NEW DIRECTIONAL CALL PLAYS

Coach, Inc. - COH - close: 62.64 change: +0.78

Stop Loss: 60.75
Target(s): 65.75
Current Option Gain/Loss: Unopened
Time Frame: up to the earnings report
New Positions: Yes, see below

Company Description

Why We Like It:
The luxury goods retailer is back on the play list as a call candidate. Shares have broken the bearish trend of lower highs and broken through resistance near $62.00 and its simple 50-dma. Retail stocks in general stumbled on Thursday morning in a reaction to very mixed December same-store sales, the group did recover. The RLX retail index ha also broken out past its 50-dma.

We like COH as a short-term bullish call candidate but we want to keep our position size small. I am suggesting bullish positions on Monday morning but only if both COH and the S&P 500 open positive. We'll use a stop loss at $60.75. Our upside target is $65.75. More aggressive traders could aim higher. NOTE: We do not want to hold over COH's late January earnings report, which is not confirmed yet (around January 25th).

*See Entry Details Above*

- Suggested Positions -

buy the Feb $65 call (COH1218B65) current ask $1.90

Annotated Chart:

Entry on January xx at $ xx.xx
Earnings Date 01/25/12 (unconfirmed)
Average Daily Volume = 2.3 million
Listed on January 07, 2012


NEW DIRECTIONAL PUT PLAYS

Walter Energy, Inc. - WLT - close: 58.73 change: -2.12

Stop Loss: 62.50
Target(s): 50.50
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
2011 was an ugly year for WLT and the bearish trend continues. The stock has been suffering under a bearish pattern of lower highs for months. Looking at the last few weeks WLT has been bouncing around the $58-64 zone. On Friday shares underperformed the market with a -3.4% drop on above average volume. Now the stock is on the verge of a breakdown.

Before I continue I have to warn you that WLT can be a volatile stock. What makes this trade even more challenging is that WLT has been considered a potential takeover candidate for months. Rumors consistently spark short-term spikes in this stock. Yet the overall trend is definitely bearish.

I am suggesting we use a trigger at $57.75 to buy puts but we want to keep our position size pretty small to limit our risk. More conservative traders may want to exit near the 2011 low ($53.41). I am listing our exit target at $50.50. FYI: The Point & Figure chart for WLT is bearish with a $49 target.

Trigger @ 57.75

- Suggested Positions -

buy the Feb $55 PUT (WLT1218N55) current ask $3.10

Annotated Chart:

Entry on January xx at $ xx.xx
Earnings Date 02/15/12 (unconfirmed)
Average Daily Volume = 2.0 million
Listed on January 07, 2012