Option Investor
Play Updates

Two targets hit, a few new stops

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Play Editor's Note: In spite of the sharp afternoon sell-off most of our plays held up reasonably well. My comments last night were that traders need to use caution and that traders needed to remain defensive and trade small. Tomorrow's action will depend on how investors interpret the jobs data. Expectations are set for bad news so the market's move will depend on whether or not we see any surprises. Whatever the jobs report delivers we can expect another volatile session. Unfortunately, if the move is lower then we'll see most of our positions get stopped out.


CALL Play Updates

Apollo Group - APOL - close: 74.05 change: -1.29 stop: 71.90 *new*

APOL held up reasonably well. Shares lost 1.7% versus the S&P 500's 2.9% drop. The stock has been honoring short-term support at its rising 10-dma. We're going to try and limit our risk by raising the stop loss to $71.90. This raises the chance that we might get stopped out on an intraday dip but the market will probably see a big move tomorrow on the jobs report. If that move is lower it could be sharp. We're not suggesting new positions at this time. Our target is the $79.75 mark. FYI: The Point & Figure chart is bullish with a $99 target.

Picked on December 01 at $ 73.00 *triggered     
Change since picked:      + 1.05
Earnings Date           01/06/09 (unconfirmed)
Average Daily Volume =       4.0 million  


Alliant Tech. - ATK - close: 79.11 change: -1.94 stop: 77.99

It was a rocky day for ATK. The stock gapped open lower at $79.76, which provided us a better entry point to open bullish positions (adjusted below). The stock then rallied to $82.75, just above the 50-dma, but couldn't hold it. When the market began to plunge late in the day shares of ATK dropped toward short-term technical support at its 10-dma. Most quote services are going to list the low at $78.00 but the real intraday low was $78.16. On a positive note ATK is maintaining the bullish trend of higher lows. However, if the market declines tomorrow we would expect to be stopped out. Our target is the $86.50 mark.

Picked on December 03 at $ 79.76 /gap down entry
Change since picked:      - 0.65 /originally listed at $81.05
Earnings Date           01/29/09 (unconfirmed)
Average Daily Volume =       424 thousand 


Axsys Tech. - AXYS - close: 67.41 change: -5.34 stop: 65.95

Ouch! It was a painful day for AXYS. The stock completely erased yesterday's gains. Investors may interpret this as a failed breakout over resistance and a bull trap. On the other hand the sell-off did stall at its rising 10-dma so the short-term trend is still bullish. Readers should be aware of a bad tick in the quote data today. Many services are going to list the intraday low at $65.81, which would be under our stop loss. Yet if you look at the daily chart you can see that shares bounced form their 10-dma currently at $66.34. If you drill down in an intraday chart you can see that the low was $66.30. We're going to keep the play alive. Although it may be a moot point. If the market sells off on the jobs data tomorrow we expect AXYS to hit our stop loss.

We are not suggesting new positions at this time. We currently have a target to exit at $74.85. We are adding a secondary target at $79.00. We still suggest readers take most of their position off the table at $74.85. The P&F chart is bullish with an $89 target and the inverse H&S pattern is suggesting a $90 target.

Picked on December 02 at $ 66.59 /gap down entry 
Change since picked:      + 0.82 /originally listed at $67.43
Earnings Date           02/19/09 (unconfirmed)
Average Daily Volume =       246 thousand 


China Mobile Ltd. - CHL - close: 46.95 change: -0.90 stop: 44.90*new*

CHL provided a better entry point with a gap down to $47.11 at the open this morning. The stock slipped toward $46.00 before paring its losses. The afternoon bounce looks like a new bullish entry point. However, traders may want to wait until we see how the market reacts to the jobs data tomorrow. We are going to adjust our stop loss to $44.90.

We have two targets. Our first target is $51.75 just under the 100-dma. Our secondary target is $57.00. FYI: The P&F chart is bullish with a $64 target but shows possible resistance near $54.

Note: I was unable to find an earnings date for CHL, which does raise our risk since we prefer to avoid holding over an earnings report.

Picked on December 03 at $ 47.11 /gap down entry
Change since picked:      - 0.00 /originally listed at $47.85
Earnings Date           00/00/08 (unconfirmed)
Average Daily Volume =       3.9 million  


Costco Wholesale - COST - close: 52.75 change: +1.33 stop: 49.75 *new*

The rally in COST today is a surprise. We were bullish on the stock yesterday but the data out this morning was bearish. COST reported that November sales fell 3% and that same-store sales dropped 5%. Analysts were estimating a 2.4% drop for same-store sales. Why the rally on bad news? One possible explanation is that investors are ignoring it as COST claims a good chunk of the drop was due to lower gasoline prices (a product some outlets sell).

The relative strength today is encouraging but I would wait until we see the market reaction to the jobs report before opening new positions. We are going to try and reduce our risk by raising the stop loss to $49.75. Our first target is $54.85.

Picked on December 02 at $ 48.93 /gap down entry point
Change since picked:      + 1.33 /originally listed at $50.10
Earnings Date           12/11/08 (confirmed)
Average Daily Volume =       7.2 million  


Entergy Corp. - ETR - close: 81.66 change: -2.20 stop: 79.99

It looked like the game was over for ETR today when shares were plunging toward the $80.00 level. Somehow the bulls managed to defend the stock and stop the decline at $80.03. The sharp bounce back late in the day is encouraging and might normally look like a possible bullish entry point. I would resist the temptation to buy ETR here. The stock has been unable to break the short-term pattern of lower highs and lower lows. If we see a rally over $84.25 then I might suggest new bullish positions.

