NEW DIRECTIONAL CALL PLAYS

Gold Fields Ltd - GFI - close 13.28 change +0.23 stop 12.25

Company Description:
Gold Fields Limited (Gold Fields) is a producer of gold and holder of gold reserves in South Africa, Ghana, Australia and Peru. In Peru, Gold Fields also produces copper. Gold Fields is primarily involved in underground and surface gold and copper mining and related activities, including exploration, extraction, processing and smelting. Gold Fields also has an interest in a platinum group metal exploration project. The majority of Gold Fields’ operations, based on gold production, are located in South Africa. Its South African operations are Driefontein, Kloof, Beatrix and South Deep. Gold Fields also owns the St. Ives and Agnew gold mining operations in Australia and has a 71.1% interest in each of the Tarkwa gold mine and the Damang gold mine in Ghana. (source: company press release or website)

Why We Like It:
Gold Miners and gold appear to be ready to make another leg higher and I suggest readers take advantage of the momentum that is building. The FOMC is keeping interest rates low and this is stoking fears of inflation, or inflationary bubbles, and I believe traders are beginning to pour into gold mining stocks once again. GFI has been trading in an upward channel since late February and appears ready to break out of resistance at $13.36. I believe the stock will quickly trade to the $13.95 over the next week. GFI reports earnings on May 6th so I plan to be out of this trade on that date. We'll place a stop below the 50-day SMA at $12.25 and our target is $13.95 which is just below the YTD highs. Our time frame is about one week or shorter. *NOTE: Please use small position size to limit risk as gold stocks tend to be volatile.*

Suggested Position: Long MAY $13.00 CALL, current ask $0.60

Annotated chart:

Entry on April xx at $xx.xx
Earnings Date May 6, 2010 (unconfirmed)
Average Daily Volume: 5.3 million
Listed on April 26, 2010


NEW DIRECTIONAL PUT PLAYS

iShares Dow Transports - IYT - close 84.02 change +0.21 stop 87.10

Company Description:
iShares Dow Jones Transportation Average Index Fund (the Fund) seeks investment results that correspond generally to the price and yield performance of the Dow Jones Transportation Average Index (the Index). The Index measures the performance of the transportation sector of the United States equity market, and includes companies in primary groups, such as airlines, trucking, railroads, air freight, transportation services and industrial services. Companies are selected for inclusion in the Index by the editors of the Wall Street Journal. (source: website)

Why We Like It:
I believe IYT is overextended and it is due to take a breather. I suggest readers buy PUTS to take advantage of a pullback. The ETF is at the top of an upward channel that started in July 2009 and has rallied +25% since the February lows. All of the technical indicators have remained overbought for some time and I think it is unsustainable. I expect a pullback to at least $81.50 which is our first target. Our second more aggressive target is the 50-day SMA, currently just under $80. We'll place a stop above the recent highs at $87.10. Our time frame is several weeks but will exit sooner if there is a sharp correction. *NOTE: Some of the strike prices in IYT have wider than normal bid/ask spreads. Use a limit order in the middle of the spread and you should get filled.

Suggested Position: JUNE $83.00 PUT, current ask $2.65

Annotated Chart:

Entry on April xx at $ xx.xx
Earnings Date N/A
Average Daily Volume = 1.0 million
Listed on April 26, 2010