Editor's Note:

Nimble traders may want to take a look at BIDU. The stock has been underperforming the market. The last two weeks saw BIDU produced a bearish H&S pattern as well as breakdown under several key moving averages. I was ready to write a put play on BIDU but earnings are coming up on October 27th (after the closing bell). That doesn't give us a lot of time.

- James


NEW DIRECTIONAL CALL PLAYS

Costco Wholesale - COST - close: 85.30 change: +1.04

Stop Loss: 83.75
Target(s): 97.50
Current Option Gain/Loss: Unopened
Time Frame: 4 to 8 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
COST saw a big surge on Tuesday and then spent the rest of the week consolidating gains with a sideways trade above $84.00. I am tempted to buy calls now. However, I still see resistance in the $86.00-86.35 area from September. I am suggesting a trigger to open bullish positions at $86.50. If triggered we'll use a stop loss at $83.75. Our multi-week exit target is $97.50. Cautious traders will want to consider an exit near $90 or $94 instead. Keep positions small.

Trigger @ $86.50 (small positions)

- Suggested Positions -

buy the NOV $85 call (COST1119K85) current ask $2.19

- or -

buy the 2012 Jan $90 call (COST1221A90) current ask $1.85

Annotated Chart:

Entry on October xx at $ xx.xx
Earnings Date 12/07/11 (unconfirmed)
Average Daily Volume = 2.9 million
Listed on October 22, 2011


Goldman Sachs - GS - close: 102.09 change: +1.23

Stop Loss: 97.95
Target(s): 114.00
Current Option Gain/Loss: Unopened
Time Frame: 4 to 6 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
GS just reported a terrible earnings report this past week. The company missed estimates by 68 cents a share. Instead of crashing the stock rallied! If investors are buying bad news then the bears are in trouble. The stock has broken one of its bearish trendlines of lower highs. It's currently in the process of breaking out past resistance in the $100-105 area and its simple 50-dma.

More conservative traders may want to wait for a rise past its 50-dma ($104.00) or a rally past last week's high (105.00) before initiating positions. We are suggesting traders buy calls now but only if both GS and the S&P 500 index both open positive on Monday. Keep in mind that there is no resolution in Europe yet so trading financial stocks can be risky. We want to keep our position size small to limit our risk.

Our target is $114.00. More conservative traders may want to exit near $110 instead.

*See Entry Point Details Above* (Small Positions)

- Suggested Positions -

buy the NOV $110 call (GS1119K110) current ask $1.80

Annotated Chart:

Entry on October xx at $ xx.xx
Earnings Date 10/18/11 (confirmed)
Average Daily Volume = 8.2 million
Listed on October 22, 2011


Rockwell Automation - ROK - close: 66.54 change: +2.85

Stop Loss: 61.90
Target(s): 71.75
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
After more than a week of consolidating sideways in the $62-66 zone shares of ROK look rested and ready to run. The stock was showing relative strength on Friday with a +4.4% gain and a breakout past the $66.00 level. I am suggesting bullish positions now but only if ROK and the S&P 500 index both open positive on Monday. If triggered we'll use a stop loss at $61.90. More conservative traders might want to consider a stop closer to $64 instead. I am somewhat concerned that the simple 100-dma or the exponential 200-dma could be overhead resistance. Let's keep our position size small. Our exit target is $71.75. FYI: The Point & Figure chart for ROK is bullish with a $91 target.

*See Entry Point Details Above* (Small Positions)

- Suggested Positions -

buy the NOV $70 call (ROK1119K70) current ask $1.90

Annotated Chart:

Entry on October xx at $ xx.xx
Earnings Date 11/08/11 (confirmed)
Average Daily Volume = 1.7 million
Listed on October 22, 2011