Option Investor
New Plays

New Option Plays

Printer friendly version
Call Options Plays
Put Options Plays
None KBH

New Calls

None today.

New Puts

KB Home - KBH - close: 108.98 change: -4.48 stop: 115.01

Company Description:
Building homes for nearly half a century, KB Home is one of America's premier homebuilders with domestic operating divisions in some of the fastest-growing regions and states: West Coast -- California; Southwest -- Arizona, Nevada and New Mexico; Central -- Colorado, Illinois, Indiana and Texas; and Southeast -- Florida, Georgia, North Carolina and South Carolina. Kaufman & Broad S.A., the Company's publicly-traded French subsidiary, is one of the largest homebuilders in France. In fiscal 2004, the Company delivered homes to 31,646 families in the United States and France. It also operates a full-service mortgage company for the convenience of its buyers. (source: company press release)

Why We Like It:
If you can't beat them; then join them. Bears overpowered the bulls several days ago and KBH broke down below major technical support at the simple 50-dma. Now after consolidating above round-number support at the $110 level for a couple of days shares of KBH are breaking down again. The market was expected to produce an oversold bounce for a few days and its sudden reversal today suggests more weakness than expected. Odds are that some investors who withstood last week's decline may start to get a little spooked here and begin to do more profit taking. The recent housing starts number with a 17 percent drop doesn't build any confidence in homebuilders in spite of the fact that the summer selling (and building) season is almost upon us. The DJUSHB home construction index just produced a failed rally near old support at the 820 level and its 100-dma. Now KBH is breaking down under its simple 100-dma on very strong volume. The stock was already in a P&F sell signal but now the signal points to a $100 target. We agree. KBH could easily trade down to the $100 level just above its exponential 200-dma. Our only concern is the upcoming 2-for-1 stock split on April 29th. Normally a stock split can be seen as a positive influence on share price but considering the market atmosphere investors probably don't care. Our target is $100.

Suggested Options:
We are suggesting the June puts.

BUY PUT JUN 110.00 KBH-RU OI= 162 current ask $7.60
BUY PUT JUN 105.00 KBH-RA OI= 111 current ask $5.50
BUY PUT JUN 100.00 KBH-RT OI= 107 current ask $3.80

Picked on April 20 at $108.98
Change since picked: - 0.00
Earnings Date 06/16/05 (unconfirmed)
Average Daily Volume = 1.5 million


MGM Mirage - MGG - close: 67.10 change: -1.78 stop: 72.51

Company Description:
MGM MIRAGE, headquartered in Las Vegas, Nevada, is one of the world's leading and most respected hotel and gaming companies. The Company owns and operates 11 casino resorts located in Nevada, Mississippi and Michigan, and has investments in three other casino resorts in Nevada, New Jersey and the United Kingdom. (source: company press release)

Why We Like It:
MGG just reported earnings and managed to beat Wall Street estimates by 12 cents. Yet the stock has sold off sharply over the past two days with volume coming in more than double the norm. This looks like a classic case of "sell the news". We like MGG as a bearish candidate based on its technical breakdown. Shares just closed under support in the $69.00 region to hit new four-month lows. The overall pattern looks like MGG built a three-month top and could consolidate back toward its 200-dma near round-number support at the $60.00 level. MGG's bearish P&F chart shows a spread triple-bottom breakdown sell signal with a $57 target. We do see potential support near $63 at its exponential 200-dma and potential support near $62 with the gap up from last December. We're going to target a drop into the $62-60 level. Readers will note that we have a relatively wide stop loss. That's because MGG is short-term oversold and could bounce back toward the $70.00 level before turning lower again. A failed rally under $70 would make a good bearish entry point but we're not going to wait given the current bearish market environment.

Suggested Options:
We are suggesting the June puts.

BUY PUT JUN 70.00 MGG-RN OI= 5930 current ask $5.10
BUY PUT JUN 65.00 MGG-RM OI=11369 current ask $2.55

Picked on April 20 at $ 67.10
Change since picked: - 0.00
Earnings Date 04/19/05 (confirmed)
Average Daily Volume = 1.1 million

New Play Archives