Option Investor
Play Updates

In Play Updates and Reviews

HAVING TROUBLE PRINTING?
Printer friendly version

Call Updates

Avalonbay - AVB - close: 73.78 change: -0.26 stop: 72.95

Friday turned out to be a very mixed session with technology stocks bucking the generally weak trend in the market. Shares of AVB pull back toward the simple 10-dma as we cautioned readers earlier in the week. We're not suggesting new bullish positions and more conservative traders may want to exit for a gain early. We're keeping the play open with an eye on our target in the $75.00-76.00 range.

Suggested Options:
We're not suggesting new positions at this time.

Picked on April 24 at $ 70.05
Change since picked: + 3.73
Earnings Date 04/21/05 (confirmed)
Average Daily Volume = 345 thousand

---

Caterpillar - CAT - close: 89.00 chg: +0.12 stop: 89.00

We're not willing to call it quits just yet in CAT and since the play is unopened there's nothing at risk. We initially added the play a few days ago with a trigger above resistance at its 50 and 100-dma's in hopes of catching a bullish breakout from the inverse head-and-shoulders pattern. In the original play description we stated that it's imperative to keep an eye on the Dow Industrials, which would likely lead CAT higher or lower as the DJIA fought with resistance near 10,400. Right now it looks like the bears are winning that fight in the DJIA. We're encouraged to see there was no follow through on Thursday's decline in shares of CAT. Yet we're wary that the current technicals will continue to sour. We're going to leave the CAT as a bullish candidate for now with our trigger to buy calls unchanged at $92.35. If we're triggered our target will be the $99.25-100.00 range.

Suggested Options:
We're not suggesting new positions at this time.

Picked on May xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 04/20/05 (confirmed)
Average Daily Volume = 2.8 million

---

Hovnanian - HOV - close: 51.90 chg: -0.30 stop: 49.99

Heads up! Traders need to be very careful. The housing sector continues to show weakness and the declines in the DJIA and S&P 500 on Friday are not very inspiring. We seriously considered closing HOV as a bullish candidate but the stock remains above round-number, psychological support at the $50.00 level. Plus the P&F chart remains bullish with the triple-top breakout buy signal. The bad news is that the technical picture is deteriorating. We are not suggesting new bullish positions and more conservative players may want to exit now to avoid further losses.

Suggested Options:
We're not suggesting new positions at this time.

Picked on May 06 at $ 54.26
Change since picked: - 2.36
Earnings Date 03/02/05 (confirmed)
Average Daily Volume = 1.2 million

---

Invitrogen - IVGN - close: 76.86 change: -0.26 stop: 71.49

IVGN has continued to show relative strength over the last few weeks and is trading near one-year highs. We remain bullish with IVGN above resistance at the $75.00 level but we hesitate to suggest new bullish positions given the weakness in the broader market. The BTK biotech index has been bullish the past couple of weeks as investors typically buy the group ahead of the ASCO conference that begins this weekend. The question now is whether or not the sector (and IVGN) will see any sell-the-news type of reaction next week. Technical indicators for IVGN do look a little overbought so traders looking for a new entry point might do well to sit and wait for a dip back to $75.00 although we'd look for signs of a bounce first before committing any capital. The P&F chart remains bullish with an ascending triple-top breakout buy signal and an $85 target. Our target is the $80.00 area. This past week IVGN also announced it would present at the Banc of America conference on May 17th.

Suggested Options:
We are suggesting the June calls although Mays and August strikes have more open interest.

BUY CALL JUN 70.00 IUV-FN OI=164 current ask $7.90
BUY CALL JUN 75.00 IUV-FO OI=562 current ask $3.90
BUY CALL JUN 80.00 IUV-FP OI=284 current ask $1.40

Picked on May 03 at $ 75.51
Change since picked: + 1.35
Earnings Date 04/28/05 (confirmed)
Average Daily Volume = 888 thousand

---

Eli Lilly - LLY - close: 58.76 change: -0.43 stop: 57.49

The DRG drug index has been cycling higher for the last few months and has reached a new turning point. The group has been consolidating lower the last several days and is due for a bounce or the beginning of the next leg higher. There is also the possibility that the DRG drug index could slip lower and retest the bottom of its wider, rising channel. If this occurs we'd expect LLY to pace the decline and break support near the $58.00 level. The catalyst we need to beware is investor reaction to the ASCO conference that began this weekend. The biotech stocks will probably have the biggest reaction but the drug sector will react as well. Since the DRG has already been consolidating the last several days we're not so concerned for a sell-the-news move but it could still occur. Considering these influences in addition to a market that looks vulnerable to more selling we are not suggesting new bullish positions. Instead we will reiterate our previous suggestion to wait for a new move over the $60.00 mark before committing any capital. FYI: P&F chart watchers will note the quadruple-top breakout buy signal and LLY's $79 price target.

