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Call Updates

Amer. Intl Group - AIG - cls: 61.30 chg: +0.35 stop: 58.99*new*

Insurance stocks joined the market in what turned out to be a broad-market, option expiration rally on Friday. Now shares of AIG were not exactly screaming higher but it does look like the stock has broken out from its recent (one-week) consolidation pattern (see chart). We see this as a new bullish entry point although more conservative traders may want to consider waiting for some confirmation with a move over minor resistance at the $62.00 mark. The Point & Figure chart is currently bullish and points to a $90.00 target. We are only targeting a move into the $64.75-65.00 range. We are also raising the stop loss to $58.99.

Suggested Options:
We are suggesting the October calls.

BUY CALL OCT 60.00 AIG-JL OI=8903 current ask $2.35
BUY CALL OCT 65.00 AIG-JM OI=5430 current ask $0.30

Picked on September 11 at $ 61.23
Change since picked: + 0.07
Earnings Date 11/08/05 (unconfirmed)
Average Daily Volume = 7.2 million

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Noble Energy - NBL - close: 44.74 chg: +0.36 stop: 42.49

Oil stocks continued to rise on Friday despite a sharp $1.75 drop in crude oil to $63.00 a barrel. It could be investors are waiting to hear if there are any surprises from the OPEC meeting this Monday. Or investors could be waiting to hear if Alan Greenspan and the FOMC has anything to say about energy prices again on Tuesday. Or Friday's strength in oil stocks could be part of the S&P rebalancing. Whatever the case is the upward trend for oil stocks and shares of NBL remains intact. We continue to target a move into the $49.00-50.00 range. More conservative traders may want to step back and wait to see if crude oil slips toward stronger support near the $60.00 a barrel level. A dip to $60/bbl could be an attractive entry point for new bullish positions in the oil stocks.

Suggested Options:
We are suggesting the October calls.

BUY CALL OCT 40.00 NBL-JH OI=1270 current ask $4.70
BUY CALL OCT 45.00 NBL-JI OI=1437 current ask $2.40

Picked on September 11 at $ 44.90 *post-split price
Change since picked: - 0.16
Earnings Date 11/02/05 (unconfirmed)
Average Daily Volume = 796 thousand

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Noble Corp - NE - close: 70.15 change: -0.92 stop: 67.85*new*

The sell-off in crude oil on Friday seemed to hit shares of NE harder than the rest of the oil sector. The OSX oil services index added 0.18% while NE lost 1.29%. Despite the loss shares of NE are still trading in a pattern of higher lows. Unfortunately the stock's multi-week consolidation has rendered many of its daily technical useless. We continue to have an upward bias for NE but traders may want to wait for the stock to breakout over resistance at the $72.00 mark before buying calls. More conservative traders can wait for a new high over $72.50. Our target is the $78-80 range, compared to the P&F chart, which points to a $94 target. We are raising the stop loss to $67.85, just under the simple 50-dma.

Suggested Options:
We like the October calls but we would not open new plays until NE trades above $72.00 again.

Picked on August 31 at $ 71.30
Change since picked: - 1.15
Earnings Date 10/17/05 (unconfirmed)
Average Daily Volume = 1.8 million
 

Put Updates

Adobe Sys. - ADBE - close: 29.43 chg: +2.53 stop: n/a

So far so good. ADBE soared on Friday with a 9.4% gain on huge volume following its better than expected earnings report on Thursday afternoon. This is a bullish breakout over resistance at its 50-dma and resistance near $28.00. Friday's gain also breaks through ADBE's three-month trendline of lower highs and additional resistance at its exponential 200-dma and its simple 100-dma. The next question is how far will this rally go? How much follow through will there be on the earnings news? The more important question for our readers is where do I exit? One of our readers emailed us and asked about potential resistance at the $30.00 level. Not only is $30.00 round-number, psychological resistance but it is also bolstered by the simple 200-dma. The $30.00 region may be a good spot to consider exiting for a profit. We suggested that readers buy the October $27.50 call (which was trading around $1.05) and the October $25.00 put (which was about $0.55). Our cost in the play should be in the $1.50-1.60 range. Following today's breakout the October $25 put is virtually worthless but the $27.50 call is now trading around $2.30. Thus $2.30 minus $1.60 is a 70-cent gain or about +43%. Our initial plan was to try and get a $1.00 or $1.50 profit out of the play. However, when faced with an opportunity to exit quickly (like Monday or Tuesday next week) for a decent gain or to wait and see if ADBE might continue to rally through the rest of September in order to hit our target we would probably choose the early exit. It's up to you when you exit. We would not be surprised at all to see ADBE rally toward the $32 level. However, we are going to adjust our target. If ADBE trades in the $29.90-30.00 range we'll close this play.

Suggested Options:
We are not suggesting new plays.

Picked on September 13 at $ 26.82
Change since picked: + 2.69
Earnings Date 09/15/05 (confirmed)
Average Daily Volume = 6.2 million

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Black & Decker - BDK - close: 83.20 chg: +0.25 stop: 87.75

BDK is a relative weakness/technical breakdown play. The stock peaked back in July, managed an oversold bounce in September, which failed under its simple 50-dma near the $88 level. Now the stock's technicals are pointing lower and shares have broken through support at its simple 200-dma and its exponential 200-dma in addition to support at the $84 level. The P&F chart points to a $74 target. We think BDK can trade into the $78-77 range before its October earnings report. Readers can watch for a failed rally under $84 or $85 as a new bearish entry point.

