NEW DIRECTIONAL CALL PLAYS

Capital One Financial - COF - close: 49.18 change: +1.20

Stop Loss: 47.75
Target(s): 54.75
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Company Description

Why We Like It:

"What's in your wallet?"

Sorry, couldn't resist COF's often-played commercial tagline. This financial stock has been consolidating sideways under resistance at the $50 level for weeks. Shares look ready to breakout.

The stock was showing relative strength today as investors reacted to news that the Federal Reserve had given their approval to COF's new purchase. The company is buying ING Groep NV's U.S. banking division (ING Direct USA) for $9 billion. This deal will increase COF's deposit base by $80 billion and add seven million new customers. It also bumps COF to the fifth largest U.S. bank, pushing U.S. Bancorp (USB) to sixth (source: Bloomberg). A Citigroup analyst offered some positive comments on this deal suggesting it would be a big boost to COF's earnings.

Not only does COF have major resistance near $50.00 but its trend line of lower highs also crosses directly above it near $50. I am suggesting a trigger to buy calls at $50.25 with a stop loss at $47.75. Our multi-week exit target is $54.75.

The U.S. stock market looks a little vulnerable right now. I am suggesting we keep our position size small to limit our risk.

Trigger @ $50.25 (small positions)

- Suggested Positions -

buy the Mar $50 call (COF1217C50) current ask $1.40

Annotated Chart:

Weekly Chart:

Entry on February xx at $ xx.xx
Earnings Date 04/23/12 (unconfirmed)
Average Daily Volume = 6.4 million
Listed on February 15, 2012