Option Investor
Play Updates

In Play Updates and Reviews

HAVING TROUBLE PRINTING?
Printer friendly version

Call Updates

Arch Cap. Grp. - ACGL - cls: 57.99 chg: -0.03 stop: 55.95

The action in the markets today looks pretty bearish. A lot of the major indices are showing bearish reversal signals. While ACGL weathered the storm pretty well today we would expect the stock to continue lower next week. If you're concerned that the markets are really headed lower then you might want to exit early and look for a new entry point on a bounce. We are expecting ACGL to slip towards the $57.00 level, which should be support. If the $57 level fails then the $55 level, bolstered by the 100-dma, is the next level of support but we would be stopped out at $55.95. We're not suggesting new bullish positions. Our target is currently the $62.50-63.00 range. We do not want to hold over the late April earnings report.

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

Picked on April 03 at $ 58.15
Change since picked: - 0.16
Earnings Date 04/27/06 (unconfirmed)
Average Daily Volume = 195 thousand

---

Amerada Hess - AHC - close: 145.84 chg: -3.57 stop: 139.95

After a bullish week the oil sector was not immune to the market-wide profit taking on Friday. Shares of AHC lost 2.38% but volume was not as strong as the recent bullish breakout. The $144 and $146 levels were overhead resistance and they should now act as support. At this point in the game we would watch for a dip into the $144-145 region. A bounce above $144 could be used as a new bullish entry point. Actually, since we have a wide stop under $140, a bounce above $140 could be used as a new bullish entry point. A noteworthy development this past week was AHC's bullish breakout produced a new triple-top breakout buy signal on its P&F chart, which now points to a $170 target. Currently our target is the $154.00-155.00 range. We do not want to hold over the April 26th earnings report.

Suggested Options:
We are not suggesting new bullish positions at this time. Watch for a bounce above $144.00.

Picked on April 05 at $146.51
Change since picked: - 0.67
Earnings Date 04/26/06 (confirmed)
Average Daily Volume = 1.5 million

---

Anadarko Petrol. - APC - cls: 102.15 chg: -1.96 stop: 98.90*new*

APC lost ground on Friday. Shares fell 1.88% and the move has given short-term technicals a bearish tilt. However, the stock should find some support at the 50-dma (100.82), the $100.00 mark, which is round-number, psychological support, and APC's four-week trendline of higher lows. We would watch for a dip toward the $100 level and watch for a bounce there as the next entry point. We're going to inch up our stop loss to $98.90. Our target remains the $109.50-110 range. The P&F chart remains bullish with a breakout buy signal that points to a $127 target. We do not want to hold over the late April earnings report.

Suggested Options:
We are not suggesting new bullish positions at this time. Watch for a bounce above the $100 level.

Picked on March 28 at $102.10
Change since picked: + 0.05
Earnings Date 04/28/06 (unconfirmed)
Average Daily Volume = 2.5 million

---

Burlington NrthSanta Fe - BNI - cls: 83.45 chg: -1.48 stop: 79.95

The Dow Transportation index spiked higher on Friday morning to hit its fifth new all-time high in a row. Unfortunately, the index reversed course and now looks poised for more profit taking. Shares of BNI are already seeing traders do some profit taking after Wednesday's peak. The technical picture is growing more bearish but we believe this is a short-term pull back in the stock's longer-term up trend. Given the action in the markets today and in BNI over the last couple of days we would expect the stock to slip lower toward the $82.00-82.50 range and probably toward stronger support near $80.00 and its simple 50-dma, which has been consistent technical support in the past (see chart). We would watch for a bounce above the $80 level as the next bullish entry point. Conservative traders may want to play it safer. The latest candlestick on the weekly chart looks like a top so you may want to re-evaluate how much risk you're willing to take. Our target is the $87.50-90.00 range. We do not want to hold over BNI's late April earnings report.

Suggested Options:
We are not suggesting new bullish positions in BNI at this time. Watch for a dip to and a bounce above the $80 level.

Picked on March 27 at $ 82.51
Change since picked: + 0.94
Earnings Date 04/25/06 (unconfirmed)
Average Daily Volume = 2.1 million

---

Beazer Homes - BZH - close: 67.87 chg: -0.91 stop: 64.74

We find the Friday trading action in BZH and the rest of the homebuilders pretty interesting. The stock market sank on rising interest rates fears yet the homebuilders failed to truly sell-off like you might expect. Both BZH and the DJUSHB home construction index were on the rebound Friday afternoon. We are cautious given the market's weakness but we don't see any change from our new play description from Thursday although waiting for a breakout over $70 may look more attractive now. What follows is a reprint of Thursday's original play description:

It might seem a bit odd to consider bullish call positions in a homebuilder in a rising interest rate environment. The yield on the 10-year bond has risen sharply lately and that's putting pressure on mortgage rates, which have risen to levels not seen since 2003. Yet historically speaking mortgage rates remain relatively low. Plus, there have been renewed comments that the Fed might be nearing the end of its tightening cycle. We also recently entered the spring/summer building and selling season for homes so maybe investors are counting on a few strong quarters from the builders. Several stocks in the group appear to have built an inverse or bullish head-and-shoulders pattern and they're all on the verge of breaking out above resistance at the neckline of this pattern. BZH is one such stock and today's gain looks like a breakout. We are going to suggest calls here but the 100-dma (near $69.00) and the $70.00 mark could still offer resistance so more conservative traders may want to wait for a move over $70.00 before initiating positions. Currently the P&F chart points to an $87 target but if BZH can trade over $69.00 it will produce a new triple-top breakout buy signal. We are going to target the $74.50-75.00 range. However, please keep in mind that this will be a short-term play. We do not want to hold over the April 27th earnings report.

