Line two 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 form.
Meanwhile, in a small heavy saucepan, melt chocolate chips and shortening over low heat; stir until smooth. Dip candy into chocolate, coating all sides; place on prepared pans. Refrigerate until set. Store in an airtight container.