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New Option Plays

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Call Options Plays
Put Options Plays
Strangle Options Plays
BTU None None
CNX    
CX    
PD    
VFC    

New Calls

Peabody Energy - BTU - close: 61.00 chg: +1.50 stop: 54.90

Company Description:
Peabody Energy is the world's largest private-sector coal company, with 2005 sales of 240 million tons of coal and $4.6 billion in revenues. Its coal products fuel approximately 10 percent of all U.S. and 3 percent of worldwide electricity. (source: company press release or website)

Why We Like It:
The current market bounce has been strong in the coal producers. The rise in crude oil back above $70 a barrel probably draws attention to alternate energy sources like coal. It did not hurt that one analyst firm upgraded their view on the coal sector to "out perform" on Friday. BTU looks like a tempting candidate given its consistent trend of bouncing from technical support at its rising 100-dma over the last several months. Shares bounced from the 100-dma again and the short-term technical oscillators are turning bullish. The P&F chart looks good with a fresh double-top breakout buy signal and a $78 target. We are going to suggest call positions on BTU right here at $61.00 but more patient traders might want to wait and hope for a dip back toward $58-57.50 as a potential entry point. We are using a relatively wide stop loss because the rebound has been so sharp in BTU. Our target is the $66.00-67.00 range. We do not want to hold over the July earnings report.

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

BUY CALL JUL 60.00 BTU-GL open interest=1157 current ask $5.60
BUY CALL JUL 65.00 BTU-GM open interest= 786 current ask $3.40

Picked on May 28 at $ 61.00
Change since picked: + 0.00
Earnings Date 07/18/06 (unconfirmed)
Average Daily Volume = 4.0 million

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Cons Energy - CNX - close: 87.80 chg: +2.33 stop: 82.49

Company Description:
CONSOL Energy Inc. has annual revenues of $3.8 billion. The company was named one of America's most admired companies in 2005 by Fortune magazine. It received the U.S. Department of the Interior's Office of Surface Mining National Award for Excellence in Surface Mining for the company's innovative reclamation practices in 2002 and 2003. Also in 2003, the company was listed in Information Week magazine's "Information Week 500" list for its information technology operations. In 2002, the company received a U.S. Environmental Protection Agency Climate Protection Award. (source: company press release or website)

Why We Like It:
CNX is another coal stock (see our new play in BTU for more details). The rebound has been pretty strong although volume came in light during the last couple of days. Short-term technicals are turning positive and the P&F chart has produced a new buy signal with a $104 target. While we are suggesting call positions here over $87 more patient traders might want to wait and look for a dip back toward $85.00 before initiating positions. Readers should note that CNX is due to split 2-for-1 on June 1st. Now it's not uncommon for stocks to see a post-split depression if they get a strong pre-split run up. Keep that in mind while planning your strategy. We are targeting a move into the $95.00-97.00 range or $47.50-48.50 post-split.

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

BUY CALL JUL 85.00 CNX-GQ open interest=7643 current ask $7.10
BUY CALL JUL 90.00 CNX-GR open interest=7576 current ask $4.50

Picked on May 28 at $ 87.80
Change since picked: + 0.00
Earnings Date 07/27/06 (unconfirmed)
Average Daily Volume = 1.6 million

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Cemex Sa - CX - close: 60.53 change: +0.93 stop: 57.22

Company Description:
CEMEX is a growing global building solutions company that provides high quality products and reliable service to customers and communities in more than 50 countries throughout the world. Commemorating its 100th anniversary in 2006, CEMEX has a rich history of improving the well-being of those it serves through its efforts to pursue innovative industry solutions and efficiency advancements and to promote a sustainable future. (source: company press release or website)

Why We Like It:
We are starting to see an oversold bounce in some of the construction materials stocks. EXP and CX are two examples. Shares of CX tested the February low and bounced. This looks like an opportunity to ride the bounce back toward potential resistance near its 100-dma and the $65.00 level. Technical traders will note that the sell-off over the past three weeks has created a big sell signal on its P&F chart but that doesn't mean CX can't bounce back to test new resistance before moving lower. We'll set our stop under Thursday's low. Our target will be the $64.00-65.00 range. The 100-dma is at $64.20. Keep a sharp eye on the simple 10-dma overhead. If CX fails to breakout past it we may elect to abandon this play pretty quickly.

