NEW DIRECTIONAL CALL PLAYS

Cummins Inc. - CMI - close: 105.03 change: +0.78

Stop Loss: 94.45
Target(s): 107.00, 114.00
Current Option Gain/Loss: Unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see trigger

Company Description

Why We Like It:
CMI is one of the best performing stocks in the S&P 500 this year. Shares have more than doubled for the year. There doesn't appear to be any slow down as investors bet on an improving global economy next year. CMI's earnings back in October were a miss but the stock recovered thanks to bullish guidance. Wall Street firms have been raising their price target on this stock. On a short-term basis CMI look a little bit overextended. I am suggesting we use a dip to $100.50 as our entry point to buy calls. We want to start with small positions! Considering only buying half your normal position size. Just in case the correction pulls CMI toward the 50-dma near $95.00 we want to have some cash on the sidelines to double down near the 50-dma. FYI: Currently the Point & Figure chart is forecasting a $115 target.

Trigger @ $100.50

- Suggested Position -
Buy the 2011 January $105 calls (CMI1122A105)

- or -

Buy the 2011 March $110 calls (CMI1119C110)

Annotated Chart:

Entry on December xxth at $ xx.xx
Earnings Date 02/02/11 (unconfirmed)
Average Daily Volume = 1.8 million
Listed on December 11th, 2010


Juniper Networks - JNPR - close: 35.88 change: +0.13

Stop Loss: 33.75
Target(s): 37.40, 39.85
Current Option Gain/Loss: Unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see trigger

Company Description

Why We Like It:
JNPR continues to be a strong momentum candidate. Shares just broke out to new two-week highs. Traders have been consistently buying the dips. The rally has currently stalled near the 2010 highs near $36.00. Odds are good that JNPR will retest $35.00 before breaking out higher. I am suggesting a trigger to buy calls on JNPR when the stock dips to $35.20. We'll use a stop loss at $33.75. Our first target is $37.40. Our second, longer-term target is $39.85. FYI: The Point & Figure chart is bullish and is forecasting a long-term $59 target.

Trigger to buy the dip @ $35.20

- Suggested Position -
Buy the 2011 January $35.00 calls (JNPR1122A35)

- or -

Buy the 2011 April $37.00 calls (JNPR1116D37)

Annotated Chart:

Entry on December xxth at $ xx.xx
Earnings Date 01/25/11 (unconfirmed)
Average Daily Volume = 5.5 million
Listed on December 11th, 2010