NEW DIRECTIONAL CALL PLAYS

Caterpillar, Inc. - CAT - close: 114.45 change: +0.75

Stop Loss: 111.95
Target(s): 119.75
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
Bullish investors have lifted shares of CAT from $90 in late December toward the $115 level seven weeks later. The last couple of weeks this Dow Industrial component has been consolidating sideways under resistance near $115.00. Now CAT looks poised to breakout to new multi-month highs.

I am suggesting a trigger to open bullish positions at $115.25. If triggered we'll use a stop loss at $111.95. Our initial target is $119.75. It's possible that the 2011 high near $116.50 could be resistance but I doubt it, not after CAT spent the last two weeks building up steam for a new leg higher. FYI: The Point & Figure chart for CAT is bullish with a $165 target.

NOTE: CAT's rival Deere (DE) is due to report earnings tomorrow morning at 7:00 a.m. before the opening bell. If DE beats Wall Street expectations ($1.20/share) then CAT will likely rally. If DE misses then CAT could follow DE lower and our trade will not open. The risk lies somewhere in the middle. Let's say DE reports numbers that are in-line with estimates. Then CAT and DE might drift higher but DE's conference call starts at 10:00 a.m. and if management says something negative both stocks could fall.

Trigger @ 115.25

- Suggested Positions -

buy the Mar $120 call (CAT1217C120) current ask $1.43

Annotated Chart:

Entry on February xx at $ xx.xx
Earnings Date 04/26/12 (unconfirmed)
Average Daily Volume = 7.5 million
Listed on February 14, 2012


Sherwin-Williams - SHW - close: 99.80 change: +0.65

Stop Loss: 97.45
Target(s): 104.75
Current Option Gain/Loss: Unopened
Time Frame: 3 to 5 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
Shares of this paint and coatings company have been very strong. The stock is up several weeks in a row and isn't showing nay signs of slowing down. The bullish trend of higher lows is suggesting SHW will breakout past round-number, psychological resistance at the $100.00 level soon.

We will have to keep an eye on the homebuilders since SHW tends to follow the group higher. I am suggesting a trigger to open bullish positions at $100.25. If triggered we'll aim for $104.75.

Trigger @ $100.25

- Suggested Positions -

buy the Mar $100 call (SHW1217C100) current ask $2.20

Annotated Chart:

Entry on February xx at $ xx.xx
Earnings Date 04/23/12 (unconfirmed)
Average Daily Volume = 1.0 million
Listed on February 14, 2012