Editor's Note:

The stock market could end up churning sideways on Wednesday as investors wait for the FOMC decision Wednesday afternoon. After the announcement stocks can get a little wild with big swings and sharp reversals but investors may choose to sit tight and wait to hear President Obama's state of the union address Wednesday night.


NEW DIRECTIONAL PUT PLAYS

JPMorgan Chase - JPM - close: 38.44 change: -0.77 stop: 41.55

Why We Like It:
You could easily argue that JPM is already short-term oversold and due for a bounce. However the stock is acting very bearish. Investors must be very concerned about the Obama administration actually passing significant reforms that will change the current banking system and how some of these large banks make money. Shares of JPM broke key support near $40.00 and its 200-dma. It has bounced around for a couple of days and now broken down to new lows.

I'm suggesting small bearish positions now. Our first target to take profits is at $35.25. Our second target is $32.00.

Suggested Options:
I am suggesting the February $38 or the March $35 puts.

BUY PUT FEB 38.00 open interest=11,923 current ask $1.34
(CBOE format: JPM1020N38)
-or-
BUY PUT MAR 35.00 open interest=11,307 current ask $1.07
(CBOE format: JPM1020O35)

Annotated Chart:

Entry  on   January 26 at $ 38.44 
Change since picked:       + 0.00
Earnings Date            04/15/10 (unconfirmed)
Average Daily Volume =         46 million  
Listed on   January 26, 2010         


SIEMENS - SI - close: 93.60 change: +4.29 stop: 98.30

Why We Like It:
SI reported earnings this morning before the bell. Fourth quarter profits came in at 1.48 billion euros on revenues of 17.4 billion euros. Analysts were only expecting a profit of 950 million euros with revenues closer to 17.9 billion. SI beat the earnings estimates thanks to cost cutting. The company reaffirmed its full year guidance even though SI has been struggling with global demand for its services (engineering) and products (electronics).

The stock rallied on the earnings news but the rebound faltered midday. I suspect this is a knee jerk reaction to the earnings beat and investors will sell into the report to lock in gains. Thus I'm suggesting we take advantage of today's pop to buy puts. We'll use a stop loss above the recent resistance. Our first target is $87.55. Our second target is $81.00. Our time frame is three to four weeks.

Suggested Options:
I am suggesting the March $90 puts.

BUY PUT MAR 90.00 open interest= 79  current ask $3.20
(CBOE format: SI1020O90)

Annotated Chart:

Entry  on   January 26 at $ 93.60 
Change since picked:       + 0.00
Earnings Date            01/26/10 (confirmed)
Average Daily Volume =        368 thousand 
Listed on   January 26, 2010