I have decided that I am going to put a toe into the options only market again. For this trade I am going to use the underlying stock of BRCD, Brocade Communications Sys Inc. There isn't anything that is fundamentally strong about this stock in any significant way.

There are a few things of interest about it. It is second in it's industry, Cisco is number one. It has been out performing the S&P 500 for the past year. And the estimated ROI is a solid multiple. Other than that, it has been in a downward trend for five months.

Technically speaking, its daily Stochastic and MACD indicators suggest that it is building momentum for positive gains. The weekly versions of the Stochastic and MACD indicators suggest that it is way oversold and is due for a turn around. I am taking the position that it will be doing so if it breaks above $6 a share.

For these reasons I am buying 2 BQB July 2010 $6 Call options if BRCD trades above $6. I am also setting a price limit of $1.05 per contract share on the option purchase to prevent the purchase of the option if the stock breaks out more than expected. That is my opinion, you can take it or leave it.

Disclaimer: See bottom of page. http://investorsopinion.blogspot.com