Option Investor
Play Updates

In Play Updates and Reviews

HAVING TROUBLE PRINTING?
Printer friendly version

Call Updates

Diageo - DEO - close: 81.38 change: -0.85 stop: 78.45

DEO lost 1% in profit taking on Friday after hitting new all-time highs on Thursday, which followed a bullish breakout over resistance near $80.00 on Wednesday. All in all it was a strong week for DEO. The stock broke out from a six-week consolidation under $80 and the company raised its guidance on Thursday morning. The dip on Friday was enough to "fill the gap" from Thursday morning and traders bought the dip. We see the rebound from Friday morning as another entry point to buy calls. Our short-term target is the $84.75-85.00 range although more aggressive traders may want to aim higher. FYI: The P&F chart points to an $89 target.

Suggested Options:
We are suggesting the March calls.

BUY CALL MAR 80.00 DEO-CP open interest=335 current ask $2.10
BUY CALL MAR 85.00 DEO-CQ open interest=145 current ask $0.15

Picked on February 14 at $ 81.04
Change since picked: + 0.34
Earnings Date 02/15/07 (confirmed)
Average Daily Volume = 452 thousand

---

OM Group - OMG - close: 51.36 change: +0.18 stop: 48.05 *new*

Shares of OMG have spent the last two weeks consolidating under resistance at the $52.00 level. So far the stock has continued to trade with a bullish pattern of higher lows, which would normally suggest that OMG is merely building up steam before breaking out over the $52 level. We are not suggesting new bullish call positions at this time although a breakout over $52 could be used as a new entry point. If you choose to buy a new breakout consider raising your target. We're only aiming for the $54.00-55.00 range. Please note that we're adjusting the stop loss to breakeven at $48.05 but more conservative traders may want to adjust theirs toward $49 or even $50. The early March earnings report is still unconfirmed but at the moment we only have a couple of weeks left.

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

Picked on January 25 at $ 48.05
Change since picked: + 3.31
Earnings Date 03/02/07 (unconfirmed)
Average Daily Volume = 770 thousand

---

RTI Int. - RTI - close: 83.84 change: +0.17 stop: 79.75

RTI has also spent the last two weeks consolidating under resistance. We initially suggested buying calls on the bullish breakout above resistance near $80.00. Unfortunately, the stock has been caught in an $80-85 trading range. The stock has been hugging its trendline of support (see chart) since the dip back toward $80.00 around February 9th. We are not suggesting new positions at this time but technically a breakout over $85 could be used for a new entry point. Bear in mind that we are already targeting the $88.00-90.00 range.

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

Picked on January 31 at $ 81.75
Change since picked: + 2.09
Earnings Date 03/12/07 (unconfirmed)
Average Daily Volume = 737 thousand

---

Rio Tinto - RTP - cls: 220.80 chg: -0.86 stop: 212.45

Shares of RTP can be volatile but the stock hasn't shown much volatility over the last couple of sessions. Volume has also come in pretty low over Thursday and Friday. Overall we do not see any changes from our original play description on Wednesday night. The stock broke out over significant resistance earlier this past week and now we're just waiting on the follow through. Readers can choose to buy calls now or wait for a potential dip near $215 or its 10-dma. Technical indicators on both the weekly and daily charts are turning positive. RTP will probably have some resistance at its November 2006 highs near $230 but our target is the $237.50-240.00 range. FYI: RTP is a high-dollar stock and is bound to see some bigger swings (volatility) and this makes the options somewhat "expensive". Consider this a more aggressive play.

Suggested Options:
We are suggesting either the March or April calls. March calls have less than five weeks left.

BUY CALL MAR 210 RTP-CB open interest= 221 current ask $13.40
BUY CALL MAR 220 RTP-CD open interest= 251 current ask $ 6.90
*we don't see any March $230 calls available

BUY CALL APR 220 RTP-DD open interest=1203 current ask $10.10
BUY CALL APR 230 RTP-DF open interest=1093 current ask $ 6.00

Picked on February 14 at $221.15
Change since picked: - 0.35
Earnings Date 02/01/07 (confirmed)
Average Daily Volume = 437 thousand

---

Sears Holding - SHLD - cls: 187.26 chg: +1.15 stop: 176.45

SHLD displayed relative strength on Friday. The stock hit a new intraday all-time high at $187.50. Shares closed right at last week's high and the stock saw above average volume behind Friday's gains, which tends to be bullish. Yet we probably would not want to buy calls right here with SHLD at last week's highs and possible resistance. Look for a move over $187.50 or a dip back toward the 10-dma near $182.00. More conservative traders may want to tighten their stops toward the $180 level. The Point & Figure chart points to a $228 target. We are aiming for the $195.00-200.00 range. We do not want to hold over the mid March earnings.

Suggested Options:
We remain bullish on SHLD but we're not suggesting new positions at this time.

