Option Investor
New Plays

New Option Plays

HAVING TROUBLE PRINTING?
Printer friendly version
Call Options Plays
Put Options Plays
Strangle Options Plays
AZNNoneNone
CRS  
CYMI  
PJC  
PLCE  
RAIL  
VLO  

Editor's note: We are adding several new bullish candidates to the play list this weekend. However, we want to remind readers that August and September are historically two of the worst months for stocks. While this August has not followed traditional patterns we would not get married to your positions. Stay prepared to exit early!


New Calls

AstraZeneca - AZN - close: 62.99 change: +0.88 stop: 59.95

Company Description:
AstraZeneca is a major international healthcare business engaged in the research, development, manufacture and marketing of prescription pharmaceuticals and the supply of healthcare services. It is one of the world's leading pharmaceutical companies with healthcare sales of $23.95 billion and leading positions in sales of gastrointestinal, cardiovascular, neuroscience, respiratory, oncology and infection products. In the United States, AstraZeneca is a $10.77 billion healthcare business with more than 12,000 employees. (source: company press release or website)

Why We Like It:
We are adding AZN to the play list as a relative strength play. The stock has been marching higher to the beat of its own drum for a few months now. The last three weeks have seen AZN consolidate sideways in a $60-62 trading range. The last few days have seen AZN breakout above resistance at $62 to hit new all-time highs. One could argue that AZN is overbought. The stock has already hit its P&F chart bullish target at $54 but Friday's gain produced another P&F chart buy signal. We're going to set our stop loss under recent support at $60.00. Traders can choose to go long here over $62 or wait for a potential dip back towards $62 or even $60. We suspect that odds of a dip might be pretty good since the major averages look short-term overbought. Please note that AZN is not necessarily a very fast moving stock. Our target is the $68.00-69.00 range but our time frame is mid-October.

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

BUY CALL OCT 60.00 AZN-JL open interest=1342 current ask $4.70
BUY CALL OCT 65.00 AZN-JM open interest=1924 current ask $1.75

Picked on August 20 at $ 62.99
Change since picked: + 0.00
Earnings Date 10/26/06 (unconfirmed)
Average Daily Volume = 1.1 million

---

Carpenter Tech - CRS - close: 98.85 chg: +2.02 stop: 94.99

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:
Iron and steel-related stocks have seen a pretty good rebound this past week. Two weeks ago the sector looked poised to breakdown and hit new relative lows. Now there are several stocks in the group that appear to have produced a short-term bottom and look ready to move higher. CRS is one such stock. Last week's low looks like the second half to a bullish double-bottom pattern, not to mention the bounce was near its rising 200-dma. CRS' rebound this past week has also produced a bullish breakout over its six-week trendline of resistance (lower highs). Short-term technical indicators have turned positive. However, we want to see more confirmation. We are suggesting a trigger to buy calls at $100.26. There is potential resistance at its August high near $103.50, which also happens to be near the 50-dma. Traders need to be defensive until CRS clears this level. Our target is the $109.00-110.00 range. It's worth noting that a move over $100 should reverse the P&F chart into a new buy signal.

Suggested Options:
We are suggesting the September calls but traders should note that September options only have four weeks left until expiration.

BUY CALL SEP 95.00 CRS-IS open interest=239 current ask $7.20
BUY CALL SEP 100.0 CRS-IT open interest=528 current ask $4.40
BUY CALL SEP 105.0 CRS-IA open interest=368 current ask $2.40

Picked on August xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/25/06 (unconfirmed)
Average Daily Volume = 921 thousand

---

Cymer Inc. - CYMI - close: 41.15 chg: -0.26 stop: 39.95

Company Description:
Cymer, Inc. is the world's leading supplier of deep ultraviolet (DUV) laser illumination sources, the essential light source for DUV photolithography systems. DUV lithography is a key enabling technology, which has allowed the semiconductor industry to meet the exacting specifications and manufacturing requirements for volume production of today's advanced semiconductor chips. (source: company press release or website)

Why We Like It:
The rally in tech stocks this past week was led by a huge surge in the semiconductor sector. The group broke out through multiple levels of resistance. It looks like the SOX is short-term overbought and due for a dip but the trend appears to have reversed higher. If that's true then we want some exposure to the semiconductor sector. The intraday bounce from CYMI's 10-dma near round-number support at $40.00 looks like a new bullish entry point to buy calls. However, since we're expecting a dip in the SOX we suggesting that traders wait for a breakout above CYMI's 50-dma, which should also be near the top of CYMI's bearish channel. We're going to suggest a trigger to buy calls at $42.55. If triggered our target is the $47.00-48.00 range. The P&F chart is bullish and points to a $59 target.

