Intl. Bus. Mach.- IBM - cls: 116.69 chg: +1.32 stop: 109.85
IBM continues to look healthy with another new five-week high on Friday. If there is anything to worry about it's that shares may be due for a dip considering the rally from its mid August lows. A pull back into the $115-114.00 zone could be used as a new bullish entry point but we'd probably look for signs of a bounce first before initiating new plays. At current levels we're not suggesting new positions. Our first target is the $118.00-120.00 range. Our second, more-aggressive target is the $124.00-125.00 zone. More conservative traders might want to consider adjusting the stop loss toward $111.50. FYI: The Point & Figure is very bullish with a $177 target.
Picked on August 26 at $113.24
Transocean - RIG - cls: 105.09 change: +2.86 stop: 99.50
Oil stocks did participate in the market's Friday rally and another rise in crude oil certainly doesn't hurt. Shares of RIG out performed most of its peers with a 2.7% gain. The stock hit an intraday high of $106.03 and broke through technical resistance at its 50-dma on an intraday basis. Our suggested trigger to buy calls was at $105.75 so the play is now open. However, we want to caution readers. Failure to hold the breakout over resistance is a concern. Plus, shares were sliding fast into the closing bell so RIG could see more profit taking on Tuesday. Next we want to remind readers that while oil will remain sensitive to any potential storm threats in the Gulf of Mexico we wouldn't be surprised if crude futures traded lower for the next couple of weeks. The trend in RIG is still short-term bullish but watch your stops and consider waiting a day or two before jumping into a new position. A bounce around $102.50 or a new relative high over $106 could be used as new entry points. Our target is the $114.00-115.00 range.
Picked on August 31 at $105.75
Acuity Brands - AYI - cls: 52.54 change: +0.16 stop: 56.01*new*
AYI posted another gain on Friday but the actual tone of the trading looks bearish. Looking at the intraday chart AYI never really participated in the market's rally and only closed up 0.3%. Shares remain in their bearish trend of lower highs. Readers can choose to open new put positions on a failed rally under $53.50 or a new decline under $52.00. We're adjusting our stop loss to $56.01. We have two targets. Our first target is the $47.75-47.50 range. Our second target is the $45.25-45.00 zone.
Picked on August 26 at $ 52.80
(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.)
Diamonds - DIA - cls: 133.40 chg: +0.83 stop: n/a
The market did see a pop on the Bernanke speech last Friday. Unfortunately, the move was not as big as expected. The DIA only rallied toward short-term resistance near $134. We are not suggesting new positions at this time. However, if the DIA dips back toward the $132 level readers could certainly use the move as a new entry to open strangle positions. It's possible that next Friday's jobs report could spark a bigger move in the major indices. Our strangle play suggested using the September $137 call (DAZ-IG) and the September $127 put (DAW-UW) with an estimated cost of $2.05. We want to sell if either option rises to $3.10 or more.
Picked on August 30 at $132.57
S&P 100 Index - OEX - cls: 687.47 chg: +7.01 stop: n/a
The OEX index produced a similar move to the DIA. It rallied higher but stalled near short-term resistance. We're not suggesting new positions but a pull back to the $680 level could definitely be used as a new entry point for strangles. Our strangle suggested using the September 700 call (OEZ-IT) and the September 660 put (OEY-UL) with an estimated cost of $14.30. We want to sell if either option rises to $21.45 or more. Considering these prices we probably need to see a move into the $705-710 range or the $655-650 zone to be profitable. This will probably be a multi-day trade. Don't expect it all in one day. FYI: With any strangle play the biggest risk is that the equity just consolidates sideways and doesn't move enough to make one side of our play profitable.
Picked on August 30 at $680.46