NEW DIRECTIONAL CALL PLAYS

iShares Biotech - IBB - close: 128.85 change: +2.45

Stop Loss: 124.90
Target(s): 134.85
Current Option Gain/Loss: Unopened
Time Frame: 3 to 6 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
The IBB biotech ETF has managed to avoid most of the market's pain. Shares reversed Thursday's pullback to close at new all-time, record highs on Friday. We like the relative strength here.

I am suggesting a trigger to buy calls at $129.25. We'll use a stop loss at $124.90. Our multi-week target is $134.85. More aggressive traders could aim higher.

Note: Readers may want to keep their position size small (see chart).

Trigger @ 129.25

- Suggested Positions -

buy the Jul $130 call (IBB1221G130) current ask $1.95

- or -

buy the Sep $135 call (IBB1222I135) current ask $2.45

Annotated Chart:

Entry on June xx at $ xx.xx
Earnings Date --/--/--
Average Daily Volume = 576 thousand
Listed on June 23, 2012


NEW DIRECTIONAL PUT PLAYS

Cummins Inc. - CMI - close: 90.39 change: -1.09

Stop Loss: 92.55
Target(s): 82.50
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
CMI makes diesel engines and related components. Unfortunately the industrial stocks are being sold on growing worries of a global slowdown. Shares of CMI are in a bearish channel and they just recently broke down from a pennant consolidation pattern.

The early June low was $89.44. I am suggesting a trigger to buy puts at $89.35. We'll set our first stop loss at $92.55. Our target is $82.50. FYI: The Point & Figure chart for CMI is bearish with an $82 target.

Trigger @ 89.35

- Suggested Positions -

buy the Jul $87.50 PUT (CMI1221S87.5) current ask $2.25

Annotated Chart:

Entry on June xx at $ xx.xx
Earnings Date 07/31/12 (unconfirmed)
Average Daily Volume = 2.8 million
Listed on June 23, 2012