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Daily Newsletter, Thursday, 07/12/2007

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Table of Contents

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

Market Wrap

Tin-Foil Markets

In recent months, many writers have commented on the Teflon (R) markets. Today, the Dow, at least, could have been called the tin-foil market. Dow component Alcoa (AA) soared after Rio Tinto (RTP) topped its bid for Canada's Alcan Inc. (AL). Within a few minutes of the open, gains in AA and other Dow components such as Home Depot (HD), Wal-Mart (WMT) General Motors (GM) and JP Morgan Chase & Co. (JPM) had led the Dow to a new all-time high. By the end of the day, article headlines noted that the Dow had produced its biggest gain in four years.

The SPX charged up to and ultimately above its all-time closing high of 1539.18. Closing at 1547.70, the SPX is not far off its March 24, 2000 intraday high of 1552.87. The Nasdaq climbed, too, to six-year-highs, with techs ignoring a warning by Motorola (MOT).

Introduction

Retail sales had also been streaming in before the open. Retailers reported mixed results, but any bad news reflected off the tin-foil markets.

Mixed results were seen elsewhere, including the forex market and some breadth measures. In early trading, the U.S. dollar declined against the euro. That result could be seen as a sign of persisting fears about the sub-prime problem. However, both the euro and the U.S. dollar climbed against the yen, at least easing concerns about the yen carry trade. Internals were positive.

Crude costs climbed during the earliest trading. So did ten-year yields. Today the Bank of Canada announced that inflation risks were balanced but that a small rate increase might be needed. The central bank's statement perhaps kept worry about inflation risks primary in the minds of bond traders.

Both rising crude costs and rising bond yields sometimes weigh down equities. Market participants watching the early equity rise must have wondered whether rising crude and bond yields would at some point stop the day's advances. The tin-foil market effect ultimately triumphed. Crude backed off its early gains, giving equities some breathing room. Some viewed the decline of bonds and subsequent rise in their yields as a sign that money was rotating into equities rather than the safer-bet treasuries.

Charts

Annotated Daily Chart of the SPX:

With the SPX not far off its all-time intraday high of 1552.87, make profit-protecting plans for bullish plays. If GE disappoints and smashes expectations for this earnings season tomorrow morning, declines could begin immediately. However, barring that, the most logical pattern for the day after such a big-range day is a consolidation day that may include a punch higher and then a close back at or near that daily Keltner resistance.

Decide tonight what you're going to do with your bullish plays if the SPX should consolidate tomorrow, perhaps beginning again its typical strong-gain-consolidate-several-days routine that was so prevalent for many months. If you're holding front-month (July) calls, such action could be deadly to your premium, with the extrinsic value rapidly seeping away while markets consolidate for days on end.

There's no guarantee this will happen but make your plans in case it does. The same is true of Dow-related options.

Annotated Daily Chart of the Dow:

Annotated Daily Chart of the Nasdaq:

Annotated Daily Chart of the SOX:

Annotated Daily Chart of the RUT:

I can't always include all the charts I want as it lengthens the report too much, but I did want to note that the TRAN did not echo the Dow's breakout, with the TRAN closing just below the June 1 intraday high of 5348.47. This is another non-confirmation, albeit a minor one.

Today's Developments

Jobless Claims for the week of July 7 and May's International Trade Balance started off the day's releases at 8:30 this morning. The Labor Department reported that initial claims fell 12,000 to 308,000. Those worried about inflationary wage pressures don't want to see this figure drop consistently below 300,000 new claims as that indicates a too-tight labor market. The four-week moving average dropped to 1,500 to 317,750. Continuing claims dropped 4,000, but the four-week moving average of this figure rose by 17,500 to 2.52 million.

Economists predicted that the International Trade Balance would widen to $59.4-60.0 billion, with the previous deficit at $58.5 billion. The trade gap widened to $60 billion. Both exports and imports increased, by 2.2 and 2.3 percent, respectively. It might be tempting to conclude that the stronger increase in imports indicated a continued strong appetite for goods, but economists note that the increase in imports was mostly driven by higher prices and not by increasing volumes of imported goods. Those higher costs were seen in petroleum-related products, of course, with imports of petroleum-related products climbing to their highest level since September.

