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Daily Newsletter, Wednesday, 11/08/2006

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Table of Contents

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

Market Wrap

Finding Common Ground

Ahead of Cisco's (CSCO) earnings report this afternoon, markets brushed off early weakness today and posted gains. Those gains didn't appear to be on the books early this morning, but gains in another big-cap stock, Microsoft (MSFT), helped propel indices higher in the afternoon. The Dow was among those, posting another record close. The Nasdaq posted its best close since February, 2001.

The morning looked bleaker. Our markets reportedly hate uncertainty, and uncertainty was what market participants faced early this morning. The Democrats had won the House, but two key Senate positions--positions that would determine whether Democrats would take control of the Senate, too--were close and undecided. While I don't want to focus too heavily on political matters, options traders understand that such political developments do impact the economy or specific sectors of the economy and so must be recognized.

For example, a key Democrat spoke this morning on CNBC, detailing what the Democrats would like to do to balance the budget, efforts that might be hampered by the President's perceived intention to veto any legislation that would undo his administration's tax cuts. Also, a changing of the guard on key committees can impact businesses directly. For example, a CNBC correspondent pointed out this morning that such a changing of the guard could mean that auto companies could be faced with a push for higher-mileage vehicles, something auto manufacturers do not want to see happen. Tax incentives granted to the energy industry could be undone. The drug manufacturers could be impacted. While one key Democratic Senator stated yesterday that while we have troops on the ground, defense cuts wouldn't be considered, some believe that defense-related companies would eventually see cuts. Some small business owners believe that a push for a higher minimum wage could hurt their bottom lines.

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While some say that it was the prospect of a Democratic-controlled House and Senate that hit futures and then stalled the cash markets for a time this morning, others will point out that it's been widely believed for weeks that this could happen and yet markets have risen. It may be more likely that the uncertainty about election results as well as an unwinding of pre-election positions that led to the pre-market decline and the stall until the afternoon when markets suddenly climbed. Uncertainty about who has control leads to uncertainty as to how a portfolio should be positioned. The country dreads another ugly recount scenario, if one or two should occur in those hotly contested Senate seats.

Apparently, the election resulted in more than a Democratic takeover of the House and a possible one of the Senate. Shortly after noon, the announcement was made that Defense Secretary Donald Rumsfeld had resigned. President Bush tapped ex-CIA chief Robert Gates to replace Rumsfeld. Markets reacted with a brief bounce, but it was just part of the choppy market movement within a confined consolidation pattern that played out until a stronger afternoon push. When President Bush talked about the changeover during an early-afternoon press conference, he was also of course questioned about his ability to work with key Democrats. He talked at length about his intention to find a common ground as well as his belief that such a common ground could be found.

Markets had spent the morning attempting to find a common ground between bulls and bears, too, one where bullish and bearish pressures were equalized. They remained equalized for a time until bulls broke that equilibrium in the afternoon.

With all the attempts to claim that the victory of the Democrats in the House and possibly in the Senate had stalled the markets, it was a company-related announcement that was given the credit for breaking that stalemate, that seeking of common ground in the markets. Microsoft (MSFT) announced that Windows Vista was ready to be shipped. The Fed's Moskow should also perhaps be given some of that credit. He spoke during the afternoon, affirming that the pause in rate hikes was appropriate and had "served us well."

Perhaps we should just look to the charts to see if today's action was in keeping with what shows up there.

Annotated Daily Chart of the SPX:

Despite the day's gain, I consider this action consolidation. The candle speaks of consolidation and so does the action as prices gyrated between support and resistance. This is a hand-drawn channel and not one calculated by regression analysis, so the midline might be slightly off.

