NEW DIRECTIONAL CALL PLAYS

Caterpillar Inc. - CAT - close: 94.85 change: +0.35

Stop Loss: 93.85
Target(s): 99.85
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
CAT is one of the 30 components in the Dow Jones Industrial Average. They make and sell farm, construction, and mining equipment. The stock plunged just prior to its earnings report only to reverse sharply higher thanks to a much better than expected Q4 earnings report. CAT beat Wall Street's estimates on both the top and bottom line and issued relatively upbeat guidance. CAT's mining division continues to struggle but that was widely expected. The post-earnings rally has continued and CAT is now hitting new multi-month highs. Today's move is a breakout past potential resistance at the $95.00 level.

We are suggesting small bullish positions now, at the opening bell tomorrow morning. More conservative traders may want to wait for a dip back toward the $95.25-95.00 zone instead as an alternative entry point. At the moment our target is $99.85 but we may adjust it higher. The Point & Figure chart for CAT is bullish with a $117 target.

*Launch small positions at the opening bell tomorrow*

- Suggested Positions -

Buy the MAR $97.50 call (CAT1422C97.5) current ask $1.79

Annotated Chart:

Weekly Chart:

Entry on February -- at $---.--
Average Daily Volume = 8.3 million
Listed on February 12, 2014


Computer Sciences - CSC - close: 61.45 change: +0.13

Stop Loss: 59.45
Target(s): 68.00
Current Option Gain/Loss: Unopened
Time Frame: 4 to 8 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
CSC is in the technology sector. The company provides information technology (IT) and professional services. The big spike higher in CSC shares on January 31st was a reaction to its earnings report. The company beat bottom line estimates by 10 cents a share and then raised its 2014 guidance.

The $60.00 area has been long-term resistance for years. Thus the breakout higher is bullish. Traders quickly bought the dip after some post-earnings profit taking. Now CSC is pushing higher and setting new multi-year closing highs. The $62.00 level looks like short-term resistance. We're suggesting a trigger to buy calls at $62.15. If triggered our target is $68.00. I will point out that CSC did see additional resistance in the past near the $63-64 zone back in 2007.

I prefer the June calls but I'm listing March as well for shorter-term traders. FYI: The Point & Figure chart for CSC is bullish with a $78 target.

Trigger @ 62.15

- Suggested Positions -

Buy MAR $60 call (CSC1422C60) current ask $2.55

- or -

Buy JUN $65 call (CSC1421F65) current ask $2.15

Annotated Chart:

Weekly Chart:

Entry on February -- at $---.--
Average Daily Volume = 1.59 million
Listed on February 12, 2014