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New Short Plays

Quest Diagnostic - DGX - close: 49.65 change: -0.25 stop: 50.51

Company Description:
Quest Diagnostics is the leading provider of diagnostic testing, information and services that patients and doctors need to make better healthcare decisions. The company offers the broadest access to diagnostic testing services through its national network of laboratories and patient service centers, and provides interpretive consultation through its extensive medical and scientific staff. Quest Diagnostics is a pioneer in developing innovative new diagnostic tests and advanced information technology solutions that help improve patient care. (source: company press release or website)

Why We Like It:
We're adding DGX as a short-term trader's play. The stock broke down in early August when shares fell through support near $50.00 and its simple and exponential 200-dma's. There was a sharp oversold rebound a couple of days later but since then there has been no upward follow through on the bounce. From the looks of it DGX is poised to move lower. We want to target a drop back to the $47.50 mark, which should coincide with its long-term trendline of support on its weekly chart. We're using a tight stop to try and minimize our risk.

Picked on August 28 at $49.65
Change since picked: - 0.00
Earnings Date 07/25/05 (confirmed)
Average Daily Volume: 904 thousand


Freeport Mcmoran - FCX - close: 39.85 chg: -0.39 stop: 42.01

Company Description:
FCX explores for, develops, mines and processes ore containing copper, gold and silver in Indonesia, and smelts and refines copper concentrates in Spain and Indonesia. (source: company press release or website)

Why We Like It:
There seems to be a disconnect between FCX and the price of copper. One would think that with copper near all-time highs at $1.65 a pound that shares of FCX, a copper miner, would be showing more strength. Instead FCX has broken its May-August up trend and is on the verge of breaking down under technical support at its simple 50-dma. Maybe investors are pegging FCX closer to the price of gold, which peaked near $453 an ounce in mid-August and has begun to pull back. This peak in gold was timed just right to produce a bearish double-top pattern for shares of FCX. Plus, technically the indicators are bearish for FCX although we do note that the P&F chart is still bullish. Readers have a choice for entry points. One would be to look for a bounce back toward $41.00 and short a failed rally there. Of course Friday's session appears to have done just that. The second entry point is to look for a decline under the 50-dma. That's the one we're suggesting. We're going to use a trigger at $39.65 to open the play. We are also going to suggest that readers sell half their position near $38.00 and its simple 200-dma, which could act as support. Then we'll target a move to $36.

Picked on August xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 07/19/05 (confirmed)
Average Daily Volume: 2.2 million

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