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Call Updates

Building Mat. - BMHC - cls: 88.06 chg: -0.26 stop: 83.49

BMHC hit some profit taking on Friday morning and dipped to $83.63 near short-term support at its rising simple 10-dma before rebounding. Fortunately, the rebound pushed the stock back above its 50-dma and previous resistance near $87.50. The dip did produce some weakness in the stock's technical oscillators but the rebound looks like a new bullish entry point. More conservative traders might want to wait for some confirmation that the bounce will continue by looking for a move over $89 or $90 before initiating new bullish positions. Our six-week target is the $98-99 range.

Suggested Options:
We are suggesting the December calls.

BUY CALL DEC 85.00 BGU-LQ open interest= 597 current ask $9.40
BUY CALL DEC 90.00 BGU-LR open interest= 456 current ask $5.60
BUY CALL DEC 95.00 BGU-LS open interest= 605 current ask $3.70

Picked on November 02 at $ 87.55
Change since picked: + 0.51
Earnings Date 10/25/05 (confirmed)
Average Daily Volume = 536 thousand

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Legg Mason - LM - cls: 113.57 change: +1.88 stop: 106.95 *new*

The broker-dealer sector continues to look strong and the XBD index set a new closing high. Shares of LM also turned higher on Friday adding 1.6% but volume was light. We are bullish on the stock after its break through resistance at the top of its $100-110 trading range. There is still a chance that LM will pull back and retest the $110 level as support before continuing higher but if you wait for the dip it may not appear. You have to decide if you're comfortable chasing LM here or if you'd rather wait. The Point & Figure chart is pretty bullish with a $138 price target. Our seven-week target is the $119-120 range. We are raising the stop loss to $106.95.

Suggested Options:
We are suggesting the December calls.

BUY CALL DEC 105.00 LM-LA open interest= 135 current ask $9.50
BUY CALL DEC 110.00 LM-LB open interest=1732 current ask $6.30
BUY CALL DEC 115.00 LM-LC open interest= 190 current ask $3.80

Picked on November 02 at $111.69
Change since picked: + 1.88
Earnings Date 10/25/05 (confirmed)
Average Daily Volume = 904 thousand

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Rockwell Autom. - ROK - cls: 55.74 chg: -0.16 stop: 53.49

ROK is a new play from the Thursday night newsletter. We do not see a lot of change from our original play description so we're reposting it below. However, it's worth noting that traders bought Friday's intraday dip near $55.00 and the late afternoon bounce on Friday looks like a new bullish entry point! Plus, the early high on Friday over the $56 mark produced a new triple-top breakout buy signal on its P&F chart.

We normally try not to immediately chase an earnings move but the technical pattern on ROK looks pretty bullish. The company reported earnings this morning that where inline with Wall Street estimates. Typically a lackluster earnings report like that can spark a "sell the news" type of reaction. Not so with ROK today. The stock continued yesterday's rally and broke out over significant resistance at the $55.00-55.25 level. The Point & Figure chart was already bullish with a $72 target but a move over $56 will produce a new triple top breakout buy signal. We are going to suggest new call positions with the stock over the $55.00 level. However, odds are pretty good that ROK may pull back and retest broken resistance at $55.00 as new support. More patient traders may want to wait for that dip back to $55 before initiating positions. ROK should have support at $55 and again at $54 near its simple 200-dma. We're setting our stop loss at $53.49. Our eight-week target is the $61.00-62.00 range.

Suggested Options:
We are suggesting the January calls because they have more open interest than Decembers.

BUY CALL JAN 55.00 ROK-AK open interest=848 current ask $3.30
BUY CALL JAN 60.00 ROK-AL open interest=235 current ask $1.15

Picked on November 03 at $ 55.90
Change since picked: - 0.16
Earnings Date 11/03/05 (confirmed)
Average Daily Volume = 804 thousand
 

Put Updates

Bard C.R.- BCR - close: 62.97 change: -0.04 stop: 63.55

BCR's oversold bounce has stalled under its 21-dma and the $63.50 level. Even though the stock has failed to participate in the market's strength over the last couple of days we are in jeopardy of seeing the stock hit our stop loss at $63.55. We have seriously considered closing the play early to avoid further losses and more conservative traders may want to give this plan some additional thought. Due to BCR's relative weakness we're going to keep the play open but we're not suggesting new positions. If BCR continues lower our target is the $58 level.

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

Picked on October 26 at $ 61.70
Change since picked: + 1.27
Earnings Date 10/18/05 (confirmed)
Average Daily Volume = 745 thousand
 

Strangle Updates

(What is a strangle? It's when a trader buys an out-of-the-money (OTM) call and an OTM put on the same stock. The strategy is neutral. You do not care what direction the stock moves as long as the move is big enough to make your investment profitable.)

