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Call Options Plays
Put Options Plays
Strangle Options Plays
ACL None None
CEG    
ZMH    

New Calls

Alcon - ACL - close: 144.60 change: +1.60 stop: 139.90

Company Description:
Alcon, Inc. is the world's leading eye care company. Alcon, which has been dedicated to the ophthalmic industry for more than 50 years, develops, manufactures and markets pharmaceuticals, surgical equipment and devices, contact lens care solutions and other vision care products that treat diseases, disorders and other conditions of the eye. Alcon's majority shareholder is Nestle, S.A., the world's largest food company. (source: company press release or website)

Why We Like It:
You've all heard the market maxim "the trend if your friend." The trend in ACL is pretty hard to miss. The stock's upward momentum has not stalled even though ACL's advance is getting close to one-year old. The stock is starting to bounce from the $140 level after a four-week consolidation in its long-term trend higher. We're going to use the recent bounce from $140 as a bullish entry point. More conservative traders may want to wait for a move over 145.50 before considering new long positions. We'll try and limit our risk with a stop loss under short-term support at $140. More aggressive traders may want to put their stops under proven support at the 50-dma. We plan to ride ACL up to its early February earnings report. Our target is the $154-155 range.

Suggested Options:
We are suggesting the February calls although we do not want to hold over the February earnings report.

BUY CALL FEB 140 ACL-BH open interest=292 current ask $11.00
BUY CALL FEB 145 ACL-BI open interest=327 current ask $ 8.30
BUY CALL FEB 150 ACL-BJ open interest=312 current ask $ 6.00

Picked on December 11 at $144.60
Change since picked: + 0.00
Earnings Date 02/08/06 (unconfirmed)
Average Daily Volume = 524 thousand

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Constellation Energy - CEG - cls: 55.60 chg: +2.26 stop: 53.39

Company Description:
Constellation Energy, a FORTUNE 200 company based in Baltimore, is the nation's largest competitive supplier of electricity to large commercial and industrial customers and the nation's largest wholesale power seller. Constellation Energy also manages fuels and energy services on behalf of energy intensive industries and utilities. It owns a diversified fleet of more than 100 generating units located throughout the United States, totaling approximately 12,000 megawatts of generating capacity. The company delivers electricity and natural gas through the Baltimore Gas and Electric Company (BGE), its regulated utility in Central Maryland. In 2004, the combined revenues of the integrated energy company totaled $12.5 billion. (source: company press release or website)

Why We Like It:
Utility stocks were able to avoid the profit taking in the energy sector on Friday. Leading the way was CEG. The stock broke out over multiple levels of resistance at the $54.50 level, the 50-dma, the 200-dma and round-number resistance at $55.00. Volume on the two-day rally has come in well above the average, which suggests more strength ahead. The Point & Figure chart for CEG has reversed into a new buy signal that points to a $64 target. We are suggesting calls with CEG above $55.00. There is some potential resistance at the 100-dma (56.67) but if the UTY utility sector can build on Friday's strength then we'd expect CEG to follow the sector higher. We'll target a run into the $60-62 range.

Suggested Options:
Right now we can choose from January or April options. Aprils look a bit expensive since we do not plan on hold over the late January earnings report.

BUY CALL JAN 50 CEG-AJ open interest= 191 current ask $8.40
BUY CALL JAN 55 CEG-AK open interest= 511 current ask $4.80
BUY CALL JAN 60 CEG-AL open interest=2066 current ask $3.40

Picked on December 11 at $ 55.60
Change since picked: + 0.00
Earnings Date 01/27/06 (unconfirmed)
Average Daily Volume = 947 thousand

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Zimmer Holdings - ZMH - close: 68.62 chg: +1.51 stop: 65.75

Company Description:
Founded in 1927 and headquartered in Warsaw, Indiana, Zimmer is the worldwide #1 pure-play orthopaedic leader in designing, developing, manufacturing and marketing reconstructive and spinal implants, trauma and related orthopedic surgical products. Zimmer has operations in more than 24 countries around the world and sells products in more than 100 countries. Zimmer's 2004 sales were approximately $3 billion. The Company is supported by the efforts of more than 6,500 employees worldwide. (source: company press release or website)

Why We Like It:
Many of the medical device makers surged higher in early December as takeover rumors began circulating again. ZMH certainly participated in the speculation and rallied from the low 60s to over $70. The move helped produce a double-bottom pattern and a breakout over resistance. The surge higher also produced a new buy signal on the P&F chart that now points to a $90 target. The recent pullback looks like a new bullish entry point. More conservative traders may want to wait for a move over $70 before considering positions. If the market's continue to dip we'd expect ZMH to fall to its 10-dma near 66. Our target is the $74.00-75.00 range under its simple 200-dma.

Suggested Options:
Readers can choose to buy January or March options. We're going to select March calls so we can play ZMH right up to its late January earnings report.

BUY CALL MAR 65 ZMH-CM open interest=5064 current ask $6.90
BUY CALL MAR 70 ZMH-CN open interest=2658 current ask $4.00
BUY CALL MAR 75 ZMH-CO open interest=2215 current ask $2.00

Picked on December 11 at $ 68.62
Change since picked: + 0.00
Earnings Date 01/25/06 (unconfirmed)
Average Daily Volume = 2.6 million
 

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New Strangles

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