Biogen Idec - BIIB - close: 45.28 change: +0.62 stop: 43.95*new*
The biotech sector was one of the few sector indices to close in the green on Friday. Contributing to the sector strength was BIIB with a nice bounce from the $44.00 level and its 40-dma. Friday's move was also a bullish engulfing candlestick pattern but we're not putting a lot of faith in the one-day bullish reversal pattern at the moment. Jim's market wrap this weekend is not bullish for January and traders may not want to be opening new bullish positions at this time. We're not suggesting new positions in BIIB. Instead we're going to try and reduce our risk by raising the stop loss to $43.95. A move over $46.50 or $46.72 (last week's high) might change our mind about going long BIIB. Currently the P&F chart is still bullish and points to a $62 target. Our target is the $49.85-50.00 range. We do not want to hold over BIIB's late January earnings report.
Picked on December 27 at $ 46.11
Cytec Ind. - CYT - close: 47.63 chg: +0.08 stop: 45.95 *new*
CYT has spent the last week trading sideways between $47.00 and $47.85. We're not going to complain about the sideways consolidation since the rest of the market was drifting lower last week. The pattern for CYT is still bullish following the late December breakout over resistance. What concerns us is the likelihood for a real market pull back in January. We would not suggesting new bullish positions in CYT at this time. Normally we might consider going long calls on a breakout over the $48.00 level but our short-term target is only the $49.85-50.00 range. The P&F chart points to a $65.00 target. We are going to tighten our stop loss to $45.95.
Picked on December 22 at $ 47.01
Femsa Fomento - FMX - close: 72.51 chg: -0.04 stop: 67.75
The Mexican markets have out performed out own over the past year but they were
afflicted by the same low-volume holiday malaise last week.
Picked on December 19 at $ 70.65
Gilead Sciences - GILD - close: 52.57 chg: -0.27 stop: 49.99
The pull back in GILD has now reached five days in a row. The bad news is that the pre-Christmas breakout is looking like a bull trap. The good news is that GILD is due for a bounce! Unfortunately, the weeklong sell-off has turned most of GILD's daily technical oscillators bearish. We are not suggesting new bullish positions at this time. More conservative traders may want to adjust their stop loss toward the 50-dma near 51.60. The P&F chart points to a $66 target. Our target is the $59.00-60.00 range. We do not want to hold over GILD's mid January earnings report.
Picked on December 22 at $ 54.51
Ipsco Inc. - IPS - close: 82.98 change: +0.00 stop: 79.99
Our bullish play with IPS has been triggered but we urge readers to be careful. The fact that the stock spiked higher near the last hour of trading and failed to hold its gains is not very convincing. Granted IPS performed better than most of the market this past week but its relative strength may have just been window dressing with funds trying to add a "winning" stock to their portfolio before the quarter ends. Our trigger to buy calls was at $83.55 and IPS hit $83.60 on late Friday afternoon. Aggressive traders may want to go long here or look for a dip back toward the $81.25-81.50 region and buy a bounce. More conservative traders might feel better just sitting out for another day or two and see if IPS has any change of heart next week. Currently our target is the $89.00-90.00 range. We do not want to hold over the January earnings report.
on December 30 at $ 83.55
United States Steel - X - close: 48.07 chg: -0.66 stop: 44.65
We believe the major market indices are in jeopardy of turning lower next week. That could pull shares of X back toward the $46.00-46.50 region. We would wait for a dip and a bounce near $46.50 before considering new bullish call positions in X, especially since the stock is giving off mixed signals. In the meantime we're going to cinch up our stop loss a bit to $44.99. Our late January target is the $52.00-52.50 range. The Point & Figure chart for X points to an $86 target. We do not want to hold over the January earnings report.
Picked on December 23 at $ 47.05
PACCAR Inc. - PCAR - close: 69.23 change: -0.74 stop: 72.51
It looks like the pre-Christmas oversold bounce in PCAR has finally failed. After oscillating near the $70.00 level and its 200-dma for a few days shares of PCAR are now trending lower again. The selling began to pick up speed and volume on late Friday afternoon. This looks like a new entry point to buy puts. More conservative traders may still want to wait for a new relative low under $68.27 or $68.00. Our target is the $65.25-65.00 range. Technical traders should note that we are betting against a bullish P&F chart but PCAR can dip toward $65 and still not reverse its current P&F buy signal. We do not want to hold over the late January earnings report.
BUY PUT FEB 75 PAQ-NO open interest=629 current ask $6.40
Picked on December 20 at $ 69.49
Progressive Corp - PGR - cls: 116.78 chg: -1.84 stop: 121.25
Our put play in PGR has been triggered. The bearish pattern of lower highs has finally blossomed into a breakdown below support near $118 and its 50-dma. Our trigger to buy puts in PGR was at $117.45, which was hit quickly on Friday morning. Long-term the pattern for PGR remains very bullish but the stock is still very overbought and could easily consolidate toward the $110 level without doing much harm to its multi-year bull run. The weakness on Friday helped confirm the bearish technical signals on its weekly chart and it produced a new (weekly) MACD sell signal. Our target is the $110.50-110.00 range but we only have 19 days ifthe current earnings date is correct. We do not want to hold over the earnings report. If you're looking for a new entry point watch for an oversold bounce and failed rally near $118 and possibly $120, which is overhead resistance.
