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Call Updates

Amer. Intl Group - AIG - close: 55.09 chg: -0.80 stop: 52.95 *new*

If you're feeling bearish then the market's momentum oscillators are looking pretty good as most of them are beginning to turn negative after days in overbought territory. If you're feeling bullish then a brief pull back is just what the market needs before scaling to new relative heights. Right now we're beginning to think that the market correction we've been expecting the last week or two may finally be upon us but until the DJIA breaks down under support near the 10,400 level and its 200-dma's we'll be somewhat hesitant to pile on a bunch of new bearish positions. At the same time, if we're expecting more of a dip then this isn't the best place to consider bullish positions either. We would watch shares of AIG for a pull back toward the $54.00 level, which should coincide with its four-week trend of higher lows (see chart). We are going to raise our stop loss to $52.95 to reduce our risk should the markets drop too much. It is worth noting that Friday's decline in AIG was fueled on volume that was about half the norm, which would probably lend more strength to the bullish camp. AIG's P&F chart remains bullish and points to a $69.00 target. Our target is the $59-60 range. A bounce from $54.00 might be the next attractive bullish entry point. In the news on Friday S&P downgraded AIG's debt rating over concerns the company will need to raise its reserve levels.

Suggested Options:
We are not suggesting new bullish positions at this time. Wait for a bounce from the $54 level. If this occurs we like the July calls.

Picked on May 26 at $ 55.05
Change since picked: + 0.04
Earnings Date 02/09/05 (confirmed)
Average Daily Volume = 15.5 million

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Caterpillar - CAT - close: 93.97 chg: -1.21 stop: 89.99

Industrial machinery stocks got even more positive analyst comments on Friday and CAT was labeled with a new "buy" rating. The analyst comments were focused on rising profit margins for the group with an expectation for falling material costs yet rising prices for the finished product. Earlier this week a Merrill Lynch analyst issued positive comments on the industry as well. Yet even a new "buy" rating wasn't enough to stop CAT from following the DJIA lower during Friday's market pull back. We remain bullish on the stock but the momentum oscillators are definitely looking tired. We would expect shares to pull back toward the $92.00 level near its simple 100-dma. Until we see a bounce we would not suggest new bullish positions. CAT's P&F chart is bullish with a $115.00 target. Our target is the $99.25-100.00 range, which coincides with the inverse/bullish head-and-shoulders pattern.

Suggested Options:
We are not suggesting new bullish positions at this time. Wait for a bounce from the $92 level. If this occurs we like the July calls.

Picked on May 18 at $ 92.35
Change since picked: + 1.62
Earnings Date 04/20/05 (confirmed)
Average Daily Volume = 2.8 million

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Career Education - CECO - close: 34.82 chg: -0.62 stop: 32.45

The market's decline on Friday appears to have short-circuited CECO's minor breakout over its simple 100-dma. The stock remains stuck in a sideways consolidation between $34 and $35.50. Traders can watch for a bounce from the $34.00 level as a new bullish entry point but we would be hesitant to initiate new long positions. CECO may drop back to retest the simple 50-dma near $33.25 if the major averages pull back too quickly. It is true that CECO's P&F chart is bearish but if the stock can trade over the $36.00 level it will produce a new bullish buy signal/reversal. Our target is the $38.50-39.50 range.

Suggested Options:
We are not suggesting new bullish positions at this time. We're going to watch to see if CECO bounces from the $34 level or not.

Picked on May 23 at $ 35.24
Change since picked: - 0.42
Earnings Date 05/02/05 (confirmed)
Average Daily Volume = 2.5 million

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Rockwell Collins - COL - close: 49.22 chg: -0.32 stop: 44.95

In spite of the market weakness on Friday both COL and the defense sector indices remain close to their recent all-time highs. However, the upward momentum has definitely stalled and hopefully the group (and COL) will correct as we expect them to. We like COL for its relative strength but don't want to chase it near its highs and under round-number resistance at the $50.00 level. Our plan is to buy a pull back toward technical support near the 100-dma. If you look at the chart below you'll see that investors have been consistently buying dips to the 100-dma for months. We (the newsletter) are going to use a trigger to open the play. Our plan would be to buy calls on a pull back into the $46.25-45.50 range. You, the reader, do not have to immediately go long on a pull back. Instead we would suggest waiting for signs of a bounce from the 100-dma before initiating new bullish positions. If we're triggered our short-term target will be the $50.00 level although the bullish P&F chart points to a target closer to $70.

Suggested Options:
If COL pulls back and hit our entry point we'll suggest the July calls.

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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Reynolds American - RAI - cls: 82.61 chg: -0.21 stop: 78.75 *new*

Shares of tobacco giant RAI continue to consolidate sideways between $82.00 and $83.30. Momentum oscillators have naturally flattened out and are starting to look negative. We would not suggest new bullish positions at this time. Instead traders can watch for a dip and bounce from the $81.00 level or a momentum-type entry point on a breakout over $83.40. We would prefer to buy a dip and if the major averages pull back too sharply we could see RAI slip toward the $80.00 level, near its simple 50-dma. Monday should be interesting as RAI issued a press release on Friday afternoon after the closing bell. A federal judge has dismissed an antitrust, price-discrimination lawsuit again RAI by some of its wholesalers. This is obviously good news but we don't know if it can shock RAI out of its trading range. The P&F chart remains bullish with a $90.00 target. Our target is the $85-86 range. We're going to cinch up our stop loss a bit to $78.75.

