Option Investor
Play Updates

In Play Updates and Reviews

Printer friendly version

Long Play Updates


Short Play Updates

BEA Systems - BEAS - close: 7.34 chg: -0.45 stop: 8.04

BEAS is a new short candidate we listed in the Thursday night newsletter with a TRIGGER to go short at $7.73. After the IBM news Thursday night the tech sector plunged on Friday. Shares of BEAS opened below our trigger at $7.68 immediately opening our play. We have adjusted our entry point for Friday's open. We remain bearish but would not be surprised to see a short-term oversold bounce back toward the $7.70 level before BEAS continues lower. Readers may want to watch for a new bounce/failed rally combo to use as a new entry point. Our target remains the $7.00 level. A reprint of the original play from Thursday follows:

We normally don't like to suggest short positions on stocks that trade under $10.00 a share. However, considering the bearish technical breakdowns in both the NASDAQ Composite and the GSO software index we're going to suggest readers consider bearish plays on BEAS. BEAS turned in a nice rally back in the second half of 2004 but like many stocks 2005 has not been kind. Shares have essentially been consolidating sideways but under a pattern of lower highs the last few months. More importantly BEAS broke down below this bearish wedge-like pattern several days ago but managed an oversold bounce right back to resistance near $8.00. The stock appears to be rolling over again under $8.00 and shares just closed right at the 200-dma. Readers should know that one of the biggest risks with bearish positions in BEAS is a takeover. There has been takeover chatter about BEAS as a target for months but one look at the chart and you can see that the overall trend this year has been one of selling, not buying. We obviously don't expect BEAS to be taken over in the next few weeks but it is a significant risk. Our short-term six-week target is the $7.00 region but we want to see a little more confirmation that the stock is truly rolling over again. Thus we're going to use a TRIGGER at $7.73 to open the play. Until BEAS trades at or below $7.73 we'll sit on the sidelines.

Picked on April 15 at $ 7.68
Change since picked: - 0.34
Earnings Date 05/18/05 (unconfirmed)
Average Daily Volume: 7.6 million


Anheuser Busch - BUD - close: 45.72 chg: -0.27 stop: 47.01

Our short play in BUD has become a waiting came. We're just waiting to see how low will shares fall before we plan to exit to avoid the company's April 27th earnings report. We are not suggesting new positions.

Picked on February 7 at $48.32
Gain since picked: - 2.60
Earnings Date 04/27/05 (unconfirmed)
Average Daily Volume: 2.4 million


Flextronics - FLEX - close: 10.45 chg: -0.73 stop: 11.76*new*

IBM's surprisingly poor earnings report on Thursday night sent the tech sector crashing on Friday. The SOX index lost 3.3 percent and FLEX under performed with a 6.5 percent decline on volume more than double the average. Shares of FLEX are now close to our target in the 10.25-10.00 range but FLEX is also very short-term oversold as well. We strongly suggest that more conservative traders consider exiting now for a profit - even through there is a chance for more weakness in the semis sector. The challenge is that any oversold bounce could easily erase our paper profits. We're going to lower the stop loss to $11.76 but you may want to tighten yours even further. We're going to hold out for another dip, probably on Monday, and we'll happily exit if FLEX trades at $10.25 or lower. We are not suggesting new bearish entries at this time.

Picked on March 16 at $11.95
Change since picked: - 1.50
Earnings Date 04/28/05 (confirmed)
Average Daily Volume: 5.5 million


Greenbrier Co - GBX - close: 31.30 chg: -0.40 stop: 34.49

Slowly but surely shares of GBX continue to sink. Now that the Dow Transportation index is truly breaking down odds of GBX hitting our target in the $30.00-28.00 range are rising in our favor. Traders do need to be prepared for an oversold bounce. GBX is very short-term oversold and the stock is nearing potential technical support at the simple 100-dma currently near 30.85. An oversold bounce could push GBX back toward the $32.00-32.50 levels before the stock continues lower. If you're looking for a new bearish entry point we suggest waiting for the bounce to occur and then begin to fail before initiating positions.

Picked on April 11 at $33.20
Change since picked: - 1.40
Earnings Date 03/30/05 (confirmed)
Average Daily Volume: 123 thousand


Lowes Companies - LOW - cls: 51.64 change: -1.20 stop: 55.01*new*

The market sell-off on Friday helped drag LOW to another new seven-month low. Shares gapped down and never fully recovered. The stock is currently nearing our exit/profit target range of $51.00-50.00. If the markets dip again on Monday LOW could easily hit our target and we will exit. We are not suggesting new bearish plays at this time. We are lowering our stop loss to $55.01. If the markets (and LOW) surprise us with an oversold bounce on Monday then be prepared for a rally toward the $54 level before LOW reverses course again.

Picked on April 10 at $54.81
Change since picked: - 3.17
Earnings Date 05/16/05 (unconfirmed)
Average Daily Volume: 3.0 million


Sina Corp - SINA - close: 27.35 chg: -0.22 stop: 30.51

To be honest we would have expected a bigger decline in shares of SINA on Friday given the 3.3 percent drop in the INX Internet sector index. Of course SINA is already short-term oversold and traders should be ready for a possible bounce back toward the $28.50 level before SINA continues lower. Readers looking for a new entry point can wait for a failed rally. Traders should also be prepared for some volatility and increased risk this coming week. Internet giant Yahoo (YHOO) reports earnings on Tuesday and Internet titan Google (GOOG) reports earnings on Thursday. Results and comments from either report could spark a big move in shares of SINA regardless of SINA's own upcoming report in May. Our target remains the $25.00 level.

