Option Investor
New Plays

New Option Plays

HAVING TROUBLE PRINTING?
Printer friendly version
Call Options Plays
Put Options Plays
Strangle Options Plays
CRS DRIV None
CSX IBM  
DE    
HYDL    
KMG    
MRO    
RIG    
VLO    

New Calls

Play Editor's note: We are adding a lot of plays to the newsletter this weekend. Most of them are bullish. Yet if you read the wrap you'll see that Jim has a bearish bias. We understand his bias and tend to agree with him. This market rebound could be nothing more than an oversold bounce on the way down. However, most of the candidates we found were bullish. We can only play what we see not what we believe. The market is always right and right now it's moving higher. It is crucial that you monitor your stop losses to minimize risk should the market reverse course lower again. You may want to play with a stop tighter than our own suggested stops.

---

Carpenter Tech - CRS - close: 121.40 chg: +3.58 stop: 114.45

Company Description:
Carpenter Technology, based in Wyomissing, PA, produces and distributes specialty alloys, including stainless steels, titanium alloys and superalloys, and various engineered products. (source: company press release or website)

Why We Like It:
The high-flying iron and steel stocks are trying to bounce. Some of them are struggling, like NUE (a current put play), while others like CRS are breaking out. CRS looks like a tempting bullish candidate given the positive turnaround in the technical oscillators, the breakout from its sideways trading range, and the new Point & Figure chart buy signal. Friday's move over $120.00 produced a new triple-top breakout buy signal with a $142 target on the P&F chart. We are going to suggest calls on CRS with the stock over $120 but you may want to wait and watch to see if shares consolidate any of last week's gains. The $115 level looks like potential support. A 10% stop loss would be under recent support at $110 but we're going to try and reduce our risk with a stop at $114.45. The next level of resistance is the $125.00 mark but we're going to aim for the $129.00-130.00 range. Please note that this would qualify as a high-risk, aggressive play given the stock's volatility.

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

BUY CALL JUL 115.00 CRS-GC open interest=153 current ask $13.70
BUY CALL JUL 120.00 CRS-GD open interest= 37 current ask $10.90
BUY CALL JUL 125.00 CRS-GE open interest= 18 current ask $ 8.40
BUY CALL JUL 130.00 CRS-GF open interest= 60 current ask $ 6.40

Picked on June 04 at $121.40
Change since picked: + 0.00
Earnings Date 07/24/06 (unconfirmed)
Average Daily Volume = 540 thousand

---

CSX Corp. - CSX - close: 68.60 chg: +1.56 stop: 65.90

Company Description:
CSX Corporation, based in Jacksonville, Fla., is one of the leading transportation companies, providing rail, intermodal and rail-to-truck transload services. The Company's transportation network spans 21,000 miles with service to 23 eastern states and the District of Columbia, and connects to more than 70 ocean, river and lake ports. (source: company press release or website)

Why We Like It:
The Dow Jones Transportation index has rebounded back above technical resistance at its 50-dma in spite of the strength in crude oil futures. This strength in the transport sector is evident in shares of CSX, a railroad stock, that added 2.3% on Friday to breakout from its two-week consolidation. Volume o Friday's rally in CSX was above average and its MACD indicator is nearing a new buy signal. We are suggesting call options as long as the stock is above $68.00-67.50 range. More conservative traders might want to wait for a move over $70.00, which could be potential resistance. Our target is the $74.00-74.50 range, near the May highs.

Suggested Options:
We are suggesting the July calls.

BUY CALL JUL 65.00 CSX-GM open interest=244 current ask $5.30
BUY CALL JUL 70.00 CSX-GN open interest=143 current ask $2.25

Picked on June 04 at $ 68.60
Change since picked: + 0.00
Earnings Date 07/27/06 (unconfirmed)
Average Daily Volume = 2.1 million

---

Deere Co - DE - close: 87.75 change: +1.44 stop: 84.45

Company Description:
Deere & Company is the world's leading manufacturer of agricultural and forestry equipment; a major manufacturer of construction equipment; and a leading supplier of equipment used in lawn, grounds and turf care. The company was founded in 1837. John Deere agriculture, construction and forestry equipment is distributed through a network of more than 1800 independent dealers worldwide. (source: company press release or website)

Why We Like It:
Shares of DE have rebounded back into their rising channel. The stock's technicals have turned positive again and its MACD indicator is nearing a new buy signal. Plus the P&F chart has reversed into a new buy signal with a $101 target. We are suggesting calls at current levels. If you're a nimble trader then consider looking for a dip back toward $86.50-86.00 as a potential entry point. If you're more conservative then you may want to wait for a move over $88 to confirm the bounce. We are suggesting that readers sell half their positions at $91.90, since the $92.00 level was resistance in May, and then sell the remainder of their positions at $94.75.

