Option Investor
New Plays

New Option Plays

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Call Options Plays
Put Options Plays

- Editor's note! -

We are not adding many new plays to the newsletter this weekend and it's not for lack of candidates. In reality the number of bearish candidates is overwhelming. The damage done by the Dow's 420-point drop in three days and the similarly impressive declines in the S&P 500 and the NASDAQ Composite is very widespread. While we do expect more weakness on Monday, and maybe on Tuesday, odds are very good that an oversold bounce will hit this week. Therefore we do not want to add new bearish positions when we could be facing a very sharp oversold bounce in just a couple of days. We would prefer to be patient and wait to see just where the coming bounce fails. Then we can begin to choose what candidates would do well as bearish plays. The opposite holds true for bullish plays. We do not want to add new bullish plays this weekend if we're facing another decline on Monday. We would prefer to wait and see where and when the market bounces before considering new bullish plays. Rest assured that we will be looking for the best entry point on both bullish and bearish plays this week.

New Calls

Patterson Cos. - PDCO - close: 51.68 chg: +0.63 stop: 49.45

Company Description:
Patterson Companies, Inc. is a value-added distributor serving the dental, companion-pet veterinarian and rehabilitation supply markets. (source: company press release)

Why We Like It:
PDCO's relative strength these past few days in the face of a market melt down has been very impressive. Shares have merely consolidated sideways while most of the market sank. This has kept PDCO in its rising bullish trend with technical support at the 50-dma. Shares even managed to tag a new high on Friday before fading into the afternoon. We suspect that the markets will continue lower on Monday when the rest of the investing public gets a chance to react to the weekend headlines of Friday's big market drop. PDCO is not completely immune and we want to see shares of PDCO slip back toward support near the $50.00 level. Our strategy is to buy a dip and then target a move toward the next level of resistance near $55.00. We are suggesting that readers buy a dip in the $51.00-50.00 range. The OI daily newsletter will set an official TRIGGER to buy calls if shares of PDCO trades at $50.75 or lower. We suggest to our readers that the preferred entry point would be to wait for PDCO to dip and then begin to buy the bounce. We'll set the stop loss at $49.45, which is just under the simple 50-dma. We will exit the play before PDCO's May earnings report.

Suggested Options:
We are suggesting the May calls.

BUY CALL MAY 50.00 DOU-EJ OI=111 current ask $3.20
BUY CALL MAY 55.00 DOU-EK OI=709 current ask $0.85

Picked on April xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 05/19/05 (unconfirmed)
Average Daily Volume = 789 million

New Puts

None today.

New Play Archives