Option Investor
New Plays

Internet, Burritos, Overnight, and Travel

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Play Editor's Note: The market's bounce looks pretty seductive. You probably have a 50/50 chance of throwing darts at a board of stocks and coming up with something that looks bullish. Don't forget the fact that we are still in a bear market. We can have tradable bullish moves in a bear market as evidenced by the last couple of weeks but the prevailing trend is still down. We need to remain on the defensive. Keep our position size and risk small and be ready to take a profit when we get one.


NEW DIRECTIONAL CALL PLAYS

Amazon.com - AMZN - close: 48.26 change: +0.94 stop: 43.25

Why We Like It:
AMZN has been a successful bullish candidate for us this month and we're going to try again. Overall most believe we're still facing a horrible holiday shopping season but AMZN caught a bid on hopes that last week's "cyber Monday" was a winner. The stock bounced sharply from its lows on Friday. Instead of chasing the rebound we are suggesting readers buy calls on a dip into the $46.00-45.00 zone with a stop loss under Friday's low. Our first (short-term) target is $49.95. Our secondary target is the $54.00 mark. The P&F chart is bullish with a $74 target.

Suggested Options:
We are suggesting the January calls. Our entry point is the $46.00-45.00 zone.

BUY CALL JAN 45.00 ZQN-AI open interest=13476 current ask $7.80
BUY CALL JAN 47.50 ZQN-AW open interest= 2136 current ask $6.40
BUY CALL JAN 50.00 ZQN-AJ open interest=11574 current ask $5.15

Annotated Chart:
AMZN

Picked on December xx at $ xx.xx <-- see TRIGGER
Change since picked:      + 0.00
Earnings Date           01/28/09 (unconfirmed)
Average Daily Volume =      12.9 million  


Chipotle Mexican Grill - CMG - close: 53.10 chg: +2.34 stop: 44.95

Why We Like It:
CMG has broken out from its long-term bearish channel. More aggressive traders may want to jump in now. We don't want to chase it. Our plan is to buy a dip in the $50.00-48.00 zone with a stop loss under $45.00. We realize that is a wide (aggressive) stop loss but CMG can be somewhat volatile. If triggered at $49.00 we have two targets. Our first target is $54.50, which honestly the stock might hit on Monday before ever being triggered. Our secondary target is $58.50.

Suggested Options:
We are suggesting the January calls. Our entry point is the $50.00-48.00 zone.

BUY CALL JAN 50.00 CJY-AJ open interest= 345 current ask $6.40
BUY CALL JAN 55.00 CMG-AK open interest= 609 current ask $3.60

Annotated Chart:
CMG

Picked on December xx at $ xx.xx <-- see TRIGGER
Change since picked:      + 0.00
Earnings Date           02/12/09 (unconfirmed)
Average Daily Volume =       475 thousand 


Express Scripts - ESRX - close: 58.58 change: +2.20 stop: 54.95

Why We Like It:
A lot of stocks ended the day higher on Friday. The 3.9% rally in ESRX was more than just a gain. It was a bullish breakout over resistance near $58.00 and technical resistance at the 40-dma. The stock has failed near its 40-dma several times in the last month. Now ESRX has broken the trend of lower highs and looks poised to run toward resistance around $65.00. We are suggesting bullish positions now. More conservative traders may want to try and wait for a dip in the $57-56 zone. Our target is $64.00.

Suggested Options:
We are suggesting the January calls.

BUY CALL JAN 60.00 XTQ-AL open interest=1099 current ask $4.40
BUY CALL JAN 65.00 XTQ-AM open interest=4634 current ask $2.35

Annotated Chart:
ESRX

Picked on December 06 at $ 58.58
Change since picked:      + 0.00
Earnings Date           02/19/09 (unconfirmed)
Average Daily Volume =       3.1 million  


Fedex - FDX - close: 73.71 change: +2.78 stop: 69.45

Why We Like It:
Falling oil prices have been a boon for the transports and the fact that investors didn't let bad economic news spook them could be a good sign for cyclical names. FDX displayed relative strength all week after recovering from the punishing drop from last Monday. The breakout over resistance at $70.00 is bullish and it looks like FDX has produced a bullish double bottom with the lows in October and November. I would consider this an aggressive play because stop loss placement was a challenge. The moves have been so volatile lately and the intraday range on Friday was very big.

I would prefer to buy calls on a dip near $70.00 but we're going to suggest bullish positions now at current levels. We'll try and limit our risk with a stop loss at $69.45. Our target is $79.50.

Suggested Options:
We are suggesting the January calls.

BUY CALL JAN 70.00 FDX-AN open interest=2421 current ask $8.40
BUY CALL JAN 75.00 FDX-AO open interest=4715 current ask $5.60
BUY CALL JAN 80.00 FDX-AP open interest=6220 current ask $3.50

Annotated Chart:
FDX

Picked on December 06 at $ 73.71
Change since picked:      + 0.00
Earnings Date           12/18/08 (confirmed)
Average Daily Volume =       3.9 million  


Priceline.com - PCLN - close: 60.46 change: +2.23 stop: 54.99

Why We Like It:
This is an aggressive, higher-risk play on PCLN. The stock broke through significant resistance a couple of weeks ago only to plunge back to the $55.00 level this past Friday. Traders bought the dip and the bounce back looks like a one-day bullish reversal pattern. We're suggesting readers buy calls here at current levels with a stop loss under $55.00. We have two targets. Our first target $64.90. Our second target is $69.90. FYI: The Point & Figure chart is bullish with a $102 target.

Suggested Options:
We are suggesting the January calls.

BUY CALL JAN 60.00 PUZ-AL open interest=3997 current ask $7.00
BUY CALL JAN 65.00 PUZ-AM open interest= 185 current ask $4.70
BUY CALL JAN 70.00 PUZ-AN open interest=6375 current ask $2.85

Annotated Chart:
PCLN

Picked on December 06 at $ 60.46
Change since picked:      + 0.00
Earnings Date           02/12/09 (unconfirmed)
Average Daily Volume =       1.8 million  


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