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New Plays
Long Plays
Short Plays
BHP None
ERIC  
PAYX  
PDX  
TLAB  
VRTX  
XOMA  
YHOO  

Play Editor's Note: All of the major market averages have produced a bullish reversal pattern over the last few sessions. However, that does not mean that stocks will go straight up from here. There is still a good chance that we will see some profit taking on Monday and Tuesday. There is an even better chance that we will continue to see volatility. Just because we add some bullish plays to the newsletter tonight doesn't mean you need to buy them on Monday morning. Be patient and be cautious. Yes, stocks are still oversold and could easily bounce but we're still in the worst two months of the year for stocks and the credit crisis hasn't been completely ironed out yet. If you cannot be actively monitoring your positions you may want to just sit out of the market for the next few weeks. Right now one of our biggest challenges is stop loss placement because the rebound from Thursday's low has been so strong.


New Long Plays

BHP Billiton - BHP - cls: 54.80 change: +2.53 stop: 52.45

Company Description:
We have some 38,000 employees working in more than 100 operations in approximately 25 countries. Reflecting our aim to be a premier global company, we occupy industry leader or near industry leader positions in major commodity businesses, including aluminium, energy coal and metallurgical coal, copper, manganese, iron ore, uranium, nickel, silver and titanium minerals, and have substantial interests in oil, gas, liquefied natural gas and diamonds. (source: company press release or website)

Why We Like It:
The global economies are still strong so mining-related stocks could see a nice rebound as investors do some bargain shopping. BHIP has produced a big bullish reversal after testing support near $50.00 and its 200-dma. We are suggesting a trigger to buy the stock at $55.26. More nimble traders could wait and try to jump in on a dip. We will try and limit our risk with a stop loss under Friday's low. There is likely resistance at the sliding 10-dma but our target is the $59.50-60.00 range. Warning - we have to label this a high-risk play because we're going to hold over the company's earnings report on August 22nd. More conservative traders may want to wait until after the company's report before considering new positions.

Picked on August xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/25/07 (unconfirmed)
Average Daily Volume: 3.5 million

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LM Ericsson - ERIC - cls: 35.53 change: +0.68 stop: 33.95

Company Description:
Ericsson is shaping the future of Mobile and Broadband Internet communications through its continuous technology leadership. Providing innovative solutions in more than 140 countries, Ericsson is helping to create the most powerful communication companies in the world. (source: company press release or website)

Why We Like It:
Shares of ERIC have been down four out of the last five weeks but it looks like the stock has hit a bottom. The widespread market sell-off pushed ERIC toward (actually past) the March 2007 lows near $34.00. This looks like significant support and the rebound is a very tempting entry point to go long the stock. We're suggesting positions now although readers definitely have a choice. You could wait for a rise past potential resistance near $36.00 or look for another dip near $34.50. Our target is the $37.90-38.00 range. More aggressive traders may want to aim higher like the 200-dma or the $40 zone.

Picked on August 19 at $35.53
Change since picked: + 0.00
Earnings Date 10/18/07 (unconfirmed)
Average Daily Volume: 2.6 million

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Paychex - PAYX - cls: 44.89 change: +0.52 stop: 42.99

Company Description:
Paychex was founded in 1971. With headquarters in Rochester, New York, the company has more than 100 offices and serves over 561,000 payroll clients nationwide. (source: company press release or website)

Why We Like It:
Shares of PAYX seem to be stair stepping higher and the recent bounce looks like another entry point. If you place a regression channel on the stock last week's low is a bounce near support. We're going to list two targets. Our conservative target is the $46.90-47.00 range. Our more aggressive target is the $48.50-49.00 range. We do not want to hold over the late September earnings report. The P&F chart is very bullish with a $70 target. FYI: Chart readers could argue the weekly has a very big inverse or bullish version of the head-and-shoulders pattern.

Picked on August 19 at $44.89
Change since picked: + 0.00
Earnings Date 09/26/07 (unconfirmed)
Average Daily Volume: 4.0 million

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Pediatrix - PDX - cls: 58.69 change: +1.69 stop: 55.90

Company Description:
Pediatrix Medical Group, Inc. is the nation's leading provider of neonatal, maternal-fetal and pediatric physician subspecialty services. (source: company press release or website)

Why We Like It:
It looks like the five-month consolidation in shares of PDX may be coming to an end soon. The stock has rebounded from a recent test of support near $52.50-53.00 and its 200-dma. Now PDX is challenging resistance near $59.00. If the stock can trade over $59.00 it will produce a new triple-top breakout buy signal on the P&F chart. We are suggesting a trigger to go long PDX at $59.15. More conservative traders may want to wait for a rally past the April 2007 high at $60.35 to avoid potential resistance at $60.00. Our target is the $64.50-65.00 range.

