Baker Hughes - BHI - close: 78.25 change: +1.35 stop: 71.99
The OIX oil index and OSX oil services index suffered some profit taking on Friday in spite of a hefty 93-cent rally in crude oil to $63.43 a barrel. Shares of BHI out performed its peers with a 1.75% gain on above average volume. We do not see any changes from our new play description from Thursday night so we're reposting it here:
OPEC announced it would cut another 500 million barrels of production starting February 1st. This sparked a big rally in crude oil futures (on Thursday) and that powered a rally in the energy sector. Shares of BHI broke out over significant resistance near $74.00, its 200-dma and the $75.00 level. Furthermore the rally in BHI was fueled by big volume, which is another bullish sign. We want to buy calls on this breakout. Traders can choose to open positions now or look for a dip back toward $75 or the 200-dma, both levels should now be short-term support. Our target is the $83.75-85.00 range. The P&F chart is bullish and points to an $81 target.
BUY CALL JAN 75.00 BHI-AO open interest=7784 current ask $5.00
Picked on December 14 at $ 76.90
B.P.Prudhoe Bay - BPT - close: 76.00 chg: +0.09 stop: 73.75
As we mentioned in the BHI update above... oil stocks trended lower with investors doing some profit taking ahead of the weekend in spite of a strong gain in crude oil futures. Shares of BPT inched higher and continues to look bullish with the bounce from support near $75.00 and its 200-dma. More conservative traders may want to consider tightening their stops toward the $75 level. Our target is the $79.75-80.00 range. The P&F chart is bullish with an $85 target.
BUY CALL JAN 75.00 BPT-AO open interest=153 current ask $2.30
Picked on November 29 at $ 75.25
Centex - CTX - close: 56.25 change: +0.18 stop: 54.95
CTX just marked its sixth day in a row of trading sideways in a relatively narrow range. The lack of upward momentum has turned the technical picture, at least with the short-term indicators, bearish. The MACD on the daily chart is about to produce a new sell signal. Plus, the stock has broken its five-week trendline of rising lows (support). Yet at the same time CTX is still holding above what should be support in the $55.00-55.50 range. We have moved our stop loss just under what should be support to reduce our risk but more conservative traders may still want to exit early to cut or avoid any losses. We are not suggesting new bullish call positions at this time. 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
Enerplus - ERF - close: 46.58 change: -0.04 stop: 44.95
ERF resisted most of the profit taking in the energy sector on Friday. Studying the intraday chart of Friday's session it really looks like the stock wants to trade higher. Unfortunately, ERF failed multiple times at the $46.75 level. A breakout at this point (46.75) might spark a significant move higher. We remain relatively defensive on the stock given its lack of upward momentum over the past three weeks. We're not suggesting new positions and more conservative traders may want to inch up their stop loss. We're going to leave our stop under $45.00 for now. 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
Infosys - INFY - close: 54.74 change: -0.46 stop: 52.99
INFY bounced around a 75-cent range all day on Friday. We noticed a big surge in volume right before the closing bell. We suspect the volume came from index funds stepping in ahead of the December 18th inclusion of INFY into the NASDAQ-100 index. Overall we do not see any changes from our new play description on Thursday night so we're reposting it here:
Shares of India-based INFY appear rested and ready to run. The stock has a relatively consistent bullish trend dating back to the June lows. After peaking in November INFY consolidated sideways while still maintaining above technical support at its rising 50-dma. The technical picture is improving and the P&F chart points to a $63 target. We are suggesting call positions now with the stock above $55.00. More conservative traders may want to wait for INFY to clear the December highs near $55.60 before initiating positions. Our target is the $59.00-60.00 range.
BUY CALL JAN 50.00 IUN-AJ open interest=2503 current ask $5.80
Picked on December 14 at $ 55.20
KB Home - KBH - close: 51.73 change: +0.13 stop: 49.95
Shares of KBH have spent more than a week consolidating sideways. The lack of upward momentum (similar to CTX's) has turned the technical picture bearish at least on a short-term basis. More conservative traders may want to exit early now. We're not yet ready to give up, especially with what should be support at $50.00 and its 200-dma. We would watch for a rally past $53.00 or a convincing bounce near $50.00 as potential entry points. Our target is the $57.50-60.00 range.
Picked on December 03 at $ 52.04
L-3 Comm. - LLL - close: 83.72 change: -0.14 stop: 79.99
LLL suffered some minor profit taking after Thursday's big rally. Right now we're expecting a bit of a dip on Monday but traders can watch for a bounce anywhere above $82.00 as a potential entry point to buy calls. The intermediate trend in LLL is still bullish. Our target is the $88.00-90.00 range. FYI: In the news this past week LLL announced a $500 million stock buyback program. At current prices that's about 5% of the float.
