Arch Cap. Grp. - ACGL - cls: 58.63 chg: +0.77 stop: 55.95
The market was mostly up on Thursday but the lack of volume behind the move does not inspire any confidence. Many professional traders left early for the long, holiday weekend. Fortunately, the lackluster session was not so bad for shares of ACGL, which added 1.3% and on above average volume. We hesitate to open new bullish positions here given the lack of direction in the major averages but this relative strength in ACGL may be a new entry point to buy calls. Our target is currently the $62.50-63.00 range. We do not want to hold over the late April earnings report, which gives us just less than two weeks.
BUY CALL MAY 55.00 UOZ-EK open interest= 51 current ask $4.70
Picked on April 03 at $ 58.15
Amerada Hess - AHC - close: 142.59 chg: -1.30 stop: 139.95
Hmm... the relative weakness in AHC on Thursday is worrisome. Crude oil rose back above $69 a barrel on Thursday as investors continue to fret over the ongoing drama between the west and Iran's nuclear program. Oil stocks were generally higher but AHC continued to sell-off. The stock did stall near technical support at its simple 50-dma and shares are still above their four-week trendline of support (see chart). We would not suggest new positions here. Watch for a bounce from the $140 region or a new rise above $144.50-145.00. Our target is the $154.00-155.00 range. We do not want to hold over the April 26th earnings report, which only gives us ten more days. FYI: Technical traders will note that the weekly chart shows a new bearish engulfing candlestick pattern, which is typically seen as a bearish reversal.
Picked on April 05 at $146.51
Anadarko Petrol. - APC - cls: 105.14 chg: +1.47 stop: 99.95*new*
Oil stock APC turned in a decent session on Thursday. Shares dipped toward $102 but bulls bought the dip and APC rebounded back into the closing bell. The stock looks poised to post more gains next week. If you were looking for an entry point this is probably it but remember we have a brief time frame. We do not want to hold over the April 27th earnings report and that only gives us about 11 days. 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. Please note that we're raising our stop loss to $99.95.
BUY CALL MAY 100 APC-ET open interest=3738 current ask $7.80
Picked on March 28 at $102.10
Burlington NrthSanta Fe - BNI - cls: 83.39 chg: +0.36 stop: 79.95
BNI tried to rally on Thursday morning but just ran out of steam. Yet buyers were ready to defend it on its midday dip back toward $82.50. Overall we remain bullish and the current bounce in the Transports looks positive for next week. Our time frame is running short. We want to exit ahead of the earnings report around April 25th. If you're looking for a new bullish entry point this would qualify although you might want to tighten your stop. Conservative traders may just want to pass on new plays. The action on the weekly chart is looking like a top. Our target is the $87.50-90.00 range. The P&F chart remains bullish and points to a $114 target.
BUY CALL MAY 80.00 BNI-EP open interest=477 current ask $5.00
Picked on March 27 at $ 82.51
ConocoPhillips - COP - close: 67.14 chg: -0.19 stop: 62.45
COP's upward momentum might be stalling and that's affecting the short-term technical oscillators. Of course Thursday's session didn't mean much with the markets going nowhere and on light volume. We remain bullish but don't be surprised by a dip toward the 10-dma (near 66.00) or even a dip back toward the $65.00 level. We do not want to hold over the April 26th earnings report. Our target is the $69.00-70.00 range versus the P&F chart with its bullish triangle breakout buy signal that points to an $82 target.
BUY CALL MAY 65.00 COP-EM open interest=27979 current ask $3.70
Picked on March 29 at $ 64.80
Lehman Brothers - LEH - close: 150.23 change: +1.25 stop: 144.45*new*
The broker-dealer stocks turned in a decent session on Thursday and LEH rebounded back above the $150 level. We remain bullish and the recent consolidation is starting to look like a bull-flag pattern. We would consider new bullish positions here but you may want to tighten your stop loss significantly. Speaking of stop losses we are raising ours to $144.45, which is still under technical support at its rising 50-dma. LEH is due to split 2-for-1 on May 1st. 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.
BUY CALL MAY 145 LES-EI open interest=1017 current ask $8.10
Picked on March 22 at $144.61
Marvell Tech. - MRVL - close: 57.54 change: +1.03 stop: 54.99
Volume was light again for MRVL so Thursday's relative strength and 1.8% gain is suspect. At face value we're encouraged by the bounce from the $56 level but without support from the SOX semiconductor index we worry that MRVL will not be able to breakout past resistance near $60 and its converging 50-dma and 100-dma. We are going to suggest bullish positions here but more conservative traders should strongly consider waiting for a breakout over $60.00 again. The P&F chart continues to look very tempting with its bullish buy signal rising off a test of support and pointing to a $73 target. Currently our target is the $65.50-66.00 range.
BUY CALL MAY 55.00 UVM-EK open interest= 5025 current ask $5.30
Picked on April 06 at $ 60.18
Apollo Group - APOL - close: 52.80 chg: +0.24 stop: 53.31
APOL's downward momentum has stalled but overall its long-term trend remains bearish. The weekly chart has a pattern of lower highs and lower lows and the P&F chart is bearish and points to a $44 target. We are continuing to suggest that traders use a trigger under support at the $50.00 level. Our trigger to buy puts is at $49.85. If triggered we will have two targets. Our first target is the $45.50-45.00 range. Conservative traders can exit near $45. We're suggesting that traders only sell half their positions near $45 and plan to sell the remainder in the $41.00-40.00 range. If APOL closes over the simple 50-dma we'll drop it as a bearish candidate. Aggressive traders might want to evaluate bullish positions.
