NEW DIRECTIONAL CALL PLAYS

Zimmer Holdings - ZMH - close: 75.11 change: +1.05

Stop Loss: 72.90
Target(s): 79.50
Current Option Gain/Loss: + 0.0%
Time Frame: 3 to 6 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
ZMH screamed higher most of January. The stock started to correct lower just before the company's earnings report. Once they did report earnings on January 31st there was a spike down but traders bought the dip at its rising 20-dma. They bought the dip again a couple of days later. Now ZMH appears to be resuming its march higher.

I still consider the stock somewhat overbought here but that doesn't mean it can't run for another couple of weeks. I am suggesting we keep our position size small to limit our risk. Open small positions at the opening bell tomorrow morning. Our target is $79.50. FYI: The Point & Figure chart for ZMH is bullish with a long-term $89 target.

- Suggested Positions - *small positions*

buy the Mar $75 call (ZMH1316c75) current ask $1.60

Annotated Chart:

Entry on February -- at $---.--
Average Daily Volume = 1.2 million
Listed on February 06, 2012


NEW DIRECTIONAL PUT PLAYS

Blue Nile Inc. - NILE - close: 32.20 change: -0.73

Stop Loss: 33.25
Target(s): 26.25
Current Option Gain/Loss: Unopened
Time Frame: To be determined (see below)
New Positions: Yes, see below

Company Description

Why We Like It:
NILE is an online jewelry retailer. Most of the stock market was in rally mode in January. Not so for shares of NILE which moved the opposite direction. NILE found support near $32.00 but the oversold bounce has reversed near resistance at $34 and its simple 200-dma. Now NILE looks poised to resume the slide lower.

The stock has bounced several times in the $31.70-31.60 region. Monday saw a new relative low at $31.54. I am suggesting a trigger to buy puts at $31.45. However, we want to keep our position size small to limit our risk. I am concerned that the $30.00 level might be potential round-number support. Plus there is the issue of NILE's earnings report. Normally we avoid holding over an earnings report. I'm tempted to hold over NILE's because retail sales in December for the economy were not as strong as many had expected. This may help explain some of NILE's recent weakness. NILE is scheduled to report earnings on Feb. 12th, after the closing bell. For now, we'll plan on exiting prior to the report but we may adjust our strategy when we get closer to NILE's announcement on the 12th.

Trigger @ 31.45 *Small Positions*

- Suggested Positions -

buy the Mar $30 PUT (NILE1316o30) current ask $1.55

Annotated Chart:

Entry on February -- at $---.--
Average Daily Volume = 319 thousand
Listed on February 06, 2012