Option Investor
Play Updates

In Play Updates and Reviews

HAVING TROUBLE PRINTING?
Printer friendly version

Call Updates

Fortune Brands - FO - close: 70.83 change: -1.18 stop: 69.74

We hope our readers were not surprised by the pull back in FO on Friday. We've been warning that shares would probably dip toward the $70.00 region. The market sell-off continued on Friday and FO finally gave into the pressure. Technical indicators are definitely turning weaker. Looking more closely we do see that the stock tried to bounce twice in the $70.40 area. FO's direction next week will probably be determined by the market's moves. The DJIA might bounce from its June lows and that could help things here but we remain cautious and we're not suggesting new bullish call positions at this time. Our target is the $74.00 level. We do not want to hold over the July earnings report (21st - unconfirmed).

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

Picked on July 06 at $ 71.30
Change since picked: - 0.47
Earnings Date 07/21/06 (unconfirmed)
Average Daily Volume = 674 thousand
 

Put Updates

Alcon Inc. - ACL - close: 95.73 chg: +0.12 stop: 100.05

Hmm... we find ACL's relative strength on Friday surprising. There was no follow through lower after Thursday's breakdown. The overall pattern remains bearish so we're keeping the play open. Don't be surprised to see a bounce towards the $98 region. We don't see any changes from our new play description from Thursday so we're reposting it here:

Historically investors tend to run toward drug-related stocks as "safe haven" plays in times of turmoil. Not this time - at least not with ACL. The stock lost 3.7% on above average volume Thursday to make a new two-month low. The move produced a new Point & Figure chart sell signal that currently points to a $91 target but we expect that to fall even lower. We are suggesting that traders open put plays with ACL under $98.00. More conservative traders might want to wait for a decline under $95.00 or the late April low near $94.44 before initiating positions. We're suggesting two targets. Our conservative target is the $90.50 mark. Our aggressive target is the $87.00-85.00 range. We do not want to hold over the July 24th earnings report so we don't have a lot of time.

Suggested Options:
We are suggesting the August puts.

BUY PUT AUG 100.00 ACL-TT open interest=1854 current ask $6.70
BUY PUT AUG 95.00 ACL-TS open interest=1933 current ask $4.10
BUY PUT AUG 90.00 ACL-TR open interest= 949 current ask $2.30

Picked on July 13 at $ 95.61
Change since picked: + 0.12
Earnings Date 07/24/06 (confirmed)
Average Daily Volume = 805 thousand

---

Air Products Chem. - APD - close: 61.95 chg: -0.47 stop: 65.01

As the market sell-off continued on Friday, shares of APD lost another 0.75%. The stock dipped intraday under its simple 200-dma. The weakness has turned the technical picture bearish and its MACD on the daily chart has produced a new sell signal. If APD does bounce next week watch for the $63-64 region to act as overhead resistance. A failed rally under $64.00 and its 50-dma could be used as a new entry point to buy puts. At this time we're not suggesting new plays. We don't want to hold over the late July earnings report. Our target is the $59.00-58.00 range.

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

Picked on July 09 at $ 62.95
Change since picked: - 1.00
Earnings Date 07/26/06 (unconfirmed)
Average Daily Volume = 1.2 million

---

Apollo Group - APOL - close: 48.30 chg: -0.77 stop: 52.01

So far so good. Shares of APOL continue to slip lower. The stock had been range bound between $50.00 and $56.00 for four months. During that time APOL produced what appears to be a bearish double top pattern. In the last few days the stock has broken down under support at the $50.00 level and looks poised to move lower. We do expect a bounce near its March lows around $47.50 and it wouldn't surprise us to see APOL bounce towards $50.00, which as broken support should now act as new overhead resistance. APOL is one of many companies being investigated by the SEC during this new backdating stock options scandal for executives. Our target is the $45.50-45.00 range. The P&F chart points to a $40.00 target. FYI: More conservative traders might want to consider tightening their stop loss (maybe around $51).

Suggested Options:
We are suggesting the August puts. You, the individual trader, need to choose which strike price best suits your risk profile.

BUY PUT AUG 50.00 OAQ-TJ open interest=1765 current ask $2.95
BUY PUT AUG 45.00 OAQ-TI open interest= 826 current ask $0.85

Picked on July 09 at $ 49.92
Change since picked: - 1.62
Earnings Date 09/19/06 (unconfirmed)
Average Daily Volume = 1.4 million

---

Caterpillar - CAT - close: 69.70 chg: -1.61 stop: 74.01

We are down to the final four days for our CAT play. The company is due to report earnings on the morning of Friday, July 21st. We do not want to hold over the report. Considering our time frame we're not suggesting new put plays although technicals continue to worsen and volume is still slowly rising on the sell-off. Our target is the $67.50-66.50 range, which is just above the rising, simple 200-dma. Readers should be prepared for a bounce in CAT if the DJIA bounces from its June low.

Suggested Options:
We are running low on time so we're not suggesting new puts in CAT.

Picked on July 12 at $ 71.31
Change since picked: - 1.61
Earnings Date 07/21/06 (confirmed)
Average Daily Volume = 5.1 million

---

IDEXX Labs - IDXX - close: 72.82 chg: +0.13 stop: 76.51 *new*

We have nothing new to report on for IDXX. The stock hit a new five-month low at $72.45 on Friday morning but then quickly tried to bounce. The rebound did fade but shares closed in the green versus a 1.78% decline in the BTK biotech index. Our conservative target at $75.25 has already been hit and we're aiming for the $72.00 level. More conservative traders may want to seriously consider exiting right here. The market has been down three days in a row and looks a bit overdue for a bounce. We are adjusting our stop loss to $76.51.

