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Industrials, Freight, Entertainment and Pets

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Play Editor's Note: So who do you believe? Do you believe the crowd who is calling this a bottom? Are they the same crowd who has been calling a bottom for the last 2,000 points on the DJIA? Or do you believe those calling for another 20% decline? You've heard it before but this is one of the toughest markets in history if you're trying to trade it.

I was listening to some on the street interviews recently and most people responded with some sort of "I'm just trying not to think of the market or what it's doing to my portfolio" or another version of sticking their head in the sand. Long-term they are right to stick with it if they have a 30, 40 or 50-year time horizon. If you continue with that train of thought then this massive sell-off is probably a great long-term entry point to buy stocks. Of course one has to wonder if next month will be a better long-term entry point to buy stocks another 10%, 15% or 20% lower.

If you're reading this then you're obviously a more independent-minded investor who believes that actively trading the market can out perform just a "buy-and-hold" philosophy. It's certainly been done. People have made fortunes trading the market. They've also lost fortunes. If the market happens to be going your direction then things look pretty good as the huge intraday swings can produce big returns on your computer screen. If the market isn't going your way then just wait. Tomorrow it probably will.

Traditionally if we look at the size of the sell-off, the pessimism in the market, and the extreme readings on the volatility index then there is a good amount of evidence that we're near "a bottom" but maybe not "the bottom". Stocks have been unable to build on any sort of rebound attempt. Rallies are sold hard as another chance to unload. Plus, you have plenty of pundits suggesting we're far from a bottom because everyone is too quick to try and call a bottom.

This week will probably see more volatility as fund redemptions and forced selling fight with end of year window dressing for those funds with an October 31st year-end. Now throw in an FOMC rate cut that may or may not be already priced in and add to it some serious bearish breakdowns in the last couple of days and it is almost impossible to pick a direction.

At this point I'm adding both bullish and bearish plays but generally we're going to stick with the trend, which is down. This month has taught us that volatility can always get higher and stocks can go lower than you or I expect. There is nothing to suggest that trend of surprises will change.

NEW BULLISH PLAYS

Ingersoll-Rand - IR - close: 17.07 change: -1.07 stop: 14.45

Why We Like It:
IR reported earnings on Friday but the results failed to save the stock from the market's weakness. The trend in IR is down but the stock should have very significant support near $15.00. We're suggesting that readers buy IR on a dip into the $15.50-15.00 zone with a stop loss at $14.45. If triggered our first target is $19.50. Our second target is $22.50.

Annotated chart:
IR

Picked on October xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/24/08 (confirmed)
Average Daily Volume: 4.8 million

NEW BEARISH PLAYS

Expeditors Intl. - EXPD - cls: 28.19 change: -2.25 stop: 30.15

Why We Like It:
You might think that crumbling oil prices might help the stock of a freight company but concerns over a worldwide economic recession are too overpowering. EXPD has broken down from its two-week consolidation. Friday's bounce failed at $30.00. We're suggesting readers short EXPD with a stop above $30.00 and a $25.00-24.00 target. The October low was $24.05. More aggressive traders may want to aim lower. Note: We do not want to hold over the November 4th earnings report.

Annotated chart:
EXPD

Picked on October 26 at $28.19
Change since picked: + 0.00
Earnings Date 11/04/08 (confirmed)
Average Daily Volume: 3.0 million

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Marvel Enter. - MVL - close: 29.07 chg: -1.54 stop: 30.25

Why We Like It:
Shares of MVL have also broken down from a very volatile two-week consolidation pattern. The rally attempt on Friday failed at the $30.00 mark providing a great spot to place our stop loss. MVL could easily retest the October lows, which happens to be near its long-term trendline higher lows. This is going to be an interesting area for MVL. Will the long-term bullish trend remain intact or will the bearish double top with the June and September peaks herald a major reversal? More aggressive traders may want to aim lower. We're aiming for $26.25. We do not want to hold over the November 4th earnings report.

Annotated chart:
MVL

Picked on October 26 at $29.07
Change since picked: + 0.00
Earnings Date 11/04/08 (confirmed)
Average Daily Volume: 880 thousand

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PetsMart - PETM - close: 18.53 change: -0.27 stop: 20.05

Why We Like It:
Friday was a very bearish day for PETM. The stock broke down through significant support and closed under it. Now that PETM is under the $19.00-18.75 level the next level of support is somewhere in the $15.00-12.50 range. We're suggesting bearish positions now with a target of $15.05. We're starting the play with a stop loss at $20.05. More conservative traders may want to use a stop loss near $19.00 instead.

Annotated chart:
PETM

Picked on October 26 at $18.53
Change since picked: + 0.00
Earnings Date 11/19/08 (confirmed)
Average Daily Volume: thousand

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