suggesting new bullish positions at this time. Any correction should find some short-term support near $118.

8/18: GLD gapped lower this morning but was quickly bought the remainder of the day. GLD hasn't seen a close this high since June. I am looking for gold prices to move about $10 to $15 higher (about +1%) which should be enough in GLD to hit our first target of $121.25 (lowered 35 cents). This should give us a +50% gain and is an area where I suggest closing positions or tightening stops. This move could happen quick so I suggest planning your exit and sticking with it. I'm ready to get out of here with a nice gain.

Current Position: Long September $120.00 CALL, entry was at $1.80

Annotated Chart:

Entry on August 12, 2010
Earnings Date N/A (unconfirmed)
Average Daily Volume: 12.4 million
Listed on August 10, 2010

UnitedHealth Group Inc - UNH - close 31.61 change -0.18 stop 29.89

Target(s): 33.40, 34.25, 35.00
Key Support/Resistance Areas: 35.00, 34.40, 33.50, 31.50
Option Current Gain/Loss: -37.6%
Time Frame: 1 to 2 weeks
New Positions: Maybe

8/21: Shares of UNH bounced twice near $31.40 this week. While it might be tempting to consider bullish positions here I suspect we'll see a better entry point near $30.00. Be patient and wait for the correction to continue. Nimble traders can keep an eye on the 50-dma near $31.00 as possible support.

8/19: UNH underperformed the market today with a -2.3% decline but it fared better than the HMO index, which fell -2.6%. I am cautious when it comes to new entries. Wait for another bounce near its rising 200-dma near $31.20 or wait for a bounce near $30.00 before initiating new positions. Please note the new stop loss at $29.89 under the late July low.

8/16: UNH is a relative strength play in a defensive sector that should do well in the current market environment. Technically, UNH recently broke out of a key pivot level near $31.50 and has retraced some the gains by turning back to re-test the pivot from above (see dashed line on chart), which is where the stock bounced today. UNH is above all of its major moving averages and is maintaining an upward trend line from the 7/1 lows. I think UNH is poised to retest its recent swing highs and possibly move up towards the $35.00 area. I suggest we initiate long positions now. Our stop is below all of the major moving averages which should provide support on any weakness, and we have realistic targets to book a nice winning trade should UNH bounce from here.

Current Position: Long September $32.00 CALL, entry was at $1.25

Annotated Chart:

Entry on August 17, 2010
Earnings Date 10/19/2010 (unconfirmed)
Average Daily Volume: 8.5 million
Listed on August 16, 2010

PUT Play Updates

Apple, Inc - AAPL - close 249.64 change -0.24 stop 267.50

Target(s): 240.00, 233.00, 226.00
Key Support/Resistance Areas: 266, 258, 256, 246, 240, 231, 235
Time Frame: Several weeks

8/21: I don't see any changes from my Thursday comments. However, we will add a second entry point at $244.00. Now we have two entry points to buy puts - at a bounce near $257.00 or at a breakdown at $244.00. If AAPL hits $244.00 we'll adjust the stop loss down to $256.00.

8/19: I (James) am very tempted to open bearish put positions in AAPL right now. Long-term I'm bullish on the stock but shares have been building a topping/consolidation pattern for four months now. It's possible investors are worried that Google will be strong competition when it launches a tablet-PC to challenge the iPad later this year. Plus there is concern that the huge success with Google's Android phone means Verizon may not want Apple's iPhone as badly as it use to. Odds are good that AAPL's leverage in negotiating with Verizon may not be as strong since the Droid phones are outpacing iPhone sales. Aggressive traders will want to consider new bearish positions now although I'd consider a tighter stop loss (maybe just over $260). For the moment we'll keep the newsletter strategy unchanged with Scott's suggested entry point to buy puts at $257.00. 8/14: AAPL has been in a fuzzy cloud recently and I believe it looks vulnerable at these levels. Recent reports on smart phone market share point to the Android capturing 18% market share compared to Apple's 14%. Technically, AAPL had a daily and weekly close below its long term upward trend from its March 2009 lows for the first time this past week. I believe AAPL should test its 200-day SMA which is below our two most conservative targets. I also think this is a good hedge against some of our long positions in the model portfolio. I suggest we initiate short positions in AAPL on strength if it trades to $255 or on weakness at $245.95. This is a position that I suggest being quick to tighten stops and/or take profits.

UPDATED: An alternative strategy readers may consider on a short AAPL position is to buy a PUT spread. For example, buy the October $240 PUTS (current ask $5.05) and sell the October $210 PUTS (current ask $2.10) to finance the cost. This is a well defined risk strategy where your max loss is $293 (the amount you paid for the spread) and your max gain is $1,707 if AAPL closes at $210 at expiration.

Suggested Position: Buy October $230.00 PUT if AAPL trades to $257.00, current ask $5.65, estimated ask at entry $4.15

Annotated Chart:

Entry on August xx
Earnings: 10/21/10 (unconfirmed)
Average Daily Volume: 23 million
Listed on August 14, 2010

FASTENAL Co. - FAST - close: 48.01 change: +0.19 stop: 50.40

Target(s): 41.00,
Key Support/Resistance Areas: 50.00, 48-47, 200-dma, 40.00
Time Frame: 3 to 4 weeks

Why We Like It:
8/21: FAST dipped toward support near $47.00 and bounced. That's why we have the trigger to buy puts at $46.50. More conservative traders could use a trigger at $46.00 instead. More aggressive traders could try and time an entry point on a failed rally near $50.00. There are no changes from my Thursday comments.