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

Picked on June 12 at $ 77.95
Change since picked: - 5.15
Earnings Date 07/28/06 (unconfirmed)
Average Daily Volume = 144 thousand

---

Whole Foods - WFMI - close: 58.39 chg: -1.42 stop: 63.01*new*

The sell-off continues in shares of WFMI. The stock lost 2.3% on Friday to breakdown to a new one-year low. This also looks like confirmation of a break below the neckline to its bearish head-and-shoulders pattern. The June retail sales figures came in below expectations and this fanned the flames of concern about a slow down in the consumer. Another record high for oil doesn't help either since higher fuel prices could hurt a high-end grocer like WFMI. We probably would not chase WFMI right here. The stock is down about $6 in just the last few days. Look for a bounce and a failed rally near $60.00-61.00 as a new bearish entry point. Our target is the $56.00-55.00 range. The P&F chart points to a $43 target. We do not want to hold over the late July earnings report. Please note that we're lowering our stop loss to $63.01. More conservative traders may want to adjust theirs closer to $62.

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

Picked on July 12 at $ 61.20
Change since picked: - 2.81
Earnings Date 07/31/06 (confirmed)
Average Daily Volume = 1.4 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.)

---

D.R.Horton - DHI - close: 21.20 change: -1.66 stop: n/a

Friday was a big day for DHI. We told our readers on Thursday night that the company had issued an earnings warning and was trading lower after hours. The stock gapped down on Friday morning to open at $20.40. Shares dipped to $20.28 before bouncing. Volume on the session was almost four times the daily average. There were a lot of analyst comments on the news and the stock. A few reiterated their "buy" ratings but the overall tone was one of more caution. It is a little frustrating that the options didn't move just a little bit more. We are aiming for an exit at $2.55. The high for the put side of our strangle was $2.50 on Friday. Our estimated cost was about $1.70. We're still planning to exit if either options rises to $2.55 or more. We're not suggesting new strangle plays. The options in our strangle are the August $25 call (DHI-HE) and the August $22.50 put (DHI-TX). Don't forget that DHI is expected to report earnings on Thursday, July 20th and we do plan on holding over the report.

Suggested Options:
We're not suggesting new strangle plays in DHI at this time.

Picked on July 09 at $ 23.90
Change since picked: - 2.70
Earnings Date 07/20/06 (confirmed)
Average Daily Volume = 3.7 million
 

Dropped Calls

Investment Tech - ITG - close: 48.67 chg: -1.94 stop: 48.95

We've been stopped out of ITG at $48.95. Friday was yet another down day for the XBD broker-dealer index and the investment-related stocks. Shares of ITG lost 3.8% to break down below potential support at the $50.00 mark and its 50-dma.

Picked on July 11 at $ 51.00
Change since picked: - 2.33
Earnings Date 08/03/06 (confirmed)
Average Daily Volume = 700 thousand
 

Dropped Puts

Apple Computer - AAPL - close: 50.67 chg: -1.58 stop: 57.05

Target achieved. AAPL was weak from the start on Friday and slipped to an intraday low of $50.16. Our target was the $50.50-50.00 range. Helping drive the price lower was analyst firm UBS who lowered their earnings estimates and price target on AAPL while maintaining their "buy" rating. AAPL is due to report earnings on Wednesday, July 19th after the closing bell. We're considering a potential strangle play with shares near the $50.00 mark in an attempt to capture any post-earnings volatility.

Picked on June 28 at $ 56.85
Change since picked: - 6.18
Earnings Date 07/19/06 (unconfirmed)
Average Daily Volume = 33.1 million

---

Intl. Bus. Mach. - IBM - cls: 73.57 chg: -0.67 stop: 78.75

Target achieved. It took a bit longer than we expected but IBM finally hit our target at the $73.50 level. The stock hit an intraday low of $73.37 and closed with a 0.9% loss on another day of above average volume. The company is due to report earnings on July 18th after the market's closing bell.

Picked on June 06 at $ 78.75
Change since picked: - 5.18
Earnings Date 07/18/06 (unconfirmed)
Average Daily Volume = 5.2 million

---

Sears Holding - SHLD - cls: 141.60 chg: -2.42 stop: 152.05

Target achieved. The June retail sales number came in below expectations and that added more fuel to the fire that the consumer might be slowing down. This helped push shares of SHLD to an intraday low of $139.15. Our target was the $142.00-140.00 range.

Picked on July 12 at $148.37
Change since picked: - 6.77
Earnings Date 08/17/06 (unconfirmed)
Average Daily Volume = 1.9 million
 

Dropped Strangles

KB Home - KBH - close: 39.92 change: -1.75 stop: n/a

Target achieved. An earnings warning from DHI really rattled the homebuilding sector. The DJUSHB index lost over 4.1% on Friday. Shares of KBH followed suit with its own 4% decline and on big volume. Our estimated cost was about $1.45 and our plan was to exit if either option rose to $2.45 or more. The August $40 put (KBH-TH) hit a high of $2.50 on Friday. We're closing the play. More aggressive traders might want to keep the play open since you have so much time left - just be prepared for an oversold bounce or two.

Picked on July 09 at $ 45.76
Change since picked: - 5.84
Earnings Date 09/14/06 (unconfirmed)
Average Daily Volume = 2.4 million

 

Play Update Archives