Editor's Note:

The U.S. stock market is flashing some mixed signals. Some of the short-term technicals have turned bearish. New relative lows for the banking stocks have been a stumbling block for the market. Strength in the U.S. dollar is definitely having an impact, especially on commodities. Readers may want to take a step back and just wait. Give the market a couple of days to determine its direction. At the moment the S&P 500 has not yet broken the bullish trend of higher lows and higher highs but it certainly looks vulnerable.

- James


NEW DIRECTIONAL CALL PLAYS

Sherwin-Williams Company - SHW - close: 86.20 change: +0.08

Stop Loss: 83.95
Target(s): 92.25, 98.50
Current Option Gain/Loss: Unopened
Time Frame: 4 to 8 weeks
New Positions: Yes, see Trigger

Company Description

Why We Like It:
SHW has been very resistant to any profit taking. The last couple of weeks have seen shares slowly march higher. Now the stock is challenging major resistance and its all-time highs in the $86.00-86.75 zone. If SHW can breakout it could make a run at the $100 area. Of course that might be hard to do with the market's major indices slipping lower. I would take a cautious approach to new entries here.

I'm suggesting a trigger to buy calls at $87.00. If triggered our first target is $92.25. Our second, much more aggressive target is $98.50. I would not be surprised to see some resistance near the $90 and $95 levels. The Point & Figure chart for SHW is bullish with a $99 target. If the stock can rally past $87 it will produce yet another buy signal.

Trigger @ $87.00

- Suggested Positions -

buy the June $90 call (SHW1118F90) current ask $0.65

- or -

buy the Sept. $90 call (SHW1117I90) current ask $2.50

Annotated Chart:

Entry on May xxth at $ xx.xx
Earnings Date 07/21/11 (unconfirmed)
Average Daily Volume = 1.1 million
Listed on May 14th, 2011


NEW DIRECTIONAL PUT PLAYS

Pioneer Natural Resources - PXD - close: 92.15 change: -0.82

Stop Loss: 96.15
Target(s): 85.25
Current Option Gain/Loss: + 0.0%
Time Frame: 4 to 6 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
PXD is an independent oil and gas company that has seen a very impressive run from its August 2010 lows. Now the rally appears to have run its course. The sell-off in early May was very sharp. The oversold bounce is failing at resistance.

I am suggesting bearish positions now. We do want to keep our position size small to limit our risk because oil and oil stocks have been increasingly volatile lately. I am suggesting a stop loss at $96.15. We'll target a drop to $85.25. More aggressive traders could aim for the rising 200-dma instead. FYI: The Point & Figure chart for PXD is bullish with a $72 target.

Open Small Bearish Positions Now!

- Suggested Positions -

Buy the June $90 PUT (PXD1118R90) current ask $3.00

Annotated Chart:

Entry on May 16th at $ xx.xx
Earnings Date 07/27/11 (unconfirmed)
Average Daily Volume = 1.9 million
Listed on May 14th, 2011