B.P.Prudhoe Bay - BPT - close: 75.50 chg: +0.05 stop: 73.75
Oil stocks didn't move much today as crude oil dipped lower late in the session. Oil services still managed to produce a decent gain. Shares of BPT managed an early gain but eventually gave most of it back. We remain bullish on the stock with shares above resistance at the $75.00 level. Actually the $75.00 level should now be support that is bolstered by additional support at its 200-dma near $74.70. We would use dips near $75.00 as new entry points. Our target is the $79.75-80.00 range. The P&F chart is bullish with an $85 target.
BUY CALL JAN 70.00 BPT-AN open interest= 20 current ask $6.60
Picked on November 29 at $ 75.25
Biosite - BSTE - close: 49.32 change: -0.45 stop: 47.95*new*
Biotech stocks edged lower on Friday but BSTE managed to under perform its peers with a 0.9% decline. The technical indicators are struggling from lack of upward momentum in the stock and many are beginning to turn bearish. However, BSTE still has a bullish trend of higher lows and if there is any sector or market strength next week we would expect a bullish breakout in BSTE above the $50 region. Unfortunately, with the major averages looking vulnerable to more selling we would be careful around BSTE. We're going to raise our stop loss to $47.95. More conservative traders might want to consider a stop under $48.50. Aggressive traders might want to buy a bounce from $49.00. We would suggest most traders wait for a rally past $50.25 before opening new call positions. Our target is the $54.50-55.00 range. FYI: The P&F chart points to a $65 target.
Picked on December 05 at $ 50.05
Centex - CTX - close: 56.13 change: -0.79 stop: 53.99*new*
The homebuilders continued to sell-off on Friday after hitting new multi-week highs on Wednesday. The group still looks relatively bullish with the breakout early last week but the Thursday-Friday reversal is turning the short-term oscillators bearish. We would wait and watch for a bounce near its 10-dma or the $55.00 level as a new entry point to buy calls. Broken resistance near $55 should now offer support. We are going to try and reduce our risk by raising the stop loss to $53.99. Currently we have two targets. Our conservative target is the $59.50-60.00 range. Our aggressive target is the $63.50-64.00 range. Be aware that the bottom of CTX's April 2006 gap down near $57.25 might be resistance as may the to of its gap near $60.00. FYI: The Point & Figure chart points to a $77 target.
Picked on December 03 at $ 55.89
Diamond Offshore - DO - close: 81.10 change: +0.86 stop: 76.99*new*
Oil driller DO continues to show relative strength. The stock hit another new four-month high on Friday but shares trended lower from the opening high and closed with a 1% gain. We are bullish on oil and the oil stocks but both oil futures and the oil sectors might trade flat to down next week. We would watch for a dip toward $80.00 or maybe as low as $78.00 as a potential entry point to buy calls in DO again. Please note we're going to adjust our stop loss to $76.99. Our target is the $85.00-86.00 range near its early July high. The P&F chart points to a $92 target.
BUY CALL JAN 75.00 DO-AO open interest=3075 current ask $8.40
Picked on December 03 at $ 80.59
Enerplus - ERF - close: 46.06 change: +0.36 stop: 44.45
We remain concerned over ERF's lack of upward momentum. The stock broke out over resistance near $45 and the $46 levels a couple of weeks ago but has been unable to build on that move. The technical indicators are beginning to fail and roll over into bearish signals. We're going to keep the play open for now since ERF displayed some relative strength on Friday. However, traders may want to tighten their stop loss toward the $45.00 level. We would not suggest new bullish positions at this time. The Point & Figure chart is bullish and points to a $64 target but shows potential resistance near $52. We are aiming for a rise into the $50.00-51.00 range.
Picked on November 29 at $ 46.01
General Dynamics - GD - cls: 74.14 chg: -0.59 stop: 73.39*new*
The rally in GD is struggling. Earlier this week the DFI defense index was breaking out to new all-time highs. The last couple of days has seen the sector see a little bit of profit taking. Unfortunately GD is under performing its peers and seeing a sharper pull back. The stock's bullish trend is in trouble. Technical indicators are turning or have already turned bearish. The drop round-number support/resistance at the $75 level was a bad sign for the bulls. Right now we're expecting a dip toward the simple 50-dma near $73.50. We're going to try and reduce some of our risk by raising the stop loss to $73.39 but given the waning momentum in the major averages more conservative traders might want to consider just exiting early right here. We're not suggesting new positions. Our target is the $78.00-80.00 range. The Point & Figure chart points to an $82 target.