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:      - 4.10
Earnings Date           01/29/09 (unconfirmed)
Average Daily Volume =       2.3 million  


FTSE/Xinhau China Index - FXI - close: 25.85 chg: -1.40 stop: 24.95

Chinese ETF the FXI provided a more attractive entry point this morning with a gap down open at $26.27 (adjusted below). The stock rallied from this early weakness but failed to breakout past the simple 50-dma. When the U.S. markets turned south this afternoon the FXI fell to $25.50 before bouncing. I am tempted to buy calls on this bounce but I'm suggesting readers wait to see how investors react to the U.S. jobs report out tomorrow. Our target is the $32.50-34.00 zone.

Picked on December 03 at $ 26.27 /gap down entry point
Change since picked:      - 0.00 /originally listed at $27.25
Earnings Date           00/00/00
Average Daily Volume =      51.2 million  


Lockheed Martin - LMT - close: 77.15 change: +0.24 stop: 73.50 *new*

Target achieved. LMT rallied to $78.87 intraday. Actually shares traded over $78.70 several times. Our first target to exit and book a profit was $78.50. LMT's ability to close with a gain on a down day for the market is bullish but the intraday double-top is actually bearish. I would expect a decline back to the $75.00 level before LMT moves higher. We're raising our stop loss to $73.50 and we're not suggesting new positions at this time.

We have two targets. Our first target is $78.50. Our second target is $81.50.

Chart:
LMT

Picked on December 01 at $ 73.50 *triggered     
Change since picked:      + 3.65
Earnings Date           01/22/09 (unconfirmed)
Average Daily Volume =       3.6 million  


PUT Play Updates

*Currently we do not have any put play updates*


Strangle & Spread Play Updates

SPDR GOLD Trust - GLD - close: 75.50 change: -0.68 stop: n/a

Gold prices failed to move higher today even as the U.S. dollar fell. This could spell trouble for the precious metal. We are almost down to the two-week mark before December options expire. More conservative traders will want to strongly consider an early exit tomorrow. Time premium decay is going to pick up speed as we approach expiration. Might as well avoid the decay over the weekend.

We are not suggesting new strangle positions in the GLD.

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:      + 3.00
Earnings Date           00/00/00
Average Daily Volume =      19.3 million  


Ultra S&P500 ProShares - SSO - close: 23.42 change: -1.41 stop: n/a

The S&P 500 index fell almost 3% on Thursday as investors look toward Friday's economic data. No matter what the news is tomorrow we can expect another volatile session. More conservative traders will want to consider an early exit since expiration is just two weeks away.

We're not suggesting new strangles 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:      - 1.42
Earnings Date           00/00/00
Average Daily Volume =       126 million  


CLOSED BULLISH PLAYS

Apple Inc. - AAPL - close: 91.41 change: -4.49 stop: 89.90

AAPL was slowly giving into a pattern of lower highs and lower lows through out the day. That changed in the last hour of trading. When the markets went into a short-term free fall shares of AAPL plunged to $89.06 and hit our stop loss at $89.90.

Last night I suggested readers take profits in AAPL and we did get a chance to do that above $95.00 today. Our official target was the $98.00 mark.

Chart:
AAPL

Picked on December 02 at $ 89.40 *gap down entry point
Change since picked:      + 2.01 /originally listed at $92.47
Earnings Date           01/22/09 (unconfirmed)
Average Daily Volume =        53 million  


Amazon.com - AMZN - close: 47.32 change: +2.11 stop: 39.90

Target exceeded! AMZN continued to show relative strength on Thursday. An early morning upgrade helped lift AMZN to an intraday high of $50.50. Our secondary target to exit and take profits was $48.50. While our play is complete we would keep an eye on AMZN for another opportunity down the road in the next few days.

Chart:
AMZN

Picked on December 01 at $ 40.50 *triggered     
Change since picked:      + 6.82 /1st target hit 44.50 on 12/03
Earnings Date           01/29/09 (unconfirmed)
Average Daily Volume =      12.7 million  


PetroChina - PTR - close: 78.80 change: -4.73 stop: 78.85

It was not a good day for oil stocks. A sharp decline in crude oil futures weighed on the energy sector and the oil indices plunged 6%. Shares of PTR lost 5.6% and hit our stop loss at $78.85. Our only consolidation was that shares gapped open lower at $79.98, marking our entry point much lower than expected.

Chart:
PTR

Picked on December 03 at $ 79.98 /gap down entry 
Change since picked:      - 1.18 /originally listed at $83.53
Earnings Date           03/06/09 (unconfirmed)
Average Daily Volume =       1.0 million  


XTO Energy - XTO - close: 32.75 change: -2.99 stop: 33.49

XTO is another casualty of the drop in oil prices. The stock fell through significant short-term support near $34.00-33.50 and hit our stop loss at $33.49 closing the play. The gap down at the open adjusted our entry point to $34.97.

Chart:
XTO

Picked on December 02 at $ 34.97 /gap down entry / stopped out
Change since picked:      - 2.22 /originally listed at $35.61
Earnings Date           02/10/09 (unconfirmed)
Average Daily Volume =      13.3 million  


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