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New Option Plays

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Call Options Plays
Put Options Plays
Strangle Options Plays
ASEI None None
GS    
MDC    
MO    
POT    
PRU    

New Calls

Amer. Science. - ASEI - cls: 72.58 chg: +3.34 stop: 67.84

Company Description:
American Science and Engineering, Inc. (AS&E) is the leading worldwide supplier of innovative X-ray inspection and screening systems. With more than 45 years experience in developing advanced X-ray security systems, the Company's product line utilizes a variety of technologies including patented Z Backscatter(TM), Shaped Energy(TM), and Radioactive Threat Detection (RTD). These technologies offer superior detection of threats including plastic explosives, plastic weapons, illegal drugs, other contraband, dirty bombs, and nuclear devices. AS&E offers a complete range of X-ray inspection products including Z Backscatter screening systems, CargoSearch(TM), and ParcelSearch(TM) inspection systems, used for critical detection and security applications to combat terrorism, drug and weapon smuggling, trade fraud, and illegal immigration. (source: company press release or website)

Why We Like It:
ASEI was out performing the broader market today with a 4.8% gain fueled by above average volume. The company reported a pretty strong earnings report earlier this month but shares sold off on the news despite the better than expected results. What seems to be driving the stock today are rumors that General Electric (GE) might be acquiring ASEI in the future. This isn't the first time this type of rumor has surfaced with ASEI. Renewed rumors certainly don't help the shorts. ASEI has relatively high short interest in its small eight million share float. What we like about the stock is the technical picture. The Point & Figure chart has produced a bullish triangle breakout pattern with a $100.00 target. The triangle breakout patterns tend to be pretty reliable. We are going to suggest a trigger at $74.05 to buy calls on the stock. The $73-74 levels has been resistance since last September. Actually the $75 mark appears to be round-number resistance and more conservative traders may want to wait for a move over $75.00 before initiating bullish positions. If triggered at $74.05 we will target a rally into the $79.75-80.00 range. More aggressive traders may want to aim higher.

Suggested Options:
We are going to suggest the April calls.

BUY CALL APR 70 KBU-DN open interest= 589 current ask $6.80
BUY CALL APR 75 KBU-DO open interest=1088 current ask $4.20
BUY CALL APR 80 KBU-DP open interest= 229 current ask $2.50

Picked on February xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 02/08/06 (confirmed)
Average Daily Volume = 178 thousand

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Goldman Sachs - GS - close: 145.53 change: +2.08 stop: 141.45

Company Description:
Goldman Sachs is a leading global investment banking, securities and investment management firm. (source: company press release or website)

Why We Like It:
We did well recently playing fellow broker stock LEH and now it looks like we have a chance to catch the next pop higher in shares of GS. The sector index is breaking out to new all-time highs and GS looks poised to do the same. Stocks in this industry tend to run up ahead of their earnings report and GS is due to report in about three to four weeks. We are going to suggest call positions with GS above the $143.00 level. The Point & Figure chart points to a $169 target. We are only going to target the $149.85-150.00 range.

Suggested Options:
We are suggesting the March calls since we plan to exit ahead of GS' earnings report in mid March.

BUY CALL MAR 140 GS-CH open interest=3878 current ask $7.10
BUY CALL MAR 145 GS-CI open interest=4708 current ask $3.60
BUY CALL MAR 150 GS-CJ open interest=4650 current ask $1.45

Picked on February 22 at $145.53
Change since picked: + 0.00
Earnings Date 03/16/06 (unconfirmed)
Average Daily Volume = 3.4 million

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MDC Holdings - MDC - close: 64.44 chg: +2.23 stop: 61.15

Company Description:
MDC, whose subsidiaries build homes under the name "Richmond American Homes," is one of the largest homebuilders in the United States. The Company also provides mortgage financing, primarily for MDC's homebuyers, through its wholly owned subsidiary HomeAmerican Mortgage Corporation. MDC is a major regional homebuilder with a significant presence in some of the country's best housing markets. The Company is the largest homebuilder in Colorado; among the top five homebuilders in Northern Virginia, suburban Maryland, Phoenix, Tucson, Las Vegas, Jacksonville and Salt Lake City; and among the top ten homebuilders in Northern California and Southern California. MDC also has established operating divisions in West Florida, Philadelphia/Delaware Valley, Chicago, Dallas/Fort Worth and Houston. (source: company press release or website)

Why We Like It:
Some positive comments about Toll Brothers (TOL) today helped spark a pretty strong rally in the homebuilders. Shares of MDC responded with a 3.5% gain and a breakout over its 50-dma and its long-term trendline of resistance dating back to last July. We suspect that this bounce in the homebuilders has further to go. MDC looks pretty oversold and could easily play catch up with its peers. We're going to suggest a trigger at $65.05 to open call positions. If triggered we will target a rally into the $69.50-70.00 range. We can expect a few hurdles near $67.50 and its exponential 200-dma, currently at 68.50. More conservative traders may want to plan an exit at the 200-ema.

