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Call Updates

Amer. Science. - ASEI - cls: 74.91 chg: +0.38 stop: 67.84

Unfortunately ASEI spent the day on Friday unsuccessfully trying to breakout over resistance at the $75.00 level. We would not suggest new bullish positions here. The overall pattern and the current bounce looks bullish for the stock. Plus, the P&F chart shows a bullish triangle breakout pattern with a $100 target. Yet right now, with the major indices going nowhere, shares of ASEI might retrace a bit before moving higher. Traders can choose to buy a breakout over Friday's high (75.30) or look for a dip (and a bounce) back near the $72.00 region. Don't forget that the current bounce was fueled by rumors that GE was considering ASEI a takeover candidate and this helped fuel some short covering since ASEI has/had relatively high short interest. Our target is the $79.75-80.00 range.

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

BUY CALL APR 70 KBU-DN open interest= 594 current ask $8.10
BUY CALL APR 75 KBU-DO open interest=1094 current ask $5.20
BUY CALL APR 80 KBU-DP open interest= 244 current ask $3.20

Picked on February 23 at $ 74.05
Change since picked: + 0.86
Earnings Date 02/08/06 (confirmed)
Average Daily Volume = 178 thousand

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Beazer Homes - BZH - close: 65.44 change: -0.64 stop: 63.19

The homebuilders have not been able to build on last Wednesday's gains. Here's a quick recap - last Wednesday the group rallied higher on some positive comments for Toll Brothers (TOL). The next day TOL reported better than expected earnings results but said that demand was slowing down and that comment sucked the wind out of the sector's sails. The overall pattern for BZH looks attractive. Shares are still bouncing from a test of technical support at their 200-dma. The daily chart's MACD indicator has produced a new buy signal. We are fighting a bearish P&F chart so diehard P&F traders may not want to open bullish positions here. We are not suggesting new call positions at the moment although we would watch for a bounce from $65.00 or a bounce from $64.00 as a potential entry point. Our short-term target is the $69.85 mark.

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

Picked on February 15 at $ 65.05
Change since picked: + 0.39
Earnings Date 01/19/06 (confirmed)
Average Daily Volume = 1.2 million

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Cephalon - CEPH - close: 76.40 change: -0.09 stop: 69.99

The BTK biotech index was one of the best performing sectors on Friday and the index closed at a new multi-year high. Unfortunately, the sector move failed to inspire a similar gain in shares of CEPH. The move over $76.00-76.50 over the last couple of days is certainly bullish for CEPH but its inability to hold it suggests a potential short-term top right here. The daily chart shows a new buy signal with its MACD indicator but we would not be surprised to see CEPH pull back and retest the $75.00 level as support first before moving higher. The Point & Figure chart displays an ascending triple-top breakout buy signal that points to a $93 target. We are aiming for a rally into the $82.00-82.50 range. 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 or April calls.

BUY CALL MAR 75 CQE-CO open interest=2960 current ask $2.95
BUY CALL MAR 80 CQE-CP open interest=1096 current ask $0.85

BUY CALL APR 75 CQE-DO open interest=1800 current ask $5.30
BUY CALL APR 80 CQE-DP open interest= 71 current ask $2.80

Picked on February 23 at $ 76.65
Change since picked: - 0.25
Earnings Date 02/14/06 (confirmed)
Average Daily Volume = 2.5 million

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Chico's FAS - CHS - close: 47.41 change: +0.01 stop: 45.89 *new*

Retail stocks turned in a mixed performance on Friday. Disappointing earnings guidance from the Gap (GPS) did not inspire much confidence in the group. Shares of CHS dipped to $46.66 before traders bought the pullback and pushed shares back into the green. We were hoping for a dip closer to the $46.00 level, which should be support. If we consider the lackluster trading in the major averages we're not that excited about opening new call positions in CHS right here. The overall bullish pattern for CHS remains in effect. The P&F chart points to a $70 target. Unfortunately, we're almost out of time for this play. CHS is due to report earnings on Wednesday. That means we need to exit on Tuesday afternoon near the closing bell. We are raising our stop loss to $45.89.

Suggested Options:
We are not suggesting new call positions in CHS. We plan to exit on Tuesday to avoid earnings.

