NEW DIRECTIONAL PUT PLAYS

PACCAR Inc. - PCAR - close: 39.41 change: -0.88

Stop Loss: 42.05
Target(s): 35.50
Current Option Gain/Loss: +0.0%
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
PCAR spent more than two weeks trying to breaokut past resistance near $44.00 and its exponential 200-dma. It looks like the bulls ran out of fuel and now selling pressure has resumed. The stock's breakdown under the psychological $40.00 level today is a new sell signal.

I am suggesting small bearish put positions now. We'll buy the open tomorrow morning with a stop loss at $42.05. More conservative traders might consider a stop closer to $41.50 instead. We'll set our target at $35.50 to start.

NOTE: It is possible that the 50-dma near 39.00 could be technical support so more conservative traders may want to wait for a drop under the 50-dma as their entry point instead.

- Suggested (Small) Positions -

buy the DEC $39 PUT (PCAR1117X39) current ask $1.80

Annotated Chart:

Entry on November 18 at $ xx.xx
Earnings Date 02/01/12 (unconfirmed)
Average Daily Volume = 3.7 million
Listed on November 17, 2011


Western Digital Corp. - WDC - close: 25.26 change: -1.56

Stop Loss: 27.75
Target(s): 21.00
Current Option Gain/Loss: + 0.0%
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
Massive flooding in Thailand has been wreaking havoc among some of the hardware makers. WDC makes hard drives and the disaster in Thailand is going to have a very negative impact on their business.

Traders quickly sold the bounce from yesterday. I am suggesting small bearish put positions now (tomorrow morning) with a stop above yesterday's high. WDC is currently resting on support at the $25.00 level and more conservative traders may want to wait for a drop under $25.00 to initiating positions instead.

It is possible that the 2010 lows near $23.00 could be support but we're aiming for a drop to the $21.00-20.00 zone.

We do want to keep our position size small because WDC has been very volatile the last few weeks.

- Suggested (Small) Positions -

buy the DEC $25 PUT (WDC1117X25) current ask $1.61

- or -

buy the JAN $22.50 PUT (WDC1221M22.5) current ask $1.36

Annotated Chart:

Entry on November 18 at $ xx.xx
Earnings Date 01/18/12 (unconfirmed)
Average Daily Volume = 6.4 million
Listed on November 17, 2011