Editor's Note:
I'm filling in for Scott this weekend.

- James


NEW DIRECTIONAL CALL PLAYS

First Solar Inc. - FSLR - close: 144.56 change: +2.29 stop: 135.95

Target(s): 145.00, 147.50, 149.00
Key Support/Resistance Areas: 137.50, 140.00, 145.00, 147.50, 150.00
Current Gain/Loss: +00.0%
Time Frame: 3 to 4 weeks
New Positions: Yes, see entry point below

Company Description:
First Solar manufactures solar modules with an advanced semiconductor technology and provides comprehensive photovoltaic (PV) system solutions. The company is delivering an economically viable alternative to fossil-fuel generation today. From raw material sourcing through end-of-life collection and recycling, First Solar is focused on creating cost-effective, renewable energy solutions that protect and enhance the environment (source: company press release or website)

Why We Like It:
Shares of FSLR have been marching higher after producing a huge (bullish) double bottom pattern with the lows in February and June. Now the stock has created a more bullish pattern of rally, consolidate, rally, consolidate. After two weeks of correcting traders are now buying the dip in FLSR near support in the $137-140 zone.

Aggressive traders could launch positions right now following Friday's bounce from $140. However, I suspect we'll see a better entry point on a minor dip this week. I'm suggesting we use a trigger at $142.50 to buy calls. If triggered we'll use a wide stop loss at $135.95 since FSLR can be so volatile (as an alternative more conservative traders could put their stop closer to $140). If triggered our first target is $145.00. Our second target is $147.50. Our final target is $149.75. More aggressive traders could aim for the $160 area. FYI: Investors should note that FSLR is due to report earnings on October 28th. Earnings reports can significantly raise our risk.

Suggested Position:

Trigger to buy calls @ $142.50.

BUY the November $150 calls.

Annotated Chart:

Entry on October xxth at $ xx.xx
Earnings Date 10/28/10 (unconfirmed)
Average Daily Volume = 1.5 million
Listed on October 16th, 2010


Humana Inc. - HUM - close: 54.84 change: +0.53 stop: 49.75

Target(s): 54.95, 57.50, 60.00
Key Support/Resistance Areas: 50.00, 51.00, 53.50, 55.00
Current Gain/Loss: +00.0%
Time Frame: 6 to 8 weeks
New Positions: Yes, see entry point below

Company Description:
Humana Inc., headquartered in Louisville, Ky., is one of the nation’s largest publicly traded health and supplemental benefits companies, with approximately 10.3 million medical members and approximately 7.3 million specialty-benefit members. Humana is a full-service benefits solutions company, offering a wide array of health and supplementary benefit plans for employer groups, government programs and individuals. Over its 49-year history, Humana has consistently seized opportunities to meet changing customer needs. Today, the company is a leader in consumer engagement, providing guidance that leads to lower costs and a better health plan experience throughout its diversified customer portfolio. (source: company press release or website)

Why We Like It:
Check out the HMO healthcare index. Investor sentiment for the healthcare sector has changed. Fears about the healthcare reform seem to have faded and now the sector is breaking out to new three-year highs. HUM is helping lead the way. Shares have been very strong this past week with a rally toward the top of its bullish channel. We want to hop on board but wait for a better entry point.

I am suggesting readers use a trigger to buy calls at $52.50. More cautious traders could look for a dip closer $51.00 but I don't think we'll see HUM pullback that low. If we are triggered at $52.50 I'm suggesting a stop loss at $49.75. Our first target is $54.90. Our second target is $57.25. Our third, longer-term target is $59.00. Time frame is six to eight weeks. Technical traders will note that the P&F chart is bullish with a $66 target. FYI: HUM is due to report earnings on November 1st. We normally want to avoid holding over earnings but I would make an exception for HUM.

Suggested Position:

Trigger to buy calls at $52.50

BUY the November $55 calls - or - BUY the 2011 January $55 calls.

Annotated Chart:

Entry on October xxth at $ xx.xx
Earnings Date 11/01/10 (confirmed)
Average Daily Volume = 2.1 million
Listed on October 16th, 2010


NEW DIRECTIONAL PUT PLAYS

Fastenal Co. - FAST - close: 52.10 change: -0.61 stop: 54.25

Target(s): 50.25, 48.25, maybe lower
Key Support/Resistance Areas: 55.00, 52.00, 50.00, 48,00,
Current Gain/Loss: +00.0%
Time Frame: 3 to 4 weeks
New Positions: Yes, see entry below

Company Description:
Fastenal sells different types of industrial and construction supplies in the following product categories: threaded fasteners and miscellaneous supplies; tools; metal cutting tool blades and abrasives; fluid transfer components and accessories for hydraulic and pneumatic power; material handling; storage and packaging products; janitorial, chemical and paint products; electrical supplies; welding supplies; safety supplies; and metals, alloys and materials. Fastenal operates more than 2,400 stores located primarily in North America with additional locations in Asia, Europe, and Central America. The Company operates 11 distribution centers in the United States - Minnesota, Indiana, Ohio, Pennsylvania, Texas, Georgia, Washington, California, Utah, North Carolina, Kansas, and three outside the United States - Ontario, Canada; Alberta, Canada; and Nuevo Leon, Mexico. (source: company press release or website)

Why We Like It:
Traders were disappointed with FAST's recent earnings report and guidance. Shares had soared from $45 to $55 in just a few weeks and the stock plunged on the earnings news (Oct. 12th). The bounce attempts this week were also sold sharply and FAST looks poised for a much deeper correction.

I am suggesting new bearish positions now at current levels. We'll use a stop loss at $54.25. Our first target is 50.75 near the simple 50-dma. Our second target is $48.25, but watch for potential support at the rising 200-dma. It is possible that FAST actually sinks lower since the larger pattern on the weekly chart is one of lower highs and lower lows.

Suggested Position:

Buy the November $50.00 puts, current ask $1.05

Annotated Chart:

Entry on October 18th at $ xx.xx
Earnings Date 10/12/10
Average Daily Volume = 1.0 million
Listed on October 16th, 2010