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RAI None
TOL  

New Calls

Reynolds American - RAI - close: 78.83 chg: +1.05 stop: 76.49

Company Description:
Reynolds American Inc. is the parent company of R.J. Reynolds Tobacco Company, Santa Fe Natural Tobacco Company, Inc., Lane Limited and R.J. Reynolds Global Products, Inc. R.J. Reynolds Tobacco Company, the second- largest U.S. tobacco company, manufactures about one of every three cigarettes sold in the United States, including five of the nation's 10 best-selling brands: Camel, Winston, Kool, Salem and Doral. Santa Fe Natural Tobacco Company, Inc. manufactures Natural American Spirit cigarettes and other tobacco products, and markets them both nationally and internationally. Lane Limited manufactures several roll-your-own, pipe tobacco and little cigar brands, and distributes Dunhill tobacco products. R.J. Reynolds Global Products, Inc. manufactures, sells and distributes American-blend cigarettes and other tobacco products to a variety of customers worldwide. (source: company press release or website)

Why We Like It:
Sometimes buying the dip can be dangerous if the stock just keeps on declining. That's why stops are so important. Fortunately, it looks like RAI has already begun to rebound. The stock peaked near $85.00 in June, which was also resistance back in March. Now the stock has drifted back toward support in the $77 region where buyers have defended RAI since early January. Looking at the daily chart you can see a wide trading range from $77 to $85. Now that RAI has started to bounce you can see that its short-term technical oscillators have begun to tick higher. Plus, its MACD is probably a couple days away from a new buy signal. We're willing to speculate on a bounce here and target a move back toward the $84-85 level. Here's what bulls should watch for: There is clearly defined levels of resistance near $80.00 and again near $82.00. More conservative traders might want to wait for RAI to trade above the $80.00 level before initiating positions. We do plan to exit before RAI's early August earnings report.

Suggested Options:
We are suggesting the August calls.

BUY CALL AUG 75.00 RAI-HO OI=2345 current ask $5.00
BUY CALL AUG 80.00 RAI-HP OI=5282 current ask $1.70
BUY CALL AUG 85.00 RAI-HQ OI=3140 current ask $0.40 *higher risk

Picked on July 10 at $ 78.83
Change since picked: + 0.00
Earnings Date 08/01/05 (unconfirmed)
Average Daily Volume = 664 thousand

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Toll Brothers - TOL - close: 103.96 chg: +1.48 stop: 97.90

Company Description:
Toll Brothers builds luxury single-family detached and attached home communities, master planned luxury residential resort-style golf communities and urban low, mid- and high-rise communities, principally on land it develops and improves. The Company operates its own architectural, engineering, mortgage, title, land development and land sale, golf course development and management, home security, landscape, cable T.V. and broadband Internet delivery subsidiaries. The Company also operates its own lumber distribution, and house component assembly and manufacturing operations. (source: company press release or website)

Why We Like It:
Normally we tend to expect stocks to suffer a bit of post-split depression after the stock actually splits and momentum traders move out of the stock. This time we expect there to be additional buying interest as investors (wrongly) think the stock more affordable to them at the post-split price. TOL announced a 2-for-1 stock split back in June and the stock is due to begin trading post-split this coming Monday, July 11th. This will put our "entry" price at 51.98 and our stop loss at 48.95. Homebuilders in general have continued to be a huge pillar of strength in the market. The DJUSHB home construction index is trading at new all-time highs. TOL's gain on Friday put it above the top of its recent trading range between $98 and $102.50. Short-term technical oscillators are bullish again and its MACD is nearing a new buy signal again. Our target is going to be the $57.50-60.00 range.

Suggested Options:
We are not suggesting option symbols at this time as there will be adjustments on Monday after TOL begins trading at its post-split price. We would suggest the August or September strikes. Check with your broker on the correct symbols Monday morning.

Picked on July 10 at $ 51.98
Change since picked: + 0.00
Earnings Date 08/22/05 (unconfirmed)
Average Daily Volume = 2.4 million
 

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