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Call Options Plays
Put Options Plays
Strangle Options Plays
CMI None None
FMC    
KMG    
KMI    
RIO    
SUN    

New Calls

Cummins Inc. - CMI - close: 91.32 chg: +2.32 stop: 87.75

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 or website)

Why We Like It:
Cyclical stocks have been pretty strong this fall and CMI looks like a tempting bullish candidate given today's breakout over resistance at $90.00. Looking at CMI's daily chart you can quickly see that shares rebounded from its exponential 200-dma in October. The rally stalled under the $90 level in November and shares consolidated sideways for the entire month. Now CMI is rested and poised to hit new highs. The Point & Figure chart has produced a new buy signal that now points to a $102 target. We would suggest new call plays with CMI above the $90 level. Our six-week target is the $97-100 range. Readers can choose to go long calls here or look for a dip back to the $90 level. We'll put our stop under the bottom of its recent trading range. One of the biggest risk here is the CYC cyclical index is very overbought with a near non-stop rally from its October lows and is nearing resistance at its late 2004 highs near 790. The second risk here is a downgrade as the median analyst target is currently at $90.

Suggested Options:
We are going to suggest the January calls. We do not plan on holding past CMI's late January earnings report. For our new readers, please note, we are not suggesting you buy all of the calls listed below. This is a quick reference for the calls we would consider buying.

BUY CALL JAN 85 CMI-AQ open interest= 227 current ask $8.30
BUY CALL JAN 90 CMI-AR open interest= 296 current ask $4.70
BUY CALL JAN 95 CMI-AS open interest=1274 current ask $2.40

Picked on December 01 at $ 91.32
Change since picked: + 0.00
Earnings Date 01/30/06 (unconfirmed)
Average Daily Volume = 611 thousand

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FMC Corp. - FMC - close: 55.04 chg: +1.87 stop: 51.95

Company Description:
FMC Corporation is a diversified chemical company serving agricultural, industrial and consumer markets globally for more than a century with innovative solutions, applications and quality products. The company employs approximately 5,000 people throughout the world and operates its businesses in three segments: Agricultural Products, Specialty Chemicals and Industrial Chemicals. (source: company press release or website)

Why We Like It:
FMC is a bullish candidate based on its technical breakout. The stock has been declining for the last four months in a descending channel. On November 23rd the stock broke out to the upside on an intraday basis but failed to push past the simple 200-dma. The breakout was fueled by an analyst upgrade who said the stock was undervalued and its weakness was a buying opportunity. The analysts might be right. As a chemical company oil prices are a significant expense for them. While oil remains near historic highs crude has been coming down from its peak the last several weeks. Therefore investor expectations for the company's earnings may be set too low. Today's rally in FMC was fueled by stronger than average volume and the stock pushed past resistance at the 200-dma and the $55.00 mark. The Point & Figure chart has reversed its sell signal into a new buy signal that points to a $68 target. We would suggest bullish positions with the stock above $54. More conservative traders may want to wait for more confirmation and look for a move over its 100-dma before initiating positions. We'll stick our stop loss at $51.95, since the top of the gap (near 52.00) should act as support. Our six-week target is the $59.85-60.00 range.

Suggested Options:
We are suggesting the January calls.

BUY CALL JAN 50 FMC-AJ open interest= 6 current ask $6.00
BUY CALL JAN 55 FMC-AK open interest=530 current ask $2.55
BUY CALL JAN 60 FMC-AL open interest= 73 current ask $0.75


Picked on December 01 at $ 55.04
Change since picked: + 0.00
Earnings Date 02/02/06 (unconfirmed)
Average Daily Volume = 270 thousand

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Kerr Mcgee - KMG - close: 89.59 chg: +3.14 stop: 84.99

Company Description:
Kerr-McGee is an Oklahoma City-based oil and natural gas exploration and production company focused in the U.S. onshore, deepwater Gulf of Mexico and select proven world-class hydrocarbon basins. (source: company press release or website)

Why We Like It:
We're going to try again with the energy stocks. The OIX oil index and XNG natural gas index both look poised for a breakout from their two-month consolidation. Meanwhile the OSX oil services index is trading near new all-time highs. KMG is a natural gas play and natural gas futures have bounced strongly the last couple of days suggesting the commodity have put in its bottom for the fourth quarter. Shares of KMG have been consolidating between $80 and $90 for the last two months but the last three weeks have seen a steady trend of higher lows. It's daily chart has the stock under resistance at the $90.00 mark and poised for a bullish breakout. Meanwhile the P&F chart has already broken out above resistance and points to a $106 price target. We are going to suggest a trigger at $90.26 to open positions. If triggered we'll target a rise into the $98.50-100.00 range by mid January.

Suggested Options:
We do not want to hold over KMG's late January earnings report so we're suggesting the January calls.

