Option Investor
New Plays

Education and Retail

HAVING TROUBLE PRINTING?
Printer friendly version
Call Options Plays
Put Options Plays
 
APOL

We're adding two new bearish candidates to the play list given their new relative lows and weak technicals.

Advertisement
SEE WARREN BUFFETT'S LATEST DISCLOSED STOCK PORTFOLIO
Now you can follow the investment master's actual moves.

To get a FREE report that details Warren Buffett's strategy and
reveals his most recently disclosed, ACTUAL stock picks, Click HERE!


Apollo Group - APOL - close: 77.61 chg: -1.92 stop: 81.01

Company Description:
Apollo Group, Inc. has been providing higher education programs to working adults for over 25 years. Apollo Group, Inc., operates through its subsidiaries The University of Phoenix, Inc., Institute for Professional Development, The College for Financial Planning Institutes Corporation, and Western International University, Inc. The consolidated enrollment in its educational programs makes it the largest private institution of higher education in the United States. It offers educational programs and services at 85 campuses and 142 learning centers in 39 states, Puerto Rico and Vancouver, British Columbia. Combined degree enrollment was 267,900 students as of November 30, 2004.
(source: company press release)

Why We Like It:
It looks like investors are giving APOL pretty low scores. The stock soared in November and early December but was punished harshly for only beating estimates by a penny. The stock gapped down after its December 16th earnings report despite pretty strong growth. Since then shares have consolidated mostly sideways until the last couple of sessions. The broad market weakness and wide spread concerns over earnings deceleration has pushed APOL through the bottom of its trading range to break technical support at the simple 50-dma. Together this has produced a bearish triangle breakdown on its point and figure chart with a $72 target. The triangle breakdown is one of the most successful P&F patterns to trade in a declining market so we're electing to buy puts on APOL's new relative low. We'll target a drop into the $72-70 range since the $70 level should be round-number, psychological support.

Suggested Options:
We are going to suggest the February and May puts.

BUY PUT FEB 80 OAQ-NP OI=3738 current ask $4.40
BUY PUT FEB 75 OAQ-NO OI=1490 current ask $2.20
BUY PUT FEB 70 OAQ-NN OI=1647 current ask $0.85

BUY PUT MAY 80 OAQ-QP OI= 414 current ask $7.00
BUY PUT MAY 75 OAQ-QO OI= 862 current ask $4.60
BUY PUT MAY 70 OAQ-QN OI= 345 current ask $2.85

Annotated Chart:

Picked on January 23 at $ 77.61
Change since picked: - 0.00
Earnings Date 12/16/04 (confirmed)
Average Daily Volume = 2.4 million

---

Kmart Holdings - KMRT - close: 91.67 chg: -0.71 stop: 92.49

Company Description:
Kmart Holding Corporation and its subsidiaries (together, "Kmart") is a mass merchandising company that offers customers quality products through a portfolio of exclusive brands that include Thalia Sodi, Jaclyn Smith, Joe Boxer, Martha Stewart Everyday and Route 66. (source: company press release)

Why We Like It:
KMRT was on a rampage in 2004. The stock steamrolled over the bears left and right leaving a wake of injured shorts in its path. Until the company's November 17th announcement it would buy/merge with Sears in an $11 billion deal. That announcement killed the momentum as a wave of skepticism washed through the financial media. Analysts left and right were doubting whether two struggling retailers could find the economies of scale to make the new, larger company a winner. Shares of KMRT slowly withered into a bearish consolidation of lower highs that blossomed into a breakdown below the $100 level and its rising 50-dma. Now three weeks later the stock's oversold bounce from the $92 level has failed and shares are trading under the 100-dma. Plus, its P&F chart has produced a descending triple-bottom breakdown sell signal. We believe the overall negativity about the Sears merger combined with a bearish market environment is a recipe for puts. However, we want to catch the next leg down so we're going to use a TRIGGER under round-number, psychological support at the $90 level. Our entry point will be $89.90. Once triggered we'll target a drop toward the $82-80 level and its 200-dma's. Short-term traders may want to consider a quick exit near $85, which does look like potential support.

Suggested Options:
We are going to suggest the March puts.

BUY PUT MAR 95 KTQ-OS OI= 1908 current ask $7.60
BUY PUT MAR 90 KTQ-OR OI= 6609 current ask $5.00
BUY PUT MAR 85 KTQ-OQ OI= 2197 current ask $3.10

Annotated chart:

Picked on January xx at $ xx.xx <-- see TRIGGER
Change since picked: - 0.00
Earnings Date 03/16/05 (unconfirmed)
Average Daily Volume = 2.4 million

New Play Archives