NEW DIRECTIONAL CALL PLAYS

Coach Inc. - COH - close: 54.09 change: +1.27

Stop Loss: 52.49
Target(s): 58.50, 62.00
Current Option Gain/Loss: Unopened
Time Frame: 4 to 6 weeks
New Positions: Yes, see trigger

Company Description

Why We Like It:
I remain very cautious on the market following Friday's apparent reversal lower. However, there was no follow through lower in the major averages on Monday. So what if the market doesn't correct lower? The overall trend is still up. I'm suggesting we look at COH as a bullish candidate. The stock has been consolidating sideways under resistance near $55.00 the last few weeks. A breakout past $55 could be an entry point to buy calls. The Jan. 18th high was $55.27.

I am suggesting a trigger to buy calls at $55.35. If triggered we'll target a move to $58.50 and $62.00 but keep in mind that the $60.00 level could end up being round-number, psychological resistance.

Trigger @ $55.35

- Suggested Positions -

Buy the 2011 March $55.00 calls (COH1119C55)

- or -

Buy the 2011 March $57.50 calls (COH1119C57.5)

Annotated Chart:

Entry on February xxth at $ xx.xx
Earnings Date 04/20/11 (unconfirmed)
Average Daily Volume = 4.1 million
Listed on January 31st, 2011


NEW DIRECTIONAL PUT PLAYS

Advance Auto Parts Inc. - AAP - close: 63.94 change: -0.15

Stop Loss: 66.15
Target(s): 60.25, 58.00
Current Option Gain/Loss: + 0.0%
Time Frame: 6 trading days
New Positions: Yes, see below

Company Description

Why We Like It:
The oversold bounce in AAP just failed at resistance near $65 and its 50-dma. This looks like an entry point to buy puts and wait for gravity to take effect. My biggest concern is that AAP might just churn sideways as investors wait for the company's earnings report due around Feb. 9th (an unconfirmed date). I am suggesting small bearish positions now with a stop loss at $66.15. More conservative traders could use a stop loss closer to today's high (65.16). We want to exit ahead of the earnings announcement. That gives us about six trading days. The Point & Figure chart for AAP is bearish with a $52 target.

- Suggested Small Positions -

Buy the 2011 Feb. $60.00 puts (AAP11N60) current ask $0.65

Annotated Chart:

Entry on February 1st at $ xx.xx
Earnings Date 02/09/11 (unconfirmed)
Average Daily Volume = 1.0 million
Listed on January 31st, 2011


Donaldson Company, Inc. - DCI - close: 58.60 change: +0.56

Stop Loss: 60.35
Target(s): 52.75, 50.50
Current Option Gain/Loss: Unopened
Time Frame: 4 to 6 weeks
New Positions: Yes, see trigger

Company Description

Why We Like It:
The rally in DCI is quickly losing steam. Shares have been stuck under resistance near $60.00 for a few weeks now. The stock looks poised to breakdown from its trading range and correct lower. The early January lows were near $57.50. I am suggesting a trigger to buy puts at $57.50. If triggered we'll aim for a drop to $52.75 and $50.50. I would keep your position size small to limit our risk.

Trigger @ 57.45 (Small Positions)

- Suggested Positions -

Buy the 2011 March $55 puts (DCI1119O55)

Annotated Chart:

Entry on February xxth at $ xx.xx
Earnings Date 02/23/11 (unconfirmed)
Average Daily Volume = 208 thousand
Listed on January 31st, 2011