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  PCP

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MGIC Invest. - MTG - close: 58.91 change: -1.39 stop: 61.11

Company Description:
MGIC ( http://www.mgic.com ), the principal subsidiary of MGIC Investment Corporation, is the nation's leading provider of private mortgage insurance coverage with $172.1 billion primary insurance inforce covering 1.37 million mortgages as of March 31, 2005. MGIC serves 5,000 lenders with locations across the country and in Puerto Rico, helping families achieve homeownership sooner by making affordable low-down-payment mortgages a reality. (source: company press release)

Why We Like It:
We like MTG as a bearish candidate because the stock just produced a failed rally near the top of its descending channel. Plus, the technical picture on the IUX insurance index has taken a recent turn for the worse. Now that the sector is turning lower in conjunction with the DJIA and the S&P 500 investors can feel more comfortable betting that MTG will continue lower as well. Shares of MTG were already in a bearish trend with the stock producing a series of lower highs over the last few months. MTG just spent about two weeks trying to breakout over the $61 level but failed. Now MTG's technical oscillators are turning lower and its MACD is nearing a new sell signal. Friday's decline looks like a bearish entry point. We are targeting a move into the $55.00-54.0 range.

Suggested Options:
We are suggesting the June puts.

BUY PUT JUN 60.00 MTG-RL OI=2438 current ask $2.60
BUY PUT JUN 55.00 MTG-RK OI= 640 current ask $0.70

Picked on May 15 at $ 58.91
Change since picked: - 0.00
Earnings Date 04/14/05 (confirmed)
Average Daily Volume = 742 thousand

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Precision Castparts - PCP - cls: 73.25 chg: -1.73 stop: 75.05

Company Description:
Precision Castparts Corp. is a worldwide, diversified manufacturer of complex metal components and products. It serves the aerospace, power generation, automotive, and general industrial and other markets. PCC is the market leader in manufacturing large, complex structural investment castings, airfoil castings, and forged components used in jet aircraft engines and industrial gas turbines. (source: company press release)

Why We Like It:
At first glance PCP may not seem like a bearish candidate when you consider its strong long-term up trend. Yet it's that very trend that is in jeopardy. Shares peaked under $80.00 back in early March and have been slowly drifting lower ever since. PCP now has three lower highs and its technical picture is deteriorating. Friday's high-volume decline brought PCP toward technical support at its 100-dma (at 72.80). We see additional support near the $72.00 level and this is confirmed on the Point & Figure chart. Chart readers will also note that if PCP trades under the $72.00 level it will reverse its P&F chart into a new sell signal. We suspect that if the DJIA and the S&P 500 index continue sliding lower that PCP will break its up trend. Our strategy will be to use a trigger under support to catch the breakdown. We'll use an entry point at $71.95 to open the play. Our target will be the $67.50-66.00 range, just above the 200-dma's.

Suggested Options:
We are suggesting the June puts.

BUY PUT JUN 75.00 PCP-RO OI= 66 current ask $3.50
BUY PUT JUN 70.00 PCP-RN OI= 81 current ask $1.10
BUY PUT JUN 65.00 PCP-RM OI=162 current ask $0.50

Picked on May xx at $ xx.xx <-- see TRIGGER
Change since picked: - 0.00
Earnings Date 05/03/05 (confirmed)
Average Daily Volume = 492 thousand
 

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