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  WFMI

New Calls

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New Puts

ITT Industries - ITT - close: 94.16 chg: -0.80 stop: 96.01

Company Description:
ITT Industries, Inc. supplies advanced technology products and services in key markets including: fluid and water management including water treatment; defense communication, opto-electronics, information technology and services; electronic interconnects and switches; and other specialty products. Headquartered in White Plains, NY, the company generated $6.8 billion in 2004 sales. (source: company press release)

Why We Like It:
We like ITT because the stock looks poised to trend back toward the bottom of its rising channel. That's right, we'd be more prone to buy calls on ITT with the stock's strong, long-term rising trend. Yet short-term shares of ITT are over extended and struggling with resistance in the $95-96 range near the top of its rising channel. Today's failed rally looks like a tempting entry point especially with the stock's MACD indicator producing a new sell signal. However, we want to see some confirmation that the short-term trend is turning bearish. Therefore we're suggesting that readers use a trigger at $93.85 to open the play to buy puts. More conservative traders may want to use a trigger under its simple 21-dma currently near $93.50. Our short-term target will be the $90.00 level but our secondary target is the bottom of the channel, which we estimate will be in the $87.50 range by the time ITT gets there. You could label this an aggressive play since we're suggesting puts on a stock with good relative strength. Ideally we'd like to see ITT hit our target within a couple of weeks but more realistically we'll use a five to six week time frame. We do not plan to hold over the July earnings.

Suggested Options:
If shares of ITT hit our entry point we'll suggest the July puts.

BUY PUT JUL 95.00 ITT-SS OI=110 current ask $2.65
BUY PUT JUL 90.00 ITT-SR OI=513 current ask $0.85

Picked on June xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 07/22/05 (unconfirmed)
Average Daily Volume = 581 thousand

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Whole Foods - WFMI - close: 118.12 chg: -2.34 stop: 121.05

Company Description:
Founded in 1980 in Austin, Texas, Whole Foods Market is the world's leading natural and organic foods supermarket and America's first national certified organic grocer. In fiscal year 2004, the company had sales of $3.9 billion and currently has more than 165 stores in the United States, Canada, and the United Kingdom. (source: company press release)

Why We Like It:
We like WFMI as a bearish candidate because the stock looks pretty over extended and in need of a correction. We're actually bullish on the stock but we don't want to consider buying calls until WFMI comes back down toward some semblance of support. Shares are so overbought that nimble traders can buy puts to capture the profit taking. Today's failed rally under $123.00 helped confirm the new MACD sell signal that began yesterday. While we like the failed rally action that occurred we do want to see some confirmation that the stock is correcting. Therefore we're suggesting that traders use a trigger to buy puts at $17.40, which is just under the Friday low. Our target will be the $111.00-110.00 range. We would qualify this as a speculative, high-risk play.

Suggested Options:
If WFMI hit our entry point we are suggesting the July puts.

BUY PUT JUL 120.00 FMQ-SD OI=455 current ask $5.20
BUY PUT JUL 115.00 FMQ-SC OI=471 current ask $2.95
BUY PUT JUL 110.00 FMQ-SB OI=320 current ask $1.55

Picked on June xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 08/03/05 (unconfirmed)
Average Daily Volume = 859 thousand
 

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