Line 2 baking sheets with waxed paper; grease the paper and set aside.

In a large heavy saucepan, combine the caramels and water; cook and stir over low heat until smooth.

Stir in pecans and cereal until coated.

Drop by teaspoonfuls onto prepared pans.

Refrigerate for 10 minutes or until firm.

Meanwhile, in a microwave, melt chocolate chips and shortening; stir until smooth.

Dip candy into chocolate, coating all sides; allow excess to drip off.

Place on prepared pans.

Refrigerate until set.

Store in an airtight container.