Option Investor
Play Updates

In Play Updates and Reviews

HAVING TROUBLE PRINTING?
Printer friendly version

Call Updates

Barr Pharma - BRL - close: 50.12 chg: +0.35 stop: 45.99

BRL continues its slow and steady pace higher. On Friday the stock rebounded again from the rising, simple 10-dma and broke out over round-number, psychological resistance at the $50.00 mark. This is the first time BRL has traded over $50 since March 2004. It's also bullish to see BRL closing above this key level on above average volume. BRL is actually climbing faster than we expected. Our strategy's time line still gives BRL a couple of months to hit our target in the $54-55 range. Readers can choose to go long with Friday's breakout or look for another dip to the 10-dma as an entry point.

Suggested Options:
We are suggesting the May calls.

BUY CALL MAY 45.00 BRL-EI OI=1704 current ask $6.30
BUY CALL MAY 50.00 BRL-EJ OI=1753 current ask $2.90


 

Picked on March 01 at $ 48.53
Change since picked: + 1.59
Earnings Date 02/02/05 (confirmed)
Average Daily Volume = 800 thousand

---

Hartford Financial - HIG - cls: 70.98 chg: -0.77 stop: 69.95

Once again HIG is nearing pivotal support at the $70.00 level. The market weakness has pulled HIG lower this past week and sucked most of its momentum out of the rally. The longer-term up trend in still intact and its P&F chart is still very bullish but if HIG breaks down under the $70 level and its 50-dma it could be bad news. At this time we are growing more and more concerned that the markets may be due for a stronger pull back. Thus we are not suggesting new bullish entries in HIG. Conservative traders may seriously want to consider exiting now to minimize any losses and wait for HIG to produce a new relative high.

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


 

Picked on February 06 at $ 71.17
Change since picked: - 0.19
Earnings Date 01/26/05 (confirmed)
Average Daily Volume = 1.2 million

---

Ingersoll-Rand - IR - cls: 84.25 chg: -0.22 stop: 82.49

IR, like many stocks in the manufacturing sector, has a bullish up trend over the last couple of months but shares have pulled back from their highs. On Thursday IR bounced where we expected it to in the $83-84 range but there was no follow through on Friday. At this point, given the lackluster performance by the broader indices and the fading/bearish technicals on IR we are expecting IR to test the $83 level and its 21-dma again. We would not suggest new bullish positions unless IR produced another big bounce from $83 and/or traded above $85.26 (Friday's high and 10-dma).

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


 

Picked on February 27 at $ 83.00
Change since picked: + 1.25
Earnings Date 02/01/05 (confirmed)
Average Daily Volume = 1.1 million

---

Nova Chemicals - NCX - close: 48.96 chg: -0.13 stop: 47.95

This past week NCX came close to hitting the bottom of our target range (52.50-54.00) but couldn't quite muster enough momentum to breakout over the $52 level. Then suddenly on Thursday the stock dropped sharply under support at its 10-dma and the 50.00 mark with big volume behind the decline. That should immediately put bulls on the defensive. We remain defensive now. The longer-term trend is still bullish and its P&F chart is still bullish but the short-term technical oscillators have turned bearish. At this point we would expect NCX to pull back more and test support in the $48.00-48.50 range. Traders can use a bounce above $48.00 as a new entry point but confirm market direction first. That means if the Industrials or S&P 500 are heading south then you may want to wait on initiating new bullish positions.

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


 

Picked on February 22 at $ 48.01
Change since picked: + 0.95
Earnings Date 01/26/05 (confirmed)
Average Daily Volume = 383 thousand

---

Parker-Hannifin - PH - close: 68.04 change: -0.22 stop: 63.99

The rebound in PH still looks tempting especially if you view the new bullish signal on its P&F chart. Unfortunately, weakness in the major indices has been affecting PH the last few days. At this point we would expect PH to probably dip again Monday-Tuesday before bouncing and that would turn its MACD indicator dangerously close to a new sell signal. We would suggest that readers looking for a new bullish entry point wait for PH to trade back above $69.00 or better yet wait for a move over $70.00.