Picked on August xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 11/01/07 (unconfirmed)
Average Daily Volume: 219 thousand

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Tellabs - TLAB - cls: 10.00 change: +0.16 stop: 9.39

Company Description:
Tellabs advances telecommunications networks to meet the evolving needs of users. Solutions from Tellabs enable service providers to deliver high-quality voice, video and data services over wireline and wireless networks around the world. (source: company press release or website)

Why We Like It:
This is purely a technical bounce play. TLAB is down three weeks in a row and down sharply from its recent high at $13.67. This past week saw investors defend the stock twice near $9.40, which makes this look like a significant bullish reversal pattern. We are suggesting long positions now. You may want to wait for a rise past the 10-dma at $10.19 before opening positions. There is a lot of congestion (a.k.a. potential resistance) between $10.50 and $11.00 but our target is the $10.90-11.00 range. This means we don't have a great risk/reward ratio so more conservative traders may want to pass on this one. Really aggressive traders may want to aim higher (maybe around $11.50).

Picked on August 19 at $10.00
Change since picked: + 0.00
Earnings Date 10/24/07 (unconfirmed)
Average Daily Volume: 8.4 million

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Vertex Pharma - VRTX - cls: 36.87 change: +1.14 stop: 33.99

Company Description:
Vertex Pharmaceuticals Incorporated is a global biotechnology company committed to the discovery and development of breakthrough small molecule drugs for serious diseases. The Company's strategy is to commercialize its products both independently and in collaboration with major pharmaceutical companies. Vertex's product pipeline is focused on viral diseases, inflammation, autoimmune diseases, cancer, pain and bacterial infection. (source: company press release or website)

Why We Like It:
The BTK biotech index has been hampered by some serious weakness in one of its biggest components, Amgen (AMGN). Fortunately for the bulls this has not slowed down the rally in VRTX. Shares of VRTX are soaring to new six-month highs and the stock held up pretty well during last week's market volatility. Traders bought the dip near $34.00 and VRTX looks poised to challenge the $40 level soon. We are suggesting bullish positions now. Our target is the $39.80-40.00 range. The P&F chart is bullish with a $66 target. It would be tempting to aim for the $44-45 zone but we don't want to get greedy here.

Picked on August 19 at $36.87
Change since picked: + 0.00
Earnings Date 10/25/07 (unconfirmed)
Average Daily Volume: 2.2 million

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XOMA Ltd. - XOMA - cls: 2.25 change: +0.06 stop: 1.99

Company Description:
XOMA is a leader in the discovery, development and manufacture of therapeutic antibodies, with a therapeutic focus that includes cancer and immune diseases. (source: company press release or website)

Why We Like It:
We're adding another biotech-related play. It's been a rough summer for shares of XOMA but the selling has stalled near $2.00. It looks like the stock has built a new base or bottom on top of old resistance. We are suggesting long positions here or on a dip back into the $2.20-2.15 zone. However, we would strongly suggest that more conservative traders wait for a new relative high over $2.35 before initiating positions. Our target is the $2.70-2.75 under the 200-dma. Be aware that the 50-dma is falling fast and could be overhead resistance. We are using a relatively wide stop loss making this a more aggressive play. FYI: The latest data shows that short interest is about 9% of the 95 million-share float. That's a high amount of short interest and raises the risk of a short squeeze, which of course would be good news for us!

Picked on August 19 at $ 2.25
Change since picked: + 0.00
Earnings Date 08/08/07 (confirmed)
Average Daily Volume: 1.9 million

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Yahoo - YHOO - close: 23.54 change: +0.78 stop: 22.45

Company Description:
Yahoo! Inc. is a leading global Internet brand and one of the most trafficked Internet destinations worldwide. Yahoo!'s mission is to connect people to their passions, their communities, and the world's knowledge. Yahoo! is headquartered in Sunnyvale, California. (source: company press release or website)

Why We Like It:
This is purely a buy the bounce sort of play. The larger pattern in YHOO is definitely bearish and the stock will probably continue to suffer just as the company is suffering under Google's shadow. However, short-term YHOO is showing a potential bullish double-bottom pattern. Plus, YHOO is bouncing from what appears to be significant support. We are aiming for the $25.85-26.00 range but keep a wary eye on the falling 50-dma, which could be trouble for us. You can also see on the weekly chart that the $25.00 level may be tough resistance so we're setting a conservative target at the $24.95-25.00 range.

Picked on August 19 at $23.54
Change since picked: + 0.00
Earnings Date 10/17/07 (unconfirmed)
Average Daily Volume: 25.6 million
 

New Short Plays

None today.
 

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