Buy Puts on Honda, Medco Health

Market Outlook Indicators are giving neutral to bearish readings, a downgrade from last week’s neutral readings. The bearishness is confirmed by the 200-day Moving Averages Index, which has fallen below its own 200-day moving average. In the past this indicator has proven to be very good at forecasting major trend changes. For options trading investors, always have some puts in your portfolio during times like the present when news events drive stock prices more than company fundamentals. You need puts to protect yourself. Recommended Options Trade: Honda Motor Company (NYSE: HMC) HMC fell sharply from $44 to support at $37.50 and bounced off of that. But the uncertainty in Japan could lead to a continued move lower. Here is the best way to play more weakness in Honda Motor Company … Buy the HMC Jul 35 Put up to $1.70 ($170 per contract). After taking the position, enter a good-til-cancelled contingent order to sell this option if the stock hits its target price of $35. That should give you an option price of about $3.10, for an 82% profit. Close this position and cut losses if the stock closes above $40.80, when the option price should be about $1.20. The stock is currently trading at $38.86. The computer-simulated probability of this option hitting its target price is 18%. Find more option analysis and trading ideas at Option Trading Strategies . Recommended Options Trade: Medco Health Solutions (NYSE: MHS) MHS broke below trading range support and has fallen below its 200-day moving average. It should continue moving lower if stocks continue their slide. Here is the best way to play more weakness in Medco Health Solutions … Buy the MHS Jul 50 Put up to $2.10 ($210 per contract). After taking the position, enter a good-til-cancelled contingent order to sell this option if the stock hits its target price of $49.70. That should give you an option price of about $4, for a 90% profit. Close this position and cut losses if the stock closes above $57.20, when the option price should be about $1.50. The stock is currently trading at $54.68. The computer-simulated probability of this option hitting its target price is 15%. ** All of our short-term recommendations can be taken for up to three days after they are recommended. Make sure the stock and option prices are close to where they were when we made the recommendation. If after three days you still have not gotten the position filled, cancel the order and wait for our new recommendations, as the profit probabilities may no longer be valid. Action to take on current position: Petroleo Brasileiro (NYSE: PBR ) Close the PBR Apr 41 Call . The position reached its maximum three-week holding period without reaching its target price. Action to take on current position: Cracker Barrel (NASDAQ: CBRL ) Lower the stop price on the CBRL Apr 45 Put to $48.80. The position has reached its maximum three-week holding period without reaching its target price, but it is currently profitable and the market has fallen into a bearish trend. Lowering the stop price will help maintain the current gain while allowing some more time to perhaps earn a bigger profit.