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Daily Newsletter, Saturday, 10/01/2005

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Table of Contents

  1. Market Wrap
  2. New Plays
  3. In Play Updates and Reviews

Market Wrap

Market Wrap

New Plays

Most Recent Plays

New Plays
Long Plays
Short Plays
DLXCECO

New Long Plays

Deluxe Corp - DLX - close: 40.16 chg: +0.64 stop: 38.99

Company Description:
Deluxe Financial Services (Deluxe) is a business unit of Deluxe Corporation. Building on the company's history as the leading check printer, Deluxe uses its knowledge and understanding of consumer preferences to orchestrate outstanding customer experiences for the financial institutions it serves. Deluxe offers a variety of checks and related products to enhance customer satisfaction, strengthen check program security, increase revenue and improve efficiency. (source: company press release or website)

Why We Like It:
Breakout alert! After eight weeks of churning sideways between $38.00 and $40.00 shares of DLX have finally broken through resistance at the top of its range. If you're the optimistic type then we could call this a new base. Unfortunately, longer-term trends suggest that DLX has a tough fight ahead of it. The good news for us is that the stock can probably rally toward the $42.00 region before encountering much resistance. We are going to suggest longs here above the $40.00 level and target a move into the $41.90-42.00 range. One note of caution. Volume on Friday's breakout wasn't what it should have been and shares are testing the 100-dma near 40.17. More conservative types may want to make sure that DLX is indeed headed higher before initiating positions. We will plan to exit ahead of DLX's late October earnings report.

Picked on October 02 at $40.16
Change since picked: + 0.00
Earnings Date 10/28/05 (unconfirmed)
Average Daily Volume: 205 thousand
 

New Short Plays

Career Educ. - CECO - close: 35.56 chg: -0.53 stop: 37.51

Company Description:
Career Education Corporation is one of the largest providers of private, for-profit postsecondary education and has a presence in both on-campus and online education. CEC's Colleges, Schools and Universities Group operates more than 80 campuses in the U.S., Canada, France, the United Kingdom and the United Arab Emirates and offers doctoral degree, master's degree, bachelor's degree, associate degree and diploma programs in the career-oriented disciplines of business studies, visual communication and design technologies, health education, information technology, and culinary arts. The Online Education Group operates American InterContinental University Online and Colorado Technical University Online and offers a variety of degrees in information technology, business, visual communication and education. CEC's total student population on July 31, 2005 was approximately 92,000 students. (source: company press release or website)

Why We Like It:
Shares of CECO have been stuck in a trading range for most of the last four months. Now that the recent oversold bounce from the bottom of the range has failed shares of CECO look poised to breakdown. The Point & Figure chart already points lower but we want to use a trigger to confirm CECO's direction. Our suggested entry point to short the stock is $34.99. More aggressive traders might want to try and jump the gun with an entry under $35.25, which seems to be the bottom of its trading range and thus support. If we are triggered we'll target a decline to the $31.00 level. We will plan to exit before CECO's late October earnings report. FYI: one of the biggest risks in trading CECO is a short squeeze. The stock has relatively high short interest at 13.9% of its float. Consider this play carefully!

Picked on October xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/26/05 (unconfirmed)
Average Daily Volume: 1.6 million
 

Play Updates

Updates On Latest Picks

Long Play Updates

Quicksilver - KWK - close: 47.79 change: +0.26 stop: 43.49 *new*

Energy stocks hit some profit taking on Friday but that didn't stop KWK from closing at a new all-time high. Wall Street is worried about potential natural gas shortages. That pushed the natural gas contracts to new all-time highs above $15/bcf. If we experience a cold winter some experts are predicting $20/bcf and massive heating bills for consumers. KWK is our play to capture the move in natural gas. More conservative traders may want to think about exiting right here for a profit. We're going to continue to target the $49.00-50.00 range. If KWK dips we would look for the $46 level to act as short-term support. We are raising our stop loss to $43.49.

Picked on September 20 at $43.68
Change since picked: + 4.11
Earnings Date 11/08/05 (unconfirmed)
Average Daily Volume: 844 thousand

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Mckesson - MCK - close: 47.45 chg: +0.02 stop: 44.85

So far so good. After weeks of consolidating sideways we finally saw MCK breakout to the upside this last Wednesday. The rally continued on Friday but MCK stalled near $47.88, where it peaked back in August. We suspect the stock will pull back and retest the $46.50 level as support. Readers can use a bounce from support as a new bullish entry point. Our target is the $49.75-50.00 range. We will plan to exit ahead of MCK's early November earnings report.

Picked on September 18 at $46.47
Change since picked: + 0.98
Earnings Date 11/08/05 (unconfirmed)
Average Daily Volume: 1.5 million

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Motorola - MOT - close: 22.03 change: -0.18 stop: 21.78

We are still not ready to give up on MOT just yet. The stock is still stuck in a short-term consolidation low but thus far it's holding support near the $22 level. This is also near technical support at its rising 50-dma. The problem we have now is that we're running low on time. MOT is due to report earnings around October 10th and we do not want to hold over the report no matter how positive we think it might be. At this time we would not suggest new positions until MOT traded over $20.50 even then we would be very careful about how big a position we would take. We are going to adjust our target to $23.95-24.00 considering our time frame.

