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Call Updates

Beazer Homes - BZH - close: 64.68 change: -0.81 stop: 62.29

Traders need to be cautious here with BZH. The bounce has not materialized as expected and that's bad news. The stock seems to be struggling with the $66.00 level where it has produced a failed rally twice in the last three days. We seriously considered exiting this play early right here. If BZH hasn't bounced by now then it will likely pull back and retest support at the simple 200-dma again currently near $62.30. More conservative traders should strongly consider exiting early right now to limit losses. You can always jump back in if BZH trades over $66.00 again. Or if you don't want to exit consider a stop loss near $64.00. We're going to keep the play open for now but we're not suggesting new plays. We do expect a pull back toward the 200-dma. If BZH does bounce then our target is the $69.85-70.00 range.

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

Picked on February 15 at $ 65.05
Change since picked: - 0.37
Earnings Date 01/19/06 (confirmed)
Average Daily Volume = 1.2 million

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Cephalon - CEPH - close: 74.39 change: -0.82 stop: 69.99

CEPH hit a little bit of profit taking on Friday morning but the stock was on the rebound by Friday afternoon. We remain on the sidelines. Our trigger to buy calls is at $76.65. We are reposting the original play description from Thursday night here:

The BTK biotech index is in breakout mode. The index closed at new five-year highs today and the sector looks prepared to keep the bullish run going for a while. We're going to try and play the upward momentum in the sector with a bullish play on CEPH. The stock has already been a big winner over the last few months and now after several weeks of consolidating sideways it looks like CEPH is ready to breakout to new highs of its own. We are going to suggest a trigger to buy calls at $76.65. If triggered we'll target a run into the $82.00-82.50 zone. More conservative traders may want to exit near $80.00 since it might be round-number resistance. Traders should remember that any time you're trading a biotech stock there is an elevated status of risk. You never know when an unexpected announcement about a drug in development or even from a competitor can send the stock you're trading gapping higher or lower in an instant.

Suggested Options:
We are suggesting the March calls. If you want more time the next month available is Mays.

BUY CALL MAR 75 CQE-CO open interest=1836 current ask $2.75
BUY CALL MAR 80 CQE-CP open interest= 540 current ask $1.05

Picked on February xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 02/14/06 (confirmed)
Average Daily Volume = 2.5 million

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Chico's FAS - CHS - close: 48.37 change: -0.29 stop: 44.89 *new*

Stronger than expected sales data helped fuel a rally in retailers early last week. The group also got a boost from J.C.Penney who produced better than expected earnings results. CHS received a higher price target from one analyst a few days ago. The consumer confidence numbers that came out on Friday could have produced a bigger sell-off in the retail group but they did not. We would probably look for a dip back toward the $46.50-46.00 range before initiating new positions. Broken resistance near $46.00 should now act as new support. Of course the $50.00 mark might act as round-number, psychological resistance so expect some volatility as CHS encounters that level. The Point & Figure chart is bullish and points to a $70 target. Our target is the $52.00-52.50 range. We are raising our stop loss to $44.89.

Suggested Options:
Wait for a dip before opening new call plays. We would choose from the March calls. We do not want to hold over the March 1st earnings report.

Picked on February 14 at $ 47.61
Change since picked: + 0.76
Earnings Date 03/01/06 (confirmed)
Average Daily Volume = 1.8 million

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Cigna - CI - close: 122.21 change: +0.64 stop: 118.79

We remain leery of the trading action in CI. The stock had a lackluster week and twice it has gapped down and not quite filled the gap either time and this should be considered bearish. The MACD indicator on its daily chart is about to produce a sell signal while on the weekly chart it has recently produced a new buy signal. Short-term technical oscillators are mixed. On a big picture basis the breakout above the $118-120 range is pretty bullish since CI consolidated sideways between $105 and $118-120 for months. The P&F chart, which eliminates a lot of the noise we see on the daily chart, is bullish with a buy signal pointing to a $154 target. If you're the optimistic type you could also point out the short-term trend of higher lows. We would not suggest new call positions until CI traded back above the $123.00 or $124.00 levels (which one is up to you). Our target is the $129.50-130.00 range.

Suggested Options:
We are not suggesting new plays at this time. If CI does move higher we'd would choose from the March or April strikes; probably the $120s or $125s.

Picked on February 12 at $123.63
Change since picked: - 1.42
Earnings Date 02/08/06 (confirmed)
Average Daily Volume = 979 thousand

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Express Scripts - ESRX - close: 92.85 chg: -0.66 stop: 91.45 *new*

Hmm... we don't know what the catalyst was but late Friday afternoon ESRX suddenly turned more volatile and there was a big spike in volume. By the closing bell the stock had erased the gains from Thursday. We are quickly running out of time. ESRX is expected to report earnings on Wednesday, February 22nd. We do not want to hold over the report. Therefore we plan to exit on Tuesday afternoon near the closing bell. However, to reduce our risk we are raising our stop loss to $91.45.

