Editor's Note:

It's going to be an interesting week with a flood of earnings and the debt ceiling tussle. Cautious traders may want to step back and not trade or at least scale back and trade very small. Headlines concerning the debt ceiling talks could roil the markets up or down on a daily basis. On top of that earnings will produce waves of headlines and plenty of volatility for individual stocks.

We're adding some bullish candidates but enter cautiously!

- James


NEW DIRECTIONAL CALL PLAYS

Caterpillar Inc. - CAT - close: 105.15 change: -6.45

Stop Loss: 102.95
Target(s): 110.00,
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
The reaction to CAT's earnings was overdone on Friday. The knee-jerk reactions pushed CAT to gap open lower and then hover near support around $105 and its 50-dma. Obviously the technical picture doesn't look so hot with the big decline, big volume, and now a new sell signal on the daily chart's MACD indicator. However, I suspect CAT will see a bounce back toward the $110-111 area as it fills the gap.

I am suggesting calls if both CAT and the S&P 500 open in positive territory on Monday morning. We'll start with a stop loss at $102.95, just under Friday's low.

buy calls if both CAT & S&P 500 are positive on Monday morning

- Suggested Positions -

buy the AUG $105 call (CAT1120H105) current ask $3.35

- or -

buy the AUG $110 call (CAT1120H110) current ask $1.43

Annotated Chart:

Entry on July xx at $ xx.xx
Earnings Date 07/22/11 (confirmed)
Average Daily Volume = 8.5 million
Listed on July 23, 2011


Open Text Corp. - OTEX - close: 69.48 change: +0.71

Stop Loss: 67.45
Target(s): 74.50
Current Option Gain/Loss: Unopened
Time Frame: 2 to 3 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
OTEX is a application software company. The stock has been surging and shares hit new all-time highs over $70 on July 14th. Since then the stock has been consolidating sideways in the $67.65-70.00 range. That consolidation seems to be narrowing. A breakout over $70.00 could produce another short squeeze. The most recent data listed short interest at more than 10% of the 55.9 million-share float. I am suggesting we buy calls now if both OTEX and the S&P 500 are both positive on Monday morning. More conservative traders will want to strongly consider waiting for a new breakout past $70.00 (maybe use a trigger at $70.25 to open positions). We will try to keep our exposure to a minimum with a tight stop loss at $67.45. We do not want to hold over the August earnings report.

If both S&P 500 and OTEX open positive on Monday

- Suggested Positions -

buy the AUG $70 call (OTEX1120H70) current ask $2.75

Annotated Chart:

Entry on July xx at $ xx.xx
Earnings Date 08/10/11 (unconfirmed)
Average Daily Volume = 300 thousand
Listed on July 23, 2011


PowerShares QQQ - QQQ - close: 59.60 change: +0.61

Stop Loss: 57.75
Target(s): 62.50, 64.75
Current Option Gain/Loss: Unopened
Time Frame: 3 to 6 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
Big cap technology stocks are leading the market higher. The NASDAQ-100 ETF (a.k.a. the QQQ) has broken out to new multi-year highs. I am suggesting we buy calls on this breakout. However, we only want to launch positions if the QQQs open positive on Monday morning. FYI: The Point & Figure chart for QQQ is bullish with a $89 target.

Trigger @ if the QQQs open positive on Monday morning.

- Suggested Positions -

buy the AUG $60 call (QQQ1120H60) current ask $0.97

- or -

buy the AUG $62 call (QQQ1120H62) current ask $0.24

Annotated Chart:

Entry on July xx at $ xx.xx
Earnings Date --/--/--
Average Daily Volume = 61.7 million
Listed on July 23, 2011