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New Option Plays

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NEW  
TAP  

New Calls

Carbo Ceramics - CRR - cls: 45.55 chg: +1.41 stop: 42.45

Company Description:
CARBO Ceramics Inc. is the world's leading manufacturer of ceramic proppants for use in the hydraulic fracturing of natural gas and oil wells and the leading supplier of fracture and reservoir diagnostic services. (source: company press release or website)

Why We Like It:
CRR is a relative strength play. The stock endured the market's weakness relatively well. Traders bought the dip near its 200-dma and then later at its exponential 200-dma. Now shares are rallying higher on stronger than average volume, which tends to be bullish. Friday's rally was a breakout over resistance at the $45.00 level. Plus, the weekly chart shows a bullish engulfing candlestick pattern, which is normally seen as a bullish reversal. Helping fuel the rally are rumors that CRR may be a takeover target. Our target is the $59.75-60.00 range. FYI: CRR might qualify as an oil services stock. The most recent data (February) puts short interest at over 15% of CRR's 18.7 million-share float. That's a relatively high degree of short interest and raises the risk of a short squeeze.

Suggested Options:
We are suggesting the April calls. As with all of our plays it is up to the individual trader to decide which strike price and which month best suits their trading style and risk.

BUY CALL APR 40.00 CRR-DH open interest= 1 current ask $6.40
BUY CALL APR 45.00 CRR-DI open interest=139 current ask $2.70
BUY CALL APR 50.00 CRR-DJ open interest=649 current ask $0.80

Picked on March 11 at $ 45.55
Change since picked: + 0.00
Earnings Date 05/03/07 (unconfirmed)
Average Daily Volume = 458 thousand

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New Century - NEW - close: 3.21 chg: -0.66 stop: n/a

Company Description:
Founded in 1995 and headquartered in Irvine, California, New Century Financial Corporation is a real estate investment trust and one of the nations premier mortgage finance companies, providing mortgage products to borrowers nationwide through its operating subsidiaries, New Century Mortgage Corporation and Home123 Corporation. The company offers a broad range of mortgage products designed to meet the needs of all borrowers. (source: company press release or website)

Why We Like It:
This is what you call a lottery-ticket play. You buy it for the big pay-off but the odds tend to be against you and if you don't win the money is gone. We're not going to recap all the nitty-gritty details of NEW's meteoric plunge. What is important is that the company is coming to a crucial crossroad. We suspect that within the next few weeks NEW will either file for bankruptcy or will announce that they will sell themselves. There were some recent analyst comments suggesting that NEW is definitely a buyout candidate now and that any buyout price is probably north of $10. Therefore we don't feel too bad with the April $5.00 calls. You could try playing May calls but odds are good that NEW probably won't make it past April expiration without some sort of life-changing news event. We are going to reiterate that this is a high-risk/high-reward play.

Suggested Options:
We are suggesting the April $5.00 and $7.50 calls although the April $10 would also work well. If you want more time the May $5 calls are only 15 cents more.

BUY CALL APR 5.00 NEW-DA open interest=12012 current ask $0.70
BUY CALL APR 7.50 NEW-DU open interest= 4270 current ask $0.35

Picked on March 11 at $ 3.21
Change since picked: + 0.00
Earnings Date 11/02/06 (confirmed)
Average Daily Volume = 6.7 million

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Molson Coors - TAP - cls: 86.35 chg: +0.77 stop: 83.49

Company Description:
Molson Coors Brewing Company is one of the world's largest brewers, with combined annual volume of more than 48 million hectoliters and net sales of more than US$5.6 billion. Molson Coors is a leading brewer in Canada through Molson Canada and in the U.K. through Coors Brewers Ltd., and has a growth profile in the U.S. through Coors Brewing Company. (source: company press release or website)

Why We Like It:
TAP is holding up relatively well. In spite of all the market volatility shares of TAP are trading near all-time highs. Investors were quick to buy the dips over the last two weeks and shares never violated their bullish pattern. The P&F chart still points to a $134 target. We are suggesting a trigger to buy calls at $87.15, which is above short-term resistance at $87.00. More conservative traders may want to wait for a new all-time high over $88.00 before considering new positions. Our target is the $92.50-95.00 range.

Suggested Options:
We are suggesting the April calls. Our suggested trigger to buy calls is at $87.15.

BUY CALL APR 85.00 TAP-DQ open interest=155 current ask $3.30
BUY CALL APR 90.00 TAP-DR open interest= 71 current ask $0.95

Picked on March xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 05/17/07 (unconfirmed)
Average Daily Volume = 782 thousand
 

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