On a short-term Keltner basis, the day's trading looked weaker than yesterday's, despite the higher close. Resistance at 1387.55-1389 was trying to firm, although a retest of that zone can't be precluded. Obviously a strong, CSCO-propelled rally such as the type that we've seen in the past could blow past any resistance seen on a 15-minute chart, but the SPX's typical pattern after a strong several-day push is a several-day consolidation period that is sideways or sideways-up and lasts up to a week. The SPX is merely following that pattern. Unless CSCO-inspired enthusiasm blows past that resistance, however, I would expect to see short-term resistance there tomorrow morning if the first push is higher.

You'll read about the Dow's record close, as you have already in the opening paragraph, but the chart displays consolidation rather than new strength.

Annotated Daily Chart of the Dow:

The Dow might have eked out a new record close, but the day's intraday high was below yesterday's, and the day's candle speaks of consolidation rather than strength. The bulls and bears are still caught in a short-term stalemate.

The 15-minute Keltner charts also show resistance firming on the Dow, at about 12,195-12,204 as of today's close. If there's an early pop tomorrow, watch for potential resistance there on 15-minute closes unless a CSCO-induced rally pushes the Dow right through that resistance.

The Nasdaq also eked out a new recent closing high, although not a new record closing high. Its daily candle was a stronger one than the Dow's, but the Nasdaq also could not top yesterday's intraday high and also stopped at the midline of its rising regression channel.

Annotated Daily Chart of the Nasdaq:

Unlike the SPX and Dow, the last push on the Nasdaq created a breakout scenario on the Nasdaq's 15-minute Keltner channel chart. Next light Keltner resistance crossed at 2391.19 as of the close, with that resistance important on a 15-minute close and not on a move within the first 15-minute period. Historical resistance exists just above, too, at yesterday's 2391.34 intraday high. Further Keltner resistance, on 30 minute closes, crosses at 2394.20. I would watch for potential short-term resistance at those levels if there's an early push higher tomorrow morning, but the approaching 2400 round-number level might prove a strong price magnet to bulls.

The Nasdaq might have produced a stronger candle than some other indices, but that wasn't due to the influence of the SOX. The SOX's daily candle was within a recent consolidation zone and below the 200-sma, and its shape was clearly indicative of indecision or consolidation.

Annotated Daily Chart of the SOX:

The SOX's chart has proved puzzling for a while. After falling out of the same rising channel that many indices produced when climbing off the summer lows, this index fell slightly, rose up in a classic manner to retest the former support, which did hold as resistance, but then failed to act as expected and dive further. It has consolidated since. While I see nothing particularly bullish about this chart, other than the fact that bears were not able to drive prices lower when they might have been expected to do so, I don't yet see confirmation of the bearishness, either. This indicator index has failed to participate in the rally seen on other indices, and that's certainly more on the bearish than the bullish side of the ledger. It may or may not be forming a potential head-and-shoulders formation, as the possible formation is rather roughly formed, but these formations have not been reliably bearish for quite some time. Bears probably need to see a sustained break below the October low to get anything going to the downside and bulls need to see a sustained break of the 200-sma as a first step, although further resistance awaits the SOX above that level.

On a 15-minute nestled Keltner chart, the SOX had attempted an afternoon breakout, but had fallen back below the breakout level by the close. Resistance and support were thickly layered above and below the SOX as of the close, but strongest resistance appeared to be just above, at 466.34, and then at 469.58, with this resistance important on 15-minute closes, and strongest support was from 460.15-461.44, also important on 15-minute closes.

Annotated Daily Chart of the RUT:

The RUT, like so many other indices, could not breach yesterday's intraday high, despite a close today that was higher than yesterday's close. The body of today's candle was within yesterday's range. Despite the relatively strong candle, this speaks to me of consolidation more than new strength. Yesterday's stalemate on the RUT has not yet been resolved, in my opinion.

At the close, the RUT was rising to retest Keltner resistance just under 770, with further resistance at 771.64-772.30, with all of those numbers important on 15-minute closes. Resistance appeared to be firming a bit, but not yet enough to guarantee that it would hold, especially if there were a strong rally tomorrow morning.

