Option Investor
Play Updates

In Play Updates and Reviews

HAVING TROUBLE PRINTING?
Printer friendly version

Call Updates

Biogen Idec - BIIB - close: 47.12 change: -0.15 stop: 44.45 *new*

Biotech stocks have had a good year so far, up four days in a row. The BTK index broke out over the 700 level and closed at new five-year highs. Unfortunately, BIIB has been consolidating the last couple of days instead of enjoying the market's strength. The overall pattern on BIIB remains bullish and the P&F chart points to a $62 target but the stock is still trying to regain its footing after the Thursday downgrade. Traders might want to consider buying a bounce from the $46.00-46.50 range but keep in mind that our target is not that far away in the $49.85-50.00 range. We are going to raise the stop a bit to $44.45. FYI: Amgen, a major component in the biotech index, has not been moving higher and looks vulnerable for a move lower. A decline in AMGN could slow any rally in the rest of the group.

Suggested Options:
We are not suggesting new calls in BIIB at this time.

Picked on December 27 at $ 46.11
Change since picked: + 1.01
Earnings Date 01/25/06 (unconfirmed)
Average Daily Volume = 3.2 million

---

Cytec Ind. - CYT - close: 48.29 chg: -0.13 stop: 45.95

CYT's failure to rally on Friday with the markets and its failed rally on Thursday are certainly not bullish developments. The current two-month pattern remains positive but the stock might retrace back to the $47.00 region before moving higher again. We would not suggest new plays at this time but watch for a bounce from the $47 level. Our target is the $49.85-50.00 range. More aggressive traders may want to aim higher. The P&F chart points to a $65 target. The biggest challenge to initiating new positions now is the time frame. We do not want to hold positions over the Jan. 19th earnings report (which is currently an unconfirmed date).

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

Picked on December 22 at $ 47.01
Change since picked: + 1.28
Earnings Date 01/19/06 (unconfirmed)
Average Daily Volume = 333 thousand

---

Foster Wheeler - FWLT - close: 38.96 chg: +0.74 stop: 35.49

FWLT continues to look strong. The stock has broken out from its four-week sideways trading range and shares are now hitting new highs. Short-term technicals like the RSI and stochastics are bullish and its MACD is nearing a new buy signal. The Point & Figure chart points to a $73 target. Our trigger to buy calls was at $38.05 and we would still consider new bullish positions here although more patient traders might consider waiting for a dip back toward $38, since broken resistance there should act as new support. Our target is the $42.00-42.50 range.

Suggested Options:
We are going to suggest the February calls.

BUY CALL FEB 35 UFB-BG open interest=1771 current ask $4.80
BUY CALL FEB 40 UFB-BH open interest=2503 current ask $1.60

Picked on January 05 at $ 38.05
Change since picked: + 0.91
Earnings Date 03/15/06 (unconfirmed)
Average Daily Volume = 598 thousand

---

Gilead Sciences - GILD - close: 57.03 chg: +0.41 stop: 51.99

New five-year highs in the BTK biotech index did hurt shares of GILD. The stock itself added 0.7% on Friday and closed at a new all-time high after an analyst reiterated their "out perform" rating. The technical picture is bullish and the P&F chart points to a $66 target. Our target is only a couple of points away in the $59.00-60.00 range. While our outlook remains positive we would not suggest new positions here. If GILD dips then watch for a bounce in the $55.00-56.00 range only then would we consider new positions. We do not want to hold over GILD's mid January earnings report.

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

Picked on December 22 at $ 54.51
Change since picked: + 2.52
Earnings Date 01/17/06 (unconfirmed)
Average Daily Volume = 4.3 million

---

Ipsco Inc. - IPS - close: 84.90 change: +1.20 stop: 79.99

We still can't find any news to account for Thursday's sell-off in IPS. If we had to render a guess it might just be profit taking after IPS hit its projected price target (near $86) from the inverted or bullish head-and-shoulders pattern formed over September through November. Fortunately, there was no follow through on the selling and the stock has bounced from its simple 10-dma. This looks like a new bullish entry point but consider new positions carefully. IPS remains overbought and some of its technical indicators are also overbought and look ready to turn lower. We are willing to keep the play open because metal and steel stocks have been strong and we suspect IPS will continue to rally up to its earnings report in late January. We do not want to hold over the earnings report. Our target is the $89.00-90.00 range.

Suggested Options:
We are suggesting the February calls because we suggest holding any bullish position up to the company's late January earnings report.