However, the U.S. did import a record $36.7 for goods such as machinery and machine tools, telecommunications equipment, and other capital goods. That was a good sign to combat the more worrisome ones.

When the numbers were adjusted for prices, the real trade deficit changed very little. Also, for the calendar year, exports have risen 10.8 percent while imports have climbed only 4.5 percent.

Our deficit with China widened, growing 17 percent so far this calendar year. The deficit with Japan decreased to its lowest level in three years.

Natural Gas Storage figures followed at 10:30. Inventories rose by 106 Bcf. Supplies of 2,627 Bcf compare to a year-ago level of 2,691. Natural gas prices were lower for the day but closed within the $6.40-6.80-ish consolidation zone that's been building the last couple of weeks.

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June's Treasury Budget was released at 2:00 EST, with the budget surplus projected to be $25 billion. The Congressional Budget Office pegged it at $27.5 billion instead, slightly above expectations. For the year, the deficit is now $121 billion. A Marketwatch.com article notes that the deficit is about $84.5 billion less than the year-ago level.

June's chain store sales were released throughout the day. WMT beat expectations as did some other retailers, but Macy's Inc. (M) results led the company to trim its forecast for its second-quarter profit. Costco (COST) also didn't quite meet expectations, but J.C. Penney Co.'s (JCP) same-store sales declined less than expected. Dillard's also fell less than expected.

In other company-related news, MOT reported that poor sales in Europe and Asia prompted a lowering of its second-quarter revenue forecast. The company expects that its second-quarter loss will be deeper than previously forecast, too.

UBS knocked its rating for Royal Dutch Shell down from a buy rating to a neutral rating. The firm noted UBS's 30-percent gain since the middle of March when downgrading the shares, so this appeared to be a valuation call.

Chemical company Huntsman (HUN) agreed to be purchased by Apollo Management's Hexion Specialty Chemicals for $10.6 billion. Russian billionaire Len Blavatnik had also made a bid for the company but didn't take advantage of the time Huntsman gave him to beat Hexion's deal.

AA benefited today from being outbid for Alcan. GE benefited from calling off its offer for two diagnostics units of Abbot Labs (ABT), although the day's candle wasn't particularly bullish and didn't represent a new breakout. Some market pundits thought GE's $8.1 billion offer had been too high.

Whole Foods' (WFMI) stock dropped early today although the stock had made up its losses by the close. Although the CEO's alleged actions may not be a market-moving event, the speculation about his comments in Web chat rooms certainly proves interesting. Allegedly, he employed those chat room comments to advance WFMI and disparage takeover targets.

Tomorrow's Economic and Earnings Releases

Tomorrow's release schedule is a busy one. June's Import and Export Prices as well as June's Retail Sales are reported at 8:30. With Fed Chairman Bernanke's failure to reassure market participants Tuesday, an undue rise in import prices might sour the mood engendered by today's rise. Also on Tuesday, a warning from one retailer and an earnings disappointment from another contributed to that day's decline, so market bulls would like to see a rise in retail sales stronger than the expected 0.3 percent to counter the early week results.

July's Consumer Sentiment is expected at 10:00, with the prior number at 85.3. May's Business Inventories number arrives at the same time slot. So does the Manufacturer's Survey for the second quarter. They're followed by the ECRI Weekly Leading Index at 10:30.

GE should report tomorrow, and the company usually reports in the morning. This report could be market moving since GE is often seen as a proxy for the economy. I noted that although GE did pocket a gain today, the candle was a small-bodied one at resistance, so that GE's performance, at least, could not be seen as confirming the breakouts.

What about Tomorrow?

Today was the Thursday before opex week. That's often a crazy day, one in which markets are driven one way or another as big money positions itself for opex week. For many months, we've often seen weakness on Wednesday, sometimes carrying over into Thursday morning. The Wednesday or early morning Thursday low was often a buying opportunity into the next week, opex week, that was sought and capitalized upon by big money.