Suggested Options:
We're not suggesting new positions at this time.

Picked on May 04 at $ 60.15
Change since picked: - 1.39
Earnings Date 04/18/05 (confirmed)
Average Daily Volume = 4.7 million

---

Reynolds American - RAI - cls: 78.45 chg: -0.55 stop: 77.95

It looks like shares of RAI were not done consolidating when we added the stock to the play list in early May. Fortunately, we decided to use a trigger above short-term resistance near the $81.25 level. Thus we remain on the sidelines waiting for RAI to trade at our entry point of $81.31. We are a little surprised that RAI and the tobacco sector has not done better the last couple of sessions. Recent news revealed that a Minnesota judge has dismissed the "lights" cigarette case against RAI. Yet shares of RAI are slowly drifting back toward the bottom of its six-week trading range near the exponential 200-dma and the $77.00 region. RAI is currently in danger of reversing its recent P&F buy signal. We will stand by our trigger to go long for now but if RAI breaks down under the $76.50 mark then more aggressive traders may actually want to consider bearish positions.

Suggested Options:
We're not suggesting new positions at this time.

Picked on May xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 04/27/05 (confirmed)
Average Daily Volume = 866 thousand

---

Research In Motion - RIMM - cls: 70.58 chg: +1.53 stop: 66.85

Whoa! We warned readers that RIMM tends to be volatile and that's one of the reasons why we labeled this play high-risk. RIMM is proving that our caution is warranted. The stock gapped down this morning and dipped toward the $67.00 level after a research firm downgraded shares to a "sell". Yet the bullishness in the NASDAQ and the entire group of technology-related sector indices helped inspire a rebound in RIMM pushing the stock back above round-number resistance at the $70.00 mark. This looks like a new bullish entry point but traders should think twice about initiating new bullish plays with the NASDAQ right under resistance at the 2000 level. We would suggest waiting for the NASDAQ to breakout first. Our target for RIMM remains the $76-77 range.

Suggested Options:
Only aggressive traders should consider this high-risk play. We like the June strikes for RIMM.

Picked on May 10 at $ 70.51
Change since picked: + 0.07
Earnings Date 04/05/05 (confirmed)
Average Daily Volume = 1.7 million
 

Put Updates

Fording Cndn Coal - FDG - close: 79.35 chg: -4.55 stop: 86.51*new*

FDG is a new bearish candidate we added to the play list on Thursday night following its technical breakdown. A reprint of the original play description follows but readers need to decide if they want to wait for an oversold bounce before considering new positions or whether or not they want to chase it. Friday's decline and massive volume (about 6x the average volume) sent option values soaring. The June 85s rose more than 50 percent and the June 75s have doubled from Thursday's prices. We are lowering the stop loss to $86.51. Our target remains in the $76-75 range. Here's a reprint of Thursday's play:

We have had our eyes on FDG for a while now but never added it to the play list due to its pattern. The stock has been consolidating in a neutral pattern of lower highs and higher lows for several weeks. Normally we would look for the prevailing pattern (which was up) to overcome but this time FDG is breaking down. The stock broke out from its neutral wedge and declined below technical support at its 100-dma on volume more than double the average. FDG's P&F chart also shows a sell signal that currently points to a $74 target. We are suggesting bearish positions at current levels with a target in the $76-75 range. This would put FDG near its simple and exponential 200-dma's. Readers can choose to buy puts at current levels or look for a possible bounce back toward the $85-86 levels and use a failed rally there as a bearish entry point.

Suggested Options:
We are suggesting the June puts. The next available would be September strikes. These are the updated prices for Friday's close.

BUY PUT JUN 85.00 FDG-RQ OI= 486 current ask $8.50
BUY PUT JUN 80.00 FDG-RP OI=1297 current ask $5.80
BUY PUT JUN 75.00 FDG-RO OI= 230 current ask $3.20

Picked on May 12 at $ 83.90
Change since picked: - 4.55
Earnings Date 04/25/05 (confirmed)
Average Daily Volume = 394 thousand

---

L-3 Comm. - LLL - close: 65.23 chg: -0.64 stop: 69.55

Already breaking down, shares of LLL lost close to one percent during Friday's market pull back. The stock did hit the $65 region and tried to bounce twice from the $64.65 level. LLL does look short-term oversold so we would expect a bounce next week unless the major averages continue declining. Readers can look for a bounce back toward the $67.00-67.50 range and then use a failed rally there as a new bearish entry point. Our target remains the $63-62 range.