Suggested Options:
We are not suggesting new call plays in ESRX.

Picked on January 29 at $ 92.42
Change since picked: + 0.43
Earnings Date 02/22/06 (confirmed)
Average Daily Volume = 2.1 million

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Google Inc. - GOOG - close: 368.75 chg: +2.29 stop: 344.48

We don't see any change from our original play description from Thursday night. However from the looks of GOOG's intraday chart we'd probably expect some profit taking on Monday. Watch for a dip back toward the $360 level at a minimum. A bounce from $360 or $355 could be used as a new entry point. Our original play description is reposted here:

This is a very aggressive speculation play. The reaction to GOOG's latest earnings report at the end of January was pretty drastic. The stock sank from $432 to less than $340 as of yesterday. The stock was very oversold and due for a bounce. That bounce came today after shares tested support near its simple 200-dma and the top of its October gap. Today's move was powerful enough to push shares above the top of its February 13th gap down and its simple 10-dma. We suspect that the bounce is not over yet. The next test of overhead resistance will probably be near the $380 level. However, we believe that GOOG can probably bounce back into the $394.00-400.00 range, which will be our target. The risk reward isn't great but we're putting the initial stop loss under today's low. We repeat this is very speculative and traders should only consider it if they're willing to risk a total loss. If you would prefer to buy a dip then watch for a pull back toward $360 or $355.

Suggested Options:
We are suggesting the March calls as the bounce will probably be a short-term affair. You, the individual trader, should pick which strike best suits your risk profile.

BUY CALL MAR 350 GGD-CJ open interest= 7235 current ask $28.30
BUY CALL MAR 360 GGD-CL open interest= 6419 current ask $21.90
BUY CALL MAR 370 GGD-CN open interest=11033 current ask $16.30
BUY CALL MAR 380 GOP-CP open interest= 8133 current ask $12.00
BUY CALL MAR 390 GOP-CR open interest= 8736 current ask $ 8.40

Picked on February 16 at $366.46
Change since picked: + 2.29
Earnings Date 01/31/06 (confirmed)
Average Daily Volume = 12.4 million

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Hartford Fin. Srv. - HIG - cls: 83.65 chg: +0.27 stop: 79.95*new*

HIG is nearing resistance at the $85.00 level. More conservative traders may want to consider an early exit close to $85 and/or its simple 50-dma (85.09). We will be expecting a pull back/profit taking back toward the $82.00 level, which looks like short-term support. use a bounce from $82 as a new bullish entry point. We would not open new plays at the moment. We are adjusting the stop loss to 79.95. Our target is the $87.50-90.00 range.

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

Picked on February 14 at $ 82.12
Change since picked: + 1.53
Earnings Date 01/26/06 (confirmed)
Average Daily Volume = 1.1 million

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Total - TOT - close: 129.31 change: +1.70 stop: 124.95

Our new call play in TOT is off to a good start. Oil stocks in general look prepared to bounce higher. Friday's gain in TOT appears to have broken the three-week trendline of resistance. We don't see any change from our original play description from Thursday night so we're reposting it here:

TOT's recent earnings report was not that impressive but that isn't stopping the stock from bouncing at the simple 200-dma. Actually the stock has a habit of rebounding from the simple 200-dma. Given today's rebound across the board in the oil stocks this looked like a tempting entry point to buy calls in TOT. However, keep in mind that the stock's short-term bearish trend has not yet been broken. While we would buy calls here more conservative traders may want to wait for a move over $130 or its 50-dma before initiating positions. Our target is the $137.00-140.00 range.

Suggested Options:
We are suggesting the March calls. You'd better double-check those current prices since it looks like an error.

BUY CALL MAR 125 TOT-CE open interest= 1 current ask $8.30
BUY CALL MAR 130 TOT-CF open interest= 20 current ask $2.90
BUY CALL MAR 135 TOT-CG open interest=773 current ask $1.00

Picked on February 16 at $127.61
Change since picked: + 1.70
Earnings Date 02/15/06 (confirmed)
Average Daily Volume = 836 thousand

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Universal Health - UHS - close: 51.18 chg: +0.02 stop: 49.24*new*

Last week was a positive one for UHS. The stock broke out through resistance near the $50.00 level and through the top of its six-month trading range. If you look at the weekly chart it looks like a big double or triple bottom pattern against the $45 level. We remain bullish on UHS but have a limited time frame. The company is due to report earnings on February 27th. We do not want to hold over the report so that only gives us about a week. If you were looking for a new entry point we'd watch for a dip toward the $50.50-50.00 region. The P&F chart is bullish and points to a $61 target but displays resistance near $56. We are targeting a rally into the $54.50-55.00 range. We are going to inch up our stop loss to $49.24.

