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Reynolds American - RAI - cls: 80.24 chg: +0.66 stop: 77.95

Company Description:
R.J. Reynolds Tobacco Company (R.J. Reynolds) is an indirect wholly owned subsidiary of Reynolds American Inc.. R.J. Reynolds is the second-largest tobacco company in the United States, manufacturing about one of every three cigarettes sold in the United States. R.J. Reynolds' product line includes five of the nation's 10 best-selling cigarette brands: Camel, Winston, Kool, Salem and Doral. (source: company press release)

Why We Like It:
We like RAI as a bullish candidate because it looks the stock has built a short-term base between the $80 level and its exponential 200-dma near the $77.00 level. Technical oscillators are positive and shares just closed over the $80 mark and its 50-dma. We also like RAI because if the market does continue lower tobacco stocks have been seen as safe havens in the past. If the market continues higher then RAI should climb with it. Plus, RAI had a bit of positive news recently. Here's an excerpt from its May 3rd press release: "Today a Miami jury found that R.J. Reynolds Tobacco Company and other cigarette manufacturers were not liable in the case of a flight attendant seeking compensation for a form of chronic sinusitis she claimed was caused by exposure to secondhand smoke on airplanes. The suit was filed by Lorraine Swaty, a flight attendant for US Airways." We are tempted to consider bullish positions at current levels. However, the Point & Figure chart is still bearish but on the verge of a new buy signal. If RAI can trade above the $81 level it should produce a new buy signal. Therefore we suggest a trigger above the early April highs. Our entry point will be $81.31. Our short-term target will be the $85-86 range. Once triggered our time frame is only six weeks.

Suggested Options:
We are suggesting the June calls.

BUY CALL JUN 80.00 RAI-FP OI=2947 current ask $2.60
BUY CALL JUN 85.00 RAI-FQ OI= 376 current ask $0.70

Picked on May xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 04/27/05 (confirmed)
Average Daily Volume = 866 thousand
 

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