Option Investor
Play Updates

In Play Updates and Reviews

Printer friendly version

Call Play Updates

Aetna Inc - AET - close: 125.97 change: -0.78 stop: 123.75*new*

Company Description:
As one of the nation's leading providers of health care, dental, pharmacy, group life, disability and long-term care benefits, Aetna puts information and helpful resources to work for its approximately 13.6 million medical members, 11.6 million dental members, 8.3 million pharmacy members and 13.3 million group insurance members to help them make better informed decisions about their health care and protect their finances against health-related risks. Aetna provides easy access to cost-effective health care through a nationwide network of more than 646,000 health care professionals, including over 385,000 primary care and specialist doctors and 3,908 hospitals. (source: company press release)

Why We Like It:
The markets narrowly escaped their fourth down week in a row and the bullish picture remains bleak. Investors are not responding well to generally positive earnings news and seem to be taking defensive action ahead of Sunday's Iraqi vote and next week's FOMC meeting. The IUX insurance index is beginning to fade and just broke down under its simple 200-dma. This could spell bad news for the likes of AET for while AET has been consolidating sideways if the IUX continues to decline it will tug at shares of AET. We would suggest that conservative traders exit now to minimize any losses and wait for AET to breakout above the $130.00 level. Currently AET is trying to bounce from the $124 level and its 40-dma but the technical picture is mixed. True support should be the $120 level and aggressive traders can leave their stop under this mark. We are going to turn defensive and raise our stop loss to $123.75, just under the recent low this past week. We risk being stopped out as AET bounces around between $120-130 but we would rather be stopped out early. We would not suggest new bullish positions until AET broke out above the $130 mark.

Suggested Options:
We are not suggesting new bullish positions at this time. Please see play details for why.

Picked on January 13 at $127.61
Change since picked: - 1.64
Earnings Date 02/10/05 (confirmed)
Average Daily Volume = 2.2 million

Alliance Resource - ARLP - close: 69.66 chg: -1.67 stop: 69.00

Company Description:
Alliance Resource Partners is the nation's only publicly traded master limited partnership involved in the production and marketing of coal. Alliance Resource Partners currently operates mining complexes in Illinois, Indiana, Kentucky and Maryland. (source: company press release)

Why We Like It:
This is it! It's do or die time for ARLP. The stock sold off on Friday afternoon to break down below the $70.00 level and its 50-dma. Traders bought the dip later in the session above the $69 level and pushed it back above the 50-dma. We normally do not hold over an earnings event and we were surprised to see that ARLP reported Q4 results Friday morning before the open. The immediate reaction was not noticeable, which is a good thing because from what we can decipher from their report ARLP missed analysts' estimates. If you're more of a fundamental trader this might be a good time to exit. If you're a technical trader then ARLP still has a chance to rebound from its simple 50-dma like it has done so many times in the past. We are not suggesting new bullish entries until we see ARLP rebound from current support.

Suggested Options:
We are not suggesting new bullish plays at this time.

Picked on January 10 at $ 69.80
Change since picked: - 0.14
Earnings Date 01/27/05 (confirmed)
Average Daily Volume = 115 thousand

Invitrogen - IVGN - close: 68.39 chg: -1.20 stop: 66.00

Company Description:
We provide products and services that support academic and government research institutions and pharmaceutical and biotech companies worldwide in their efforts to improve the human condition. Our life science technologies improve and accelerate all areas of research, drug discovery, and commercial bioproduction. (source: company website)

Why We Like It:
It's been a confusing week for biotech traders. The BTK index rebounded sharply from a breakdown under the 200-dma on Tuesday. The sector continued to bounce but peaked on Thursday forming a failed rally. This second sell signal saw some confirmation on Friday but short-term oscillators are mixed. This has not helped shares of IVGN. While for the most part IVGN has been out performing its peers in the biotech sector over the last few months the stock is not immune to the fluctuations in the BTK index or the market itself. The stock broke out above resistance at $70.00 on Thursday and hit our entry point at $70.05. Unfortunately, like the BTK it could not maintain its gain. The stock could easily retrace back toward the bottom of its rising channel near $65.00 or its rising simple 40-dma near $66.50. Aggressive traders can watch for a bounce from the 40-dma as an entry point. We're going to suggest that readers wait for IVGN to trade back above the $70.00 or $70.50 levels before considering new bullish positions.

