NEW DIRECTIONAL PUT PLAYS

DaVita Inc. - DVA - close: 83.65 change: -0.84

Stop Loss: 85.35
Target(s): 80.50, 77.00
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see Trigger

Company Description

Why We Like It:
DVA provides dialysis services for patients with kidney problems. Unfortunately the rally in DVA peaked in early May. Shares tried to hold support near their 50-dma but eventually lost it. Now DVA looks poised to begin a new leg lower. I would be very tempted to buy puts now. However, DVA has bounced twice from the $83.50 area. I am suggesting a trigger to buy puts at $83.30. If triggered our first target is $80.50 (near the 100-dma). The $80 area will probably be short-term support so we can expect a bounce there. Our secondary target is $77.00.

We want to keep our position size small to limit our risk.

Trigger @ 83.30 (small positions)

- Suggested Positions -

buy the June $85 PUT (DVA1118R85) current ask $2.30

- or -

buy the June $80 PUT (DVA1118R80) current ask $0.55

Annotated Chart:

Entry on May xxth at $ xx.xx
Earnings Date 08/02/11 (unconfirmed)
Average Daily Volume = 1.0 million
Listed on May 24th, 2011


Perrigo Co. - PRGO - close: 82.97 change: -0.14

Stop Loss: 86.15
Target(s): 78.00
Current Option Gain/Loss: + 0.0%
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
PRGO is in the healthcare sector and the company makes a number of healthcare related, nutritional, and generic drug products. Unfortunately for the bulls the up trend has reversed. Yesterday's breakdown under support near $85 has created a new sell signal. I would prefer to launch new positions on a bounce or failed rally in the $85-86 area but we may not get that chance. Thus I am suggesting small bearish positions now. If we do see a failed rally near $85 we might add to our positions. Our first target is the $78.00 level (or the 100-dma).

Small Positions!

buy the June $80 PUT (PRGO1118R80) current ask $1.00

Annotated Chart:

Entry on May 25th at $ xx.xx
Earnings Date 08/11/11 (unconfirmed)
Average Daily Volume = 654 thousand
Listed on May 24th, 2011