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RRGB DNA
  LNG

New Calls

Red Robin Burger - RRGB - close: 48.00 chg: +1.80 stop: 43.99

Company Description:
Red Robin Gourmet Burgers (www.redrobin.com) is a casual dining restaurant chain that serves an imaginative selection of high quality gourmet burgers to America's families, particularly women, teens and tweens. Red Robin serves gourmet burgers in a variety of recipes with bottomless fries, as well as many other items including salads, soups, appetizers, entrees, desserts, and its signature Mad Mixology. specialty beverages. There are more than 250 Red Robin locations across the United States and Canada, including both company-owned locations and those operated under franchise or license agreements. (source: company website)

Why We Like It:
We like RRGB for its relative strength and technical breakout. The relative strength is shown today with a 3.89 percent rally while the rest of the market went sideways (or worse). RRGB's technical breakout looks very bullish with a move over its two-month trendline of resistance, its 50-dma, and its 100-dma on volume that is over twice the average (see chart). The stock also has bullish breakouts in the MACD indicator and RSI oscillator. The P&F chart is currently bearish but RRGB is obviously bouncing and appears to have put in a double-bottom near the $44. There is a risk that RRGB could be channeling sideways but most of the signs above say otherwise. The median analyst target is $54 and we agree. Our eight-week target is also $54. Look for news next week when RRGB presents at the Bank of America conference on March 16th.

Suggested Options:
We are going to suggest the June calls. Aprils are available but the open interest (OI) is very low.

BUY CALL JUN 45.00 QZR-FI OI= 16 current ask $5.10
BUY CALL JUN 50.00 QZR-FJ OI= 51 current ask $2.65
BUY CALL JUN 55.00 QZR-FK OI= 54 current ask $1.25


 

Picked on March 10 at $ 48.00
Change since picked: + 0.00
Earnings Date 02/14/05 (confirmed)
Average Daily Volume = 199 thousand

New Puts

Genentech - DNA - close: 44.20 chg: -1.55 stop: 47.11

Company Description:
Genentech is a leading biotechnology company that discovers, develops, manufactures and commercializes biotherapeutics for significant unmet medical needs. A considerable number of the currently approved biotechnology products originated from, or are based on, Genentech science. Genentech manufactures and commercializes multiple biotechnology products directly in the United States, and receives royalties or other income from companies that are licensed to market its products outside of the United States. (source: company website)

Why We Like It:
This is simply a technical breakdown play. The BTK biotech sector index is in decline and now DNA has broken down below significant support at the $45.00 level on volume almost twice the average. The MACD has produced a new sell signal and its P&F chart points to a $38.00 target. We want to target a quick drop into the 41.00-40.00 range. Traders need to know there a couple of significant risks here. Normally when playing a biotech stock there is always risk of a failed clinical trial or a successful cure vaulting the stock one way or the other. For option traders that can mean the difference between a massive windfall or a total loss. However, this time we know what some of the risks are. DNA has a few significant clinical trials coming to an end or potential FDA filings that could move the stock expected to occur sometime in 2005. The company expects at least one sometime in the second quarter of this year. The second major risk for the bears is the upcoming ASCO conference in mid-May. Biotech stocks tend to rally the month before this conference and then they sell-off (a classic sell the news move). That means we, as short-term bears, only have about four weeks for DNA to hit our target.

Suggested Options:
We like the April puts.

BUY PUT APR 45.00 DNA-PI OI=7610 current ask $2.80
BUY PUT APR 40.00 DNA-PH OI=1811 current ask $0.85


 

Picked on March 10 at $ 44.20
Change since picked: + 0.00
Earnings Date 04/11/05 (unconfirmed)
Average Daily Volume = 3.8 million

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Cheniere Energy - LNG - close: 70.14 chg: -5.61 stop: 75.01

Company Description:
Cheniere Energy, Inc. is a Houston-based energy company engaged in developing LNG Receiving Terminals and Gulf of Mexico Exploration & Production. Cheniere is developing 100% owned Gulf Coast LNG Receiving Terminals near Sabine Pass in Cameron Parish, La.; near Corpus Christi, Texas; and near the Creole Trail in Cameron Parish, La. Cheniere is also a 30% limited partner in Freeport LNG Development, L.P., which is building an LNG Receiving Terminal in Freeport, Texas. Cheniere explores for oil and gas in the Gulf of Mexico using a regional database of 7,000 square miles of PSTM 3D seismic data. Cheniere owns 9% of Gryphon Exploration Company, along with Warburg, Pincus Equity Partners, L.P., which owns 91%. (source: company website)

Why We Like It:
We normally do not like to play a stock this close to its earnings date but given the current sell-off underway in the oil sector we couldn't help but take the bait. LNG reported earnings today that were worse than expected. On top of disappointing earnings news the oil sector confirmed yesterday's reversal. The result was a 7.4 percent decline in LNG on volume more than three times the average. The stock has broken its simple 50-dma but is desperately holding on the $70.00 level. Given the massive run up in the stock price LNG is a huge target for profit taking. We will use a TRIGGER under today's low to open the play. Wait for LNG to trade at $69.49 before buying puts. Our target is the $60.00-62.00 range.

Suggested Options:
We are suggesting the April puts.

BUY PUT APR 75.00 LNG-PO OI= 17 current ask $7.60
BUY PUT APR 70.00 LNG-PN OI= 85 current ask $4.80
BUY PUT APR 65.00 LNG-PM OI=222 current ask $2.80


 

Picked on March xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 03/10/05 (confirmed)
Average Daily Volume = 517 thousand

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