With CNBC and most other networks more concerned with election news than economic developments and with economic releases few and far between, little attention was paid to those releases. The first was at 7:00, when the Mortgage Bankers Association released its weekly mortgage application volume survey for the previous week, with that volume showing an 8.8-percent increase. The increase was driven higher by an 11 percent rise in refinance application volume. These are week-over-week comparisons, however. Year over year, the total volume fell 5 percent.

Four-week-moving averages moved higher, too, reacting to this week's big jump. The four-week averages of the market, purchase and refinance components jumped 0.9 percent, 1.2 percent and 0.6 percent, respectively. The average contract interest rate for a fixed-rate, 30-year mortgage was unchanged from the previous week's 6.24 percent, but points decreased.

Today, Centex Corporation's (CTX) Chief Executive addressed an investor conference that was sponsored by UBS. The Chief Executive said that historical patterns suggested that the housing industry downturn might have a bit further today in its decline from the July, 2005 boom. He believes that difficulty in selling existing homes is still leading to cancellations in new homes, driving inventory higher and prices lower. Whether as a result of his words or a reaction to other developments, the DJUSHB, the Dow Jones U.S. Home Construction Index, dropped beneath recent consolidation, ending at a best-fit trendline off the summer's low. A trendline that encompasses all candle shadows, too, is lower and has not yet been violated or tested, but there was no participation by this index in the afternoon rally, despite a drop in bond yields today and this afternoon, in particular.

Crude inventories were reported mid-morning. If only minimal on-air commentary was allotted to a discussion of crude's price actions, the TRAN was still showing some short-term reactions, dropping when crude rose immediately after the announcement, rising when crude prices retreated, then dropping again when the crude price climbed. The TRAN has looked weaker by some measures than some other indices lately.

Annotated Daily Chart of the TRAN:

Although I did not draw the trendline because I wanted the blue 10-sma to be clearly visible, the TRAN's prices have dropped below a best-fit rising trendline off the September low and now have risen to retest that trendline. The TRAN's prices are showing some hesitancy at that former supporting trendline, but that hesitancy is so far in the form of a sideways consolidation. Neither bulls nor bears have prevailed yet.

While the TRAN struggles with resistance, the current crude futures contract does, too, struggling with the 30-sma.

Annotated Daily Chart of Crude Futures:

A sustained push above that 30-sma might negatively impact the TRAN as well as other indices. Crude costs should be watched tomorrow and the TRAN's reaction or non-reaction to its movements should be watched, too. Today, the OIX and XOI gained, helping to propel the SPX higher.

The Department of Energy's survey showed that crude inventories climbed 400,000 barrels last week. Both distillates--important as the winter season approaches--and gasoline inventories fell. Distillates fell by 2.7 million barrels, the DOE reported, while gasoline supplies dropped 600,000. The draw downs were larger than expected, with the decline in distillate supplies about three times what was expected, according to CNBC. Refinery capacity also dropped, by 0.8 percent.

As you may already know, yesterday the Energy Department released its forecasts for crude and natural-gas costs and demand. Those forecasts included an increase in demand for crude across the globe of 1 million barrels a day for the full year. It expects WTI crude to average $66 a barrel in 2006 and $65 a barrel in 2007.

Some company-related developments also impacted markets, with several companies of note reporting or announcing news today or late yesterday. Those included Federated Department Stores (FD), reportedly missing expectations, but climbing sharply in early trading. Sirius Satellite Radio (SIRI) reported higher subscriber additions and a narrower third-quarter loss and climbed in early trading, too. Late yesterday, National Semiconductor (NSM) had blamed slow shipments to cell-phone manufacturers for the company's decision to cut its targets, but even NSM rose in early trading.