Either big money accelerated the schedule by a day, driving markets lower on Tuesday and beginning the buying yesterday morning, or some other pattern is asserting itself. I don't know which might be true, but I do know that the Thursday before opex week is often more about positioning for opex week than about following technical analysis. That positioning may have skewed indicators. When you study the intraday charts below, you'll discover many Keltner breakout moves but was this action skewed and will the breakout moves continue tomorrow?

I'm worried, just a bit, by failures to confirm strength. This could be seen in the failure of the RUT, TRAN and USD/yen pair to lead gains today as well as in non-confirmation by RSI moves on daily charts, in some cases. The USD/yen pair ended up jammed against resistance (intraday Keltner, daily converging 10- and 30-sma's, etc.) In addition, the propensity is for big-range days to be followed by small-range ones. The non-confirmations aren't strong enough for me to declare that the rally isn't sustainable or anything like that, but it does lend some credence to the possibility that markets could follow that often-seen tendency for a big-range up day to be followed by a smaller-range one or even by a decline.

Let's see what the intraday Keltner charts show, but I would urge bulls and bears alike to watch the TRAN, RUT and USD/yen (BUSDJPY on QuoteTracker but I'm not sure what on other charting programs) for confirmation or non-confirmation of equity moves.

Annotated 30-Minute Chart of the SPX:

With such a setup, it is often typical to see prices bounce back and forth between the purple upper channel line and the black upper channel line before deciding on final direction. Barring an impetus for a stronger move, perhaps delivered by GE, that would support the idea that tomorrow could be a smaller-range consolidation-type day. The SPX is in breakout mode, but I'm just not sure whether prices just overran the resistance when shorts were forced to cover at the close. Once the breakout mode is erased, confirmed by the upper purple line holding as resistance on 30-minute closes, it's typical for prices to eventually pull back to the aqua-colored line, but that line will be rising and so will be higher than it is now. It's the 120-ema.

Annotated 30-Minute Chart of the Dow:

Annotated 30-Minute Chart for the Nasdaq:

 


New Plays

New Option Plays

Call Options Plays
Put Options Plays
Strangle Options Plays
BA None None
BNI    
FDX    
LLL    
SNP    
TM    
X    

New Calls

Boeing Co - BA - cls: 100.78 change: 0.66 stop: 98.95

Company Description:
Boeing is the world's leading aerospace company and the largest manufacturer of commercial jetliners and military aircraft combined. (source: company press release or website)

Why We Like It:
BA has gotten a lot of press from delivering its first dreamliner aircraft. The excitement has fueled a big rebound over the past two weeks. We suspect there is more upside to come. The stock has spent the last couple of days digesting its gains under its old highs in early June 2007. We're suggesting a trigger to buy calls on a new high. Our suggested trigger is at $101.55. If triggered our target is the $109.00-110.00 range. A move over $102 would produce a new triple-top breakout buy signal on the P&F chart. We don't have much time and plan to exit ahead of the late July earnings report.

Suggested Options:
Our trigger to buy calls is at $101.55. We're suggesting the August strikes.

BUY CALL AUG 100 BA-HT open interest=14434 current ask $3.40
BUY CALL AUG 105 BA-HA open interest= 8362 current ask $1.40

Picked on July xx at $ xx.xx <-- see TRIGGER
Change since picked: 0.00
Earnings Date 07/25/07 (unconfirmed)
Average Daily Volume = 4.1 million

---

Burlington Northern - BNI - cls: 88.17 chg: 1.04 stop: 83.99

Company Description:
Burlington Northern Santa Fe Corporation's subsidiary, BNSF Railway Company, operates one of the largest North American rail networks, with about 32,000 route miles in 28 states and two Canadian provinces. BNSF Railway Company is among the world's top transporters of intermodal traffic, moves more grain than any other American railroad, carries the components of many of the products we depend on daily, and hauls enough low-sulfur coal to generate about ten percent of the electricity produced in the United States. (source: company press release or website)

