NEW DIRECTIONAL PUT PLAYS

ishares China - FXI - close: 40.83 change: +0.83 stop: 42.25

Company Description:
The FXI is the ishares exchange traded fund for the FTSE/Xinhau China 25 index.

Why We Like It:
China currently has one of the strongest economies on the planet with 2010 expectations in the 8-to-10% growth range. Unfortunately for investors that has already been priced into the market. The challenge now is rising inflation and the Chinese governments recent attempts to slow down their economy from overheating. Banking regulators have already raised bank reserve requirements twice this year and they tend to use that tool to slow down growth several times in a row. Now just this past week the Chinese market managed to rebound off their lows when a member of the central bank was quoted in an interview that China would not remove their stimulus from the economy too soon. As we all know sometimes a regulator's idea of not removing stimulus may not match up with what the market expects.

The oversold bounce in the FXI has stalled in the $41.50-42.00 zone near the 200-dma and 100-dma. I suspect that this ETF will correct toward the $35.00 region over the next few weeks. I am suggesting bearish positions now. More conservative traders may want to wait for a move or a close under the $40.00 level before initiating positions. Our target to exit is $35.75.

Suggested Position: BUY PUT MAY $40.00 (FXI 10Q40.00) current ask $1.43

Annotated Chart:

Entry on March 29th at $ 40.83(?)
Earnings Date --/--/--
Average Daily Volume = 21.3 million
Listed on March 27th, 2010


iShares Russell 2000 - IWM - close: 67.81 change: -0.03 stop: 70.15

Company Description:
The IWM is the iShares exchange traded fund (ETF) that seeks to mimic the performance of the small cap Russell 2000 index.

Why We Like It:
Small caps have had an incredible rally off their February lows with a 19% surge in just the last several weeks. Now the rally is getting a little frothy at the top and it looks like traders are starting to sell into strength. These are clues the rally could be poised to correct. Since the small caps had the biggest move higher they could have a substantial pull back.

I am suggesting bearish positions now. It's a little aggressive since we still have three days left for the first quarter and last minute window dressing could still push stocks higher. More conservative traders could wait until Thursday before initiating positions. I am suggesting a stop loss at $70.15. An alternative, more cautious stop loss would be near $69.40, which is just above the Thursday high. Broken resistance near $65.00 should be new support. Our target will be $65.10. We're not trying to knock the ball of the cover with this trade. We're just looking for a decent gain on what could be a temporary correction for the small caps.

Keep in mind that April options expire in three weeks. You may want to trade May options instead.

Suggested Position: BUY PUT APRIL $65.00 (IWM 10P65.00) current ask $0.55

Annotated Chart:

Entry on March 29th at $ 67.81(?)
Earnings Date --/--/--
Average Daily Volume = 60.4 million
Listed on March 27th, 2010


ProShares Ultra(Long) Basic Mat. - UYM - close: 35.16 chg: +0.55 stop: 37.26

Company Description:
The UYM is the ultra long or double-long exchange traded fund (ETF) that tries to mimic twice the daily performance of the Dow Jones U.S. Basic Materials index. There are 68 companies in the index that are involved in aluminum, commodity chemicals, specialty chemicals, forest products, non-ferrous metals, paper products, precious metals and steel. The top ten companies are: FCX, DOW, DD, NEM, APD, AA, NUE, BTU, IP, and PX.

Why We Like It:
The rally in the UYM appears to have run out of gas. Weakness in the euro and strength in the dollar has been a major issue affecting this group. While the dollar might look a little short-term overbought the new trend is up and I expect it to remain strong. Meanwhile the UYM is struggling with resistance near its January highs. Thursday's session was a bearish reversal but we have yet to see any follow through on it. I am suggesting a trigger at $34.30 to buy puts. If triggered our target is the $30.25 mark. More aggressive traders could aim for the 200-dma closer to $28.00. I do consider this somewhat aggressive since our stop is so wide. Keep your position size small, especially since we're trading a double-long ETF. FYI: If you want a more aggressive trade look at our put play for FCX below.

Trigger to buy puts at $34.30

Suggested Position: BUY PUT MAY $30.00 (UYM 10Q30.00) current ask $1.20

Annotated Chart:

Entry on March xxth at $ xx.xx
Earnings Date --/--/--
Average Daily Volume = 4.5 million
Listed on March 27th, 2010


Freeport McMoran - FCX - close: 79.17 change: +1.26 stop: 81.26

Company Description:
FCX is a leading international mining company with headquarters in Phoenix, Arizona. FCX operates large, long-lived, geographically diverse assets with significant proven and probable reserves of copper, gold and m olybdenum. FCX has a dynamic portfolio of operating, expansion and growth projects in the copper industry and is the world’s largest producer of molybdenum. The company’s portfolio of assets includes the Grasberg mining complex, the world’s largest copper and gold mine in terms of recoverable reserves, significant mining operations in the Americas, including the large scale Morenci and Safford minerals districts in North America and the Cerro Verde and El Abra operations in South America, and the Tenke Fungurume minerals district in the Democratic Republic of Congo. (source: company press release or website)

Why We Like It:
The thought process here with FCX is the same as that on the UYM. The rally in basic materials is slowing down thanks in part to the strength in the dollar. We know China is trying to slow down their economy and India recently raised their interest rates to slow down their economy. The trading action in FCX looks like momentum is about to roll over in favor of the bears. However, readers should keep in mind that if geopolitical tensions rise again gold would normally rally and that could give FCX a boost.

I am suggesting a trigger to buy puts on FCX at $77.90. If triggered our target is $72.00. I expect the 200-dma near $71.00 to act as technical support. This can be a volatile stock. I do consider this an aggressive, higher-risk trade. Keep your position size small.

Trigger to buy puts at $77.90

Suggested Position: BUY PUT APRIL $75.00 (FCX 10P75.00) current ask $1.07

Keep in mind that April options expire in three weeks. I expect this trade to be over before April options expire.

Annotated Chart:

Entry on March xxth at $ xx.xx
Earnings Date 04/22/10
Average Daily Volume = 5.67 million
Listed on March 27th, 2010