Current Portfolio:

CALL Play Updates

Cliffs Natural Resources - CLF - close: 70.00 change: +3.13 stop: 61.85

Target(s): 68.75, 70.75
Key Support/Resistance Areas: 71.25, 69.00, 65.00 62.00
Current Option Gain/Loss: Unopened
Time Frame: 1 to 2 weeks
New Positions: Yes

11/4: It's too bad our trigger to launch bullish positions in CLF was barely missed yesterday as CLF has surged nearly +7% off of those lows. Now the stock has run away from us and is already trading between the middle of our targets. Chasing an entry at these levels is a high risk proposition for a swing trade. I think a move back towards CLF's 20-day SMA and rising trend line provides the best entry point (between $64 and $66), however, this may be too shallow of a pullback. We'll keep the trigger at $64.50 for now and reassess market conditions after we see how the week closes.

11/3: CLF came within 20 cents of triggering our entry of $65.40 to launch bullish positions, however, the stock reversed and closed +$1.48 off of its lows. I do not recommend chasing CLF higher unless you are looking for a short intraday move. We simply need to see more price action after today's QE announcement by the FOMC, and this will most likely take a few days to resolve itself. We have seen several sharp post FOMC sell-offs recently, however, the difference behind this one is that the Fed announced billions of dollars of asset purchases in the coming months. Whether the full amount is already priced into the market is still up for debate.

After some thought I actually think we should lower the trigger to $64.50 and try to get a more a favorable entry point on a pullback. This is near CLF's primary uptrend line that began in early July and the 50-day SMA.

Trigger = $64.50

Suggested Position: Buy 2010 December $70.00 CALL

Entry on November XX
Earnings Date More than two months
Average Daily Volume = 4.3 million
Listed on November 1, 2010

Humana Inc. - HUM - close: 59.26 change: -0.31 stop: 49.75

Target(s): 57.50, 60.00
Key Support/Resistance Areas: 50.00, 51.00, 53.50, 55.00
Current Gain/Loss: Unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see entry point below

11/4: Surprisingly HUM lost -0.52% today despite the broader market strength. The healthcare sector is considered a defensive play and considering some of the runs these stocks have made I suppose some profit taking was expected. The bearish candle pattern I mentioned below is working. Let's get ready to buy the dip if HUM trades to $53.00.

11/3: HUM printed a bearish dark cloud cover candle pattern today which signals a decline is imminent and needs no confirmation. However, the comments below regarding the GOP gaining control in the House definitely throws a wrench in the pattern. I suggest we remain patient to see if HUM does in fact pullback and I agree with James that $53.80 to $54.00 is a logical entry point on a dip to find support and continue higher. The rising 50-day SMA is currently near $52.50 so we will keep the trigger at $53.00.

11/2 (James): Grrr! Talk about buyer's remorse. I regret not buying HUM when we listed it the first time. This stock continues to surge without us! The stock added another +3.3% to close at two-year highs after being upgraded this morning. Expectations for the Republicans to gain a majority in the House in today's elections was also boosting the healthcare stocks. We do not want to chase HUM and may end up dropping it as a candidate before the week is out. For now our trigger to buy calls remains at $53.00 although I'm starting to think a dip to $55 or $54 might work.

Suggested Position:

Trigger to buy calls at $53.00 <-- new trigger!

BUY the 2011 January $55 calls.

Entry on November xxth at $ xx.xx
Earnings Date 11/01/10 (confirmed)
Average Daily Volume = 2.1 million
Listed on October 16th, 2010

VimpelCom Ltd - VIP - close 15.81 change +0.37 stop 14.80

Target(s): 16.70, 17.35
Key Support/Resistance Areas: 17.50, 16.75, 16.05, 15.30, 20-day SMA
Current Gain/Loss: Unopened
Time Frame: 2 to 4 weeks
New Positions: Yes, see trigger

11/4: We were hoping for a dip to launch bullish positions in VIP, but the stock gapped higher today along with the broader market. Chasing the stock it at these levels is a higher risk play. At a minimum VIP should fill today's gap at $15.81, but I think it eventually trades to our trigger at $15.60 before going too much higher. Let's remain patient and we'll reassess conditions after this week's close.

