New Plays, Saturday, 05/24/2008
HAVING TROUBLE PRINTING?
Call Options Plays
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Play Editor's note: This past week's failure in the major
market indices does not bode well for the summer. I suspect we will see a bounce
soon but it may end up being a new entry point to establish bearish positions. I
haven't had the chance to read this week's market commentary so I don't know how
my own hypothesis lines up with this weekend's wrap. FYI: A few stocks that I am
watching as potential put candidates on a bounce are ISRG, FDX and UTX. I also
think that MT might be a strangle
candidate right here near $100. Another
candidate readers might want to consider is buying calls on the VIX. Yup, the
Volatility index. A dip near 18.00 or a breakout over 20.00 could be used as a
new entry point to buy calls. Target 22.50-24.00.
Mechel OAO - MTL - close: 49.19 change: -1.91 stop: 47.69
Mechel is one of the leading Russian companies. Its business includes three
segments: mining, steel, and power. Mechel unites producers of coal, iron ore
concentrate, nickel, steel, rolled products, hardware, heat and electric power.
Mechel products are marketed domestically and internationally. (source: company
press release or website)
Why We Like It:
MTL has seen a very painful sell-off in the last few days but the long-term
trend is still bullish and traders bought the dip near its trendline of support
on Friday. We are suggesting readers buy the dip with a tight stop loss under
Friday's lows. We do admit this is an aggressive play. We are essentially trying
to call a bottom on last week's sell-off and we're buying the stock after it has
produced a bearish engulfing candlestick (reversal) pattern on its weekly chart.
target is the $54.00-55.00 zone. Note: The gap some of you might
see on May 20th was due to a ratio change in the number of shares each U.S.
traded ADR of MTL is worth.
We are suggesting the June or July calls.
BUY CALL JUN 50.00 MTL-FJ open interest=600 current ask $2.70
BUY CALL JUN 55.00 MTL-FK open interest=230 current ask $1.15
BUY CALL JUL 50.00 MTL-GJ open interest= 28 current ask $4.60
BUY CALL JUL 55.00 MTL-GK open interest=195 current ask $2.70
Picked on May 25 at $ 49.19
Change since picked: + 0.00
Earnings Date 06/23/08 (unconfirmed)
Average Daily Volume = 1.4 million