Why We Like It:
The railroad sector is breaking out over resistance, which is adding strength to the transportation sector. The consolidation in BNI appears to be ending. Technical indicators have reversed back into bullish signals. We are suggesting calls on BNI with the stock above $88.00. There is potential resistance at the 50-dma near $89.15 and again near the $90.00 level but if the major averages continue to hit new highs we suspect BNI will be able to push higher. The P&F chart is still bearish but we're aiming for the $94.00-95.00 range. This is somewhat aggressive given our time frame as we plan to exit ahead of the July 24th earnings report.

Suggested Options:
We are suggesting the August calls but plan to exit ahead of the late July earnings.

BUY CALL AUG 85.00 BNI-HQ open interest=1598 current ask $5.40
BUY CALL AUG 90.00 BNI-HR open interest=3140 current ask $2.60

Picked on July 12 at $ 88.17
Change since picked: 0.00
Earnings Date 07/24/07 (confirmed)
Average Daily Volume = 2.3 million

---

FedEx - FDX - cls: 114.42 change: 0.90 stop: 111.85

Company Description:
FedEx provides access to a growing global marketplace through a network of supply chain, transportation, business and related information services. (source: company press release or website)

Why We Like It:
With the transportation sector rallying toward new highs shares of FDX look poised to catch up to its peers. The stock broke out over resistance four days ago when Barron's suggested FDX might be a takeover candidate. The stock spent the rest of this week digesting those gains and testing support at broken resistance. The current bounce from the $112 level looks like a new entry point to buy calls. There is some resistance near $117 but we are targeting a move into the $119.50-120.00 zone. The P&F chart is still bearish for now.

Suggested Options:
We are suggesting the August calls.

BUY CALL AUG 110 FDX-HB open interest= 696 current ask $6.70
BUY CALL AUG 115 FDX-HC open interest=3793 current ask $3.60
BUY CALL AUG 120 FDX-HD open interest=1162 current ask $1.60

Picked on July 12 at $114.42
Change since picked: 0.00
Earnings Date 09/20/07 (unconfirmed)
Average Daily Volume = 2.4 million

---

L-3 Comm. - LLL - cls: 100.15 change: 1.60 stop: 97.45

Company Description:
Headquartered in New York City, L-3 Communications employs over 63,000 people worldwide and is a prime system contractor in aircraft modernization and maintenance, C(3)ISR (Command, Control, Communications, Intelligence, Surveillance and Reconnaissance) systems and government services. L-3 is also a leading provider of high technology products, systems and subsystems. The company reported 2006 sales of $12.5 billion. (source: company press release or website)

Why We Like It:
LLL has been a steady performer for the bulls although shares have spent the last five week consolidating sideways under resistance at the $100 mark. Today's widespread really helped push LLL through resistance and the stock rose 1.6% on strong volume. We're suggesting calls with LLL above $100. Our target is the $104.90-105.00 range. We would aim higher but we don't have a lot of time. We plan to exit ahead of the earnings report on July 26th. The P&F chart points to a $113 target.

Suggested Options:
We are suggesting the August calls but plan to exit ahead of the July earnings.

BUY CALL AUG 95.00 LLL-HS open interest= 45 current ask $6.60
BUY CALL AUG 100.0 LLL-HT open interest=690 current ask $3.10
BUY CALL AUG 105.0 LLL-HA open interest=580 current ask $1.05

Picked on July 12 at $100.15
Change since picked: 0.00
Earnings Date 07/26/07 (confirmed)
Average Daily Volume = 640 thousand

