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New Option Plays

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Call Options Plays
Put Options Plays
None FDX
  MMM

New Calls

None today.
 

New Puts

Fedex - FDX - close: 82.16 chg: +0.05 stop: 85.01

Company Description:
FedEx Corp. provides customers and businesses worldwide with a broad portfolio of transportation, e-commerce and business services. With annual revenues of $29 billion, the company offers integrated business applications through operating companies competing collectively and managed collaboratively, under the respected FedEx brand. Consistently ranked among the world's most admired and trusted employers, FedEx inspires its more than 250,000 employees and contractors to remain "absolutely, positively" focused on safety, the highest ethical and professional standards and the needs of their customers and communities. (source: company press release or website)

Why We Like It:
It may seem counterintuitive to add new shorts to our play list when many of the sector indices are hitting new relative highs. We see these new bearish play candidates as a chance to get prepared for the coming consolidation. The current rally is looking pretty long in the tooth so we're going to add a couple of stocks that have been showing a lot of relative weakness and already trending lower. The thinking here is that the market's strength has been stalling their declines and when the market finally runs out of gas these stocks (FDX and MMM) will pick up the pace on their declines. Now that doesn't mean you have to immediately buy puts on these. The market may continue up tomorrow or may be Thursday, who knows. What we do know is that these summer rallies tend to peak during the first week or two of earnings season. We like FDX because the stock is already showing a lot of weakness. The stock has been trending lower since March and really broke down in late June when the company missed its earnings estimates and guided lower. The action over the last three weeks looks like an oversold bounce and we see resistance at the $85.00 level. Technical oscillators are weak and its MACD is nearing another sell signal. The Point & Figure chart is bearish and points to a $71.00 target. We are going to suggest puts here and target a drop into the $77.00-76.00 range. Our time frame is six to eight weeks. The biggest risk we probably see with this play would be a serious decline in oil, which would translate to lower fuel costs for FDX.

Suggested Options:
We like the September strikes although Octobers, which have more volume and open interest, would work well too.

BUY PUT SEP 85.00 FDX-UQ OI=104 current ask $4.10
BUY PUT SEP 80.00 FDX-UP OI= 20 current ask $1.50
BUY PUT SEP 75.00 FDX-UO OI= 15 current ask $0.50

Picked on July 19 at $ 82.16
Change since picked: - 0.00
Earnings Date 06/23/05 (confirmed)
Average Daily Volume = 2.1 million

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3M Co. - MMM - close: 74.92 change: -0.24 stop: 77.51

Company Description:
Every day, 3M people find new ways to make amazing things happen. Wherever they are, whatever they do, the company's customers know they can rely on 3M to help make their lives better. 3M's brands include Scotch, Post-it, Scotchgard, Thinsulate, Scotch-Brite, Filtrete, Command and Vikuiti. Serving customers in more than 200 countries around the world, the company's 67,000 people use their expertise, technologies and global strength to lead in major markets including consumer and office; display and graphics; electronics and telecommunications; safety, security and protection services; health care; industrial and transportation. (source: company press release or website)

Why We Like It:
MMM is another under performer that is not participating in the market's strength. Investors are concerned over MMM's profit growth and the reaction to its earnings out this past Monday has been pretty muted. Technically we notice that MMM has filled the gap from late June. Plus, shares are trading under its April-June trading range. We also see that MMM's Point & Figure chart is bearish and points to a $63.00 price target. Our initial target is the $70.00-68.00 range but we may adjust once the major indices finally begin to consolidate some of their gains. We'll start with a stop loss over Friday's high. Remember, you may want to wait a day or two before initiating new bearish positions here. The market may continue to rally for another day or two.

Suggested Options:
We like the September puts although the October strikes would also work well.

BUY PUT SEP 80.00 MMM-UP OI= 15 current ask $6.30
BUY PUT SEP 75.00 MMM-UO OI=377 current ask $2.55
BUY PUT SEP 70.00 MMM-UN OI=150 current ask $0.70

Picked on July 19 at $ 74.92
Change since picked: - 0.00
Earnings Date 07/18/05 (confirmed)
Average Daily Volume = 3.4 million
 

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