Editor's Note:

I had written a trade to buy calls on DMND tonight. The stock has huge short interest at 48% of the float. The stock could easily see a short squeeze back toward its highs. Yet the spreads on DMND's options are way too wide to trade. Stock traders may want to give it a try.

We also considered buying puts on WHR, with the breakdown to a new relative low. Yet shares look extremely oversold with the stock down eight weeks in a row.

- James


Stericycle Inc. - SRCL - close: 81.12 change: +1.16

Stop Loss: 77.75
Target(s): 84.90. 88.50
Current Option Gain/Loss: Unopened
Time Frame: 2 to 4 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
We have not yet given up on the idea that stocks might be able to rebound off their August lows again. With that in mind SRCL has been showing relative strength the last couple of days. Traders were buying the dip in the $78 area. I'll confess this isn't the most compelling trade. SRCL looks like it has a cloud of resistance in the $82-84 area not to mention its 50-dma and 200-dma overhead. Yet that doesn't mean shares can't rally higher.

I am suggesting very small bullish positions now but only if SRCL and the S&P500 both open positive tomorrow morning. Our first target is $84.90.

buy calls if SRCL and S&P500 index both open positive tomorrow morning

- Suggested (small) Positions -

buy the SEP $85 call (SRCL1117I85) current ask $1.70

Annotated Chart:

Entry on August xx at $ xx.xx
Earnings Date 10/27/11 (unconfirmed)
Average Daily Volume = 858 thousand
Listed on August 22, 2011