Suggested Options:
We are suggesting the July calls.

BUY CALL JUL 85.00 DE-GQ open interest= 804 current ask $4.90
BUY CALL JUL 90.00 DE-GR open interest=3078 current ask $2.20

Picked on June 04 at $ 87.75
Change since picked: + 0.00
Earnings Date 08/15/06 (unconfirmed)
Average Daily Volume = 2.1 million

---

Play Editor's note: We have been and remain long-term bullish on the oil sector. More importantly we've grown short-term bullish on oil stocks. The rising tensions with Iran, the violence in Nigeria against the oil workers and structures there and the upcoming summer driving season have all helped push crude oil back above $72.00 a barrel. The technicals on crude oil has turned bullish too after a four-week consolidation. Meanwhile many of the oil stocks, that were punished hard in the month of May, are rebounding strongly. We are not suggesting that readers buy positions in each oil stock profiled this weekend. Find the one or two that you like best or consider something like the IXC ishares.

---

Hydril - HYDL - close: 77.65 change: +1.15 stop: 71.75

Company Description:
Hydril, headquartered in Houston, Texas, is engaged worldwide in engineering, manufacturing and marketing premium connections and pressure control products used for oil and gas drilling and production. (source: company press release or website)

Why We Like It:
HYDL has a history of bouncing near its rising 200-dma, which can also be seen as a bounce from the bottom of its long-term rising channel on its weekly chart. Shares are bouncing from this technical support again and the MACD indicator has produced a new buy signal. You'll probably notice that we have a relatively wide stop loss because HYDL has been so volatile lately. We'd like to use a tighter stop but HYDL needs room to move. We are targeting a rally into the $84.50-85.00 range. If HYDL can trade over $78.00 it will produce a new triple-top breakout buy signal. FYI: More aggressive traders may want to aim higher ($89-90).

Suggested Options:
We are suggesting the July calls. Currently there is nothing available above $80 for Julys.

BUY CALL JUL 75.00 HBQ-GO open interest= 29 current ask $6.50
BUY CALL JUL 80.00 HBQ-GP open interest= 51 current ask $4.00

Picked on June 04 at $ 77.65
Change since picked: + 0.00
Earnings Date 07/24/06 (unconfirmed)
Average Daily Volume = 328 thousand

---

Kerr Mcgee - KMG - close: 110.86 chg: +3.56 stop: 104.85

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:
KMG is another oil stock that has broken out from its recent consolidation. The stock wasn't hit as hard as many of its peers
and its P&F chart did not produce any bearish signals during the May sell-off. Now that the oil sector is bouncing KMG is on the move. The stock has broken out over resistance near $108 and $110 in the last couple of days. Readers should note that KMG is due to split 2-for-1 on June 15th. Our target is the $119.00-120 range (or $59.50-60.00 post-split). More conservative traders may want to lock in some profits near $115.00, which was resistance in May. You don't have to chase KMG right here. Odds are decent that shares will see a pull back toward $110 and maybe $108.

Suggested Options:
We are suggesting the July calls. Confirm your option symbols. There are some odds symbols available with a KMO root. We are suggesting the KMG root series.

