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Daily Newsletter, Saturday, 09/09/2006

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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
AKAMPTEN
UTX 

New Long Plays

Akamai Tech. - AKAM - close: 41.15 chg: +1.74 stop: 38.44

Company Description:
Akamai is the leading global service provider for accelerating content and business processes online. Thousands of organizations have formed trusted relationships with Akamai, improving their revenue and reducing costs by maximizing the performance of their online businesses. (source: company press release or website)

Why We Like It:
We are not feeling exceptionally bullish on the market right now but AKAM seems to be marching to the beat of its own drummer. The stock's sideways consolidation over the past month has a bullish tilt to it. The MACD on the daily chart is nearing a new buy signal. The three-day candlestick pattern looks like a bullish reversal. Plus, the P&F chart is bullish with a $56 target. We are going to suggest a trigger to go long the stock at $42.05. If triggered our target is the $47.50-50.00 range. Looking at the weekly chart we don't see any significant resistance until about $50.00. Please note that AKAM is due to hold an analyst meeting this week on Wednesday, September 13th from 8:00 a.m. to 2:00 p.m. ET. Reaction to the meeting could produce volatility so protect yourself. We're setting our stop loss under last week's low.

Picked on September xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/25/06 (unconfirmed)
Average Daily Volume: 3.8 million

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United Tech. - UTX - close: 63.34 chg: +0.57 stop: 61.99

Company Description:
United Technologies, based in Hartford, Conn., is a diversified company that provides high technology products and services to the building and aerospace industries. (source: company press release or website)

Why We Like It:
Dow-component UTX looks ready to produce a new leg higher. Early last week the stock broke out over significant four-month old resistance. During the market's weakness last week shares of UTX dipped back to retest broken resistance as new support near its 10-dma and 100-dma. Traders appeared to buy the bounce on Friday. We are not very optimistic for stocks during September and its historical pattern for equity weakness but UTX is somewhat defensive in nature and this looks like a lower-risk entry point. We're suggesting readers go long above $63.00 and target a rally to $66.00. More aggressive traders may want to aim higher. Be aware that some of UTX's management will be speaking at a conference on September 15th.

Picked on September 10 at $63.34
Change since picked: + 0.00
Earnings Date 10/17/06 (unconfirmed)
Average Daily Volume: 3.5 million
 

New Short Plays

Patterson-UTI - PTEN - cls: 25.28 change: -1.10 stop: 27.01

Company Description:
Patterson-UTI Energy, Inc. provides onshore contract drilling services to exploration and production companies in North America. The Company owns 403 land-based drilling rigs. (source: company press release or website)

Why We Like It:
Oil and oil service stocks are breaking down. The end of the summer driving season means lower demand. There aren't any significant or threatening storms in the Atlantic or Caribbean that might threaten our oil production in the Gulf. Plus, the verbal conflict between the U.S. and Iran has hit a lull (for the moment). Crude oil futures are breaking down and have broken various levels of support. We think there is more profit taking ahead. However, be aware that there is a significant risk with this and any bearish oil play. If there is any escalation between Iran and the west or any terrorist attack then oil prices will likely skyrocket higher and oil stocks with them. Since this play is based on shorting the stock our risk is technically infinite. A stop loss may not help much in a "fast" market. We like PTEN as a bearish candidate based on the breakdown from its trading range on Friday. Shares closed under support at $26.00 and the next level of support appears to be $22.50. We're suggesting positions under $26.00 and our target is the $22.75-22.50 range. The P&F chart points to a $20 target.

Picked on September 10 at $25.28
Change since picked: + 0.00
Earnings Date 11/02/06 (unconfirmed)
Average Daily Volume: 2.8 million
 

Play Updates

Updates On Latest Picks

Long Play Updates

Brookfield Asset Mgt. - BAM - cls: 43.93 chg: -0.64 stop: 42.95

We have to wave the yellow caution flag with our play on BAM. Most of the market rebounded on Friday following a sharp two-day pull back. Shares of BAM failed to participate in any bounce. Instead the stock produced a mini-failed rally at the 10-dma and the decline on Friday helped produce a MACD sell signal on the daily chart. Volume came in a little bit above the daily average. More conservative traders might want to cut their losses right here and exit early. We're not suggesting new positions.