In addition, late yesterday Merck (MRK) reported four tax disputes in Canada and the U.S. MRK wasn't as lucky as some of the other companies missing expectations, lowering forecasts or reporting bad news, however. It dropped from the get-go this morning, with the drop perhaps exacerbated by uncertainty over how drug manufacturers would be impacted by a Democratic-led House and gridlock in the Senate or even a Democratic-led Senate.

CNBC characterized CSCO's after-hours report as "very good news," with the company beating expectations. Earnings were $0.31, above the $0.29 expected. The revenue was reported as being $300,000 above expectations. Gross margins were 64.8 percent, a little below the 65 percent that the company had guided and a little below the expectations of at least one analyst, but the stock soared in the after-hours period immediately after the release. I caution that this activity was shortly after the report and before the conference call. The conference call can change the reaction, especially as the analyst mentioned above was anxious to get a look at the company's book-to-bill report.

Tomorrow's economic reports are more numerous than those for the rest of the week. They include the usual jobless claims at 8:30 tomorrow morning, but that time slot will also see the release of September's International Trade and Import/Export Prices. The market expects a deficit of $66.1 billion in international trade, with that being a narrower deficit than the previous $69.9 billion deficit. Import/Export Prices are expected to drop 1.1 percent, with the previous drop at 2.1 percent. That release will be followed by November's Consumer Sentiment at 10:00. Consumer Sentiment is expected to remain relatively flat, at 93.7, after November's 93.6. Wholesale Trade figures appear at the same time, with an increase of 0.6 percent expected, down from the previous month's 1.1-percent increase. Natural gas inventories will bring up the rear, at 10:30.

Earnings releases are winding down, but tomorrow's reporting companies include AEG, AMCC, BVF, CPKI, CPST, CWEI, DAR, DSCO, EPEX, FMR, GT, HLS, IVAN, JCP, KSS, LR, PSUN, QBAK, BID, SCON, TXU, USHS, URBN, VIA and DIS.

What happens tomorrow? Nothing on the charts predicts that unless one considers the recent tendency of a week-long consolidation period to follow a few days of gains to be predictive enough to suggest that tomorrow will be another consolidation day. Another pattern argues against that consolidation, however: recently, the Thursday before opex week has often proven volatile.

With all honesty, as I began writing this Wrap and annotating the charts, I expected to project a more bullish tone than I found myself projecting after viewing the charts. Prices had bounced from the bottoms of rising price channels, bouncing more strongly than I had expected last week since I'd thought there might be consolidation nearer the bottom of the channels than the midlines of those channels ahead of the elections. However, other than the TRAN's struggle with its 10-sma, the potentially bearish formation seen on its chart and the SOX's puzzling behavior, I see nothing that warrants my less-bullish-than-expected tone, but the TRAN's chart does bother me, perhaps more than it should.

The SPX, Dow and OEX are just doing what they've done so many times before, posting a strong gain and then consolidating sideways for a few days before they continue their journey up through those rising channels. So, my advice remains the same as it has so many times before when the markets consolidate as they're doing now. If you're in long-term bullish positions, you've hopefully been ratcheting up your stops as the markets climb, and will continue to do so, watching those price channels in which the indices have been climbing. If you're in short-term bullish positions, you'll want to be a little more careful tomorrow morning if there's an early push toward yesterday's highs and Keltner resistance, as there might be a pullback from those zones, particularly if there's any sell-the-fact effect in CSCO. Beware such a reaction, which has occurred in the past and could occur again.

If you're a want-to-be bear, you might be gazing at the midlines of those rising price channels and the resistance they've been offering the last couple of days, wondering if now is the time to try a bearish position. Who knows? It could be: the Thursday before an opex week is an ideal day to expect some strange price antics, and something about the charts tonight makes me less bullish than I would expect to be when the typical punch-higher-consolidate-sideways pattern has appeared once again. However, there's just no confirmation tonight that such action will occur tomorrow. I've studied all kinds of MA's on all kinds of intraday charts to see if there's "the" moving average or "the" trendline or "the" price level that I can give you to show that markets were in the process of rolling over, if there should be any decline tomorrow, but the last two days have produced chop that's chopped up the charts, too. Half of today, the SPX was finding resistance under its 30-minute 9-ema on 30-minute closes: the other half it was finding support on that average.