Suggested Options:
We are suggesting the May calls but we plan to exit on April 26th to avoid holding over earnings.

BUY CALL MAY 65.00 BAD-EM open interest= 483 current ask $6.10
BUY CALL MAY 70.00 BAD-EN open interest=1539 current ask $3.20

Picked on April 06 at $ 68.78
Change since picked: - 0.91
Earnings Date 04/27/06 (confirmed)
Average Daily Volume = 1.2 million

---

ConocoPhillips - COP - close: 65.95 chg: -1.29 stop: 62.45 *new*

COP was not exempt from the profit taking on Friday. After a strong week traders decided to take some money off the table. Overall the pattern remains unchanged and bullish. The P&F chart shows a bullish triangle breakout pattern with an $82 target. Statistics suggest that this is one of the most successful patterns to trade in an up market. However, short-term the market looks poised for more weakness. We would watch COP for a dip back toward the $65.00 level and probably the $64.00 level. A bounce in that general area could be used as a new bullish entry point. We are going to raise the stop loss to $62.45, which is under the simple 200-dma. Our target for COP is the $69.00-70.00 range.

Suggested Options:
We are not suggesting new bullish positions at this time. Wait and watch for the bounce. We do not want to hold over the late April earnings report.

Picked on March 29 at $ 64.80
Change since picked: + 1.15
Earnings Date 04/26/06 (unconfirmed)
Average Daily Volume = 10.5 million

---

Deere Co - DE - close: 79.63 change: -0.37 stop: 75.95

Shares of DE held up relatively well during Friday's weakness. The stock has been short-term overbought and Friday would have been a good excuse for investors to lock in some profits but they did not. Even so the short-term technicals are turning lower. We need to be prepared for a potential dip back to technical support at its rising 50-dma (near 76.70). More conservative traders may want to adjust their stops closer to the 50-dma. Our target is the $84.00-85.00 range. The P&F chart is bullish and points to a $112 target.

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

Picked on March 22 at $ 77.29
Change since picked: + 2.34
Earnings Date 05/16/06 (unconfirmed)
Average Daily Volume = 1.6 million

---

Grainger W.W.Inc. - GWW - close: 75.40 change: -1.41 stop: 73.95

GWW's recent breakout is reversing course. The stock lost 1.8% on Friday and while volume was low the move is lending new weakness to a technical picture that was already suffering. We are expecting shares to dip back toward the bottom of its previous trading range near $74.00, which should be support. More conservative traders may want to consider an early exit if GWW trades under $75.00 or $74.50. We are not suggesting new plays at this time. Our target is the $79.90-80.00 range. Please remember that we plan to exit ahead of the April 17th earnings report.

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

Picked on March 30 at $ 76.51
Change since picked: - 1.11
Earnings Date 04/17/06 (confirmed)
Average Daily Volume = 449 thousand

---

Halliburton - HAL - close: 77.27 chg: -1.25 stop: 71.45

Same story, different stock. After some strong mid-week gains shares of HAL pulled back on Friday. A dip to the 10-dma (near 74.75) or the $74.00 region would not be out of line here but it would turn the short-term technicals bearish. We would watch for a bounce in the $74.00-75.00 region as a new bullish entry point. Our target is the $79.85-80.00 range. More aggressive traders may want to aim for the January highs near $82. The P&F chart looks very bullish with a $90 target. We do not want to hold over the April 21st earnings report.

Suggested Options:
We are not suggesting new bullish positions at this time. Watch for the bounce near $75.

Picked on April 04 at $ 75.20
Change since picked: + 2.07
Earnings Date 04/21/06 (confirmed)
Average Daily Volume = 8.0 million

---

Lehman Brothers - LEH - close: 148.65 change: -2.35 stop: 143.49

Uh-oh! We need to issue a reversal alert for LEH. The stock almost completely erased Thursday's breakout and Friday's candlestick is a bearish engulfing pattern. Overall the long-term pattern is still bullish but short-term the stock could be headed back toward support near the 50-dma. The best case scenario is that LEH bounces from the $148 level. Odds are probably better that LEH dips toward $145. We would look for a bounce near $145 as a new bullish entry point. We are suggesting that readers consider selling half their positions at $153.00 and then sell the second half of their position at $159.00. More conservative traders may want to exit completely near $152.50-153.00.

Suggested Options:
We are not suggesting new bullish positions at this time. Look for a bounce north of $145 and/or its 50-dma.