Picked on August 22 at $44.82
Change since picked: - 0.89
Earnings Date 08/03/06 (confirmed)
Average Daily Volume: 393 thousand

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eBay Inc. - EBAY - close: 28.51 chg: +0.98 stop: 26.75 *new*

Traders stepped in to buy the dip in EBAY on Friday. The stock rallied with a 3.5% gain after dipping toward its 10-dma on Thursday. Overall the pattern looks bullish given the stock's apparent breakout from its longer-term bearish channel but we still see short-term resistance at the descending 100-dma, currently near $29.10. Due to the 100-dma approaching EBAY we're going to adjust our target from $29.25-29.50 to $28.95-29.25. More aggressive traders may want to aim higher. We're going to raise our stop loss to $26.75. We're not suggesting new positions at this time.

Picked on August 24 at $26.25
Change since picked: + 2.26
Earnings Date 10/18/06 (unconfirmed)
Average Daily Volume: 19.6 million

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Elk Corp. - ELK - close: 27.98 change: +0.14 stop: 26.45 *new*

The Friday bounce in ELK did not get very far. Shares spent most of the day butting up against the $28.00 level. Overall the pattern looks bullish given ELK's breakout from its long-term bearish channel. However, we hesitate to suggest new positions right here. We're going to raise our stop loss to $26.45.

Picked on August 22 at $27.10
Change since picked: + 0.88
Earnings Date 08/17/06 (confirmed)
Average Daily Volume: 245 thousand

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Mittal Steel - MT - close: 33.63 chg: +0.13 stop: 32.49

The bullish trend in MT may be in jeopardy. Early last week the steel sector saw a widespread rally and several stocks in the group broke out above key resistance levels. Unfortunately, that proved to be a bull trap. The breakouts all reversed and in MT's case the stock never broke out over resistance at $35.00. Currently shares of MT are trading near the bottom of its four-week rising channel. If the stock closes under $33.00 we'll drop MT as a bullish candidate. Until then we'll keep waiting for a breakout over resistance at $35.00. If triggered our target is the $39.50-40.00 range. We do not want to hold over the early November earnings report. FYI: The Point & Figure chart is bullish with a $47 target.

Picked on September xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 11/01/06 (unconfirmed)
Average Daily Volume: 3.2 million

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Knight Cap. Grp - NITE - cls: 16.99 chg: -0.07 stop: 15.95

There is no change from our previous updates on NITE. We told readers to expect a dip toward the stock's two-month trendline of rising support. Technically NITE is giving us mixed signals with the majority of short-term momentum indicators turning bearish. The weekly MACD and the P&F chart are still bullish. A bounce above $16.00 or $16.50 could be used as a new entry point to go long the stock but we would be extra careful about opening new bullish positions at this time. Our target is the $19.85-20.00 range.

Picked on August 22 at $17.36
Change since picked: - 0.37
Earnings Date 07/18/06 (confirmed)
Average Daily Volume: 1.5 million
 

Short Play Updates

Brookfield Asset Mgt. - BAM - cls: 43.93 chg: -0.64 stop: 42.95

We have to wave the yellow caution flag with our play on BAM. Most of the market rebounded on Friday following a sharp two-day pull back. Shares of BAM failed to participate in any bounce. Instead the stock produced a mini-failed rally at the 10-dma and the decline on Friday helped produce a MACD sell signal on the daily chart. Volume came in a little bit above the daily average. More conservative traders might want to cut their losses right here and exit early. We're not suggesting new positions.

Picked on August 22 at $44.82
Change since picked: - 0.89
Earnings Date 08/03/06 (confirmed)
Average Daily Volume: 393 thousand

---

eBay Inc. - EBAY - close: 28.51 chg: +0.98 stop: 26.75 *new*

Traders stepped in to buy the dip in EBAY on Friday. The stock rallied with a 3.5% gain after dipping toward its 10-dma on Thursday. Overall the pattern looks bullish given the stock's apparent breakout from its longer-term bearish channel but we still see short-term resistance at the descending 100-dma, currently near $29.10. Due to the 100-dma approaching EBAY we're going to adjust our target from $29.25-29.50 to $28.95-29.25. More aggressive traders may want to aim higher. We're going to raise our stop loss to $26.75. We're not suggesting new positions at this time.