All I can suggest is that, if you're inclined to look for a bearish entry, make sure that the bearish ducks all line up, and that the VIX and TRIN are climbing, the advance/decline line is dropping and that they stay that way. Changes in breadth indicators have been fairly good predictors the last couple of days that bulls were gaining ground again.

Bulls and bears should both be aware of the sentiment number expected at 10:00, as, in this jittery time, that number could reverse any early-morning movement, particularly if it's much lower than expected. If there's an early-morning bounce, short-term bulls need to evaluate whether they'll hold on through that release. You've been told tonight, so you have time to consider your choices and make up a game plan tonight.
 

New Plays

Most Recent Plays

New Plays
Long Plays
Short Plays
HSC None
HNZ  
OIS  
PEIX  

New Long Plays

HARSCO - HSC - close: 82.02 change: +0.44 stop: 79.45

Company Description:
Harsco Corporation is a diversified, worldwide company with four market-leading business groups that provide mill services, access services, engineered products and services, and gas containment and control technologies to customers around the globe. The Company employs approximately 21,000 people in 45 countries of operation and recorded 2005 sales of $2.8 billion. (source: company press release or website)

Why We Like It:
We normally try not to play stocks that are price more than $50 or $60 but HSC looks like a tempting candidate. Shares of HSC are poised to breakout over resistance in the $82.60-82.75 region. Technical indicators are improving and the P&F chart is already bullish with a $111 target. We want to catch a breakout over $83.00. Our suggested trigger to buy calls is at $83.05. If triggered our target is the April-May 2006 highs in the $89.00-90.00 range.

Picked on November xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/26/06 (confirmed)
Average Daily Volume = 173 thousand

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Heinz - HNZ - close: 43.20 change: +0.89 stop: 41.85

Company Description:
H. J. Heinz Company, offering "Good Food Every Day"(TM) is one of the world's leading marketers and producers of branded foods in ketchup, condiments, sauces, meals, soups, snacks and infant foods. Heinz satisfies hungry consumers in every outlet, from supermarkets, to restaurants to convenience stores and kiosks. (source: company press release or website)

Why We Like It:
The bullish technical breakout in HNZ today looks like an entry point to go long the stock. The move appears to have been fueled by a company press release. HNZ is putting an initiative on the ballot for shareholders to change the voting procedure to elect directors. The company is also considering a shareholder rights plan. Plus, the management said that the company was on track to grow earnings ten percent this year. The rally today (+2.1%) is a significant breakout from the stock's six-month consolidation pattern. We are suggesting long positions here but a pull back toward what should be support near $42.50 could also be used as an entry point. Our target is the $46.50-47.00 range. We don't have a lot of time. HNZ is due to report earnings around November 21st and we plan to exit ahead of the report.

Picked on November 08 at $43.20
Change since picked: + 0.00
Earnings Date 11/21/06 (unconfirmed)
Average Daily Volume: 1.6 million

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Oil States - OIS - close: 30.21 change: +0.99 stop: 28.84

Company Description:
Oil States International, Inc. is a diversified oilfield services company. With locations around the world, Oil States is a leading manufacturer of products for deepwater production facilities and subsea pipelines, and a leading supplier of a broad range of services to the oil and gas industry, including production-related rental tools, work force accommodations and logistics, oil country tubular goods distribution and land drilling services. (source: company press release or website)

Why We Like It:
The oil sector continues to look strong so we want to add another bullish candidate in the group. OIS has a steady pattern of higher lows and today's rebound from its rising 21-dma also produced a bullish engulfing candlestick pattern and a breakout over $30.00 and its 100-dma. Volume came in very strong on the move. Our target is the $32.50-33.00 range.

