Option Investor

Daily Newsletter, Tuesday, 05/30/2006

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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

New Long Plays

None today.

New Short Plays

None today.

Play Updates

Updates On Latest Picks

Long Play Updates

Arch Coal - ACI - close: 46.41 change: -1.09 stop: 43.74

The market's sell-off on Tuesday helped reverse ACI's early strength. The stock closed the session with a bearish engulfing candlestick pattern, which is typically seen as a bearish reversal. It was a very common pattern on Tuesday, which does not bode well for the market this week. Conservative traders, if you opened positions this morning, should strongly consider just cutting their losses right here. We are going to leave the play open with the expectation that ACI may bounce near $45.00 or its rising 50-dma near 44.40. We would not consider new bullish positions until we saw some kind of bounce.

Picked on May 28 at $47.50
Change since picked: - 1.09
Earnings Date 07/21/06 (unconfirmed)
Average Daily Volume: 3.9 million


Amer. Std. Co. - ASD - close: 42.26 change: -0.86 stop: 41.49

There was absolutely zero follow through on ASD's bounce from Friday. The stock tried to rally from this morning's initial spike lower but it eventually ran out of steam. Therefore we expect ASD to slip back toward $42.00 and probably last week's lows near $41.50 and its simple 200-dma. The market action was so bearish today that if you opened positions this morning you might just want to bail out right here to minimize any losses. You can already re-enter on another bounce later.

Picked on May 28 at $43.30
Change since picked: - 0.86
Earnings Date 07/19/06 (unconfirmed)
Average Daily Volume: 1.3 million


Brookfield Asset Mgt - BAM - cls: 41.11 chg: -0.16 stop: 38.49

BAM spiked higher this morning to set a new two-week high but shares quickly succumbed to profit taking. We would not be surprised to see BAM consolidate back toward the $40.00 level. We are not suggesting new bullish positions at this time. More conservative traders may want to tighten their stops.

Picked on May 25 at $40.83
Change since picked: + 0.28
Earnings Date 04/28/06 (confirmed)
Average Daily Volume: 473 thousand


Drew Industry - DW - close: 31.49 chg: -0.51 stop: 30.19

We warned readers to look for a dip back toward $31.50 and the stock delivered today. We would wait for a move back over $31.75 or $32.00 before considering new bullish positions. More conservative traders may want to tighten their stops toward $31.00. We are leaving our stop under last week's low.

Picked on May 25 at $31.62
Change since picked: - 0.13
Earnings Date 05/01/06 (confirmed)
Average Daily Volume: 137 thousand


Health Net. - HNT - close: 42.10 chg: +0.01 stop: 39.95

It wasn't much but HNT did manage to close in the green. While we are encouraged by the relative strength the momentum in the stock has stalled. We are not suggesting new bullish positions at this time. Our target remains the $44.50-45.00 range for now. More conservative traders might want to consider a tighter stop near $41.00 or its 10-dma near 41.50.

Picked on May 16 at $41.12
Change since picked: + 0.98
Earnings Date 08/07/06 (unconfirmed)
Average Daily Volume: 1.1 million


ImClone Sys. - IMCL - close: 39.47 chg: -0.73 stop: 38.74

The BTK biotech index reversed course today with a 2% decline after testing its trendline of lower highs. Shares of IMCL followed with its own 1.8% sell-off. Shares hit a high of $40.41 so we remain on the sidelines. Our trigger to go long is at $40.55. We are going to leave IMCL on the play list as a bullish candidate for now but more conservative traders may want to adjust their trigger to go long toward $41.00 near the top of its recent gap down.

Picked on May xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 07/16/06 (unconfirmed)
Average Daily Volume: 1.6 million


Murphy Oil - MUR - close: 50.85 chg: -0.91 stop: 48.75

MUR is another oil stock casualty. The oil sector was hit by another round of selling in spite of a strong day for crude oil prices. Shares of MUR ended up producing a bearish engulfing candlestick pattern, which is normally seen as a bearish reversal. Thankfully the stock did not hit our trigger to go long at $52.55 so we remain spectators at this point. Shares look poised to retest support in the $48.50-49.00 region.

Picked on May xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 07/25/06 (unconfirmed)
Average Daily Volume: 1.3 million


SLM Corp. - SLM - close: 53.66 chg: -0.97 stop: 53.45 *new*

Shares of SLM closed the session at their low for the day, which is typically pretty bearish for the next trading day's open. Conservative traders may want to exit immediately to minimize any losses. We are raising our stop loss to $53.45 and if the stock sees any follow through tomorrow then we expect to be stopped out.

Picked on May 22 at $55.21*gap higher*
Change since picked: - 1.55
Earnings Date 07/20/06 (unconfirmed)
Average Daily Volume: 2.0 million

Short Play Updates

Akamai - AKAM - close: 30.70 chg: -0.97 stop: 33.01

The volatile shares of AKAM lost 3% versus a 1.7% decline in the NWX networking index. The stock did try to bounce from the $30.00 level so more conservative traders may want to tighten their stop loss. Our target is at $28.50 to account for potential support at its rising 100-dma.

Picked on May 23 at $31.15
Change since picked: - 0.45
Earnings Date 07/26/06 (unconfirmed)
Average Daily Volume: 3.2 million


K-Swiss - KSWS - close: 26.67 chg: -0.55 stop: 28.05

KSWS lost just over 2% today but volume came in below average on the move. We do not see any changes from our previous updates. Our target is $26.00. More conservative types might want to adjust their stop toward $27.50.

Picked on May 12 at $27.45
Change since picked: - 0.78
Earnings Date 04/27/06 (confirmed)
Average Daily Volume: 300 thousand


Starbucks - SBUX - close: 34.93 chg: -0.50 stop: 36.65

SBUX lost 1.4% and given the market weakness we would consider new bearish positions here. Traders should be aware that shares of SBUX could see some volatility on Thursday, June 1st when the company reports its May sales numbers. We are going to target the top of its February gap (33.00) with an exit range of $33.15-33.00.

Picked on May 23 at $35.59
Change since picked: - 0.66
Earnings Date 08/02/06 (unconfirmed)
Average Daily Volume: 5.7 thousand

Closed Long Plays


Closed Short Plays


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


Option Investor Inc is neither a registered Investment Advisor nor a Broker/Dealer. Readers are advised that all information is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor is it to be construed as a recommendation to buy, hold or sell (short or otherwise) any security. All opinions, analyses and information included herein are based on sources believed to be reliable and written in good faith, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. In addition, we do not necessarily update such opinions, analysis or information. Owners, employees and writers may have long or short positions in the securities that are discussed.

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