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AmerisourceBergen - ABC - cls: 76.50 chg: -0.43 stop: n/a

ABC continues to produce some volatility but it just seems to be chopping up and down above the $75 level. The reaction to the earnings news was not as sharp as we would have liked. There are only two weeks left before November options expire. That means more conservative traders may want to adjust their target on the November strangle from $3.50 to $2.10(breakeven). The options in the November strangle were the November $80 calls (ABC-KP) and the November $70 puts (ABC-WN). We also suggested a December strangle and the options for the December strangle are the December $80 calls (ABC-LP) and the December $70 puts (ABC-XN). We are leaving our target at $5.00 for the December position. We are not suggesting new plays.

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

Picked on October 16 at $ 74.81
Change since picked: + 1.69
Earnings Date 11/03/05 (confirmed)
Average Daily Volume = 900 thousand

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Genentech - DNA - close: 93.95 chg: +1.11 stop: n/a

The BTK biotech index has climbed back toward its recent multi-year highs. Meanwhile DNA has climbed back toward all-time highs and is nearing resistance at the $95.00 level. We would not be surprised to see DNA climb to $95 and then sell-off as traders do some profit taking. The $90-91 region should act as short-term support. We still have seven weeks left before the December options expire. Our target was for a rise to $4.50-5.00 and the December $94 calls (DWN-LS) are trading near $3.30.

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

Picked on October 20 at $ 84.83
Change since picked: + 9.12
Earnings Date 10/10/05 (confirmed)
Average Daily Volume = 3.9 million

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eBay Inc. - EBAY - close: 41.58 chg: +0.03 stop: n/a

We are still dealing with a worse case scenario here with EBAY. The stock has not launched on any new direction following its October 19th earnings report. Instead shares have channeled sideways between $37 and old resistance at $42. There are two weeks left before November options expire. We need to adjust our target to breakeven at $1.05. The options in our strangle were the November $45 calls (XBA-KI) and the November $35 puts (XBA-WG).

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

Picked on October 18 at $ 40.42
Change since picked: + 1.16
Earnings Date 10/19/05 (confirmed)
Average Daily Volume = 18.3 million

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General Dynamics - GD - cls: 116.38 chg: +0.23 stop: n/a

Shares of GD have traded one trading range for another trading range and that doesn't work for our strangle play. Lately the stock has been stuck between potential support at its 100-dma near $115 and overhead resistance at its 50-dma near $117. We need to see GD pick a direction and move pretty soon. There are only two weeks left before November options expire. Therefore we are adjusting our target for the strangle from $4.00 to breakeven at $2.00. The options in our strangle were the November $115 puts (GD-WC) and the November $125 calls (GD-KE).

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

Picked on October 09 at $119.59
Change since picked: - 3.21
Earnings Date 10/19/05 (confirmed)
Average Daily Volume = 713 thousand

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Harman Intl - HAR - cls: 100.83 chg: +2.19 stop: n/a

We are also fighting a worse case scenario here with HAR. There has been no follow through action following its earnings report. To make matters worse the stock has churned sideways in a tight range between $98 and $102 for the last several days. There are only two weeks left before November options expire. We are adjusting our target on the strangle to $2.75, which is under break even at $3.80. The options in our strangle were the November $110 calls (HAR-KB) and the November $90 puts (HAR-WR).

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

Picked on October 18 at $100.80
Change since picked: + 0.03
Earnings Date 10/19/05 (confirmed)
Average Daily Volume = 739 thousand

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Hutchinson Tech. - HTCH - cls: 25.50 chg: -0.31 stop: n/a

HTCH's better than expected earnings report did not produce enough volatility to make our strangle play immediately profitable. This pull back to the $25 level may be a sign that conservative traders should consider exiting early. We did choose the January options so there is plenty of time for HTCH to make a move. The options in our strangle are the January $30 calls (UTQ-AF) and the January $20 puts (UTQ-MD). Our target is for a rise to $3.00. We are not suggesting new strangles at this time.

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

Picked on October 26 at $ 24.89
Change since picked: + 0.61
Earnings Date 11/01/05 (confirmed)
Average Daily Volume = 666 thousand

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Inamed Corp. - IMDC - close: 74.87 change: -0.54 stop: n/a

IMDC finally felt some profit taking on Friday. The stock was looking short-term overbought so it's not a surprise. The $74 region looks like it could offer some short-term support. We are not suggesting new plays at this time. The options in our strangle are the December $75 calls (UZI-LO) and the December $65 puts (UZI-XM)). Our target is for a rise to $5.00 or more.

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

Picked on October 30 at $ 70.63
Change since picked: + 4.24
Earnings Date 11/01/05 (unconfirmed)
Average Daily Volume = 533 thousand

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Kos Pharma - KOSP - close: 59.34 chg: -1.66 stop: n/a

Reaction to KOSP's earnings report on Thursday has been mostly negative. Yet the stock has not launched into any new trends. The failed rally at the 50-dma on Thursday is bearish but when KOSP broke down to a new relative low on Friday there was a quick rebound. We are not suggesting new plays. There are only two weeks left before November options expire and conservative traders may want to seriously consider adjusting their targets lower. Our target is for a rise to $5.00 or more. Our hypothetical cost in the play is about $2.90. The options are the November $65 call (KQW-KM) and the November $55 put (KQW-WK).

