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IBM FMCN None
ILMN    

Play Editor's Note: I don't trust this rally. My bias is that we're still in a bear market and this is just a big bounce. However, I can't trade what I think is happening - only what the market is showing us. I'm adding a couple of bullish positions but traders need to be cautious!


New Calls

Intl. Bus. Mach. - IBM - cls: 128.81 chg: -0.24 stop: 127.45

Company Description:
International Business Machines Corporation (IBM) is one of the largest tech and information systems company in the world.

Why We Like It:
IBM has actually been under performing many of its tech-stock brethren the last few days. However, if the market continues to rally shares of Big Blue should be able to breakout over resistance near $130. The recent high is $130.93. We are suggesting a trigger to buy calls at $131.05. If triggered our target is the $137.50-140.00 zone.

Suggested Options:
We are suggesting the September calls. Our trigger is at $131.05.

BUY CALL SEP 130.00 IBM-IF open interest=6210 current ask $3.30
BUY CALL SEP 135.00 IBM-IG open interest=2487 current ask $1.35

Picked on August xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/16/08 (unconfirmed)
Average Daily Volume = 8.2 million

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Illumina - ILMN - cls: 89.36 chg: +1.34 stop: 86.45

Company Description:
Illumina develops and markets next-generation tools for the large-scale analysis of genetic variation and function. (source: company press release or website)

Why We Like It:
Normally when a company announces another secondary offering the current shareholders are unhappy with management's decision to dilute their holdings and investors sell the stock. That did not happen with ILMN. On Thursday last week ILMN announced a 3.5 million share secondary at $87.50/share. There was no big reaction on Thursday and Friday's saw traders buy the dip at $87.00 (the second time in a week). ILMN is still in a long-term up trend. We'd like to buy a dip to its rising 100-dma but that may not happen any time soon. Instead we are suggesting readers buy calls at $91.55, which is above the 10-dma and above Thursday's intraday high. IF triggered we have two targets. Our first target is $95.25. Our second target is $99.50. FYI: ILMN has a 2-for-1 stock split scheduled for September 23rd. Traders might also want to note that ILMN's short interest is about 19% of the 50 million-share float. That's high enough to spark some short squeezes.

Suggested Options:
We are suggesting the September calls. Our trigger is at $91.55.

BUY CALL SEP 90.00 IQA-IR open interest=629 current ask $4.60
BUY CALL SEP 95.00 IQA-IS open interest=550 current ask $2.55

Picked on August xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 07/27/08 (unconfirmed)
Average Daily Volume = 1.2 million
 

New Puts

Focus Media - FMCN - cls: 25.00 chg: -1.62 stop: 28.75

Company Description:
Focus Media Holding Limited is China's leading multi-platform digital media company, operating the largest out-of-home advertising network in China using audiovisual digital displays, based on the number of locations and number of flat-panel television displays in our network, and is also a leading provider of mobile handset advertising and Internet marketing solutions in China. (source: company press release or website)

Why We Like It:
The Olympic spotlight on China has done nothing to save FMCN's share price. The stock is in a significant bearish trend and the July bounce has failed under the 50-dma and the $30.00 level. The MACD just produced a new sell signal. The P&F chart is bearish. We are going to use a relatively wide stop loss at $28.75. We're suggesting put positions now or on another failed rally under the 50-dma (around $28.00). More conservative traders may want to use a tighter stop but we want to leave room for another bounce from $25.00. We should expect to see some support around $22.65-22.50 but our target is the $20.50-20.00 zone. This is going to be a short-term play. We do not want to hold over the August 17th earnings report. We'll plan to exit by Friday, August 15th at the closing bell if FMCN hasn't hit our target yet.

Suggested Options:
We are suggesting the September puts.

BUY PUT SEP 25.00 QOH-UE open interest= 918 current ask $2.80
BUY PUT SEP 22.50 QOH-UX open interest=1894 current ask $1.70
BUY PUT SEP 20.00 QOH-UD open interest= 443 current ask $1.30

Picked on August 10 at $ 25.00
Change since picked: + 0.00
Earnings Date 08/17/08 (confirmed)
Average Daily Volume = 3.9 million
 

New Strangles

None today.
 

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