NEW DIRECTIONAL CALL PLAYS

Alliance Data Systems - ADS - close: 92.01 change: +2.91

Stop Loss: 87.99
Target(s): 96.50, 99.75
Current Option Gain/Loss: + 0.0%
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
Monday's breakdown under $90.00 looked pretty bearish for ADS. Yet there was no follow through lower. Shares have spent most of this week building support at the $88 level and now the stock is bouncing from technical support near its 40 and 50-dma. The rally back above $90.00 is bullish. Normally, I would be tempted to wait for a dip and buy calls on a pull back near $91 or even $90. However, ADS has above average short interest and the stock may not see a pull back any time soon. Therefore I am suggesting we buy calls immediately. This does raise the risk on this trade so let's keep our position size small.

FYI: The most recent data listed short interest at more than 26% of the float. This elevated short interest significantly raises the risk of a short squeeze.

- Suggested (SMALL) Positions -

Buy the June $95 call (ADS1118F95) current ask $0.95

- or -

buy the July $95 call (ADS1116G95) current ask $2.00

Annotated Chart:

Entry on May 27th at $ xx.xx
Earnings Date 07/18/11 (unconfirmed)
Average Daily Volume = 999 thousand
Listed on May 26th, 2011


Fossil Inc. - FOSL - close: 105.15 change: +2.89

Stop Loss: 99.35
Target(s): 109.75, 114.00
Current Option Gain/Loss: + 0.0%
Time Frame: 3 to 6 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
In spite of three weeks of market declines FOSL never broke down under the $100 level. The lowest it got to was $99.41. Today's rally has broken the short-term trend of lower highs. Considering the strength in consumer goods I am suggesting bullish positions in FOSL now. However, we do want to keep our position size small to limit our risk. We'll start this trade with a stop at $99.39. More conservative traders may want to wait for a dip near the $103.00-102.50 area before initiating positions.

- Suggested (SMALL) Positions -

buy the June $110 call (FOSL1118F110) current ask $1.40

- or -

buy the July $110 call (FOSL1116G110) current ask $3.10

Annotated Chart:

Entry on May 27th at $ xx.xx
Earnings Date 08/09/11 (unconfirmed)
Average Daily Volume = 842 thousand
Listed on May 26th, 2011