BUY CALL JUL 105.00 KMG-GA open interest= 583 current ask $ 8.90
BUY CALL JUL 110.00 KMG-GB open interest=1221 current ask $ 5.70
BUY CALL JUL 115.00 KMG-GC open interest= 387 current ask $ 3.40

Picked on June 04 at $110.86
Change since picked: + 0.00
Earnings Date 07/26/06 (unconfirmed)
Average Daily Volume = 1.6 million

---

Marathon Oil - MRO - close: 78.39 chg: +1.58 stop: 72.95

Company Description:
Marathon is the fourth-largest U.S.-based fully integrated international energy company engaged in exploration and production; integrated gas; and refining, marketing and transportation operations. The Company has exploration and production activities in the United States, the United Kingdom, Angola, Canada, Equatorial Guinea, Gabon, Ireland, Libya and Norway. Marathon also is developing integrated gas projects that are linking stranded natural gas resources with key demand areas where domestic production is declining and demand is growing, particularly in North America. Marathon is the fifth largest refiner in the U.S. The Company's retail marketing system comprises approximately 5,500 locations in 17 states. (source: company press release or website)

Why We Like It:
MRO is offering a new entry point to buy calls. The stock consolidated from $86 to almost $70 in a six-week descending channel. Now it looks like the consolidation is over. The MACD has produced a new buy signal and the P&F chart has produced a new buy signal that points to an $88.00 target. Friday's move, while not on strong volume, was a breakout over short-term resistance at $78.00. We are suggesting calls with MRO above $78.00. If you want more confirmation then consider waiting for a move over the 50-dma (78.81) or the $80.00 level. If you prefer to buy a dip then look for a pull back toward the $77-76 region. Our target is the $85.00-86.00 range.

Suggested Options:
We are suggesting the July calls.

BUY CALL JUL 75.00 MRO-GO open interest=2187 current ask $6.10
BUY CALL JUL 80.00 MRO-GP open interest=6706 current ask $3.30
BUY CALL JUL 85.00 MRO-GQ open interest=3286 current ask $1.50

Picked on June 04 at $ 78.39
Change since picked: + 0.00
Earnings Date 07/27/06 (unconfirmed)
Average Daily Volume = 3.1 million

---

Transocean Inc. - RIG - close: 83.15 chg: +1.90 stop: 77.99

Company Description:
Transocean Inc. is the world's largest offshore drilling contractor with a fleet of 88 mobile offshore drilling units. The company's mobile offshore drilling fleet, consisting of a large number of high-specification deepwater and harsh environment drilling units, is considered one of the most modern and versatile in the world due to its emphasis on technically demanding segments of the offshore drilling business. The company's fleet consists of 33 High-Specification Floaters (semisubmersibles and drillships), 21 Other Floaters, 25 Jackups and other assets utilized in the support of offshore drilling activities worldwide. (source: company press release or website)

Why We Like It:
RIG is rebounding from its May sell-off. The stock has a short-term bullish pattern of higher lows and a breakout over minor resistance near $82.00-82.50 and its 50-dma (82.84). The MACD has a new buy signal and the P&F chart is bullish with a $98 target. We are suggesting calls with RIG above $80.00. You can choose to initiate positions now or look for a dip. Our target is the $89.00-90.00 range.

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

BUY CALL JUL 80.00 RIG-GP open interest=5885 current ask $6.20
BUY CALL JUL 85.00 RIG-GQ open interest=3721 current ask $3.60
BUY CALL JUL 90.00 RIG-GR open interest=1819 current ask $1.90

BUY CALL AUG 80.00 RIG-HP open interest=6474 current ask $7.70
BUY CALL AUG 85.00 RIG-HQ open interest=13557 current ask $5.20
BUY CALL AUG 90.00 RIG-HR open interest=7165 current ask $3.30

Picked on June 04 at $ 83.15
Change since picked: + 0.00
Earnings Date 08/03/06 (unconfirmed)
Average Daily Volume = 5.7 million

---

Valero Energy - VLO - close: 63.05 chg: +1.55 stop: 59.85

Company Description:
Valero Energy Corporation is a Fortune 500 company based in San Antonio, with approximately 22,000 employees and annual revenue of more than $80 billion. The company owns and operates 18 refineries throughout the United States, Canada and the Caribbean with a combined throughput capacity of approximately 3.3 million barrels per day, making it the largest refiner in North America. Valero is also one of the nation's largest retail operators with approximately 5,000 retail and branded wholesale outlets in the United States, Canada and the Caribbean under various brand names including Valero, Diamond Shamrock, Shamrock, Ultramar, and Beacon. (source: company press release or website)

Why We Like It:
News of a refinery shutdown did nothing to stop the rebound in shares of VLO. The stock has spent the last six weeks consolidating lower in a descending channel but Friday's 2.5% gain was a breakout over the top of the channel and resistance near $62.00 and resistance at its 50-dma. The move helped confirm a fresh MACD buy signal from Thursday. We are suggesting bullish positions with VLO above $60.00. We'd like to see the $62 level act as new support but a dip toward $60.00 (more likely 61.50) can be used as a new entry point. Our target is the $69.50-70.00 range.