11/3: VIP has broken out above a key long term pivot level near $15.30 on heavy volume. The stock looks poised to fill a gap from August that is about $1 higher from current levels. I would like to see the stock retrace some of todays's gains and suggest readers use a trigger of $15.60 to launch bullish positions. Our initial stop is $14.80 which is below the primary uptrend line and rising 20 and 50-day SMA's, which should provide support on dips. Our initial targets are +7% and +11% from current levels.

Suggested Position: Buy December $15.00 CALL if VIP trades to $15.60, estimated ask at entry $1.10

Entry on November XX
Earnings Date 11/24/2010 (unconfirmed)
Average Daily Volume: 3.5 million
Listed on November 3, 2010

Volatility Index - VIX - close: 19.56 change: -2.01 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: -50%
Time Frame: Two or Three weeks
New Positions: Yes


11/4: The VIX continues to peel back but seems to have found support at $18.00, which is where it bounced to close +3% off of its lows. The upward channel mentioned yesterday has been broken. Tomorrow's close will be telling and we will reassess the play in this weekend's updates.

11/3: Ouch! After a quick spike higher following the QE announcement by the FOMC, volatility collapsed. Our calls are hanging tough considering the -9% drop in the VIX. In my opinion, today's price action looks like it could have been a capitulation event in volatility. I suggest we remain patient and not panic out of the position. Since 10/13 VIX has been trading in an upward channel of higher highs and higher lows, and now it finds itself at the bottom of the channel. Let's see what happens over the next few days so we can get a better sense of today's VIX beating.

11/2 (James): Tomorrow is the big day. I expect stocks (and the VIX) to drift sideways in a very narrow range tomorrow until the FOMC announcement in the 2:00-2:15 p.m. time frame. That's when the fireworks should start. If you want to be in this trade then open positions ahead of the announcement.

Current Position: Long 2010 December 25.00 calls (VIX1022L25), entry was at $2.25

Entry on November 1, 2010
Earnings Date N/A --/--/--
Average Daily Volume = xxx million
Listed on October 30th, 2010

PUT Play Updates

Millicom Intl. - MICC - close: 96.97 change: +0.43 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: -22.5%
Time Frame: Three weeks
New Positions: Yes

11/4: MICC gapped higher this morning and it was all down hill from there. The stock immediately collapsed to fill the gap and then bounced a bit into the close for small gain on the day. MICC clearly underperformed the broader market and should head lower in a hurry if we get a broader market correction. Our stop is above todays high so trying short positions here with a tight stop is a good set-up if you think the market heads lower before higher.

11/3: MICC is consolidating under its 50-day SMA and declining 20-day SMA (both at $96.50). There is resitance right here at current levels and this is a logical spot for the stock to turn lower and make a lower low. The 100-day SMA is just under $93.00 which may provide support on weakness. I like new positions to play for a pullback but we are most likely going to need help from the broader market.

11/2 (James): MICC is providing a potential entry point here. Over the weekend I suggested that readers may want to wait for a bounce toward $96.00 and MICC delivered that bounce today. Shares are also testing overhead resistance near their 50-dma. Aside from the new entry point I don't see any changes from our prior comments.

Current Position: Long December 2010 $90 puts (MICC1018X90), entry was at $2.45

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

PNC Financial - PNC - close 55.93 change +1.87 stop NONE

Target(s): 53.00(hit), 52.10, 51.05 (hit), 50.35
Key Support/Resistance Areas: 54.50, 53.50, 50.50, 49.50, 48.75, 47.00
Current Gain/Loss: -93%
Time Frame: 1 to 2 weeks
New Positions: Neutral

11/3 & 11/4: The break lower is not happening, at least not yet. Our thought process in PNC remains the same, which is to take advantage of more meaningful market correction and salvage 20 to 40 cents of our option premium. We have come close the past few days but the stock has once again been saved with support at its 50-day SMA. Throw in QE from the Fed, which appears to be an effort to steepen the yield curve (which will help bank earnings), and this trade could be over. PNC has traded in a downward channel over the past week and a half but looks like it is on the verge on breaking higher, however, the broader market direction will most likely determine PNC's immediate fate. I would continue to use weakness to exit positions. The comments below remain valid.

