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Call Updates

Aetna Inc - AET - close: 130.45 change: -0.40 stop: 125.00

The IUX insurance index enjoyed a strong day on Friday with the broad market rally but the IUX remains under resistance at the 325 level. A breakout here would be good news for insurance bulls. Meanwhile AET failed to participate in the rally and that concerns us a bit. The stock has spent the last three days consolidating between $130 and $132. We are encouraged to see the $130 level holding as support but we're running out of time. AET is due to report earnings on Thursday morning. That means we need to plan an exit on Wednesday afternoon to avoid the event. Currently the bottom edge of our target range is $135 and we will exit there on any spike higher or we'll be forced to close the play at Wednesday's close.

Suggested Options:
We would not suggest new positions at this time.


 

Picked on January 13 at $127.61
Change since picked: + 2.84
Earnings Date 02/10/05 (confirmed)
Average Daily Volume = 2.2 million

Amerada Hess - AHC - close: 91.30 change: +0.13 stop: 84.99

Oil stocks continued to climb this week in spite of a pull back for crude oil prices. The OIX oil index has broken out to new all-time highs again. The OSX oil services index has done the same. AHC turned in a very strong week and the breakout over the $89 and $90 levels is very bullish only now AHC looks short-term overbought. We suggested that short-term traders actually consider taking some profits here but our target remains the $94 level. We would not be surprised to see AHC dip after last week's gains and we would use the dip as a new entry point. Look for the $89 level to act as support.

Suggested Options:
We're suggesting the March and May calls. The $85 strikes would work on a dip.

BUY CALL MAR 90 AHC-CR OI=732 current ask $3.70

BUY CALL MAY 90 AHC-ER OI=614 current ask $5.90


 

Picked on January 31 at $ 86.65
Change since picked: + 4.65
Earnings Date 01/26/05 (confirmed)
Average Daily Volume = 1.2 million

Cooper Industries - CBE - close: 70.40 chg: +0.39 stop: 67.49

CBE is a new call play from Thursday's newsletter. The relative strength and breakout through the top of its trading range is a bullish entry point. The P&F chart shows an ascending triple-top breakout buy signal with a $74 target. We're targeting a move to the $74-75 range. Friday's rally put CBE above its all-time high of $70.37 dating back to May 1998. If shares surprise us with a dip we would look to the $69 level for support and a bounce from there as a new entry point.

Suggested Options:
We are suggesting the April calls although July strikes would work as well. We do not see an April $75 strike yet but one should be available soon.

BUY CALL APR 65 CBE-DM OI= 719 current ask $6.10
BUY CALL APR 70 CBE-DN OI= 292 current ask $2.50


 

Picked on February 03 at $ 70.01
Change since picked: + 0.39
Earnings Date 01/25/05 (confirmed)
Average Daily Volume = 436 thousand

Goldman Sachs - GS - close: 110.02 chg: +1.28 stop: 105.00 *new*

Another big week of merger and acquisition news continues to fuel the favor for the investment banks that help facilitate these deals. GS has soared from the breakout of its trading range a week ago and already tagged the $110 level. We suggested that short-term traders consider exiting at this level given the potential resistance from December's high. Some of our suggested options have doubled in value and that's a tempting reward to pass up, especially with GS now looking short-term overbought. We remain bullish on the stock and the group but right now we'd look for a dip, probably back to the $108 range, before considering new positions. Our ultimate target is the $115 region but if you check out the weekly chart it looks like GS is producing a potential cup-and-handle formation and patient traders might consider targeting the $120 level.

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

BUY CALL MAR 100 GS-CT OI= 150 current ask $10.70
BUY CALL MAR 105 GS-CA OI= 847 current ask $ 6.30
BUY CALL MAR 110 GS-CB OI=5268 current ask $ 2.55

BUY CALL APR 105 GS-DA OI=16727 current ask $6.90
BUY CALL APR 110 GS-DB OI=13452 current ask $3.50


 

Picked on January 30 at $106.12
Change since picked: + 3.90
Earnings Date 03/17/05 (unconfirmed)
Average Daily Volume = 3.4 million

Invitrogen - IVGN - close: 70.20 chg: +1.12 stop: 67.00 *new*

We have come pretty close to giving up on IVGN as a bullish candidate merely because the stock refused to participate in this past week's market rally. Now after several days of consolidating under resistance at the $70.00 level IVGN is on the move again. This close over $70 looks like a new bullish entry point for a run toward the $75 region and the top of its rising channel. The risk now is that we'll run out of time before IVGN's February 17th earnings report that we do not plan to hold over. More conservative traders can still wait for IVGN to trade over the $70.50 level before initiating long positions. We are going to raise our stop loss to $67.00.

Suggested Options:
We are suggesting the March calls because we do not plan to hold over the February 17th earnings report.

