Option Investor
Play Updates

Monitor Positions, Prepare to Exit

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Play Editor's Note: The best four days in the stock market since 1932. That's what the financial media is reporting. I don't recall if they're looking at the percentage move in the S&P 500 (+17.9%) or the percentage move in the DJIA (+15.5%). Both moves are impressive for a four-day rally. Friday is a shortened trading session following tomorrow's holiday here in the U.S. Typically the post-Thanksgiving Friday is a bullish one for the stock market but volume is extremely low, which lets stocks get pushed around for big one-day percentage moves. After such a strong four-day bounce I don't want to chase it with new bullish positions but it's not time yet to consider new bearish positions. This will make picking new candidates a challenge this weekend. The best trade here is probably do nothing. Just monitor your current positions, maybe tighten stops, and be prepared to take profits if stocks near your targets or reverse on us. I want to wish everyone a happy Thanksgiving. We're thankful for your continued membership.


CALL Play Updates

Entergy Corp. - ETR - close: 83.90 change: -0.09 stop: 79.99*new*

I remain extremely wary of the action in ETR. The stock has under performed the market the last couple of days. Technically it just looks like ETR has been digesting its bullish breakout from Friday. This week's consolidation in ETR would be normal except for the fact that the S&P 500 and the DJIA have been in rally mode. Traders bought the dip near ETR's 10-dma and 50-dma, which is encouraging. We are upping our stop loss to $79.99. More conservative traders may want to exit early or raise their stops toward $81.00-81.25 under Wednesday's low. In spite of the relative weakness I'm tempted to buy this dip or wait for a new move over $85.00.

The P&F chart is bullish with a $104 target. We're setting two targets. Our first target to take profits is $92.50. Our secondary target is $97.50. Keep a wary eye on possible resistance at the 100-dma and exponential 200-dma overhead.

Picked on November 22 at $ 85.76
Change since picked:      - 1.86
Earnings Date           01/29/09 (unconfirmed)
Average Daily Volume =       2.3 million  


Intuitive Surgical - ISRG - close: 134.67 change: +10.28 stop: 119.99*new*

It was a great start to our new play on ISRG. We got a much better entry point when the stock gapped open lower at $120.25 and then proceeded to surge to new two-week highs. ISRG ended the day with an 8.1% gain. We would strongly consider taking profits right here. Please note we're adjusting our exit target to $139.50. More aggressive traders may want to aim higher but we would expect resistance near $150. Today's rally over $130 has produced a new P&F chart buy signal with a $180 target. Please note our new stop at $119.99. More conservative traders may want to use a stop loss around $125 instead.

Picked on November 25 at $120.25 /gap down entry point
Change since picked:      +14.42 /originally listed at $124.39
Earnings Date           01/29/09 (unconfirmed)
Average Daily Volume =       1.4 million  


iShares Russell 2000 - IWM - close: 46.87 change: +2.65 stop: 42.49

It was a strong day for the small caps. We got a better entry point with the morning gap down. The RUT surged almost 6% and the IWM actually outpaced it. We're moving our stop loss up to $42.99. We would not suggesting new positions at this time. Our target is the $48.00 mark.

Picked on November 25 at $ 43.27 /gap down entry
Change since picked:      + 3.60 /originally listed at $44.22
Earnings Date           00/00/00
Average Daily Volume =       119 million  


Priceline.com - PCLN - close: 67.66 change: +4.84 stop: 60.95*new*

Target achieved? Maybe. We would strongly consider taking some money off the table right here. PCLN provided a better entry point with the gap down at $61.10 this morning. Then shares exploded higher and hit $69.99. Our first target to take profits was at $69.90. Yet the $69.99 price appears to be a bad tick. If you drill down on an intraday chart the high for the day was only $69.87. Yes, that's only three cents away from our target. It certainly sounds like a winner. We're not suggesting new bullish positions at this time. We are moving our stop loss to $60.95 and more conservative traders may want to move their stop toward $62.50 instead.

We would probably call today a win for our first target. We still have a secondary, more aggressive target at $74.85.

Chart:
PCLN

Picked on November 25 at $ 61.10 /gap down entry point
Change since picked:      + 6.56 /originally listed at $62.82
Earnings Date           02/12/09 (unconfirmed)
Average Daily Volume =       1.9 million  


Sears Holding - SHLD - close: 37.15 change: +3.76 stop: 31.58*new*

It was another strong day for retail stocks. SHLD really out performed with an 11% gain. The stock closed at its highs, which should be bullish for Friday. We are raising our stop loss to $31.58 (breakeven). Readers will want to seriously consider taking profits right here. SHLD already hit our first target at $34.90. We're currently aiming for our secondary target at $39.50.

Picked on November 22 at $ 31.58 /gap open higher/1st target hit
Change since picked:      + 5.57 /originally listed @ 30.44
Earnings Date           12/02/08 (confirmed)
Average Daily Volume =       2.2 million  


PUT Play Updates

*Currently we do not have any put play updates*


Strangle & Spread Play Updates

SPDR GOLD Trust - GLD - close: 80.38 change: -0.49 stop: n/a

Gold took a back seat to equities as investors slowly pushed stock prices higher. The GLD bounced around the $79-81 zone and settled with a fractional loss. Resistance at the 100-dma and exponential 200-dma remains directly overhead.

We are not suggesting new strangle positions at this time. Our remaining strangle involves December options.

What is a strangle?
A strangle involves buying both an out-of-the-money call and an out-of-the-money put. We don't care what direction the stock goes as long as it moves one direction. If the stock moves far enough one side of our trade will rise in value and pay for the entire trade and make a profit.

-December Strangle-

Summary:
We suggested readers buy the December $75 call (GVD-LW) and the December $70 puts (GVD-XR). Our estimated cost was $6.30. We want to sell if either option hits $12.00.

Picked on November 09 at $ 72.50
Change since picked:      + 7.88
Earnings Date           00/00/00
Average Daily Volume =      19.3 million  


Ultra S&P500 ProShares - SSO - close: 26.01 change: +1.64 stop: n/a

The S&P 500 continued to rally and posted a four-day winning streak. This was the best four-day percentage move for the markets in decades. The SSO responded with a 6.7% gain. This play is neutral. We really don't care what direction the market goes but we do need it to move!

We're not suggesting new positions at this time.

Note: The SSO is an ultra-long ETF that typically moves twice the daily performance of the S&P 500 index.

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.

-December Strangle Details-
We suggested readers buy the December $30.00 call (SOJ-LD) and the December $20.00 put (SOJ-XT). Our estimated cost is $3.75. We want to sell if either option hits $6.00.

Picked on November 12 at $ 24.84
Change since picked:      + 1.17
Earnings Date           00/00/00
Average Daily Volume =       126 million  


CLOSED BULLISH PLAYS

Axsys Tech. - AXYS - close: 69.01 change: +2.56 stop: 61.83

Target achieved. AXYS continued to rally and hit $69.61 intraday. Our target to exit was the $69.50 mark as the $70.00 mark has been resistance for weeks. At this point I would expect some profit taking in AXYS but would keep it on your watch list for another opportunity. The stock has produced a bullish inverse H&S pattern and if the stock breaks the neckline it would suggest a bullish target of $90 or more.

Chart:
AXYS

Picked on November 22 at $ 61.83 /target hit 69.50
Change since picked:      + 7.18
Earnings Date           02/19/09 (unconfirmed)
Average Daily Volume =       195 thousand 


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