Option Investor
New Plays

A new bag of goodies

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Play Editor's Note: The expectation this week is that the market will see some sort of profit taking after a 10% bounce in the market. More and more it looks like the lows are behind us at least for the next few weeks. November begins a traditionally bullish time of year for stocks but these seasonal trends may struggle as we face a global recession. Our short-term plan is to buy the dips. Our challenge will be stop loss placement. We want them to be tight but not too tight. I wouldn't be surprised if the market did nothing Monday and Tuesday as the nation waits to see who is elected President but many market pundits are already discounting an Obama win.

FYI: The only decent bearish candidate I could find was SYMC. The oversold bounce failed on Friday. Readers could short it with a stop loss around $13.25.

---------------------- NEW BULLISH Plays ----------------------

American Express - AXP - close: 27.50 change: +1.44 stop: 24.75

Why We Like It:
Fundamentally I think AXP will continue to see challenges. We are facing a recession and AXP's delinquent accounts are only going to grow. The company recently announced plans, including some job cuts, to help shore up its financial situation as it faces hard times. Short-term the stock is acting bullish. I'm suggesting readers buy a dip in the $25.75-25.00 zone with a stop loss at $24.75. If triggered our target is $29.90.

Annotated chart:
AXP

Picked on November xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/20/08 (confirmed)
Average Daily Volume: 19.4 million

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BB&T Corp. - BBT - close: 35.85 change: +1.51 stop: 31.75

Why We Like It:
Trading in BBT, a regional bank, has turned bullish. The stock is building a pattern of higher lows. Friday's session saw a bullish engulfing candlestick pattern but volume was low. It would be tempting to buy a breakout over the $36.00 level but we think the market is ready to see a little correction before moving higher. Thus we're suggesting readers buy a dip in the $34.00-33.75 zone with a stop loss at $31.75. If triggered our target is $39.90. FYI: Readers should note that BBT has been rumored to be a merger candidate in recent weeks.

Annotated chart:
BBT

Picked on November xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/16/08 (confirmed)
Average Daily Volume: 10.5 million

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BHP Billiton - BHP - close: 38.88 change: +0.61 stop: 34.75

Why We Like It:
BHP can be a volatile stock or maybe it's just a volatile sector. The metal and mining group has been eviscerated this year. BHP delivered a huge rebound this past week. We think it's poised for some profit taking but we want to buy the dip. Our plan is to buy a dip in the $36.25-35.00 zone with a stop loss at $34.75. If triggered we want to take some money off the table at $39.95 but we're really aiming for $44.00. The Point & Figure chart is bullish with a $63 target.

Annotated chart:
BHP

Picked on November xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/30/08 (unconfirmed)
Average Daily Volume: 6.7 million

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CIENA Corp. - CIEN - close: 9.61 change: +0.45 stop: 7.95

Why We Like It:
Could this be a bottom in CIEN? The stock sank to new all-time lows last month under $7.00 a share after a six-month decline from $35. On the positive side CIEN has spent four weeks building a base between $7.00 and $9.00. This could be an opportunity to get long the stock.

We're suggesting readers buy CIEN in the $9.00-8.50 range with a stop loss at $7.95. If triggered we have two targets. Our first target is $11.75. Our second target is $13.85. The gap down in early September could be tough resistance to work through. We also need to keep a wary eye on the 50-dma near $10.90. This play might take a few weeks to reach its conclusion. FYI: The P&F chart is bullish with a $15.00 target.

Annotated chart:
CIEN

Picked on November xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 12/11/08 (unconfirmed)
Average Daily Volume: 5.9 million

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Lam-Research - LRCX - close: 22.36 change: +1.34 stop: 19.75

Why We Like It:
It would appear that the semiconductor sector has bottomed in spite of Intel's recently bearish comments. LRCX out performed the market on Friday with a strong gain. Buying a dip looks like a good plan here. We want to jump into LRCX on a dip into the $21.00-20.00 zone with a stop loss at $19.75. If triggered our first target is $23.50. Our second target is $25.50.

Annotated chart:
LRCX

Picked on November xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/22/08 (confirmed)
Average Daily Volume: 4.0 million

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Ultra(Long) Real Estate - URE - cls: 11.08 change: +1.23 stop: 8.65

Why We Like It:
The URE is an exchange traded fund (ETF) that typically moves twice the daily performance of the Dow Jones Real Estate index. This has been a volatile group, which only makes the URE a very volatile ETF. However, if we can catch the right entry point and keep our stop loss tight it could be a strong winner. Volume has been rising sharply on the recent bounce suggesting some strong buying interest. We want to buy a dip in the $10.00-9.75 zone with a stop loss at $8.65. We have to label this a higher-risk, more aggressive play because our stop loss is so wide. More conservative traders could try a stop in the $9.50-9.35 zone. If we are triggered our first target is $12.45. Our second target is $14.75.

Annotated chart:
URE

Picked on November xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 00/00/00
Average Daily Volume: 33.6 million

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