Suggested Options:
We are suggesting the July calls.

BUY CALL JUL 60.00 VLO-GL open interest=4741 current ask $5.50
BUY CALL JUL 62.50 VLO-GZ open interest=4052 current ask $3.90
BUY CALL JUL 65.00 VLO-GM open interest=3942 current ask $2.70
BUY CALL JUL 67.50 VLO-GR open interest=1268 current ask $1.80

Picked on June 04 at $ 63.05
Change since picked: + 0.00
Earnings Date 07/25/06 (unconfirmed)
Average Daily Volume = 9.8 million
 

New Puts

Digital River - DRIV - close: 43.56 chg: -1.45 stop: 45.55

Company Description:
Digital River, Inc., a global leader in e-commerce outsourcing, builds and manages online businesses for more than 40,000 software publishers, manufacturers, distributors and online retailers. Its multi-channel e-commerce solution, which supports both direct and indirect sales, is designed to help companies of all sizes maximize online revenues as well as reduce the costs and risks of running an e-commerce operation. The company's comprehensive platform offers site development and hosting, order management, fraud prevention, export controls, tax management, physical and digital product fulfillment, multi-lingual customer service, advanced reporting and strategic marketing services. (source: company press release or website)

Why We Like It:
After an amazing five-month rally the bulls have finally run out of steam in DRIV. Shares have been struggling to breakout over resistance near $48.00 for about five weeks. Now the stock is breaking down. The recent weakness has produced a triple-bottom breakdown sell signal on its P&F chart with a $38 target. Friday's session produced a failed rally/bearish engulfing candlestick pattern. We are suggesting puts with DRIV under $45.00. We're going to suggest two targets. Consider selling half your position at $40.20 and then sell the remainder at $37.65. We are concerned that the $37.50 region might be support with its slowly rising 200-dma. FYI: if you're a technical trader the 38.2% Fibonacci retracement of DRIV's rally would be about $38.65.

Suggested Options:
We are suggesting the July puts.

BUY PUT JUL 45.00 DQI-SI open interest=326 current ask $3.50
BUY PUT JUL 40.00 DQI-SH open interest=426 current ask $1.35

Picked on June 04 at $ 43.56
Change since picked: + 0.00
Earnings Date 07/27/06 (unconfirmed)
Average Daily Volume = 983 thousand

---

Intl. Bus. Mach. - IBM - cls: 79.52 chg: -1.17 stop: 81.05

Company Description:
IBM is one of the largest information technology companies in the world with three major divisions: systems and financing, software, and information services.

Why We Like It:
IBM is struggling to rebound with the rest of the tech sector. In the middle of May IBM broke down from a neutral pattern of lower highs and higher lows. Now shares are poised to breakdown from its recent two-week sideways consolidation above support at $79.00. Giving the stock a gentle push lower was an analyst downgrade on Friday. The recent weakness looks like a failed rally on its P&F chart, which points to a $73 target. If you study the weekly chart it looks like IBM may have produced a bearish head-and-shoulders pattern. We are going to suggest a trigger to buy puts at $78.75 (under support at $79.00). If triggered then we'll target a decline into the $73.50-73.00 range.

Suggested Options:
If we are triggered at $78.75 we are suggesting the July puts. We do not want to hold over the mid July earnings report.

BUY PUT JUL 80.00 IBM-SP open interest=22905 current ask $2.35
BUY PUT JUL 75.00 IBM-SO open interest=13280 current ask $0.80

Picked on June xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 07/18/06 (unconfirmed)
Average Daily Volume = 5.2 million
 

New Strangles

None today.
 

New Play Archives