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CMI None
FDG  

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Cummins Inc - CMI - close: 74.03 change: +1.64 stop: 70.95

Company Description:
Cummins Inc., a global power leader, is a corporation of complementary business units that design, manufacture, distribute and service engines and related technologies, including fuel systems, controls, air handling, filtration, emission solutions and electrical power generation systems. Headquartered in Columbus, Indiana, (USA) Cummins serves customers in more than 160 countries through its network of 550 Company-owned and independent distributor facilities and more than 5,000 dealer locations. With more than 28,000 employees worldwide, Cummins reported sales of $8.4 billion in 2004. (source: company press release)

Why We Like It:
When CMI reported earnings in April the company bested Wall Street's estimates and raised guidance for 2005. This sent the stock gapping higher but the rally failed at its 200-dma. Since then CMI has put in what appears to be a double-bottom and now after weeks of consolidating under the 200-dma the stock is breaking out. CMI pushed past the $73.00 level and its simple 200-dma on Friday to hit a new 2 1/2 month high. The breakout also pushed CMI through resistance on its Point & Figure chart, which now points to a bullish $95 target. We're suggesting bullish positions following Friday's move. Our initial target is the $77.50-80.00 range. We only have about a month before CMI reports earnings so we're not setting the target too high. We will not hold the play over its earnings report. We'll set the stop loss at $70.95 but more aggressive traders may want to consider setting theirs under tested support at the $70.00 mark.

Suggested Options:
July strikes are available but we'll probably hold the play past July expiration. Thus we're suggesting the next available, which is currently Septembers.

BUY CALL SEP 70.00 CMI-IN OI= 156 current ask $6.80
BUY CALL SEP 75.00 CMI-IO OI=1053 current ask $3.90

Picked on June 19 at $ 74.03
Change since picked: + 0.00
Earnings Date 07/21/05 (unconfirmed)
Average Daily Volume = 970 thousand

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Fording Candn Coal - FDG - cls: 90.30 chg: +2.37 stop: 84.99

Company Description:
Fording Canadian Coal Trust is an open-ended mutual fund trust. Through investments in metallurgical coal and industrial minerals mining and processing operations, the Trust makes quarterly cash distributions to unitholders. The Trust, through its wholly owned subsidiary, Fording Inc., holds a 60% interest in the Elk Valley Coal Partnership and is the world's largest producer of the industrial mineral wollastonite. Elk Valley Coal Partnership, comprised of Canada's senior metallurgical coal mining properties, is the world's second largest exporter of metallurgical coal, and expects to supply approximately 27 million tonnes of high-quality coal products to the international steel industry in 2005. (source: company press release)

Why We Like It:
It's back! We've played FDG before and now the stock is offering bulls another entry point. Oil is not the only energy sector drawing attention. Coal stocks like FDG have turned in some strong returns over the last year or so. We like FDG here given the stock's bullish technical breakout over resistance at its 50-dma, 100-dma and round-number, psychological resistance at the $90.00 mark. Friday's move also pushed FDG through technical resistance at its 3 1/2 month trendline of lower highs. Plus, volume came in well above normal but that could have been due to option expiration Friday. In addition to all of the bullish signals listed above FDG's Point & Figure chart just produced a new buy signal that points to a $106 target. We are willing to suggest bullish positions here. Possible alternative entry points could be a dip back toward the $89-88 region or a new relative high over $91.25. Our short-term target is the $97.00-100.00 range. Our stop loss is a bit wider (aggressive) but once FDG confirms the breakout we'll probably tighten the stop. We do not plan on holding over FDG's July earnings report.

Suggested Options:
July strikes are available but they'll probably expire before the play does. August strikes are available but there is no open interest yet. Therefore we're suggesting the September strikes.

BUY CALL SEP 85.00 FDG-IQ OI= 331 current ask $9.70
BUY CALL SEP 90.00 FDG-IR OI= 464 current ask $7.30
BUY CALL SEP 95.00 FDG-IS OI=1374 current ask $4.50
BUY CALL SEP100.00 FDG-IT OI= 361 current ask $3.10

Picked on June 19 at $ 90.30
Change since picked: + 0.00
Earnings Date 07/25/05 (unconfirmed)
Average Daily Volume = 384 thousand
 

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