NEW DIRECTIONAL CALL PLAYS

Union Pacific - UNP - close: 67.39 change: -0.20 stop: 64.90

Why We Like It:
The market's pull back on Tuesday has allowed us an entry point into the railroads. The sector broke out past resistance in just the last few days so this dip is a chance to hop on board. I'm suggesting we buy calls on UNP now. Our first target is $69.95. Our second target is $72.00 but that is very optimistic. Earnings are coming up this month and we plan to exit ahead of earnings. I'm listing our stop loss at $64.90 but more conservative traders might be able to get away with a stop closer to $66.25 or $66.50. The low today was $66.76. Our risk/reward is not super attractive here so consider smaller positions.

Suggested Options:
I am suggesting the February calls but we will plan to exit ahead of the January 21st earnings report. My preference is for the $70 strike.

BUY CALL FEB 70.00 UNP-BN open interest=5561 current ask $1.20

Annotated Chart:

Entry  on   January 12 at $ 67.39  
Change since picked: + 0.00
Earnings Date 01/21/10 (confirmed)
Average Daily Volume = 2.5 million
Listed on January 12, 2010