Suggested Options:
We are not suggesting new plays at the moment. Look for a dip toward $50.00. We would pick the March calls since we plan to exit before the February earnings report.

Picked on February 15 at $ 50.51
Change since picked: + 0.67
Earnings Date 02/27/06 (confirmed)
Average Daily Volume = 613 thousand
 

Put Updates

MGIG Invest. - MTG - close: 62.80 change: -1.00 stop: 65.51*new*

Good news. MTG has produced a failed rally near resistance at $64.00, its exponential 200-dma and the neckline to its bearish head-and-shoulders pattern. The action on Friday looks like a new entry point to buy puts. More conservative traders might want to wait for a decline under $62.00, which is short-term support. We are inching our stop loss down to $65.51. More conservative traders may also want to consider using a stop closer to $64.50. Our target is the $58.00-57.50 range.

Suggested Options:
We are suggesting the March puts. Our readers should pick the strike price (and month) that best suits their trading style and risk.

BUY PUT MAR 65 MTG-OM open interest=1214 current ask $2.95
BUY PUT MAR 60 MTG-OL open interest=4106 current ask $0.80

Picked on February 06 at $ 63.70
Change since picked: - 0.90
Earnings Date 01/12/06 (confirmed)
Average Daily Volume = 833 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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Building Materials - BMHC - cls: 72.57 chg: -1.43 stop: n/a

It looks like shares of BMHC have produced a failed rally on Friday near resistance at the $75.00 level and the bottom of its earnings-news inspired gap down. We are not suggesting new strangle positions. Please note that the last day of trading for March options is Friday, March 17th. Yet BMHC is due to split 2-for-1 on March 15th. For ease of accounting we will probably plan on exiting this strangle ahead of the stock split. 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 strangle plays in BMHC.

Picked on December 18 at $ 80.95
Change since picked: - 8.38
Earnings Date 02/07/06 (confirmed)
Average Daily Volume = 527 thousand

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Encana Corp. - ECA - close: 42.99 chg: +0.15 stop: n/a

Oil stocks bounced on Friday and ECA rallied to the $44 level before paring its gains. We are not suggesting new strangle positions. Our strangle strategy involves the April $50 calls (ECA-DJ) and the April $40 puts (ECA-PH). Our estimated cost is $3.45. We are aiming for a rise to $5.95.

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

Picked on January 10 at $ 45.56
Change since picked: - 2.57
Earnings Date 02/15/06 (confirmed)
Average Daily Volume = 4.4 million

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Loews Corp. - LTR - close: 95.43 change: -0.57 stop: n/a

Attention! We want to remind readers that this has been and remains a high-risk, speculative strangle play. Our goal was to capture any post-earnings volatility. LTR reported earnings on Thursday morning and the lack of real movement on Thursday and Friday does not bode very well for this play. If you have a strangle position in LTR using the March options then you may want to seriously consider exiting now to limit your losses! Buying this strangle was a bet that LTR will be trading at more than $102 (above resistance) or less than $88 (under support) by March expiration. The options in our strangle are the March $100 calls (LTR-CT) and the March $90 puts (LTR-OR). Our estimated cost is $1.75.

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

Picked on February 13 at $ 95.72
Change since picked: - 0.29
Earnings Date 02/16/06 (confirmed)
Average Daily Volume = 513 thousand

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Ryland Group - RYL - close: 68.82 change: -0.41 stop: n/a

It looks like the oversold bounce in RYL is failing at the $70.00 level. As a matter of fact this looks like an entry point to buy puts with stop loss above round-number resistance at $70.00. However, before you get too exited the weakness was kept to a minimum on Friday and the MACD indicator on the daily chart is nearing a new buy signal. Lest anyone forget this is supposed to be an update on our RYL strangle play. We are not suggesting new strangle positions at this time. Our play involves the April $80 calls (RYL-DP) and the April $70 puts (RYL-PN). Our estimated cost is $7.00. Our target is $12.00.

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

Picked on January 22 at $ 75.19
Change since picked: - 6.37
Earnings Date 01/24/06 (confirmed)
Average Daily Volume = 1.1 million
 

Dropped Calls

None
 

Dropped Puts

Cameco Corp. - CCJ - close: 73.37 change: +1.46 stop: 72.56

As we expected shares of CCJ continued to bounce on Friday and the stock has stopped us out at $72.56. In retrospect it looks like the bounce on Wednesday where CCJ closed at $70.26 would have been a good spot to bail out. Nimble traders may actually want to consider bullish positions here. We would not be surprised to see CCJ make a run for its highs near $80.00, especially if the mining stocks continue to rebound.

Picked on February 07 at $ 68.57
Change since picked: + 4.80
Earnings Date 01/31/06 (confirmed)
Average Daily Volume = 1.1 million
 

Dropped Strangles

None
 

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