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


 

Picked on March 03 at $ 68.11
Change since picked: - 0.06
Earnings Date 01/18/05 (confirmed)
Average Daily Volume = 1.0 million

---

PACCAR - PCAR - close: 75.23 chg: -0.92 stop: 71.99

We're starting to sound like a broken record but the mild weakness in the major indices is weighing on the markets, which is of course completely normal. In PCAR's case that means the stock has pulled back and is testing support at the $75.00 level. Fortunately, PCAR has additional support near the $74.00 mark. Another bounce from $74.00 would be a bullish entry point but we'd wait for the bounce back over the $75 level.

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


 

Picked on February 28 at $ 75.25
Change since picked: - 0.02
Earnings Date 02/01/05 (confirmed)
Average Daily Volume = 1.0 million

---

Progressive - PGR - close: 88.54 change: -0.75 stop: 85.80

The very long-term trend in PGR and its Point & Figure chart is still very bullish. Short-term the five-week trend is bullish too but we're starting to see the momentum fade as PGR tries to breakout over the $90.00 level. Given the recent weakness in the major indices and the breakdown in the IUX insurance index PGR could have a tough time logging any gains next week. Readers looking for new positions might do best to wait for a breakout over the $90.00 mark. At this point we're expecting PGR to retest the $87.50 level before moving higher.

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


 

Picked on March 07 at $ 89.20
Change since picked: - 0.66
Earnings Date 04/21/05 (unconfirmed)
Average Daily Volume = 770 thousand

---

Red Robin Burger - RRGB - close: 48.03 chg: +0.03 stop: 43.99

RRGB is a new play from Thursday night's newsletter. The stock hasn't changed much and neither has the strategy although we would suggest looking for some follow through on Thursday's breakout. A reprint of the Thursday play description follows:

We like RRGB for its relative strength and technical breakout. The relative strength is shown today with a 3.89 percent rally while the rest of the market went sideways (or worse). RRGB's technical breakout looks very bullish with a move over its two-month trendline of resistance, its 50-dma, and its 100-dma on volume that is over twice the average (see chart). The stock also has bullish breakouts in the MACD indicator and RSI oscillator. The P&F chart is currently bearish but RRGB is obviously bouncing and appears to have put in a double-bottom near the $44. There is a risk that RRGB could be channeling sideways but most of the signs above say otherwise. The median analyst target is $54 and we agree. Our eight-week target is also $54. Look for news next week when RRGB presents at the Bank of America conference on March 16th.

Suggested Options:
We are going to suggest the June calls. Aprils are available but the open interest (OI) is very low.

BUY CALL JUN 45.00 QZR-FI OI= 16 current ask $5.30
BUY CALL JUN 50.00 QZR-FJ OI= 51 current ask $3.00
BUY CALL JUN 55.00 QZR-FK OI= 54 current ask $1.25


 

Picked on March 10 at $ 48.00
Change since picked: + 0.03
Earnings Date 02/14/05 (confirmed)
Average Daily Volume = 199 thousand

---

Texas Industries - TXI - cls: 64.08 chg: +0.03 stop: 63.49

Fasten those seat belts! TXI is trading at a pivotal level of support. The pull back in the past few days has erased the late February breakout and TXI is resting on long-term support at the rising 50-dma. The good news is that TXI has tested this technical support several times and we would expect the stock to bounce from here. The bad news is that if TXI breaks down instead it could hit a crowd of stop losses and there could be a rapid amount of profit taking. Readers need to double-check and make sure they are happy with where their stop losses are set. At this point we would look for a move over $65.50 or 65.85 before considering new bullish positions. Until then we're not suggesting new plays.

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


 

Picked on January 09 at $ 60.18
Change since picked: + 3.90
Earnings Date 12/16/04 (confirmed)
Average Daily Volume = 238 thousand

---

Wellpoint - WLP - close: 122.81 chg: -1.54 stop: 119.99

We do not have much new to report on for WLP. The stock has failed to produce any follow through on the breakout to new highs six days ago. Technical oscillators are starting to look negative. Fortunately, WLP still has a rising trend of higher lows, which has built a trendline of support for us to watch. Readers can watch for a bounce above the $120.00 level as a new bullish entry point. However, we would want to see that bounce push past the $124 or $125 levels before initiating new positions. Until then we are not suggesting new positions.

