Option Investor
New Plays

New Option Plays

HAVING TROUBLE PRINTING?
Printer friendly version
Call Options Plays
Put Options Plays
CBENone
RHD 

New Calls

Cooper Industries - CBE - close: 70.01 chg: +0.85 stop: 67.49

Company Description:
Cooper Industries, Ltd., with 2004 revenues of $4.5 billion, is a global manufacturer of electrical products and tools and hardware. Incorporated in Bermuda, the Company's administrative headquarters are in Houston, TX. Cooper has more than 26,000 employees serving more than 90 manufacturing locations around the world, and sells products to customers in more than 50 countries. (source: company website)

Why We Like It:
We like CBE for its relative strength and breakout through the top of its trading range and round-number, psychological resistance at the $70.00 mark. CBE was a big winner through September-November of last year but the stock has spent most of the last three months consolidating those gains in a range between $65 and $68. The company reported earnings several days ago and beat Wall Street expectations. This helped fuel a rebound and now CBE is breaking out to the upside. The P&F chart is bullish with an ascending triple-top breakout buy signal with a $74 target. We are willing to go long with today's close over $70. Today's 1.22 percent gain is a decent show of strength given the broader-market pull back. More conservative traders may want to wait for CBE to trade over the $70.40 level before initiating positions. CBE's all-time high is $70.37 dating back to May of 1998. Our target is the $74-75 range.

Suggested Options:
We are suggesting the April calls although July strikes would work as well. We do not see an April $75 strike yet but one should be available soon.

BUY CALL APR 65 CBE-DM OI= 733 current ask $5.70
BUY CALL APR 70 CBE-DN OI= 272 current ask $2.30

Picked on February 03 at $ 70.01
Change since picked: + 0.00
Earnings Date 01/25/05 (confirmed)
Average Daily Volume = 436 thousand

RD Donnelley - RHD - close: 60.76 change: +1.69 stop: 57.95

Company Description:
RHD publishes 389 directories, with total distribution of approximately 28 million serving approximately 260,000 local and national advertisers in 19 states. RHD publishes 260 directories under the Sprint Yellow Pages. brand in 18 states with total distribution of approximately 18 million serving approximately 160,000 local and national advertisers, with major markets including Las Vegas, Nevada, and Orlando and Ft. Myers, Florida. In addition, RHD publishes 129 directories under the SBC. Yellow Pages brand in Illinois and Northwest Indiana with total distribution of approximately 10 million serving approximately 100,000 local and national advertisers. (source: company website)

Why We Like It:
We like RHD for its relative strength and its bullish breakout over round-number, psychological resistance at the $60.00 level. If you check out RHD's long-term weekly chart you'll notice that the stock has a habit of producing these long bullish trends. Currently RHD is in a rising channel that began last summer. More importantly RHD is rebounding off the bottom of this rising channel and Thursday's breakout over resistance at $60.00 was fueled by volume that was way above average. The MACD indicator has produced a new buy signal. RHD looks like a decent momentum play and traders can target a short-term move to the $64-65 region. We see three risks that readers should be aware of. First, we cannot find a solid date for RHD's Q4 earnings report. To the best of our knowledge RHD is likely to report on February 25th or 28th. We would not want to hold over the report. Second, RHD does not trade a lot of volume, which normally makes us cautious. Third, the P&F chart looks very extended and the bullish price target has already been hit.

Suggested Options:
This is a short-term momentum play and we plan to be out before the end of February. However, we do not see much volume in the March calls so we're going to suggest the May strikes. Unfortunately we do not see a May 65 strike yet but expect one will become available soon.

BUY CALL MAY 55 RHD-EK OI= 338 current ask $7.10
BUY CALL MAY 60 RHD-EL OI= 468 current ask $3.60

Picked on February 03 at $ 60.76
Change since picked: + 0.00
Earnings Date 02/27/05 (unconfirmed)
Average Daily Volume = 186 thousand

New Puts

None today.

New Play Archives