Picked on November 29 at $ 74.35
KB Home - KBH - close: 51.54 change: -0.57 stop: 49.45
Warning! There could be trouble ahead for KBH. On Thursday we suggested that readers look for a dip toward the 10-dma, the 200-dma or the $50 level. The stock declined to its 10-dma before starting to bounce. We were somewhat encouraged by the rise in volume on the very late afternoon bounce from its lows. It looked like KBH had weathered the pull back and was ready to run higher again. Unfortunately we suspect he stock will see more profit taking on Monday. KBH tried to be sneaky and release some bad news after the closing bell on Friday hoping everyone had gone home and wouldn't notice. In the company's 8-K filing they said that, "The homebuilding industry in the United States is experiencing an increasingly challenging operating environment, which includes an oversupply of inventory, a decline in new home orders and sales prices and an increase in sales incentives required to generate new home orders." Furthermore the company went on to say that KBH..."anticipates that the aggregate non-cash charge associated with inventory impairments may range from $235 million to $285 million in the fourth quarter of its fiscal year ended November 30, 2006. Further, the non-cash charge related to the abandonment of certain land option contracts is expected to total approximately $90 million in the fourth quarter." KBH also addressed the issue of executive option grants and potential back dating with these comments..."On November 12, 2006, the Company announced that a subcommittee of the Audit and Compliance Committee and its independent legal counsel conducting an investigation into the Company's past stock option practices had concluded that the Company used incorrect measurement dates for financial reporting purposes for annual stock option grants for the fiscal years 1999 to 2005, and that the Company expected that the incremental non-cash compensation expense arising from these errors would not likely exceed an aggregate of $50 million, spread over the vesting periods of the options in question. The Company also announced that it expected an increased tax provision as a result of related tax issues. The Company stated that it was evaluating with its independent auditors whether a restatement of previously-filed financial statements would be required. The Company currently estimates that the total incremental non-cash compensation expense arising from the stock option matter is approximately $41 million..."
More conservative traders might want to try and exit early on Monday assuming the stock doesn't gap lower at the opening bell. There is still a chance that some of this has already been priced into the stock since investors knew that KBH was investigating the options issue. The best-case scenario we see would be a dip near $50.00. However, odds are probably leaning toward a bigger correction. If KBH breaks the $50 level then broken resistance near $47.50 is the next level of support. Needless to say we're not suggesting new positions.
Picked on December 03 at $ 52.04
L-3 Comm. - LLL - close: 82.82 change: -0.53 stop: 79.99
Shares of LLL are holding up relatively well. The stock spent most of last week consolidating the gains from Monday. Traders bought the dip on Friday morning near its rising 10-dm. We remain bullish on the stock given its breakout over resistance near $82.00. Traders can choose to buy the dip on Friday or wait for another dip next week closer to the $82 level, which as broken resistance should now act as support. Some of the short-term technical indicators are rolling over into bearish signals after four days of trading flat to down. Yet the P&F chart is still bullish and points to a $104 target. Our target is the $88.00-90.00 range.
BUY CALL JAN 80.00 LLL-AP open interest=2345 current ask $4.30
Picked on December 04 at $ 83.81
Lockheed Martin - LMT - cls: 91.82 change: +0.18 stop: 87.65
LMT managed to out perform most of its peers in the defense sector. Traders bought the dip early on Friday morning near the rising 10-dma. We remain bullish on the stock with shares above $90.00 but want to remind readers to monitor their stops. LMT does appear to have a bearish divergence between price and some of its technical indicators. If the market or the defense sector continues to see profit taking next week then we'd look for a dip closer to the $90 level. More conservative traders may want to raise their stops. We have two targets. Our conservative target is the $94.85-95.00 range. Our more aggressive target is in the $99-100 range.
BUY CALL JAN 90.00 LMT-AR open interest=1564 current ask $3.70
Picked on November 29 at $ 90.62
Sepracor - SEPR - close: 57.28 chg: +0.21 stop: 54.69*new*
After Monday's big spike higher, thanks to rumors that Pfizer might buy SEPR, shares of SEPR consolidated sideways in a $2.00 range. The upward trend is still intact and thus far traders are buying the dip near its 10-dma above $56. We note that volume has evaporated as the week worn on. Optimistically we'd like to see another step higher next week but SEPR's intraday chart suggest another dip toward the $56 level soon. We're going to try and reduce our risk by raising the stop loss to $54.69. We are not suggesting new plays at this time. Our target for SEPR is the $59.50-60.00 range.
Picked on November 19 at $ 54.69
Thomas & Betts - TNB - close: 52.82 chg: +0.23 stop: 49.90
TNB spent the whole week trading sideways in a relatively narrow range. The technical picture is still mixed with both buy and sell signals among the indicators. Thus far the Point & Figure chart is still bullish with a $77 target. The lack of upward momentum does put us on the defensive but so far TNB has maintained a bullish trend of higher lows. More conservative traders may want to tighten their stops toward the 200-dma near $50.66 or the 50-dma near $51.30. If you are looking for a new entry point consider a bounce near $52.00. The next challenge is resistance at the $54.00 level. Our target is the $56.00-57.00.
