Chaparral Steel - CHAP - cls: 74.19 chg: +1.01 stop: 69.95
The markets turned in another solid day on Friday. CHAP displayed relative strength with a 1.3% gain and on improving volume. We are encouraged since Thursday's session looked like a short-term failed rally under resistance. Not only do we like CHAP for its bullish pattern but the steel and metals industry has seen some mergers and acquisitions and it's expected that the group will see more consolidation this year. That makes CHAP a potential buyout target. The company already announced back in April that it was exploring all of its strategic alternatives. Part of the risk here is that CHAP might announced a bid to buy someone else in which case we would expect CHAP's stock to go down as the buyer. We are suggesting call positions now. More conservative traders will want to strongly consider waiting for a breakout over $75.00 or the $75.50-75.60 zone before buying calls. We're going to set two targets. Our first target is the $79.50-80.00 range. Our aggressive target is the $84.00-85.00 range. The P&F chart currently points to a $99 target.
BUY CALL JUL 70.00 ZHQ-GN open interest= 592 current ask $6.90
Picked on May 30 at $ 73.69
OM Group - OMG - cls: 62.73 chg: +0.22 stop: 59.85
Shares of OMG under performed the market this past week. The stock was stuck trading sideways as it consolidates under the $64.00 level. On the positive side it does have a bullish pattern of higher lows and the consolidation is narrowing, which would suggest a breakout higher is just around the corner. A dip toward the $61.00 region is still a viable entry point to buy calls but at this point we would probably wait for a breakout over $64.00 before opening positions. Our target is the $68.50-70.00 range. The P&F chart is bullish with an $86 target.
BUY CALL JUL 60.00 OMG-GL open interest=203 current ask $5.90
Picked on May 27 at $ 62.44
Sunoco - SUN - cls: 81.11 chg: +1.40 stop: 75.95
A $1.00 rally in crude oil powered a strong move in the oil stocks. SUN, a refining stock, surged 1.75% and broke out over resistance at the $80.00 level. Our suggested trigger to buy calls was at $80.26. If we had any complaints it is with the low volume behind Friday's move. Now that the play is open we have two targets. Our first target is the $84.00-85.00 range. Our second, more aggressive, target is the $88.00-90.00 range. The P&F chart has seen its buy signal rise from $94 to $100. We would still consider new positions here but we suspect that odds are relatively good that SUN will dip back toward the $80 level, which would be a better entry point.
BUY CALL JUL 80.00 SUN-GP open interest=2281 current ask $4.80
BUY CALL AUG 80.00 SUN-HP open interest=2572 current ask $6.10
Picked on June 01 at $ 80.26
Vangard Emergy Mkts ETF -VWO- cls: 89.29 chg: +1.97 stop: 84.99*new*
The emerging markets ETF, the VWO, really popped on Friday. The VWO gapped open higher above resistance near $88.00 and rallied to a new all-time high. The ETF is nearing our target in the $89.85-90.00 range. More aggressive traders may want to aim higher. It's very common for equities that reach the $90 level to quickly sprint toward the $100 zone. The $100 mark is such a strong psychological level it can act like a magnet. We suspect that VWO moves a bit too slowly for a sprint toward $100 but the ETF does have a strong bullish trend. Chart readers will notice that Friday's rally is a breakout over its multi-month trendline of resistance (higher highs). We're raising our stop loss to $84.99.
Picked on May 16 at $ 86.15
XTO Energy - XTO - cls: 58.37 chg: +0.36 stop: 54.99
We are surprised that XTO didn't show more strength on Friday. The surge in crude oil futures really pushed the energy stocks higher. Shares of XTO rallied toward short-term resistance near $59.00 and failed on Friday morning. While this is discouraging traders jumped in to buy the dip near $58.00 Friday afternoon. The stock continues to have a bullish trend of higher lows. Should XTO continue to dip then look for a bounce near $57.00. We would still consider new positions now but some readers may want to see a new relative high first. More conservative traders may want to raise their stop loss toward $56.00 just under technical support at the rising 50-dma. Our target is the $62.50-65.00 range. Aggressive traders may want to aim higher.
BUY CALL JUL 55.00 XTO-GK open interest=124 current ask $4.70
BUY CALL AUG 55.00 XTO-HK open interest=3533 current ask $5.40
Picked on May 27 at $ 57.63
Anixter Intl. - AXE - cls: 72.83 chg: -1.03 stop: 72.05
AXE under performed the markets on Friday with a 1.39% decline. Yet that didn't stop the daily chart's MACD indicator from producing a new buy signal. This past week was bullish for AXE with a big bounce from support near its 50-dma. We are currently sitting on the sidelines so it doesn't hurt to leave AXE on the newsletter as a bearish candidate but the bears are definitely having a hard time here and AXE looks closer to breaking out over resistance near $75.00 than breaking down under $70.00. Currently it is our suggested strategy to buy puts on a breakdown under $68.50. We are considering a higher trigger point at $69.00 or just under $70.00 but for now we'll stick with a $68.49. More nimble traders might actually want to scope out potential bullish positions if AXE can trade over resistance at the $75.00 mark.
Picked on May xx at $ xx.xx <-- see TRIGGER
Gilead Sciences - GILD - cls: 83.00 chg: -0.00 stop: 82.55
We are still in a wait and see mode with GILD. Biotechs turned in a decent week and the BTK index has broken the trend of lower highs and the MACD on the BTK's daily chart is nearing a new buy signal. Meanwhile shares of GILD continue to churn sideways inside its $80.00-85.00 trading range. We are waiting on a breakdown to signal a correction lower. Our suggested plan is to buy puts on a breakdown with a trigger at $79.90. If triggered we will have two targets. Our conservative target is $75.25-75.00. Our aggressive target is the $72.50-70.00 range. Readers should note that the stock is set to split 2-for-1 on June 25th. FYI: The P&F chart is still bullish with a $97 target but a drop under $80 should reverse it into a new sell signal. If GILD can breakout over $85.00 we might switch directions!
Picked on May xx at $ xx.xx <-- see TRIGGER
Vital Images - VTAL - cls: 28.25 chg: +0.66 stop: 29.05 *new*
It is tough to be a bear when the markets are hitting new high after new high. While VTAL has under performed its peers and the broader market indices but the lack of downward momentum is starting to hint that VTAL may have found a bottom here. We are concerned that VTAL's recent sideways consolidation is going to end with a breakout higher. Please note that we're adjusting our stop loss to $29.05. The $30.00 level should be stronger overhead resistance but we don't want to risk that much of a move at this time. More conservative traders may want to just exit early right here or tighten their stop loss even further.
Picked on May 16 at $ 27.99
Freeport McMoran - FCX - cls: 79.25 chg: +0.80 stop: 74.45
Target achieved! The rally in FCX continued into Friday and the stock hit an intraday high of $80.00. Our target was the $79.50-80.00 range. We remain bullish on FCX but would look for a dip back toward the 10-dma or the $75.00 level before considering new positions.
Picked on May 27 at $ 74.61
Las Vegas - LVS - cls: 80.30 change: +2.28 stop: 81.15
We are throwing in the towel on LVS and suggesting an early exit! The stock has bounced more than once near the $75.00 level and now Friday's big bounce (+2.9%) has erased any unrealized gains. The close over round-number resistance at $80.00 on strong volume is bullish. We'd rather cut our losses now than see LVS rally toward overhead resistance at its 200 or 50-dma near $84.
Picked on May 07 at $ 79.85