Picked on March 22 at $144.61
Change since picked: + 4.04
Earnings Date 06/14/06 (unconfirmed)
Average Daily Volume = 2.0 million

---

Marvell Tech. - MRVL - close: 59.74 change: -0.44 stop: 54.99

The semiconductor sector index lost 1.8% as the group suffered through a sharp day of profit taking in the tech sector. Yet shares of MRVL held up pretty well due to an analyst upgrade before the opening bell. We would watch for a dip to the $58.00 level, which should be support. We are reposting the original play description from Thursday here:

The SOX semiconductor index has reversed course. After a five-week consolidation pattern the semis have rebounded and now the SOX index is breaking out over the 520 level and technical resistance at the 50-dma. Strength in the sector is helping fuel as rebound and a breakout in MRVL. The stock spent about three weeks consolidating between $54.00 and $58.00 and now shares are breaking out on rising volume. The technical picture is positive and today's high-volume move is a breakout over the $60.00 mark and its 100-dma. We also like the Point & Figure chart, which looks very bullish for MRVL and currently points to a $73 target. We are suggesting bullish positions above $58.00 and our target is going to be the $65.50-66.00 range. The next level of resistance appears to be $66.50-67.00.

Suggested Options:
We are suggesting the May calls.

BUY CALL MAY 55.00 UVM-EK open interest=4675 current ask $7.00
BUY CALL MAY 57.50 UVM-EY open interest=2553 current ask $5.50
BUY CALL MAY 60.00 UVM-EL open interest=7241 current ask $4.10
BUY CALL MAY 62.50 UVM-ES open interest=5807 current ask $3.10

Picked on April 06 at $ 60.18
Change since picked: - 0.44
Earnings Date 05/25/06 (unconfirmed)
Average Daily Volume = 5.9 million

---

Pantry Inc. - PTRY - close: 65.00 chg: -0.91 stop: 59.99*new*

PTRY suffered a midday sell-off but the stock rebounded when traders stepped in near the simple 10-dma. Coincidentally PTRY bounce also occurred near the bottom of its rising channel. Normally we would see this sort of bounce as a new bullish entry point but we are suggesting caution given the market's weakness on Friday. Our target remains unchanged in the $67.00-68.00 range although if you look at the rising channel you might want to consider aiming for the $70 region. We are raising our stop loss to $59.99. More conservative traders may want to tighten their stops closer to our breakeven point near $61.85. The P&F chart points to a $78 target. We do not want to hold over the late April earnings report.

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

Picked on March 26 at $ 61.85
Change since picked: + 3.15
Earnings Date 04/27/06 (unconfirmed)
Average Daily Volume = 364 thousand
 

Put Updates

Apollo Group - APOL - close: 52.50 chg: -0.38 stop: 53.31

We are still in a wait and see mode with APOL. The stock gapped higher on Thursday after an analyst upgrade. While it looks like APOL is breaking out through the top of its channel the stock is still stuck under resistance at its 50-dma and the $54.00 level. We'll keep the stock as a bearish candidate for now. We're suggesting a trigger to buy puts at $49.85, which is under support at the $50.00 level. If triggered we will have two targets. Our first target is the $45.50-45.00 range. Conservative traders can exit here, the rest of us we're suggesting sell half their position. We'll keep the other half open and target a decline into the $41.00-40.00 range, which is closer to the bottom of its channel.

Suggested Options:
We are suggesting the May puts. Our trigger to buy puts is at $49.85.

BUY PUT MAY 50.00 OAQ-QJ open interest=2824 current ask $0.95
BUY PUT MAY 45.00 OAQ-QI open interest= 728 current ask $0.25

Picked on April xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 06/22/06 (unconfirmed)
Average Daily Volume = 2.4 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.)

---

Encana Corp. - ECA - close: 46.84 chg: -1.18 stop: n/a

Time is running short for our strangle in ECA. April options expire in two weeks. To have any chance of success ECA needs to trade over $50 or under $40 pretty soon. We are not suggesting new positions. Our strangle strategy involves the April $50 calls (ECA-DJ) and the April $40 puts (ECA-PH). Our estimated cost is $3.45.

Suggested Options:
We are not suggesting new strangle positions.

Picked on January 10 at $ 45.56
Change since picked: + 1.28
Earnings Date 02/15/06 (confirmed)
Average Daily Volume = 4.4 million

---

Ryland Group - RYL - close: 71.97 change: -1.05 stop: n/a

Time is also running out for our RYL strangle. We have two weeks left before the April options expire. Currently we do not have any expectations that the stock will move enough to make this play profitable after last week's big reversal higher. We are not suggesting new plays. Our play involves the April $80 calls (RYL-DP) and the April $70 puts (RYL-PN).

Suggested Options:
We are not suggesting new strangle positions.

Picked on January 22 at $ 75.19
Change since picked: - 3.22
Earnings Date 01/24/06 (confirmed)
Average Daily Volume = 1.1 million
 

Dropped Calls

None
 

Dropped Puts

None
 

Dropped Strangles

None
 

Play Update Archives