NEW DIRECTIONAL CALL PLAYS

Biotech ETF - BBH - close: 95.56 change: -0.30

Stop Loss: 93.75
Target(s): 109.00
Current Option Gain/Loss: Unopened
Time Frame: 6 to 7 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
The BBH is an ETF that mimics the Market Vectors US Listed Biotech 25 index. The top ten holdings for this ETF are: GILD, AMGN, CELG, BIIB, ALXN, VRTX, ILMN, INCY, REGN, QGEN. Biotechs as a group were strong performers last year and they have continued to show relative strength this year. If this market does manage to reverse higher we would expect the biotechs to outperform.

Today's high for the BBH was $97.13. I am suggesting a trigger to buy calls at $97.25 with a stop below today's low at $93.75. If triggered our multi-week target is $109.00. We're listing the March calls. You may want to consider the June calls. The Point & Figure chart for BBH is bullish with a $111.00 target.

(NOTE: If the BBH does not move higher I would still keep an eye on it. The $90 area could offer some support. A pullback toward $90 could provide a buy-the-dip entry point near one of the BBH's trend lines of higher lows.)

Caution: The BBH does not see a lot of option volume. Traders may want to use small positions to limit their exposure.

Trigger @ 97.25

- Suggested Positions -

Buy the MAR $100 call (BBH1422C100) current ask $2.45

Annotated Chart:

Entry on January -- at $---.--
Average Daily Volume = 164 thousand
Listed on January 29, 2014


NEW DIRECTIONAL PUT PLAYS

Sears Holding - SHLD - close: 36.36 change: -2.05

Stop Loss: 38.55
Target(s): 30.25
Current Option Gain/Loss: Unopened
Time Frame: exit PRIOR to earnings in late February
New Positions: Yes, see below

Company Description

Why We Like It:
SHLD is in the services sector. The company operates a chain of department stores with over 2,000 locations. The company and the stock price have suffered a very volatile couple of years. The latest sell-off began in late November last year as investors worried about the very competitive holiday shopping season. Thus far the data we have seen about last year's Christmas shopping season has proved the critics to be right. Big promotions and tough competition have eaten away retailer's margins and foot traffic was down overall for the industry.

On January 10th this year shares of SHLD collapsed after the company issued an earnings warning. There has been very little bounce. Now after consolidating sideways for over a week it looks like SHLD is poised to resume the down trend. I do consider this a more aggressive trade because there is so much short interest. The shorts are probably right on this stock but SHLD could still see short-term spikes if some of the weaker shorts rush to cover on any unexpected good news. The most recent data listed short interest at 54% of the 50.7 million share float.

I am suggesting a trigger to buy puts at $35.85. If triggered our target is $30.25. More aggressive traders could aim lower since the Point & Figure chart for SHLD is bearish with a $20 target. However, I would not hold over the earnings report expected in late February.

Trigger @ 35.85

- Suggested Positions -

Buy the MAR $30 PUT (SHLD1422o30) current ask $1.62

Annotated Chart:

Entry on January -- at $---.--
Average Daily Volume = 2.6 million
Listed on January 29, 2014