Picked on February 14 at $ 47.61
Change since picked: - 0.20
Earnings Date 03/01/06 (confirmed)
Average Daily Volume = 1.8 million

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Google Inc. - GOOG - close: 377.40 chg: -0.67 stop: 349.99

If not for last Thursday GOOG's week would have been pretty boring. The stock's oversold bounce is struggling with every level of potential resistance. Right now the stock is testing the $380 level and its 21-dma. While the daily chart's MACD indicator has produced a new buy signal we would not suggest new bullish positions right here. Next week seems to be up for grabs. The markets will likely be pushed around by the boatload of economic data due to be released. Meanwhile GOOG has an analyst conference scheduled for Thursday, March 2nd. We do find it very interesting that GOOG's P&F chart has reversed back into a buy signal with a $464 target. Our bullish target remains the $394 level. More conservative traders (who probably shouldn't be trading GOOG anyway) may want to tighten their stops. This is a very aggressive speculation play.

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

Picked on February 16 at $366.46
Change since picked: +10.94
Earnings Date 01/31/06 (confirmed)
Average Daily Volume = 12.4 million

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Goldman Sachs - GS - close: 144.16 change: +0.20 stop: 141.45

Our last update told readers to watch for a bounce from the $143.00 level. We said a bounce from $143 could be used as a new bullish entry point. Well, that's exactly what GS delivered on Friday. The stock gapped lower to open at $143.05 and then immediately rebounded. Unfortunately, GS could not manage to make a new high despite a new high for the XBD broker-dealer index. We remain bullish on the sector and the overall pattern for GS is certainly bullish. The question is whether or not the stock will produce any sort of pre-earnings run. Stocks in the broker sector tend to produce a run up ahead of earnings and then sell-off a bit no matter how great the earnings results were. GS is due to report earnings in a couple of weeks. We plan to exit ahead of the earnings report. More aggressive traders may want to give GS more room to maneuver and put their stop loss under $140.00. More conservative traders may want to tighten their stops toward the $143.00 level. We're going to leave our stop where it is at $141.45. The Point & Figure chart points to a $169 target. We are only going to target the $149.85-150.00 range.

Suggested Options:
We are suggesting the March calls since we plan to exit ahead of GS' earnings report in mid March.

BUY CALL MAR 140 GS-CH open interest=4018 current ask $6.10
BUY CALL MAR 145 GS-CI open interest=4734 current ask $2.85
BUY CALL MAR 150 GS-CJ open interest=5552 current ask $1.00

Picked on February 22 at $145.53
Change since picked: - 1.37
Earnings Date 03/16/06 (unconfirmed)
Average Daily Volume = 3.4 million

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Hartford Fin. Srv. - HIG - cls: 83.29 chg: -1.21 stop: 79.95

Watch out. We have been warning readers that HIG may need to retrace back toward the $82 level and it looks like that consolidation has begun. Shares lost 1.4% on Friday and volume came in well above the daily average. Short-term technical oscillators are turning negative. We expect shares to pull back toward the $82 level, which should be short-term support. Earlier we suggested that more conservative traders could have exited near $85 and if you did not you might want to think about exiting early here or at least adjusting your stop loss toward $82.00. We are not suggesting new bullish positions at this time.

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

Picked on February 14 at $ 82.12
Change since picked: + 1.17
Earnings Date 01/26/06 (confirmed)
Average Daily Volume = 1.1 million

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MDC Holdings - MDC - close: 63.54 chg: -0.90 stop: 61.15

We remain on the sidelines with MDC. Our plan is to catch the next leg higher with a trigger to buy calls at $65.05. It looked like MDC was prepared to begin that next leg higher on Wednesday when the stock broke out over its simple 50-dma and its long-term trendline of resistance. Unfortunately, MDC has not seen any follow through. If triggered we will target a rally into the $69.50-70.00 range.

Suggested Options:
We are suggesting the April calls although March calls would also work well.

BUY CALL APR 60 MDC-DL open interest= 0 current ask $6.50
BUY CALL APR 65 MDC-DM open interest=314 current ask $3.40
BUY CALL APR 70 MDC-DN open interest= 29 current ask $1.50

Picked on February xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 04/18/06 (unconfirmed)
Average Daily Volume = 856 thousand

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Altria Group - MO - close: 72.45 chg: -0.93 stop: 71.85

We are still in a wait-and-see mode with MO. The stock has been bouncing around in the $72.00-74.00 range. We want to catch a bullish breakout over resistance at $74.00 and we're suggesting a trigger to buy calls at $74.10. More conservative traders may want to wait for MO to trade over its simple 50-dma (currently 74.30) before initiating positions. If triggered we are going to target the $77.50-78.00 range. We will also keep an eye out for a bounce from support at its rising 200-dma, now at 70.93. However, Friday's trading has produced a bearish engulfing candlestick pattern and MO's short-term oscillators are turning bearish. We'd be careful about trying to buy the first bounce.

