Editor's Note:
In spite of the recent volatility the market is still poised to move higher. We want to take advantage of some recent moves as we look toward yearend. MCK is a bullish candidate in the healthcare services area and UNP is a bullish candidate in the railroad industry.

- James


NEW DIRECTIONAL CALL PLAYS

McKesson Corp. - MCK - close: 66.00 change: +0.61

Stop Loss: 63.75
Target(s): 67.95, 70.75
Current Option Gain/Loss: + 0.0%
Time Frame: 6 to 8 weeks
New Positions: Yes

Company Description:
McKesson Corporation, currently ranked 14th on the FORTUNE 500, is a healthcare services and information technology company dedicated to helping its customers deliver high-quality healthcare by reducing costs, streamlining processes, and improving the quality and safety of patient care. Over the course of its 177-year history, McKesson has grown by providing pharmaceutical and medical-surgical supply management across the spectrum of care; healthcare information technology for hospitals, physicians, homecare and payors; hospital and retail pharmacy automation; and services for manufacturers and payors designed to improve outcomes for patients. (source: company press release or website)

Why We Like It:
MCK has turned itself into a healthcare services company and management just announced plans to buy US Oncology for $2.16 billion on November 1st. Shares of MCK initially spiked higher on the announcement but then spent the next two weeks correcting lower. Traders have bought the dip near prior resistance and its 200-dma. This rebound looks like a new entry point to buy calls. I am suggesting new positions now. More conservative traders may want to wait for a dip near $65.00 before initiating positions. We'll use a stop loss at $63.75. Our first target is $67.95. Our second target is $70.75. The 2010 highs stand at $71.49. FYI: The P&F chart is bullish with an $85 target.

Suggested Position: Buy the 2011 January $65 calls (MCK1122A65) current ask $3.20

Annotated Chart:

Entry on November 22nd at $ xx.xx
Earnings Date 01/26/11
Average Daily Volume = 2.7 million
Listed on November 20th, 2010


Union Pacific - UNP - close: 91.82 change: +0.13

Stop Loss: 88.99
Target(s): 96.25, 99.75
Current Option Gain/Loss: Unopened
Time Frame: 4 to 6 weeks
New Positions: Yes, see trigger

Company Description:
Union Pacific Corporation owns one of America's leading transportation companies. Its principal operating company, Union Pacific Railroad, links 23 states in the western two-thirds of the country. Union Pacific serves many of the fastest-growing U.S. population centers and provides Americans with a fuel-efficient, environmentally responsible and safe mode of freight transportation. Union Pacific's diversified business mix includes Agricultural Products, Automotive, Chemicals, Energy, Industrial Products and Intermodal. The railroad emphasizes excellent customer service and offers competitive routes from all major West Coast and Gulf Coast ports to eastern gateways. Union Pacific connects with Canada's rail systems and is the only railroad serving all six major gateways to Mexico, making it North America's premier rail franchise. (source: company press release or website)

Why We Like It:
UNP just raised its dividend again for the second time this year and the stock has garnered some positive analyst comments recently. Bigger picture UNP looks very overbought but instead of correcting lower the stock has been consolidating sideways. Now after two weeks of churning UNP is poised to breakout higher again. The November highs are in the $92.50-92.75 zone. I am suggesting a trigger to buy calls at $92.85. If triggered our targets are $96.25 and $99.75.

Trigger @ 92.85

Suggested Position: Buy the 2011 January $95 calls (UNP1122A95)

Annotated Chart:

Entry on November xxth at $ xx.xx
Earnings Date 01/20/11
Average Daily Volume = 2.9 million
Listed on November 20th, 2010