Option Investor
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New Option Plays

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FCX None None

Play Editor's note: I was extremely tempted to add new bullish positions today. A lot of stocks have been crushed back to long-term support levels or significant bottoms. However, if a coordinated, six-country rate cut can't sustain a market rebound then what will? Stocks don't go down in a straight line for too long and will eventually see a sustained rebound. Valuations will eventually get cheap enough that people will choose to step in. Unfortunately for the last couple of weeks everyone has been waiting for someone else to be the first person to step in and buy the dip. I'm going to list a few more stocks to watch or stocks that are near significant support levels. Aggressive traders might want to study these in more depth.

POT: Several stocks in the fertilizer and related chemicals industry saw some very big bounces today. POT produced a huge bullish engulfing (reversal) candlestick pattern. I was tempted to buy it but the stock had a +20% trading range today. Where do you put your stop loss? What makes these moves even more attractive is that they build on Monday's intraday rebound.

SPW: This stock has been eviscerated in the last five weeks with a drop from $120 to $41.60 this morning. Volume today was almost five times the norm. The low today was very close to the 2005 lows. Do you buy the bounce?

IBM: This stock was on my watch list yesterday. Shares went ahead and gave up another 5% to test support at the $90.00 level. Do you buy the pull back to support with a tight stop loss?

BNI: I'm still watching this railroad stock for a dip near the $75.00-74.00 zone.

NRP: Readers might want to keep an eye on this coal stock. The stock rebounded with volume almost seven times the norm.

SSO: If you think we are nearing a bottom you'll definitely want to keep an eye on this one. The SSO is the ultra-long etf on the S&P 500. It will move twice the daily performance of the S&P 500 index.

MON: Is another fertilizer stock that experienced a huge rebound. It's worth watching.

CF: This stock is another fertilizer-related equity. I would be tempted to buy another dip near $48.50-47.00 with a very tight stop or a new rally over $61.55. If your entry point is over $60 stop loss placement will be a challenge.

AGU: Here's another chemical-fertilizer stock that is seeing massive volume as it tries to find a bottom.

New Calls

Freeport McMoran - FCX - close: 42.60 chg: +3.91 stop: 36.85

Company Description:
FCX is a leading international mining company with headquarters in Phoenix, Arizona. FCX operates large, long-lived, geographically diverse assets with significant proven and probable reserves of copper, gold and molybdenum. FCX has a dynamic portfolio of operating, expansion and growth projects in the copper industry and is the worlds largest producer of molybdenum. (source: company press release or website)

Why We Like It:
I am totally going out on a limb here with FCX. Shares of FCX have been chewed up and spit out with a drop from over $120 back in June. The commodity trade died. Hedge funds were liquidating and now investors worry over a deep global recession. I've been watching it for days, cussing myself for not buying puts on the breakdown under $80.00 or $60.00. Now it looks like shares are close to putting in a bottom. Volume has accelerated but investors have been buying the dips in the $40-37 zone. I'd rather buy a dip in the $40-37 zone but we may not get the chance. We have two targets. Our first target is $49.90. Our second target is $59.00.

Suggested Options:
We are suggesting the November calls.

BUY CALL NOV 45.00 FCX-KI open interest= 999 current ask $6.35
BUY CALL NOV 50.00 FCX-KJ open interest=5412 current ask $4.65
BUY CALL NOV 55.00 FCX-KK open interest=4464 current ask $3.30

Picked on October 08 at $ 42.60
Change since picked: + 0.00
Earnings Date 10/22/08 (unconfirmed)
Average Daily Volume = 16.5 million

New Puts

None today.

New Strangles

None today.

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