Walmart Surprises Bears
Wal-Mart surprised the street on Tuesday with a report of better than expected June sales. This sudden improvement provided a boost to market sentiment given the record energy prices. If consumers boosted spending while staring down $60 oil and gasoline at $2.25 then maybe there is hope for the economy. Maybe the economy is actually stronger than analysts had been led to believe.
Quanex - NX - close: 54.75 change: +1.30 stop: 52.45
Why We Like It:
BUY CALL AUG 50.00 NX-HJ OI= 10 current ask $5.90
Picked on July xx at $ xx.xx <-- see Trigger
Ashland - ASH - close: 61.78 change: +1.63
We want to provide some more details on the Ashland call play that we closed over the weekend. If you have been following the play you will remember that ASH sold off its stake in an oil refinery to Marathon Oil (MRO) for $3.7 billion last week. The actual asset swap occurred on Friday and shares of ASH were adjusted lower (about $12) from $71.87 to a closing price on Friday of $60.15. We know that many traders have stops set based on the stock and not their option price and assuming a worse case scenario we closed the play as a loss. In reality the adjustment in ASH also included an interest in MRO stock. Thus each contract now reflects 100 shares of ASH and 23 shares of MRO. The adjustment also changed the root symbol for ASH's options to GFU-. We continue to recommend that you call your broker to verify how these adjustments have been made in your account if you were long ASH calls. We appreciate our readers who emailed in regarding this play and congratulations on those traders told us they are currently profitable on the play!
Chubb Corp - CB - close: 86.63 change: +1.19 stop: 82.99
A strong day for the broader markets helped fuel a 1.39 percent rebound in shares of CB as well. The stock look poised to breakout over the $87 level. Our target is the $89.50-90.00 range.
Picked on June 10 at $ 85.05
Rockwell Collins - COL - close: 47.49 chg: +0.25 stop: 46.49
COL may have out performed its peers in the defense sector but the stock under performed the broader market. We reiterate our suggestion that more conservative traders wait for a move over $48.25 before initiating new positions.
Picked on June 27 at $ 46.75
Cummins Inc - CMI - close: 74.85 change: +0.09 stop: 70.95
CMI dipped toward the simple 200-dma this morning but traders were there to buy the dip. We see no change from our weekend update. Our target is the $77.50-80.00 range.
Picked on June 19 at $ 74.03
Coventry Hlth Care - CVH - cls: 72.84 chg: +2.24 stop: 68.49
CVH is showing lots of strength today with a 3.17 percent rally on volume above its average. The move pushed CVH through resistance in the $72.00-72.50 range and hit our entry point to buy calls at $72.75. The play is now open. Our target is the $77.50-80.00 range.
Picked on July 05 at $ 72.75
Fording Candn Coal - FDG - cls: 93.35 chg: -0.25 stop: 88.49
No change from our previous update.
Picked on June 19 at $ 90.30
Fortune Brands - FO - close: 91.98 chg: +1.47 stop: 86.95
FO is off to a strong start this week with a 1.6 percent rally on volume well above the norm. Our target is the $95-96 range. The company had some headlines today. Allied Domecq's shareholders okayed FO's takeover of the company and FO announced that the acquisition would be complete by July 26th.
Picked on July 03 at $ 90.51
Noble Energy - NBL - close: 78.85 chg: +1.23 stop: 73.99
Fears that an active storm season off the Atlantic coast and in the gulf helped push crude oil prices higher again today. Hurricanes in the Gulf of Mexico can disrupt our incoming oil supply and actually damage infrastructure both offshore and on the coast. Meanwhile shares of NBL continued to rally and broke through weeklong resistance at the $78.00 level. Our entry point to buy calls was at $78.15 so the play is now open. Our target is the $84-85 region.
Picked on July 05 at $ 78.15
Rio Tinto - RTP - close: 124.42 chg: +1.44 stop: 119.99
RTP is showing lots of strength today. This is especially true considering the weakness in some of the metal and mining stock today. This still looks like a bullish entry point to us. Our target is the $129.50-130.00 range.
Picked on June 27 at $123.33
SLM Corp - SLM - close: 49.89 change: -0.36 stop: 48.95
This is not a good sign. SLM lost ground on a day the markets were widely positive. Furthermore SLM broke back below the $50.00 mark, which should have acted as round-number support/resistance. There is still additional support with the 200-dma near $49.25 and the 50-dma near $49.00 but more conservative traders may want to eye the exits here. We are not suggesting new bullish plays with SLM under $50.
Picked on June 20 at $ 50.92
Sunoco Inc - SUN - close: 121.09 chg: +3.22 stop: 114.49*new*
Up, up and away! As discussed in the NBL update the fear of tropical storms and hurricanes potentially disrupting the oil supply helped send crude prices higher again today. That helped fuel the breakout in SUN today. We see no changes from our weekend update. Our target is the $124.50-125.00 range. We are going to raise our stop loss to $114.49. FYI: other stocks we like in this group and considered adding over the weekend are AHC and VLO, both of which are up today.
Picked on July 03 at $117.87
Molson Coors - TAP - close: 60.97 chg: -0.62 stop: 59.49
We are not excited about TAP's under performance today but it's nothing alarming. We've been suggesting that readers watch for a dip back toward the $60.00-60.50 region as a potential entry point for bullish plays.
Picked on June 29 at $ 61.38
Wellpoint Inc - WLP - close: 70.35 chg: +0.53 stop: 65.90
No change from our weekend update.
Picked on June 05 at $ 68.40
Ambac Fincl. - ABK - close: 70.76 chg: +0.50 stop: 71.51
We remain on the defensive here. The broad market rally today fueled another rebound back above the $70.00 mark. We are not suggesting new positions until ABK trades under $69.65.
Picked on June 26 at $ 69.62
ESCO Tech. - ESE - close: 101.41 chg: +1.81 stop: 101.65
Heads up! It may be time to head for the exits here. The market's strength today helped push ESE back above the $100 mark again and erase Friday's decline. The stock is not far from our stop loss at $101.65. We are certainly not suggesting new positions here.
Picked on June 26 at $ 97.80
KLA-Tencor - KLAC - close: 44.37 chg: +0.77 stop: 45.76
It was a tough day to be a bear, especially in tech stocks. The NASDAQ Composite added more than one percent and the SOX semiconductor index rebounded for a 1.5 percent gain and closed back above support/resistance at the 420 level. Meanwhile KLAC rallied as well, bouncing from its 50-dma, and back above the $44.00 level. This does not bode well. We are not suggesting new bearish plays at this time.
Picked on June 29 at $ 43.88
Today's Newsletter Notes: Market Wrap by Jim Brown and all other plays and content by the Option Investor staff.
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