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Healthcare, Internet, Cement, & Oil

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NEW DIRECTIONAL CALL PLAYS

Covance Inc. - CVD - close: 40.58 change: +0.51 stop: 37.97

Why We Like It:
CVD looks like a bullish candidate here. The stock has broken its multi-month trend of lower highs and early December produced a higher low. More recently shares of CVD have built a new trend of higher lows and the P&F chart has reversed into a new buy signal with a $54 target. Meanwhile CVD still has a relatively high amount of short interest at 7% of the 62 million-share float.

More aggressive traders may want to buy calls now. We want to see some confirmation this week so we're suggesting a trigger to buy calls at $41.55. If triggered we're listing two targets. Our first target is $46.00. Our second target is $49.50.

Suggested Options:
Our suggested trigger is $41.55. We would use the January calls.

BUY CALL JAN 40.00 CVD-AH open interest=247 current ask $4.20
BUY CALL JAN 45.00 CVD-AI open interest= 83 current ask $2.00

Annotated Chart:
CVD

Picked on December xx at $ xx.xx <-- see TRIGGER
Change since picked:      + 0.00
Earnings Date           01/29/09 (unconfirmed)
Average Daily Volume =       1.2 million  


Google Inc. - GOOG - close: 315.76 change: +15.54 stop: 293.50

Why We Like It:
I usually avoid playing GOOG on the newsletter because the stock's high-dollar price and volatile swings make the options very expensive to play. That hasn't changed but shares appear to be offering a pretty decent entry point for bullish strategies. Traders bought the dip at $294 on Friday and GOOG rallied to a 5% gain to close at its highs for the day. The move almost looks like a breakout buy signal from a bull flag pattern. The Point & Figure chart has turned bullish with a $424 target.

We're listing two strategies. One strategy is our normal plan, which is to buy a call option and sell it when the stock hits our target. The second strategy is to sell a deep in the money put. See the details below.

Our target on GOOG is $360.00. We're listing a stop at $293.50 but more conservative traders may want to use a stop closer to $300. Speaking of conservative traders you may want to avoid this play altogether or if GOOG fails to see any follow through higher on Monday just exit early.

Strategy #1 - Buying Calls
Suggested Options:

We are suggesting the January calls. We are suggesting positions now but a dip back toward $310 or $305 would also be an attractive entry point.

BUY CALL JAN 330 GGD-AF open interest=1191 current ask $16.20
BUY CALL JAN 340 GGD-AE open interest= 914 current ask $12.30
BUY CALL JAN 350 GGD-AJ open interest=2385 current ask $ 9.10

Strategy #2 - Selling an in-the-money Put
Suggested Options:

This strategy involves selling (short) an in-the-money put to take advantage of the stock's volatility and high option premiums. If the stock goes up the put value will drop drastically and we can buy it back cheaper. You still need to use a stop loss. If GOOG hits our stop this strategy requires that you buy back the put you sold short.

Note: selling a put short does involve risk. If you want to limit your risk consider buying a deep out of the money put as a hedge against disaster.

You can pick any significantly deep in the money put you want to sell. I'm suggesting the January $350. We'll exit when GOOG hits $350.00 or higher.

SELL PUT JAN 350 GGD-MJ open interest=1802 current ask $43.80

Annotated Chart:
GOOG

Picked on December 13 at $315.76
Change since picked:      + 0.00
Earnings Date           01/29/09 (unconfirmed)
Average Daily Volume =       7.2 million  


NYSE Euronext - NYX - close: 27.53 change: +1.55 stop: 25.45

Why We Like It:
This past week was very bullish for NYX. The stock broke out from its bearish trendline (see chart) and has been consolidating under resistance at $28.00. Furthermore the consolidation has a bullish trend of higher lows so the stock is coiling more tightly for another breakout higher. We are suggesting readers use a trigger to buy calls at $28.10. If triggered our target is the $32.50 mark or the simple 100-dma (currently 33.42), whichever one the stock hits first. FYI: The P&F chart is bullish with a $43 target.

Suggested Options:
We are suggesting the January calls.

BUY CALL JAN 30.00 NYX-AF open interest=7302 current ask $2.10

Annotated Chart:
NYX

Picked on December xx at $ xx.xx <-- see TRIGGER
Change since picked:      + 0.00
Earnings Date           02/05/09 (unconfirmed)
Average Daily Volume =       5.8 million  


Texas Industries - TXI - close: 34.43 change: +1.98 stop: 31.25

Why We Like It:
TXI might be one of the winners from the Obama-infrastructure play. The company provides construction materials like cement. The stock is also a candidate for a short squeeze. The most recent data listed short interest at more than 20% of the very small 21 million-share float.

We are suggesting readers buy calls now with a stop loss under Friday's low. We have two targets. Our first target is $39.50. Our second target is $43.00.

Suggested Options:
We are suggesting the January calls.

BUY CALL JAN 35.00 TXI-AG open interest=189 current ask $4.30
BUY CALL JAN 40.00 TXI-AH open interest=298 current ask $2.40

Annotated Chart:
TXI

Picked on December 13 at $ 34.43
Change since picked:      + 0.00
Earnings Date           01/08/09 (unconfirmed)
Average Daily Volume =       745 thousand 


ExxonMobil - XOM - close: 80.45 change: +0.43 stop: 78.45

Why We Like It:
I'm starting to think that crude oil may have found a significant bottom these past two weeks. It may not be the bottom but the commodity is definitely bouncing. OPEC meets later this week and will do whatever they can to cut production and boost prices. At least that is the impression they will try and make on the world. Many believe they won't have much impact on oil at this time.

If oil does continue to rally then XOM should be able to breakout over resistance near $82.00 and its simple 200-dma. I'm suggesting readers use a trigger to buy calls at $82.25. Once triggered our target is $89.50. There is some resistance at $85.00 but I would expect XOM to push through it. FYI: The P&F chart is bullish with a $98 target.

Suggested Options:
Our suggested trigger is $82.25. We would use the January calls.

BUY CALL JAN 80.00 XOM-AP open interest=67371 current ask $5.30
BUY CALL JAN 85.00 XOM-AQ open interest=76528 current ask $2.89
BUY CALL JAN 90.00 XOM-AR open interest=63856 current ask $1.302

Annotated Chart:
XOM

Picked on December xx at $ xx.xx <-- see TRIGGER
Change since picked:      + 0.00
Earnings Date           02/05/09 (unconfirmed)
Average Daily Volume =        56 million  


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