8/19: Investors are growing more and more worried that the U.S. economy is slowing down too fast. A weaker economy or a double-dip would be bad news for a company that sells construction supplies. Even though FAST blew away the earnings estimates back in July the stock has continued to build on a pattern of lower highs. Shares are now testing support near $48-47 and will soon test the simple 200-dma near $46.75.

More aggressive traders may want to consider new bearish positions now. I am suggesting we use a trigger at $46.50. We'll start the play with a stop loss at $50.40. Our target is $41.00.

Suggested Position:
Buy the September $45 puts (current ask $0.65)

- or -

Buy the November $45 puts (current ask $2.10)

Annotated Chart:

Entry on August xxth at $ xx.xx
Earnings Date 10/12/10
Average Daily Volume = 839 thousand
Listed on August 19, 2010

NUCOR Corp. - NUE - close: 38.37 change: -0.17 stop: 40.55

Target(s): 35.25, 31.90
Key Support/Resistance Areas: 43.00, 40.30, 37.00, 35.00
Option Current Gain/Loss: -11.4%
Time Frame: 4 to 6 weeks

Why We Like It:
8/21: NUE gapped open lower at $38.29 (our entry point) and bounced from the $38.00 level intraday. I would still consider new positions at current levels or you can wait for another bounce toward $40 and its 50-dma. ,P> 8/19: After nearly a year of trading sideways in the $39-50 zone NUE has finally broken down. The oversold bounce has stalled near the $40 level and its descending 50-dma. The action today looks like another failed rally under resistance. I am suggesting we take advantage of this weakness with new put positions.

We'll start with a stop loss at $40.55. More aggressive traders may want to use a stop just over $41.00. Our first target is $35.25. Our longer-term target is $31.00 but honestly we may not be in the play that long. FYI: The Point & Figure chart is bearish and is forecasting a $26 target.

Current Position: Long October $35.00 PUT, entry was at $0.96
symbol: NUE1016V35

Annotated Chart:

Entry on August 20th at $ 38.29
Earnings Date 10/21/10
Average Daily Volume = 2.9 million
Listed on August 19, 2010

Occidental Petrol. - OXY - close: 75.06 change: -0.33 stop: 81.05

Target(s): 74.00, 71.50, 67.50
Key Support/Resistance Areas: 75-74.00, 70.00, 65.00
Current Gain/Loss: N/A
Time Frame: Several Weeks
New Positions: Yes, trigger at $77.50

8/21: There is no change from Thursday's update. Oil and the oil sector continue to look weak. Odds are growing that OXY will breakdown. We have two entry points. One possible entry is at $77.50. Another is at $73.50. If triggered at $73.50 we'll change the stop loss to $78.51. Plus we'll change the targets to $70.25 and $66 if triggered on the breakdown.

8/19: I am adjusting the strategy on this play. Instead of waiting for a bounce toward $77.50 (which still works as an entry point) I am adding a breakdown trigger to buy puts at $73.50. The recent low was $73.90 and so far traders have continued to buy OXY near support at $74.00. If we are triggered at $73.50 we'll move the stop loss down to $78.51. I'm adjusting our targets to $70.25 and $66.00 if triggered at $73.50.

We can keep the bounce trigger to buy puts at $77.50, if hit we'll use a stop loss at $81.05.

P.S. I've changed the suggested puts to November. 8/14: Hope is not a good strategy when you are in a position, but I suppose it's OK if you're not in yet. I sure hope OXY bounces to $77.50 so our trigger to enter short positions is reached. All we want is a bounce in the stock so we can exploit it. There is so much overhead congestion, moving averages, trend lines, etc. to keep this stock in check. I want to remove the lower trigger to enter for now. If OXY breaks down prior to bouncing the stock could reverse on us so I don't want to get trapped. I like the short set up on strength and suggest looking for a quick move down to the adjusted targets above. I will also add that OXY could bounce higher than $77.50. It really just depends on the strength in the oil sector and how far the broader market can bounce. A bounce much over $79.00 doesn't seem likely.

Suggested Position: Buy November $70.00 PUT, current ask $3.05.

Annotated Chart:

Entry on August XX
Earnings Date 10/21/10 (unconfirmed)
Average Daily Volume 4.4 million
Listed on August 7th, 2010

Procter & Gamble - PG - close: 59.98 change: -0.21 stop: 63.26

Target(s): 59.50 (hit), 58.05, 55.25
Key Support/Resistance Areas: 59.00, 61.00
Current Gain/Loss: -1%
Time Frame: 2 to 3 weeks
New Positions: Yes, see below

8/21: PG continues to bounce around the $59-61 trading range. There is no change from my Thursday comments. Readers can choose to buy puts near $61 or wait for a breakdown and confirmation of the trend with a drop under $59.00.

8/19: Shares of PG have been forming a top for over eight months now. If the stock breaks down under support near $59.00 it would forecast a drop toward $54.00. Readers can choose to open positions near $61-62 but I would prefer to see a breakdown under $59.00. Please note I have adjusted our exit targets to $58.05 and $55.25. FYI: If you launch new positions I would buy the Novembers.

8/14: Rallies in PG keep getting sold into. We have a nice gain in this position and it could turn into a big winner if PG breaks below $59.00 which is below our 2nd target. I'm inclined to hang on to this position to see if the selling begins, however, that probably means enduring a bounce this week. PG is also a defensive play so the decline in the stock may take a while. If we get down to $59.05 I suggest tightening stops too see if we can get more out of the trade. If we do get to this level we should have close to a +100% gain. That's hard to beat.

Current Position: Long September $57.50 PUT, entry was at $0.36

Annotated Chart:

Entry on August 10, 2010
Earnings Date 10/28/10 (unconfirmed)
Average Daily Volume 2.5 million
Listed on August 7th, 2010