BUY CALL MAR 65 IUV-CM OI= 30 current ask $6.50
BUY CALL MAR 70 IUV-CN OI=334 current ask $3.00
BUY CALL MAR 75 IUV-CO OI=485 current ask $1.05


 

Picked on January 27 at $ 70.05
Change since picked: + 0.15
Earnings Date 02/17/05 (confirmed)
Average Daily Volume = 800 thousand

RD Donnelley - RHD - close: 61.44 change: +0.68 stop: 57.95

RHD is a new play from the Thursday night newsletter. The stock has been a relative strength leader for months as it channels higher. The recent breakout over round-number resistance at $60.00 is a bullish entry point and we're seeing some follow through with Friday's gain. We're targeting a move to the top of the channel near $64-65. Readers can consider new positions at current levels or hope for a pull back toward $60, which should now act as support.

Suggested Options:
This is a short-term momentum play and we plan to be out before the end of February. However, we do not see much volume in the March calls so we're going to suggest the May strikes. Unfortunately we do not see a May 65 strike yet but expect one will become available soon.

BUY CALL MAY 55 RHD-EK OI= 338 current ask $8.70
BUY CALL MAY 60 RHD-EL OI= 498 current ask $4.00


 

Picked on February 03 at $ 60.76
Change since picked: + 0.68
Earnings Date 02/27/05 (unconfirmed)
Average Daily Volume = 186 thousand

Texas Industries - TXI - close: 64.91 change: +0.63 stop: 59.95

When we originally added TXI to the play list our short-term target was the $64.50-65.00 region. TXI has hit this level multiple times now giving short-term traders a chance to exit for a profit. We have since adjusted our target toward the $69-70 range given TXI's longer-term up trend. Now that the market is finally in rally mode TXI can finally get started on its next leg higher. We're encouraged by the Friday morning dip to $64.00 and the quickness that traders bought that dip. The P&F chart currently points to $74 but if TXI can trade over the $66 mark it will produce a new spread triple-top breakout buy signal.

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 $6.80
BUY CALL APR 65 TXI-DM OI=120 current ask $3.70
BUY CALL APR 70 TXI-DN OI= 93 current ask $1.85


 

Picked on January 09 at $ 60.18
Change since picked: + 4.73
Earnings Date 12/16/04 (confirmed)
Average Daily Volume = 238 thousand

Put Updates

Apollo Group - APOL - close: 78.66 chg: +0.49 stop: 80.11 *new*

When the market is in rally mode and almost ever sector is rebounding the best we can hope for from our put plays is under performance. Fortunately, APOL has done just that. The stock continues to struggle under round-number resistance at the $80 level. We remain bearish on the stock but look for another down day to confirm direction. We're going to lower our stop loss to $80.11 to reduce our risk. If the broader indices continue to climb we would hesitate to launch new put positions on anything.

Suggested Options:
The major market indices are ramping up and that makes it tough to play puts. We hesitate to suggest new positions but if APOL continues to under perform look to the March or May puts.


 

Picked on January 23 at $ 77.61
Change since picked: + 1.05
Earnings Date 12/16/04 (confirmed)
Average Daily Volume = 2.4 million

Nike Inc - NKE - close: 87.04 chg: +0.44 stop: 87.01

We are still in wait mode with NKE. The stock has under performed the market this past week by churning sideways instead of participating in the rally. NKE is currently trading under its six-week trend of lower highs. A move up through its 50-dma would break that trendline and probably spark some short covering. We are currently sitting on the sidelines waiting for NKE to breakdown under the $85 level and its 100-dma to hit our trigger at $84.65.

Suggested Options:
We are not suggesting positions at this time. Our trigger to buy puts is at $84.65.


 

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

Calls

KB Home - KBH - close: 116.22 change: +4.22 stop: 105.00

Target achieved. The lackluster jobs report helped push long-term interest rates lower again and that's good news for homebuilders who thrive on low mortgage rates. The DJUSHB index soared for a five-percent gain. KBH added 3.76 percent on big volume to burst into our target range of $115-120. We're closing the play at $116.22.


 

Picked on January 13 at $106.00
Change since picked: +10.22
Earnings Date 03/17/05 (unconfirmed)
Average Daily Volume = 1.1 million
 

Pixar - PIXR - close: 87.62 change: +0.54 stop: 85.75

We are throwing in the towel on PIXR. The stock continues to consolidate sideways in a coiling pattern. The formation of higher lows and lower highs is actually neutral and PIXR could breakout either direction. We're choosing to exit early because PIXR has failed to participate in the market rally.


 

Picked on January 18 at $ 88.24
Change since picked: - 0.62
Earnings Date 02/10/05 (confirmed)
Average Daily Volume = 934 thousand

Puts

Eli Lilly - LLY - close: 55.03 change: +0.16 stop: 56.01

We remain bearish on LLY but the market rebound is starting to tug at the DRG drug index. Looking more closely at the DRG index we see signs of a short-term bottom and if the sector rallies next week then odds are LLY will spike higher and hit our stop loss. We would rather exit now for a small loss and keep LLY on our watch list for another bearish entry point.


 

Picked on January 30 at $ 53.58
Change since picked: + 1.45
Earnings Date 01/26/05 (confirmed)
Average Daily Volume = 4.0 million

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