Option Investor
Play Updates

In Play Updates and Reviews

HAVING TROUBLE PRINTING?
Printer friendly version

Call Updates

B.P.Prudhoe Bay - BPT - close: 76.07 chg: -0.16 stop: 72.45

Oil stocks remain a pocket of strength in the market, especially with crude oil rising to $63 a barrel. We remain bullish on BPT with its breakout through significant resistance at the $75.00 level last week. Traders bought the dip on Friday morning near $75.25 and we would use the pull back as a new entry point to launch call positions. Our target is the $79.75-80.00 range. The P&F chart is bullish with an $85 target. FYI: More conservative traders may want to consider tighter stops.

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

BUY CALL JAN 75.00 BPT-AO open interest=83 current ask $2.80
BUY CALL JAN 80.00 BPT-AP open interest=93 current ask $0.70

Picked on November 29 at $ 75.25
Change since picked: + 0.82
Earnings Date 00/00/00 (unconfirmed)
Average Daily Volume = 219 thousand

---

Enerplus - ERF - close: 46.00 change: -0.13 stop: 43.85

ERF is another oil stocks that has been rebounding higher. If you missed our previous updates shares of ERF sank in early November on a proposed tax change for its home country Canada. Shares found support and reversed higher in the $39-40 region and now we're seeing a strong rebound thanks in part to a strong rise in crude oil futures. The breakout in the $45 and $46 area looked like a new bullish entry point. Friday's intraday bounce from the $45 level looks like another entry point to buy calls. More conservative traders may want to consider a tighter stop loss. Our target is the $50.00-51.00 range.

Suggested Options:
We are suggesting the January calls.

BUY CALL JAN 40.00 ERF-AH open interest= 784 current ask $6.20
BUY CALL JAN 45.00 ERF-AI open interest=3669 current ask $2.10
BUY CALL JAN 50.00 ERF-AJ open interest=2423 current ask $0.55

Picked on November 29 at $ 46.01
Change since picked: - 0.01
Earnings Date 11/10/06 (confirmed)
Average Daily Volume = 973 thousand

---

EOG Resources - EOG - close: 70.63 change: +0.10 stop: 67.99

We don't see any real changes from our previous updates on EOG. The stock displayed some weakness on Friday morning but traders bought the dip under $69.00 and EOG managed to recoup all of its losses. The intraday bounce looks like another entry point to buy calls although more conservative traders may want to wait for a new move past $71.50 before considering new positions. EOG is set up for a bullish move higher following its breakout above the multi-month trendline of resistance (see chart). Our target is the $78.00-80.00 range. The P&F chart has a very bullish pattern called a bullish triangle breakout that points to a $94 target

Suggested Options:
We are suggesting the January calls.

BUY CALL JAN 70.00 EOG-AN open interest=3538 current ask $4.20
BUY CALL JAN 75.00 EOG-AO open interest=5549 current ask $1.95
BUY CALL JAN 80.00 EOG-AP open interest=3620 current ask $0.80

Picked on November 29 at $ 72.06
Change since picked: - 1.43
Earnings Date 10/25/06 (unconfirmed)
Average Daily Volume = 3.6 million

---

General Dynamics - GD - cls: 74.81 chg: -0.03 stop: 71.90

Friday marked the second day in a row that the defense stocks saw their rally stall. The DFI defense index is struggling to push past the 1200 level. Meanwhile GD is trying to make it past the $75 level. GD has spent the last two trading days bouncing around $74.20-75.00. We remain bullish and expect GD to breakout soon. Traders can choose to buy a dip back towards $74.20 or even $73.00-73.50 near its rising 50-dma. Our target is the $78.00-80.00 range. The Point & Figure chart points to an $82 target.

Suggested Options:
We are suggesting the January calls.

