Editor's Note:

The first quarter has come to a close and stocks delivered a pretty good performance with the S&P 500 up +5%. I suspect the first few days of April could see inflows as fund managers put new money to work. However, we're quickly approaching the onset of Q1 earnings season in mid April. Odds are really good that this earnings season could be pivotal in fueling the next leg higher or acting as a catalyst for investors to take some money off the table, especially if corporate guidance doesn't back up the bullish outlook for the economic recovery. There has been a lot of talk about how healthy corporations are right now. They need to prove it.

This newsletter normally wants to avoid holding a position over an earnings report. There are too many variables that could send the stock plunging lower. Thus most of our current positions will be closed in the next two to four weeks. Any new positions are likely to be relatively short-term (less than three weeks).

In addition to tonight's new candidates these stocks caught my eye and might offer some opportunity: ROP, SWK, GWW, and ORLY.

- James


NEW DIRECTIONAL CALL PLAYS

CH Robinson Worldwide Inc. - CHRW - close: 74.90 change: +0.77

Stop Loss: 71.90
Target(s): 79.50
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see Trigger

Company Description

Why We Like It:
The Dow Jones Transportation index just broke out to new relative highs in spite of the recent surge in crude oil prices. Let's hop on board with a transport that is breaking out past multiple levels of resistance. CHRW just broke through resistance at $74.00 and at its 50-dma this past week. The rally stalled on Friday near resistance at $75-ish and at its 100-dma. I suspect CHRW will retest support near $74.00 so I am suggesting we buy calls on the dip at $74.50. Aggressive traders could go ahead and just buy calls now.

We do not want to hold over the late April earnings report. FYI: The Point & Figure chart for CHRW is bullish with a $91 target.

Trigger @ $74.50

- Suggested Positions -

Buy the May $75.00 calls (CHRW1121E75) current ask $2.40

Annotated Chart:

Entry on April xxth at $ xx.xx
Earnings Date 04/26/11(confirmed)
Average Daily Volume = 1.2 million
Listed on April 2nd, 2011


Sohu.com - SOHU - close: 90.88 change: +1.52

Stop Loss: 87.40
Target(s): 99.00, 107.50
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see trigger

Company Description

Why We Like It:
This play is for the aggressive traders out there. Chinese Internet-related stocks like SOHU and BIDU have been showing plenty of relative strength the last few days. SOHU managed to tag a new all-time high near $92.00 but it can't quite get past this level. The old high back in 2008 was $91.50. Fortunately for the bulls SOHU has a bullish trend of higher lows and looks ready to breakout further.

I am suggesting a trigger to buy calls at $92.50. If triggered our first target is $99.50. Our second, much more aggressive target is $107.50. However, we will plan to exit before the earnings report in late April.

I want to reiterate that this is an aggressive, higher-risk trade. I'm suggesting we keep our position size small to limit our risk. FYI: The Point & Figure chart for SOHU is bullish with a $120 target.

Trigger @ 92.50

- Suggested Positions -

Buy the May $100 call (SOHU1121E100) current ask $3.50

Annotated Chart:

Weekly Chart:

Entry on April xxth at $ xx.xx
Earnings Date 04/25/11 (unconfirmed)
Average Daily Volume = 1.1 million
Listed on April 2nd, 2011