NEW DIRECTIONAL CALL PLAYS

Express Scripts, Inc - ESRX - close 52.74 change -0.41 stop 49.80

Company Description:
Express Scripts, Inc. is a pharmacy benefit management (PBM) operating in North America. It offers a range of services, which include health maintenance organizations (HMOs), health insurers, third-party administrators, employers, union-sponsored benefit plans, workers' compensation plans and government health programs. The Company operates in two business segments: PBM and Emerging Markets (EM). The PBM segment consists of retail network pharmacy management and retail drug card programs, home delivery services, specialty pharmacy services, benefit plan design and consultation, medication therapy and safety through pharmacogenomics, and assistance programs for low-income patients. The EM segment consists of distribution of pharmaceuticals and medical supplies to providers and clinics, distribution of fertility pharmaceuticals requiring special handling or packaging, and healthcare account administration and implementation of consumer-directed healthcare solutions.

Target(s): 53.70, 54.75
Key Support/Resistance Areas: 54.00, 51.25, 50.00
Time Frame: Several weeks

Why We Like It:
ESRX has been a strong performer despite the market weakness over the past six weeks. The stock has built quite an impressive congestion area between $50.00 and $51.50 since late March and recently broke out printing a new high. The stock is now turning back to retest the key pivot area and I suggest we take advantage of any weakness the stock gives us. In addition, the stock's 20-day and 50-day SMA's are near $51.25 which should provide solid support if the ESRX trades down there. I would like to use $51.90 as an area to initiate long positions. I believe the market will give us this level and allow ESRX to break out to new highs. Our targets are $53.70 and $54.75 (which would be a new all time high for the stock). We'll use a stop at $49.50 which is at the bottom of the congestion area and below the aforementioned SMA's, but I will be surprised if ESRX trades down there unless the overall market is under severe pressure. Aggressive traders may consider entering now but I think if we are patient we will get filled in the coming days on market weakness, which is bound to happen.

Suggested Position: Buy August $52.50 CALL if ESRX trades down near $51.90, current ask $3.10, estimated ask at entry $2.60

Annotated Chart:

Entry on June xx
Earnings Date 7/29/10 (unconfirmed)
Average Daily Volume: 5.5 million
Listed on 6/17/10