NEW DIRECTIONAL CALL PLAYS

Mohawk Industries - MHK - close: 72.55 change: +1.09

Stop Loss: 69.75
Target(s): 78.50
Current Option Gain/Loss: Unopened
Time Frame: exit prior to the Aug. 2nd earnings
New Positions: Yes, see below

Company Description

Why We Like It:
MHK makes flooring and carpet. The stock has spent the last three weeks churning under resistance near $70.00. The last two days have seen a breakout past this level with today's session retesting $70 as new support.

I am suggesting we buy calls at the open tomorrow with a stop under today's low. There is potential resistance at the May highs (near $75.00) but we're aiming for $78.50. FYI: The Point & Figure chart for MHK is bullish with an $85 target.

- Suggested Positions -

buy the Aug $75 call (MHK1218H75) current ask $2.05

Annotated Chart:

Entry on July xx at $ xx.xx
Earnings Date 08/02/12 (unconfirmed)
Average Daily Volume = 408 thousand
Listed on July 19, 2012


NEW DIRECTIONAL PUT PLAYS

Pharmacyclics Inc. - PCYC - close: 49.70 change: -2.80

Stop Loss: 51.05
Target(s): 45.05
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
PCYC, like most stocks that go parabolic, the rally eventually runs out of gas. It appears that PCYC has peaked at resistance near $60.00 back in early July. The initial correction took it down to $50 and the oversold bounce struggled at $55. Now PCYC is breaking down under short-term support at $50.00.

I am suggesting puts if PCYC confirms this breakdown. Today's low was $48.53. We'll use a trigger at $48.40. Our target is $45.05 but readers could aim for the simple 50-dma instead (currently near $42). FYI: The most recent data listed short interest at 11% of the 45 million-share float.

Trigger @ 48.40

- Suggested Positions -

buy the Aug $45 PUT (PCYC1218T45) current ask $1.90

Annotated Chart:

Entry on July xx at $ xx.xx
Earnings Date 09/12/12 (unconfirmed)
Average Daily Volume = 1.8 million
Listed on July 19, 2012