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New Plays
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Short Plays
ACAD None
BUD  
IACI  
MFE  
PDLI  

Play Editor's note: The market's strength during the last few weeks has been unusual. We're not going to discuss why the market has been strong right here. That's what the market commentary is for. We will say that historically stocks tend to be weak the second half of September and the first half of October. Today may have been a turning point. The broad-based rally today was pretty strong. Internals looked good although we could have done with a little more volume. We are cautiously bullish here. You will note a large number of new long plays today but do not interpret that as our bias as being very bullish. At this point the contrarian in us expects every rally to fail but we can't trade on our market bias alone - only what the market gives us. Right now the trend is up so we're going to play it. Watch those stop losses!


New Long Plays

ACADIA - ACAD - close: 8.65 chg: +0.28 stop: 7.99

Company Description:
ACADIA is a biopharmaceutical company utilizing innovative technology to fuel drug discovery and clinical development of novel treatments for central nervous system disorders. ACADIA currently has five Phase II-stage clinical programs as well as a portfolio of preclinical and discovery assets directed at diseases with large unmet medical needs, including schizophrenia, Parkinson's disease, sleep maintenance insomnia, and neuropathic pain. (source: company press release or website)

Why We Like It:
Biotech stocks are breaking out higher and with the major market indices hitting new multi-year (or all-time) highs we suspect that ACAD will find the strength to breakout soon as well. The stock has been consolidating sideways under resistance at the $8.80 level for the past six weeks yet the pattern has a bullish trend of higher lows. Short-term intraday technical indicators are suggesting the breakout could be soon. We are suggesting a trigger to go long the stock at $8.85. If triggered our target is the $9.95-10.00 range. More aggressive traders may want to aim higher for the 200-dma. We want to remind readers that we always consider trading biotech stocks as higher-risk. There is always a risk that the company might come out with a news report that could send the stock gapping down (or up). We also consider this play higher risk because we have a wide stop loss. We do not want to hold over the early November earnings report.

Picked on October xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 11/10/06 (unconfirmed)
Average Daily Volume: 225 thousand

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Anheuser-Busch - BUD - close: 47.83 change: +0.64 stop: 46.85

Company Description:
Based in St. Louis, Anheuser-Busch is the leading American brewer, holding a 48.8 percent share of U.S. beer sales. The company brews the world's largest-selling beers, Budweiser and Bud Light. Anheuser-Busch also owns a 50 percent share in Grupo Modelo, Mexico's leading brewer, and a 27 percent share in Tsingtao, the No. 1 brewer in China. (source: company press release or website)

Why We Like It:
Slow-moving shares of BUD are bouncing higher from the bottom of its four-week trading range, technical support at its 100-dma and its eight-month trendline of rising support (see chart). This looks like an entry point and more aggressive traders may want to take it. We're suggesting that traders wait for BUD to clear resistance near $48.00 and its 50-dma (48.11). The biggest challenge with this play is the time frame. We only have about three weeks left before BUD reports earnings and we don't want to hold over the report. We're going to suggest a trigger to go long at $48.21, which is above last week's high. If triggered our target is the $49.90-51.00 range. The $50.00 mark is round-number psychological resistance and historical resistance but the top of BUD's channel is a lot higher.

Picked on October xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/25/06 (unconfirmed)
Average Daily Volume: 2.6 million

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IAC/InterActive - IACI - close: 29.73 change: +0.90 stop: 28.69

Company Description:
IAC operates leading and diversified businesses in sectors being transformed by the internet, online and offline... our mission is to harness the power of interactivity to make daily life easier and more productive for people all over the world. (source: company press release or website)

Why We Like It:
The market rally on Wednesday fueled a big bullish breakout in shares of IACI. The stock added just over 3% on above average volume to breakout through resistance at the top of its seven-week trading range. The move today also produced a new buy signal on its MACD indicator. We are suggesting long positions with IACI above $29.00. Readers can choose to open positions here or wait for a dip back toward the $29.00 region. Normally we would expect resistance at the $30.00 level but if you look at the stock's weekly chart you can see that the line of resistance is about $31.50. We're setting a target in the $31.40-31.50 range. We do not want to hold over the late October earnings report. FYI: The P&F chart is still bearish so more conservative traders might want to play with a tighter stop loss.

Picked on October 04 at $29.73
Change since picked: + 0.00
Earnings Date 10/31/06 (unconfirmed)
Average Daily Volume: 2.2 million

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McAfee - MFE - close: 24.90 chg: +0.07 stop: 23.99

Company Description:
McAfee, Inc., headquartered in Santa Clara, California and the global leader in Intrusion Prevention and Security Risk Management, delivers proactive and proven solutions and services that secure systems and networks around the world. (source: company press release or website)

Why We Like It:
The GSO software index looks very overbought and way overdue for some profit taking but there seems to be no stopping the software stocks right now. The GSO index added just over 2% as tech stocks helped lead the rally higher on Wednesday. Shares of MFE also look overbought and its MACD on the daily chart looks poised for a new sell signal. Yet the trend is still bullish. The trading in MFE has a bullish pattern of higher lows and shares look poised to breakout over resistance at the $25.00 level. We're going to suggest a trigger to go long at $25.20, which is five cents above the mid September high. A stop loss just under $24.00 and its 200-dma should limit our risk. Our target is the $27.25-27.50 range. We do not want to hold over the late October earnings report.

Picked on October xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/26/06 (unconfirmed)
Average Daily Volume: 1.9 million

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PDL BioPharma - PDLI - close: 19.75 chg: +0.86 stop: 18.69

Company Description:
PDL BioPharma, Inc. is a biopharmaceutical company focused on discovering, developing and commercializing innovative therapies for severe or life- threatening illnesses. (source: company press release or website)

Why We Like It:
PDLI is another play in the bullish biotech sector. The BTK biotech index is breaking out higher from a multi-month sideways consolidation pattern. We suspect that as the sector continues to rise that PDLI will be able to breakout over significant resistance at the $20.0 mark. Short-term technicals are already turning positive and the P&F chart already has a buy signal with a $26 target. We are suggesting a trigger to go long at $20.11. If triggered our target is the $22.25-22.50 range. We do not want to hold over the early November earnings report.

Picked on October xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 11/02/06 (unconfirmed)
Average Daily Volume: 1.3 million
 

New Short Plays

None today.
 

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