Suggested Options:
We are suggesting the September calls but please note September options will expire in four weeks.

BUY CALL SEP 40.00 CQG-IH open interest=1937 current ask $2.75
BUY CALL SEP 45.00 CQG-II open interest= 800 current ask $0.75

Picked on August xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/24/06 (unconfirmed)
Average Daily Volume = 1.0 million

---

Piper Jaffray - PJC - close: 55.70 change: +0.40 stop: 49.99

Company Description:
Piper Jaffray Companies is a leading middle-market investment bank and institutional securities firm, serving the needs of clients since 1895. Piper Jaffray & Co., the firm's principal operating subsidiary, provides a comprehensive set of products and services, including equity and public finance underwriting; mergers and acquisitions; equity and debt capital markets; high-yield and structured products; institutional equity, tax-exempt and taxable sales and trading; and equity and high-yield research. (source: company press release or website)

Why We Like It:
We are increasing our exposure to the broker-dealer sector. The XBD broker-dealer index recently broke out over technical resistance at its 100-dma. More importantly the XBD looks poised to breakout over more significant resistance at the 220 mark. More conservative traders might want to hesitate about opening new call positions in PJC or GS (another call play) until the XBD trades over the 220 level. We like shares of PJC as a bullish candidate for multiple reasons. The rally this past week has pushed PJC through resistance at the $53.00 level and through technical resistance at its 50-dma, which happens to be near the top of its bearish channel (and trendline of resistance). We also like PJC for its very clear bullish double-bottom pattern (see chart). The Point & Figure chart has produced a buy signal that points to a $75 target. We are suggesting new positions right here but our preferred entry point would be on a dip back into the $53.00-54.00 region. We could see both $54.00 and $53.00 acting as short-term support levels. A dip to either could be used as an entry point to buy calls. Our short-term target is the $59.90-60.00 range.

Suggested Options:
We would prefer to buy October calls but none are available yet. That leaves us with September strikes, which expire in about four weeks.

BUY CALL SEP 50.00 PJC-IJ open interest=631 current ask $6.70
BUY CALL SEP 55.00 PJC-IK open interest=331 current ask $3.20
BUY CALL SEP 60.00 PJC-IL open interest=424 current ask $1.15

Picked on August 20 at $ 55.70
Change since picked: + 0.00
Earnings Date 10/18/06 (unconfirmed)
Average Daily Volume = 300 thousand

---

Children's Place - PLCE - cls: 59.59 chg: +0.26 stop: 56.95

Company Description:
The Children's Place Retail Stores, Inc. is a leading specialty retailer of children's merchandise. The Company designs, contracts to manufacture and sells high-quality, value-priced merchandise under the proprietary "The Children's Place" and licensed "Disney Store" brand names. As of July 29, 2006, the Company owned and operated 822 The Children's Place stores and 320 Disney Stores in North America. (source: company press release or website)

Why We Like It:
PLCE's spike higher on Thursday was fueled by the company's better than expected earnings report. The rally pushed the stock past resistance at its 50-dma and its 100-dma. The move also cleared its three-month trendline of resistance (see chart). Thus far the consumer has refused to give up and traders might continue to look toward retail stocks as we head into the school year and start thinking about the holiday shopping season. More aggressive traders might want to consider call positions here or on a dip back towards $57.50-58.00. We're going to wait for a new relative high. Thus we're suggesting a trigger to buy calls at $60.35. If triggered our target is the $64.85-67.00 range. The P&F chart is bullish and points to a $73 target.

Suggested Options:
We would prefer to buy October calls but none are available yet. That leaves us with September strikes, which expire in about four weeks.

BUY CALL SEP 55.00 TUY-IK open interest= 337 current ask $5.80
BUY CALL SEP 60.00 TUY-IL open interest=2076 current ask $2.40
BUY CALL SEP 65.00 TUY-IM open interest= 915 current ask $0.70

Picked on August xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 08/17/06 (confirmed)
Average Daily Volume = 588 thousand

---

FreightCar Amer. - RAIL - close: 59.13 chg: +1.42 stop: 53.99

Company Description:
FreightCar America, Inc. manufactures railroad freight cars, with particular expertise in coal-carrying railcars. In addition to coal cars, FreightCar America designs and builds flat cars, mill gondola cars, intermodal cars, coil steel cars and motor vehicle carriers. (source: company press release or website)

