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Call Updates

Apple Inc. - AAPL - close: 124.86 change: -4.59 stop: see details

It would be natural for AAPL bulls to be scratching their heads in puzzlement at today's relative weakness. AAPL did lose 3.5%. Yet we warned readers yesterday that the stock was challenging resistance and was probably due for a minor retracement. Our biggest concern today was the bearish engulfing candlestick pattern. The dip to $125 could be used as a new bullish entry point. However, at this time, we would wait to see if shares slip any further into the $122-120 zone and look for a bounce there as a new entry point.

AAPL play #1 - directional calls

The directional call play on AAPL took something of a beating given the sharp decline. Look for a dip and then a bounce in the $122-120 zone as a potential entry point for new positions. We are suggesting a stop loss at 116.99 under last week's low. More conservative traders may want to use a stop closer to $120.

AAPL play #2 - Credit put spread

Today's pull back provides a better entry point to open new credit put spreads but tomorrow might be a better entry point if AAPL dips toward $120. The options we suggested were buying the March $110 put and selling the March $120 put.

AAPL play #3 - Sell Naked Puts

Wait for signs of a bounce before considering new naked put positions. We had suggested selling the March $150 put with plans to buy it back when AAPL hits $139.00.

Picked on February 10 at $125.48
Change since picked: - 0.61
Earnings Date 04/24/08 (unconfirmed)
Average Daily Volume = 44.4 million

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Apollo Group - APOL - close: 72.93 chg: -0.10 stop: 69.95

In some of APOL's short-term technical oscillators we're starting to see more weakness Yet until APOL breaks support we don't see any changes to our strategy. We would use any dip near its rising 100-dma (72.04), which is technical support, as a new bullish entry point to buy calls. Actually any dip in the $72.00-70.50 zone is probably a good spot to buy calls but if APOL is under $71 wait for signs of a bounce before jumping in. Our target is the $80.00-81.00 range.

Picked on February 10 at $ 73.94
Change since picked: - 0.91
Earnings Date 04/07/08 (unconfirmed)
Average Daily Volume = 3.1 million

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CONSOL Energy - CNX - cls: 76.98 change: -3.98 stop: 73.85 *new*

Ouch! Shares of CNX just got slammed today with a 4.9% decline following yesterday's breakout to new highs. It looks like the culprit was a disappointing earnings report from coal producer ANR. Traders used the news as an excuse to lock in profits across the industry. Normally one might consider the pull back toward $75 and the 10-dma in CNX as a potential entry point for new call positions. However, today's session has painted a very clear bearish engulfing candlestick pattern, which is normally seen as a one-day bearish reversal pattern. This is definitely a warning for the bulls that this group isn't quite as strong as they thought it was. We would use a bounce from here as a new bullish entry point. Please note that we are raising the stop loss to $73.85. More aggressive traders may want to leave their stop under support near $70.00. We have two targets for CNX. Our first target is the $84.50-85.00 range. Our second, more aggressive target is the $88.00-90.00 zone. The P&F chart has a brand new triple-top breakout buy signal with a $124 target.

Picked on February 10 at $ 77.54
Change since picked: - 0.56
Earnings Date 04/24/08 (unconfirmed)
Average Daily Volume = 3.3 million

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Monsanto - MON - cls: 115.05 change: +1.02 stop: 107.85

All the fertilizer stocks popped higher this morning thanks to news from MON. The company raised their earnings guidance from $2.50-2.60 per share to $2.70-2.80 per share compared to Wall Street estimates of $2.81 a share. There appeared to be a mix of analysts comments. Some analysts were bullish on MON's herbicide sales and the company's international business. While another analyst worried that the rising cost of wheat will prompt more farmers to plant wheat instead of corn, which will negatively impact MON who makes more on farmers planting corn (see note below). Shares of MON gapped open at $118.09 and traded to $119.95 before giving back most of its gains. We were suggesting a trigger to buy calls at $117.05 so we would have been triggered at the opening bell ($118.09). Look for signs of a bounce before jumping into new call positions. Short-term a dip into the $112.50-110 zone would look like a new bullish entry point. We have two targets. Our first target is the $127.00 level. Our second target is the $137.00-140.00 range. As we discussed earlier a move over $118 triggered a new P&F chart buy signal, which now forecasts a $157 price target. These have been very volatile stocks so readers should consider them aggressive, higher-risk plays. FYI: MON is presenting at the Morgan Stanley Basic Materials Conference 2008 on February 21st.

