NEW DIRECTIONAL PUT PLAYS

Cummins Inc. - CMI - close: 136.04 change: -1.85

Stop Loss: 140.25
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 1.26 million
Entry on September -- at $---.--
Listed on September 22, 2014
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
CMI is in the industrial good sector. The stock has been in a long-term albeit choppy up trend since mid 2012.

Company describes itself as, CMI, "a global power leader, is a corporation of complementary business units that design, manufacture, distribute and service diesel and natural gas engines and related technologies, including fuel systems, controls, air handling, filtration, emission solutions and electrical power generation systems. Headquartered in Columbus, Indiana, (USA) Cummins currently employs approximately 48,000 people worldwide and serves customers in approximately 190 countries and territories through a network of approximately 600 company-owned and independent distributor locations and approximately 6,800 dealer locations. Cummins earned $1.48 billion on sales of $17.3 billion in 2013."

CMI is actually developing a bullish trend of beating Wall Street's estimates and raising guidance. Unfortunately investors seem to have forgotten about this growth. Shares have been underperforming since CMI peaked in June. It's been a steady trend of lower highs.

It does not help that Dow-component Caterpillar (CAT), considered a competitors for CMI, recently warned of slowing sales around the world.

Technically CMI's recent oversold bounce just failed at the $140.00 level. The stock has also broken down below a long-term trend line of support (see the weekly chart below).

Last week's low was $134.77. Tonight we're suggesting a trigger to buy puts at $134.65. We are not setting an exit target yet but the point & figure chart is bearish with a $114.00 target.

Trigger @ $134.65

- Suggested Positions -

Buy the DEC $135 PUT (CMI141220P135) current ask $5.30

Option Format: symbol-year-month-day-call-strike

Daily Chart:

Weekly Chart:


Starbucks Corp. - SBUX - close: 74.60 change: -1.47

Stop Loss: 76.51
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 3.6 million
Entry on September -- at $---.--
Listed on September 22, 2014
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
Summer is over and fall is officially here. That has many consumers thinking of hot coffee and seasonal fare like SBUX's pumpkin spice lattes. Unfortunately Wall Street doesn't appear too keen on SBUX, if you're looking at the share price action.

This company is in the services sector. They are a global power house as a specialty retailer of what some might consider overpriced coffee and sugary drinks with too many calories. After 30 years in business they have grown to more than 20,000 stores and over 180,000 full time employees.

The stock peaked in late 2013. It looked like the correction was over back in April this year and SBUX did rally from $68 to $79 by July. Yet the stock has been dead money the last several weeks and now it's starting to underperform the market.

That spike you see on the daily chart was a reaction to its Q2 earnings results. The recent breakdown under $76 is bearish and the oversold bounce just failed near this level. Today's intraday low was $74.33. We're suggesting a trigger to buy puts at $74.25.

Trigger @ $74.25

- Suggested Positions -

Buy the NOV $72.50 PUT (SBUX141122P72.5) current ask $1.50

Option Format: symbol-year-month-day-call-strike

Daily Chart:

Weekly Chart: