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Precision Castparts - PCP - cls: 90.02 chg: +0.20 stop: 92.01

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 or website)

Why We Like It:
We normally try to avoid picking a top in stocks that have been exceptionally strong. We think PCP might be an exception because the stock is starting to turn lower after struggling with resistance at the top of its longer-term bullish channel. A glance at the weekly chart (below) will show that PCP has been in a rising channel for two years. Furthermore it looks like the latest weekly candlestick is painting a bearish engulfing reversal pattern. We think the stock can consolidate some of its gains back toward top of its gap higher near $84.00. The gap was sparked by PCP's better than expected earnings report. We're going to label this a more aggressive play because we're using a short time frame. We want to exit PCP before the stock's 2-for-1 stock split on September 9th. While some stocks tend to go through a post-split depression there's no way to know if PCP will be one of them. We are suggesting a trigger to open the play at $89.49. If we are triggered we'll target a move into the $85.00-84.00 range. FYI: if PCP pulls back toward the bottom of its channel we can evaluate it for a potential bullish play.

Suggested Options:
We are suggesting the September puts since this is a short-term play.

BUY PUT SEP 95.00 PCP-US OI= 15 current ask $5.40
BUY PUT SEP 90.00 PCP-UR OI=133 current ask $1.90
BUY PUT SEP 85.00 PCP-UQ OI= 27 current ask $0.45

Picked on August xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 07/19/05 (confirmed)
Average Daily Volume = 415 thousand
 

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