New Plays, Sunday, 02/20/2005
New Option Plays
by OI Staff
HAVING TROUBLE PRINTING?
Call Options Plays
Put Options Plays
Bear Stearns - BSC - close: 97.84 chg: -2.43 stop: 102.51
Founded in 1923, The Bear Stearns Companies Inc. is the parent company of Bear, Stearns & Co. Inc., a leading investment banking and securities trading and brokerage firm. With approximately $46.1 billion in total capital, Bear Stearns serves governments, corporations, institutions and individuals worldwide. The company's business includes corporate finance, mergers and acquisitions, institutional equities and fixed income sales and trading, securities research, private client services, derivatives, foreign exchange and futures sales and trading, asset management and custody services. Through Bear, Stearns Securities Corp., it offers financing, securities lending, clearing and technology solutions to hedge funds, broker-dealers and investment advisors. Headquartered in New York City, the company has approximately 11,000 employees worldwide. (source: company website)
Why We Like It:
Last week was a tough week for the broker-dealers. The previous couple of weeks saw the group claw its way back toward the December highs. Unfortunately for the bulls the broker stocks couldn't breakout and have since turned lower with a full technical retreat in its indicators. The MACD produced a new sell signal on Friday for the XBD index. Shares of BSC are not only tracking the XBD index but appear to be leading the way down. News last Monday that the SEC's probe into BSC's involvement for the mutual fund scandal is getting deeper probably doesn't help investor confidence. Friday's breakdown below the $100 level and its 100-dma looks like bad news and volume came in well above average suggesting more weakness ahead. We also note how BSC has closed below its January lows while its own MACD indicator has produced a new sell signal. BSC's P&F chart has also reversed into a new sell signal with a $90 target. We want to buy puts at current levels and target a drop toward its simple 200-dma in the $91-92 range. We do have a wide stop to begin with but will adjust it lower as BSC confirms the new trend.
We are going to suggest the March or April puts.
BUY PUT MAR 100 BSC-OT OI=284 current ask $3.40
BUY PUT MAR 95 BSC-OS OI=440 current ask $1.15
BUY PUT APR 100 BSC-PT OI= 939 current ask $4.20
BUY PUT APR 95 BSC-PS OI=1554 current ask $1.95
Picked on February 20 at $ 97.84
Change since picked: - 0.00
Earnings Date 03/22/05 (unconfirmed)
Average Daily Volume = 934 thousand
Career Education - CECO - close: 35.91 chg: -0.78 stop: 37.51
Career Education Corporation (www.careered.com) is the world's largest on-campus provider of private, for-profit, postsecondary education and has a rapidly-growing presence in online education. CEC's Colleges, Schools and Universities Group operates 82 campuses in the U.S., Canada, France, the United Kingdom and the United Arab Emirates and offers doctoral degree, master's degree, bachelor's degree, associate degree and diploma programs in the career-oriented disciplines of visual communication and design technologies, information technology, business studies, culinary arts and health education. The Online Education Group operates American InterContinental University Online and Colorado Technical University Online and offers a variety of degrees in information technology, business, visual communication and education. CEC's total student population on January 31, 2005 was approximately 101,500 students. (source: company website)
Why We Like It:
We are doubling up on put plays in the education sector. We already have APOL on the list and now we're adding CECO. The stock has been consolidating sideways between $35 and $42 for the last couple of months but the highs have been slipping as investors sold each time CECO neared its simple 200-dma. Now the consolidation is in danger of turning lower. The company reported earnings a few days ago and managed to beat estimates. Yet the stock gapped lower following the report and is barely holding to support near the 100-dma. The recent move lower has produced a bearish triangle breakdown sell signal on its P&F chart, which is one of the most successful patterns that traders can short. Currently the P&F chart points to a $30.00 target and we agree. However, we want to use a TRIGGER to open the play. We'd rather see the new trend confirmed with a breakdown under the $35.00 level. Our entry point will be $34.90 and our target will be the $30.00 region.
We like the March or April puts.
BUY PUT MAR 40 CUY-OH OI=1986 current ask $4.70
BUY PUT MAR 35 CUY-OG OI=2727 current ask $1.45
BUY PUT MAR 30 CUY-OF OI=1583 current ask $0.35
BUY PUT APR 40 CUY-PH OI=3611 current ask $5.30
BUY PUT APR 35 CUY-PG OI=8050 current ask $2.30
BUY PUT APR 30 CUY-PF OI=5324 current ask $0.85
Picked on February xx at $ xx.xx <-- see TRIGGER
Change since picked: - 0.00
Earnings Date 02/15/05 (confirmed)
Average Daily Volume = 2.1 million