Editor's Note:

Sometimes an earnings release exposes potential problems and sometimes they expose potential opportunities.

James is traveling this week and will be back on Monday.


NEW DIRECTIONAL CALL PLAYS

ADSK - Autodesk - $28.84, Change +.38 Stop $27.50

Company Description:
Autodesk, Inc., is a world leader in 2D and 3D design engineering and entertainment software for the manufacturing, building and construction, and media and entertainment markets. Since its introduction of AutoCAD software in 1982, Autodesk continues to develop the broadest portfolio of state-of-the-art software to help customers experience their ideas digitally before they are built. Fortune 100 companies -- as well as the last 14 Academy Award winners for Best Visual Effects -- use Autodesk Software tools to design, visualize and simulate their ideas to save time and money, enhance quality and foster innovation for competitive advantage.

Why We Like It:
Autodesk is the number one source for 2D and 3D design. They were the primary software behind the movie Avatar, which has been nominated for nine Academy awards. ADSK beat the street when they announced earnings on Feb-24th and raised guidance. ADSk business lines grew quarter over quarter. They signed 22 deals valued at $1 million or more, double that of the prior three quarters, and the product backlog rose to the highest level in six quarters. ADSK should be poised to shake off the recession blues and extend their gains.

ADSK spiked +$2 on the earning on the 24th and has been moving slowly higher since then. ADKS is at a 52-week high but refuses to decline. It appears as though a fund is sitting on the stock at the $29 level but we are also seeing progressively higher lows that could be leading to an explosive breakout. When a stock is coiling in this fashion it is eventually going to make a big break soon. That break could be in either direction but I am betting it will move higher.

The options I am recommending are for April. The next cycle was July and the premiums were nearly double. I am going to recommend the April $30 strike which gives us roughly 6 weeks.

BUY CALL APR 30.00 (ADSK 10D3000), OI= 1,268, Ask= $.55

Chart:

Entry on March 8th at $ xx.xx
Earnings Date 02/24/10 (confirmed)
Average Daily Volume = 2.75 million
Listed on March 6th, 2010


ATHN - AthenaHealth Inc - $39.18, Change +.53 Stop $36.50

Company Description:
AthenaHealth, Inc. is a leading provider of Internet-based business services for physician practices. AthenaHealth 's service offerings are based on proprietary web-native practice management and electronic health record (EHR) software, a continuously updated payer knowledge-base, integrated back-office service operations, and automated and live patient communication services.

Why We Like It:
AthenaHealth has been a favorite of the MD crowd and investors. It has fallen on some hard times lately in terms of investor perception. In early January the company's 13 year CFO resigned, (announced in June 2009), and was replaced by a new CFO. When it came time to report the Q4 financials the company postponed their earnings to investigate a "revenue recognition" problem. This could be just the new guy getting comfortable with the way the company recognizes income or it could be he found something he did not like and they are dealing with it. There is always the potential for a revenue restatement and that has already been priced into the stock.

After the announcement on Feb-26th the stock took an -$8 hit. Over the last week it has rebounded to $39 where it appears it is coiling for a breakout.

This could be a risky trade but it also has a high reward potential if they release earnings without any major changes. The stock could spike several dollars all at once. It could also drop several dollars if they announce some big change. Be aware there is additional risk.

The options I am recommending are for April. The next cycle was July and the premiums were nearly double. I am going to recommend the April $30 strike which gives us roughly 6 weeks.

BUY CALL APR 40.00 (ATHN 10D4000), OI= 1,327, Ask= $2.00

Chart:

Entry on March 8th at $ xx.xx
Earnings Date = Unknown but any day now
Average Daily Volume = 600,000
Listed on March 6th, 2010