11/2 (James): Moody's issued some bearish comments on the banks this morning, which depressed the financial sector. The banks were the worst performers on Tuesday. PNC followed the group lower with a -0.5% decline. I am almost tempted to launch new positions here but readers may want to wait for a move under $52.50 first.

11/1: PNC lost -1.35% today and printed a bearish engulfing candlestick. However, the stock is finding support at its 20 and 50-day SMA's. We have three weeks for PNC to break down and are playing for a move back towards the recent lows. We are most likely going to take a loss on this trade but if we can gain another 20 to 30 cents in premium I suggest exiting the position.

Current Position: Long November $48.00 PUT, entry was at $1.26

Entry on September 30, 2010
Earnings: 10/21/2010 (unconfirmed)
Average Daily Volume: 5 million
Listed on September 29, 2010


Genco Shipping - GNK - close 16.41 change -0.18 stop 15.50

Target(s): 17.00 (hit), 17.35
Key Support/Resistance Areas: 18.25, 17.75, 16.90, 16.25, 15.75
Current Option Gain/Loss: -37.5%
Time Frame: 1 to 3 weeks
New Positions: No

11/4: Per last night's updates we closed GNK on strength this morning. This is a disappointing loss but the right move to make considering options expire in two weeks.

11/3: GNK reported earnings after the bell today of 99 cents per share compared to estimates of 96 cents. Revenues also beat estmates and the CEO made positive comments. We'll have to see how this translates into trading tomorrow but I suggest using strength to close positions or tighten stops to protect capital. We need to be looking for an exit (even if it is a loss) to prevent further time decay as our options expire in November.

11/2 (James): GNK still acts like it wants to trade higher but I wonder what it's waiting for. The market's major indices are hitting new five-month highs and GNK is still inching along. I am not suggesting new bullish positions in this stock. More conservative traders may want to strongly consider exiting positions ahead of the FOMC announcement tomorrow afternoon!

Closed Position: Long November $17.00 CALL at $0.50, entry was at $0.80

Note: Readers who want to give this more time to work may want to consider buying the JAN 2011 $17.50 CALLS

Annotated chart:

Entry on October 12, 2010
Earnings 11/3/2010 (unconfirmed)
Average Daily Volume: 1.2 million
Listed on October 11, 2010


Fastenal Co. - FAST - close: 53.75 change: +0.53 stop: 53.40

Target(s): 51.20 (hit), 50.25, 49.65, 48.25, maybe lower
Key Support/Resistance Areas: 55.00, 52.00, 50.00, 48,00,
Final Option Gain/Loss: -75%
Time Frame: 3 to 4 weeks
New Positions: Closed

11/4: Today's strength got us and our stop was hit in FAST. Our first target was hit last week for a small gain but we kept the position open and paid for it. If readers still have positions I would use weakness as an opportunity to close positions.

11/3: FAST was weak early and down nearly -2%, but the stock surged late in the day to close barely in the green. My comments haven't changed from James' below, except that I would add to be looking to close positions on weakness and salvage the remaining premium in our options positions.

11/2 (James): Homebuilders were some of the best performers today with the DJUSHB index up +4.2%. I think some of the builder's strength rubbed off on FAST and the stock gained +2.5% on no news. On a very short-term basis today's close over its 10, 20, and 30-dma is bullish. If I wasn't expecting a market sell-off in the next 48 hours I would consider an early exit right here and now! However, since we are looking for a market decline soon we'll stick it out but readers may want to adjust their stops. Currently our stop is at $53.40 and it wouldn't take much for FAST to stop us out tomorrow. No new positions at this time.