Picked on September 25 at $22.79
Change since picked: - 0.76
Earnings Date 10/10/05 (unconfirmed)
Average Daily Volume: 19.2 million
 

Short Play Updates

Anheuser Busch - BUD - cls: 43.04 chg: -0.42 stop: 45.65

BUD sank to yet another new three-year low on Friday. We remain bearish on the stock but we are not suggesting new positions. Thus far we're going to maintain our target in the $40.00 region (40.25-40.00) by BUD's late October earnings report. However, we've been suggesting that more conservative traders consider exiting near $42.50, which could be support. The $44.00 level, now broken support, should act as overhead resistance. We will not hold over the earnings report.

Picked on July 28 at $44.77
Change since picked: - 1.73
Earnings Date 10/26/05 (confirmed)
Average Daily Volume: 2.3 million

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Cogent Inc. - COGT - close: 23.75 chg: -0.53 stop: 26.51

COGT continues to under perform the various technology sectors with a 2.18% decline on Friday. Of course the bears got some help with a broker rating. Jefferies & Co started coverage on COGT with a "hold" and a $22 target. Coincidentally our own target for COGT is the $22.50-22.00 range. We would not suggest new positions here. Only a failed rally under $26.00 (maybe 25.75) would tempt us to initiate new shorts. Don't forget that we plan to exit before the company's earnings report.

Picked on September 22 at $25.21
Change since picked: - 1.46
Earnings Date 10/25/05 (unconfirmed)
Average Daily Volume: 874 thousand

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Cost Plus - CPWM - close: 18.15 change: -0.09 stop: 20.31

We have no complaints with CPWM. The stock continues to under perform the market and its peers in the retail sector. The stock failed to bounce on Friday and looks poised to breakdown below the $18.00 level despite being so oversold. We are not suggesting new plays but readers may want to consider new positions if CPWM produces another failed rally under $19.50 or resistance at the $20.00 mark. Our target is the $16.50-16.00 range.

Picked on September 20 at $19.78
Change since picked: - 1.63
Earnings Date 11/17/05 (unconfirmed)
Average Daily Volume: 390 thousand

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Enzo Biochem - ENZ - close: 15.36 chg: -0.17 stop: 15.51

Thus far we remain on the sidelines with ENZ. The stock has painted a big bearish head-and-shoulders pattern with a slanting neckline on its daily chart. Thursday's rally was a bounce off this neckline, which (naturally) is support until broken. We are suggesting that readers use a trigger at $14.49 to open the play and confirm the breakdown. The two biggest risks are earnings and a short squeeze. ENZ has relatively high short interest for its small float. We think that is why Thursday's rally was so sharp. The earnings issue is a problem because ENZ is due to report around October 14th and we do not want to hold over the report.

Picked on September xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/14/05 (unconfirmed)
Average Daily Volume: 90 thousand

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99c Only Stores - NDN - close: 9.25 chg: +0.18 stop: 10.01

NDN managed a decent oversold bounce on Friday with its shares rising almost two percent. Unfortunately for shareholders volume was very low suggesting very little confidence behind the move. The technical picture remains very bearish with the breakdown below the $10.00 mark and a Point & Figure chart that projects a $3.00 price target. We will continue to target a decline into the $8.60-8.50 range. Readers watching for a new entry point can keep an eye on the simple 10-dma near $9.55. A failed rally at the 10-dma could be used as a new entry.

Picked on September 27 at $ 9.40
Change since picked: - 0.15
Earnings Date 10/20/05 (unconfirmed)
Average Daily Volume: 581 thousand

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Nautilus Inc. - NLS - close: 22.07 chg: -0.08 stop: 24.11

No change. NLS ended the quarter with a whimper. Three weeks ago the stock broke down below the bottom of its long-term rising channel in addition to breaking support at the $25.00 mark and its simple and exponential 200-dma's. After a quick retest to affirm broken support as new resistance shares of NLS have fallen toward the $22 level where it is trying to stop the bleeding. If NLS can breakdown from this level the next level of support would be near our target in the $20.50-20.00 range. We are not suggesting new plays at this time. More conservative traders may want to take some money off the table before NLS produces any sort of oversold bounce.

Picked on September 14 at $23.80
Change since picked: - 1.73
Earnings Date 10/25/05 (unconfirmed)
Average Daily Volume: 363 thousand
 

Closed Long Plays

Burlington N. Santa F. - BNI - cls: 59.80 chg: +0.75 stop: 54.90

Target achieved. You can blame it on end of quarter window dressing or just a continuation of BNI's upward trend but the stock hit a high of $59.99 several times on Friday, which is near the top of our 59.75-60.00 target range. We're closing the play per our game plan but will keep an eye on BNI for future entry points.

Picked on September 20 at $56.75
Change since picked: + 3.05
Earnings Date 10/25/05 (unconfirmed)
Average Daily Volume: 2.0 million
 

Closed Short Plays

None
 

Today's Newsletter Notes: Market Wrap by Jim Brown and all other plays and content by the Option Investor staff.

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