---

China Petro - SNP - cls: 116.26 change: 1.77 stop: 112.35

Company Description:
Sinopec is an integrated energy and chemical company. The scope of its business mainly covers oil and gas exploration, development, production and marketing; oil refining; production and sales of petrochemicals, chemical fibers, chemical fertilizers and other chemical products; storage and pipeline transportation of crude oil and natural gas; import, export and import/export agency business of crude oil, natural gas, refined oil products, petrochemicals, chemicals, and other commodities and technologies; research, development and application of technology and information. It is Chinas largest producer and supplier of oil products (including gasoline, diesel and jet fuel, etc.) and major petrochemical products (including petrochemical intermediates, synthetic resin, synthetic fiber monomers and polymers, synthetic fiber and chemical fertilizer). It is also Chinas second largest crude oil producer. (source: company press release or website)

Why We Like It:
We are bullish on oil and energy stocks and the Chinese market continues to be red hot so SNP seems like a natural candidate for bullish positions. Shares have been consolidating with a bullish pattern of higher lows suggesting a new breakout higher is coming soon. We're suggesting a trigger to buy calls at $116.55, which isn't that far away. There is potential resistance at $120 but our target is the $124.00-125.00 range. The P&F chart is bullish with a $132 target. FYI: We would qualify this as somewhat aggressive. SNP is an ADR stock so it's prone to gap opens and the technical indicators are looking tired, which suggests the rally could fail at any moment.

Suggested Options:
Our suggested trigger to buy calls is at $116.55. We're suggesting the August calls.

BUY CALL AUG 115 SNP-HC open interest=319 current ask $5.60
BUY CALL AUG 120 SNP-HD open interest=273 current ask $3.30

Picked on July xx at $ xx.xx <-- see TRIGGER
Change since picked: 0.00
Earnings Date 08/27/07 (unconfirmed)
Average Daily Volume = 563 thousand

---

Toyota Motor - TM - cls: 126.30 change: 0.63 stop: 123.99

Company Description:
Toyota Motor Corp. is an automotive giant with operations around the world.

Why We Like It:
It looks like the correction in TM is over and the stock is developing a new bullish channel higher. Traders bought the dip near support around the $125 level and its rising 200-dma. We're suggesting calls with TM above $125.00. We have two targets. Our conservative target is the $129.75-130.00 range. Our aggressive target is the $133.50-135.00 zone. We do not want to hold over the early August earnings report.

Suggested Options:
We are suggesting the August calls.

BUY CALL AUG 125 TM-HE open interest=130 current ask $4.30
BUY CALL AUG 130 TM-HF open interest=314 current ask $1.95

Picked on July 12 at $126.30
Change since picked: 0.00
Earnings Date 08/02/07 (unconfirmed)
Average Daily Volume = 557 thousand

---

United States Steel - X - cls: 114.41 chg: 3.30 stop: 109.49

Company Description:
United States Steel Corporation headquartered in Pittsburgh, Pa., manufactures a wide variety of steel sheet, tubular and tin products; coke, and taconite pellets; and has a worldwide annual raw steel capability of 26.8 million net tons. (source: company press release or website)

Why We Like It:
Steel and metal stocks are making a comeback. Positive comments about the future of steel prices and the constant M&A in the market is reviving the rally. X spike to all-time highs a few weeks ago on rumors it was a takeover candidate. Now that shares are rebounding the technical indicators are improving. Aggressive traders may want to buy calls now. We want to see a new relative high first. We're suggesting a trigger to buy calls at $115.51. If triggered our target is the $124.00-125.00 range. More conservative traders may want to exit early near $120. We don't have much time. X is due to report earnings on July 24th. Given our time frame this should be considered a more aggressive play.

Suggested Options:
We're suggesting a trigger to buy calls at $115.51. We like the August strikes. (Note - check your symbols. Normally the AUG 120 call should be -HD but the CBOE has it as -HU)

BUY CALL AUG 110 X-HB open interest=774 current ask $8.50
BUY CALL AUG 115 X-HC open interest=553 current ask $5.90
BUY CALL AUG 120 X-HU open interest=727 current ask $3.90

Picked on July xx at $ xx.xx <-- see TRIGGER
Change since picked: 0.00
Earnings Date 07/24/07 (confirmed)
Average Daily Volume = 3.4 million
 

New Puts

None today.
 

New Strangles

None today.
 


