Option Investor
New Plays

New Option Plays

HAVING TROUBLE PRINTING?
Printer friendly version
Call Options Plays
Put Options Plays
Strangle Options Plays
ATI None None
BGC    
CTX    
DIA    
FWLT    
MOS    
PBR    
SGR    

Play Editor's Note: A week ago the major indices had rallied to resistance and the market was flooded with bearish reversals. Thoughts of a retest of the January low were rampant among traders and analysts alike. My what a difference a week makes. Investor sentiment seems to have changed. Now that investors believe that the Fed will protect the economy from recession and there is growing hope for a bond insurer bailout everyone is in a buying mood (or a short covering mood). However, last week was one of the best weeks for the market in five years. It's probably time for a dip.

FYI: We found a lot of stocks we liked as potential bullish plays this weekend. I think TEX looks attractive here over $60.00. Additional stocks I am watching for potential entry points are: CEO, HUM, UTX, JEC, FLR, POT, PSA, APOL, MAC, SIGM, VNO, RYL.

Remember, it is up to the individual trader to decide which month and which strike price best suits your trading style and risk.


New Calls

Allegheny Tech. - ATI - cls: 74.02 chg: +3.73 stop: 68.65

Company Description:
Allegheny Technologies Incorporated is one of the largest and most diversified specialty metals producers in the world with revenues of $5.5 billion during 2007. (source: company press release or website)

Why We Like It:
Shares of ATI appear to have bottomed. The short-term trend of higher lows looks good. We have two alternative entry points. We're suggesting readers buy a breakout over $75.00 (at $75.11) or buy a dip in the $71.00-70.00 zone. If triggered our short-term target is the $79.75-80.00 range or the 50-dma, whichever is hit first. The P&F chart for ATI looks very bullish with an $87 target.

Suggested Options:
We are suggesting the March calls.

BUY CALL MAR 70.00 ATI-CN open interest=518 current ask $7.90
BUY CALL MAR 75.00 ATI-CO open interest=457 current ask $5.10
BUY CALL MAR 80.00 ATI-CP open interest=680 current ask $3.10

Picked on February xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 04/24/08 (unconfirmed)
Average Daily Volume = 2.4 million

---

General Cable - BGC - cls: 60.22 change: +1.96 stop: 54.95

Company Description:
General Cable, headquartered in Highland Heights, Kentucky, is a global leader in the development, design, manufacture, marketing and distribution of copper, aluminum and fiber optic wire and cable products for the energy, industrial, and communications markets. (source: company press release or website)

Why We Like It:
This is going to be a short-term play. BGC is due to report earnings on February 12th and we do not want to hold over the report. The stock has rebounded from support and aggressive traders may want to buy calls now with Friday's breakout over $60.00. We would rather wait for a dip. Our suggested entry point is the $57.75-57.00 range. If triggered our target is the $64.50-65.00 range or the 50-dma, whichever comes first. The Point & Figure chart is very bullish with a $73 target.

Suggested Options:
Traders can choose the February options (expire in two weeks) or the March options.

BUY CALL FEB 55.00 BGC-BK open interest=2080 current ask $6.60
BUY CALL FEB 60.00 BGC-BL open interest=2136 current ask $3.50
BUY CALL FEB 65.00 BGC-BM open interest=2225 current ask $1.35

BUY CALL MAR 60.00 BGC-CL open interest=608 current ask $5.90
BUY CALL MAR 65.00 BGC-CM open interest= 49 current ask $3.70

Picked on February xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 02/12/08 (confirmed)
Average Daily Volume = 1.1 million

---

Centex - CTX - close: 29.00 change: +1.25 stop: 24.99

Company Description:
Dallas-based Centex (NYSE: CTX), founded in 1950, is one of the nation's leading home building companies. In addition to its home building operations, Centex's related business lines include mortgage, title and insurance services and integrated pest defense systems. (source: company press release or website)

Why We Like It:
It looks like the homebuilders may have really put in a bottom this January. A 125 basis point cut by the FOMC and a potential boost in the President's stimulus plan to raise the mortgage caps for FHA loans would be huge for the homebuilders. CTX looks like it has produced a bullish double bottom with the November and January low. We are suggesting readers buy a dip in the $27.00-26.00 range. Our short-term target is the $32.00-32.50 zone. We're also adding a second target in the $34.75-35.00 range but we do expect the 200-dma to act as resistance. The Point & Figure chart is very bullish with a $51 target. FYI: The numbers may not be up to date but the most recent data put short interest at 18% of CTX's 121 million-share float. That raises the odds of a short squeeze.

Suggested Options:
We are suggesting the March or April calls.

BUY CALL MAR 25.00 CTX-CE open interest= 661 current ask $5.90
BUY CALL MAR 30.00 CTX-CF open interest=1425 current ask $2.85

BUY CALL APR 30.00 CTX-DF open interest=11620 current ask $3.70

Picked on February xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 04/30/08 (unconfirmed)
Average Daily Volume = 5.3 million

---

DIAMONDS Trust - DIA - close: 127.43 chg: +1.43 stop: 123.99

Company Description:
The DIAMONDS Trust is an Exchanged Traded Fund (ETF) that mimics the Dow Jones Industrial Average (DJIA).

Why We Like It:
This past week has seen the DJIA breakout past resistance and while the index is currently nearing another resistance level the short-term trend is up. We want to try and buy a dip near what should be short-term support around $125 in the DIA. Our suggestd entry point will be the $125.50-125.00 range. We'll try and limit our risk with a stop loss at $123.99. Our target is the $129.50-130.00 zone.

Suggested Options:
We are suggesting the March calls although Februarys would work, just be aware that February strikes expire in two weeks.

