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Daily Newsletter, Tuesday, 05/30/2006

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Table of Contents

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

Market Wrap

Market Wrap


New Plays

New Option Plays

Call Options Plays
Put Options Plays
Strangle Options Plays
NoneNoneNone

New Calls

None today.
 

New Puts

None today.
 

New Strangles

None today.
 


Play Updates

In Play Updates and Reviews

Call Updates

Peabody Energy - BTU - close: 60.34 chg: -0.66 stop: 54.90

The market action on Tuesday was very bearish. While shares of BTU held up better than the major averages the stock has produced a bearish engulfing candlestick pattern with Tuesday's session. We are NOT suggesting new bullish positions at this time and if you did buy calls this morning you might want to consider an early exit right now to minimize any losses. We do expect the market averages and shares of BTU to decline tomorrow. We'd look for BTU to dip toward its 10-dma and 50-dma in the $58.00-59.00 region, maybe lower (57.50).

Picked on May 28 at $ 61.00
Change since picked: - 0.66
Earnings Date 07/18/06 (unconfirmed)
Average Daily Volume = 4.0 million

---

Goldman Sachs - GS - close: 149.83 chg: -3.11 stop: 146.75

President Bush has picked Goldman Sachs CEO Hank Paulson to replace Treasury Secretary Snow. Shares of GS lost 2% as investors pondered who would replace Paulson as head of Goldman. Considering the market's weakness we are not suggesting new bullish positions at this time. Odds are growing that GS will fill the gap from last week dipping toward the $147.00 level.

Picked on May 25 at $147.32
Change since picked: + 2.51
Earnings Date 06/13/06 (confirmed)
Average Daily Volume = 4.5 million

---

Halliburton - HAL - close: 71.92 chg: -1.58 stop: 68.65

Oil stocks continued to sell-off today in spite of more strength in crude oil futures. That's not a good sign and shares of HAL produced a failed rally under $75.00 while ending the session with a bearish engulfing candlestick pattern (a.k.a. bearish reversal). More conservative traders may just want to exit early right here. We would expect shares of HAL to dip back toward $70.00 and probably toward technical support at its simple 200-dma ($68.00). Aggressive traders may want to adjust their stop loss to under $68.00. Currently our stop loss is under last Thursday's low.

Picked on May 25 at $ 73.80
Change since picked: - 1.73
Earnings Date 07/20/06 (unconfirmed)
Average Daily Volume = 7.1 million

---

Holly Corp. - HOC - close: 79.75 chg: -1.69 stop: 75.95

HOC is another oil stock casualty. The stock has produced a bearish engulfing candlestick and looks poised to drop toward its 50-dma near $77.50. We are not suggesting new bullish positions at this time. Considering the widespread market weakness more conservative types may want to just exit early right here to minimize any losses!

Picked on May 25 at $ 81.20
Change since picked: - 1.45
Earnings Date 08/07/06 (unconfirmed)
Average Daily Volume = 475 thousand

---

iShares Global Energy - IXC - cls: 103.00 chg: -1.66 stop: 99.49

The IXC global energy ishares is a reflection of the oil sector and the ETF produced a failed rally and bearish engulfing candlestick pattern, which was a common occurrence by the close of Tuesday's session. At this point in time we are not suggesting new bullish positions and expect the IXC to dip toward support near $100 and its 200-dma. If you do not want to endure that sort of pull back then consider exiting early right here.

Picked on May 25 at $103.67
Change since picked: - 0.67
Earnings Date 00/00/00 (unconfirmed)
Average Daily Volume = 47 thousand

---

Omnicom - OMC - close: 93.57 chg: -0.45 stop: 90.64

OMC is still showing relative strength with only a minor loss today. Following Friday's failed rally we expected worse. The stock remains a big target for profit taking if the markets keep sliding. We are not suggesting new bullish positions and would expect shares to consolidate back toward the $92.00 region.

Picked on May 15 at $ 92.05
Change since picked: + 1.52
Earnings Date 07/25/06 (unconfirmed)
Average Daily Volume = 1.1 million

---

Priceline.com - PCLN - close: 31.01 chg: -0.39 stop: 29.25

PCLN lost 1.24% today versus the 2.1% decline in the INX Internet sector. It does not look like the profit taking is over yet and we'd expect shares of PCLN to slide toward the $30.00 level, which as broken resistance, should act as new support. We are not suggesting new bullish positions at this time but readers can look for a bounce near $30.00 as a potential entry point.

Picked on May 25 at $ 30.67
Change since picked: + 0.34
Earnings Date 08/02/06 (unconfirmed)
Average Daily Volume = 432 thousand

---

VF Corp. - VFC - close: 62.22 change: -0.86 stop: 61.84

We are still on the sidelines with VFC. Our strategy calls for traders to wait for the breakout over resistance with a trigger at $63.51. More aggressive traders might want to consider buying a bounce near $62.00, which would be near its trendline of higher lows.

