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New Plays

A Tide of Bearish Candidates

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NEW DIRECTIONAL PUT PLAYS

AIRGAS Inc. - ARG - close: 35.31 change: -3.12 stop: *varies*

Why We Like It:
ARG reported earnings after the closing bell on Wednesday last week. The news was good enough to push the stock toward $40 but the rally failed at resistance and its 100-dma. Investors were dumping the stock in earnest on Friday as shares lost 8%. Friday's decline was a breakdown under short-term support at the 50-dma.

I'm listing two different entry points for ARG. Our first entry point is a breakdown under $35.00 with a trigger at $34.90. If triggered at $34.90 our stop loss will be $38.05.

Our second entry point is a bounce back into the $37.00-38.00 zone and we will use a stop loss at $38.75. Our target for both entries is the $30.25-28.00 zone. More aggressive traders could aim for the 2008 lows near $27.50.

Suggested Options:
We are suggesting the March puts.

BUY PUT MAR 40.00 ARG-OH open interest= 41  current ask $6.10
BUY PUT MAR 35.00 ARG-OG open interest= 13  current ask $2.95
BUY PUT MAR 30.00 ARG-OF open interest= 44  current ask $1.20

Annotated Chart:
ARG

Picked on January xx at $ xx.xx <-- see TRIGGER
Change since picked:     + 0.00
Earnings Date          01/28/09 (confirmed)
Average Daily Volume =      1.4 million  


AutoZone - AZO - close: 132.89 change: -3.11 stop: 138.15

Why We Like It:
I think the rally in AZO is struggling. The rally that began from its November lows has run out of steam. Now it looks like AZO is building a bearish head-and-shoulders pattern. Technical indicators are mixed but if the stock market is poised to drop then AZO could become a big target for profit taking as investors scramble to sell anything that has value left. I would consider this a more aggressive play just because AZO has shown some much relative strength the last couple of weeks.

I'm suggesting put positions now. More conservative traders may want to wait for a drop under $130.00. Our first target is $121.00. Our second target is $115.50.

Suggested Options:
We are suggesting the March puts.

BUY PUT MAR 130.0 AZO-OF open interest=2653 current ask $8.60
BUY PUT MAR 125.0 AZO-OE open interest=2289 current ask $6.80
BUY PUT MAR 120.0 AZO-OD open interest=1554 current ask $5.30

Annotated Chart:
AZO

Picked on January 31 at $132.89
Change since picked:     + 0.00
Earnings Date          03/03/09 (unconfirmed)
Average Daily Volume =      1.2 million  


Ball Corp. - BLL - close: 38.34 change: -1.84 stop: 41.05

Why We Like It:
It looks like the bounce in BLL has failed at the $41.00 level under its exponential 200-dma. Volume was pretty strong on Friday's decline. While the technical picture is mixed most indicators have turned bearish. I am suggesting bearish positions now with a stop loss at $41.05. More conservative traders may want to wait for a new decline under the 100-dma. My first target is $35.10. Our second target is $32.10. FYI: The P&F chart is bearish with a $30 target.

Suggested Options:
We are suggesting the March puts.

BUY PUT MAR 40.00 BLL-OH open interest= 49  current ask $3.60
BUY PUT MAR 35.00 BLL-OG open interest= 62  current ask $1.40

Annotated Chart:
BLL

Picked on January 31 at $ 38.34
Change since picked:     + 0.00
Earnings Date          01/29/09 (confirmed)
Average Daily Volume =      1.1 million  


Chevron - CVX - close: 70.52 change: -0.10 stop: 72.10

Why We Like It:
CVX just reported earnings on Friday and a record quarter was not enough to breakout from its bearish trend of lower highs. The stock is slowly fading lower and quickly nearing support at $68.00 again. I think it will break down the next time shares hit $68.00.

I'm listing a trigger to buy puts at $67.85. If triggered our target is $60.50.

Suggested Options:
We are suggesting the March puts.

