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New Option Plays

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Call Options Plays
Put Options Plays
Strangle Options Plays
None CAT None
  DVA  
  TEX  

Play Editor's Note: After Friday's big sell-off I'm expecting an oversold bounce but would use it as an opportunity to open new bearish positions. FYI: A couple of more stocks we think look like bearish candidates are JEC and TXT.


New Calls

None today.
 

New Puts

Caterpillar - CAT - close: 79.99 change: -2.74 stop: 84.05

Company Description:
Since its inception over 80 years ago, Caterpillar has grown to be the world's largest maker of construction and mining equipment, diesel and natural gas engines, and industrial gas turbines. (source: company press release or website)

Why We Like It:
CAT's upward trend ran into trouble back in mid April and the stock has struggled ever since with shares stuck in an $86-80 trading range. Now CAT looks like it's about to breakdown from its bullish trend and produce a big double-top pattern (see weekly chart), which is bearish. We want to buy puts on a bounce but we are listing two entry points. Our preferred entry point is to buy puts on a bounce in the $81.50-82.00 zone. However, if CAT does not bounce then we're setting a secondary entry point at $79.45. If triggered our target is the $75.25 mark. CAT will probably find some support near $75.00 and its 200-dma. The P&F chart is bearish with a $74 target.

Suggested Options:
We have two entry points. If triggered we are suggesting the July puts.

BUY PUT JUL 85.00 CAT-SQ open interest=4781 current ask $6.45
BUY PUT JUL 80.00 CAT-SP open interest=6663 current ask $3.30
BUY PUT JUL 75.00 CAT-SO open interest=6552 current ask $1.41

Picked on June xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 07/18/08 (unconfirmed)
Average Daily Volume = 6.2 million

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DaVita Inc. - DVA - close: 50.42 chg: -1.37 stop: 53.01

Company Description:
DaVita Inc. is a leading provider of kidney care in the United States, providing dialysis services and education for patients with chronic kidney failure and end stage renal disease. DaVita manages over 1,300 outpatient facilities and acute units in over 700 hospitals located in 43 states and the District of Columbia, serving approximately 107,000 patients. (source: company press release or website)

Why We Like It:
After more than a month consolidating sideways it looks like DVA is about to renew its trend lower. Shares had rebounded from its March lows but stalled out at the 50% retracement level (see chart). Friday's breakdown looks like an entry point but shares found some support at their 50 and 100-dma. We suspect that DVA will bounce from here but roll over again in the $51.50-52.00 zone. We are suggesting readers buy puts on a bounce into the $51.25-52.00 zone. If triggered we have two targets. Our first target is 47.75-47.50. Our second target is the $45.15-45.00 zone. The P&F chart is bearish with a $45 target. FYI: Last month DVA announced a $250 million stock buy back program. At $50 a share that's about 5 million shares. DVA has about 104 million shares outstanding.

Suggested Options:
We are suggesting the July puts.

BUY PUT JUL 55.00 DVA-SK open interest= 857 current ask $4.90
BUY PUT JUL 50.00 DVA-SJ open interest=1043 current ask $1.60

Picked on June xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 07/31/08 (unconfirmed)
Average Daily Volume = 606 thousand

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Terex Corp. - TEX - close: 67.37 change: -3.56 stop: 72.05

Company Description:
Terex Corporation is a diversified global manufacturer with 2007 net sales of more than $9.1 billion. Terex operates in five business segments: Terex Aerial Work Platforms, Terex Construction, Terex Cranes, Terex Materials Processing & Mining, and Terex Roadbuilding, Utility Products and Other. (source: company press release or website)

Why We Like It:
TEX was already looking weak the last several days but Friday's move looks deadly - if you're a bull. The stock has broken multiple levels of support including its trendline of support and its 50-dma, 200-dma and 200-ema. We are sorely tempted to buy puts right here but after a 5% drop on Friday we think TEX might see an oversold bounce. We are suggesting readers buy puts on a bounce back into the $69.00-70.00 zone. Our suggested stop loss is $72.05. If triggered we have two targets. Our first target is $65.25. Our second target is $61.50. The P&F chart is bearish with a $61 target.

Suggested Options:
If triggered we are suggesting the July puts.

BUY PUT JUL 70.00 TEX-SN open interest= 731 current ask $5.50
BUY PUT JUL 65.00 TEX-SM open interest= 993 current ask $2.95

Picked on June xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 07/23/08 (unconfirmed)
Average Daily Volume = 1.7 million
 

New Strangles

None today.
 

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