NEW DIRECTIONAL CALL PLAYS

Caterpillar - CAT - close: 86.35 change: +1.33

Stop Loss: 84.90
Target(s): 91.50
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
In spite of concerns over a slowing global economy investors are buying shares of this industrial giant. CAT makes all manner of heavy duty equipment. It looks like the stock is turning higher after finding support in the $80-79 area. Shares are back above their 50-dma and challenging the late July high near $87.00.

I do consider this somewhat aggressive. CAT's recent earnings were strong and the company raised guidance but its stock price is probably still vulnerable to negative economic headlines. Furthermore the $90.00 level might be round-number resistance.

I am suggesting a trigger to buy calls at $87.25. Let's keep position size small. We'll use a stop loss at $84.90. Our target is $91.50 or the 100-dma.

Trigger @ 87.25

- Suggested Positions -

buy the Sep $90 call (CAT1222I90) current ask $1.60

Annotated Chart:

Entry on August xx at $ xx.xx
Average Daily Volume = 8.6 million
Listed on August 6, 2012