Editor's Note:

Energy stocks were showing some relative strength on Friday. There are plenty of stocks that could be bullish candidates in this sector. DVN caught my eye with the traders buying the dip twice near $90.00. Aggressive traders may want to buy calls on DVN on a move over $92.50. I am watching for a move past $93.50 as a potential entry point.

CXO is another energy stock that looks bullish. The stock is starting to bounce from technical support at its 50-dma. I was very tempted to buy calls now with a tight stop under the 50-dma. You could target a quick move toward resistance near $110.00. More conservative traders could wait for a breakout over $110 before initiating positions.

BCR is a healthcare stock. I'm watching for a dip near $98.00. VMW is a technology company. Look for a move past $84.00 or $85.00 as a potential entry point.

If you prefer bearish candidates given the market's recent weakness, then check out these stocks: SHLD, LEA, COH, MMS, and COHR all looks like possible bearish put candidates.

- James


NEW DIRECTIONAL CALL PLAYS

Honeywell Intl. Inc. - HON - close: 58.30 change: -0.19

Stop Loss: 56.99
Target(s): 62.75
Current Option Gain/Loss: + 0.0%
Time Frame: less than two weeks
New Positions: Yes, see below

Company Description

Why We Like It:
HON is a very diversified technology and manufacturing company. The stock rallied to new two-year highs at the end of March and has slowly been consolidating lower. Prior resistance near $58.00 is now acting as support. Friday's intraday bounce from this level near $58 looks like a new bullish entry point. However, the broad market indices look vulnerable. We want to be cautious launching new bullish positions. Therefore I am suggesting small positions either 1/2 or 1/4 your normal trade size. We'll use a stop loss at $56.99. More conservative traders could put their stop closer to Friday's low near $57.80 instead. Our upside target is $62.75 but we will plan on exiting ahead of the April 21st earnings report.

Open Small Positions Now

- Suggested Positions -

Buy the May $60.00 call (HON1121E60) current ask $1.03

Annotated Chart:

Entry on April 11th at $ xx.xx
Earnings Date 04/21/11 (confirmed)
Average Daily Volume = 4.0 million
Listed on April 9th, 2011


Vertex Pharmaceuticals - VRTX - close: 48.16 change: +1.25

Stop Loss: 45.95
Target(s): 51.85, 58.50
Current Option Gain/Loss: + 0.0%
Time Frame: about 2, maybe 3 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
VRTX soared to new nine-year highs back in February this year on some positive clinical trial data. Shares have been pretty volatile since then but VRTX is developing a trend of higher lows. The stock is marching to the beat of its own drum and doesn't seem as influenced by the broad market indices. That doesn't mean it will be immune if the S&P 500 or NASDAQ declines. This remains a higher-risk trade because VRTX has been so volatile. I can't find a confirmed earnings date but it looks like VRTX might report on April 21st. That gives us less than two full weeks.

I am suggesting very small bullish positions now. Our first target is $51.85. Our second, much more aggressive target is $58.50 but again, we don't have a lot of time so we may have to exit early. I am listing our stop at $45.95, under last week's lows.

- Open Very Small Bullish Positions -

- Suggested Positions -

Buy the May $50.00 calls (VRTX1121E50) current ask $2.70

Annotated Chart:

Entry on April 10th at $ xx.xx
Earnings Date 04/21/11 (unconfirmed)
Average Daily Volume = 2.1 million
Listed on April 9th, 2011