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Aerospace, Commodities, Transports, Currencies.

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Play Editor's Note: The market has gone almost straight up for three days in a row. That's not normal and to make it worse it was powered by low, holiday volume. I don't trust it. However, we have to play the trend and last week reversed a lot of the bearish sell signals that had been developing. I am going to add some bullish positions with a plan to buy a dip and use a tight stop. That way if the pull back doesn't rebound we'll be stopped out quickly.


NEW DIRECTIONAL CALL PLAYS

Boeing - BA - close: 45.25 change: +2.58 stop: 41.45

Why We Like It:
The last five quarters have been extremely tough for BA with shares falling from $107 to under $40. The company has had to deal with constant delays for its Dreamliner product and most of its customers are facing cutbacks or bankruptcy. With that rosy picture in place Friday saw shares of BA breakout from a six-week consolidation pattern and over resistance dating back to last May.

We don't want to buy last week's rally. I think BA will correct first before moving higher. I'm suggesting readers buy calls on a dip into the $42.75-42.00 zone. Our target is $47.45. More aggressive traders could aim for the $50 level or the 100-dma. FYI: The point & figure chart has turned bullish with a $56 target.

Suggested Options:
Our trigger is $42.75. We are suggesting the February calls. Yet we plan to exit ahead of the late January earnings report.

BUY CALL FEB 40.00 BA-BZ open interest=1994 current ask $6.40
BUY CALL FEB 45.00 BA-BI open interest=7654 current ask $3.10

Annotated Chart:
BA

Picked on January xx at $ xx.xx <-- see TRIGGER
Change since picked:     + 0.00
Earnings Date          01/28/09 (unconfirmed)
Average Daily Volume =      7.1 million  


SPDR GOLD ETF - GLD - close: 86.23 change: -0.29 stop: varies

Why We Like It:
Gold is at a pivotal spot. The commodity has risen toward the top of its bearish channel and actually appears to have broken out past it yet the rally is struggling with resistance at $87.00. Some chart technicians are suggesting that gold has actually created a huge bull-flag pattern. It doesn't matter if its a flag or a channel if gold rallies from here it would be a significant bullish breakout.

I am adding the GLD as a bullish candidate but I do so with hesitation. The U.S. dollar (via the UUP dollar ETF) looks poised to rally higher and breakout over the 25.00 level. Normally if the dollar moves higher gold moves lower in response. Traders in the GLD will want to keep one eye on the U.S. dollar and react accordingly.

I am listing two different entry and stop loss strategies. One plan is to buy a dip at $84.50 with a stop loss at $83.95. The second plan is to buy a breakout at $87.25 with a stop loss at $85.75. I am trying to keep the stops tight in case GLD reverses. If the GLD trades under the $82.00-81.50 zone we may want to switch directions and open bearish positions.

Our first target is $93.50. Our second target is $97.00.

Suggested Options:
We are suggesting the February calls. Strikes are available at $1.00 increments.

BUY CALL FEB 85.00 GLD-BG open interest=4306 current ask $5.80
BUY CALL FEB 90.00 GLD-BL open interest=18139 current ask $3.70
BUY CALL FEB 95.00 GLD-BQ open interest=1697 current ask $2.35

Annotated Chart:
GLD

Picked on January xx at $ xx.xx <-- see TRIGGER
Change since picked:     + 0.00
Earnings Date          00/00/00
Average Daily Volume =       11 million  


iShares DJ Transport - IYT - close: 65.32 chg: +2.01 stop: 59.90

Why We Like It:
The Transportation sector has shown a lot of relative strength. The IYT has broken out through several different levels of resistance. The group looks a little extended after last week's rally so we want to try and buy a dip. I am suggesting that readers buy calls on a pull back into the $62.50-61.50 zone with a stop loss at $59.90. If triggered our target is $68.50. More aggressive traders could aim for $70 or the 100-dma. FYI: The P&F chart is bullish with a $78 target.

Suggested Options:
We are suggesting the February calls. Readers may want to use the January or March calls since they have more open interest. Editor's Note: Do not buy these options if the spreads are more than 75 cents. I was finding some odds numbers over the weekend. Personally, I find spreads over 50 cents to be too wide but some securities don't seem to have enough liquidity.

BUY CALL FEB 60.00 IYT-BH open interest= 14  current ask $8.70
BUY CALL FEB 65.00 IYT-BM open interest= 86  current ask $5.20
BUY CALL FEB 70.00 ITY-BN open interest= 16  current ask $3.90

Annotated Chart:
IYT

Picked on January xx at $ xx.xx <-- see TRIGGER
Change since picked:     + 0.00
Earnings Date          00/00/00
Average Daily Volume =      565 thousand 


NEW DIRECTIONAL PUT PLAYS

Currency ETF Japanese Yen - FXY - cls: 107.79 chg: -2.30 stop: 110.26

Why We Like It:
The Japanese Yen ETF has broken its four-month up trend. The FXY spent the last several days hovering around the $110 level and finally broke down on Friday. A better entry point would be on a bounce back toward $109.00-110.00 and patient traders may want to wait. I am suggesting readers buy puts right now. Our target is $102.00.

Suggested Options:
January options don't have much time left. February options don't have a lot of volume. We're left with March puts. Strikes are available at $1.00 increments. There are two root symbols for FXY options.

BUY PUT MAR 110 GDW-OF open interest= 199 current ask $5.10
BUY PUT MAR 108 GDW-OD open interest= 184 current ask $3.70
BUY PUT MAR 104 FXY-OZ open interest= 265 current ask $1.55

Annotated Chart:
FXY

Picked on January 03 at $107.79
Change since picked:     + 0.00
Earnings Date          00/00/00
Average Daily Volume =      234 thousand 


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