Suggested Options:
We are not suggesting new bullish positions at this time. Wait for IVGN to trade back above the $70.00 or $70.50 level.

Picked on January 27 at $ 70.05
Change since picked: - 1.66
Earnings Date 02/17/05 (unconfirmed)
Average Daily Volume = 800 thousand

KB Home - KBH - close: 107.69 change: +1.92 stop: 99.50

Company Description:
Building homes for nearly half a century, KB Home is one of America's premier homebuilders with domestic operating divisions in some of the fastest-growing regions and states: West Coast-California; Southwest-Arizona, Nevada and New Mexico; Central-Colorado, Illinois, Indiana and Texas; and Southeast-Florida, Georgia, North Carolina and South Carolina. Kaufman & Broad S.A., the Company's majority-owned subsidiary, is one of the largest homebuilders in France. In fiscal 2004, the Company delivered homes to 31,646 families in the United States and France. It also operates a full-service mortgage company for the convenience of its buyers. Founded in 1957, and winner of the 2004 American Business Award for Best Overall Company. (source: company press release)

Why We Like It:
The DJUSHB home construction index was one of the few sector indices to close in the green on Friday. Actually it was the market's best performer out pacing the bounce in the airline sector. The rebound from the 800 level in the DJUSHB looks like good news but bulls might feel more comfortable looking for some confirmation given the bearish market environment. You'll see a similar pattern in shares of KBH, which has been consolidating sideways above support near the $105 level. The last few days we've been suggesting that readers wait for a move over $107 or better yet $108 before initiating new positions. KBH managed to breakout over the $108 level about midday on Friday but couldn't hold it, still the stock added 1.8 percent for the session. We remain bullish on KBH and would use any bounce from $105 or move over $108 as an entry point. We are going to turn a little more defensive and raise our stop loss to $103.99 since the last for the past two weeks has been $104.30.

Suggested Options:
We are going to suggest the April calls.

BUY CALL APR 100 KBH-DT OI=1023 current ask $11.90
BUY CALL APR 110 KBH-DU OI= 492 current ask $ 6.00
BUY CALL APR 115 KBH-DC OI= 713 current ask $ 4.00
BUY CALL APR 120 KBH-DV OI= 223 current ask $ 2.50

Picked on January 13 at $106.00
Change since picked: + 1.69
Earnings Date 03/17/05 (unconfirmed)
Average Daily Volume = 1.1 million

Pulte Homes - PHM - close: 64.99 chg: +0.60 stop: 62.49*new*

Company Description:
Pulte Homes, Inc., based in Bloomfield Hills, Mich., has operations in 45 markets across the U.S. Under its Del Webb (www.delwebb.com) brand, the company is the nation's leading builder of active adult communities for people age 55 and older. Over its history, the company has constructed more than 370,000 homes. In 2004, J.D. Power and Associates ranked Pulte Homes No. 1 in customer satisfaction in 14 U.S. markets, and among the top three homebuilders in 23 of 25 total markets surveyed. J.D. Power and Associates also named Pulte Homes the inaugural recipient of its Platinum Award for Excellence in Customer Service among the nation's largest new homebuilders in 2004. Pulte Mortgage LLC is a nationwide lender committed to meeting the financing needs of Pulte Homes' customers by offering a wide variety of loan products and superior customer service. (source: company press release)

Why We Like It:
PHM is in a similar situation to KBH. The homebuilding stock has been consolidating its recent breakout just as the DJUSHB index has been churning sideways above the 800 level. KBH does look a little stronger but PHM has its own bullish trend and bullish P&F chart. Unfortunately, we're quickly running out of time because PHM is due to report earnings on Wednesday, February 2nd after the closing bell. Wall Street is looking for the company to earn $3.05 a share. We do not want to hold over the event and thus plan to exit on Tuesday afternoon at the close or Wednesday before the close. We are going to turn somewhat defensive and raise our stop loss to $62.49 under last week's low.

Suggested Options:
We are running out of time with PHM's upcoming earnings report on February 2nd. We suggest traders plan to exit on Tuesday.