Play Updates

In Play Updates and Reviews

Call Updates

Avery Dennison - AVY - cls: 68.11 chg: 1.44 stop: 65.90 *new*

The widespread market rally fueled a 2.1% gain in AVY. Shares pushed past resistance near $67.00 to hit new three-month highs. We are raising our stop loss to $65.90. Our target is the $69.75-70.00 range. We do not want to hold over the late July earnings report.

Picked on June 11 at $ 66.05
Change since picked: 2.06
Earnings Date 07/24/07 (unconfirmed)
Average Daily Volume = 728 thousand

---

Deere Co - DE - close: 128.33 change: 3.12 stop: 119.95*new*

The rally in DE continues. Shares rose another 2.49% and closed at a new all-time high. The stock is nearing our first target. We have two targets. Our first target is the $129.50-130.00 range. Our second, more aggressive target is the $134.00-135.00 range. Please note that we are raising the stop loss to $119.95, just under the rising 50-dma. More conservative traders may want to raise their stop loss to breakeven.

Picked on June 20 at $123.55
Change since picked: 4.78
Earnings Date 08/15/07 (unconfirmed)
Average Daily Volume = 2.6 million

---

GulfMark - GMRK - cls: 55.96 change: 0.99 stop: 52.45

GMRK rallied to another new high. Volume also improved on the gain. We don't see any real changes from our previous comments. Our target is the $59.50-60.00 range. We don't want to hold over the late July earnings report.

Picked on July 09 at $ 55.05
Change since picked: 0.91
Earnings Date 07/27/07 (unconfirmed)
Average Daily Volume = 284 thousand

---

Russell 2000 iShares - IWM - cls: 84.79 chg: 0.96 stop: 81.35

The Russell 2000 rose 1.8% and the IWM ishares that follow the RUT only rose 1.1%. The IWM also managed to close over resistance at the $85.00 level. Our target is the $86.50-87.50 range.

Picked on June 24 at $ 82.85
Change since picked: 1.96
Earnings Date 00/00/00 (unconfirmed)
Average Daily Volume = 71.6 million

---

Joy Global - JOYG - cls: 63.15 chg: 0.38 stop: 57.99

JOYG posted another gain but we're actually surprised today's rally wasn't bigger following yesterday's bullish breakout. We would still be considering new call positions here. Our target is the $68.00-70.00 range. Our time frame is six to eight weeks. The Point & Figure chart is forecasting an $81 target.

Picked on July 11 at $ 62.05
Change since picked: 1.10
Earnings Date 08/30/07 (unconfirmed)
Average Daily Volume = 1.9 million

---

Manpower - MAN - cls: 94.52 change: 1.00 stop: 89.90

MAN posted a 1% gain and is still trying to breakout past the $95.00 level. The trend is technically bullish but readers may want to wait for a new high (over $95.30) before jumping in. Plus, readers might want to consider a tighter stop loss near $91.50. Our target is the $99.50-100.00 range.

Picked on June 20 at $ 94.15
Change since picked: 0.37
Earnings Date 07/20/07 (unconfirmed)
Average Daily Volume = 829 thousand

---

Pacific Ethanol - PEIX - cls: 14.45 chg: -0.11 stop: 11.90

PEIX has been struggling the last couple of days as it trades sideways between $14.00 and the descending 100-dma. We're not suggesting new positions. More conservative traders may want to exit early to lock in a gain. Our target is the $15.40-15.60 range. FYI: We cannot find a future earnings date for PEIX but suspect it will be in August or September.

Picked on June 24 at $ 12.83
Change since picked: 1.62
Earnings Date 00/00/00 (unconfirmed)
Average Daily Volume = 892 thousand

---

Penn National Gaming - PENN - cls: 60.10 chg: -0.24 stop: n/a

PENN failed to participate in the market's rally. Investors are still waiting for a second bidder to show up and pay more than $67 a share. We are suggesting high-risk, speculative call positions on the gamble that a new suitor does show up and offer more than the current buy-out price. Thus far there hasn't been any news and PENN has less than 30 days to find another bidder. Shares of PENN hit some profit taking but found support near $60.00.