BUY CALL FEB 80 IPS-BP open interest= 18 current ask $7.80
BUY CALL FEB 85 IPS-BQ open interest=173 current ask $4.80

Picked on December 30 at $ 83.55
Change since picked: + 1.45
Earnings Date 01/24/06 (unconfirmed)
Average Daily Volume = 396 thousand

---

Lennar Corp. - LEN - close: 62.62 chg: -0.29 stop: 59.99

Homebuilders were one of the few sectors that did not rally on Friday and that is a surprise. If the markets rallied higher due to the jobs report assuming that the economic data suggests the Fed is closer to ending its tightening cycle on interest rates then the builders should have enjoyed some strength. Lower rates usually equals lower mortgage rates and that means more home sales. Yes, it's true that home sales are expected to decline from 2005's blistering pace but 2006 is still expected to be one of the best years ever for the number of homes sold. The DJUSHB home construction index still looks poised for a breakout as do shares of LEN. The P&F chart for LEN is very bullish. The stock has produced a bullish triangle breakout pattern with a $75 target. We are going to suggest a trigger to buy calls at $64.01. If triggered we'll target a rally into the $69.50-70.00 range by February option expiration.

Suggested Options:
We are suggesting the February calls because March strikes aren't available and we don't want to pay for Mays.

BUY CALL FEB 60 LEN-BL open interest=2459 current ask $4.60
BUY CALL FEB 65 LEN-BM open interest=6679 current ask $1.80
BUY CALL FEB 70 LEN-BN open interest=1394 current ask $0.50


Picked on January xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 03/16/06 (unconfirmed)
Average Daily Volume = 2.6 million

---

Mohawk Ind. - MHK - close: 88.56 change: -0.60 stop: 85.90

MHK continued to show relative weakness on Friday. The stock's failure to rally with the rest of the market is a danger sign. We liked MHK as a bullish candidate because the Tuesday rally put shares above its long-term trendline of resistance. Wednesday's strength confirmed the move and pushed MHK above round-number resistance at $90.00. Our trigger to buy calls was at $90.25. A little profit taking we understand and we are okay with it but it makes us nervous that MHK slid lower when the markets were hitting new highs on Friday. Aggressive traders might want to consider new positions here since MHK was bouncing off its lows of the session on Friday afternoon. For the rest of us we would wait for another move over $90 or even $91 before considering new bullish positions. Our target is the $94.85-95.00 range. It might be notable that last week's rally did produce a new triple-top breakout buy signal on the P&F chart. Don't forget that we want to exit ahead of its February earnings report.

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

Picked on January 04 at $ 90.25
Change since picked: - 1.69
Earnings Date 02/02/06 (unconfirmed)
Average Daily Volume = 355 thousand

---

Petrochina Co - PTR - close: 85.75 change: +1.32 stop: 79.99

Oil stocks continued to rise on Friday. The OIX oil index added 2% and the OSX oil services index really moved with a 3.5% gain. Shares of PTR hit a new four-month high with Friday's 1.5% gain. We probably wouldn't chase PTR here. If you're looking for a new entry wait for a potential dip back into the $84.00-84.50 region. Our end of February target is the $89.50-90.00 range.

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

Picked on January 03 at $ 83.50
Change since picked: + 2.25
Earnings Date 03/00/06 (unconfirmed)
Average Daily Volume = 488 thousand
 

Put Updates

Netease.com - NTES - close: 57.14 chg: -0.96 stop: 58.01

It looks like shorts in NTES may have run for cover a little bit on Friday. The stock rallied to resistance near $60 before turning lower in the afternoon. The move was probably fueled by the general market bullishness and some positive analyst comments over Chinese Internet and technology companies. Friday's action looks like a failed rally so we'll keep NTES on the list as a candidate. Our trigger to buy puts on the stock is at $54.95, under the November low. If triggered we'll target a decline into the $50.25-50.00 range. We do not want to hold positions over the February earnings report.

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

Picked on January xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 02/21/06 (unconfirmed)
Average Daily Volume = 4.2 million

---

Progressive Corp - PGR - cls: 116.26 chg: -0.74 stop: 120.05

We're impressed. The markets climbed higher for the first four days of January but PGR continued to show relative weakness. Thursday's failed rally at the $118 level was repeated early on Friday morning. This looks like a new entry point to buy puts but that takes guts with the rest of the market in breakout mode, plus we have a time crunch issue. It looks like PGR is due to report earnings on January 18th. That gives us less than a week and a half to reach our target so we are not suggesting new positions. Don't forget that January 16th is a market holiday. We do not want to hold over the earnings report. More aggressive traders might want to enter new positions here carefully and consider tightening your stop loss. We are adjusting our target to $111.50-111.00 to account for potential support at the rising 100-dma.