Suggested Options:
We are switching from suggesting March calls to April calls.

BUY CALL APR 70 MO-DN open interest= 1967 current ask $4.50
BUY CALL APR 75 MO-DO open interest= 6033 current ask $1.85

Picked on February xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 04/19/06 (unconfirmed)
Average Daily Volume = 8.1 million

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Occidental Petrol. - OXY - cls: 92.38 chg: +2.38 stop: 85.95

Wow! If nothing else OXY will keep your heart racing with all the gap ups and downs. On Friday the stock gapped higher after some bullish analyst comments. JP Morgan upgraded the stock to an "over weight" and UBS reiterated their "buy" rating and raised their price target to $111. The 2.6% gain on Friday has pulled the daily chart's macd indictor closer to a new buy signal. Oil stocks in general were stronger on Friday as geopolitical concerns continue to heat up. We remain bullish. Readers can choose to go long here at current levels or wait for a potential pull back if OXY decides to fill the gap from Friday morning. Our target is the February highs in the $97.50-98.00 range.

Suggested Options:
Traders can choose March or April calls. We're suggesting new positions use April strikes.

BUY CALL APR 90 OXY-DR open interest=105 current ask $6.00
BUY CALL APR 95 OXY-DS open interest= 50 current ask $3.50

Picked on February 21 at $ 92.00 *gap higher*
Change since picked: + 0.38
Earnings Date 05/09/06 (unconfirmed)
Average Daily Volume = 3.4 million

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Potash - POT - close: 94.47 chg: -0.45 stop: 89.95

POT experienced a little bit of profit taking after Thursday's bullish breakout and readers may want to use the dip as a new bullish entry point. On Thursday the stock broke out over its short-term trendline of resistance and its 10 and 200-dma's. Our short-term target is the $99.50-100.00 range. If POT can trade over $96.00 it will produce a new P&F chart buy signal and more aggressive traders may want to aim for a higher target.

Suggested Options:
We are suggesting the March calls although April strikes would also work well.

BUY CALL MAR 90 POT-CR open interest= 486 current ask $6.20
BUY CALL MAR 95 POT-CS open interest=1055 current ask $3.20
BUY CALL MAR100 POT-CT open interest= 679 current ask $1.30

Picked on February 23 at $ 93.05
Change since picked: + 1.42
Earnings Date 04/29/06 (unconfirmed)
Average Daily Volume = 826 thousand

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Prudential - PRU - close: 77.42 change: +0.87 stop: 74.59*new*

PRU is breaking out! The stock gapped higher on Friday morning to open at $77.10. Our trigger to buy calls was at $77.05 so we have adjusted our entry point to reflect the gap higher. The move over $77.00 is a breakout over resistance. Technical indicators are improving and its P&F chart shows a double-top breakout buy signal with a $103 target. If you missed the entry point on Friday morning we'd still consider new bullish positions right here. Our target is the $82.00-82.50 range. We do expect some resistance near $80.00. We are adjusting our stop loss to $74.59 just under Wednesday's low.

Suggested Options:
We are suggesting the April calls although March strikes are available and have more open interest.

BUY CALL APR 75 PRU-DO open interest=111 current ask $4.10
BUY CALL APR 80 PRU-DP open interest=201 current ask $1.30

Picked on February 24 at $ 77.10
Change since picked: + 0.32
Earnings Date 02/08/06 (confirmed)
Average Daily Volume = 1.9 million

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Total - TOT - close: 127.66 change: +0.35 stop: 124.95

We do not have anything new to report on for TOT. The oil stocks were trending higher on Friday due to geopolitical concerns but shares of TOT are still showing a bit of relative weakness here. A bounce from its rising 200-dma, which has been consistent long-term support, could be used as a new bullish entry point to buy calls. More conservative traders may want to wait for a move over $130.00 or its 50-dma before initiating plays. Our target is the $137.00-140.00 range.

Suggested Options:
We are suggesting the March and/or the April calls but at this point we'd prefer the Aprils if you're starting new positions.