BUY PUT FEB 120 PGR-ND open interest=755 current ask $6.00
Picked on December 30 at $117.45
Stryker Corp. - SYK - close: 44.43 chg: -0.48 stop: 46.51
Our bearish play in SYK is now open. The stock gapped lower on Friday and dipped to $44.29 and then proceeded to consolidate sideways above its simple 50-dma. Sometimes we wonder if it is just a coincidence that the low (or the high) of the day happens to be our trigger, which is the case here. Friday's decline in SYK does appear to be a bearish breakdown from its two-month rising channel. While the play is officially open readers may want to wait a day or two before initiating positions. Look for a failed rally near $45.00-45.40 or a new low under $44.25-44.00 before considering new put plays. The Point & Figure chart points to a $23.00 target. Our target is the $40.25-40.00 range, near its October lows. We do not want to hold over the January earnings report. That gives us about three weeks, maybe less.
BUY PUT FEB 45 SYK-NI open interest=378 current ask $2.10
Picked on December 30 at $ 44.29
(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.)
Amer. Eagle Out. - AEOS - cls: 22.98 chg: -0.14 stop: n/a
The retail index (RLX) does not look very healthy. The sector looks poised to produce a new leg lower in January. That would coincide nicely with AEOS's rally up to its five-month trendline of resistance (see chart). We only have three weeks left before January options expire. We're not suggesting new plays. The current strangle has an estimated cost of $2.35 with the January $27.50 calls (AQU-AY) and the January $22.50 puts (AQU-MX). We are targeting a rise to $4.70.
Picked on November 13 at $ 25.47
Abercrombie&Fitch - ANF - close: 65.18 chg: -0.17 stop: n/a
ANF is still out performing the rest of the retail sector but the rally may be in for a struggle with January at our doorstep. We only have three weeks left before January options expire. If ANF doesn't trade over $70 by expiration or near $50 then we do not have much chance of breaking even on this play. More conservative traders may want to lower their target. We are adjusting our target to breakeven at $5.15. We are not suggesting new strangle positions at this time. The options in our strangle are the January $65 calls (ANF-AM) and the January $55 puts (ANF-MK). Our estimated cost was $5.15.
Picked on November 13 at $ 59.67
Blue Coat Sys. - BCSI - cls: 45.72 chg: -0.52 stop: n/a
As it stands right now we're in trouble with this BCSI strangle play. The December 16th breakdown from its sideways consolidation did not produce any follow through. Instead shares bounced sideways along its rising 100-dma. Then just a few days ago Standard & Poor's announced they were adding BCSI to their smallcap index. The stock naturally moved higher on the news but not high enough to breakout over resistance in the 46.50-47.00 range. We only have three weeks left before January options expire. In order to breakeven we need to see BCSI rally above $50 or fall under $40 in that time frame. We're adjusting our target to breakeven at $3.25. Our current play involves the January $50 call and the January $40 put. Our estimated cost is $3.25.
Picked on December 04 at $ 45.43
Building Materials - BMHC - cls: 68.21 chg: -3.79 stop: n/a
The sell-off in BMHC is picking up steam. The stock lost another 5.2% on Friday. Volume came in very big at about double the daily average. Friday's decline was also a breakdown below support at the 200-dma and at the $70.00 level. Currently shares are oversold and due for a bounce but it looks like the new trend has been established. We are not suggesting new strangle positions at this time. The options in our strangle play are the March $90 calls (BGU-CR) and the March $70 puts (BGU-ON). Our estimated cost is $8.20. Our target is $12.50 by March expiration. Currently the BGU-ON puts are trading at $6.70bid / $7.30ask.
Picked on December 18 at $ 80.95
Chicago Merc. Exchg. - CME - cls: 367.49 chg: -0.52 stop: n/a
The bounce from CME's December low appears to be failing again. Shares dipped to $361 on Friday morning and the stock closed under the simple 50-dma. Most of the technical indicators are bearish and the recent buy signal on its Point & Figure chart has reversed into a new bull-trap pattern. If CME doesn't starting moving one direction soon we're going to be in trouble. There are only three weeks left before January options expire. We are adjusting our target to breakeven at $26.70. That means CME needs to trade well above $400 or under $350 if we're going to hit our new target. We are not suggesting new positions. Our current play involves the January $400 calls (CMJ-AK) and the January $350 puts (CMJ-MA). Our estimated cost was $26.70.
