Penn National Gaming - PENN - cls: 56.05 chg: -0.78 stop: n/a
Our speculative, high-risk play in PENN has not panned out. PENN failed to find any new bidders to raise the buyout price. Meanwhile the credit market has collapsed and shares of PENN are trading significantly under the $67 buyout price announced back in June. This weakness is suggesting that the market doesn't believe the deal will get done in its current form or price. We are not suggesting new positions at this time. However, it's worth noting that on a technical basis Friday's intraday rebound almost looks like the second half to a bullish double-bottom pattern. Unfortunately, technicals become less reliable when we're dealing with a stock in a post-merger or post-buyout announcement. FYI: We'll be dropping this stock at August option expiration.
Picked on June 17 at $ 62.12
Sears Holding - SHLD - cls: 133.10 chg: +3.20 stop: 127.49
We are issuing another reversal alert for SHLD. This time the stock has produced a bullish reversal with Friday's bullish engulfing candlestick pattern. The stock dipped to $128.00 on Friday morning and rebounded to a 2.4% gain. This is a new bullish entry point to buy calls. Our short-term target is the $139.50-140.00 range. We plan to exit ahead of the August 30th (unconfirmed) earnings report. More aggressive traders may want to aim higher. The $145-150 zone looks like a tempting target. FYI: We noticed a large number of calls were traded at the September $140 strike on Friday.
BUY CALL SEP 130 KTQ-IY open interest= 520 current ask $10.80
Picked on August 3 at $133.00
(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.)
Daimler-Benz AG - DAI - cls: 83.84 chg: -0.51 stop: n/a
Intraday weakness pushed DAI (new symbol) to $81.85 before the stock bounced back into the close. This pushed the August $85 puts to an intraday high of $3.90. We are not suggesting new strangles on DCX at this time. The options in our suggested strangle were the August $95 calls (DAI-HS) and the August $85 puts (DAI-TQ). Our estimated cost was $3.70. Please note that we're running out of time. August options expire in five trading days. Therefore we're adjusting our target to sell the winning side of this strangle to $5.55, which would be a 50% gain.
Picked on July 22 at $ 89.75
ITT Educ. - ESI - cls: 108.29 change: +9.65 stop: 105.05
Shares of ESI hit our stop loss at $105.05 on Friday. Why did the stock spike 10% on Friday when most of the market was flat to down? Normal news channels don't say why ESI was so strong. You can see the sharp rally in the morning and then the huge spike higher midday shortly after twelve noon. Evidently the catalyst behind Friday's spike was news that Goldman Sachs (GS) has upped (or announced) their stake in ESI is now at 10.1%. This was revealed in an SEC disclosure filed on Friday. Click on the link here for details. Look down to page 1 of 7 and then look at line 9 and line 10. This event is another good example of why we have to play with stop losses. An unexpected event can always push stocks in the opposite direction.
Picked on August 05 at $102.22