NEW DIRECTIONAL PUT PLAYS

Apple Inc. - AAPL - close: 320.26 change: -4.90

Stop Loss: 325.50
Target(s): 301.00
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see Trigger

Company Description

Why We Like It:
June has been a very rough month for AAPL with a drop from $350 to support at $320. Along the way AAPL has broken down through several layers of support including its simple 200-dma. AAPL hasn't been under its 200-dma since April 2009. This technical breakdown is very bearish but the stock managed to cling to its March 2011 lows near $320, which was a level of previous resistance.

I do want to point out that AAPL is currently an active call play for OI. We waited to buy a dip near its 200-dma on the expectation AAPL would bounce from this support level. Our AAPL call play has a stop loss at $318.25, which would be a new relative low. If AAPL does hit our stop at $318.25 I want to use that spot as an entry point to buy put options. Further weakness will most likely portend a drop toward support near $300. Some analysts are predicting a drop toward $280. Currently the Point & Figure chart for AAPL is bearish with a $292 target.

AAPL is due to report earnings in late July and we do not want to hold over this announcement.

Trigger @ 318.25

- Suggested Positions -

buy the July $300 PUT (AAPL1116S300) current ask $4.00

Annotated Chart:

Entry on June xxth at $ xx.xx
Earnings Date 07/19/11 (unconfirmed)
Average Daily Volume = 13.7 million
Listed on June 18th, 2011


Walter Energy, Inc. - WLT - close: 108.07 change: -1.03

Stop Loss: 115.50
Target(s): 100.50
Current Option Gain/Loss: Unopened
Time Frame: 4 to 6 weeks
New Positions: Yes, see TRIGGER

Company Description

Why We Like It:
WLT is a coal mining stock that has been stuck in a bearish trend of lower highs and lower lows for a couple of months. Yet it wasn't until this past week that WLT broke down under important support near $110 and its 200-dma, currently at $113.00. This opens the stock up for a drop toward prior resistance and what will likely be support near $100.

We don't want to chase it right here. There is a good chance that the market might bounce on Monday or Tuesday. We want to be ready to use that bounce as an entry point to launch bearish positions. The 200-dma should now be resistance. I am suggesting a trigger to open bearish positions at $112.00. We'll use a stop loss at $115.50. WLT can be a volatile stock so we want to keep our position size small to limit our risk. If triggered at $112.00 our target is $100.50. We do not want to hold over the late July earnings report.

Trigger @ $112.00

- Suggested Positions -

Buy the July $105 PUT (WLT1116S105) current ask $4.10

- or -

BUy the Sept. $100 PUT (WLT1117U100) current ask $6.65

Annotated Chart:

Weekly Chart:

Entry on June xxth at $ xx.xx
Earnings Date 07/27/11 (unconfirmed)
Average Daily Volume = 2.0 million
Listed on June 18th, 2011