BUY CALL JAN 70.00 GD-AN open interest=7715 current ask $5.70
BUY CALL JAN 75.00 GD-AO open interest=6683 current ask $2.10
BUY CALL JAN 80.00 GD-AP open interest=2801 current ask $0.45

Picked on November 29 at $ 74.35
Change since picked: + 0.46
Earnings Date 01/24/07 (unconfirmed)
Average Daily Volume = 1.4 million

---

KLA-Tencor - KLAC - close: 50.65 chg: -1.02 stop: 49.49

We are growing concerned with KLAC. Some of its technical indicators are turning bearish. On Friday the semiconductor sector struggled after one of its biggest components, AMD, lost 4% after word spread that the company had received a government subpoena about a potential antitrust issue. KLAC did manage a bounce from its lows, which happened to be near its rising trendline of support. If we see a follow through bounce higher on Monday then the bulls might be okay. If not we will probably be looking for an early exit. More conservative traders might want to consider tightening their stops toward Friday's low. Currently our target is the $54.50-55.00 range.

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

Picked on November 14 at $ 50.81
Change since picked: - 0.16
Earnings Date 01/00/07 (unconfirmed)
Average Daily Volume = 3.9 million

---

Lockheed Martin - LMT - cls: 90.35 change: -0.10 stop: 87.65

LMT is another defense-related stock that witnessed its rally slow down. Shares churned sideways but if you're feeling optimistic the $90.00 level held up as short-term support. We mentioned earlier that LMT does have a bearish divergence between price and its MACD and that's starting to become more evident as momentum wanes and the MACD hints at rolling over. We're not willing to give up just yet. LMT's direction will likely be determined by the strength in the DJIA or the S&P 500 next week. Readers can use a bounce from current levels (above $90.00) as a new entry point to buy calls. More conservative traders may want to wait for a new rise past $91.00 before opening plays. Our short-term target is the $94.85-95.00 range. More aggressive traders may want to aim for the $99-100 region.

Suggested Options:
We are suggesting the January calls.

BUY CALL JAN 85.00 LMT-AQ open interest=1421 current ask $6.70
BUY CALL JAN 90.00 LMT-AR open interest=1667 current ask $3.00
BUY CALL JAN 95.00 LMT-AS open interest=2194 current ask $0.90

Picked on November 29 at $ 90.62
Change since picked: - 0.27
Earnings Date 01/23/07 (unconfirmed)
Average Daily Volume = 2.1 million

---

Petroleo Brasileiro - PBR - cls: 93.90 chg: -0.25 stop: 88.85*new*

PBR is a Brazilian oil company who has seen its stock recently breakout higher from a multi-week consolidation pattern. Technical indicators are mostly bullish and volume came in strong on the initial breakout. On Thursday we suggested that readers look for a dip to $92 as a new entry point and the stock dipped to $91.93 on Friday morning before bouncing. The rebound looks like a new entry point to buy calls. We're going to raise our stop loss to $88.85. Our target is the $98.00-100.00 range.

Suggested Options:
We are suggesting the January calls.

BUY CALL JAN 90.00 PBR-AR open interest=8735 current ask $6.50
BUY CALL JAN 95.00 PBR-AS open interest=5882 current ask $3.50

Picked on November 29 at $ 91.51
Change since picked: + 2.39
Earnings Date 10/25/06 (unconfirmed)
Average Daily Volume = 2.6 million

---

Research In Motion - RIMM - cls: 135.68 chg: -3.15 stop: 129.99

RIMM suffered some profit taking after its Wednesday-Thursday rebound from the $130 region to almost $140. Traders did step in to buy the dip on Friday afternoon but RIMM still lost 2.2%. This remains an aggressive, higher-risk momentum play. We're going to leave our stop loss under short-term support at the $130 level but more conservative traders might want to consider a tighter stop loss (maybe under Friday's low). Our target is the $142.00 level. This past week Goldman Sachs raised their price target on RIMM to $170.

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

Picked on November 28 at $134.29
Change since picked: + 1.39
Earnings Date 12/21/06 (unconfirmed)
Average Daily Volume = 7.2 million

---

Sepracor - SEPR - close: 55.30 chg: -0.34 stop: 53.61

We still don't see any specific news to account for SEPR's spike higher on Thursday morning. The stock did produce a bearish reversal on Thursday but Friday's decline doesn't amount to much of a follow through lower. Shares still managed to bounce from its rising 10-dma on Friday. It is worth noting that short-term technicals are beginning to turn bearish. More conservative traders may want to exit early right here. We're not suggesting new positions and suspect that SEPR will dip back towards the $54.00-53.75 region before bouncing again. Our target is the $59.50-60.00 range. Keep an eye on the DRG drug index, which is currently rebounding higher and should lend some support to SEPR.

