NEW DIRECTIONAL PUT PLAYS

Celgene Corp. - CELG - close: 137.38 change: -6.22

Stop Loss: 143.15
Target(s): 127.00
Current Option Gain/Loss: Unopened
Time Frame: Exit PRIOR to earnings on April 24th
New Positions: Yes, see below

Company Description

Why We Like It:
CELG is in the healthcare sector. The company is in the biotech industry. As you may have heard the biotech stocks have been getting crushed. The IBB biotech ETF is down -17.5% from its February highs. The BTK biotech index is down -15% over the same time frame. Some point to the story of Democrat leaders questioning the price of Gilead Science's Sovaldi treatment for Hepatitis C as a potential turning point for investor sentiment on the biotech group. Sovaldi treatments cost $84,000 in the U.S. but they are much cheaper around the world. There is no proof this was the turning point but it definitely raised a few eyebrows.

It has been a widespread sell-off in the biotech stocks. Some blame it on sector rotation. Others suggest it's investors actually showing some wisdom and taking some money off the table after some major gains in the biotech group. As of late February the IBB biotech ETF was up +217% from its 2008 lows and up +65% last year.

CELG actually peaked earlier than the biotech industry. When the IBB was hitting new highs in late February CELG made a lower high instead. During the sell-off in recent weeks analysts have continued to issue bullish calls on CELG suggesting the pullback was a buying opportunity and the stock kept going lower and lower. Now there seems to be a growing chorus that the biotechs were in a bubble and the bubble has popped. The jury is still out on the bubble concept but CELG is definitely underperforming.

The recent bounce in CELG this past week just failed at resistance near $150.00. Friday's drop is a bearish breakdown below support near $139-140 and its simple 300-dma near $138.50. CELG looks like it might fill the gap from July 2013, which could mean a drop to $125.00.

Biotech stocks can be volatile so I am labeling this trade an aggressive, higher-risk trade. We want to use small positions to try and limit our risk. Friday's low was $136.65. I am suggesting a trigger at $136.40. If triggered our target is $126.50.

Trigger @ 136.40 *small positions*

- Suggested Positions -

Buy the May $130 PUT (CELG1417Q130) current ask $3.75

Annotated Chart:

Entry on April -- at $---.--
Average Daily Volume = 4.3 million
Listed on April 05, 2014


CME Group Inc. - CME - close: 70.60 change: -1.58

Stop Loss: 72.25
Target(s): 62.50
Current Option Gain/Loss: Unopened
Time Frame: Exit PRIOR to earnings on May 1st.
New Positions: Yes, see below

Company Description

Why We Like It:
CME is in the financial sector. The company operates futures and options markets. Market pundits and analysts seem mostly bullish on CME and yet the stock has been underperforming the market for months. It's easy to see the bullish case. Trading volume in options and futures has been rising significantly over the years. Every month CME posts their volume numbers and they consistently outpace the previous year. Yet CME's trading growth doesn't seem to be inspiring any new buyers in its stock.

Instead CME's stock has a decidedly bearish pattern on both the daily and weekly chart. Shares are nearing what looks like major support near $70.00. We're suggesting a trigger to buy puts at $69.75. If triggered our target is $62.50. More aggressive traders could aim lower since the Point & Figure chart for CME is bearish with a $60 target.

Trigger @ 69.75

- Suggested Positions -

Buy the May $70 PUT (CME1417Q70) current ask $1.90

Annotated Chart:

Weekly chart:

Entry on April -- at $---.--
Average Daily Volume = 1.9 million
Listed on April 05, 2014