Option Investor
Newsletter

Daily Newsletter, Monday, 04/25/2005

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Table of Contents

  1. Market Wrap
  2. New Option Plays
  3. In Play Updates and Reviews

Market Wrap

Wall of Worry


New Plays

New Option Plays

Call Options Plays
Put Options Plays
GDW None

New Calls

Golden West Fincl - GDW - close: 62.32 chg: +1.25 stop: 59.95

Company Description:
Headquartered in Oakland, Calif., Golden West is one of the nation's largest financial institutions with assets over $110 billion as of March 31, 2005. The Company has one of the most extensive thrift branch systems in the country, with 279 savings branches in 10 states and lending operations in 38 states. (source: company press release)

Why We Like It:
If the markets are going to rally they probably can't get very far without the financials. Banking stocks are on the rebound (like most of the market). We like GDW because the stock appears to have built a base between $58 and $62 over the last couple of months. Technical indicators are positive and the stock is nearing resistance. We are suggesting that traders use a TRIGGER at $62.55 to open the play. This would be a bullish breakout over resistance and would put traders in position to capture a run towards the February highs near $67.00. Our target will be $66.50.

Suggested Options:
We are suggesting the June calls.

BUY CALL JUN 60.00 GDW-FL OI=101 current ask $3.80
BUY CALL JUn 65.00 GDW-FM OI=476 current ask $1.00

Picked on April xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 04/20/05 (confirmed)
Average Daily Volume = 1.3 million
 

New Puts

None today.


Play Updates

In Play Updates and Reviews

Call Updates

Avalonbay - AVB - close: 70.93 change: +0.88 stop: 67.49

AVB is off to a decent start. Morgan Stanley reiterated their "equal-weight" rating today. There are no changes from our previous update on 04/24/05.

Picked on April 24 at $ 70.05
Change since picked: + 0.88
Earnings Date 04/21/05 (confirmed)
Average Daily Volume = 345 thousand

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Eaton Corp - ETN - close: 60.30 chg: -0.01 stop: 58.25

We remain bullish on ETN but we're disappointed that shares did not participate more in today's rally. We are not suggesting new bullish positions. Our target remains the $62 level. No other changes from our previous update on 04/24/05.

Picked on April 18 at $ 58.51
Change since picked: + 1.79
Earnings Date 04/14/05 (confirmed)
Average Daily Volume = 1.1 million

---

Nucor - NUE - close: 53.15 chg: -0.45 stop: 49.95

There is no change from our previous update on 04/24/05. Our trigger to go long/buy calls is at $55.05.

Picked on April xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 04/21/05 (confirmed)
Average Daily Volume = 3.3 million

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Patterson Cos. - PDCO - close: 51.15 chg: +0.95 stop: 49.75

Finally we are seeing some signs of a bounce in PDCO. Today's close over the $51.00 level could be used as a bullish entry point but we still stand by our suggestion on Sunday to look for a move past the $51.50 mark.

Picked on April 18 at $ 50.75
Change since picked: + 0.40
Earnings Date 05/19/05 (unconfirmed)
Average Daily Volume = 789 million
 

Put Updates

CDW Corp - CDWC - close: 56.77 chg: +1.09 stop: 58.01

Another bounce for tech stocks helped CDWC erase Friday's decline. The stock remains under short-term resistance at the $57.00 level. We would not suggest new bearish positions until CDWC trades under $55.50. If CDWC trades over its 50-dma at $57.10 then more conservative traders may want to exit early.

Picked on April 24 at $ 55.68
Change since picked: + 1.09
Earnings Date 04/19/05 (confirmed)
Average Daily Volume = 920 thousand

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KB Home - KBH - close: 112.96 change: +3.76 stop: 115.01

Uh-oh! Bears need to be really careful here. Bulls came back with a vengenance today in the housing sector. The DJUSHB home construction index rallied 3.2 percent and closed right at its 100-dma. Shares of KBH outpaced the index with a 3.4 percent gain. Worse yet shares of KBH look poised to rally further tomorrow. More conservative traders may want to exit here to minimize any losses. We still expect some resistance in the $114.00-114.50-115.00 levels although if the major averages can build on today's bounce then bears may be in short-term trouble.

Picked on April 20 at $108.98
Change since picked: + 3.98
Earnings Date 06/16/05 (unconfirmed)
Average Daily Volume = 1.5 million

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Lehman Brothers - LEH - close: 93.00 chg: +2.53 stop: 92.51

Financials rallied pretty strongly today and the broker dealer index (XBD) added 1.8 percent. Shares of LEH outpaced its peers and the market with a 2.79 percent bounce. The stock is challenging technical resistance at its 40 and 50-dma's. Currently our play remains untriggered as we wait for a drop to $89.45. However, if LEH trades above the $94 level we'll close the play unopened.

Picked on April xx at $ xx.xx <-- see TRIGGER
Change since picked: - 0.00
Earnings Date 03/15/05 (confirmed)
Average Daily Volume = 2.3 million

---

MGM Mirage - MGG - close: 69.40 change: +2.70 stop: 71.51

Whoa! Shares of MGG bounced a bit more than we expected they might. The market rally today combined with a strong earnings report from Boyd Gaming (BYD) really inspired the bulls to buy the dip in MGG. Shares of MGG remain under resistance at the $70.00 level but we would turn cautious here. More conservative traders may want to tighten their stop loss.

Picked on April 20 at $ 67.10
Change since picked: + 2.30
Earnings Date 04/19/05 (confirmed)
Average Daily Volume = 1.1 million
 

Dropped Calls

None
 

Dropped Puts

None

DISCLAIMER

Option Investor Inc is neither a registered Investment Advisor nor a Broker/Dealer. Readers are advised that all information is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor is it to be construed as a recommendation to buy, hold or sell (short or otherwise) any security. All opinions, analyses and information included herein are based on sources believed to be reliable and written in good faith, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. In addition, we do not necessarily update such opinions, analysis or information. Owners, employees and writers may have long or short positions in the securities that are discussed.

Readers are urged to consult with their own independent financial advisors with respect to any investment. All information contained in this report and website should be independently verified.

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