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New Option Plays

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IHP None None

Play Editor's Note: Nimble and aggressive traders may want to look at a few of the coal stocks as potential bullish candidates. I think many of them look overbought and due for a correction but ACI is just now breaking out from its recent consolidation. I had the entire call play for ACI already written up but chose not to add it. Coal stocks are rising, in part, because of the rally in crude oil. Just look at the chart for crude and a chart of ACI. There is a very close correlation in movement between the two. If we think crude oil is about to see a sell-off then coal stocks will likely see profit taking as well. Conversely, if you think oil will keep going higher from here then ACI may very well be a great candidate for you.

If you are looking for a bearish play, consider buying puts on the XLF financial ETF. The XLF broke down from its two-week consolidation and under technical support at its 50-dma today.


New Calls

IHOP Corp. - IHP - close: 51.28 change: +0.98 stop: 49.49

Company Description:
Based in Glendale, California, IHOP Corp. franchises and operates restaurants under the International House of Pancakes, or IHOP, and the Applebee's Neighborhood Grill & Bar brands. With more than 3,300 restaurants combined, IHOP Corp. is the largest full-service restaurant company in the world. (source: company press release or website)

Why We Like It:
Shares of IHP look like they are nearing the end of a five-month consolidation. The prevailing pattern of higher lows suggests the stock is going to breakout higher. It doesn't have to but that's what we're going to focus on. IHP briefly traded above technical resistance at its 200-dma today before paring its gains. If IHP can rally to a new relative high it could spur some real buying and short covering. Our suggested entry point to buy calls is at $53.75. If triggered our target is the $59.50-60.00 zone. The P&F chart is bullish with a $68 target. FYI: The most recent data listed short interest at more than 26% of the very small 14.8 million-share float. That's about two weeks worth of short interest so if IHP breaks out it could see a huge squeeze.

Note: we have to label this a more aggressive play because the option spreads are so wide.

Suggested Options:
Our suggested entry point to buy calls is $53.75. We are suggesting the June calls.

BUY CALL JUN 50.00 IHP-FJ open interest=2147 current ask $3.50
BUY CALL JUN 55.00 IHP-FK open interest=1623 current ask $1.40
BUY CALL JUN 60.00 IHP-FL open interest= 530 current ask $0.60

Picked on May xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 04/27/08 (unconfirmed)
Average Daily Volume = 326 thousand
 

New Puts

None today.
 

New Strangles

None today.
 

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