NEW DIRECTIONAL PUT PLAYS

Caterpillar - CAT - close: 38.66 change: -0.80 stop: 41.51

Why We Like It:
CAT helped power the DJIA index forward yesterday as investors bought the stock on a better than expected second quarter earnings announcement. Yet the rally has begun to falter. CAT warned that the third quarter could be so tough that the company might lose money. The stock is so overbought and without any catalyst to drive it higher odds are good shares will see a correction. We want to buy puts now in the $38.00-40.00 zone. I would expect a bounce near $37.00 and a bounce near $35.00. Our first target to take profits is at $35.25.

Suggested Options:
I am suggesting the August puts. Strikes are available at $1.00 increments. It is always up to the individual trader to decide which month and which strike price best suits your trading style and risk profile.

BUY PUT AUG 40.00 CAT-TH open interest=6340 current ask $2.59
BUY PUT AUG 38.00 CXJ-TL open interest=5451 current ask $1.55
BUY PUT AUG 35.00 CXJ-TI open interest=13627 current ask .62

Annotated Chart:

Picked on     July 22 at $ 38.66
Change since picked:      + 0.00
Earnings Date           07/21/09 (confirmed)
Average Daily Volume =        15 million  
Listed on  July 22, 2009         


Genzyme Corp. - GENZ - close: 51.21 change: -4.70 stop: 53.55

Why We Like It:
Biotech firm GENZ reported earnings this morning that were inline with estimates. The bad news was guidance. The company issued an earnings warning in their full year 2009 guidance. The stock sold off hard with an 8.4% drop on big volume. Shares broke short-term support near $53.50 and they're nearing major support at $50.00. I am suggesting readers wait for the breakdown under $50.00. More nimble traders could try waiting for a failed rally in the $53.00-53.50 zone. I would certainly be tempted if we saw one. However for this play I'm suggesting a trigger at $49.90.

If GENZ does break support at $50.00 it will also break the neckline to a bearish head-and-shoulders pattern that would forecast a drop toward $37.50. If triggered I'm setting our first target at $45.50. Our second target is $40.50. My time frame is six to twelve weeks. FYI: The P&F chart is bearish with a $40 target.

Suggested Options:
I'm suggesting the August, September or October puts depending on your time frame. August for the $45 target. Longer options for the $40 target. Trigger is at 49.90.

BUY PUT AUG 52.50 GZQ-TO open interest=3202 current ask $2.60
BUY PUT AUG 50.00 GZQ-TJ open interest= 957 current ask $1.40
BUY PUT AUG 47.50 GZQ-TW open interest= 388 current ask .70
BUY PUT AUG 45.00 GZQ-TI open interest= 347 current ask .35

BUY PUT SEP 50.00 GZQ-UJ open interest= 58  current ask $2.15
BUY PUT SEP 47.50 GZQ-UW open interest=  5  current ask $1.30
BUY PUT SEP 45.00 GZQ-UI open interest=  0  current ask .75

BUY PUT OCT 47.50 GZQ-VW open interest=1705 current ask $1.85
BUY PUT OCT 45.00 GZQ-VI open interest= 446 current ask $1.20
BUY PUT OCT 42.50 GZQ-VV open interest=1211 current ask .75
BUY PUT OCT 40.00 GZQ-VH open interest= 231 current ask .50

Annotated Chart:

Picked on     July xx at $ xx.xx <-- see TRIGGER
Change since picked:      + 0.00
Earnings Date           07/22/09 (confirmed)
Average Daily Volume =       2.8 million  
Listed on  July 22, 2009         


United Technologies - UTX - close: 53.13 change: -0.85 stop: 55.05

Why We Like It:
This should be a very short-term trade. UTX has already reported earnings and while the results were good the stock is selling off anyway. The oversold bounce has failed at $55.00 and it looks like UTX will test support at $50.00 soon. Use a stop above $55.00. Our first target to take profits is at $50.15.

Suggested Options:
We want to use the August puts.

BUY PUT AUG 55.00 UTX-TK open interest=5227 current ask $3.10
BUY PUT AUG 50.00 UTX-TJ open interest=7328 current ask .75

Annotated Chart:

Picked on     July 22 at $ 53.12
Change since picked:      + 0.00
Earnings Date           07/21/09 (confirmed)
Average Daily Volume =       5.9 million  
Listed on  July 22, 2009