BUY CALL JAN 80.00 LLL-AP open interest=2309 current ask $4.70
Picked on December 04 at $ 83.81
Lockheed Martin - LMT - cls: 90.04 change: -0.21 stop: 88.99
We remain on the defensive with LMT. The stock failed to rally with the broader market on Friday. This show of relative weakness is not a good sign especially when coupled with rising volume. The MACD indicator on the daily chart produced a new sell signal this week. We had already warned readers of a bearish divergence between price and the MACD. Currently LMT is balancing precariously along round-number support at the $90.00 level. A rebound from here can be used as a new bullish entry point. More conservative traders might want to tighten their stops toward Friday's low. We have two targets. Our conservative target is the $94.85-95.00 range. Our more aggressive target is in the $99-100 range.
Picked on November 29 at $ 90.62
NII Holdings - NIHD - close: 68.46 chg: -0.49 stop: 66.99
NIHD gapped higher at the open on Friday but the rally failed under round-number resistance at the $70.00 mark. We do not see any changes from our Thursday nigh new play description so we are reposting it here:
The pattern in NIHD looks relatively close to a bullish cup-and-handle pattern. We have also noticed that the technical indicators are starting to turn bullish again and volume is beginning to rise. The Point & Figure chart has a very bullish pattern called a bullish triangle breakout and it points to a $110 target. More aggressive traders may want to open call positions here. We want to see a breakout past potential round-number resistance at $70 so we're suggesting a trigger to buy calls at $70.25. If triggered our target is the $74.50-75.00 range. Aggressive traders may want to aim higher.
BUY CALL JAN 65.00 QHQ-AM open interest=1465 current ask $4.90
Picked on December xx at $ xx.xx <-- see TRIGGER
Sepracor - SEPR - close: 56.84 chg: +0.40 stop: 55.99*new*
Unfortunately there is still no real change in SEPR or our previous updates. The stock has spent the last two weeks consolidating sideways in a $2.00 range. The lack of movement does not help our options. The lack of upward momentum has turned the short-term technicals bearish. More conservative traders may want to exit early. We're going to inch up our stop loss to $55.95. If the market can see some upward momentum next week then maybe SEPR can produce a breakout from its current trading range. We're not suggesting new positions. Our target for SEPR is the $59.50-60.00 range.
Picked on November 19 at $ 54.69
Suncor Energy - SU - close: 80.90 change: -0.73 stop: 77.69
Oil stocks suffered some profit taking on Friday even though crude oil futures were up sharply over $63 a barrel. We remain bullish on oil and see the Friday pull back in SU as a new entry point to buy calls. More conservative traders may want to use a trigger above Thursday's high (82.08) before initiating positions. Our target is the April-May highs in the $89.00-90.00 range. The Point & Figure chart has produced a fresh triple-top breakout buy signal with a $92 target.
BUY CALL JAN 80.00 SU-AP open interest=6769 current ask $3.80
Picked on December 14 at $ 81.63
Valero Energy - VLO - close: 55.12 change: +0.17 stop: 53.99
VLO managed to out perform many of its peers in the oil sector on Friday. Unfortunately, the stock is still trading under a six-day trend of lower highs as it struggles to breakout past its simple 100-dma again. The lack of upward momentum has turned the short-term technicals bearish. We remain very wary. If you are looking for a new entry point we'd wait for a new rise past $55.50 before considering call positions. Thus far the P&F chart is still bullish with a triple-top breakout buy signal pointing to a $67 target. We are aiming for the $59.50-60.00 range.
Picked on December 03 at $ 55.85
MEMC Electronic - WFR - close: 43.55 change: +0.73 stop: 39.95*new*
WFR continues to show relative strength. The stock rose 1.7% on above average volume on Friday and now shares are testing short-term resistance at the $44.00 level. We are adjusting our stop loss to $39.95 as the $40.00 level should offer support. More conservative traders may want to tighten their stops further. Our target is the $47.50-50.00 range. The P&F chart is bullish with a $48 target.
Picked on December 10 at $ 42.40
Expeditors Intl.- EXPD - close: 43.33 chg: -0.46 stop: 45.05
The rise in crude oil prices negatively impacted the transportation sector, which closed in the red on Friday. Shares of EXPD spiked higher at the open but quickly reversed. The move looks like a new failed rally under its multi-week trendline of lower highs. Volume on the session was strong. We see Friday's performance as a new entry point to buy puts but we want to caution readers about opening new put plays if the major market indices are poised to move higher. Our short-term target is the $40.15-40.00 range. More aggressive traders may want to aim for the August lows.
