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Call Updates

Amer. Intl Group - AIG - close: 56.40 chg: +0.69 stop: 52.49

So far so good. Investors are reacting positively to the newly minted civil lawsuit filed by NY Attorney General Spitzer's office against AIG and two of its top execs. The street seems pleased that the focus of the suit is so "narrow" as some are calling it. This sent shares of AIG soaring on Thursday to breakout over resistance at the $55.00 level and hit our trigger to go long/buy calls a $55.05. Friday's 1.2 percent gain was a nice follow through to Thursday's breakout. Here's what we expect to happen next. The markets still look short-term overbought and due for a dip. AIG is arguably short-term overbought too. We'll expect a dip in AIG back toward the $55.50-55.00 level, which should now act as new support. Traders can buy a bounce from $55.00 as a new bullish entry point. Our target remains the $59.00-60.00 range.

Suggested Options:
We are suggesting the August calls.

BUY CALL AUG 50 AIG-HJ OI=11233 current ask $7.50
BUY CALL AUG 55 AIG-HK OI=62862 current ask $3.60
BUY CALL AUG 60 AIG-HL OI=45105 current ask $1.20

Picked on May 26 at $ 55.05
Change since picked: + 1.35
Earnings Date 02/09/05 (confirmed)
Average Daily Volume = 15.5 million

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Caterpillar - CAT - close: 94.31 chg: -0.12 stop: 89.00

We're not complaining about the action in CAT either but this may not be a good spot to initiate new positions. We initially added CAT a couple of weeks ago with a trigger to go long once the stock broke through resistance at the $92 level and its 50-dma. This also proved to be a bullish breakout from an inverse (or bullish) head-and-shoulders pattern. That H&S pattern projects a $100 price target (give or take a point). Thus far CAT is doing pretty well with a retest of the $92 level as support on Wednesday. Our concern now is that the major market averages still look overbought and due for a pull back. Readers may want to wait for a dip back toward the $92 level again before starting new positions. If the pull back gets ugly we could see CAT slipping toward the $90 level. Our target remains the $99.25-100.00 range. Meanwhile the Point & Figure chart is bullish with a $109 target.

Suggested Options:
We are suggesting the July calls.

BUY CALL JUL 90.00 CAT-GR OI= 180 current ask $6.00
BUY CALL JUL 95.00 CAT-GS OI=3279 current ask $2.70
BUY CALL JUL100.00 CAT-GT OI= 368 current ask $0.85


Picked on May 18 at $ 92.35
Change since picked: + 1.96
Earnings Date 04/20/05 (confirmed)
Average Daily Volume = 2.8 million

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Career Education - CECO - close: 34.97 chg: -0.03 stop: 32.45

We're starting to wonder if we picked the wrong education stock to play on the breakout. CECO's larger rival APOL has been much more consistent with its up trend and follow through on the recent breakout over the 200-dma. We are still bullish on CECO and the recent sideways consolidation could be just the rest this stock needs before pushing higher. However, readers have a choice to make. We believe the major indices look a bit extended and due for a pull back. If that occurs then we'd look for CECO to dip back toward the $34.00 level (maybe 33.50) near its 50-dma. Readers could use the dip as a new bullish entry point. If the market does not consolidate lower then traders could use move of a momentum-type entry point on a push through $35.50 and its simple 100-dma (currently 35.57). If shares of CECO can trade above the $36.00 mark it will reverse its P&F chart from bearish to a new bullish buy signal. Our target remains in the $38.50-39.50 range.

Suggested Options:
We are suggesting the July calls.

BUY CALL JUL 30.00 CUY-GF OI= 762 current ask $6.00
BUY CALL JUL 35.00 CUY-GG OI=4639 current ask $2.45

Picked on May 23 at $ 35.24
Change since picked: - 0.27
Earnings Date 05/02/05 (confirmed)
Average Daily Volume = 2.5 million

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Rockwell Collins - COL - close: 49.55 chg: +0.29 stop: 44.95

Our bullish COL play may require a little extra patience. We're drawn to the stock by its relative strength. Like the DFI defense sector index, shares of COL are trading at new all-time highs. This might look like a tempting entry point after a six-day sideways consolidation. However, COL is nearing what should be round-number, psychological resistance at the $50.00 mark. Combine that with the fact that the major market indices are short-term overbought and due for a consolidation then you can understand why we would prefer to buy calls on COL after a significant dip. A quick look at its daily chart shows that investors have been consistently buying pull backs near its simple 100-dma. Right now that 100-dma is near $45.50. We are suggesting that readers use a trigger for new bullish plays if COL dips into the $46.25-45.50 range. It is certainly possible that COL will not consolidate that low and we may be forced to adjust our entry point down the road.

Suggested Options:
If we are triggered in COL we'll suggest the July calls although Octobers are available.