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

Picked on December 30 at $117.45
Change since picked: - 1.19
Earnings Date 01/18/06 (confirmed)
Average Daily Volume = 836 thousand

---

Scotts Miracle grow - SMG - cls: 46.73 change: +0.78 stop: 47.55

Uh-oh! The market strength on Friday inspired SMG to rebound again and shares closed just under resistance near the $47.00 level. If the broader market continues to rally on Monday we would expect shares of SMG to breakout higher and retest stronger resistance near $48.00. More conservative traders may just want to exit early right here or tighten their stop closer to the $47 level. We are not suggesting new positions at this time.

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

Picked on January 01 at $ 45.24
Change since picked: + 1.49
Earnings Date 01/26/06 (unconfirmed)
Average Daily Volume = 354 thousand

---

Stryker Corp. - SYK - close: 45.14 chg: +0.29 stop: 46.51

In spite of last week's market strength shares of SYK still look poised to move lower. The two-month oversold bounce ended with a failed rally near $48 and its 200-dma in December and now SYK is in a narrow, descending channel. Yet we need to consider that the market's strength may continue so traders looking for new positions may want to wait for a decline under the 50-dma and the $44.50 level or wait for a new relative low under $44.00. We do want to issue one note of caution. The weekly chart shows a hammer-type candlestick, which is normally seen as a bullish reversal pattern. 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.

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

Picked on December 30 at $ 44.29
Change since picked: + 0.85
Earnings Date 01/26/06 (confirmed)
Average Daily Volume = 2.1 million
 

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.)

---

Amer. Eagle Out. - AEOS - cls: 24.09 chg: +0.08 stop: n/a

Time is running out. We have two weeks left before January options expire. For this strangle play to have a chance at exiting at breakeven or better then AEOS needs to trade above $27.50 or under $22.50. We are 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 changing our target to breakeven at $2.35.

Suggested Options:
We are not suggesting new strangle plays in AEOS.

Picked on November 13 at $ 25.47
Change since picked: - 1.38
Earnings Date 11/15/05 (confirmed)
Average Daily Volume = 3.6 million

---

Abercrombie&Fitch - ANF - close: 66.38 chg: +0.36 stop: n/a

Time is running out for our ANF strangle as well. We have two weeks left before January options expire. Currently ANF is trading over the $65 strike but not by much. We need to see the stock make a run for the $70 level if we want to exit near breakeven. We are not suggesting new plays at this time. The options in our strangle are the January $65 calls (ANF-AM) and the January $55 puts (ANF-MK). Our target has been adjusted to breakeven at $5.15. FYI: the Jan. $65 calls (ANF-AM) are trading at $2.45bid/$2.50ask.

Suggested Options:
We are not suggesting new strangle plays in ANF.

Picked on November 13 at $ 59.67
Change since picked: + 6.71
Earnings Date 11/15/05 (confirmed)
Average Daily Volume = 2.7 million

---

Blue Coat Sys. - BCSI - cls: 41.82 chg: +0.46 stop: n/a

BCSI's oversold bounce got some more help from the analyst community on Friday. The stock was started with a "buy" rating. Shares responded with a 1.1% gain but volume came in below average. We only have two weeks left and BCSI needs to trade under $39 or well over $50 if we are going to be able to exit at breakeven. Last week we adjusted our target to breakeven at $3.25. We are not suggesting new plays. Our current play involves the January $50 call and the January $40 put.

Suggested Options:
We are not suggesting new strangle plays in BCSI.

Picked on December 04 at $ 45.43
Change since picked: - 3.68
Earnings Date 02/14/06 (unconfirmed)
Average Daily Volume = 416 thousand

---

Building Materials - BMHC - cls: 76.43 chg: +1.41 stop: n/a

A positive market environment really helped BMHC's oversold bounce. Friday the stock continued to rise following a broker upgrade and volume came in above average. Yet there is a chance that the bounce is over. The Friday rally failed near the $77.50 region, which was previous support and broken support usually becomes resistance. 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.

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

Picked on December 18 at $ 80.95
Change since picked: - 4.52
Earnings Date 01/24/06 (unconfirmed)
Average Daily Volume = 527 thousand

---

Chicago Merc. Exchg. - CME - cls: 374.95 chg: +10.95 stop: n/a

CME will just not pick a direction and go with it. Every time it looks like CME has broken out higher or broken down it quickly reverses course. We are running out of time too. There are only two weeks left before January options expire. At the moment if we have any hope of exiting near breakeven we need to see CME trade under $340 or above $410 and do it pretty quickly. Odds of that happening don't seem very high at the moment. We are not suggesting new plays. Our current play involves the January $400 calls (CMJ-AK) and the January $350 puts (CMJ-MA).

Suggested Options:
We are not suggesting new strangles in CME.