BUY PUT MAR 70.00 CVX-ON open interest=7175 current ask $4.40
BUY PUT MAR 65.00 CVX-OM open interest=7483 current ask $2.50
BUY PUT MAR 60.00 CVX-OL open interest=7489 current ask $1.35

Annotated Chart:
CVX

Picked on January xx at $ xx.xx <-- see TRIGGER
Change since picked:     + 0.00
Earnings Date          01/30/09 (confirmed)
Average Daily Volume =       14 million  


Grainger WW - GWW - close: 72.95 change: -1.16 stop: 75.25

Why We Like It:
The oversold bounce in GWW has failed under resistance at its 20-dma and 100-dma near $75.00. I am tempted to buy puts right now but Friday managed to find support at its 50-dma. So I'm suggesting readers buy puts on a drop below $72.00. We'll use a trigger at $71.90. If triggered our target is $65.25. More aggressive traders may want to aim lower since the P&F chart points to a $62 target.

Suggested Options:
We are suggesting the March puts.

BUY PUT MAR 75.00 GWW-OO open interest= 68  current ask $5.70
BUY PUT MAR 70.00 GWW-ON open interest= 67  current ask $3.40
BUY PUT MAR 65.00 GWW-OM open interest=120  current ask $1.90

Annotated Chart:
GWW

Picked on January xx at $ xx.xx <-- see TRIGGER
Change since picked:     + 0.00
Earnings Date          04/14/09 (unconfirmed)
Average Daily Volume =      1.5 million  


Monsanto - MON - close: 76.06 change: -2.08 stop: *varies*

Why We Like It:
MON's earnings rally from early January has quickly faded. The consolidation was trying to build a bullish trend of higher lows but that was broken with Friday's decline. While I am seriously tempted to buy puts right here there is potential support at $75.00 and its 50-dma (74.87).

I am suggesting two different entry points. Our first entry point is a continuation of the decline with a trigger to buy puts at $74.75. If triggered at $74.75 we'll use a stop loss at $78.05. Our alternative entry point is on a bounce into the $78.00-80.00 zone. If triggered at $78.00 we'll use a stop loss at $81.10. I'm listing two targets. Our first target is $70.50. Our secondary target is $66.50.

FYI: MON is normally a volatile stock so consider this an aggressive play. You might want to note that the P&F chart is bearish with a $70 target.

Suggested Options:
We are suggesting the March puts.

BUY PUT MAR 75.00 MON-OO open interest=6350 current ask $5.40
BUY PUT MAR 70.00 MON-ON open interest=2479 current ask $3.50
BUY PUT MAR 65.00 MON-OM open interest=1934 current ask $2.10

Annotated Chart:
MON

Picked on January xx at $ xx.xx <-- see TRIGGER
Change since picked:     + 0.00
Earnings Date          04/02/09 (unconfirmed)
Average Daily Volume =       10 million  


Priceline.com - PCLN - close: 67.09 change: -0.56 stop: 70.10

Why We Like It:
PCLN appears to be on the verge of another breakdown. The stock is coiling in a tight formation between resistance near $70.00 and support at its 50-dma. I am suggesting that readers buy puts with a trigger at $66.45. Alternatively if PCLN breaks higher you could buy calls above $70.50. However, I'm focusing on the downside. If triggered at $66.45 we have two targets. Our first target is $60.50. Our second target is $56.00. Please note that we do not want to hold over the mid February earnings report.

Suggested Options:
We are suggesting the March puts.

BUY PUT MAR 70.00 PUZ-ON open interest= 178 current ask $8.00
BUY PUT MAR 65.00 PUZ-OM open interest=  91 current ask $5.50
BUY PUT MAR 60.00 PUZ-OL open interest= 118 current ask $3.60

Annotated Chart:
PCLN

Picked on January xx at $ xx.xx <-- see TRIGGER
Change since picked:     + 0.00
Earnings Date          02/12/09 (unconfirmed)
Average Daily Volume =      1.3 million  


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