Option Investor
New Plays

Health Services & Cigarettes

Printer friendly version


DaVita Inc. - DVA - close: 46.89 change: -0.61 stop: 50.05

Why We Like It:
DVA provides dialysis services for patients with kidney failure. I would think that this is a recession proof business but the stock looks pretty bearish with a trend of lower highs and lower lows. Shares just broke down from a consolidation phase and a failed rally under $50.00. This looks like a new entry point to buy puts or on another bounce toward $48.00. We're suggesting a stop loss at $50.05. Our target is $42.00. More aggressive traders could aim for the November lows around $41.00 or follow the trendline of lower lows and aim for $40.00.

Suggested Options:
We are suggesting the February puts. You might want to consider trading April options since they have more open interest.

BUY PUT FEB 50.00 DVA-NJ open interest= 31 current ask $4.60
BUY PUT FEB 45.00 DVA-NI open interest= 41 current ask $2.05
BUY PUT FEB 40.00 DVA-NI open interest= 22 current ask $0.90

Annotated Chart:

Picked on January 06 at $ 46.89
Change since picked:     + 0.00
Earnings Date          02/09/09 (unconfirmed)
Average Daily Volume =      873 thousand 

Lorillard Inc. - LO - close: 54.54 change: -1.47 stop: 56.05

Why We Like It:
As the market sank to new lows last year you probably heard the talking heads on TV recommend how we as investors need to buy high-dividend stocks to protect ourselves. Well, LO has a pretty good dividend. Currently its yield is over 6%, but that isn't stopping the selling pressure. Shares have a bearish pattern of lower lows and lower highs. LO flirted with a major breakdown under support today after a three-month consolidation. I suspect the sell-off continues. The October 2008 low was $53.30. We want to use a trigger at $53.00 to buy puts. Our first target is $48.00.

Suggested Options:
Our trigger is $53.00. We are suggesting the March puts but plan to exit ahead of the late January earnings report.

BUY PUT MAR 55.00 LO-OK open interest= 116 current ask $5.40
BUY PUT MAR 50.00 LO-OJ open interest= 234 current ask $3.20
BUY PUT MAR 45.00 LO-OI open interest=1735 current ask $1.70

Annotated Chart:

Picked on January xx at $ xx.xx <-- see TRIGGER
Change since picked:     + 0.00
Earnings Date          01/26/09 (unconfirmed)
Average Daily Volume =      1.5 million  

New Play Archives