BUY CALL MAR 125 DAW-CU open interest=4785 current ask $5.65
BUY CALL MAR 127 DAW-CW open interest=4515 current ask $4.35
BUY CALL MAR 130 DAW-CZ open interest=8820 current ask $2.55

Picked on February xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 00/00/00 (unconfirmed)
Average Daily Volume = 16.8 million

---

Foster Wheeler - FWLT - cls: 71.80 change: +3.33 stop: 66.49

Company Description:
Foster Wheeler Ltd. is a global company offering, through its subsidiaries, a broad range of engineering, procurement, construction, manufacturing, project development and management, research and plant operation services. (source: company press release or website)

Why We Like It:
FWLT makes the list again. Shares look like they have bottomed and investors have been buying the dips. While we would prefer to buy a dip in the $68.00-67.00 range we are going to suggest readers buy calls now following Friday's breakout over $70.00. There is potential resistance near $75.00 but our target is the $77.50-80.00 range. The P&F chart is bullish with a $99 target.

Suggested Options:
We are suggesting the March calls but we do not want to hold over the late February earnings report. FWLT has some odd strikes because of its recent stock split.

BUY CALL MAR 70.00 UFB-CN open interest=456 current ask $7.50
BUY CALL MAR 72.50 UFB-CV open interest= 92 current ask $6.40
BUY CALL MAR 75.00 UFB-CO open interest=474 current ask $5.10
BUY CALL MAR 77.50 UFG-CW open interest=469 current ask $4.20

Picked on February 03 at $ 71.80
Change since picked: + 0.00
Earnings Date 02/26/08 (confirmed)
Average Daily Volume = 3.6 million

---

Mosaic - MOS - close: 93.47 change: +2.54 stop: varies

Company Description:
The Mosaic Company is one of the world's leading producers and marketers of concentrated phosphate and potash crop nutrients. For the global agriculture industry, Mosaic is a single source of phosphates, potash, nitrogen fertilizers and feed ingredients. (source: company press release or website)

Why We Like It:
We suspect that there is still a lot of momentum in the fertilizer companies like MOS and Potash (POT). We are suggesting two alternative entry points to open call positions in MOS. If MOS breaks out over resistance near $95.00 then we are suggesting a trigger to buy calls at $95.51. If MOS sees another round of profit taking then we're suggesting readers buy calls on a dip into the $87.00-85.00 zone. These two entry points are rather wide so we have two stop loss. If triggered at $95.51 our suggested stop loss is $88.99. If triggered at $87.00 then our suggested stop loss is $84.45. Our target is the $108.00-110.00 range even though we do expect some resistance at $100.00.

Suggested Options:
We are suggesting the March calls.

BUY CALL MAR 90.00 MOS-CR open interest=2370 current ask $11.10
BUY CALL MAR 95.00 MOS-CS open interest=1868 current ask $ 8.50
BUY CALL MAR 100.0 MOS-CT open interest=2567 current ask $ 6.40

Picked on February xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 04/09/08 (confirmed)
Average Daily Volume = 5.6 million

---

Petroleo Brasileiro - PBR - cls: 113.06 chg: +2.10 stop: 105.85

Company Description:
PBR is an integrated company that performs in oil and oil byproduct exploration, production, refining, marketing, and transportation, both in Brazil and abroad. (source: company press release or website)

Why We Like It:
This play is a little aggressive. Not only does PBR look a little overbought from its huge January bounce but shares are facing resistance at $115.00 and again at $120.00. We suspect that PBR still has a lot of momentum in it so we are suggesting readers buy calls at $116.00. More conservative traders could wait for a breakout over $120. If we are triggered at $116 our target is the $128.00-130.00 range. A move over $116 would produce a new Point & Figure chart buy signal. FYI: Another risk is PBR's earnings report. We can't find an earnings date and they normally report in mid February. That is a risk because we do not like to hold over an earnings report.

Suggested Options:
We are suggesting the March calls.

BUY CALL MAR 115 PMJ-CZ open interest= 488 current ask $7.90
BUY CALL MAR 120 PMJ-CD open interest= 594 current ask $5.50

Picked on February xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 02/12/08 (unconfirmed)
Average Daily Volume = 7.6 million

---

Shaw Group - SGR - cls: 58.85 chg: +2.34 stop: 54.85

Company Description:
The Shaw Group Inc. is a leading global provider of technology, engineering, procurement, construction, maintenance, fabrication, manufacturing, consulting, remediation and facilities management services for government and private sector clients in the energy, chemical, environmental, infrastructure and emergency response markets. (source: company press release or website)

Why We Like It:
It looks like SGR has produced a bottom as well. Shares found short-term support once it broke out over its 200-dma again. However, we have to point out that SGR is in a bearish trend of lower highs and lower lows. We are fighting the trend here. The stock is currently testing resistance near $60.00 and its 50-dma. We're listing two alternative entry points. If SGR breaks out over $60.00 we are suggesting readers buy calls at $60.25. If SGR pulls back then we are suggesting readers buy calls in the $56.00-55.00 range. We are listing two targets. Our first target is the $64.50-65.00 range. Our second target is the $67.50-70.00 range.

Suggested Options:
We are suggesting the March calls.

BUY CALL MAR 55.00 SGR-CK open interest=373 current ask $7.40
BUY CALL MAR 60.00 SGR-CL open interest=428 current ask $4.60
BUY CALL MAR 65.00 SGR-CM open interest=365 current ask $2.55

Picked on February xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 04/08/08 (confirmed)
Average Daily Volume = 2.0 million
 

New Puts

None today.
 

New Strangles

None today.
 

New Play Archives