Suggested Options:
LLL is only a couple of points from our target so we're not suggesting new plays unless the stock produces a bounce. If this occurs we'd use the June or July puts.

Picked on May 10 at $ 68.01
Change since picked: - 2.65
Earnings Date 04/26/05 (confirmed)
Average Daily Volume = 855 thousand

---

Marriot - MAR - close: 60.80 chg: -0.52 stop: 64.21

MAR is almost there. The stock lost another 0.8 percent on Friday and hit another new relative low at $60.40. MAR is very close to our target in the $60.00-58.00 range and we're suggesting that readers prepare to exit. Actually, some traders may want to plan an exit anywhere between $60.40 and $60.00 to avoid any potential bounce since the $60 mark could be round-number, psychological support.

Suggested Options:
MAR is very close to our target so we're not suggesting new positions at this time.

Picked on April 28 at $ 63.37
Change since picked: - 2.57
Earnings Date 04/21/05 (confirmed)
Average Daily Volume = 1.2 million

---

Parker Hannifin - PH - close: 57.97 change: -0.41 stop: 62.01

After the early May bearish reversal shares of PH have been consistently weak. Now the stock is hitting new three-week lows while its MACD indicator has produced a new sell signal with Friday's decline. The P&F chart continues to look weak as well with a sell signal pointing to a $44.00 target. We would use the recent weakness as a new bearish entry point but more patient traders can look for a possible bounce back toward the $59 level and then consider new put positions. Our target is the $55-54 range.

Suggested Options:
We are suggesting the June puts although the May and August strikes do have more open interest.

BUY PUT JUN 60.00 PH-RL OI=302 current ask $3.50
BUY PUT JUN 55.00 PH-RK OI=142 current ask $1.00

Picked on April 28 at $ 59.08
Change since picked: - 1.11
Earnings Date 04/18/05 (confirmed)
Average Daily Volume = 1.2 million
 

Dropped Calls

Chubb Corp - CB - close: 80.45 chg: -1.51 stop: 79.99

It was a weak day all day for the insurance group and the selling appeared to pick up speed into the afternoon. The IUX insurance index pierced support near the 295 level just as shares of CB pierced support near the $80.00 level in the last couple of hours of trading. Our stop loss was at $79.99 closing the play. The MACD indicator has produced a new sell signal but more aggressive players might want to watch for a bounce back above the $82.50 level as a potential bullish entry point. The $85.00 level has been set as new overhead resistance.

Picked on May 01 at $ 81.78
Change since picked: - 1.33
Earnings Date 04/25/05 (confirmed)
Average Daily Volume = 1.2 million

---

Coventry Hlth Care - CVH - close: 64.21 chg: -2.51 stop: 66.99

It could be game over for the CVH bulls. After two weeks of trying to breakout over the $70.00 level the stock finally faltered and broke down below its multi-month trendline of support and technical support at its 50-dma on Thursday. Friday's high-volume decline merely confirmed the breakdown. Our plan was to go long/buy calls at our trigger of $70.51. That never occurred and we're closing the play unopened. Nimble traders may actually want to consider bearish positions with a target in the $57.50-60.00 range. The $60 could be round-number support but we see the exponential 200-dma near 57.50 and the simple 200-dma just north of $55. The P&F chart has reversed from a buy signal into a sell signal pointing to $57.

Picked on May xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 05/03/05 (confirmed)
Average Daily Volume = 973 thousand
 

Dropped Puts

Lehman Brothers - LEH - close: 87.55 chg: -0.30 stop: 92.80

Target achieved. Smith Barney issued a note on the broker-dealer sector and trimmed its earnings estimates for some big name brokers. The Smith Barney analyst is concerned about revenue weakness in the second quarter for the group. This news sent shares of LEH declining sharply at the open and the stock traded to $85.92, which is inside our target of $86-85. After a quick bounce shares of LEH faded toward the $86 level again before yet another late day bounce. Volume has been very heavy during the declines over the last few days. We're closing the play but readers may want to keep an eye on LEH. It wouldn't surprise us to see another bounce toward the $90.00 level, which might roll over again and offer another short-term bearish entry point.

Picked on April 29 at $ 89.45
Change since picked: - 1.90
Earnings Date 03/15/05 (confirmed)
Average Daily Volume = 2.3 million
 

Play Update Archives