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"The smurf" has bulls turning from blue to green

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Last week we thought equity bulls should be looking to the Forest/Paper Products Index (FPP.X) +2.01% for some bullish gains, specifically in shares of Smurfit-Stone Container (NASDAQ:SSCC) $17.14 +4.51% as the stock traded the $16.06 level in our 03:00 Update on May 2. If nothing else, the packaging products maker's price gains should have a bull's outlook turning from blue to green.

Today, shares of SSCC are on the move and ready to challenge the mid-point of regression after breaking above Friday's "inside day". Late last week, the stock got a boost on news that Dublin, Ireland based Smurfit, the world's No. 1 paper-based packaging group, said it was in preliminary talks that may or may not lead to an offer being made for the company. Smurfit did not identify the potential suitor, but analysts said possible bidders could be International Paper (NYSE:IP) $42.84 +0.82%, a privately held conglomerate like New York-based Kohlberg Kravis Roberts or U.S. affiliate Smurfit Stone Container (NASDAQ:SSCC) $17.14 +4.51%, in which SSCC has a 29% stake.

Smurfit-Stone Container Chart - Daily Interval

Shares of SSCC look to have gotten a bullish catalyst from last week's announcement that Ireland-based Smurfit was in talks to potentially be acquired. While U.S.-based Smurfit-Stone Container (SSCC) is considered a potential suitor, the company's 29% stake could have SSCC a benefactor of a buyout of Smurfit if its from another party.

I'd currently hold the profiled SSCC November $17.50 calls (JJQKW) that were profiled in the May 2nd 03:00 update as our longer-term target of $24 has yet to be achieved. Should the stock pop to the upper end of regression near $18.90, I would then look to sell 1/2 of the position.

Stocks edge higher to mixed

After a lower open for the broader market averages, stocks have managed to get back to break-even levels and edge higher.

The tech-heavy NASDAQ-100 Index (NDX.X) is up 7 points (+0.63%) to 1,198. In this weekend's wrap, we wanted to monitor things closely here as we felt bears had the bulk of the risk due to a lower NASDAQ-100 Bullish % ($BPNDX) reading. So far this morning, high trade of the session has been the 1,203 level.

The Dow Industrials (INDU) 9,994 -0.11% has been hovering back and forth from the 10,000 level all morning. One stock in the index we discussed in the market monitor as a good looking short/put candidate was shares of Boeing (NYSE:BA) $43.89 -1.65% as an August $45 put (BATI) offered $3.50 now, and target the $37 level near-term.

Boeing Chart - Weekly Interval

One of CNBC's guest technical analysts had Boeing (NYSE:BA) as a stock that looked short/put in his universe of stocks. I liked his "reasoning" and see how his belief that the 200-wk and 50-wk could be a hint to further weakness in the shares. I checked the point and figure chart of Boeing (BA) and its supply/demand chart is also bearish. The current bearish vertical count of $31 gives plenty of downside to the analyst's target of $37.

Jeff Bailey
Senior Market Technician
Option Investor

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