Closed Position: Long November $50.00 PUT @ $0.25, entry was at $1.00

Annotated chart:

Entry on October 18, 2010
Earnings Date 10/12/10
Average Daily Volume = 1.0 million
Listed on October 16, 2010

Illinois Tool Works - ITW - close 47.89 change +1.58 stop 47.83

Target(s): 44.95, 44.15, 43.50
Key Support/Resistance Areas: 47.75, 46.10, 45.50, 44.60, 44.00, 43.00
Final Gain/Loss: -54.16%
Time Frame: 2 to 3 weeks
New Positions: Closed

11/4: ITW broke out of its bear flag and surged higher today, hitting our stop along the way. We are flat the positions for a dissapointing loss. There is a big gap to fill from 10/19 so I would be very cautious holding short positions, especially if the market continues higher prior to correcting.

11/3: ITW has been bouncing around between $45.60 and $47.70 for the past week. We are looking for a break but are going to need some help from the broader mmarket. The comments below all remain valid.

11/2 (James): ITW is still trying to bounce higher and managed a +0.5% gain today. I would keep an eye on the $47 level and the 20-dma (47.40) and 30-dma (47.25) as potential overhead resistance. A failed rally near these levels could be a new entry point.

Closed Position: Long December $45.00 PUT at $0.55, entry was at $1.20

Annotated chart:

Entry on October 27, 2010
Earnings: More than two months (unconfirmed)
Average Daily Volume: 4.5 million
Listed on October 26, 2010

Mechel OAO - MTL - close 25.27 change +1.68 stop 24.60

Target(s): 22.30, 21.25, 20.25
Key Support/Resistance Areas: 24.25, 24.00, 23.60
Final Gain/Loss: -42.3%
Time Frame: 1 to 3 weeks
New Positions: Closed

11/4: Yesterday's failed rally at MTL's 20 and 50-day SMA's proved to be a head fake. The stock ripped +7% higher today and through our stop so we are flat the position for a loss. There is resistance at $25.50 and if MTL breaks through this level it could easily run another $1 higher.

11/3: The bounce in MTL looks like it has failed at its 20-day SMA as the stock lost -1.30% today. However, MTL found support at its 200-day SMA, which is also near the top of the prior congestion level from last week. If MTL breaks below today's low of $23.31 I anticipate a retest of the 10/22 lows.

11/2 (James): We need to be nimble here. The $23.50-24.25 zone should be overhead resistance for MTL. The stock has managed to rally past $23.50 and its 200-dma and today saw shares challenge its 50-dma and $24.25 area. This could be a new bearish entry point but I'd like to see the stock roll over first!

Closed Position: Long December $23.00 PUT at $0.75, entry was at $1.30

Annotated chart:

Entry on October 30, 2010
Earnings Date: More than two months (unconfirmed)
Average Daily Volume: 2.1 million
Listed on October 27, 2010

VMWare Inc - VMW - close: 77.28 change: -1.46 stop: 80.25

Target(s): 72.25, 68.50
Key Support/Resistance Areas: 80.00, 79.00, 75.00, 72.00, 200-dma
Final Gain/Loss: -43.2%
Time Frame: 3 to 4 weeks
New Positions: Closed

11/4: This one is tough to take. VMW surged higher this morning, hit our stop, and then collapsed to close -1.85% lower on the day. Nonetheless, we are flat for a disappointing loss. If readers still have open positions they are near breakeven. Look for weakness to book a profitable trade.

11/3: VMW was weak again this morning but gained +1.39% on the day, and our positions took a hit. The stock gained about +$2 off of its lows today and finds itself at near $79.00 resistance, which is last week's highs. VMW is forming a symmetrical triangle near the bottom of its trading range from the past month. It looks like a bearish pennant to me but readers should use caution and may want to consider tighter stops. We are most likely going to need help from a broader market correction for this to be a profitable trade, and this is certainly still a good possibility.

11/2 (James): So far so good. VMW has seen a little bit of a bounce but it's still trading inside the trend of lower highs. I would still consider new positions at current levels.

Closed Position: Long 2010 December $70.00 put (VMW1018X70) at $1.05, entry was at $1.85

Annotated chart:

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