NEW DIRECTIONAL PUT PLAYS

Abbott Labs - ABT - close: 53.35 change: +0.00 stop: 55.05

Why We Like It:
Shares of ABT look ready to correct lower. The stock performed a bearish reversal pattern in mid January (see chart) and then broke significant support in the last few days of January. The oversold bounce is already reversing. I'm very tempted to buy puts right here! However, the bounce in the market may not be over yet. Thus I'm suggesting we use a trigger to buy puts at $52.80, which would be a new relative low. If triggered our first target is $50.15. More aggressive traders can target the 200-dma or support near $48.00.

Suggested Options:
I am suggesting the March $50.00 puts.

BUY PUT MAR 50.00 ABT1022Q50 open interest=4181 current ask $1.35

Annotated Chart:

Entry  on  February xx at $ xx.xx <-- TRIGGER @ 52.80
Change since picked:       + 0.00
Earnings Date            04/21/10 (unconfirmed)
Average Daily Volume =        7.5 million  
Listed on  February 09, 2010         


MEDCO Health Solutions - MHS - close: 61.25 change: +1.08 stop: 64.26

Why We Like It:
The rally in healthcare stocks may not be over yet since the fight in Washington has made it to overtime. However, on a short-term basis shares of MHS appear to be correction. Again I'm very tempted to buy puts right here with today's failed rally near $62.00. However, I'm suggesting we use a trigger at $62.75 to buy puts. The $64.00 level and the 50-dma should be overhead resistance. Use a bounce to $62.75 as an entry point. Our first target is $57.50.

Suggested Options:
I am suggesting the March $60 puts.

BUY PUT MAR 60.00 MHS1020O60 open interest=16,041 current ask $2.10

Annotated Chart:

Entry  on  February xx at $ xx.xx <-- TRIGGER @ 63.00
Change since picked:       + 0.00
Earnings Date            02/23/10 (unconfirmed)
Average Daily Volume =        3.2 million  
Listed on  February 09, 2010