Suggested Options:
We are not suggesting new bullish positions at this time. Yet if RAI does bounce from the $81 region we would look to buy the July calls.

Picked on May 16 at $ 81.31
Change since picked: + 1.36
Earnings Date 04/27/05 (confirmed)
Average Daily Volume = 866 thousand

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United Technologies - UTX - cls: 106.25 chg: -0.84 stop: 102.45

We've been suggesting that readers watch for a pull back toward the $105 level and now it looks like UTX may finally provide one. Momentum oscillators are reversing course and UTX has broken short-term support at its 10-dma. We are expecting a drop back toward the $105.00 level. Actually, the way the market tends to overreact we'd suggest patience and look for UTX to dip toward the $104 level. That's where traders bought the dip back on May 20th. Buying a bounce from either level sounds like a good plan to us. The bullish P&F chart points to a $131 target. We are targeting a move into the $114.00-115.00 range.

Suggested Options:
We are not suggesting new bullish positions at this time. Yet if UTX does bounce from the $105-104 region we would look to buy the July calls.

Picked on May 23 at $106.25
Change since picked: + 0.00
Earnings Date 04/20/05 (confirmed)
Average Daily Volume = 2.0 million
 

Put Updates

MedcoHealth Sol. - MHS - close: 50.34 change: -0.42 stop: 52.21

We remain bearish on MHS but continue to suggest that readers look for the stock to trade under $49.50 before initiating new bearish positions. If you missed the original play we listed MHS as a put candidate on May 31st after the stock broke down from its wedge-like pattern and broke down under technical support at its 50-dma. Yet shares had stopped at the $50.00 mark so we suggested a trigger at $49.90. MHS dipped below our trigger on June 1st opening the play but followed up with a bounce. Fortunately, that bounce has stalled under former support at the 50-dma. This is good news for the bears but we want to see some confirmation that the trend has changed. If MHS trades back under $49.50 we suggesting buying puts and target a drop into the $45.50-45.00 range. We do want to caution traders that the simple 100-dma could be a problem for the bears and that resides near $47.50. The P&F chart is currently bearish and points to a $44 target.

Suggested Options:
If MHS trades under $49.50 we would suggest the July puts.

BUY PUT JUL 55.00 MHS-SK OI= 227 current ask $5.20
BUY PUT JUL 50.00 MHS-SJ OI=2403 current ask $2.00
BUY PUT JUL 45.00 MHS-SI OI=1694 current ask $0.55

Picked on June 01 at $ 49.90
Change since picked: + 0.44
Earnings Date 07/26/05 (unconfirmed)
Average Daily Volume = 2.0 million

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United Thera. - UTHR - close: 49.13 chg: -1.37 stop: 51.26 *new*

Almost there! Once again UTHR has come relatively close to hitting our target in the $48.25-47.50 range. FRiday's intraday low was $48.50. We're encouraged because the breakdown under the $50.00 mark and its 50-dma appears to confirm that UTHR will trade lower - at least toward stronger technical support at its rising 100-dma (currently near $47.00). Volume on Friday's decline was well above average. We are not suggesting new plays at this time. Given Friday's weakness we're expecting UTHR to hit our target relatively soon. However, more conservative traders may want to seriously consider exiting here. We are going to lower our stop loss to $51.26, placing it above last week's high.

Suggested Options:
This close to our target we're not suggesting new bearish plays.

Picked on May 24 at $ 53.38
Change since picked: - 4.25
Earnings Date 05/03/05 (confirmed)
Average Daily Volume = 452 thousand
 

Dropped Calls

Federated Dept Stores - FD - cls: 67.90 chg: -1.19 stop: 64.45

Target achieved. FD may have closed lower on the day but not before trading to an intraday high of $69.83. That's enough for us as our target was a move into the $69.50-70.00 range. The failed rally under the $70.00 level doesn't bode well for anyone who has not yet exited. While there is support near the $67.00 level it would not surprise us to see FD retrace back toward the $65 region. We're closing the play at $69.50.

Picked on May 17 at $ 66.60
Change since picked: + 1.30
Earnings Date 05/11/05 (confirmed)
Average Daily Volume = 2.9 million

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Wynn Resorts - WYNN - close: 55.02 chg: +1.62 stop: 44.99

Wow! We continue to be impressed by WYNN's strength. An analyst upgrade to "out perform" by CIBC on Friday morning sent shares of WYNN gapping higher on Friday. We were expecting the stock to pull back as shares looked short-term overbought on Thursday. We mentioned that WYNN could have been experiencing a short squeeze and the upgrade on Friday probably had some bears panicking. Our target was the $57.00-58.00 range and WYNN hit an intraday high of $56.90 on Friday morning. We realize that WYNN missed our target but that's awfully close. We're closing the play here at $55 and suggesting that readers consider doing the same. The stock looks way too short-term overbought and we'd hate to see profit taking drag WYNN back toward round-number support at the $50.00 level. We'll be sure to keep an eye on WYNN for another bullish entry point now that the stock has broken its three-month bearish trend.

Picked on June 01 at $ 49.96
Change since picked: + 5.06
Earnings Date 08/03/05 (unconfirmed)
Average Daily Volume = 2.2 million
 

Dropped Puts

None
 

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