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New Plays
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STLD AXL

New Long Plays

Steel Dynamics - STLD - cls: 31.47 chg: +1.97 stop: 27.99

Company Description:
Steel Dynamics is a growing Indiana-based mini-mill producer of hot rolled, cold-rolled and coated sheet steel, wide-flange beams, bar steel, rails, and steel building systems. (source: company press release or website)

Why We Like It:
It's amazing when a company can miss earnings estimates by 13 cents a share and still see its stock go up. That's what happened to STLD. The company reported earnings on July 19th and missed analysts' estimates. Yet the stock is in rally mode with above average volume pushing the stock higher. Actually it looks like the entire steel industry is seeing their stocks rise this week. We like STLD's because the stock has broken through resistance at the $30.00 level after building a new base between $25 and $30 over the past three months. The rally has also produced a new Point & Figure chart buy signal that points to a $42.00 target. Our plan is simple. The $30.00 level should now act as new support. We want to buy a dip into the $30.50-30.00 range. Our target will be the simple 200-dma currently at 34.04 (we'll adjust the target as the 200-dma moves). Readers will note that our recent buy the dip strategy didn't pan out with Home Depot (HD). It's up to you if you want to chase STLD here. With the major averages looking overbought we'd prefer to buy a dip in STLD.

Picked on July xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 07/19/05 (confirmed)
Average Daily Volume: 1.4 million
 

New Short Plays

Amer. Axl & Mfg - AXL - close: 26.01 chg: -2.60 stop: 28.01

Company Description:
AAM is a world leader in the manufacture, engineering, design and validation of driveline systems and related components and modules, chassis systems and metal formed products for light trucks, sport utility vehicles and passenger cars. In addition to its locations in the United States (in Michigan, New York and Ohio), AAM also has offices or facilities in Brazil, China, England, Germany, India, Japan, Mexico, Scotland and South Korea. (source: company press release or website)

Why We Like It:
A negative reaction to GM's earnings disappointment could prove to be bad news for parts provider AXL. GM turned in a terrible quarter in spite of huge sales from their employee discount marketing plan. GM would not offer any earnings guidance going forward and Wall Street hates uncertainty. That's one of the reasons why an analyst downgraded shares of AXL today to an "under perform". The combination of GM's negative report and the downgrade helped send AXL to a 9% loss on volume three times the average. Shares were already testing a long-term trendline of resistance dating back to February 2004 and today's decline looks like a bearish reversal. AXL was already looking overbought and extended with its rally from the $18.50 region back in May just two months ago. We would qualify this as an aggressive play because we are essentially calling a short-term top on the stock. However, to reduce our risk we're going to use a TRIGGER under today's low. The selling paused at technical support near the simple and exponential 200-dma's (just under $26.00). We're going to suggest a trigger at $25.60 to open the play. More aggressive traders may want to look for a bounce and failed rally tomorrow under the $27.50 region as an alternative entry point. Once the play is triggered we will lower our stop loss to something more conservative. Our target would be a quick drop to the $23.00 region near the 50-dma. One of the biggest risks here is our time frame. AXL is due to report earnings on July 28th and we do not want to hold over the report.

Picked on July xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 07/28/05 (unconfirmed)
Average Daily Volume: 1.1 million
 

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