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

Picked on October 20 at $ 59.80
Change since picked: - 0.46
Earnings Date 11/03/05 (confirmed)
Average Daily Volume = 460 thousand

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Legg Mason - LM - cls: 113.57 chg: +1.88 stop: n/a

LM continues to rally after breaking out through the top of its trading range at the $110 level. This is very bullish and we added LM to the play list as a call candidate to capture the move. This play, a strangle, has been given new life. We suggested the November $110 calls (LM-KB) and the November $90 puts. Our current target is for one side of the strangle to rise to $5.00 or more. Currently the LM-KB calls are trading at $4.60bid/$4.90ask. Our cost was about $2.40. You, the reader, have a choice. You can sell now for a profit, or hang on for our target at $5.00.

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

Picked on October 12 at $102.59
Change since picked: +10.98
Earnings Date 10/25/05 (confirmed)
Average Daily Volume = 966 thousand

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Loews - LTR - close: 94.53 change: -0.54 close: n/a

LTR was due for some profit taking and shares dipped back to broken resistance, now short-term support, at the $94 level. If the stock continues to pull back the $92.50 region should also act as support. We're not suggesting new strangle positions in LTR. The options in our strategy are the December $95 calls (LTR-LS) and the December $85 puts (LTR-XQ). We'll plan to exit if either option rises to $5.00 or more.

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

Picked on October 23 at $ 89.94
Change since picked: + 4.59
Earnings Date 10/27/05 (confirmed)
Average Daily Volume = 602 thousand

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Microsoft - MSFT - close: 26.66 change: +0.22 stop: n/a

MSFT turned in a very strong week following the previous week's earnings report. The stock is short-term overbought and due for a dip. We are not suggesting new strangle positions. Our strangle is based on the December $27.50 call (MSQ-LY) and the December $22.50 put (MSQ-XX). We are aiming for a rise to $0.80-0.90 for either side of the strangle.

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

Picked on October 25 at $ 25.03
Change since picked: + 1.65
Earnings Date 10/27/05 (confirmed)
Average Daily Volume = 64 million

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O'Reilly Auto. - ORLY - close: 29.90 chg: -0.07 stop: n/a

ORLY continues to show strength by its lack of profit taking on Friday. The stock does look short-term overbought and due for a dip. The $29 level looks like short-term support. A breakout over $30 would be very bullish. The target for our strangle is $1.20 but more conservative traders may want to exit early around breakeven at $0.75. There are only two weeks left before November options expire. It may be prudent to just exit at breakeven if we get the chance. The options in our suggested strangle were the November $30 calls (OQR-KF) and the November $25 puts (OQR-WE).

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

Picked on October 09 at $ 28.23
Change since picked: + 1.71
Earnings Date 10/25/05 (confirmed)
Average Daily Volume = 513 thousand

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Oshkosh Truck - OSK - close: 43.28 chg: +0.30 stop: n/a

Reaction to OSK's earnings report on November 1st was not as powerful as we would have liked. The lack of volatility is not good for our strangle and more conservative traders may just want to exit early. We're going to give OSK a few more days to breakout from its $41.50-44.00 trading range before we bail out. We are not suggesting new strangles. The options in our suggested strangle are the December $45 call (OSK-LI) and the December $40 put (OSK-XH). We're targeting a rise to $3.00 or more.

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

Picked on October 30 at $ 42.82
Change since picked: + 0.46
Earnings Date 11/01/05 (confirmed)
Average Daily Volume = 405 million

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Verifone Holdings - PAY - cls: 24.32 chg: +0.23 stop: n/a

Target achieved! PAY posted its fifth gain in a row and another new high on Friday. When we launched the play we suggested two strangles. Our preferred play was the January strangle with the January $22.50 calls (PAY-AX) and the January $17.50 puts. We also suggested a more aggressive November strangle with the November $22.50 calls (PAY-KX) and the November $17.50 puts. Our target on the November strangle was for a rise to $2.00. On Friday the November $22.50 calls hit a high of $2.00 and are currently trading at $1.80bid/$2.30 ask. Our hypothetical cost was $1.15. The January strangle is still open. Our target for the Januarys is for a rise to $4.50.

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

Picked on October 12 at $ 19.98
Change since picked: + 4.34
Earnings Date 11/18/05 (unconfirmed)
Average Daily Volume = 259 thousand

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Protein Design Labs - PDLI - cls: 25.99 chg: -0.52 stop: n/a

Reaction to PDLI's recent earnings report has been negative. The stock is testing support near $25.50 and its rising 100-dma. A breakdown from here could send the stock toward $23 to fill the gap from August. We are no longer suggesting new strangle positions. The options in our hypothetical strangle are the December $30 calls (PQI-LF) and the December $25 puts (PQI-XE). We'll plan to sell if either side rises to $3.25.

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

Picked on October 30 at $ 27.70
Change since picked: - 1.67
Earnings Date 11/01/05 (confirmed)
Average Daily Volume = 1.8 million
 

Dropped Calls

None
 

Dropped Puts

None
 

Dropped Strangles

None
 

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