NEW DIRECTIONAL PUT PLAYS

Intl. Business Machines - IBM - close: 172.90 change: -3.78

Stop Loss: 176.55
Target(s): 161.00
Current Option Gain/Loss: Unopened
Time Frame: 4 to 6 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
IBM is in the technology sector. They used to be a major player in the hardware industry but have turned into more of a technology services company. The company is a bit famous for meeting or exceeding Wall Street earnings estimates by aggressive stock buyback programs to reduce the number of shares outstanding. It's recently been revealed that IBM may have manipulated its profit by shuffling sales through a subsidiary to reduce its tax liabilities. It's tax rate has fallen to a 20-year low.

IBM has been suffering with a long-term down trend since it peaked in 2013. Today's market sell-off has pushed IBM to key support near $172.50. Bulls on the stock could argue that IBM shares are already oversold with a plunge from $190 just a few weeks ago. That's true but stocks can always grow more oversold. A breakdown under support could spark another wave of selling.

I am suggesting we limit our risk by using small positions. We'll use a trigger to buy puts at $172.25. If triggered our target is $161.00. FYI: The Point & Figure chart for IBM is bearish with a $156 target.

Trigger @ 172.25

- Suggested Positions -

Buy the MAR $170 PUT (IBM1422o170) current ask $3.60

Annotated Chart:

Weekly Chart:

Entry on February -- at $---.--
Average Daily Volume = 6.0 million
Listed on February 03, 2014