Allegheny Tech. - ATI - cls: 76.60 chg: +1.41 stop: 69.75
A number of the iron, steel and metals stocks were up on Friday. ATI was one of them with a 1.8% gain capping off a decent week. The stock looks relatively strong here and readers may want to consider buying calls on another dip in the $75.00-74.00 zone. Conservative traders might want to adjust their stop toward $72.50. Our short-term target is the $79.75-80.00 range or the 50-dma, whichever is hit first. The P&F chart for ATI looks very bullish with an $87 target.
Picked on February 04 at $ 75.11 *triggered
Petroleo Brasileiro - PBR - cls: 111.57 chg: -0.03 stop: 104.95
PBR failed to see any follow through higher on Friday in spite of a sharp rally in crude oil futures. We're fundamentally bullish on PBR but we're waiting for an entry point. Currently our official suggested entry point is to buy calls at $116.00. However, we're also carefully watching the $105 region or the $100 level as an alternative entry point to buy calls. Our target is the $128.00-130.00 range. A move over $116 would produce a new Point & Figure chart buy signal. FYI: Another risk is PBR's earnings report. We can't find an earnings date and they normally report in mid February. That is a risk because we do not like to hold over an earnings report.
Picked on February xx at $ xx.xx <-- see TRIGGER
Ambac Fincl. - ABK - cls: 10.99 change: +0.03 stop: n/a
Shares of ABK continue to idle sideways as the market waits for news on any potential bailout plan. As of Friday it seemed that hopes were fading that any plan would get done. Furthermore the rating agencies are expected to downgrade the bond insurers (ABK and MBI) some time in the next two weeks. If a plan does get announced then this stock could double overnight. It is our bias that a plan will not happen and ABK will see it share price fall toward zero. However, that doesn't mean we can't make money on the long side too. We are going to hedge our bets and make this more of a strangle-type of play. We initially listed this play with a suggestion to buy the May $5 or May $2.50 puts. We are now suggesting readers buy an out of the money call. However, instead of buying May calls we're suggesting March calls since a deal should happen in the next two weeks, otherwise the rating agencies are going to downgrade this company's credit rating.
Here's what we're thinking. Buy something like the March $20 call (ABK-CD) currently trading at $0.45bid/0.60ask. If a deal gets announced in the next two weeks then ABK will soar and the call could rise in value to cover all of our costs in both the put and call and probably still post a profit. Remember this is just an alternative to our speculative puts. Buying the call increases our cost in the play but gives us some upside potential on a surprise.
Picked on January 27 at $ 11.54
iShares DJ Financial - IYF - cls: 88.29 chg: -1.82 stop: 93.01
Another round of credit concerns and sub-prime fears helped push financials lower on Friday. The bounce in the IYF rolled over and the equity lost 2%. This looks like a new entry point to buy puts. We're aiming for a test of the $80.00 region. Our official target is the $81.00-80.00 zone.
Picked on February 06 at $ 88.62
MBIA Inc. - MBI - close: 14.60 change: +0.40 stop: n/a
Claiming that their secondary offering (of convertible notes) was oversubscribed MBI announced that they were able to raise $1 billion, not just $750 million in the last two days of the week. This is a big bet by the buyers of these notes that MBI will survive and that some sort of rescue plan will come to pass. Our bias is still bearish. Most of the speculation this month is suggesting that the bailout needs to happen by the end of the month (February) or the ratings agencies are going to downgrade the big bond insurers and they will lose their essential triple-A credit rating. However, comments coming out Thursday and Friday this week are suggesting that something has to happen this coming week (Feb. 11-15) or the downgrades are going to fall sooner. It is a volatile situation. If a bailout plan is announced then MBI could rocket to $25-30 almost overnight. We're still betting that MBI will falter and trade toward $5 or less. However, like the ABK play, we're suggesting readers turn this into more of a strangle instead of just speculative puts. Something is going to happen in the next two weeks so why don't we buy some upside "protection" with a cheap out of the money call? We're suggesting readers buy the March $22.50 calls (MBI-CX), which is trading around 0.30bid/0.45 ask. This way if a deal is announced these call should more than pay for our entire investment on both sides and probably still come out with a profit. Naturally we are increasing our expense and thus our risk and this would be an optional adjustment to the initial play.
Picked on January 27 at $ 14.20
Myriad Genetics - MYGN - cls: 39.71 chg: +0.35 stop: 43.01
The DRG drug index continued to hit new multi-year lows on Friday while the BTK biotech index dipped to its January low. Shares of MYGN actually managed a bounce but round-number resistance near $40.00 held the bulls in check. We would still consider new put positions here. However, considering the big market decline it might be prudent to wait until we see if the market bounces Monday or Tuesday and then open new put positions. A failed rally at the 10-dma (41.50) or $42.00 could be used as a new entry point. Our target is the $36.00-35.00 range. The Point & Figure chart is bearish with a $34 target. FYI: We always consider a biotech stocks to be a more aggressive, higher risk play because you never know when an FDA decision will be released or some clinical trial info will come out that could send the stock moving sharply either direction.
Picked on February 07 at $ 39.75 *triggered
Simon Properties - SPG - cls: 83.86 chg: -3.70 stop: 90.61
SPG rolled over pretty quickly on Friday and shares broke down under recent support posting a 4.2% loss. Short-term technicals have definitely turned negative. Most of the stocks in the REIT industry look similar so we're seeing a sector rotation lower. We are suggesting new put positions here but again, the market got hammered this past week, it might be time for a bounce. This time we can look for a failed rally in the $86-87.50 zone as an alternative entry point. Our target is the $76.00-75.00 range.
Picked on February 07 at $ 84.39 *triggered
(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.)
DJIA 1/100 Index - $DJX - cls: 121.82 chg: -0.65 stop: n/a
This is make-or-break week for our strangle play in the DJX, a shadow of the Dow Jones Industrial Average. The trend is definitely bearish but after last week's reversal lower it's probably time for a dip. Unfortunately, we only have five days left before February options expire. Due to this time frame we are adjusting our suggested sell target to $4.40. Keep an eye on those puts. We are not suggesting new strangle positions at this time. The options we suggested were the February $127 calls (DJW-BW) and the February $122 puts (DJW-NR). Our estimated cost was $3.36.
Picked on January 29 at $124.80
Google - GOOG - close: 516.69 chg: +11.74 stop: n/a
We're down to our last five days on this GOOG strangle (earnings) play. The post-earnings sell-off was down but the bulls have been buying dips near $500 and shares of GOOG are starting to see an oversold bounce. This is a crucial week. If the bear market continues then GOOG should break to new lows in spite of all the folks claiming this is a buying opportunity (near $500). If this is too speculative for you then traders need to consider an early exit on Monday to salvage any remaining premium on the put side. If you just want to play defensive then start selling off your position as the put option rises to $15, then $18, then $21, etc. We are not suggesting new positions. The options we suggested were the February $600 calls (GOO-BT) and the February $500 puts (GOP-NO). Our estimated cost is $17.00. We want to sell if either option hits $27.00 or more.
Picked on January 30 at $548.27
Suncor Energy - SU - cls: 94.74 chg: +2.67 stop: 95.01
The short squeeze in crude oil on Friday prompted a rally in the oil and energy stocks. SU rose 2.89% but managed to breakout intraday over multiple levels of resistance. Shares hit our stop loss at $95.01 closing the play.
Picked on February 07 at $ 89.75 *triggered