Picked on November 08 at $30.21
Change since picked: + 0.00
Earnings Date 10/30/06 (confirmed)
Average Daily Volume: 980 thousand

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Pacific Ethanol - PEIX - close: 17.51 chg: +1.29 stop: 15.79

Company Description:

(source: company press release or website)

Why We Like It:
Several stocks related to alternative fuels surged on Wednesday after democrats won control of the house during Tuesday's election. Shares of PEIX rallied almost 8% on very strong volume. Normally we would not want to chase such a big move but we suspect there is more to come. The stock's rally is also a technical breakout from its three-week consolidation. There is no doubt that this is probably a riskier, more aggressive play. PEIX has been volatile in the past and we have a relatively short time frame. The company is expected to report earnings sometime between November 14th and the 26th. Unfortunately, we don't have a confirmed date yet. We do not want to hold over the report when we do find out the correct date. Traders can choose to chase the stock right here near $17.50 or hope for a pull back. The $16.50 level might be a good spot to try and buy the dip. Shares do have potential resistance with the 100-dma overhead. Our target is the $19.90-20.00 range. We're sticking our stop loss under today's low.

Picked on November 08 at $17.51
Change since picked: + 0.00
Earnings Date 11/14/06 (unconfirmed)
Average Daily Volume: 1.6 million
 

New Short Plays

None today.
 

In Play Updates and Reviews

Long Play Updates

ENSCO - ESV - close: 53.06 change: +2.13 stop: 48.75 *new*

Oil stocks turned in decent gains on Wednesday. The OIX oil index rose 1.26% and the OSX oil services index rose 2.18% thanks to a bounce in crude oil futures. Shares of ESV out performed its peers with a 4.18% gain on above average volume. The stock is making a lot of progress towards our target in the $54.50-55.00 range. We're raising the stop loss to $48.75.

Picked on November 05 at $50.23
Change since picked: + 2.83
Earnings Date 10/24/06 (confirmed)
Average Daily Volume: 3.1 million

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Hess Corp. - HES - close: 44.48 chg: +0.66 stop: 39.99

HES turned in some good news today. Traders bought the dip near $43.50 and there was no follow through lower on yesterday's bearish engulfing candlestick (bearish reversal) pattern. We remain bullish and would continue to open new plays here. More conservative traders may want to adjust their stop toward the $42 level, which is where we would expect the stock to find support. Our target is the $48.00-50.00 range over the next several weeks.

Picked on November 05 at $43.85
Change since picked: + 0.73
Earnings Date 10/25/06 (confirmed)
Average Daily Volume: 3.7 million
 

Short Play Updates

INVACARE - IVC - close: 21.71 change: -0.31 stop: 23.11

IVC lost 1.4% today following yesterday's failed rally under $22.50. Traders may want to consider new short positions here. Our target is the $20.05-20.00 range. More aggressive traders may want to aim lower.

Picked on October 30 at $21.94
Change since picked: - 0.23
Earnings Date 10/26/06 (confirmed)
Average Daily Volume: 209 thousand

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Joy Global - JOYG - close: 40.09 chg: +0.67 stop: 40.65

Coal stocks are still looking weak and poised to move lower but shares of JOYG continue to bounce nonetheless. Today's rally is a minor bullish engulfing candlestick pattern and a breakout over round-number resistance at the $40.00 level. This is a pivotal point for JOYG. More conservative traders may want to tighten their stops a bit or just exit early to limit losses.

Picked on November 01 at $37.35
Change since picked: + 2.74
Earnings Date 12/14/06 (unconfirmed)
Average Daily Volume: 3.1 million

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Rambus Inc. - RMBS - close: 16.33 change: -0.18 stop: 17.25

There is no change from our previous updates. We are still waiting for a breakdown under support at $16.00 before suggesting new positions but more aggressive traders may want to consider new plays here. Our trigger to open positions is at $15.90. If triggered our target is the $12.50 level. More aggressive traders may want to aim for the August lows closer to $10.00. Be advised that RMBS is very active in various legal battles over patents and intellectual property and bears (and bulls) are constantly at risk for an unexpected headline sending the stock surging one way or the other. More conservative traders may want to avoid this play. FYI: The latest (October) data put short interest at 6.4% of the 85.3 million-share float.