Suggested Options:
We are suggesting the July calls. We do not want to hold over the mid July earnings report. Double-check your option symbols with your broker. There are some odd symbols with the CXK root.

BUY CALL JUL 60.00 CX-GL open interest= 275 current ask $4.00
BUY CALL JUL 65.00 CX-GM open interest= 632 current ask $1.80

Picked on May 28 at $ 60.53
Change since picked: + 0.00
Earnings Date 07/17/06 (unconfirmed)
Average Daily Volume = 1.7 million

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Phelps Dodge - PD - close: 88.26 chg: +2.08 stop: 82.45

Company Description:
Phelps Dodge Corp. is one of the world's leading producers of copper and molybdenum and is the largest producer of molybdenum-based chemicals and continuous-cast copper rod. The company employs 13,500 people worldwide. (source: company press release or website)

Why We Like It:
Shares of PD have grown increasingly volatile lately. The stock dipped just enough last week to fill the gap higher in late March. The new rebound in PD has produced a new Point & Figure chart buy signal (see below) that points to a triple-digit target. The price of copper seems to be mostly unaffected by all the weakness in equities this past month. Actually, the commodity did see some volatility moving from $4.00 to $3.50 and back toward $4.00 again where it is trading near all-time highs. The market is bullish on copper due to strong demand and output concerns. We are going to suggest some speculative calls on PD. Technicals have turned bullish but the bounce is already looking a little mature with the rebound from $77 to $88. Readers can choose to buy calls here, wait for a move over $90 (potential resistance) or look for a pull back toward $85.00. We wanted to put our stop loss under $80.00 and/or its 100-dma (79.33) but that seems like too much risk. We're going to try it with our stop at $82.45. We are suggesting that traders exit half their positions $94.50 and the second half of their positions at $99.00. We want to remind readers that this is considered a higher-risk play. If you study the daily chart it almost looks like PD could be building the right shoulder to a bearish head-and-shoulders pattern.

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

BUY CALL JUL 85.00 DPB-GQ open interest= 6140 current ask $8.50
BUY CALL JUL 87.50 DPB-GY open interest= 2545 current ask $7.10
BUY CALL JUL 90.00 DPB-GR open interest=18599 current ask $5.90
BUY CALL JUL 92.50 DPB-GZ open interest= 3222 current ask $4.80

Picked on May 28 at $ 88.26
Change since picked: + 0.00
Earnings Date 07/27/06 (unconfirmed)
Average Daily Volume = 6.1 million

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VF Corp. - VFC - close: 63.08 change: +0.54 stop: 61.84

Company Description:
VF Corporation is a leader in branded lifestyle apparel including jeanswear, outdoor products, intimate apparel, image apparel and sportswear. Its principal brands include Wrangler, Lee, Riders, Rustler, Vanity Fair, Vassarette, Bestform, Lily of France, Nautica, John Varvatos, JanSport, Eastpak, The North Face, Vans, Reef, Napapijri, Kipling, Lee Sport and Red Kap. (source: company press release or website)

Why We Like It:
VFC is more of a relative strength, bullish breakout play. The stock broke through multiple levels of resistance in mid April after raising their earnings guidance. Since then shares have been consolidating sideways under resistance near $63.00 but with a bullish trend of higher lows. Now that the major market indices are rebounding VFC has a chance to breakout to new highs again. We are going to suggest a trigger to buy calls at $63.51. If triggered we'll target a rally into the $68.00-70.00 range. Currently the bullish P&F chart points to an $84 target. We are going to try and keep our risk to a minimum with a stop loss under $62.00 and last Thursday's low.

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

BUY CALL JUL 60.00 VFC-CL open interest= 50 current ask $4.00
BUY CALL JUL 65.00 VFC-GM open interest= 23 current ask $1.20

Picked on May xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 07/25/06 (unconfirmed)
Average Daily Volume = 545 thousand
 

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