Picked on January 16 at $ 65.99
Change since picked: - 1.00
Earnings Date 02/02/05 (confirmed)
Average Daily Volume = 1.5 million

Pixar - PIXR - close: 86.65 change: -1.43 stop: 84.90*new*

Company Description:
Pixar Animation Studios combines creative and technical artistry to create original stories in the medium of computer animation. Pixar has created and produced six of the most successful and beloved animated films of all time: Academy Award.-winning Toy Story (1995); A Bug's Life (1998); Golden Globe-winner Toy Story 2 (1999); the Academy Award.-winning Monsters, Inc. (2001); the Academy Award.-winning Finding Nemo (2003); and The Incredibles (2004). Pixar's six films have earned more than $3 billion at the worldwide box office to date. The Northern California studio's next film release is Cars (June 9, 2006). (source: company press release)

Why We Like It:
We are starting to worry that there will not be any follow through to PIXR's mid-January breakout from its trading range. Instead PIXR has fallen into a new trading range between $86 and $90 and is currently in danger of falling through the bottom boundary. The technical picture is mixed and leaning toward a bearish bias, especially with PIXR's short-term, two-week trend of lower highs. Given the current bearish market environment we would probably suggest that conservative traders exit now (or on a bounce back toward $88) to minimize losses. We would like to suggest new plays on a breakout over $90.00 but PIXR's earnings report is quickly approaching on February 10th. Given our deteriorating time horizon we too may exit on any bounce back toward $88-89. We're going to raise our stop loss to $84.90 to reduce our risk.

Suggested Options:
Time is running out with just nine trading days before PIXR reports earnings. We're not suggesting new positions at this time.

Picked on January 18 at $ 88.24
Change since picked: - 1.59
Earnings Date 02/10/05 (confirmed)
Average Daily Volume = 934 thousand

Texas Industries - TXI - close: 62.83 change: +1.28 stop: 59.95*new*

Company Description:
TXI is a leading supplier of building materials, primarily cement and structural steel. Cement operations serve Texas and California, the two largest cement markets in the nation. Structural steel products are distributed throughout North America. (source: company press release)

Why We Like It:
Right on cue shares of TXI bounced from rising support at the simple 50-dma and the $60.00 level. Short-term technical oscillators like the stochastics and RSI have turned positive again and this looks like a new bullish entry point. When we began this play our initial target was the 64.50-65.00 range, which was hit a couple of weeks ago. We have since adjusted our target toward the $69-70 region but this assumes a breakout over resistance at the $65 level. Short-term traders can exit again near $64-65 while longer-term players can hold on for the breakout. We are raising our stop loss to $59.95 to keep it under support at $60.00 and its 50-dma.

Suggested Options:
February and March calls are available but we are suggesting the April strikes.

BUY CALL APR 60 TXI-DL OI= 78 current ask $5.40
BUY CALL APR 65 TXI-DM OI=105 current ask $2.80

Picked on January 09 at $ 60.18
Change since picked: + 2.65
Earnings Date 12/16/04 (confirmed)
Average Daily Volume = 238 thousand

Put Play Updates

Apollo Group - APOL - close: 76.98 chg: -0.04 stop: 81.01

Company Description:
Apollo Group, Inc. has been providing higher education programs to working adults for over 25 years. Apollo Group, Inc., operates through its subsidiaries The University of Phoenix, Inc., Institute for Professional Development, The College for Financial Planning Institutes Corporation, and Western International University, Inc. The consolidated enrollment in its educational programs makes it the largest private institution of higher education in the United States. It offers educational programs and services at 85 campuses and 142 learning centers in 39 states, Puerto Rico and Vancouver, British Columbia. Combined degree enrollment was 267,900 students as of November 30, 2004. (source: company press release)

Why We Like It:
We initiated this play with the technical breakdown under $80.00 support and its exponential 200-dma after weeks of consolidating under the $84 level. The stock has continued to fade and APOL was absent during the recent two-day market bounce. Yet while APOL does continue to decline it is certainly taking its time. The stock dipped toward $75.50 on Friday but traders bought the dip and shares closed almost unchanged. After several down days in a row APOL is short-term oversold and due for a bounce. Watch for a failed rally near $78 or even the $80 level. Aggressive traders could use such moves as a new bearish entry point. The P&F chart continues to look very negative with the bearish triangle breakdown sell signal and its $68 target. Our target remains unchanged in the $72-70 region.

Suggested Options:
We are going to suggest the March and May puts. There are only three weeks left for February strikes so we would suggest the March or May options.