Picked on October xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/19/06 (confirmed)
Average Daily Volume: 9.7 million

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Toll Brothers - TOL - close: 27.50 chg: -0.54 stop: 30.05

Homebuilders as a group continued to show relative weakness. The DJUSHB index lost 1.5%. Shares of TOL under performed its peers losing 1.9% thanks to an analyst downgrade today. Our target is the $25.25-25.00 range. We do not want to hold over the early December earnings report. FYI: The P&F chart is still bullish for TOL and shares can trade to $25 and not break the current buy signal. Traders should also note that the latest (October) data put short interest at 15% of TOL's 114.9 million-share float. That's a high amount of short interest and increases the chance of a short squeeze should TOL suddenly move higher.

Picked on November 07 at $27.60
Change since picked: - 0.10
Earnings Date 12/07/06 (unconfirmed)
Average Daily Volume: 3.5 million

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Texas Instruments - TXN - close: 29.35 change: -0.39 stop: 31.15

TXN under performed the markets and its peers in the semiconductor sector with today's 1.3% decline on above average volume. Our target is the $27.50 mark.

Picked on October 27 at $29.90
Change since picked: - 0.55
Earnings Date 10/23/06 (confirmed)
Average Daily Volume: 14.8 million
 

Closed Long Plays

Basic Energy - BAS - close: 26.84 change: +1.00 stop: 24.99

Our short-term bullish play in BAS didn't turn out that bad. A rally in oil stocks thanks to a rebound in crude oil today helped push BAS to a 3.8% gain. It was our plan to exit today at the closing bell to avoid holding over the company's earnings report expected tomorrow.

Picked on November 05 at $25.30
Change since picked: + 1.54
Earnings Date 11/09/06 (confirmed)
Average Daily Volume: 287 thousand
 

Closed Short Plays

Monster Worldwide - MNST - close: 42.51 chg: +1.41 stop: 41.65

We have been stopped out at $41.65. The after hours weakness we saw last night never materialized. Shares of MNST produced an impressive rally rising more than 3.4% on above average volume.

Picked on November 01 at $39.60
Change since picked: + 2.91
Earnings Date 10/25/06 (confirmed)
Average Daily Volume: 1.5 million
 

Play Updates

Updates On Latest Picks

Long Play Updates

ENSCO - ESV - close: 53.06 change: +2.13 stop: 48.75 *new*

Oil stocks turned in decent gains on Wednesday. The OIX oil index rose 1.26% and the OSX oil services index rose 2.18% thanks to a bounce in crude oil futures. Shares of ESV out performed its peers with a 4.18% gain on above average volume. The stock is making a lot of progress towards our target in the $54.50-55.00 range. We're raising the stop loss to $48.75.

Picked on November 05 at $50.23
Change since picked: + 2.83
Earnings Date 10/24/06 (confirmed)
Average Daily Volume: 3.1 million

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Hess Corp. - HES - close: 44.48 chg: +0.66 stop: 39.99

HES turned in some good news today. Traders bought the dip near $43.50 and there was no follow through lower on yesterday's bearish engulfing candlestick (bearish reversal) pattern. We remain bullish and would continue to open new plays here. More conservative traders may want to adjust their stop toward the $42 level, which is where we would expect the stock to find support. Our target is the $48.00-50.00 range over the next several weeks.