Picked on August 24 at $26.25
Change since picked: + 2.26
Earnings Date 10/18/06 (unconfirmed)
Average Daily Volume: 19.6 million

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Elk Corp. - ELK - close: 27.98 change: +0.14 stop: 26.45 *new*

The Friday bounce in ELK did not get very far. Shares spent most of the day butting up against the $28.00 level. Overall the pattern looks bullish given ELK's breakout from its long-term bearish channel. However, we hesitate to suggest new positions right here. We're going to raise our stop loss to $26.45.

Picked on August 22 at $27.10
Change since picked: + 0.88
Earnings Date 08/17/06 (confirmed)
Average Daily Volume: 245 thousand

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Mittal Steel - MT - close: 33.63 chg: +0.13 stop: 32.49

The bullish trend in MT may be in jeopardy. Early last week the steel sector saw a widespread rally and several stocks in the group broke out above key resistance levels. Unfortunately, that proved to be a bull trap. The breakouts all reversed and in MT's case the stock never broke out over resistance at $35.00. Currently shares of MT are trading near the bottom of its four-week rising channel. If the stock closes under $33.00 we'll drop MT as a bullish candidate. Until then we'll keep waiting for a breakout over resistance at $35.00. If triggered our target is the $39.50-40.00 range. We do not want to hold over the early November earnings report. FYI: The Point & Figure chart is bullish with a $47 target.

Picked on September xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 11/01/06 (unconfirmed)
Average Daily Volume: 3.2 million

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Knight Cap. Grp - NITE - cls: 16.99 chg: -0.07 stop: 15.95

There is no change from our previous updates on NITE. We told readers to expect a dip toward the stock's two-month trendline of rising support. Technically NITE is giving us mixed signals with the majority of short-term momentum indicators turning bearish. The weekly MACD and the P&F chart are still bullish. A bounce above $16.00 or $16.50 could be used as a new entry point to go long the stock but we would be extra careful about opening new bullish positions at this time. Our target is the $19.85-20.00 range.

Picked on August 22 at $17.36
Change since picked: - 0.37
Earnings Date 07/18/06 (confirmed)
Average Daily Volume: 1.5 million
 

Closed Long Plays

Maxim Integrated - MXIM - close: 29.20 chg: -0.16 stop: 27.95

We are dropping MXIM as a bullish candidate. The SOX semiconductor index has spent the last two weeks failing to breakout over technical resistance at its descending 100-dma. The sell-off last week produced a new MACD sell signal for the SOX and the path of least resistance might be down at least until the SOX retests the 420 level or its 50-dma as support. Shares of MXIM did manage to breakout from its multi-month bearish channel but the stock never achieved a significant breakout over the $30.00 level. Our suggested trigger to go long MXIM has been at $30.15, which has not yet been hit. If the SOX does continue to slip lower then MXIM might breakdown support at the $28.00 level and traders, if you're nimble enough, may want to short the stock for a 6%-10% move.

Picked on August xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 11/03/06 (unconfirmed)
Average Daily Volume: 6.0 million

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Steel Dynamics - STLD - close: 52.83 change: -0.98 stop: 49.99

We are choosing to cut our losses early with STLD. The sector-wide rally in the steel sector that began early last week has failed. Shares of STLD couldn't get past its 50-dma and now shares look poised to fall back toward the 200-dma or the $50 level. We'd rather exit now and wait and watch to see if and where STLD bounces.

Picked on September 03 at $54.48
Change since picked: - 1.65
Earnings Date 10/19/06 (unconfirmed)
Average Daily Volume: 1.5 million
 

Closed Short Plays

Brookefield Homes- BHS - close: 23.75 chg: +0.40 stop: 24.05

Watch out! The homebuilders managed to bounce on Friday in spite of another earnings warning from another company in the industry (third warning this week). It seems that the market may have already priced in all the bad news. Shares of BHS managed to spike to $24.03. Our stop loss is at $24.05. We are suggesting that traders exit early right now. The intraday chart suggests the next move is still upward. The latest (August) data puts short interest at 27.8% (up from 20% in July) of BHS' 26.2 million-share float. That is a high degree of short interest and increases the risk of a short-squeeze! Traders might actually want to consider going long the stock above $24.15 or its 50-dma (25.62) in an effort to capture any short-squeeze in the stock!

Picked on August 25 at $22.99
Change since picked: + 0.76
Earnings Date 07/20/06 (confirmed)
Average Daily Volume: 497 thousand
 

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

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