NEW DIRECTIONAL PUT PLAYS

BorgWarner - BWA - close: 81.81 change: -2.54

Stop Loss: 84.55
Target(s): 75.50
Current Option Gain/Loss: Unopened
Time Frame: up to the April 26th earnings report
New Positions: Yes, see below

Company Description

Why We Like It:
Shares of BWA, an auto parts maker, are breaking down from a three-week consolidation sideways. The stock broke support near $82.00 today and is testing its 50-dma. The intraday low was $81.44. I am suggesting a trigger to buy puts at $81.25. Our target is $75.50.

We do want to keep our position size small. The most recent data listed short interest at 16% of the 107 million-share float. That does raise the risk of a short squeeze.

Trigger @ $81.25

- Suggested (small) Positions -

buy the Apr $80 PUT (BWA1221P80) current ask $1.05

Annotated Chart:

Entry on April xx at $ xx.xx
Earnings Date 04/26/12 (confirmed)
Average Daily Volume = 1.1 million
Listed on April 09, 2012


Timken Co. - TKR - close: 49.51 change: -1.32

Stop Loss: 51.55
Target(s): 45.50
Current Option Gain/Loss: Unopened
Time Frame: up to its late April earnings report
New Positions: Yes, see below

Company Description

Why We Like It:
TKR is in the industrial goods sector. The stock has spent weeks moving sideways in the $50-54 zone. Now shares are breaking down. I want to see a little more confirmation. Use a trigger to buy puts at $48.90. Our target is $45.50 although we need to keep a careful eye on possible technical support at the 100-dma, exponential 200-dma, and the 300-dma all near the $46 area. Keep position size small.

Trigger @ $48.90

- Suggested (small) Positions -

Buy the Apr $50 PUT (TKR1221P50) current ask $1.50

Annotated Chart:

Entry on April xx at $ xx.xx
Earnings Date 04/26/12 (unconfirmed)
Average Daily Volume = 846 thousand
Listed on April 09, 2012