BUY PUT MAY 55.00 OAQ-QK open interest=1583 current ask $3.20
Picked on April xx at $ xx.xx <-- see TRIGGER
Express Scripts - ESRX - close: 85.51 chg: +0.90 stop: 90.01
ESRX's oversold bounce has reached its third day. The stock has broken back above potential round-number resistance at the $85.00 mark and is now challenging potential resistance near its 10-dma and the $86.00 level. The rebound has turned short-term technical oscillators higher but the overall pattern remains bearish. The chart below shows the bearish head-and-shoulders pattern. Yet in spite of the trends we are going to suggest caution. The relative strength cannot be denied and traders should be extra careful considering new put positions. We'd look for a new move back below the $84.00 level before initiating positions. Keep in mind that we only have ten more days before we plan to exit to avoid the April 26th earnings report. Our short-term target is the $80.25-80.00 range. However, more aggressive traders may want to aim lower. The H&S pattern points to a target in the $73-74 range, which, coincidentally is where you'll find the simple 200-dma.
Picked on April 09 at $ 85.39
Genzyme Corp. - GENZ - close: 64.82 chg: -0.07 stop: 66.26*new*
Time is running low for our bearish play in GENZ. The company is due to report earnings on April 19th and we do not want to hold over the announcement. Therefore we plan to exit on Tuesday afternoon near the closing bell. More conservative traders may want to exit early on Monday since the BTK biotech index is bouncing. Fortunately, GENZ failed to maintain its gains on Thursday and the move looks like a failed rally under resistance. Nimble traders who can jump in and out quickly may want to use this as a new bearish entry point. We are going to lower our stop loss to $66.26.
Picked on April 10 at $ 63.97 *gap lower*
Overseas Shipping - OSG - cls: 47.02 chg: -0.43 stop: 50.01
Shares of OSG continue to show relative weakness and the stock is hitting new four-month lows. Last week's failed rally near $50.00 and its 50-dma has blossomed into a breakdown below support near $47.50 and now shares are headed toward the next level of support near $46.00. We do anticipate a bounce there but the prevailing pattern is bearish. We do not want to hold over the early May earnings report. Our target is the $43.00-42.50 range, which coincides with the bearish P&F chart target.
BUY PUT MAY 50.00 OSG-QJ open interest= 95 current ask $3.80
Picked on April 11 at $ 48.10
Reynolds American - RAI - cls: 104.40 chg: -0.38 stop: 106.75*new*
Lack of follow through on RAI's recent breakdown below support at the 50-dma and the $105 level makes us nervous. Bears are fighting against a bullish P&F chart and lots of upward momentum. Yes, the stock has broken down below its five-month up trend but sellers have to overcome those looking to buy the dip. Helping the bears is the relative weakness in larger rival Altria (MO). We are going to continue to suggest puts with RAI under $105.00 but we're going to adjust our stop loss to $106.75. Our target is the 100-dma near the $100.00 mark. We'll use an exit range of $100.50-100.00. We do not want to hold over the late April earnings report.
BUY PUT MAY 105 RAI-QA open interest= 779 current ask $3.70
Picked on April 09 at $104.97
Texas Ind. - TXI - close: 58.36 chg: -0.16 stop: 61.11
Lack of follow through on TXI's recent failed rally makes us concerned. Overall the technical picture looks bearish and the MACD on the weekly chart is about to produce a new sell signal. We do have a relatively tight stop so if TXI reverses on us we should be taken out pretty quickly. Traders may want to wait for a move under $57.90 or below Thursday's low of $57.83 before initiating new positions.
BUY PUT MAY 60.00 TXI-QL open interest=640 current ask $3.40
Picked on April 11 at $ 58.34
(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: 47.75 chg: +0.09 stop: n/a
The technical picture is definitely mixed on ECA. The weekly chart's MACD is showing a new buy signal while shorter-term technicals are starting to look bearish again. ECA's lack of strength during crude oil's recent rise toward $70.00 is a big sign of weakness. Our strangle play has almost run out of time. April options expire next week. That gives us five trading days for ECA to trade significantly above $50 or under $40. At the moment odds of either aren't looking very good. Our strangle strategy involves the April $50 calls (ECA-DJ) and the April $40 puts (ECA-PH). Our estimated cost is $3.45.
Picked on January 10 at $ 45.56
Ryland Group - RYL - close: 67.82 change: -0.78 stop: n/a
Traders have a choice to make. There are five days left before April options expire. Do you sell the April $70 puts, currently trading around $2.75 and recoup part of your trading capital? Or do you keep the play open and risk RYL producing an oversold bounce next week. The technical picture is mixed. One concern is that RYL is already down five days in a row and nothing falls in a straight line for very long. Then again the weekly chart has just produced a new bearish engulfing candlestick (a.k.a. bearish reversal pattern). Bond yields are still rising and that will continue to put pressure on the homebuilders. We are not suggesting new plays. Our play involves the April $80 calls (RYL-DP) and the April $70 puts (RYL-PN).
Picked on January 22 at $ 75.19
Amgen Inc. - AMGN - close: 70.07 chg: +0.10 stop: 72.55
AMGN is due to report earnings on April 18th. Given the bounce in the BTK biotech index and the lack of follow through on AMGN's recent breakdown below $70 we're going to exit early. There is a chance that AMGN could move big on its earnings news and more aggressive traders might want to consider a strangle (or a straddle) position.
Picked on April 11 at $ 69.90