Editor's Note:

Additional stocks that caught my eye as possible bullish candidates this weekend are: HSIC, ESRX, EL, ZMH, and COH.

- James


NEW DIRECTIONAL CALL PLAYS

NetApp, Inc. - NTAP - close: 53.30 change: +1.80

Stop Loss: 50.75
Target(s): 58.00
Current Option Gain/Loss: + 0.0%
Time Frame: about 3 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
NTAP is a data storage company. The stock has spent the last two weeks consolidating sideways between overhead resistance at its 100-dma and short-term support at the $51.00 level. That changed on Friday with NTAP's bullish breakout. I am suggesting we buy calls now with a stop loss at $50.75. More aggressive traders could put their stop lower under the 200-dma or the $50.00 mark. I do see potential resistance near $55.00, which is the bottom of NTAP's gap down in February and there is potential resistance at the top of the gap near $58.00. However, if the wider market rallies I expect NTAP to power past the $55 level. We're setting our exit target at $58.00. FYI: The Point & Figure chart for NTAP is bullish with a $68 target.

NOTE: We do not want to hold over the late May earnings report. The date is still unconfirmed. This gives is about two or three weeks as our time frame.

- Suggested Positions -

Buy the June $55 calls (NTAP1118F55) current ask $1.88

Annotated Chart:

Entry on May 9th at $ xx.xx
Earnings Date 05/25/11 (unconfirmed)
Average Daily Volume = 5.8 million
Listed on May 7th, 2011


Union Pacific - UNP - close: 102.34 change: +0.63

Stop Loss: 98.95
Target(s): 109.00, 114.00
Current Option Gain/Loss: + 0.0%
Time Frame: 4 to 8 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
Railroad stocks helped fuel the Dow Jones Transportation average to a new all-tie high in the last two weeks. UNP was a part of that move with a breakout past major resistance at $100. Now broken resistance is new support. This dip is a bullish entry point to buy calls. I am suggesting new positions now. Cautious traders may want to wait and hope for a dip into the $101-100 zone as their entry point instead. Our targets are $109.00 and $114.00. FYI: The Point & Figure chart for UNP is bullish with a $116 target.

- Suggested Positions -

Buy the June $105 call (UNP1118F105) current ask $1.78

Annotated Chart:

Entry on May 9th at $ xx.xx
Earnings Date 07/21/11 (unconfirmed)
Average Daily Volume = 3.4 million
Listed on May 7th, 2011


SPDR Oil & Gas ETF - XOP - close: 57.97 change: +0.68

Stop Loss: 55.99
Target(s): 61.00, 65.00
Current Option Gain/Loss: + 0.0%
Time Frame: 4 to 8 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
The XOP is an exchange traded fund (ETF) designed to track the oil and gas exploration and production industry. So why buy calls on the XOP now? The sell-off last week was terrible and fueled by big volume. By all accounts it looks like a bearish breakdown and change in trend. Normally I would be tempted to look for the next failed rally at resistance as an entry point to buy puts. However, we have a strong suspicion that the sell-off in oil was overdone due to the weakness across the commodity sector. It may have been influenced by traders needing to liquidate something to make their margin calls for their silver positions.

We are suggesting calls here but this is a very aggressive and high-risk trade. I like the XOP because we don't have to deal with any one stock struggling due to company specific news. You'll notice the XOP bounced at support near its early February and early March lows. I'm suggesting we buy calls right here with a stop loss at $55.99. Our first target is $61.00. Our second, more aggressive target is $65.00 but the XOP will have to climb through a cloud over overhead resistance to get there. Keep an eye on the U.S. dollar. If the dollar continues to rise it will put downward pressure on oil prices and oil stocks could follow it lower.

I would keep our position size small to limit our risk. We can buy May calls for the short-term bounce and exit soon since May calls expire in two weeks. The June calls would be a little less risky.

- Suggested Positions - (Small positions)

buy the May $58.00 call (XOP1121E58) current ask $1.50

- or -

buy the June $60.00 call (XOP1118F60) current ask $1.64

Annotated Chart:

Entry on May 9th at $ xx.xx
Earnings Date --/--/--
Average Daily Volume = 4.8 million
Listed on May 7th, 2011