BUY PUT MAR 80 OAQ-OP OI= 54 current ask $5.50
BUY PUT MAR 75 OAQ-OO OI= 745 current ask $3.00
BUY PUT MAR 70 OAQ-ON OI=1136 current ask $1.50

BUY PUT MAY 80 OAQ-QP OI= 418 current ask $7.00
BUY PUT MAY 75 OAQ-QO OI=1087 current ask $4.60
BUY PUT MAY 70 OAQ-QN OI= 477 current ask $2.75

Picked on January 23 at $ 77.61
Change since picked: - 0.63
Earnings Date 12/16/04 (confirmed)
Average Daily Volume = 2.4 million

Black & Decker - BDK - close: 80.91 chg: +1.35 stop: 82.61*new*

Company Description:
Black & Decker is a leading global manufacturer and marketer of power tools and accessories, hardware and home improvement products, and technology- based fastening systems.
(source: company press release)

Why We Like It:
BDK's long-term up trend has been broken but the bulls aren't going to make it easy on us. Looks like someone was buying the dip on Friday and pushed shares back over the $80 level, which should be acting as round-number resistance. The stock is still trading under its 100-dma and should have more resistance near $82.00 and $82.50. If you check out its P&F chart you'll notice the pattern is one of a bullish signal reversed and points to a $68 target. We're only targeting a drop to the $75 region but we would suggest that readers wait for a move back under the $80 level or even the $79 level before initiating new bearish positions. Please note we have adjusted our stop loss by a few cents to $82.61 to better reflect the short-term overhead resistance.

Suggested Options:
We are going to suggest the February and March puts.

BUY PUT FEB 80 BDK-NP OI= 2264 current ask $1.40

BUY PUT MAR 80 BDK-OP OI= 179 current ask $2.60
BUY PUT MAR 75 BDK-OO OI= 20 current ask $1.05

Picked on January 26 at $ 79.47
Change since picked: + 1.44
Earnings Date 01/26/05 (confirmed)
Average Daily Volume = 659 thousand

Nike Inc - NKE - close: 86.49 chg: +0.04 stop: 87.01

Company Description:
Nike, Inc. based in Beaverton, Oregon is the world's leading designer, marketer and distributor of authentic athletic footwear, apparel, equipment and accessories for a wide variety of sports and fitness activities. Wholly owned Nike subsidiaries include Converse Inc., which designs, markets and distributes athletic footwear, apparel and accessories; Bauer NIKE Hockey Inc., a leading designer and distributor of hockey equipment; Cole Haan, which designs, markets, and distributes fine dress and casual shoes and accessories; and Hurley International LLC, which designs, markets and distributes action sports and youth lifestyle footwear, apparel and accessories.
(source: company press release)

Why We Like It:
NKE is producing an oversold bounce partially fueled by a big spike higher in rival Reebok this week. Aggressive traders can still eye a failed rally under the 10 or 50-dma's. We are going to wait for NKE to breakdown under the $85 level and hit our trigger to buy puts at $84.65.

Suggested Options:
We're going to suggest the March and April puts.

BUY PUT MAR 85 NKE-OQ OI= 292 current ask $2.00
BUY PUT MAR 80 NKE-OP OI= 125 current ask $0.70

BUY PUT APR 85 NKE-PQ OI=1086 current ask $2.50
BUY PUT APR 80 NKE-PP OI= 873 current ask $1.10

Picked on January xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 12/16/04 (confirmed)
Average Daily Volume = 1.1 million


Adobe Systems - ADBE - close: 55.48 change: -0.69 stop: 57.11

A minor sell-off in the software sector and another pull back in the NASDAQ helped push ADBE to a new three-month low on Friday. Shares bypassed our recently adjusted target at $55.35 and dipped under our old target at $55.00 to hit $54.80 before a late day bounce in the last 30 minutes. We are closing the play per our guidelines at $55.35. Traders still short the stock should note that ADBE is very short-term oversold and testing support at the $55 level, which happens to be its 38.2 percent Fibonacci retracement of the July-December rally. The stock is overdue for a bounce.

Picked on January 06 at $ 58.99
Change since picked: - 3.51
Earnings Date 03/17/05 (unconfirmed)
Average Daily Volume = 2.3 million

Play Update Archives