Picked on November 20 at $375.90
Four Seasons - FS - close: 49.75 chg: -0.01 stop: n/a
The long-term pattern for FS remains bearish but over the last couple of weeks FS is slowly building or coiling for what looks like a bullish breakout. If FS does breakout over $50.50 and its 50-dma it will be bad news for our strangle position. We only have three weeks left before January options expire. Considering this more conservative players may want to exit early and cut their losses here. Our bias for January is turning bearish so we're willing to risk it and keep the play open. In order to hit our target FS needs to trade near $45 before expiration. We are not suggesting new strangles at this time. The options in our strangle were the January $60 calls (FS-AL) and the January $50 puts (FS-MJ). Our estimated cost was about $2.60. We're aiming for a rise to $5.00 or more.
Picked on November 08 at $ 55.37
Lear Corp - LEA - close: 28.46 chg: +0.18 stop: n/a
The volatility in shares of LEA has dried up over the last few weeks. This lack of movement has had the unwanted affect of evaporating the option premiums. The stock appears to have built a new base or bottom with support near the $27 level over the last couple of months. There are only three weeks left before January options expire. For this play to succeed or even breakeven we need to see LEA trade over $35 (not likely) or under $25 (a dwindling prospect). We might be able to recoup the cost of this play by buying calls on LEA if the stock can breakout over the $29.00 level. We are no longer suggesting new strangle positions. The options in our strangle are the January $35 calls (LEA-AG) and the January $25 puts (LEA-ME). Our estimated cost was $1.60. We are lowering our target to $1.60.
Picked on November 06 at $ 30.24
Verifone Holdings - PAY - cls: 25.30 chg: +0.09 stop: n/a
Readers have a decision to make. So far PAY has been holding above broken resistance, now support, at the $25.00 level. Will the stock hold here and rally higher or will it turn lower potentially dragged under support by a market meltdown? If you think the stock will not rally from here than consider exiting now. Our cost for the January strangle was about $2.60. Currently the PAY-AX Jan. $22.50 calls are trading at $2.70bid/$3.30 ask. If you do think PAY will continue higher, and it might since the stock tends to follow its own course and not react too much to market momentum, then keep the play alive. Our target is for a rise to $4.50. Just remember that we only have three weeks left before January options expire.
Picked on October 12 at $ 19.98
Questar Corp. - STR - close: 75.70 chg: -0.69 stop: n/a
STR continues to sink and shares closed under the $76.00 level on Friday. Oil may have bounced higher into New Year's but natural gas futures were drifting lower. Currently we're in bad shape with this strangle play. The stock has reverted back to our entry level near $75-76. We only have three weeks left before January options expire and to see this play even breakeven we'd need to see a rally towards $85 or a decline towards $65. We are adjusting our target to breakeven but the odds are against us unless natural gas really sees a big move soon. Our strangle involves the January $80 calls (STR-AP) and the January $70 puts (STR-MN). Our estimated cost was $5.10.
Picked on November 20 at $ 76.25
Texas Ind. - TXI - close: 49.84 chg: +0.28 stop: n/a
We are still in a wait and see mode with TXI. The company is due to report earnings on Thursday, January 5th. The earnings report is pretty much our only chance to try and score (and/or breakeven) with this strangle play. If the news fails to jolt TXI out of its three-month trading range then our strangle is in deep trouble. We are not suggesting new plays but aggressive traders might consider a new position using February strikes. The options in our strangle are the January $55 calls (TXI-AK) and the January $45 puts (TXI-MI). Our estimated cost is $2.70.
Picked on November 27 at $ 49.57
Valero Energy - VLO - close: 51.60 chg: +0.00 stop: n/a
VLO closed unchanged on the last session of 2005. The stock gapped down at the open but managed a late afternoon rally higher. Currently the short-term pattern looks bearish with a trend of lower highs. We're a little surprised that VLO hasn't rallied higher given the strength in crude oil the last few sessions. This divergence could be a bad omen if you're bullish. We have a bigger problem. January options are set to expire in three weeks. If this play is going to score we need to see VLO trade over $55 or under $45 before expiration. Unfortunately, at this time, we do not expect either move to happen before expiration. If by chance VLO does make a move we're adjusting our target to $2.93 (breakeven).
Picked on November 21 at $ 50.50
Tractor Supply - TSCO - cls: 52.94 chg: -0.54 stop: 52.65
The retail sector has not shown any strength and the RLX index looks poised to breakdown next month. Shares of TSCO are also withering slowly lower. We're going to exit early before the stock hits our stop loss. We can always reconsider a new bullish position if shares trade over $55 again.
Picked on November 30 at $ 52.75
D.R.Horton - DHI - close: 35.73 chg: -0.48 stop: n/a
DHI has finally closed under the $36.00 level and the move has confirmed a breakdown below its two-month trendline of support. If shares of DHI follow through on this pattern and turn lower back toward the $32.50 level we'll end up with a nothing left of our initial investment. We're choosing to exit now. The DHI-AG January $35 calls are still trading in the $1.50-1.65 range. Our estimated cost was $3.15. More aggressive players willing to lose it all may want to hold on for an unexpected rally in DHI and the homebuilding sector.
Picked on November 13 at $ 32.56