Why We Like It:
We're going to hedge our bets on the railroad stocks. We currently have BNI listed as a put candidate but shares of BNI have rallied back toward overhead resistance. If the Dow Transportation average continues to rebound then BNI could be stopped out but we'll have RAIL as a bullish play to capture any strength in the group. Shares of RAIL have been showing relative strength against the transports and the railroads the last few weeks and this past week helped push shares past resistance at its 200-dma and its 100-dma. The daily chart also appears to have an inverse or bullish head-and-shoulders pattern. There is no such ambiguity on the P&F chart, which shows an ascending triple-top breakout buy signal with a $79 target. The stock's bounce from its simple 200-dma on Friday morning looks like a new entry point to buy calls. We're suggesting positions right now although more conservative traders may want to strongly consider waiting for a breakout past the $60.00 level first. Our short-term target is the $64.50-65.00 range.

Suggested Options:
We would prefer to buy October calls but none are available yet. That leaves us with September strikes, which expire in about four weeks.

BUY CALL SEP 55.00 RQN-IK open interest=854 current ask $5.90
BUY CALL SEP 60.00 RQN-IL open interest=296 current ask $2.80
BUY CALL SEP 65.00 RQN-IM open interest=343 current ask $1.00

Picked on August 20 at $ 59.13
Change since picked: + 0.00
Earnings Date 10/26/06 (unconfirmed)
Average Daily Volume = 475 thousand

---

Ryland Group - RYL - close: 43.98 change: +0.80 stop: 39.95

Company Description:
With headquarters in Southern California, Ryland is one of the nation's largest homebuilders and a leading mortgage-finance company. The company currently operates in 28 markets across the country and has built more than 255,000 homes and financed more than 215,000 mortgages since its founding in 1967. (source: company press release or website)

Why We Like It:
We're switching directions on the homebuilders. Two weeks ago the sector looks poised to breakdown into a new leg lower. That weakness never materialized. Now that the markets believe the Fed might really be done raising rates for the rest of the year suddenly interest-rate sensitive homebuilders are seeing buyers again. The group looks very oversold and could see a big rebound rally. We're going to suggest a trigger to buy calls on RYL at $45.15, which is above the current August high and resistance near $45.00. Our short-term target is the $49.90-50.00 range, which might also see resistance at its descending 100-dma. Right now our biggest concern is Toll Brothers (TOL), who is a rival homebuilder and due to report earnings on the morning of August 22nd. TOL's results and their comments could undermine any rally in the builders.

Suggested Options:
We are suggesting the October calls but we do not want to hold over RYL's October earnings report. Remember, you decide which month and strike price best suits your trading style and risk.

BUY CALL OCT 40.00 RYL-JH open interest=1180 current ask $5.80
BUY CALL OCT 42.50 RYL-JV open interest=1311 current ask $4.20
BUY CALL OCT 45.00 RYL-JI open interest=1432 current ask $2.90
BUY CALL OCT 47.50 RYL-JW open interest= 235 current ask $1.90
BUY CALL OCT 50.00 RYL-JJ open interest=1918 current ask $1.20

Picked on August xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/18/06 (unconfirmed)
Average Daily Volume = 1.7 million

---

Valero - VLO - close: 61.84 change: +0.81 stop: 59.99

Company Description:
Valero Energy Corporation is a Fortune 500 company based in San Antonio, with approximately 22,000 employees and annual revenues 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 more than 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:
We are well aware of Jim's comments in the market wrap that crude oil is probably headed lower. Inventories are high and the summer driving season is almost gone. That's just a couple of reasons why crude oil has slipped from $77 to almost $70 a barrel. We are willing to speculate that crude will bounce a little bit higher before sinking below the $70 level. Any bounce in crude should fuel a similar bounce in oil stocks like VLO. We like VLO as a bullish candidate because shares bounced from round-number support at $60 on Friday, which also happened to be a test of very long-term support (see chart). We're sticking a stop loss under $60 and our target is the $66.00-67.00 range. We suspect that the rhetoric will heat up this week between the West and Iran as we near the August 31st deadline for Iran to quit enriching uranium. This coming conflict could put a bid under oil futures for the time being.

Suggested Options:
We're suggesting the September calls.

BUY CALL SEP 60.00 VLO-IL open interest=18594 current ask $3.40
BUY CALL SEP 62.50 VLO-IZ open interest= 8192 current ask $2.05
BUY CALL SEP 65.00 VLO-IM open interest=23430 current ask $1.10

Picked on August 20 at $ 61.84
Change since picked: + 0.00
Earnings Date 10/31/06 (unconfirmed)
Average Daily Volume = 9.1 million
 

New Puts

None today.

 

New Strangles

None today.

 

New Play Archives