Editor's Note:

Here is a list of stocks currently on my radar screen:

ORLY, ILMN, PCP, COH, BEN, BCR, UNP, EL, GR, APD, PH, HUM, NSC, NOC, WPI, JNJ, and TM.

- James


NEW DIRECTIONAL CALL PLAYS

Caterpillar - CAT - close: 108.62 change: +2.16

Stop Loss: 102.25
Target(s): 112.00
Current Option Gain/Loss: Unopened
Time Frame: Until the earnings report
New Positions: Yes, see trigger

Company Description

Why We Like It:
The combination of a market-wide rally and a sudden improvement in economic data has really boosted gains in shares of CAT. The stock has reversed higher but it's now short-term overbought. We want to buy calls but we don't want to chase it here. Broken resistance near its 50-dma and the 100-dma has converged near $105.00, which should now act as new support.

I am suggesting a buy-the-dip entry point to open small bullish positions at $105.50. If triggered we'll use a stop loss at $102.25. Our upside targets will be $109.75 and $112.00 but we'll plan on exiting ahead of the late July earnings report.

Trigger @ 105.50

- Suggested Positions -

Buy the Aug. $110 call (CAT1120H110)

Annotated Chart:

Entry on July xx at $ xx.xx
Earnings Date 07/22/11 (unconfirmed)
Average Daily Volume = 8.4 million
Listed on July 2, 2011


Norfolk Southern - NSC - close: 76.93 change: +2.00

Stop Loss: 71.99
Target(s): 79.75
Current Option Gain/Loss: Unopened
Time Frame: up until its earnings report.
New Positions: Yes, see trigger

Company Description

Why We Like It:
The transportation sector index has rallied to an all-time closing high above the 5500 level. This group got there thanks to relative strength in the railroad industry. NSC has broken out from a multi-week consolidation pattern and rallied past resistance at $75.00 to hit new all-time highs.

We don't want to chase it here. Broken resistance near $75 and $74 should be new support. I am suggesting a buy-the-dip trigger at $75.15. Our target is $79.75 but we do not want to hold over the late July earnings report.

Trigger @ $75.15

- Suggested Positions -

Buy the Aug. $75 call (NSC1120H75)

Annotated Chart:

Entry on July xx at $ xx.xx
Earnings Date 07/27/11 (unconfirmed)
Average Daily Volume = 2.3 million
Listed on July 2, 2011