Editor's Note:

In addition to tonight's new trade, readers may want to put these stocks on their watch list for an entry point:

NILE, ORLY, THS, DSW, MT, ROK, XOM, and SNP

Please note that I am concerned for the rally. Stocks are up big off their Tuesday lows. We could see equities spike higher on Friday and then sell-off into the weekend. Investors will want to consider keeping their position size small to limit risk.

- James


NEW DIRECTIONAL CALL PLAYS

Sears Holding - SHLD - close: 63.51 change: +1.62

Stop Loss: 59.90
Target(s): 68.50
Current Option Gain/Loss: Unopened
Time Frame: 2 to 4 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
Sears is a heavily shorted stock and when the market reversed higher on Tuesday this stock shot higher through resistance at $60.00 and its 50-dma. Now it looks like SHLD is turning around after weeks of consolidating sideways. This should make shorts very nervous. There potential resistance at the 100-dma and the $66 level but I expect that if the market continues to rally then SHLD will soar toward its exponential 200-dma or $70.00.

The problem I have with this trade is that the jobs report is due out tomorrow morning. If the jobs number is good then the stock market (and SHLD) will probably gap open higher. More conservative traders may want to avoid this trade if SHLD gaps open too high (how high is too high? that's up to you). I am setting our exit target at $68.50, which is just under the 200-ema and its trendline of lower highs.

Please note that we do NOT want to buy calls unless both SHLD and the S&P500 index both open positive tomorrow.

It's worth noting that the Point & Figure chart on SHLD has reversed higher and is now pointing to an $83 target.

FYI: The most recent data listed short interest at 47% of the float.

*See Entry Point Details Above*

- Suggested Positions -

buy the OCT $65 call (SHLD1122J65) current ask $2.47

- or -

buy the NOV $67.50 call (SHLD1119K67.5) current ask $3.35

Annotated Chart:

Weekly Chart:

Entry on October xx at $ xx.xx
Earnings Date 11/17/11 (unconfirmed)
Average Daily Volume = 644 thousand
Listed on October 06, 2011