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HAVING TROUBLE PRINTING?
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BDK HIG None
  RE  

Play Editor's Note: This is an extremely tough market to trade. As Jim said in the wrap this weekend there are a lot of cross currents pulling at the market. Seasonally this is the worst time of year for stocks and we're already in a bear market. The path of least resistance should be down. A lot of traders are keeping an eye on the VIX for a spike to the 30 region as a sign for a potential bottom. A perfectly good strategy this week would be to do nothing. I would be looking for any bounce in the major averages to fail.

FYI: I have a lot of stocks on my watch list for this week. I wanted to list a few here:

ESRX looks bullish. The stock is poised to breakout from its recent trading range. Technicals are turning positive again.

CALM tends to bounce near its 200-dma. I wouldn't chase Friday's move but a dip might be an entry point. Alternatively a move over possible resistance near $35.00 could be an entry point.

WFR: There is no arguing that the trend in WFR is down but shares are bouncing from its trendline of lower lows. Aggressive traders might want to speculate on a bounce.

BCR has a bullish pattern of higher lows. Shares could be setting up for a run at resistance near $100.

WYNN delivered an oversold bounce back toward resistance near $90.00. Watch for the bounce to roll over.

DVA has a bullish pattern of higher lows and shares look ready to breakout from their recent trading range. A move over resistance at $60.00 could be an entry point.

VNO: I'm surprised to see a real-estate related stock doing well. VNO has a bullish trend and could be near a breakout over $105.

KSS: I can really close to adding KSS as a short-term bullish play. The stock is bouncing from its trendline of higher lows. Readers could buy Friday's late afternoon bounce with a tight stop and target $55.00.


New Calls

Black & Decker - BDK - close: 67.65 chg: +0.90 stop: 63.75

Company Description:
Black & Decker is a global manufacturer and marketer of quality power tools and accessories, hardware and home improvement products, and technology based fastening systems. Our products and services are marketed in more than 100 countries, and we have manufacturing operations in eleven countries. (source: company press release or website)

Why We Like It:
Shares of BDK have developed a bullish trend since their July lows and last week the stock broke out past resistance near $67.50 and its simple and exponential 200-dma. Adding to BDK's relative strength could be the hurricanes. Hurricane Ike was huge and the damage is being estimated in the billions. BDK could see a surge of demand for its tools as the rebuilding begins. We see Friday's breakout as a new entry point to buy calls. Our target is the $74.00 mark. The Point & Figure chart for BDK is bullish with a $78 target.

FYI: Traders may want to check out Home Depot (HD) and Lowes (LOW) who have also seen a rally ahead of the hurricanes.

Suggested Options:
We are suggesting the October calls.

BUY CALL OCT 65.00 BDK-KM open interest= 463 current ask $6.40
BUY CALL OCT 70.00 BDK-KN open interest=1411 current ask $3.70
BUY CALL OCT 75.00 BDK-KO open interest=1096 current ask $2.00

Picked on September 14 at $ 67.65
Change since picked: + 0.00
Earnings Date 10/23/08 (unconfirmed)
Average Daily Volume = 1.0 million
 

New Puts

Hartford Fincl. - HIG - cls: 60.38 chg: -1.68 stop: 62.25

Company Description:
The Hartford, a Fortune 100 company, is one of the largest diversified financial services companies in the United States, with 2007 revenues of $25.9 billion. The Hartford is a leading provider of investment products, life insurance and group benefits; automobile and homeowners products; and business property and casualty insurance. (source: company press release or website)

Why We Like It:
The IUX insurance index looks poised to breakdown and make a run at new lows. Weighing on the sector are headlines from AIG and concerns about the company's future. Investors worry that rivals to AIG might be in similar peril. HIG already has a long-term bearish trend of failed rallies and lower highs. The latest failed rally occurred on September 9th near its 100-dma. Now the technical indicators are rolling over again. More aggressive traders could open positions now. We are suggesting a trigger to buy puts at $58.70. If triggered our target is $54.00. The July low was $53.20, which happens to be near the late 2004 lows. The P&F chart is bearish with a $53 target.

Suggested Options:
We are suggesting the October puts.

BUY PUT OCT 60.00 HIG-VL open interest=1230 current ask $3.80
BUY PUT OCT 55.00 HIG-VK open interest=1992 current ask $2.10

Picked on September xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/29/08 (unconfirmed)
Average Daily Volume = 3.5 million

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Everest RE Group - RE - close: 78.49 chg: +0.54 stop: 80.75

Company Description:
Everest Re Group, Ltd. is a Bermuda holding company that operates through the following subsidiaries: Everest Reinsurance Company provides reinsurance to property and casualty insurers in both the U.S. and international markets. (source: company press release or website)

Why We Like It:
RE is another struggling insurance stock. The bounce from its July lows stalled around resistance in the 83.50-84.00 zone. Now shares are breaking down into what appears to be the next leg lower. We are suggesting readers buy puts now after Friday's performance. At this point our biggest risk is probably some amazing rescue for insurance giant AIG. As of Friday AIG was desperately trying to raise capital. If Monday morning rolls around and AIG has been successful enough to alleviate investors fears then it's conceivable that RE could bounce. Look for a failed rally near $80.00 or its 50-dma as another entry point to buy puts. We are listing two targets. Our first target is $75.05. Our second, more aggressive target is $71.00. If you're following the trendline of lower lows then you could aim much lower.

Suggested Options:
We are suggesting the October puts.

BUY PUT OCT 80.00 RE-VP open interest=1168 current ask $3.80
BUY PUT OCT 75.00 RE-VO open interest= 763 current ask $1.85

Picked on September 14 at $ 78.49
Change since picked: + 0.00
Earnings Date 10/20/08 (unconfirmed)
Average Daily Volume = 522 thousand
 

New Strangles

None today.
 

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