Note: We have heard some chatter today about the USDA agricultural projections for 2008/2009 and how U.S. farmers are planting less corn and more wheat. This is a potential negative for the fertilizer companies since wheat requires significantly less fertilizer than corn. However, these fertilizer companies are seeing huge business overseas and many of the phosphates and similar materials are still sold out or seeing shortages here in the U.S.

Picked on February 12 at $118.09 *gap higher entry
Change since picked: - 3.04
Earnings Date 04/03/08 (unconfirmed)
Average Daily Volume = 7.1 million

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Mosaic - MOS - close: 100.41 change: +0.88 stop: 89.45

Shares of MOS gapped open higher thanks to the bullish earnings guidance from rival MON this morning. This positive trend was further fueled by bullish comments from MOS at their investor presentation at the AgForum this morning. We were suggesting a trigger to buy calls at $101 so this morning's open at $101.83 is our new entry point. The afternoon sell-off looks like a new bullish entry point. Broken resistance in the $100-101 zone should be new support. If you prefer then wait for signs of a bounce first. If MOS surprises us and turns lower tomorrow then look for a dip or bounce in the $97-98 region as a potential entry point to buy calls. We have two targets. The first target is $109.75, just under the January highs. Our second, more aggressive target is the $118.00-120 zone. These are very volatile stocks with a lot of intraday spikes so we're playing with a very wide stop loss. More conservative traders may want to use a tighter stop in the $94-95-96 zone. We would consider this a more aggressive, higher-risk play.

Note: We have heard some chatter today about the USDA agricultural projections for 2008/2009 and how U.S. farmers are planting less corn and more wheat. This is a potential negative for the fertilizer companies since wheat requires significantly less fertilizer than corn. However, these fertilizer companies are seeing huge business overseas and many of the phosphates and similar materials are still sold out or seeing shortages here in the U.S.

Picked on February 12 at $101.83 *gap higher entry
Change since picked: - 1.42
Earnings Date 04/09/08 (unconfirmed)
Average Daily Volume = 5.8 million

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Petroleo Brasileiro - PBR - cls: 113.75 chg: -1.35 stop: 104.95

An intraday breakout over resistance near $116 was enough to trigger our bullish call play on PBR. Unfortunately, the market's rally faded and PBR faded with it. Shares gave back all of their gains and lost 1.1% on the day. A rebound from here would look like a new bullish entry point but we would prefer to wait and see if shares dip and bounce near $110, which would be a more attractive entry point at this time. Our target is the $128.00-130.00 range. The move over $116 has produced a new Point & Figure chart buy signal. Actually it is a quadruple-top bullish breakout buy signal with a $138 target. 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 12 at $116.00 *triggered
Change since picked: - 2.25
Earnings Date 02/12/08 (unconfirmed)
Average Daily Volume = 7.6 million

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Potash - POT - close: 149.28 change: +5.20 stop: 136.99

It was another strong day for POT. The stock gapped open higher at $147.00 thanks to bullish earnings comments from rival MON. We were suggesting a trigger to buy calls at $147.50 so the play is now open. POT hit $154.63, a new all-time high, before paring its gains this afternoon. We are going to go ahead and list two targets. Our first target is the $158.00-160.00 range. Our second, more aggressive target is the $168.00-170.00 zone. More aggressive traders may want to aim significantly higher. The Point & Figure chart is forecasting a $222 target. Again, this is a very volatile stock. Readers should consider it an aggressive, higher-risk trade. Aggressive traders could put their stop under the 50-dma. We're going to try and get away with a stop loss under Monday's low.