Suggested Options:
We are suggesting the April calls although March calls would also work well.

BUY CALL APR 60 MDC-DL open interest= 0 current ask $6.50
BUY CALL APR 65 MDC-DM open interest=314 current ask $3.40
BUY CALL APR 70 MDC-DN open interest= 29 current ask $1.50

Picked on February xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 04/18/06 (unconfirmed)
Average Daily Volume = 856 thousand

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Altria Group - MO - close: 73.38 chg: +1.18 stop: 71.85

Company Description:
Altria Group is the parent company of Kraft Foods, Philip Morris International, Philip Morris USA and Philip Morris Capital Corporation. In addition, Altria Group, Inc. has a 28.7% economic interest in SABMiller. (source: company press release or website)

Why We Like It:
Tobacco and cigarette producer MO is bouncing from long-term technical support at its simple 200-dma. Its smaller rival RAI is hitting new all-time highs. We believe that MO could make a run at catching up to its peer. However we want to see some confirmation. The stock currently has short-term resistance near $74.00 and its simple 100-dma (73.78). We are going to suggest a trigger to buy calls at $74.10. More conservative traders may want to wait for MO to trade over its simple 50-dma (currently 74.30) before initiating positions. If triggered we are going to target the $77.50-78.00 range. The high for MO was last December at $78.68. More aggressive traders may want to aim higher and they might also want to put their stop lower under the 200-dma. We're putting our stop at $71.85.

Suggested Options:
We are suggesting the March calls although Aprils would also work well.

BUY CALL MAR 70 MO-CN open interest= 85006 current ask $4.40
BUY CALL MAR 75 MO-CO open interest=123361 current ask $1.25

Picked on February xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 04/19/06 (unconfirmed)
Average Daily Volume = 8.1 million

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Potash - POT - close: 91.99 chg: +0.94 stop: 89.95

Company Description:
Potash Corporation of Saskatchewan Inc. is the world's largest fertilizer enterprise producing the three primary plant nutrients and a leading supplier to three distinct market categories: agriculture, with the largest capacity in the world in potash, third largest in phosphate and fourth largest in nitrogen; animal nutrition, with the world's largest capacity in phosphate feed ingredients; and industrial chemicals, as the largest global producer of industrial nitrogen products and one of only three North American suppliers of industrial phosphates. (source: company press release or website)

Why We Like It:
We suspect that the consolidation in POT is about over. Traders have been buying the dips for the last couple of weeks and while the bulls have been losing the fight so far it looks like the tables are about to turn. We are going to suggest a trigger to buy calls at $93.05. This should be enough to confirm a breakout over its two-week trend of lower highs. More conservative traders may want to wait for POT to trade over its simple 10-dma, which is currently at 93.86. If we are triggered at $93.05 we will target a rally into the $99.50-100.00 range.

Suggested Options:
We are suggesting the March calls although April strikes would also work well.

BUY CALL MAR 90 POT-CR open interest=432 current ask $4.80
BUY CALL MAR 95 POT-CS open interest=556 current ask $2.30
BUY CALL MAR100 POT-CT open interest=702 current ask $0.95

Picked on February xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 04/29/06 (unconfirmed)
Average Daily Volume = 826 thousand

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Prudential - PRU - close: 76.53 change: +0.99 stop: 73.99

Company Description:
Prudential Financial companies, with approximately $532 billion in total assets under management as of December 31, 2005, serve individual and institutional customers worldwide and include The Prudential Insurance Company of America, one of the largest life insurance companies in the United States. These companies offer a variety of products and services, including life insurance, mutual funds, annuities, pension and retirement related services and administration, asset management, securities brokerage, banking and trust services, real estate brokerage franchises and relocation services. (source: company press release or website)

Why We Like It:
PRU is a somewhat diversified financial services company and should benefit from the strength in the brokerage industry and the insurance sector. The XBD broker-dealer index is hitting new highs and the IUX insurance index just broke out over resistance near 360 and its 50-dma. The trading in PRU looks positive with a bullish engulfing candlestick pattern on above average volume. We are going to suggest a trigger at $77.05 to buy calls. If triggered we are going to target a rally into the $82.00-82.50 range. We do expect some resistance at $80 and would not be surprised to see PRU breakout, touch $80, and then pull back and retest the $77 level again as support. The P&F chart is bullish and points to a $103 target.

Suggested Options:
We are suggesting the April calls although March strikes are available and have more open interest.

BUY CALL APR 75 PRU-DO open interest= 25 current ask $3.50
BUY CALL APR 80 PRU-DP open interest=120 current ask $1.00

Picked on February xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 02/08/06 (confirmed)
Average Daily Volume = 1.9 million
 

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