Picked on November 20 at $375.90
Change since picked: -00.95
Earnings Date 01/24/06 (unconfirmed)
Average Daily Volume = 879 thousand

---

Four Seasons - FS - close: 54.54 chg: -0.42 stop: n/a

We have nothing new to report on for FS. Last week's breakout over its 50-dma and its multi-month trendline of resistance and lower highs has all but killed this strangle play. We have two weeks left before January options expire. The options in our strangle were the January $60 calls (FS-AL) and the January $50 puts (FS-MJ). We have adjusted our target to breakeven at $2.60.

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

Picked on November 08 at $ 55.37
Change since picked: - 0.83
Earnings Date 11/10/05 (confirmed)
Average Daily Volume = 319 thousand

---

Lear Corp - LEA - close: 29.34 chg: +0.09 stop: n/a

In the news on Friday Fitch Ratings lowered their rating on Lear Corp. to junk status over worries about the company's free cash flow (source: Reuters). The news had little impact on shares of LEA, which traded in a narrow range on Friday. We have two weeks left before January options expire. If we have any hope of exiting near breakeven then LEA needs to trade over $35 or under $25 pretty soon. 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). We have lowered our target to breakeven at $1.60.

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

Picked on November 06 at $ 30.24
Change since picked: - 0.90
Earnings Date 01/25/06 (confirmed)
Average Daily Volume = 1.8 million

---

Questar Corp. - STR - close: 79.51 chg: +0.39 stop: n/a

STR tried to rally over the $80 level for the second day in a row but weakness in the natural gas futures may have weakened investors' resolve. The short-term technicals are bullish but if we're going to see this strangle reach our target we need to see STR trade over $85.00 before January options expire. We have adjusted our target to breakeven at $5.10. Our strangle involves the January $80 calls (STR-AP) and the January $70 puts (STR-MN).

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

Picked on November 20 at $ 76.25
Change since picked: + 3.26
Earnings Date 01/26/05 (unconfirmed)
Average Daily Volume = 716 thousand

---

Texas Ind. - TXI - close: 51.05 chg: +0.00 stop: n/a

We have nothing new to report on for TXI. The strangle play is pretty much dead. The company's earnings report, while coming in strong, failed to produce any sort of move in the stock price. Shares even failed to participate in the market rally on Friday. There is no reason to suspect the stock will breakout from its three-month trading range before January options expire. We are not suggesting new plays. 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 and we have adjusted our target to breakeven on the slim chance that TXI does produce a move.

Suggested Options:
We are not suggesting new strangle positions in TXI.

Picked on November 27 at $ 49.57
Change since picked: + 1.48
Earnings Date 01/05/06 (confirmed)
Average Daily Volume = 354 thousand

---

Valero Energy - VLO - close: 55.89 chg: +1.12 stop: n/a

A strong week for oil and oil stocks was capped off with a big gain on Friday. Shares of VLO participated in the oil stock rally and added more than 2% on Friday. The move also marks a bullish breakout over resistance. We are not suggesting new plays at this time. We only have two weeks left before January options expire. Our target has been adjusted to breakeven at $2.93. The options in our strangle are the January $45 puts (VLO-MI) and the January $55 calls (VLO-AK)(both post-split). Currently the VLO-AK calls are trading at $1.90bid/$2.05 ask.

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

Picked on November 21 at $ 50.50
Change since picked: + 5.39
Earnings Date 01/30/06 (unconfirmed)
Average Daily Volume = 10.7 million
 

Dropped Calls

United States Steel - X - close: 51.17 chg: -0.01 stop: 44.99

Target achieved. Shares of X continued to rally on Friday morning and traded over the $51.10 level multiple times before fading lower into the closing bell. Our target was the $52.00-52.50 range. The stock looks short-term overbought and due for a dip.

Picked on December 23 at $ 47.05
Change since picked: + 3.12
Earnings Date 01/24/06 (unconfirmed)
Average Daily Volume = 3.8 million
 

Dropped Puts

None
 

Dropped Strangles

Verifone Holdings - PAY - cls: 27.00 chg: +0.94 stop: n/a

Target achieved. This past week has been bullish for PAY, which was bouncing from support near the $25.00 level. Friday's session was very strong with a 3.6% gain on very strong volume. The stock is now challenging its highs from last month. The surge higher on Friday pushed the options higher as well. Our target has been for a rise to $4.50. The January $22.50 calls (PAY-AX) closed at $4.30bid/$4.70ask. We are closing the play. More aggressive traders may want to think about holding their position a little while longer just to see if the rally continues. Our estimated cost was about $2.60.

Picked on October 12 at $ 19.98
Change since picked: + 7.02
Earnings Date 12/01/05 (confirmed)
Average Daily Volume = 259 thousand
 

Play Update Archives