Note: We have heard some chatter today about the USDA agricultural projections for 2008/2009 and how U.S. farmers are planting less corn and more wheat. This is a potential negative for the fertilizer companies since wheat requires significantly less fertilizer than corn. However, these fertilizer companies are seeing huge business overseas and many of the phosphates and similar materials are still sold out or seeing shortages here in the U.S.

Picked on February 12 at $147.50 *triggered
Change since picked: + 1.78
Earnings Date 04/24/08 (unconfirmed)
Average Daily Volume = 5.9 million
 

Put Updates

Ambac Fincl. - ABK - cls: 8.90 change: -1.58 stop: n/a

News that Warren Buffett was willing to buy the municipal bond businesses from the bond insurers may have fueled the market rally but it did not help stocks like ABK and MBI. Shares of ABK slipped 15% and broke down under support near $10.00. If you were looking for the stock to make a move out of its recent sideways consolidation this looks like the signal. Currently we are suggesting the May puts and a speculative out of the money March call as a hedge to protect us if a bailout deal does get done. Many on Wall Street expect something to occur this week but it could drag out to next week. The options we suggested were the May $5 or $2.50 puts and the March $20 call.

Picked on January 27 at $ 11.54
Change since picked: - 2.64
Earnings Date 04/24/08 (unconfirmed)
Average Daily Volume = 10.9 million

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Avalonbay - AVB - close: 93.70 change: +4.64 stop: 95.05

The volatile REIT stocks continued to produce some big swings. Yesterday AVB broke down under support. Today the stock completely reversed higher with a 5.2% move, fueled initially by some short covering. The Buffett bid for the municipal bond business sparked a rally in financials and shorts panicked in the REITs. We warned readers that AVB had above average short interest. If you did open positions this morning you may want to close them given today's rally past its 50-dma. We are not suggesting new positions at this time unless AVB reverses back under $90 again. Our target is the $81.50-80.00 zone. A big risk with AVB is the above average short interest. The most recent data puts short interest at 12% of the 70 million-share float. Depending on which figure you use for "average" volume this equates to about 6.5 to 9.0 days of short interest and raises the risk of a short squeeze.

Picked on February 11 at $ 89.06
Change since picked: + 4.64
Earnings Date 02/06/08 (confirmed)
Average Daily Volume = 1.2 million

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Bear Stearns - BSC - cls: 78.93 chg: -0.83 stop: 84.31

BSC also reacted negatively today and the stock continued to slip lower under support near $80.00. The initial pop this morning failed at $82.00. Our target is the $71.00-70.00 zone. Our biggest risk is that a bailout plan for the bond insurers does get done (and probably this coming week). If plan is announced and the street thinks it has a good chance of actually coming to pass then shares of BSC are bound to rally sharply due to its exposure to the sub-prime mess.

Picked on February 11 at $ 79.49 *triggered
Change since picked: - 0.56
Earnings Date 03/13/08 (unconfirmed)
Average Daily Volume = 7.4 million

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FedEx - FDX - close: 88.10 change: -0.35 stop: 92.05

Shares of FDX tried to rally again today but produced a mini-double top, which is bearish, near $89.65 today. This looks like another entry point to buy puts. Of course FDX and the transports might rally tomorrow morning if the weekly oil numbers show another strong build up of inventories. We would expect any bounce to be temporary. There is potential support at $86 but our target is the $81.00-80.00 zone.

Picked on February 10 at $ 88.00
Change since picked: + 0.10
Earnings Date 03/20/08 (unconfirmed)
Average Daily Volume = 3.2 million

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W.W.Grainger - GWW - close: 75.85 chg: -0.52 stop: 80.05

This morning before the opening bell GWW reported that January 2008 sales were up 8% versus 2007. This sounds like good news but the stock failed to react on it. The trend continues to look bearish. We would expect any rebound to roll over in the $77.50-80.00 zone so look for a failed rally as a new entry point to buy puts. Another alternative would be to wait for a breakdown under support at $75.00. Our target is the $70.75-70.00 zone.