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


 

Picked on March 06 at $126.88
Change since picked: - 4.07
Earnings Date 04/20/05 (unconfirmed)
Average Daily Volume = 2.1 million

Put Updates

Apollo Group - APOL - close: 74.00 chg: -1.95 stop: 78.01

The bears did it again. A few days ago APOL was in danger of breakout over three-month old resistance in its descending trendline of lower highs. Yet the stock couldn't push past the $78 level and declines in the major averages helped sap any investors buying interest in APOL. Friday's 2.5 percent decline did a lot to help re-establish the bearish pattern but we still see short-term support near the $73 region. This is a challenge for us since our initial target was the $72-70 range. Considering the lack of strength in the major indices we're going to stick to our target and plan an exit at $72.00. However, this close to our target we're not suggesting new plays.

Suggested Options:
We are not suggesting new bearish positions at this time.


 

Picked on January 23 at $ 77.61
Change since picked: - 3.61
Earnings Date 12/16/04 (confirmed)
Average Daily Volume = 2.4 million

---

Career Education - CECO - close: 33.22 chg: -0.40 stop: 37.51

So far so good. CECO continues to wither and the stock closed at a new relative low on Friday. Shares are now approaching the next challenge for the bears and that is potential support near the $32.50 level. Fortunately, when you consider the lackluster major indices, weakness in CECO's peers, the bearish triangle breakdown sell signal in CECO's P&F chart we feel confident the stock will continue sinking. Currently the P&F chart points to a $24 target. Our short-term target is the $30.00 area.

Suggested Options:
We are suggesting the April puts.

BUY PUT APR 35.00 CUY-PG OI=11638 current ask $2.95
BUY PUT APR 30.00 CUY-PF OI= 8130 current ask $0.90


 

Picked on February 22 at $ 34.90
Change since picked: - 1.68
Earnings Date 02/15/05 (confirmed)
Average Daily Volume = 2.1 million

---

Genentech - DNA - close: 44.08 chg: -0.12 stop: 47.11

DNA is a new put candidate we listed in Thursday's newsletter. There has been little change in the stock and no change in our strategy. A reprint of the original play description follows:

This is simply a technical breakdown play. The BTK biotech sector index is in decline and now DNA has broken down below significant support at the $45.00 level on volume almost twice the average. The MACD has produced a new sell signal and its P&F chart points to a $38.00 target. We want to target a quick drop into the 41.00-40.00 range. Traders need to know there a couple of significant risks here. Normally when playing a biotech stock there is always risk of a failed clinical trial or a successful cure vaulting the stock one way or the other. For option traders that can mean the difference between a massive windfall or a total loss. However, this time we know what some of the risks are. DNA has a few significant clinical trials coming to an end or potential FDA filings that could move the stock expected to occur sometime in 2005. The company expects at least one sometime in the second quarter of this year. The second major risk for the bears is the upcoming ASCO conference in mid-May. Biotech stocks tend to rally the month before this conference and then they sell-off (a classic sell the news move). That means we, as short-term bears, only have about four weeks for DNA to hit our target.

Suggested Options:
We like the April puts.

BUY PUT APR 45.00 DNA-PI OI=7590 current ask $2.90
BUY PUT APR 40.00 DNA-PH OI=2524 current ask $0.95


 

Picked on March 10 at $ 44.20
Change since picked: - 0.12
Earnings Date 04/11/05 (unconfirmed)
Average Daily Volume = 3.8 million

---

Google Inc - GOOG - close: 177.80 chg: -2.18 stop: 185.01

On your mark. Get set. Go! GOOG is our recently added high-risk aggressive play. We added the stock on Wednesday with a trigger to buy puts when shares traded at $179.49. Our plan is to catch the next breakdown with a target in the $165.00 region. The good news is that GOOD has broken below technical support at its 100-dma and its three-month trendline of support of higher lows. GOOG has also broken round-number support at the $180.00 level and its recent drop has produced a fresh P&F chart sell signal with a $156 price target. Potentially adding to GOOG's weakness was a recent article in Barron's highlighting another case of insider selling of GOOG shares. Friday's drop looks like another bearish entry point.

