Stocks have broken several layers of support and the correction is upon us.

Editor's Note:

There were plenty of stocks that looked like bearish candidates. Just a few more that caught my eye were FISV, MCK, HRS, and AZO.


NEW DIRECTIONAL CALL PLAYS

Deckers Outdoor - DECK - close: 100.68 change: -2.83 stop: 99.75

Why We Like It:
The stock market is very short-term oversold and I think we could see a bounce before the market continues lower. Let's try and catch that bounce with a play on DECK. The stock has retreated to what should be significant support at $100.00. We can use a tight stop to limit our risk and if DECK bounces we're in and out in a couple of days.

Buy calls now (in the 100-101.50 zone) and target an exit at $104.95.

Suggested Options:
I am suggesting the February calls. My preference is the $105 strike.

BUY CALL FEB 105 QUK-BA open interest=348  current ask $2.65

Annotated Chart:

Entry  on   January 23 at $100.68 
Change since picked:       + 0.00
Earnings Date            02/25/10 (unconfirmed)
Average Daily Volume =        549 thousand 
Listed on   January 23, 2010         


NEW DIRECTIONAL PUT PLAYS

FEDEX Corp. - FDX - close: 80.29 change: -1.31 stop: varies

Why We Like It:
FDX is at risk of breaking its long-term up trend. You could say it's already broken but FDX found support at $80.00 and its 100-dma on Friday. I think it continues lower but shares might see an oversold bounce first. I'm suggesting two different entry points.

Entry point #1: If FDX keeps falling we want to buy puts with a trigger at $79.45 and use a stop loss at $82.55.

Entry point #2: If FDX bounces we want to buy puts with a trigger at $81.75 with a stop loss at $86.05.

Our first target is $75.25.

Suggested Options:
I am suggesting the March puts although February would probably work just fine. My preference is the $80 put for either entry point.

BUY PUT MAR 80.00 FDX-OP open interest=531  current ask $4.00

Annotated Chart:

Entry  on   January xx at $ xx.xx <-- two triggers
Change since picked:       + 0.00
Earnings Date            03/18/10 (unconfirmed)
Average Daily Volume =        3.0 million  
Listed on   January 23, 2010         


Gymboree - GYMB - close: 39.74 change: -1.11 stop: 42.75

Why We Like It:
Retail stocks are rolling over and GYMB has a head start on its peers. Shares just broke round-number support at $40.00 and technical support at the 200-dma. I'm suggesting put positions now. Our first target is $35.50. Our second, longer-term target is $32.00. We are going to use a slightly wider, more aggressive stop loss in case GYMB sees an oversold bounce. Consider using small positions to limit your risk.

Suggested Options:
I am suggesting the February puts. My preference is the $40 strike.

BUY PUT FEB 00.00 GQU-NH open interest=1413 current ask $1.75

Annotated Chart:

Entry  on   January 23 at $ 39.74 
Change since picked:       + 0.00
Earnings Date            03/04/10 (unconfirmed)
Average Daily Volume =        513 thousand 
Listed on   January 23, 2010         


Retail Holders - RTH - close: 91.42 change: -1.11 stop: 95.05

Why We Like It:
If you want to play the retailers but don't want to play an individual stock you could buy puts on the RTH. The sector has clearly rolled over and this ETF just broke down under its 100-dma. I'm suggesting small positions now. We can double down if we see another failed rally in the $93-94 region. Our first target is the $87.00 level. The 200-dma will probably be support. The RTH moves kind of slow.

Suggested Options:

This is the new CBOE format:

BUY PUT 2010 MAR 90.00 RTH1020O90 open interest=391  ask $2.45

Annotated Chart:

Entry  on   January 23 at $ 91.42 
Change since picked:       + 0.00
Earnings Date            --/--/--
Average Daily Volume =        1.7 million  
Listed on   January 23, 2010