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Play Updates

Sliced in Half

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Play Editor's Note: Friday's volatile session sliced our portfolio of call candidates in half. Fortunately our stops were relatively tight and COST hit our target to take profits and exit. With only two weeks left before December options expire our current strangle plays are in jeopardy.


CALL Play Updates

Apollo Group - APOL - close: 75.87 change: +1.82 stop: 71.90

APOL temporarily broke down under its 10-dma on Friday morning as investors reacted to the terrible jobs number. It looked like shares were going to hit our stop loss but APOL managed to bounce at $72.31. By the end of the day APOL had completely recovered and ended back near its recent highs. If the market is positive this week I would expect APOL to breakout from the recent consolidation and hit our target at $79.75. FYI: The Point & Figure chart is bullish with a $99 target.

Suggested Options:
We are not suggesting new positions at this time but a dip back toward $74.00 near the 10-dma may be another entry point. We're suggesting the January calls.

Annotated Chart:
APOL

Picked on December 01 at $ 73.00 *triggered     
Change since picked:      + 2.87
Earnings Date           01/06/09 (unconfirmed)
Average Daily Volume =       4.0 million  


China Mobile Ltd. - CHL - close: 49.71 change: +2.76 stop: 45.75*new*

Shares of CHL displayed significant relative strength on Friday. The stock didn't see the same amount of selling pressure on Friday morning and actually gapped higher at the open after an analyst upgrade. The stock eventually rallied to new six-week highs and closed up 5.8%. We are raising our stop loss to $45.75. If you're looking for a new entry point consider waiting for another pull back into the $48.00-47.00 region.

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.

Suggested Options:
If CHL provides another entry point we would use the January calls.

Annotated Chart:
CHL

Picked on December 03 at $ 47.11 /gap down entry
Change since picked:      + 2.60 /originally listed at $47.85
Earnings Date           00/00/08 (unconfirmed)
Average Daily Volume =       3.9 million  


FTSE/Xinhau China Index - FXI - close: 27.83 chg: +1.98 stop: 24.95

Friday was a bullish session for FXI. The Chinese ETF spiked higher at the open. When there was profit taking buyers stepped in at $26.00 and shares marched steadily higher for the remainder of the day. The stock closed up 7% and broke through technical resistance at its 50-dma. We would still consider new positions here although you might want to wait for a dip back toward $27.50 or $27.00 to initiate positions. Our target is the $32.50-34.00 zone. More conservative traders may want to inch up their stops toward $26. While I'm on the subject of conservative moves, you might want to start taking profits early in the $29.75-30.00 zone since the $30.00 mark could be round-number resistance.

Suggested Options:
Strikes are available at $1.00 increments. I would use the January calls.

Annotated Chart:
FXI

Picked on December 03 at $ 26.27 /gap down entry point
Change since picked:      + 1.56 /originally listed at $27.25
Earnings Date           00/00/00
Average Daily Volume =      51.2 million  


Lockheed Martin - LMT - close: 80.19 change: +3.04 stop: 74.49 *new*

Defense contractor LMT looks pretty strong here. The stock surged past the $80.00 mark on Friday afternoon. I am suggesting that readers start profit taking right here. Aggressive traders could aim for the 50-dma near $84.00. We are sticking with our secondary target to exit at $81.50. LMT has already surpassed our first target at $78.50. Please note that we are raising the stop loss to $74.49, just under Friday's low.

Suggested Options:
We are not suggesting new positions at this time.

Annotated Chart:
LMT

Picked on December 01 at $ 73.50 *triggered     
Change since picked:      + 6.69
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: 74.52 change: -0.98 stop: n/a

Gold prices continued to under perform after an early morning rise for the U.S. dollar on Friday. It was a rough week for gold but I suspect the U.S. dollar is poised to move lower. We're not making any directional picks here. We don't care what direction GLD goes but it needs to move quickly. At this point we're going to need a big move toward $85 or $65 in the next two weeks. Is that possible? Yes. Is it probable? Maybe not.

I am repeating my earlier comments that more conservative traders will want to consider an early exit immediately. With only two weeks left before December options expire the time premiums are eroding fast!

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.

Suggested Options:
No new positions.

Annotated Chart:
GLD

Picked on November 09 at $ 72.50
Change since picked:      + 2.02
Earnings Date           00/00/00
Average Daily Volume =      19.3 million  


Ultra S&P500 ProShares - SSO - close: 25.08 change: +1.66 stop: n/a

Our strangle play with the SSO is not in a very good position. It's been three weeks and we're right back to where we started. We only have two weeks left before December options expire and more conservative traders may want to abandon ship.

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.

Suggested Options:
No new plays.

Annotated Chart:
SSO

Picked on November 12 at $ 24.84
Change since picked:      + 0.24
Earnings Date           00/00/00
Average Daily Volume =       126 million  


CLOSED BULLISH PLAYS

Alliant Tech. - ATK - close: 81.33 change: +2.22 stop: 77.99

The Friday morning swoon in the stock market was too much for ATK and the stock declined to $76.94 intraday. That was more than enough to hit our stop loss at $77.99 closing the play. ATK eventually recovered and closed up 2.8% but failed to breakout past its 50-dma. Readers may want to reconsider new bullish positions on a move over $82.50 or $83.00.

Chart:
ATK

Picked on December 03 at $ 79.76 /gap down entry
Change since picked:      + 1.57 /originally listed at $81.05
Earnings Date           01/29/09 (unconfirmed)
Average Daily Volume =       424 thousand 


Axsys Tech. - AXYS - close: 65.70 change: -1.71 stop: 65.95

The relative strength in AXYS evaporated on Thursday and Friday. We warned readers that Thursday's move looked like a bull-trap failed-rally pattern after Wednesday's bullish breakout was reversed. The selling continued into Friday morning and the stock gapped open lower at $66.27 and then plunged to its 40-dma near $61.25. AXYS hit our stop loss at $65.95 closing the play. We would keep an eye on AXYS for another breakout over $70.00 as a bullish entry point. The inverse H&S pattern is forecasting a $90 target.

Chart:
AXYS

Picked on December 02 at $ 66.59 /gap down entry 
Change since picked:      - 0.89 /originally listed at $67.43
Earnings Date           02/19/09 (unconfirmed)
Average Daily Volume =       246 thousand 


Costco Wholesale - COST - close: 55.58 change: +2.83 stop: 49.75

Target exceeded! COST showed an impressive amount of relative strength on Friday. There was almost no sell-off on Friday morning and shares soared right past our target at $54.85 and broke through round-number resistance at $55.00 and through technical resistance at its 50-dma. The next level of overhead resistance looks like the $59-60 zone. Watch COST for another entry point after its December 11th earnings report.

Chart:
COST

Picked on December 02 at $ 48.93 /gap down entry point
Change since picked:      + 6.65 /originally listed at $50.10
Earnings Date           12/11/08 (confirmed)
Average Daily Volume =       7.2 million  


Entergy Corp. - ETR - close: 83.11 change: +1.45 stop: 79.99

Utility stocks were not immune to the market weakness on Friday morning. Shares of ETR gapped open lower at $80.52 and broke down under support at $80.00 and its 40-dma to sink to $77.28 before bouncing back. ETR hit our stop loss at $79.99 closing the play. While the bounce back is encouraging we would wait for a new rally over $84.50 or $85.00 before considering new bullish positions on ETR.

Chart:
ETR

Picked on November 22 at $ 85.76
Change since picked:      - 2.65
Earnings Date           01/29/09 (unconfirmed)
Average Daily Volume =       2.3 million  


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