NEW DIRECTIONAL CALL PLAYS

Phillip Morris Intl. - PM - close: 73.09 change: +1.01

Stop Loss: 69.90
Target(s): 78.50
Current Option Gain/Loss: Unopened
Time Frame: 6 to 9 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
Investors are growing cautious again with the stock market stumbling lower this past week. A lot of investors are turning to high-dividend stocks in their search for returns. PM has a dividend above 4% and the stock just broke out to new all-time highs.

I am suggesting we open bullish call positions on Monday morning if both PM and the S&P 500 index both open positive. However, just in case the S&P 500 moves lower and PM does not then we will use an alternative breakout trigger to buy calls on PM at $73.75.

I am listing this trade with a stop loss at $69.90 but more conservative traders might want to consider a stop near $70.75 instead. Our multi-week target is $78.50. FYI: The Point & Figure chart for PM is bullish with a $95 target.

- Suggested Positions -

buy the 2012 Jan $75 call (PM1221A75) current ask $1.53

Annotated Chart:

Entry on November xx at $ xx.xx
Earnings Date 02/09/12 (unconfirmed)
Average Daily Volume = 7.3 million
Listed on November 19, 2011


NEW DIRECTIONAL PUT PLAYS

Lululemon Athletica - LULU - close: 49.06 change: -1.26

Stop Loss: 51.25
Target(s): 42.50
Current Option Gain/Loss: Unopened
Time Frame: Seven Trading Days or 6 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
LULU sells athletic apparel and is known for its yoga clothing. The stock has been a huge winner from the bottom back in 2009. Yet now the stock seems to be losing strength. There are definitely a lot of investors that doubt the story, or at least LULU's valuation because short interest is high. The most recent data listed short interest at 19% of the 97.9 million-share float. That does raise the risk of a short squeeze if the market suddenly rebounds.

On a short-term basis LULU is breaking down under potential support near $50.00 and its simple and exponential 200-dma. Aggressive traders may want to buy puts now. I want to see a little bit more confirmation. Thus I am suggesting a trigger to buy puts at $47.90. If triggered we'll use a stop at $51.25 and aim for a drop to $42.50. More aggressive traders could for the $40.00 level instead. FYI: The Point & Figure chart for LULU is bearish with a $40 target.

TIME FRAME: Traders have to make a decision about their time frame with LULU. Normally I would give this trade a few weeks to work out but LULU is due to report earnings on December 1st. As a rule the newsletter almost never holds over an earnings report. At the moment we'll plan to exit this trade on November 30th if shares don't hit our exit before then.

Trigger @ 47.90

- Suggested Positions -

buy the DEC $47.50 PUT (LULU1117X47.5) current ask $2.85

- or -

buy the 2012 JAN $45 PUT (LULU1221M45) current ask $3.30

Annotated Chart:

Weekly Chart:

Entry on November xx at $ xx.xx
Earnings Date 12/01/11 (confirmed)
Average Daily Volume = 2.8 million
Listed on November 19, 2011