Picked on February 14 at $183.64
Change since picked: + 1.62
Earnings Date 03/15/07 (unconfirmed)
Average Daily Volume = 1.2 million
 

Put Updates

Harley Davidson - HOG - cls: 68.04 chg: -1.05 stop: 70.11

Be careful with your positions in HOG. Friday's show of relative weakness with a 1.5% decline looks like a failed rally under HOG's trendline of resistance and thus a new entry point for puts. However, a couple of hours after the closing bell on Friday HOG announced a tentative agreement with the 2,800 strikers at its Pennsylvania plant. As we expected news of a settlement with the striking workers sent the stock higher. In after hours on Friday HOG was trading near $69 again. Therefore, we would wait and watch for another failed rally under $69 or more likely the $70 area before considering new positions. It is very possible that the reaction to the news will send HOG past $70 and stop us out. Our target is the $63.00-62.00 range but more conservative traders may want to exit early near $65.00.

Suggested Options:
The pattern remains bearish on HOG but we are not suggesting new positions until we see how shares react to news out late Friday.

Picked on February 11 at $ 67.80
Change since picked: + 0.24
Earnings Date 04/19/07 (unconfirmed)
Average Daily Volume = 2.3 million

---

MarineMax - HZO - close: 22.52 change: -0.19 stop: 24.25

The consolidation in HZO may be ending soon. Shares spent the last week trading sideways in a narrow range. The lack of movement can be painful and frustrating if we own options on the stock. Fortunately, on Friday the stock displayed some relative weakness with a 0.8% decline. Both daily and weekly technical indicators are bearish and the P&F chart is very bearish with a $2.00 price target. We would still consider new positions here but more conservative readers may want to use a trigger under $22.00 and a tighter stop loss before opening new plays. Our target is the $20.25-20.00 range.

Suggested Options:
We are suggesting the March puts although April puts would also work well.

BUY PUT MAR 25.00 HZO-OE open interest= 41 current ask $2.90
BUY PUT MAR 22.50 HZO-OX open interest=161 current ask $0.90
BUY PUT MAR 20.00 HZO-OD open interest= 30 current ask $0.40

Picked on February 11 at $ 22.59
Change since picked: - 0.07
Earnings Date 04/26/07 (unconfirmed)
Average Daily Volume = 300 thousand

---

Meritage - MTH - close: 43.56 change: +0.01 stop: 45.26

The homebuilders were in focus again on Friday after the Friday morning housing starts report surprised everyone. Housing starts for January dropped over 14% to a new ten-year low. The initial reaction sent the homebuilders sharply lower but then surprisingly they bounced almost as quickly. The overall pattern in the group and MTH still looks bearish but we hesitate to open new put plays following Friday's intraday rebound. We would wait for a new decline under $42.00 before buying puts again. More conservative traders might want to tighten their stops. The P&F chart has produced a triple-breakdown sell signal with a $37.00 target. We are aiming for the $37.50-37.00 range.

Suggested Options:
We are not suggesting new positions in MTH until we see a new decline under $42.00.

Picked on February 11 at $ 41.99
Change since picked: + 1.57
Earnings Date 04/25/07 (unconfirmed)
Average Daily Volume = 473 thousand
 

Strangle Updates

None
 

Dropped Calls

Nike - NKE - close: 106.30 change: +0.79 stop: 99.89

Target achieved. NKE announced a two-for-one stock split this morning and the news sent shares to an intraday high of $107.51. Our target was the $107.50-110.00 range. More aggressive traders may want to keep their play open and aim higher. However, we would caution that NKE is up nine days in a row and way overdue for some profit taking. The stock split is due in early April.

Picked on February 06 at $101.17
Change since picked: + 5.13
Earnings Date 03/21/07 (unconfirmed)
Average Daily Volume = 1.4 million
 

Dropped Puts

Sealed Air - SEE - close: 66.25 chg: +0.17 stop: 65.26

We are dropping SEE as a bearish candidate. The stock bounced from technical support at its 50-dma early last week and never looked back. While technical indicators are mixed the daily MACD just produced a new buy signal. Shares of SEE look poised to breakout to new 52-week highs soon and challenge the all-time highs set in 1999 and 1998. It was our plan to buy puts on a breakdown below the 50-dma with a trigger at $63.75. Nimble traders may want to consider new bullish positions if SEE can breakout to a new relative high over $66.50.

Picked on February xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 05/02/07 (unconfirmed)
Average Daily Volume = 281 thousand
 

Dropped Strangles

Google - GOOG - cls: 469.94 change: + 8.47 stop: n/a

Our strangle plays in GOOG have come to an end with February option expiration. The post-earnings reaction was not quite as sharp or strong as we expected and left our strangles with a loss.

Picked on January 28 at $495.84
Change since picked: -25.90
Earnings Date 01/31/07 (confirmed)
Average Daily Volume = 5.2 million

---

United Parcel Srv. - UPS - cls: 74.04 chg: -0.44 stop: n/a

UPS spent most of the last two weeks trading sideways and the post earnings reaction in the stock price was not near large enough to give our strangles a chance. The February options expiration has ended the play.

Picked on January 28 at $ 72.49
Change since picked: + 1.55
Earnings Date 01/30/07 (confirmed)
Average Daily Volume = 2.9 million
 

Play Update Archives