Picked on June 17 at $ 62.12
Change since picked: - 2.02
Earnings Date 07/26/07 (unconfirmed)
Average Daily Volume = 1.0 million

---

Toro Co. - TTC - cls: 61.29 change: 0.45 stop: 57.95

TTC posted a 0.7% gain but it doesn't look like much follow through on yesterday's big rally. The overall trend remains bullish and we'd still suggest call positions with shares above $60.00. More conservative traders may want to inch up their stop toward Wednesday's low (58.42). Our target is the $64.95-65.00 range. More aggressive traders may want to aim higher. The P&F chart points to a $77 target.

Picked on July 11 at $ 60.75
Change since picked: 0.54
Earnings Date 08/23/07 (unconfirmed)
Average Daily Volume = 354 thousand
 

Put Updates

Goldman Sachs - GS - cls: 219.75 chg: 3.03 stop: 225.81

We are honestly surprised that given today's massive market rally shares of GS did not rally more. The stock rose 1.39% and does look poised to breakout over the $220 level again. Yet financials and brokers were two leading sectors with gains of 2.5% and 2.3%, respectively. GS under performed its peers and the broad-market averages. While bears might take some comfort in this relative weakness we would be cautious here. With the market hitting new highs and M&A deals becoming a daily occurrence we can't imagine GS under performing for very long. Technically the pattern is still bearish and a failed rally under $225 or its 50-dma near $225 could be used as a new entry point for puts. However, we would hesitate to launch new put plays with the market looking this strong.

Picked on July 10 at $217.08
Change since picked: 2.67
Earnings Date 09/12/07 (unconfirmed)
Average Daily Volume = 5.9 million

---

Mettler Toledo - MTD - cls: 98.31 chg: 0.41 stop: 99.11

We are also surprised that MTD did not show more relative strength today. Shares continued to trade sideways with a minor pop late in the session. More aggressive traders may want to give MTD more room to move and place their stop above $100. We are leaving our stop loss at $99.11 for now. We would wait for a new drop under $96.50 (near the 10-dma) or under $96.00 before considering new positions. The 100-dma is still a hazard for the bears.

Picked on June 19 at $ 96.75
Change since picked: 1.56
Earnings Date 07/26/07 (unconfirmed)
Average Daily Volume = 215 thousand
 

Strangle Updates

None
 

Dropped Calls

BP Plc. - BP - close: 74.78 change: 0.78 stop: 68.75

Target achieved. The market strength combined with multi-month highs for oil continued to lift the energy stocks. Shares of BP hit an intraday high of $74.87. Our target was the $74.85-75.00 range. More aggressive traders may want to aim higher.

Picked on June 22 at $ 70.25
Change since picked: 4.53
Earnings Date 07/24/07 (unconfirmed)
Average Daily Volume = 3.5 million
 

Dropped Puts

Gilead Sciences - GILD - cls: 39.94 chg: 0.22 stop: 40.15

We are giving up on GILD and suggesting an early exit. The stock continues to trade sideways but shares look poised to breakout over resistance near $40.00 and its 50-dma soon.

Picked on June 07 at $ 39.95 *split adjusted
Change since picked: - 0.01
Earnings Date 07/18/07 (unconfirmed)
Average Daily Volume = 4.1 million
 

Dropped Strangles

Genentech - DNA - cls: 75.37 change: -0.56 stop: n/a

DNA reported earnings last night and the results failed to move the stock price. Our plan was to capture any post-earnings surge. Now that it has failed to materialize we're bailing out!
We were suggesting the July $80 calls (DWN-GP) and the July $70 puts (DWN-SN). Our estimated cost was $0.45.

Picked on July 08 at $ 75.10
Change since picked: 0.27
Earnings Date 07/11/07 (confirmed)
Average Daily Volume = 3.5 million
 

Today's Newsletter Notes: Market Wrap by Linda Piazza and all other plays and content by the Option Investor staff.

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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