Picked on April 13 at $28.52
Change since picked: - 1.14
Earnings Date 05/05/05 (confirmed)
Average Daily Volume: 3.5 million


Westlake Chem. - WLK - close: 27.01 chg: -0.52 stop: 30.51*new*

WLK continues to sink and the stock notched another five-month low on Friday. Shares are already oversold so when the market bounces traders need to be prepared for WLK to bounce as well. Readers can look for a failed rally in the 28.50-29.00 region as a new bearish entry point. We are lowering the stop loss to 30.51. Our exit/profit target remains the 25.50-25.00 range.

Picked on April 08 at $29.19
Change since picked: - 2.18
Earnings Date 05/04/05 (confirmed)
Average Daily Volume: 207 thousand


West Marine - WMAR - close: 20.02 chg: -0.15 stop: 21.01*new*

We continue to grow concerned with WMAR. The lack of a breakdown below support at the $20.00 level in spite of the big market sell-off is a warning sign. If you look at the intraday chart you can see a huge amount of volume as WMAR hovered around the $20.00 level on Friday afternoon. This tug-of-war between buyers and sellers will probably end with a significant move one way or the other. Currently the trend is down and we would expect another decline but we are not suggesting new bearish positions. In reality more conservative traders may actually want to consider exiting now for a small profit. We are going to lower our stop loss to $21.01.

Annotated chart:

Picked on March 17 at $21.20
Change since picked: - 1.18
Earnings Date 03/03/05 (confirmed)
Average Daily Volume: 155 thousand


XM Satellite Radio - XMSR - cls: 27.50 chg: -0.84 stop: 30.26*new*

XMSR continues to sell-off as we expected it too and the market melt down doesn't hurt either. Friday's 2.9 percent decline pushed XMSR to a new seven-month low below the late March dip. Everything looks great but now XMSR is starting to look a little oversold. The trend is obviously bearish but be prepared for an oversold bounce back toward the $29.00-29.50 range. Readers looking for a new entry point can use a failed rally under $30.00 as a new bearish entry point. Our target remains the $26.00-25.00 range but we're lowering the stop loss to $30.26. It's worth noting that the company has announced its Q1 earnings release date as April 27th and this has reduced the amount of time left in this play since we do not plan to hold over earnings. More conservative traders may want to consider exiting now since XMSR is already down more than 10 percent from the entry price.

Annotated chart:

Picked on April 10 at $30.67
Change since picked: - 3.17
Earnings Date 04/27/05 (confirmed)
Average Daily Volume: 5.2 million

Closed Long Plays

Amer. Egl Outftr - AEOS - cls: 26.88 chg: -1.59 stop: 27.65

Friday's nearly 200-point loss in the Industrials and the 2.45 percent drop in the RLX retail index was too much for AEOS. Investors finally bailed out trying to lock in profits after AEOS' multi-month rally. We hope some of our own readers locked in some profits as well when AEOS hit our initial target at $30.00 several days ago. We have been stopped out at $27.65 as shares of AEOS broke down below long-term support at its 50-dma.

Picked on March 28 at $28.19
Change since picked: - 1.31
Earnings Date 05/14/05 (unconfirmed)
Average Daily Volume: 1.1 million


Forest Oil - FST - close: 37.82 chg: -1.41 stop: 38.99

There are no surprises here. As we warned on Thursday the breakdown below the $40.00 level and its 50-dma looked like bad news. Oil stocks continued to sink on Friday and FST lost another 3.5 percent. We have been stopped out at $38.99.

Picked on April 03 at $42.00
Change since picked: - 4.18
Earnings Date 05/09/05 (unconfirmed)
Average Daily Volume: 1.0 million


Global Imaging - GISX - close: 34.65 chg: -0.40 stop: 34.95

Shares of GISX could not escape the broader market's sell-off either and the stock broke down under the $35.00 level. We have been stopped out at $34.95. Readers can keep an eye on GISX to see if shares bounce from the $34 level, which is bolstered by its 200-dma or watch to see if GISX breaks down under this support level.

Picked on April 05 at $36.50
Change since picked: - 1.85
Earnings Date 04/25/05 (unconfirmed)
Average Daily Volume: 114 thousand


OSI Pharma - OSIP - close: 47.90 chg: -0.84 stop: 44.49

Target achieved. Sour economic news and even worse earnings news from the likes of IBM sent the markets plunging on Friday. In response investors pushed money into old-fashioned safe haven stocks like drugs. The DRG drug index popped higher at the opening and that lifted shares of OSIP to a new relative high at $50.20, above round-number, psychological resistance at the $50.00 level. More importantly to us this was enough for OSIP to hit our exit/profit target at the $50.00 level. We are closing the play at our target of $50. Traders who choose to hold long positions in OSIP can probably expect a short-term dip back toward the $45.00 level.

Picked on April 08 at $45.51
Change since picked: + 2.39
Earnings Date 05/10/05 (unconfirmed)
Average Daily Volume: 1.5 million

Closed Short Plays


Premier Investor Play Update Archives