Danaher - DHR - close: 56.02 chg: -0.34 stop: 53.99
The recent action in the markets looks like a bearish reversal and this is bad news for our bullish play in DHR. It is true that DHR is holding up better than most of the market but if the major indices pick up speed as they move lower we would expect DHR to follow suit. Technical indicators for DHR are beginning to turn bearish. We see short-term risk in DHR in the $54.00-54.50 region. We are not suggesting new bullish plays at this time. Very conservative traders may actually want to exit now and then wait to see if DHR bounces from its simple 200-dma (near 54.50) as a future entry point for calls.
Picked on August 03 at $ 56.67
CR Bard - BCR - close: 63.55 chg: -0.07 stop: 66.05*new*
S&P raised its credit ratings for BCR on Friday and that may have been responsible for the stock's lack of participation in the market's decline. Shares of BCR continue to look very vulnerable to further selling but we all know that nothing moves in a straight line. We suspect that BCR could bounce a bit more before turning lower again especially since it is testing a short-term trendline of support (see chart). We would suggest that readers watch for a bounce into the $64.50-65.00 range as a new bearish entry point to buy puts. The $65.00 level should now act as round-number, psychological resistance, which is also reinforced by its exponential 200-dma. Meanwhile we are going to lower our stop loss to $66.05, just above its simple 200-dma. Our target is the $60.50-60.00 range compared to the Point & Figure chart, which points to a $55.00 target.
BUY PUT SEP 65.00 BCR-UM OI=143 current ask $2.65
Picked on August 03 at $ 64.45
Eastman Chemical - EMN - close: 53.49 chg: -0.66 stop: 56.01
EMN is a new bearish candidate added to the newsletter on Thursday night. The stock has broken down under support at the $54.00 level and hit our trigger to buy puts at $53.90 opening the play. This has also created a new sell signal on EMN's Point & Figure chart. We see no change in our strategy so we're reposting the Thursday night play description here:
EMN has been slowly consolidating sideways the last three months but with a trend of lower highs. Technically all of its indicators point lower and the share price recently broke down below technical support at both its simple and exponential 200-dma's. We also see that its P&F chart is bearish and points to a $49.00 target but this could move lower as a decline under the $54.00 mark would produce a new double-bottom breakdown sell signal. We are going to suggest a trigger under support at the $54.00 level. Our suggested entry point to buy puts will be $53.90. We'll start with a stop loss at $56.01. Our target will be the $50.50-50.00 range.
BUY PUT SEP 55.00 EMN-UK OI=680 current ask $3.20
Picked on August 05 at $ 53.90
Fedex Corp - FDX - close: 84.60 chg: -0.40 stop: 86.01
We remain bearish on FDX but are currently still sitting on the sidelines waiting for shares to breakdown and hit our trigger to buy puts. Fortunately, odds of FDX turning lower are improving. Not only has crude oil prices hit a new high but the Dow Transportation index just broke its five-week up trend and its MACD has produced a new sell signal. Looking at FDX its technical indicators are suggesting a turn lower and its MACD is nearing a new sell signal. We also see that FDX is still struggling under technical resistance at its simple 50-dma. We are going to adjust our suggested entry point to buy puts from $82.85 to $82.99. More aggressive traders may want to consider buying puts in FDX if the stock trades under short-term support at $84.00. Our two-month target is the $76-75 range. Currently the bearish P&F chart points to a $71.00 target for FDX.
Picked on July xx at $ xx.xx <-- see TRIGGER
F5 Networks - FFIV - close: 37.17 chg: -0.88 stop: 41.01*new*
Networking stock FFIV continues to show lots of relative weakness with another 2.3% decline on Friday. The P&F chart is looking very bearish with a $22.00 price target. We remain bearish on the stock but FFIV is starting to look a little oversold here. Our target is only the $35.00-34.00 range so traders looking for a new entry point might want to wait for an oversold bounce back toward the $39.00 or $40.00 levels. We are going to lower our stop loss to $41.01 just above the simple 10-dma, which should act as technical resistance. The $40.00 mark should also act as round-number resistance. Traders need to be aware that CSCO's earnings on August 9th (after the closing bell) does represent a risk. If CSCO comes out with some unexpected positive news it could lift the whole industry group.
Picked on August 03 at $ 38.76
Fannie Mae - FNM - close: 54.96 chg: -0.91 stop: 57.01*new*
FNM continues to decline in a steady fashion but Friday brought good news to the bears. Shares of FNM broke down and closed under round-number support at the $55.00 level. There is still a chance for an oversold bounce but we would expect the simple 10-dma near 56.30 to act as overhead resistance. We are going to lower our stop loss to 57.01, which is above its simple 100-dma (also overhead resistance). Our target remains the $51.50-50.00 range.
BUY PUT JAN06 60 WFN-ML OI=12542 current ask $6.20
Picked on July 27 at $ 56.49
Google - GOOG - close: 292.35 chg: -5.38 stop: 300.01
On your mark. Get set. Wait! Thus far GOOG has spent the last week consolidating between $287 and $300. The failure to breakout back above the $300 level may be a telling clue that its upward momentum has stalled. Yesterday we suggested that aggressive traders may actually want to open bearish positions if shares broke down under the $295 level. It will be interesting to see if that proves to be a successful entry point or not. Our strategy here is to try and catch a breakdown in GOOG, which looks very overbought from its April to July rally from $183 to $315. We are suggesting that readers use a trigger at $284.50 to open bearish positions in GOOG and target a consolidation back toward the $250 region (255-250). The Point & Figure chart is currently bearish and points to a $256 target for GOOG. We feel that due to GOOG's volatility that even using a trigger under $285 still makes this an aggressive and high-risk play. If you're a very aggressive trader then you may want consider buying puts if GOOG breaks down under its simple 50-dma near $291.
