Option Investor
New Plays

New Option Plays

HAVING TROUBLE PRINTING?
Printer friendly version
Call Options Plays
Put Options Plays
Strangle Options Plays
CLF None None
CVX    
FLR    
XTO    

Play Editor's Note: The markets have been exceptionally volatile lately. Sometimes the best play is to actually sit out and not trade. We are adding a few bullish positions because the markets, and these stocks, look poised to bounce. However, they are all more aggressive, higher-risk plays. We picked stocks that should not have any exposure to the weakness in financials and sub-prime fears.


New Calls

Cleveland Cliffs - CLF - close: 67.30 chg: +4.18 stop: 61.45

Company Description:
Cleveland-Cliffs Inc, headquartered in Cleveland, Ohio, is the largest producer of iron ore pellets in North America and sells the majority of its pellets to integrated steel companies in the United States and Canada. (source: company press release or website)

Why We Like It:
It was only a few months ago that CLF was soaring to new highs on speculation that someone would acquire the stock. The company should look more attractive now near $70 than it did near $90. The world economy is still strong so metal and mining stocks should still see a healthy business. Yet looking at the big picture with CLF the stock has produced what is arguably a bearish double top pattern with the June and July peaks. We think the stock can rebound sharply before it continues lower (if it continues lower). Friday's move looks like a bullish entry point with a clear bounce from technical support at the 200-dma and a bullish engulfing candlestick pattern. Unfortunately, the stock has been volatile so we are using a wide stop loss with our stop just under Friday's low. We're suggesting new positions now at current levels or on a dip back toward $65.00. We do expect some resistance near $70.00 but our target is the $74.50-75.00 range. The 50-dma could be another layer of overhead resistance.

Suggested Options:
We are suggesting the September calls although October calls would also work well.

BUY CALL SEP 65.00 CLF-IM open interest= 147 current ask $6.30
BUY CALL SEP 70.00 CLF-IN open interest= 431 current ask $3.80
BUY CALL SEP 75.00 CLF-IO open interest=1206 current ask $2.15

Picked on August 12 at $ 67.30
Change since picked: + 0.00
Earnings Date 10/25/07 (unconfirmed)
Average Daily Volume = 1.8 million

---

Chevron - CVX - cls: 83.42 change: +2.31 stop: 79.35

Company Description:
Chevron Corporation is one of the world's leading energy companies. With approximately 56,000 employees, Chevron subsidiaries conduct business in more than 180 countries around the world, producing and transporting crude oil and natural gas, and refining, marketing and distributing fuels and other energy products. (source: company press release or website)

Why We Like It:
This is a higher-risk, more aggressive play. We've been warning readers about a significant correction in crude oil for weeks. The commodity has recently seen a 10% pull back. We now suspect that crude oil will try and bounce from the $70.00 level. If we continue to have a quiet hurricane season then the commodity may indeed dip under the $70 zone. However, short-term we're expecting a bounce. Any rebound in crude should help lift the energy sector. CVX is already trying to find a bottom near the $80 level. Friday's move looks like a bullish engulfing (reversal) pattern. We're suggesting new positions now. More conservative traders could wait for a new breakout over $85 and its 50-dma. Our target is the $89.00-90.00 range. FYI: The P&F chart is still very bearish with a $68 target.

Suggested Options:
We are suggesting the September calls.

BUY CALL SEP 80.00 CVX-IP open interest=10044 current ask $6.20
BUY CALL SEP 85.00 CVX-IQ open interest= 8893 current ask $3.30
BUY CALL SEP 90.00 CVX-IR open interest= 5516 current ask $1.50

Picked on August 12 at $ 83.42
Change since picked: + 0.00
Earnings Date 10/25/07 (unconfirmed)
Average Daily Volume = 11.3 million

---

Fluor - FLR - clse: 121.00 change: +0.68 stop: 114.99

Company Description:
Fluor Corporation provides services on a global basis in the fields of engineering, procurement, construction, operations, maintenance and project management. (source: company press release or website)

Why We Like It:
FLR is a simple relative strength play. The stock has shown a lot of resilience lately. Shares still have a bullish trend of higher lows. Short-term technicals are starting to turn bullish again. It would be tempting to buy calls now but FLR has clear resistance at the $123.00 level. We are suggesting that readers wait for a breakout and use a trigger at $123.25. If triggered at $123.25 then our first target is the $129.75-130.00 range. Our secondary target is the $134.00-135.00 range. If FLR can trade over $123.00 it would produce a new quadruple-top bullish breakout buy signal on its P&F chart, which already points to a $169 target.

Suggested Options:
We are suggesting the September calls although October calls would also work. Our trigger to buy calls is at $123.25.

BUY CALL SEP 120 FLR-ID open interest=216 current ask $7.60
BUY CALL SEP 125 FLR-IE open interest=233 current ask $5.30
BUY CALL SEP 130 FLR-IF open interest=374 current ask $3.50

Picked on August xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 11/06/07 (unconfirmed)
Average Daily Volume = 1.1 million

---

XTO Energy - XTO - cls: 57.08 change: +1.84 stop: 54.45

Company Description:
XTO Energy Inc. is a domestic energy producer engaged in the acquisition, development and discovery of quality, long-lived oil and natural gas properties in the United States. Its properties are concentrated in Texas, New Mexico, Arkansas, Oklahoma, Kansas, Wyoming, Colorado, Alaska, Utah, Louisiana and Mississippi. (source: company press release or website)

Why We Like It:
It looks like the bounce in XTO has already started. Traders bought the dip near its rising 200-dma over a week ago. More recently XTO has been bouncing around the $55.00-57.50 range with resistance near the 100-dma and bulls buying the dip near $55.00 (actually 54.50). Aggressive traders might want to consider buying calls now. We want to see a new relative high so we're suggesting a trigger to buy calls at $57.61. There is potential resistance at the 50-dma around 59.20 and more potential resistance near $60.00. Yet our target is the $62.00-62.05 range. FYI: The P&F chart is still very bearish. Plus, readers should note our comments about oil in the CVX play tonight.

Suggested Options:
We are suggesting the September calls although November calls would also work. Our suggested trigger to open positions is at $57.61.

BUY CALL SEP 55.00 XTO-IK open interest=1521 current ask $4.20
BUY CALL SEP 60.00 XTO-IL open interest=1389 current ask $1.60

Picked on August xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/24/07 (unconfirmed)
Average Daily Volume = 4.6 million
 

New Puts

None today.
 

New Strangles

None today.
 

New Play Archives