Editor's Note:

My market bias is still bearish. Until we see the S&P 500 close above 1100 or the 1120 level I suspect the path of least resistance is going to be down. However, on a very short-term basis the market bounce on Friday looks like a bullish reversal pattern. Now technically this pattern needs to see confirmation first before it's a buy signal. I believe stocks will confirm the reversal but I'm only expecting a bounce toward 1100 and maybe the 50-dma (1111 on the S&P 500). As we near the 1100 area we'll start looking for possible shorts again. Of course everything could change if there is no bounce on Monday.

We are going to try and scalp some points on the bounce with some aggressive calls plays. You'll want to use a tight stop loss and be prepared to exit quickly!


NEW DIRECTIONAL CALL PLAYS

Freeport McMoran - FCX - close: 70.23 change: +3.49 stop: 65.85

Why We Like It:
Metal and mining stocks have been getting crushed. The debt woes in Europe have been pushing the euro lower and that's powered a big rally in the dollar. This dollar strength is killing the commodities. Copper has lost more than 18% from its recent highs. Shares of FCX, a huge copper mining company, has seen its stock plummet from $90 to $66.

It looks like the rally in the dollar and the sell-off is commodities is getting tired and ready to reverse. While this is probably a temporary move we want to try and grab a few points as FCX bounces. The stock has formed a short-term bullish double bottom near technical support at the 200-dma. This is an aggressive trade. We want to use small positions. Out first target to take profits is at $74.75. Our second target is the 100-dma near $77.50.

Suggested Options:
This should be a very short-term move. I'm suggesting the February calls, which expire in two weeks. I'm listing March calls as well for the less aggressive traders.

BUY CALL FEB 70.00 FHZ1020B70 open interest=19,634 current ask $2.99
-or-
BUY CALL MAR 75.00 FHZ1020C75 open interest=25,001 current ask $2.73

Annotated Chart:

Entry  on  February 06 at $ 70.23 
Change since picked:       + 0.00
Earnings Date            04/22/10 (unconfirmed)
Average Daily Volume =       20.6 million  
Listed on  February 06, 2010         


Intl Bus. Mach. - IBM - close: 123.52 change: +0.52 stop: 121.49

Why We Like It:
IBM is one of the premier technology and IT companies in the world. We have stock already listed on the newsletter as a put candidate but our trigger to buy puts is at $127.75. Instead of just waiting for IBM to bounce to our put entry point I'm suggesting we try and capture part of the move with some very aggressive, short-term calls. Buy calls now with a stop loss under Friday's low. Our target to exit will be $127.75. We can sell the calls and buy puts.

Suggested Options:
This should be a very short-term trade. I'm suggesting the February $125 calls. February options expire in two weeks.

BUY CALL FEB 125 IBM1020B125 open interest=9335 current ask $1.16

Annotated Chart:

Entry  on  February 06 at $123.52 
Change since picked:       + 0.00
Earnings Date            04/20/10 (unconfirmed)
Average Daily Volume =        8.3 million  
Listed on  February 06, 2010         


U.S.Steel - X - close: 44.78 change: +0.71 stop: 42.25

Why We Like It:
Steel stocks have gotten crushed and the correction in X seen a drop from $65 to $42 (-35%). Traders bought the dip near the 200-dma on Friday. While the trend is clearly bearish I think the combination of the market bounce and X's rebound near the 200-dma looks like an opportunity to catch an oversold bounce. Buy calls now with a stop under Friday's low. Our first target to take profits is at $49.25. Our second target is $51.75 near the 50-dma. This is an aggressive trader. Use small positions.

Suggested Options:
This should be a very short-term bounce. Buy the February $45 calls. February options expire in two weeks.

BUY CALL FEB 45.00 FBJ1020B45 open interest=4207 current ask $1.93

Annotated Chart:

Entry  on  February 06 at $ 44.78 (small positions)
Change since picked:       + 0.00
Earnings Date            04/27/10 (unconfirmed)
Average Daily Volume =       22.4 million  
Listed on  February 06, 2010