Picked on February 10 at $ 76.65
Change since picked: - 0.80
Earnings Date 04/16/08 (unconfirmed)
Average Daily Volume = 1.0 million

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iShares DJ Financial - IYF - cls: 87.73 chg: +1.02 stop: 93.01

The IYF managed a bounce fueled by the Buffett-driven rally in financials. However, it is worth noting that the bulls struggled with the $89 level twice today. We remain bearish and another failed rally in the $89-90 zone could be used as a new entry point. 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
Change since picked: - 0.89
Earnings Date 00/00/00
Average Daily Volume = 1.1 million

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MBIA Inc. - MBI - close: 11.50 change: -2.08 stop: n/a

MBI also got hammered for a 15% decline. The offer by Warren Buffett to buy the best part of the bond insurers, the municipal bond business, was not received well by shareholders. Shares of MBI definitely look like they are headed lower. Currently we are suggesting the May puts and a speculative out of the money March call as a hedge to protect us if a bailout deal does get done. Many on Wall Street expect something to occur this week but it could drag out to next week. The options we suggested were the May $7.50, $5.00 or $2.50 puts. We recently added a deep out of the money call, the March $22.50 call, as a hedge in case a rescue plan does get announced and the stocks react to it.

Picked on January 27 at $ 14.20
Change since picked: - 2.70
Earnings Date 01/31/08 (confirmed)
Average Daily Volume = 15.2 million

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Myriad Genetics - MYGN - cls: 38.30 chg: -0.35 stop: 43.01

We don't see any changes from our previous comments. MYGN continues to look bearish here. The stock did not move on the strength in the DRG drug index and the BTK biotech index is still languishing near its lows. Our target is the $36.00-35.00 range. More aggressive traders may want to aim lower. 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
Change since picked: - 1.45
Earnings Date 02/05/08 (confirmed)
Average Daily Volume = 801 thousand

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Sears Holding - SHLD - cls: 99.07 chg: -2.00 stop: 100.25

We seriously considered new put positions in SHLD right here. The stock under performed the market and its peers and gave back most of yesterday's gains. However, the company is due to present tomorrow at an investor conference. While we don't expect any surprises we're going to wait. Currently our official entry point to buy puts is at $94.75. If triggered at $94.75 our target is the $86.00-85.00 range. We do not want to hold over the end of February (unconfirmed) earnings report.

Picked on February xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 02/28/08 (unconfirmed)
Average Daily Volume = 3.0 million

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Simon Properties - SPG - cls: 86.07 chg: +2.47 stop: 90.61

The REIT stocks popped higher with the market this morning but the rally in SPG stalled near $86.50 multiple times. That doesn't mean it's not going higher tomorrow but the bulls have their work cut out for them. Look for a failed rally near its 50-dma (88.25) or the $90 level as a new bearish entry point to buy puts. Our target is the $76.00-75.00 range.

Picked on February 07 at $ 84.39 *triggered
Change since picked: + 1.68
Earnings Date 02/01/08 (confirmed)
Average Daily Volume = 2.7 million
 

Strangle Updates

(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.)

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DJIA 1/100 Index - $DJX - cls: 123.73 chg: +1.33 stop: n/a

We are down to our last three days before February options expire. Due to this time frame we are now adjusting our suggested sell target to $4.00. 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
Change since picked: - 1.07
Earnings Date 00/00/00
Average Daily Volume = million

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Google - GOOG - close: 518.09 chg: - 3.07 stop: n/a

It looks like the rebound in GOOG is running out of steam. Shares plunged from the high near $530 to an intraday low of $513 before bouncing back. We're still in trouble here with just three days to go and option expiration on Friday. Even if GOOG started trading lower again odds are pretty good that it would be pegged at the $500 strike price for expiration on Friday. We need to start selling on any dips into the $510-500 zone. 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 was $17.00. We want to sell if either option hits $24.00 or more.

Picked on January 30 at $548.27
Change since picked: -30.18
Earnings Date 01/31/08 (confirmed)
Average Daily Volume = 5.6 million
 

Dropped Calls

None
 

Dropped Puts

None
 

Dropped Strangles

None
 

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