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

BUY PUT APR 185 GOU-PQ OI=2374 current ask $12.00
BUY PUT APR 180 GOU-PP OI=2707 current ask $ 8.90
BUY PUT APR 175 GOU-PO OI=4266 current ask $ 6.30
BUY PUT APR 170 GOQ-PW OI=2040 current ask $ 4.30 *symbol change*


 

Picked on March 10 at $179.49
Change since picked: - 1.69
Earnings Date 02/01/05 (confirmed)
Average Daily Volume = 10.9 million

---

Ishares Dow Jones US Energy - IYE - cls 75.40 chg: +0.55 stop: 80.01

The oil sector managed a very meager bounce on Friday but that's to be expected after the Wednesday-Thursday decline. We remain short-term bearish but long-term bullish on the group. We added IYE on Wednesday given the very clear bearish engulfing candlestick reversal pattern and the massive volume on the breakdown. We are only looking for a quick drop to the $72.00-71.00 range, which is where we expect investors will attempt to buy the dip. A drop to this level would be between the 38.2 percent and 50.00 percent retracement levels.

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

BUY PUT APR 80 IYE-PP OI= 14 current ask $5.70
BUY PUT APR 75 IYE-PO OI=349 current ask $2.30
BUY PUT APR 70 IYE-PN OI= 88 current ask $0.70


 

Picked on March 09 at $ 76.25
Change since picked: - 0.85
Earnings Date 00/00/00 (unconfirmed)
Average Daily Volume = 124 thousand

---

Cheniere Energy - LNG - close: 70.68 chg: +0.54 stop: 75.01

LNG is a new put candidate we listed in Thursday's newsletter. We had a trigger to buy puts on a breakdown below $69.49. The stock hit our trigger on Friday afternoon after fading from its early morning highs. We remain bearish and our strategy remains unchanged. However, more conservative traders might want to wait for LNG to now trade under $69.00 before initiating positions. A reprint of Thursday's play description follows:

We normally do not like to play a stock this close to its earnings date but given the current sell-off underway in the oil sector we couldn't help but take the bait. LNG reported earnings today that were worse than expected. On top of disappointing earnings news the oil sector confirmed yesterday's reversal. The result was a 7.4 percent decline in LNG on volume more than three times the average. The stock has broken its simple 50-dma but is desperately holding on the $70.00 level. Given the massive run up in the stock price LNG is a huge target for profit taking. We will use a TRIGGER under today's low to open the play. Wait for LNG to trade at $69.49 before buying puts. Our target is the $60.00-62.00 range.

Suggested Options:
We are suggesting the April puts.

BUY PUT APR 75.00 LNG-PO OI= 27 current ask $7.40
BUY PUT APR 70.00 LNG-PN OI=125 current ask $4.40
BUY PUT APR 65.00 LNG-PM OI=769 current ask $2.90


 

Picked on March 11 at $ 69.49
Change since picked: + 1.19
Earnings Date 03/10/05 (confirmed)
Average Daily Volume = 517 thousand

---

Oil Service Holders - OIH - close: 94.71 chg: +0.48 stop: 100.01

This OIH play is using the same strategy as the IYE play above. The holders have broken its bullish up trend and reversed on huge volume. Friday's bounce is no surprise considering the sell-off. We remain bearish but we're only targeting a drop to the $91.00-90.00 range, which is where we expect investors to attempt to buy the dip.

Suggested Options:
We are suggesting the April puts.

BUY PUT APR 100 OIH-PT OI= 5916 current ask $6.80
BUY PUT APR 95 OIH-PS OI=20074 current ask $3.70
BUY PUT APR 90 OIH-PR OI=10050 current ask $1.65


 

Picked on March 09 at $ 96.10
Change since picked: - 1.39
Earnings Date 00/00/00 (unconfirmed)
Average Daily Volume = 3.1 million

Dropped Calls

Loews Corp - LTR - close: 71.80 chg: -1.29 stop: 69.95

We are choosing an early exit in LTR. Friday's 1.7 percent decline broke down through the stock's four-week trendline of support and helped produced a new MACD sell signal. The stock should still have support near the $70.00 level but we would prefer to exit now and minimize our losses.


 

Picked on February 15 at $ 74.15
Change since picked: - 2.35
Earnings Date 02/10/05 (confirmed)
Average Daily Volume = 452 thousand

Play Update Archives