Picked on May xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 04/27/05 (confirmed)
Average Daily Volume = 800 thousand

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Federated Dept Stores - FD - cls: 67.72 chg: -0.16 stop: 64.45

We're starting to think that maybe we should have exited when FD hit $69.50 a few days ago. Thus far FD has been holding up pretty well near its simple 10-dma but if the major averages see any type of profit taking next week we would expect FD to slip back toward the $65.00 level. The $65 level was once resistance and now broken should act as support. We're certainly not suggesting new plays at this time. We are going to adjust our target to $69.50-70.00 so we can exit if FD spikes toward overhead resistance again. In the news FD has set July 13th as its shareholder vote to approve the $11 billion deal to acquire May Department Stores (MAY).

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


Picked on May 17 at $ 66.60
Change since picked: + 1.12
Earnings Date 05/11/05 (confirmed)
Average Daily Volume = 2.9 million

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Reynolds American - RAI - cls: 82.84 chg: +0.67 stop: 77.95

Friday's bounce from RAI's simple 10-dma after a six-day sideways consolidation looks like a potential bullish entry point. However, like most stocks, if the markets see any consolidation lower next week we would expect shares of RAI to follow. We've been suggesting that readers watch for a dip back into the $80-81 range. Actually we'd prefer buying a bounce from that area. The P&F chart is positive and currently points to a $90.00 target. We're targeting a move into the $85.00-86.00 range.

Suggested Options:
We are not suggesting new positions at this time. Watch for a dip. If RAI provides a new entry point we'd prefer to buy the August calls.

Picked on May 16 at $ 81.31
Change since picked: + 1.53
Earnings Date 04/27/05 (confirmed)
Average Daily Volume = 866 thousand

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United Technologies - UTX - cls: 107.88 chg: +0.26 stop: 102.45

UTX continues to show plenty of relative strength and the stock now looks poised to breakout over the $108.00 level. We initially added UTX to the bullish play list after its breakout above resistance at the $105 level but we wanted confirmation of the move and listed a trigger to go long at $106.25. UTX powered through the $106 level and its previous highs from December last Monday. This produced a new triple-top breakout buy signal on its P&F chart, which now points to a $131 target. We are targeting a move into the $114.00-115.00 range. Readers now have a choice to make. Traders can use a momentum-style entry point on a breakout above the $108 level. Or, since you know we're expecting a market pull back sooner rather than later, we'd watch UTX for a dip back toward the $106.00 to $105.00 levels and buy a bounce there.

Suggested Options:
We are suggesting the August calls. Junes are available.

BUY CALL AUG 100.00 UTX-HT OI=1994 current ask $9.70
BUY CALL AUG 105.00 UTX-HA OI=6754 current ask $5.80
BUY CALL AUG 110.00 UTX-HB OI=1575 current ask $2.70

Picked on May 23 at $106.25
Change since picked: + 1.63
Earnings Date 04/20/05 (confirmed)
Average Daily Volume = 2.0 million
 

Put Updates

United Thera. - UTHR - close: 48.81 chg: -3.15 stop: 53.38*new*

Oh! So close. UTHR lost another six percent on Friday with big volume (almost five times the normal volume) powering the move. Shares of UTHR have now broken down below the $50.00 mark, which posed a potential threat as round-number support. Plus, UTHR has broken below its technical support at the simple 50-dma. The big move was fueled by an analyst downgrade moving UTHR to a "market perform". We are lowering our stop loss to breakeven at $53.38. UTHR hit an intraday low of $48.37 on Friday, which was almost enough for our target $48.25-47.50 range. More conservative traders may want to consider exiting the play now before the stock produces any sort of oversold bounce. We are not suggesting new positions.

Suggested Options:
We are not suggesting new plays this close to our target.


Picked on May 24 at $ 53.38
Change since picked: - 4.57
Earnings Date 05/03/05 (confirmed)
Average Daily Volume = 452 thousand
 

Dropped Calls

Amerada Hess - AHC - close: 94.85 chg: +2.12 stop: 89.95

Target achieved. Actually AHC has surpassed our target of $93.50-94.00. An 84-cent jump in crude oil to $51.85 a barrel on Friday helped fuel a nice rally in the oil sector. Shares of AHC have now broken through resistance at the top of its three-month descending channel and its simple 50-dma. While this looks like a bullish breakout worth considering as a new entry point we'd be careful. Volume in the markets and in AHC has been pretty light the last couple of days as investors began heading out early for the long, three-day weekend. Plus, crude oil has jumped 6.6 percent in the past week and looks short-term overbought. Of course as we all know it can get more overbought before consolidating. We're closing the play per our strategy at 93.50.

Picked on May 17 at $ 89.41
Change since picked: + 5.44
Earnings Date 07/27/05 (unconfirmed)
Average Daily Volume = 1.6 million
 

Dropped Puts

None Today.

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