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

Picked on November 19 at $ 54.69
Change since picked: + 0.61
Earnings Date 01/25/07 (unconfirmed)
Average Daily Volume = 2.3 million

---

Thomas & Betts - TNB - close: 52.06 chg: +0.19 stop: 49.90

TNB displayed a modicum of strength on Friday. Unfortunately, while very short-term support held at the $51 level the stock failed to breakout past its simple 10-dma. The technical picture remains muddy. However, TNB has been trying to bounce for most of this week and a rally past $52.50 might be a new entry point for calls. More conservative traders might want to tighten their stop loss toward $50.50, which is just under technical support at its 50-dma and 200-dma. Our target is the $56.00-57.00 range although TNB needs to breakout past additional resistance at the $54 level first.

Suggested Options:
We're not suggesting new plays at this time. Watch for a move past $52.50.

Picked on November 12 at $ 51.36
Change since picked: + 0.70
Earnings Date 01/23/07 (unconfirmed)
Average Daily Volume = 471 thousand
 

Put Updates

None
 

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.)

---

Caterpillar - CAT - close: 61.19 chg: -0.84 stop: n/a

We have been warning readers for days that we're running out of time and that CAT's recent trading action does not look like it will cooperate with our strangle strategy. As of Friday nothing has changed except that we're now down to two weeks before December options expire. We're not suggesting new plays. It is possible that CAT will finally move for us and it's growing more likely that the move will be down but our expectations are not very high. If given the opportunity you might want to try and exit if you can salvage a significant chunk of the investment. Our estimated cost was about $0.75. We want to exit if either options rises to $1.50. The options in our strangle are the December $65 call (CAT-LM) and the December $55 put (CAT-XK).

Suggested Options:
We're not suggesting new plays in CAT.

Picked on November 08 at $ 60.10
Change since picked: + 1.09
Earnings Date 01/19/06 (unconfirmed)
Average Daily Volume = 7.7 million

---

Blue Nile - NILE - cls: 33.40 chg: -0.09 stop: n/a

It has been a rough week for NILE. The stock fell almost 8% and broke down through multiple levels of support. We're not suggesting new positions at this time. Our estimated cost was $2.40 and we're planning to sell if either side of our strangle rises to $3.90. The options in our suggested strangle are the January $45 call (JWU-AI) and the January $35 put (JWU-MG). FYI: The January $35 put is currently trading at $2.65bid/$3.00ask.

Suggested Options:
We're not suggesting new positions in NILE.

Picked on October 29 at $ 38.92
Change since picked: - 5.52
Earnings Date 10/30/06 (confirmed)
Average Daily Volume = 226 thousand
 

Dropped Calls

Fomento Econo. - FMX - close: 106.17 chg: +0.92 stop: 99.49

Target achieved. FMX continued to rally on Friday and hit an intraday high of $107.37 before paring its gains. Our target was the $107-110 range. The play is closed for us but more aggressive traders may want to aim higher. FMX still has upward momentum.

Picked on November 08 at $102.09
Change since picked: + 4.08
Earnings Date 10/27/06 (confirmed)
Average Daily Volume = 314 thousand
 

Dropped Puts

Essex Property Trust - ESS - cls: 131.75 chg: -0.29 stop: 130.01

ESS has not shown any additional weakness so we're dropping it as a potential bearish candidate. We initially added ESS to the list after its potentially bearish double-top shaped pattern. Yet there was no follow through lower and no breakdown under its 50-dma. We were suggesting a trigger to open plays at $124.90, under round-number support at $125 but it was never hit. Traders might want to keep ESS on the watch list for a bullish breakout over resistance at $134 as a signal to buy calls.

Picked on November xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 11/01/06 (confirmed)
Average Daily Volume = 147 thousand
 

Dropped Strangles

None
 

Play Update Archives