BUY CALL MAR 125 TOT-CE open interest= 21 current ask $4.60
BUY CALL MAR 130 TOT-CF open interest= 68 current ask $1.80
BUY CALL MAR 135 TOT-CG open interest=814 current ask $0.65

BUY CALL APR 125 TOT-DE open interest= 0 current ask $6.50
BUY CALL APR 130 TOT-DF open interest= 9 current ask $3.90
BUY CALL APR 135 TOT-DG open interest= 6 current ask $2.15

Picked on February 16 at $127.61
Change since picked: + 0.05
Earnings Date 02/15/06 (confirmed)
Average Daily Volume = 836 thousand

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Tenaris S.A. - TS - cls: 160.41 chg: +3.26 stop: 149.95 *new*

TS is showing relative strength again with a 2% gain on Friday. Volume wasn't that great on Friday's session and that doesn't lend a lot of conviction behind the rally. The daily chart for TS shows the macd indicator nearing a new buy signal. If oil stocks continue to rally next week we would not be surprised to see TS hit our target in the $164.00-165.00 range. You may recall that TS is a steel company that produces pipes and fixtures for the oil industry. More aggressive traders may want to aim higher since a move over $165.00 would be a new high. We are raising our stop loss to $149.95.

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

Picked on February 21 at $156.22
Change since picked: + 4.19
Earnings Date 03/01/06 (unconfirmed)
Average Daily Volume = 516 thousand
 

Put Updates

Apollo Group - APOL - close: 58.09 chg: +0.91 stop: 60.01

Uh-oh! APOL surprised us on Friday with an oversold bounce we weren't really expecting. Watch the descending 50-dma, now at 58.95, to act as short-term overhead resistance. If shares push past the 50-dma there is still resistance near $60.00. We would not suggest new bearish positions at this time. Our target is the $53.00-52.50 range.

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

Picked on February 19 at $ 58.06
Change since picked: + 0.03
Earnings Date 03/16/06 (unconfirmed)
Average Daily Volume = 2.0 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.)

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Building Materials - BMHC - cls: 72.46 chg: -0.24 stop: n/a

We have three weeks left before March options expire and even less time if you plan to exit ahead of the stock split. BMHC has been struggling with resistance near $75 for the last couple of weeks and it would be great if shares could hit new relative lows soon. We are not suggesting new strangle positions. 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. We are adjusting our target to breakeven at $8.20 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: - 8.49
Earnings Date 02/07/06 (confirmed)
Average Daily Volume = 527 thousand

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Encana Corp. - ECA - close: 42.04 chg: +0.03 stop: n/a

Oddly enough shares of ECA haven't been moving much the past couple of days in spite of the volatility in crude oil. The overall trend for the stock looks bearish given its breakdown under the $45.00 level and its 200-dma and the failed rally near the same level a week later. 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 strangles in ECA at this time.

Picked on January 10 at $ 45.56
Change since picked: - 3.52
Earnings Date 02/15/06 (confirmed)
Average Daily Volume = 4.4 million

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Loews Corp. - LTR - close: 93.35 change: -1.95 stop: n/a

Hmm... we cannot find any specific news but LTR must have said something bearish at a travel show on Friday. That's the only thing we can find that might explain the sudden spike down on Friday morning. Volume was very strong at more than three times the daily average. We are not suggesting new strangle positions. 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 at this time.

Picked on February 13 at $ 95.72
Change since picked: - 2.37
Earnings Date 02/16/06 (confirmed)
Average Daily Volume = 513 thousand

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Ryland Group - RYL - close: 72.11 change: +0.37 stop: n/a

Traders bought the dip near $70.00 on Friday and RYL looks poised to continue its rebound. There is still about two months to go before April expiration. There is no way to know where RYL will be two months from now but this rebound may suggest the stock is stuck in a range. More conservative traders might want to consider just exiting early. If you exited today you could probably sell the options in our strangle for around $4.00-4.40 and limit your loss. 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 at this time.

Picked on January 22 at $ 75.19
Change since picked: - 3.08
Earnings Date 01/24/06 (confirmed)
Average Daily Volume = 1.1 million
 

Dropped Calls

Universal Health - UHS - close: 50.75 chg: -0.17 stop: 49.99

UHS is expected to report earnings on Monday, February 27th and Wall Street is looking for UHS to produce profits of 44-cents a share. We do not want to hold over the report so it was our published plan to exit on Friday near the closing bell.

Picked on February 15 at $ 50.51
Change since picked: + 0.24
Earnings Date 02/27/06 (confirmed)
Average Daily Volume = 613 thousand
 

Dropped Puts

None
 

Dropped Strangles

None
 

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