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Call Updates

Eaton Corp - ETN - close: 60.31 chg: -0.35 stop: 58.25*new*

Thus far ETN is performing as expected. We added the stock after shares began to bounce from a deeply oversold condition. The combination of the market bouncing from support and ETN bouncing from a long-term trendline of support and also showing P&F chart support looked like a winner. We are still targeting a move into the $62-63 range but given the overall bearish trend in ETN and the broad market indices we'd focus on exiting near $62.00. Traders began to buy the dip toward $60.00 on Friday afternoon so we're expecting some follow through next week. However, we would not be looking to enter new bullish positions here. We are going to raise our stop loss to $58.25.

Suggested options:
We are not suggesting new bullish positions here.

Picked on April 18 at $ 58.51
Change since picked: + 1.80
Earnings Date 04/14/05 (confirmed)
Average Daily Volume = 1.1 million

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Nucor - NUE - close: 53.15 chg: -0.45 stop: 49.95

NUE is a new play we added to the call candidates list on Thursday night. The stock is bouncing from support near $49 and its 200-dma's. Considering NUE's oversold status from its five-week decline we suspect that the stock can rally back toward $60.00 but we're using a trigger at $55.05 to open the play. A reprint of Thursday's play description follows:

The broad market bounce is likely to give shares of NUE a boost as investors respond to its positive earnings report. The company reported earnings today that were well above analyst estimates. Profits actually tripled from the same period a year ago. The company also reaffirmed its Q2 guidance and raised its dividend. We believe that bargain hunters will also be drawn to the technical picture. Not only is NUE oversold from five weeks of declines but the stock is bouncing from support. NUE has price support and technical support in the $49-50 range and this looks like a good spot to speculate on a stronger rebound. Short-term technical oscillators have turned positive. However, it's worth noting that the P&F chart is currently bearish. We want to see confirmation that NUE has indeed reversed course. Our suggestion is to use a TRIGGER at $55.05. There could be round-number resistance at the $55 level in addition to its 100-dma. We can wait for NUE to trade at $55.05 and then target a move toward $60.00 or higher. We are using a very wide stop loss and traders may need to adjust it for their own comfort level.

Suggested Options:
We are suggesting the June calls.

BUY CALL JUN 50.00 NUE-FJ OI=399 current ask $5.30
BUY CALL JUN 55.00 NUE-FK OI=995 current ask $2.60
BUY CALL JUN 60.00 NUE-FL OI=238 current ask $1.10

Picked on April xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 04/21/05 (confirmed)
Average Daily Volume = 3.3 million

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Patterson Cos. - PDCO - close: 50.20 chg: -0.60 stop: 49.75*new*

We are still disappointed that PDCO has not performed better. Yet the stock has managed to ignore a lot of the market's volatility this past week. We added PDCO a few days ago with the strategy to go long on a dip back toward the $50.00 level. Our entry point was $50.75. We expected traders to buy the dip toward round-number, psychological support at the $50.00 mark, which is also underpinned by rising technical support at its simple 50-dma. Thus far the stock is still holding above support but there has been no bounce and the technical indicators continue to sour. We would hesitate to begin new bullish positions. Our suggestion would be to wait for PDCO to trade over $51.50 before opening new bullish plays. We are also tightening our stop loss to $49.75, just under the 50-dma. If PDCO breaks down we want to be taken out very quickly.

Suggested options:
We are not suggesting new bullish positions here.

Picked on April 18 at $ 50.75
Change since picked: - 0.55
Earnings Date 05/19/05 (unconfirmed)
Average Daily Volume = 789 million
 

Put Updates

KB Home - KBH - close: 109.20 change: -2.05 stop: 115.01

Whether or not you believe the housing market is in a bubble ready to burst or whether the home market will remain strong there is no denying that shares of KBH have broken their up trend that began in August-September 2004. This could just be a long, overdue correction before housing stocks rise again but traders can capitalize on the pullback. We like KBH's breakdown under the $110 level and its 100-dma that occurred three sessions ago. KBH's P&F chart is in a sell signal pointing to a $100 target. We agree and are targeting a drop toward the $100 level. The major market indices are currently in an intermediate down trend and that is going to put pressure on homebuilders since investors will feel the heat and begin to sell their winners to lock in profits. Next week could bring some additional volatility with the latest housing numbers but the short-term trend for KBH is still bearish. On Thursday we suggested that readers wait for another drop under $109 before buying puts again. The stock is close to falling under the $109 level now. More aggressive players could open new positions now. KBH does have an upcoming 2-for-1 stock split on April 29th but given the current market environment we do not believe it will be a factor in KBH's decline.

Suggested options:
We are suggesting the June puts.

BUY PUT JUN 110.00 KBH-RU OI= 320 current ask $7.10
BUY PUT JUN 105.00 KBH-RA OI= 945 current ask $5.00
BUY PUT JUN 100.00 KBH-RT OI= 236 current ask $3.40

Picked on April 20 at $108.98
Change since picked: + 0.22
Earnings Date 06/16/05 (unconfirmed)
Average Daily Volume = 1.5 million

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MGM Mirage - MGG - close: 66.70 change: -1.99 stop: 71.51 *new*

The MGG put play is shaping up pretty well. The stock is following our script and shares just closed at a new relative low. We suggested that readers watch the $70.00 level for resistance and use a failed rally there as a new bearish entry point. MGG did just that and now the stock looks poised to continue lower. We're also encouraged by MGG's weakness considering that the stock was upgraded to an "add" on Friday. Plus, the P&F chart's sell signal points to a $55.00 target. There is potential support at its exponential 200-dma near $63.00 but we believe that MGG will be able to trade into the $62-60 range, which is our target. We are going to lower our stop loss to $71.51.

Suggested Options:
We are suggesting the June puts.

BUY PUT JUN 70.00 MGG-RN OI= 5930 current ask $5.10
BUY PUT JUN 65.00 MGG-RM OI=11369 current ask $2.55

Picked on April 20 at $ 67.10
Change since picked: - 0.40
Earnings Date 04/19/05 (confirmed)
Average Daily Volume = 1.1 million
 

Dropped Calls

Ishares Dow Jones Energy - IYE - cls: 73.14 chg: +0.25 stop: 69.95

Target achieved. Crude oil prices continued to climb on Friday and that gave oil stocks and the IYE a boost. Shares of IYE traded above the $74.00 level on Friday before the afternoon sell program hit the market. Dip buyers did step in late Friday afternoon and more aggressive traders may want to consider holding on to bullish positions in IYE for another day or two. We wouldn't be surprised to see IYE trade up into the 74.50-75.00 range. Our concerns about holding on to oil stocks is that botht he OIX index and OSX index tagged their simple 50-dma's in addition to testing the tops of their descending channels. Granted these could just be bull-flag patterns for the whole group but until the oil indices breakout above their short-term trendline of resistance we would be careful. We wanted to catch a short-term pop higher and that's what we did.

Picked on April 18 at $ 70.78
Change since picked: + 2.36
Earnings Date 00/00/00 (unconfirmed)
Average Daily Volume = 170 thousand
 

Dropped Puts

None

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