Picked on November 05 at $43.85
Change since picked: + 0.73
Earnings Date 10/25/06 (confirmed)
Average Daily Volume: 3.7 million
 

Short Play Updates

INVACARE - IVC - close: 21.71 change: -0.31 stop: 23.11

IVC lost 1.4% today following yesterday's failed rally under $22.50. Traders may want to consider new short positions here. Our target is the $20.05-20.00 range. More aggressive traders may want to aim lower.

Picked on October 30 at $21.94
Change since picked: - 0.23
Earnings Date 10/26/06 (confirmed)
Average Daily Volume: 209 thousand

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Joy Global - JOYG - close: 40.09 chg: +0.67 stop: 40.65

Coal stocks are still looking weak and poised to move lower but shares of JOYG continue to bounce nonetheless. Today's rally is a minor bullish engulfing candlestick pattern and a breakout over round-number resistance at the $40.00 level. This is a pivotal point for JOYG. More conservative traders may want to tighten their stops a bit or just exit early to limit losses.

Picked on November 01 at $37.35
Change since picked: + 2.74
Earnings Date 12/14/06 (unconfirmed)
Average Daily Volume: 3.1 million

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Rambus Inc. - RMBS - close: 16.33 change: -0.18 stop: 17.25

There is no change from our previous updates. We are still waiting for a breakdown under support at $16.00 before suggesting new positions but more aggressive traders may want to consider new plays here. Our trigger to open positions is at $15.90. If triggered our target is the $12.50 level. More aggressive traders may want to aim for the August lows closer to $10.00. Be advised that RMBS is very active in various legal battles over patents and intellectual property and bears (and bulls) are constantly at risk for an unexpected headline sending the stock surging one way or the other. More conservative traders may want to avoid this play. FYI: The latest (October) data put short interest at 6.4% of the 85.3 million-share float.

Picked on October xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/19/06 (confirmed)
Average Daily Volume: 9.7 million

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Toll Brothers - TOL - close: 27.50 chg: -0.54 stop: 30.05

Homebuilders as a group continued to show relative weakness. The DJUSHB index lost 1.5%. Shares of TOL under performed its peers losing 1.9% thanks to an analyst downgrade today. Our target is the $25.25-25.00 range. We do not want to hold over the early December earnings report. FYI: The P&F chart is still bullish for TOL and shares can trade to $25 and not break the current buy signal. Traders should also note that the latest (October) data put short interest at 15% of TOL's 114.9 million-share float. That's a high amount of short interest and increases the chance of a short squeeze should TOL suddenly move higher.

Picked on November 07 at $27.60
Change since picked: - 0.10
Earnings Date 12/07/06 (unconfirmed)
Average Daily Volume: 3.5 million

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Texas Instruments - TXN - close: 29.35 change: -0.39 stop: 31.15

TXN under performed the markets and its peers in the semiconductor sector with today's 1.3% decline on above average volume. Our target is the $27.50 mark.

Picked on October 27 at $29.90
Change since picked: - 0.55
Earnings Date 10/23/06 (confirmed)
Average Daily Volume: 14.8 million
 

Closed Long Plays

Basic Energy - BAS - close: 26.84 change: +1.00 stop: 24.99

Our short-term bullish play in BAS didn't turn out that bad. A rally in oil stocks thanks to a rebound in crude oil today helped push BAS to a 3.8% gain. It was our plan to exit today at the closing bell to avoid holding over the company's earnings report expected tomorrow.

Picked on November 05 at $25.30
Change since picked: + 1.54
Earnings Date 11/09/06 (confirmed)
Average Daily Volume: 287 thousand
 

Closed Short Plays

Monster Worldwide - MNST - close: 42.51 chg: +1.41 stop: 41.65

We have been stopped out at $41.65. The after hours weakness we saw last night never materialized. Shares of MNST produced an impressive rally rising more than 3.4% on above average volume.

Picked on November 01 at $39.60
Change since picked: + 2.91
Earnings Date 10/25/06 (confirmed)
Average Daily Volume: 1.5 million
 

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

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