Picked on July xx at $ xx.xx <-- see TRIGGER
KB Home - KBH - close: 74.50 chg: -3.86 stop: 82.01
Homebuilders got hit hard on Friday after the jobs report suggested that interest rates will continue to climb to help cool the economy. Shares of KBH lost almost 5% and broke down under its 40 and 50-dma's on big volume about double its average. We see no change in our strategy so we're reprinting Thursday's play description below. However, traders looking for new positions can probably look for an oversold bounce back toward the $78.00 region. A failed rally there near $78 could be used as a new bearish entry point. The option prices below have been updated to reflect Friday's decline. Thursday's play description begins here:
Here we go again. The rally in the homebuilders has stalled. While we remain bullish on the group we are going to try and scalp a few points from KBH as it consolidates lower. The stock has broken its three-month trend of support and all of its daily technical indicators have turned south. This is an aggressive, high-risk play so treat it with caution. Traders may want to consider waiting for a bit before entering positions just to see if KBH bounces back toward the $80.00 level again before moving lower. However, it is worth noting that the DJUSHB home construction index has also broken its three-month trendline of support, suggesting a short-term change in direction. We are going to target the $71.50-70.00 range.
BUY PUT SEP 80.00 KBH-UP OI=1150 current ask $7.10 +2.60
Picked on August 04 at $ 78.36
Lehman Brothers - LEH - cls: 103.43 chg: -1.77 stop: 108.01
...And there was much rejoicing! LEH has finally broken down under three-week old support at the $105.00 level. Friday's decline also broke technical support at its 21-dma. Suddenly our target at the $100 level doesn't look so far away. This has been a speculative high-risk play gambling on a consolidation in LEH back toward the $100 level before the August options expire on August 19th. Traders can still play the August options but September strikes work too. If you chose not to open positions in the previous weeks you might want to watch for a bounce back toward $105.00, which should now act as resistance.
BUY PUT AUG 100 LES-TT OI=3623 current ask $0.40
Picked on July 21 at $105.13
3M Co. - MMM - close: 72.99 change: -0.36 stop: 76.01*new*
Dow-component MMM continues to slowly consolidate lower. The stock hit new one-month lows on Friday and was sinking faster on rising volume toward the close. We also notice that its MACD has produced a new sell signal. Our short-term target is the 70.00-68.00 range. We are lowering the stop loss to $76.01, above the simple 50-dma.
BUY PUT SEP 75.00 MMM-UO OI=1507 current ask $3.10
Picked on July 19 at $ 74.29
MicroStrategy - MSTR - close: 73.39 chg: -1.98 stop: 77.51
Our aggressive play to try and scalp a few points in MSTR as it fills the gap from late July has been opened. The breakdown under the $75.00 level on Friday hit our trigger at $74.95. Short-term technical indicators are bearish and its MACD is nearing a new sell signal. We don't see any changes from our strategy so we are reposting the Thursday night play description here:
MSTR is another candidate for aggressive players. The stock is prone to being volatile but we suspect the next move will be down. The stock got a big pop higher on July 29th after its better than expected earnings report. That rally stalled at the $80.00 level, which was resistance back in January 2005. After a week of trying to breakout over the $80 level shares are now testing the top of its gap near $75, which is acting as support. Given that the broader markets still look somewhat extended and overbought from their July lows and the fact that we're moving into the slow August-September time period for stocks we believe that odds are good MSTR will fill its gap before moving higher. We are suggesting a trigger at $74.95 to open the play. Our target will be the $70.50-70.00 range. We're not that happy with the stop loss because MSTR can be very volatile but we're not excited about putting a stop at $80.01, which is current resistance. Our readers should adjust the stop to best suit their needs.
BUY PUT SEP 75.00 EOU-UO OI=291 current ask $5.70
Picked on August 05 at $ 74.95
Panera Bread - PNRA - close: 56.30 chg: -1.28 stop: 57.51*new*
No changes here. As expected the weakness in PNRA has begun to pick up speed with the recent declines in the market. Our target has been the $52.50 region but we are planning to exit early on Monday afternoon at the close to avoid holding over PNRA's earnings report on Tuesday morning. We are not suggesting new plays. Instead we are lowering the stop loss to almost break even at $57.51.
Picked on August 1 at $ 57.49
Alliance Res.Part. - ARLP - cls: 90.00 chg: +0.80 stop: 91.01
We still believe that ARLP is poised to consolidate lower, at least toward its simple 10-dma near 85.00, but it appears that our stop loss was too tight. ARLP was an aggressive, high-risk put play for us and we tried to mitigate our risk by using a relatively tight stop. Shares displayed too much volatility and stopped us out on Friday with the spike to $93.42. Our stop loss was $91.01. While we are closing the play readers may want to consider new bearish positions if ARLP trades under Thursday low of $88.69.
Picked on August 04 at $ 89.39