BUY CALL JAN 85 KMG-AQ open interest=1109 current ask $7.20
BUY CALL JAN 90 KMG-AR open interest=1337 current ask $4.10
BUY CALL JAN 95 KMG-AS open interest=1743 current ask $2.00

Picked on December xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 01/25/06 (unconfirmed)
Average Daily Volume = 1.8 million

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Kinder Morgan - KMI - close: 92.24 chg: +1.64 stop: 87.45

Company Description:
Kinder Morgan, Inc. is a leading North American energy transportation and distribution company with approximately 40,000 miles of natural gas and petroleum transportation pipelines, 1.1 million natural gas distribution customers and 150 terminals. Kinder Morgan, Inc. owns the general partner interest of Kinder Morgan Energy Partners, L.P., one of the largest publicly traded pipeline limited partnerships in the United States. Combined, the two companies have an enterprise value of more than $35 billion. (source: company press release or website)

Why We Like It:
We are going to double up on the natural gas stocks. If you didn't like the KMG play then consider KMI as an alternative candidate. KMI's two-month consolidation looks a bit more bullish than KMG's and the stock has already broken out above technical resistance at its 50-dma and 100-dma. The P&F chart for KMI points to a $104 price target. Aggressive traders could open positions right here. We want to see some confirmation. Our strategy is to use a trigger at $92.75 to open call positions. If triggered we'll target a rally into the $98.50-100.00 range before KMI's mid January earnings report.

Suggested Options:
We are suggesting the January calls.

BUY CALL JAN 90 KMI-AR open interest=1811 current ask $4.60
BUY CALL JAN 95 KMI-AS open interest=1625 current ask $1.95

Picked on December xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 01/18/06 (unconfirmed)
Average Daily Volume = 749 thousand

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Companhia Vale de Rio - RIO - close: 44.94 chg: +1.58 stop: 41.85

Company Description:
Companhia Vale do Rio Doce (CVRD) is the largest metals & mining company in the Americas and one of the largest in the global metals & mining industry, with a market capitalization of approximately US$ 45 billion. CVRD shares are traded on the New York Stock Exchange - NYSE (RIO and RIOPR), on the BOVESPA (Vale3 and Vale5) and on Latibex (XVALP and XVALO). The ADR depositary agent is JP Morgan Chase. CVRD is the world's largest producer and exporter of iron ore and pellets and one of the leading producers of manganese and ferro- alloys. It also produces copper, bauxite, kaolin, potash, alumina and aluminum. CVRD is the largest logistics service provider in Brazil, where it owns and operates a series of railroads and ports. It also holds stakes in steel companies in Brazil and abroad. (source: company press release or website)

Why We Like It:
Metal and mining stocks have been one of the bright spots in the market. Following some positive analyst comments for the sector we think the group still has more gains ahead of it. Shares of RIO have rallied up to resistance at the $45.00 level and look poised to break out. We are going to suggest a trigger at $45.45, above last week's high (45.30). If triggered our six-week target will be the $49.50-50.00 range.

Suggested Options:
We are suggesting the January calls but traders might want to consider March calls and exit ahead of RIO's March earnings report.

BUY CALL JAN 40 RIO-AH open interest=4106 current ask $5.80
BUY CALL JAN 45 RIO-AI open interest=2763 current ask $2.35
BUY CALL JAN 50 RIO-AJ open interest= 872 current ask $0.65

Picked on December xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 03/14/06 (unconfirmed)
Average Daily Volume = 2.7 million

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Sunoco Inc. - SUN - close: 80.69 chg: +3.49 stop: 76.45

Company Description:
Sunoco, Inc., headquartered in Philadelphia, PA, is a leading manufacturer and marketer of petroleum and petrochemical products. With 900,000 barrels per day of refining capacity, approximately 4,800 retail sites selling gasoline and convenience items, over 4,300 miles of crude oil and refined product owned and operated pipelines and 38 product terminals, Sunoco is one of the largest independent refiner-marketers in the United States. Sunoco is a significant manufacturer of petrochemicals with annual sales of approximately five billion pounds, largely chemical intermediates used in the fibers, resins and specialties markets. Utilizing a unique, patented technology, Sunoco also currently has the capacity to manufacture over 2.5 million tons annually of high-quality metallurgical-grade coke for use in the steel industry. (source: company press release or website)

Why We Like It:
If we're going to consider some energy stocks as bullish candidates we can't forget the refiners. SUN has rebounded strongly from its October lows off the 100-dma. Currently shares are challenging resistance near its all-time highs. The P&F chart for SUN points to a $93 target. We are going to suggest a trigger at $81.75, above its September high of $81.49. If triggered we'll target a run into the $89.90-90.00 range over the next six weeks.

Suggested Options:
We're going to suggest the January options. Be sure to double-check your option symbol. There are some odd symbols out there due to SUN's 2-for-1 split back in August.

BUY CALL JAN 80 SUN-AP open interest=2469 current ask $5.10
BUY CALL JAN 85 SUN-AQ open interest=2248 current ask $2.80
BUY CALL JAN 90 SUN-AA open interest= 972 current ask $1.45

Picked on December xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 02/02/06 (unconfirmed)
Average Daily Volume = 2.8 million
 

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New Strangles

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