Picked on May xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 07/25/06 (unconfirmed)
Average Daily Volume = 545 thousand
 

Put Updates

Amgen Inc. - AMGN - close: 66.83 chg: -1.98 stop: 70.01

It was a tough day for biotech stocks. The BTK index lost 2% and failed to breakout over its trendline of resistance. Shares of AMGN helped lead the way lower with a 2.8% decline. The MACD indicator on AMGN's daily chart is nearing a new sell signal. Readers might want to open new put positions here with a stop loss just above the 50-dma (69.34) or wait for a drop under last week's low (66.28). Our target is the $62.50-62.00 range. We do expect some sort of bounce near $65.00.

Picked on May 23 at $ 66.85
Change since picked: - 0.02
Earnings Date 07/18/06 (unconfirmed)
Average Daily Volume = 8.8 million

---

Apollo Group - APOL - close: 51.38 chg: +0.11 stop: 54.45

Hmm... APOL produced some relative strength today with a rally towards its 50-dma and the $52.50 region. The stock did pare its gains in the last 30 minutes of trading so today's session may be a new bearish entry point. If APOL can trade under $50.00 again it will produce a new Point & Figure chart sell signal. Our target is the $47.75-47.50 range near its early March lows.

Picked on May 17 at $ 51.75
Change since picked: - 0.37
Earnings Date 06/20/06 (unconfirmed)
Average Daily Volume = 2.1 million

---

Franklin Res. - BEN - close: 87.70 chg: -2.69 close: 92.55

The XBD broker-dealer index was one of the market's worst performing sectors today with a 2.9% loss. Shares of BEN paced the decline sliding almost 3%. This decline back under $90.00 may be used as a new bearish entry point to buy puts. Our target is the $85.00-84.00 range.

Picked on May 14 at $ 89.30
Change since picked: - 1.60
Earnings Date 07/27/06 (unconfirmed)
Average Daily Volume = 1.1 million

---

3M Co. - MMM - close: 83.46 chg: -0.41 stop: 85.01

MMM's sideways consolidation is narrowing. Taking into account the market's bearish attitude we'd expect the imminent breakout in MMM to be lower. More conservative traders may want to tighten their stop loss. Our target is the $80.25-80.00 range.

Picked on May 23 at $ 83.44
Change since picked: - 0.02
Earnings Date 07/21/06 (unconfirmed)
Average Daily Volume = 3.2 million

---

SanDisk - SNDK - close: 56.83 chg: -2.81 stop: 63.05

Shares of SNDK lost 4.7% and under performed its peers in spite of some positive analyst comments this morning. Our target is the $53.00-52.50 range. More conservative traders may want to adjust their stop toward $61.50 or even $60.00. We're leaving ours at $63.05 for now.

Picked on May 23 at $ 58.98
Change since picked: - 2.15
Earnings Date 07/20/06 (unconfirmed)
Average Daily Volume = 11.1 million
 

Strangle Updates

None
 

Dropped Calls

Cons Energy - CNX - close: 85.88 chg: -1.92 stop: 82.49

Red alert! The trading in CNX on Tuesday has turned bearish. The stock has produced a failed rally at $90.00 and a bearish engulfing candlestick pattern. It is arguable that the stock could bounce near $85.00 but we'd rather cut our losses right now. Shares of BTU, another coal stock, have produced a similar move but to a smaller degree and we're going to keep our bullish play on BTU open for now but we're not suggesting new positions. We are choosing to bail out of CNX immediately. More aggressive traders may want to think about raising their stop loss instead (maybe the $83.50-84.00 region).

Picked on May 28 at $ 87.80
Change since picked: - 1.92
Earnings Date 07/27/06 (unconfirmed)
Average Daily Volume = 1.6 million

---

Cemex Sa - CX - close: 57.55 change: -2.98 stop: 57.22

Abandon ship! There was absolutely no follow through on CX's bounce last from last week. The stock opened up under $60.00 and fell right back through its simple 200-dma. We are electing to cut our losses immediately.

Picked on May 28 at $ 60.53
Change since picked: - 2.98
Earnings Date 07/17/06 (unconfirmed)
Average Daily Volume = 1.7 million

---

Komag - KOMG - close: 41.05 chg: -2.16 stop: 41.99

KOMG has continued to sell-off and the stock under performed even its peers with a 4.99% loss today. KOMG is nearing support in the $40.75 region and shares are likely to have additional support at $40.00 and its 200-dma (39.20). Should KOMG drop under its 200-dma readers might want to consider buying puts on the stock and aiming for the $35.00-32.50 region. We are dropping KOMG as a bullish candidate. The play was never opened with our trigger at $46.11.

Picked on May xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 07/26/06 (unconfirmed)
Average Daily Volume = 1.2 million

---

Phelps Dodge - PD - close: 83.80 chg: -4.46 stop: 82.45

It looks like we should have used a trigger above the $90.00 level. We warned readers that PD had grown volatile but we were not expecting a 5% decline today. We are suggesting that if you opened positions this morning consider cutting your losses early. We're closing PD as a bullish candidate and will watch to see if shares bounce near $80.00 and its 100-dma.

Picked on May 28 at $ 88.26
Change since picked: - 4.46
Earnings Date 07/27/06 (unconfirmed)
Average Daily Volume = 6.1 million
 

Dropped Puts

None
 

Dropped Strangles

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.

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