Flotek Industries Inc. - FTK - close: 10.55

Company Info

Why We Like It:
FTK is in the basic materials sector but the company actually serves the oil services industry and oil services are outperforming again. Shares of FTK have been on a tear. This past week saw the stock breakout past major resistance in the $9.50-10.00 zone and close at new two-year highs.

I am suggesting we buy calls now! However, this is an aggressive entry point. Not only is FTK short-term overbought here but the company is due to report earnings in early August and we can't find a confirmed earnings date yet. Therefore we need to keep our position size very small. I would only buy 1/4 or 1/2 of your normal trade size here. Personally, I would prefer to launch new positions on a bounce from the $9.50 area so save some cash in reserve and if we see the pull back near $9.50 we can add to positions.

Why buy now if we'd rather buy a dip near $9.50? Well FTK has above average short interest (about 12%) and a very small float (39 million shares) so the short squeeze could keep going. Our long-term target is $14.75. I'm suggesting a stop loss at $8.90.

Start Small

- Suggested Positions -
Jul 25, 2011 - entry price on FTK @ --.--, option @ -.--
symbol: FTK1217C10 2012 MAR $10 call - current bid/ask $ 2.25/ 2.50

- or -

Jul 25, 2011 - entry price on FTK @ --.--, option @ -.--
symbol: FTK1217C12.5 2012 MAR $12.50 call - current bid/ask $ 1.45/ 1.60

Chart of FTK:

Current Target: $14.75
Current Stop loss: 8.90
Play Entered on: 07/25/11
Originally listed in the New Plays 07/23/11


The Coca-Cola Co. - KO - close: 69.73

Company Info

Why We Like It:
KO is one of the largest beverage companies in the world and arguably the best known brand on the globe. The company appears to be winning the cola wars. Management just reported earnings a couple of days ago. KO beat estimates by a penny with revenues surging almost +47%. Investors did not seem spooked by higher commodity costs in the earnings report. Now the Point & Figure chart is forecasting a long-term target of $95.

The earnings news pushed KO past resistance near $69 and the stock closed at new ten-year highs. Shares don't move super fast and the $70 level could be round-number, psychological resistance so I am suggesting we start by keeping our positions small. Only buy 1/4 or 1/2 of your normal trade size. Another reason I want to keep our position size small is that shares could be forming a very long-term bear wedge pattern (illustrated on the chart below).

It's unlikely that KO is going to run away without us. I would launch positions now. We'll start with a wide (aggressive) stop loss at $64.90, near the simple 200-dma. Our long-term targets are $79 and $84.

I see this as an 18-month investment. We will list the 2012 January calls but don't expect KO to hit our targets by then.

Start Small

- Suggested Positions -
Jul 25, 2011 - entry price on KO @ --.--, option @ -.--
symbol: KO1221A70 2012 JAN $70 call - current bid/ask $ 2.47/ 2.51

- or -

Jul 25, 2011 - entry price on KO @ --.--, option @ -.--
symbol: KO1319A75 2013 JAN $75 call - current bid/ask $ 2.53/ 2.62

Chart of KO:

Current Target: $79.00 & 84.00
Current Stop loss: 64.90
Play Entered on: 07/25/11
Originally listed in the New Plays 07/23/11