BUY PUT JAN 45.00 URP-MI open interest=2700 current ask $2.55
Picked on December 10 at $ 43.68
NewMarket - NEU - close: 59.51 change: +0.40 stop: 62.01
NEU is still trying to cling to support near $60.00 and its simple 100-dma. This past week the stock broke down under multiple levels of support and looks poised to drop toward its next level of support at its rising 200-dma near $53.75. On Thursday we adjusted our entry point to $59.11 and tightened our stop loss to $62.01. More conservative traders may want to stick to our original plan with a trigger to buy puts at $58.25, which has not yet been hit. Our target is the $54.00-53.50 range. FYI: The P&F chart points to a $51 target. Plus, short-interest is about 7% of the 14.8 million-share float, which is probably enough to raise the risk of a short squeeze if NEU abruptly turns higher.
BUY PUT JAN 60.00 NEU-ML open interest=209 current ask $3.30
Picked on December 14 at $ 59.11
Yahoo! Inc. - YHOO - close: 26.90 chg: +0.03 stop: 27.05
Some of the technical indicators in YHOO are starting to suggest a bullish turnaround is in the works. The strength in the INX Internet index, which hit new multi-year highs on Friday, certainly doesn't hurt the bulls. Fortunately, we are still on the sidelines with YHOO waiting for a breakdown under support near $26.00 and its 50-dma. We're suggesting a trigger to buy puts at $25.85. If triggered our target is the $22.65 level near the October low. More aggressive traders may want to aim lower. FYI: If YHOO closes above $27.50 we'll probably drop it as a bearish candidate. Plus, it might be worth noting that short interest is about 6.9% of YHOO's 1.2 billion share float.
Picked on December xx at $ xx.xx <-- see TRIGGER
YUM Brands - YUM - close: 58.68 change: -0.18 stop: 60.51
Friday morning, before the bell, news hit the wires that the C.D.C. had told Taco Bell, a division of YUM, that the E.coli out break was over. Yet surprisingly the news failed to have any impact on the stock price. Any early morning strength in YUM failed and the oversold bounce from last week's lows seems to be struggling. We remain bearish on YUM and readers can use Friday's weakness as a new bearish entry point to buy puts. However, traders need to be ready for a continuation of the bounce and a potential rally towards $60.00 and its 50-dma, which should be overhead resistance. Our target is the $55.75-55.00 range.
Picked on December 12 at $ 58.49
(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.)
Blue Nile - NILE - cls: 35.38 chg: -0.15 stop: n/a
It looks like the bounce in NILE is running out of steam. Earlier this past week the stock shot higher after it was announced that NILE would be added to the S&P's smallcap 600 index at a date to be announced. You can see the big volume on the news for December 13th. Yet the stock has been unable to build on that rebound and remains under resistance near $36 and its 50-dma. There has been some talk that the new movie about conflict diamonds or blood diamonds might hamper jewelry store sales. We would not put too much stock in that claim but it is another black cloud over NILE. We are not suggesting new strangle positions at this time. Keep in mind that we only have about five weeks before January options expire. More conservative traders may want to think about an early exit to salvage some capital if NILE doesn't begin to move soon. 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
Diamond Offshore - DO - close: 84.05 chg: -0.38 stop: 79.95
Target achieved. Late Friday afternoon DO traded over the $85.00 level and hit our target. Unfortunately, shares began to give into the profit taking in the energy sector. We would expect a dip back toward the 10-dma near $81.30 or the $80 level. Keep an eye on the $80 level as a bounce near $80 might be a new bullish entry point.
Picked on December 03 at $ 80.59
Genzymme - GENZ - close: 63.39 change: +2.31 stop: 64.05
We have been stopped out of GENZ at $64.05. Before the opening bell it was announced that the U.S. government had reversed an earlier decision on an unfavorable reimbursement rate for GENZ's Synvisc. The drug is used for osteoarthritis. The news sent GENZ gapping higher at $63.50 and the stock tagged $64.21 before paring its gains.
Picked on December 03 at $ 62.77
Caterpillar - CAT - close: 61.82 chg: -0.30 stop: n/a
We can put the CAT strangle to rest. We have been defensive and cautious on the play ever since shares failed to breakout past the 50-dma in late November. Shares were unable to move past the $64.00 level and currently appear to be headed back toward the $60 region. Our estimated cost was about $0.75.
Picked on November 08 at $ 60.10