Tonight's newsletter has a trade for the bulls and the bears. Plus a few stocks for your watch list.

Editor's Note:

I hesitate to load up on new bullish trades right now with the S&P 500 stuck in its trading range. If the index can breakout it should herald a new leg higher. I am listing a few stocks that caught my eye and made it to my watch list as possible bullish candidates if the market improves.

Stocks to watch: IBM, SWM, USTR, LLL, GD, and ETR.


NEW DIRECTIONAL CALL PLAYS

United Tech. - UTX - close: 69.40 change: +1.47 stop: 67.45

Why We Like It:
Shares of UTX are rallying toward resistance near $70.00. After four weeks of consolidating sideways the stock should be rested and ready for another run. Technicals are improving. The Point & Figure chart is bullish with a $95.00 target.

I'm suggesting traders use a trigger to buy calls at $70.25. If triggered our first target is $74.75.

Suggested Options:
I'm suggesting the January calls. My preference is the $70 strike.

BUY CALL JAN 70.00 UTX-AN open interest=13234 current ask $1.65

Annotated Chart:

Entry  on  December xx at $ xx.xx <-- TRIGGER @ 70.25
Change since picked:       + 0.00
Earnings Date            01/21/10 (unconfirmed)
Average Daily Volume =        4.0 million  
Listed on  December 12, 2009         


NEW DIRECTIONAL PUT PLAYS

Freeport McMoran - FCX - close: 76.81 change: -0.93 stop: 80.55

Why We Like It:
FCX is one of the largest mining companies on the planet. They mine for copper, gold, silver and more. The decline in the dollar has been bullish for commodities, which has powered a big move in FCX. Yet now the dollar has reversed higher and broken its bearish downtrend. If the dollar continues to rally commodities should correct and FCX with them.

You could argue that the correction has already happened with gold off $100 from its highs and FDX down more than $10 from its November highs. Yet the move up was so strong there could be further profit taking to go. Something to keep in mind with FCX, if the dollar rallies it should push both gold and copper lower. Yet if the economy improves then demand for copper should rise, which might temper FCX's decline.

Technically FCX has broken multiple levels of support at $80.00, at its 50-dma, and its trendline of higher lows. I consider this an aggressive, higher-risk trade because the dollar, commodities, and shares of FCX can be somewhat volatile. Use very small positions to help limit risk. Our first target is $72.50.

Suggested Options:
I'm suggesting the January puts. Stocks tend to fall faster than they climb. My preference is the $75 strike.

BUY PUT JAN 75.00 FHZ-MO open interest=10124 current ask $3.35

Annotated Chart:

Entry  on  December 12 at $ 76.81 
Change since picked:       + 0.00
Earnings Date            01/26/10 (unconfirmed)
Average Daily Volume =       12.6 million  
Listed on  December 12, 2009