Picked on November 12 at $ 51.36
Valero Energy - VLO - close: 54.91 change: -0.67 stop: 53.45
Red alert! VLO displayed some relative weakness on Friday and closed under its 100-dma, exponential 200-dma and the $55 level. The selling stopped on its 10-dma and VLO should have additional support at its October and November highs near $54.70. The action over the last few days looks like a short-term bearish reversal following the late November early December bullish breakout. It was that breakout that produced a strong triple-top breakout buy signal on its P&F chart, now with a $67 target. We remain bullish on oil stocks and VLO but short-term it looks like the bears are in control. Readers can choose to buy a rally back above the $55 level or look for a bounce near $54.70. If the $54.70 level breaks then the next level of support should be the $54.00 mark. A bounce from $54 would also make a potential entry point. Our target is the $59.50-60.00 range.
BUY CALL JAN 50.00 VLO-AJ open interest=13155 current ask $5.70
Picked on December 03 at $ 55.85
Genzymme - GENZ - close: 62.24 change: +0.60 stop: 66.05
Friday turned out to be a volatile session for GENZ. The stock followed the same rocky path that the BTK biotech index produced with a big intraday rally that reversed midday. The only difference was that GENZ produced bigger swings and managed to close up 0.9%. It is interesting to note that the rally failed again near its 10-dma and in the $63.60-63.80 region. We remain bearish on GENZ but would probably look for a new decline under $62.00 before considering new put positions. The Point & Figure chart looks pretty bearish with a quadruple-bottom breakdown sell signal with a $51 target. Our target is the $58.00-56.00 range. More conservative traders may want to think about tightening their stops toward the $64 level.
Picked on December 03 at $ 62.77
NewMarket - NEU - close: 62.03 change: +0.76 stop: 62.25
We are still in a wait-and-see mode with NEU. A week ago the stock look poised to breakdown under a multi-month trendline of support and its 100-dma. Last Monday the markets rallied and NEU produced an oversold bounce. Since then the stock has been consolidating relatively sideways with a bearish trend of lower highs and lower lows. Shares are still at a pivotal spot where it will choose to continue the previous up trend or begin a new bearish trend lower. More aggressive traders may want to buy puts on a breakdown under $60 or its 100-dma (near 59.58). We want to see a drop under the early December low so we're suggesting a trigger to open positions at $58.25. If triggered our target will be the $53.50-52.50 range, which is an adjustment from our original target due to potential support at its rising 200-dma.
BUY PUT JAN 60.00 NEU-ML open interest=192 current ask $2.80
Picked on December xx at $ xx.xx <-- see TRIGGER
(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: 63.40 chg: +0.40 stop: n/a
We are down to our last five days with this strangle on CAT. It looks like the stock wants to climb higher with Friday's bullish breakout over its simple 50-dma. Unfortunately, the major market indices look like they want to go lower and if they do it could be the final nail in this strangle's coffin. We've been warning readers for weeks about CAT's lack of movement. For this play to have a chance of exiting at a profit CAT needs to trade above $66 or under $54 before Friday's close. We're not suggesting new positions. 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).
Picked on November 08 at $ 60.10
Blue Nile - NILE - cls: 33.32 chg: -0.52 stop: n/a
Shares of NILE continue to sell-off. The stock lost another 1.5% on Friday and closed back under its simple 200-dma. Shares look poised to hit new relative lows next week. Keep an eye on the put side of our strangle as it could be nearing our target soon. Aggressive traders may actually want to aim for more. 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).
Picked on October 29 at $ 38.92
Burlington Nor.SantaFe - BNI - cls: 75.88 chg: -0.07 stop: 74.49
Unfortunately, Friday failed to help the railroad stocks establish any sort of trend. Shares of BNI have traded sideways in a narrow range for two and a half days while it hugs the simple 200-dma. The technical picture is mixed with various indicators suggesting both sell signals and buy signals. The P&F chart is still bearish and BNI has been unable to recover from Wednesday's bearish reversal. We are growing more worried about a potential bearish reversal in the major averages and with this in mind we're going to exit early our BNI play. More aggressive traders may want to keep the play open. We're going to exit here and just keep an eye on it for a new relative high over $79.
Picked on December 04 at $ 77.26
KLA-Tencor - KLAC - close: 51.06 chg: -0.44 stop: 49.90
We are throwing in the towel on KLAC. The stock and the semiconductor group have struggled over the past couple of weeks. The SOX index might be in the process of forming a bearish double-top pattern. The sector could turn around if Texas Instruments (TXN) has a positive mid-quarter update next week. However, we don't want to risk it. Shares of KLAC still look poised to drop toward the $50 level, where it should find support. Aggressive traders may want to keep the play open. We're opting for an early exit to avoid or limit any losses, especially now with the major averages looking vulnerable.
Picked on November 14 at $ 50.81