Suggested Options:
We are suggesting the November puts but plan to exit ahead of BDK's late October earnings report.

BUY PUT NOV 85.00 BDK-WQ OI=724 current ask $4.40
BUY PUT NOV 80.00 BDK-WP OI=573 current ask $2.10

Picked on September 14 at $ 83.31
Change since picked: - 0.11
Earnings Date 10/25/05 (unconfirmed)
Average Daily Volume = 636 thousand

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Fedex Corp - FDX - close: 80.19 chg: +0.47 stop: 82.01 *new*

Transport stocks bounced on Friday following a $1.75 decline in crude oil prices. The one-percent gain in the Dow transportation index pushed the index toward the top of its descending channel and technical resistance at its simple 200-dma. A breakout from here would suggest a trend change higher. That's why we're lowering the stop loss on FDX to $82.01. The stock bounced back above the $80 level and will probably challenge the $80.50 region. What concerns us is how the technical indicators on FDX are suggesting a new short-term bottom is being formed. We're not going to suggest new plays at the moment and more conservative traders may want to take some money off the table.

Suggested Options:
We are not suggesting new plays at the moment.

Picked on August 23 at $ 82.99
Change since picked: - 2.80
Earnings Date 09/22/05 (unconfirmed)
Average Daily Volume = 2.0 million

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Hershey Co. - HSY - close: 57.96 change: +0.09 stop: 59.51

Volume on Friday for HSY was massive due to the S&P rebalancing. The stock managed to rally toward resistance near $59 but couldn't breakout. This looks like a new bearish entry point that traders can use but more conservative types may want to wait for a new relative low under $57.70 before initiating positions. Our target is the $54.00-53.50 range. Currently the P&F chart points to a $51 target.

Suggested Options:
We are suggesting the November puts.

BUY PUT NOV 60.00 HSY-WL OI=1348 current ask $2.80
BUY PUT NOV 55.00 HSY-WK OI= 647 current ask $0.80

Picked on September 14 at $ 57.90
Change since picked: + 0.06
Earnings Date 10/20/05 (unconfirmed)
Average Daily Volume = 760 thousand

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MBIA Inc. - MBI - close: 58.20 chg: +0.84 stop: 59.01

Put holders may need to turn their toes toward the exits. The massive rally in financials on Friday helped push MBI back toward resistance near the top of its descending channel. So far the bearish trend in MBI remains intact but if shares breakout over the top of its channel and its 200-dma we expect to be stopped out at $59.01. It will be very interesting to see if Friday's rally was a one-day rally inspired by the S&P rebalancing or whether it will have any legs to it.

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

Picked on September 13 at $ 57.75
Change since picked: + 0.45
Earnings Date 11/01/05 (unconfirmed)
Average Daily Volume = 1.2 million
 

Dropped Calls

KB Home - KBH - close: 75.00 chg: -2.05 stop: 71.50

We've been somewhat cautious on the homebuilders the last few days but KBH had been out performing the group until Friday. Suddenly KBH went from setting new relative highs to trying to catch up to weakness in the homebuilding sector. The RLX retail index and the DJUSHB Home construction index were the only two major indices to close in the red on Friday. The DJUSHB lost strong 2.88% and looks poised for more weakness. Now we can't tell how much, if any, this was due to the S&P rebalancing but we have to react to what the market shows us and right now KBH is displaying a short-term bearish reversal. We're going to exit early here and watch to see if KBH will bounce from its rising 100-dma again.

Picked on September 07 at $ 75.89
Change since picked: - 0.89
Earnings Date 09/22/05 (confirmed)
Average Daily Volume = 2.5 million

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MDC Holdings - MDC - close: 77.15 change: -1.82 stop: 74.45

We are going to jump out of MDC too. The stock has been struggling a bit under technical resistance at its simple 50-dma. The new weakness in the DJUSHB home construction index doesn't help matters. We'd rather exit early and watch to see if MDC retests support near its 200-dma again, which bulls can try and use as a new entry point.

Picked on September 01 at $ 77.01
Change since picked: + 0.14
Earnings Date 10/13/05 (unconfirmed)
Average Daily Volume = 489 thousand
 

Dropped Puts

Ishares DJ Fin. Serv. - IYF - cls: 96.87 chg: +1.24 stop: 96.75

Friday produced some huge rallies in the financial sector that pushed both the BKX and BIX banking indices through significant trendlines of resistance. The IYF spiders were no different and the IYF broke out over resistance at the $96.50 mark and hit our stop loss at $96.75.

Picked on September 13 at $ 95.76
Change since picked: + 1.11
Earnings Date 00/00/00 (unconfirmed)
Average Daily Volume = 20 thousand

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United Parcel Svc - UPS - cls: 68.98 chg: +0.52 stop: 70.11

UPS, like most of the transports on Friday, rallied higher following the $1.75 decline in crude oil but not before UPS dipped under the $68.00 level and into our target range of $68.00-67.00. We are closing the play per our game plan. If you failed to exit on Friday (or last Monday) we would expect UPS to rally back towards the $70 level and maybe higher if oil prices continue to drop and the Dow Transportation index breaks out of its current bearish channel.

Picked on August 17 at $ 71.99
Change since picked: - 3.01
Earnings Date 07/21/05 (confirmed)
Average Daily Volume = 2.6 million
 

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