Editor's Note:

We've got three new candidates tonight. They all offer a different entry point strategy.

- James


NEW DIRECTIONAL CALL PLAYS

Caterpillar Inc. - CAT - close: 99.59 change: +0.66

Stop Loss: 93.90
Target(s): 99.75, 104.00
Current Option Gain/Loss: Unopened
Time Frame: 4 to 6 weeks
New Positions: Yes, see trigger

Company Description

Why We Like It:
The $100 level is traditionally round-number, psychological resistance. Shares of CAT are quickly approaching this level. I would expect a little pull back and we want to be ready to buy the dip near the bottom of CAT's rising bullish channel. I'm suggesting a trigger at $96.50 with a stop at $93.90. Our targets are $99.75 and $104.00.


The Point & Figure chart for CAT is bullish with a $112 target.

Trigger @ 96.50

Buy the March $100 calls (CAT1119C100) current ask $2.92

Annotated Chart:

Entry on February xxth at $ xx.xx
Earnings Date 04/21/11 (unconfirmed)
Average Daily Volume = 6.2 million
Listed on February 5th, 2010


Donaldson Company, Inc. - DCI - close: 59.43 change: +0.71

Stop Loss: 57.40
Target(s): 62.50, 64.75
Current Option Gain/Loss: Unopened
Time Frame: 4 to 6 weeks
New Positions: Yes, see trigger

Comments:
02/05 update: We have had DCI on our newsletter as a put candidate with the expectation that when the market corrects shares of DCI would breakdown from its trading range. Now it looks like the market is not going to correct any time soon and DCI is poised to breakout higher from its trading range. We are switching directions. Instead of puts we want to buy calls.

I am suggesting a trigger to buy calls at $60.35. If triggered we'll use a stop at $57.40. Our targets are $62.50 and $64.75. We will plan to exit ahead of the late February earnings report.

Trigger @ 60.35 (Small Positions)

- Suggested Positions -

Buy the 2011 March $60 calls (DCI1119C60) Current ask $1.75

02/05 Switched from puts to calls. Trigger @ 60.35

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


PACCAR Inc. - PCAR - close: 50.60 change: +0.10

Stop Loss: 49.45
Target(s): 53.85
Current Option Gain/Loss: + 0.0%
Time Frame: 2 to 3 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
Shares of PCAR were crushed after only reporting earnings results that were inline with expectations. The stock has been hammered from the $56 level toward round-number, psychological support near $50 in just days. It would seem the sell-off might be overdone. PCAR seems to have found some support. I think we can catch a short-term bounce from $50 toward resistance near $54.

I'm suggesting small bullish positions now. Buy calls at current levels. The low on Thursday was $49.70. We'll use a stop at $49.45. Our exit target is $53.85. This should be a short-term trade. Aggressive traders could use February calls. I'm listing both February and March. Just remember that Februarys expire in two weeks.

Note: A lot of the option strikes are odd. PCAR must have had some sort of dividend.

Open Small Positions Now

Buy the February $49.70 call (PCAR1119B49.7) current ask $1.60

- or -

Buy the March $55 call (PCAR 1119C55) current ask $0.40 (small positions)

Annotated Chart:

Entry on February 7th at $ xx.xx
Earnings Date 04/20/11 (unconfirmed)
Average Daily Volume = 2.9 million
Listed on February 5th, 2010