Editor's Note:

The major U.S. indices have broken out past resistance. The bulls are still firmly in control. I am sure that the very act of me giving up my reluctant bullish stance and embracing the rally will be the final straw that turns the market around. However, until the trend changes we need to go with the flow.

In addition to tonight's new candidates there were several additional stocks that caught my attention. Be sure to check for potential earnings dates. Some of these need to see a breakout past resistance while other need to see a pull back. On my watch list tonight are: AAPL, CKH, PX, EMN, CMP, PPG, WYNN, ILMN, ESRX, OXY, MMM, UPS, and MCD.

- James


NEW DIRECTIONAL CALL PLAYS

Ashland Inc. - ASH - close: 58.41 change: +0.50

Stop Loss: 54.95
Target(s): 63.00
Current Option Gain/Loss: +0.0%, and +0.0%
Time Frame: 6 to 8 weeks
New Positions: Yes

Company Description

Why We Like It:
The big pop higher in late January was a reaction to ASH's much better than expected Q4 earnings news. The stock has spent the last couple of weeks digesting those gains. Now shares look ready to bounce again. I am suggesting bullish positions now at current levels. We'll use a stop loss at $54.95 but more conservative traders could probably get away with a tighter stop loss. Our first target is the $63.00 level.

The Point & Figure chart for ASH is bullish with a $83 target.

Open Positions Now

- Suggested Positions -

Buy the March $60 calls (ASH1119C60) current ask $1.45

- or -

Buy the April $60 calls (ASH1116D60) current ask $2.20

Annotated Chart:

Entry on February 14th at $ xx.xx
Earnings Date 04/27/11 (unconfirmed)
Average Daily Volume = 1.0 million
Listed on February 12th, 2010


Fluor Corp. - FLR - close: 73.52 change: +2.11

Stop Loss: 69.25
Target(s): 77.25, 79.75
Current Option Gain/Loss: Unopened
Time Frame: 7 trading days
New Positions: Yes, see trigger

Company Description

Why We Like It:
The market's strength on Friday was enough to lift FLR out of its trading range. This stock has broken out to new two-year highs after four weeks of consolidating sideways. Aggressive traders may want to buy calls now. I am suggesting we wait for a dip and use a trigger at $72.00 to launch bullish positions.

Please note that this is a short-term trade. We only have a few days. FLR is due to report earnings on Wednesday, Feb. 23rd before the opening bell. Therefore we will plan to exit on Tuesday, Feb. 22nd at the closing bell, if FLR hasn't hit our exit target before then.

The Point & Figure chart for FLR is bullish with an $84 target.

Trigger @ $72.00

- Suggested Positions -

Buy the March $75.00 calls (FLR1119C75) current ask $2.50

Annotated Chart:

Entry on February xxth at $ xx.xx
Earnings Date 02/23/11 (unconfirmed)
Average Daily Volume = 2.0 million
Listed on February 12th, 2010


Proshares Ultra(long) Russell 2000 - UWM - close: 46.87 change: +1.03

Stop Loss: 42.99
Target(s): 49.75, 54.00
Current Option Gain/Loss: +0.0%
Time Frame: 6 to 8 weeks
New Positions: Yes, see below

iShares Russell 2000 - IWM - close: 82.07 change: +0.88

Stop Loss: 78.65
Target(s): 84.95, 87.25
Current Option Gain/Loss: +0.0%
Time Frame: 6 to 8 weeks
New Positions: Yes, see below

Why We Like It:
A few days ago, when the market looked like it was going to roll over and breakdown, we added a bearish put play on the IWM to try and capture a drop in the small cap Russell 2000 index. That trade did not work out (you can see it in the puts section of our updates). When the Russell 2000 index started to move higher I started talking about buying calls on a breakout in the IWM (Russell 2000) for a few days now. Instead of talking about it we want to follow up on that trading idea. In addition to buying calls on the IWM I am also listing the UWM, which is the double long (2x) ETF on the Russell 2000 index, which has the symbol UWM.

Since these are both ETFs on the Russell 2000 index I am listing them together. More conservative traders will want to trade the IWM, which has less volatility.

I am suggesting we add small bullish positions now on this breakout higher. Then if we see a dip back toward short-term support we can add to positions.

Small Positions Now at current levels

- UWM Position -

Buy the April $48 calls (UWM1116D48) current ask $2.75

UWM Chart:

- or -

- IWM Position -

Buy the April $84 calls (IWM1116D84) current ask $1.84

IWM Chart:

UWM Entry on February 14th at $ xx.xx
IWM Entry on February 14th at $ xx.xx
Listed on February 12th, 2010


Joy Global Inc. - JOYG - close: 93.89 change: +1.24

Stop Loss: 87.40
Target(s): 97.25, 99.85
Current Option Gain/Loss: +0.0%
Time Frame: 3 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
JOYG makes mining equipment and the stock has been a consistent winner thanks to the rising price of commodities. The stock now looks poised to breakout to another round of new all-time highs. I am suggesting small bullish positions now at current levels but we should be prepared for a dip back toward the $91.50-90.00 zone. A dip in this area could be used to add to positions.

I do consider this a more aggressive, higher-risk trade because our stop loss is a little wide. You could try a tighter (more conservative) stop loss but JOYG can see sudden bouts of volatility. Our upside targets are $97.25 and $99.85.

The Point & Figure chart for JOYG is bullish with a $113 target.

Small Bullish Positions Now.

- Suggested Positions -

Buy the March $95 calls (JOYG1119C95) current ask $3.85

- or -

Buy the April $100 calls (JOYG1116D100) current ask $3.15

Annotated Chart:

Entry on February 14th at $ xx.xx
Earnings Date 03/02/11 (unconfirmed)
Average Daily Volume = 1.4 million
Listed on February 12th, 2010


Quality Systems Inc. - QSII - close: 80.80 change: +1.15

Stop Loss: 77.95
Target(s): 84.90, 89.00
Current Option Gain/Loss: +0.0%
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
QSII is a short squeeze candidate. Look at the daily chart. Those sudden moves higher were helped by short covering. The most recent data listed short interest at more than 29% of the very small 17 million share float. That is definitely a recipe for a short squeeze. Now the stock has been consolidating sideways under the $81.00 level. Normally, I would suggest we wait for a breakout (past $81.00) and use a trigger to open positions (maybe a trigger at $81.25). More conservative traders may want to follow that route. Tonight I am suggesting a more aggressive entry point to go ahead and buy calls now. Don't go overboard just because the March $85 calls look cheap.

The Point & Figure chart for QSII is bullish with a $119 target.

Open Positions Now at current levels

- Suggested Positions -

Buy the March $85 calls (QSII1119C85) current ask $0.90

Annotated Chart:

Entry on February 14th at $ xx.xx
Earnings Date 05/31/11 (unconfirmed)
Average Daily Volume = 202 thousand
Listed on February 12th, 2010