NEW DIRECTIONAL PUT PLAYS

UltraDow30 - DDM - close: 37.82 change: -1.95 stop: 41.26

Why We Like It:
The DDM is the ultra Dow 30 ETF, which tries to deliver twice the daily performance of the Dow Jones Industrial Average. I suspect that the DJIA will catch up to the rest of the major averages, which means the selling should accelerate. The failed rally last week at the $40.00 level looks like a good entry point but I am only suggesting small positions. The larger trend is still up and we're trying to catch a reversal lower. Let's limit our position size to reduce our overall risk.

Our first target is $35.25. The 100-dma near $35.00 could be technical support. I am considering a second target at $32.50 but for now we'll exit 100% at $35.25.

Suggested Options:
This should be a relatively quick trade. I'm suggesting the November puts. Strikes are available in $1.00 increments. My preference is for the $38.00 strike.

BUY PUT NOV 38.00 HXD-WL open interest=1246 current ask $1.95

Annotated Chart:

Picked on   October 31 at $ 37.82 (1/2 position size)
Change since picked:       + 0.00
Earnings Date            --/--/--
Average Daily Volume =        3.2 million  
Listed on   October 31, 2009         


Intuitive Surgical - ISRG - close: 246.35 change: -7.20 stop: 261.00

Why We Like It:
It looks like ISRG is forming a top. Shares hit new 2009 highs in October the day before earnings. The stock gapped lower on its earnings news and now the post-earnings bounce has filled the gap and reversed lower. All together it paints a very bearish picture for ISRG. The only thing bulls can point to is the low volume on the decline and the fact that ISRG is still clinging to technical support at its 50-dma. I believe that support is going to break soon.

Before I go any further I want to caution traders that this is an aggressive trade. ISRG can be very volatile and options aren't cheap. I would use very small positions about 25% your normal trade size. Our first target is $226.00. Our second target is $202.00.

Suggested Options:
November puts have more open interest and should work well for our first target. I'm suggesting the December puts, which will give us more time. My preference is the $220 strike.

BUY PUT DEC 220 AXV-XW open interest= 259 current ask $4.90

Annotated Chart:

Picked on   October 31 at $246.35
Change since picked:       + 0.00
Earnings Date            10/20/09 (confirmed)
Average Daily Volume =        939 thousand 
Listed on   October 31, 2009         


Precision CastParts - PCP - close: 95.53 change: -2.56 stop: 100.55

Why We Like It:
PCP spent more than four weeks building a top in the $103-104 region. Now shares are breaking down. I would prefer to open put positions on a bounce or failed rally near $99-100 but we may not get the chance. I'm suggesting small positions about 50% your normal trade size. Our only target is $90.25. More aggressive traders may want to aim lower but I'm concerned about the trendline off the March lows, which could be strong support.

Suggested Options:
This should be a relatively quick play. I'm suggesting the November puts. My preference is the $90 put.

BUY PUT NOV 90.00 PCP-WR open interest=488  current ask $1.45

Annotated Chart:

Picked on   October 31 at $ 95.53
Change since picked:       + 0.00
Earnings Date            10/20/09 (confirmed)
Average Daily Volume =        1.3 million  
Listed on   October 31, 2009