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New Option Plays

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VLO None None

Play Editor's Note: After a day like today you can't help but find bullish candidates. However, both the NASDAQ Composite and the S&P 500 have rallied toward their recent highs or short-term resistance. Combine that with the jobs report tomorrow and we don't feel like chasing today's rally. Since we're not adding many new plays I'm listing some stocks we're watching.

DE - Shares of Deere Co (DE) appear to have built a short-term bottom near technical support at its 200-dma. Today's bounce might be a new bullish entry point. Use a tight stop.

IBB - This is the iShares Biotech ETF and it just broke through resistance near $80.00 and its 200-dma.

EGN - Energen is a natural gas play. The stock looks poised to breakout higher from its two-week consolidation pattern.

ESI - ITT Education also looks ready to breakout from its consolidation. Consider an $80 target or the exponential 200-dma.

FSLR - This would be a very aggressive, higher-risk play but First Solar is bouncing from its trendline of higher lows. Considering buying calls now with a stop loss under this week's low.

DRYS & EXM - These are the shipping stocks and both of them look ready to bounce again. Shipping rates just went up again.

COF - Considering its exposure to consumer debt, Capital One would not be my first choice for bullish positions, but shares are bouncing from its trendline of higher lows.

TRA - Terra Industries and the rest of the fertilizer stocks are rebounding. TRA is close to breaking through its trendline of lower highs.


New Calls

Valero Energy - VLO - close: 49.64 change: 0.26 stop: 47.99

Company Description:
Valero Energy Corporation is a Fortune 500 company based in San Antonio, with approximately 22,000 employees and 2007 annual revenues of $95 billion. The company owns and operates 17 refineries throughout the United States, Canada and the Caribbean with a combined throughput capacity of approximately 3.1 million barrels per day, making it the largest refiner in North America. (source: company press release or website)

Why We Like It:
I'm going to stick my neck out on the oil refiners. The group exploded higher a few days ago and VLO broke through very significant resistance. Yet the rally just as quickly reversed. Today's bounce is both a bounce from the broken trendline of resistance and its new trendline of higher lows. I'm suggesting readers buy calls but use a tight stop. More conservative traders may want to exit at the 100-dma (currently near 52.75). We are aiming for the $54.75-55.00 zone. The P&F chart has a bullish $66 target.

Suggested Options:
We're suggesting the July calls. It is up to the individual trader to decide which month and which strike price best suits your trading style and risk.

BUY CALL JUL 47.50 VLO-GW open interest=1065 current ask $4.20
BUY CALL JUL 50.00 VLO-GJ open interest=4478 current ask $2.79
BUY CALL JUL 52.50 VLO-GX open interest=2551 current ask $1.77
BUY CALL JUL 55.00 VLO-GK open interest=12870 current ask $1.05

Picked on June 05 at $ 49.64
Change since picked: 0.00
Earnings Date 07/29/08 (unconfirmed)
Average Daily Volume = 10.0 million
 

New Puts

None today.
 

New Strangles

None today.
 

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