Illumina Inc. - ILMN - close: 65.66 change: -1.34

Stop Loss: 63.40
Target(s): 69.50
Current Option Gain/Loss: + 0.0%
Time Frame: 4 to 6 weeks
New Positions: Yes, see below

Company Description
Illumina is a leading developer, manufacturer, and marketer of life science tools and integrated systems for large-scale analysis of genetic variation and function. We provide innovative sequencing and array-based solutions for genotyping, copy number variation analysis, methylation studies, gene expression profiling, and low-multiplex analysis of DNA, RNA and protein. We also provide tools and services that are fueling advances in consumer genomics and diagnostics. Our technology and products accelerate genetic analysis research and its application, paving the way for molecular medicine and ultimately transforming healthcare. (source: company press release or website)

Why We Like It:
This past week saw shares of ILMN breakout from a three-week consolidation pattern. Friday's pull back toward $65, thanks to the market's widespread dip, is an entry point to buy calls. I like ILMN because it's a biotech company without the normal risk associated with biotechs (like critical clinical trials data that could send the stock gapping sharply one way or the other). If the rally in ILMN continues the stock could see some short covering. The most recent data listed short interest 11% of the 115 million-share float.

I am suggesting bullish positions now. We do want to keep our position size small since we may not be in this trade very long. I'm still expecting a market correction in the second half of January. I'm setting our exit target at $69.50. Keep in mind that ILMN is due to report earnings in early February and we normally do not want to hold over the earnings report.

Open positions now at current levels.

- Suggested Positions -

Buy the 2011 February $70.00 call (ILMN1119B70) current ask $2.20

Annotated Chart:

Entry on January 10th at $ xx.xx
Earnings Date 02/03/11 (unconfirmed)
Average Daily Volume = 1.0 million
Listed on January 8th, 2010

QUALCOMM Inc. - QCOM - close: 51.73 change: -0.94

Stop Loss: 48.75
Target(s): 54.75
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see trigger

Company Description

Why We Like It:
Investors reacted positively to news that QCOM was buying Atheros (ATHR). Many times the acquiring company's stock moves lower. Shares of QCOM did not see the normal dip on this acquisition news. The move should help QCOM better compete with rivals BRCM and INTC. This past week saw shares of QCOM breakout past major resistance at the $50.00 level. Now this resistance should be new support.

I am suggesting we buy calls on a dip in the $50.75-50.00 zone. Officially our trigger will be $50.75 but traders could wait for a dip closer to $50.00. there is some support near $49.00 so we'll put our stop loss at $48.75. Our target is $54.75. However, earnings are less than three weeks away and we normally want to avoid holding over an earnings report.
FYI: The Point & Figure chart for QCOM is bullish with an $84 target.

Trigger @ 50.75

- Suggested Positions -

Buy the 2011 February $52.50 calls (QCOM1119B52.5) current ask $1.65

Annotated Chart:

Entry on January xxth at $ xx.xx
Earnings Date 01/26/11 (unconfirmed)
Average Daily Volume = 12.1 million
Listed on January 8th, 2010