Option Investor
Play Updates

Stocks continue to drift lower

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CALL Play Updates

Amazon.com - AMZN - close: 52.08 change: -1.10 stop: 48.24

There were no surprises here. We expected a dip and AMZN slipped to $51.20 before a very late afternoon bounce pared its losses. The move today is another bullish entry point although more conservative traders may want to raise their stop loss.

Our first target is $54.95. Our second target is $59.50. More aggressive traders may want to aim for the 100-dma. FYI: The P&F chart is bullish with a $73 target.

Picked on December 13 at $ 51.25
Change since picked:      + 0.83
Earnings Date           01/28/09 (unconfirmed)
Average Daily Volume =      12.9 million  


Caterpillar - CAT - close: 42.16 change: -2.49 stop: 39.95

Uh-oh! CAT is flashing a "danger" sign at the bulls today. The stock lost 5.5% under performing the market and producing a bearish engulfing candlestick pattern. More conservative traders will want to seriously consider hitting the eject button and cutting their losses right now. I still see round-number support at $40.00 so we're going to stick with CAT for the moment. If you don't want to exit but feel like reducing your risk then consider raising your stop loss toward the $41.00 level. We're not suggesting new positions at this time. I know that yesterday we said look for a dip near $42.00 as an entry point but the way CAT turned lower today is bearish.

Our target is $49.50. The Point & Figure chart is bullish with a $58 target.

Picked on December 16 at $ 43.80
Change since picked:      - 1.64
Earnings Date           01/29/09 (unconfirmed)
Average Daily Volume =      13.4 million  


China Mobile Ltd. - CHL - close: 52.66 change: -1.23 stop: 51.90

CHL slipped toward its simple 10-dma to close with a 2.2% loss. I continue to suggest readers take profits here. We're not suggesting new positions. Our secondary target is $57.00.

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:      + 5.55 /originally listed at $47.85
Earnings Date           00/00/08 (unconfirmed)
Average Daily Volume =       3.9 million  


Express Scripts - ESRX - close: 59.35 change: -0.06 stop: 56.95

The trading in ESRX looked a little ominous today. The stock only lost six cents but shares produced another failed rally near $61.50 and technically produced a bearish engulfing candlestick pattern. The selling held at the simple 10-dma. A bounce from here could be used as a new entry point but more conservative traders may want to raise their stop loss a dollar or two. Our target is $64.00.

Picked on December 06 at $ 59.36 /gap higher entry 
Change since picked:      - 0.01 /originally listed at $58.58
Earnings Date           02/19/09 (unconfirmed)
Average Daily Volume =       3.1 million  


FTSE/Xinhau China Index - FXI - close: 30.48 chg: -0.28 stop: 28.65

FXI just barely managed a new relative high at $31.50 but could not hold there for very long. The stock drifted back toward the $30.00 level and short-term technical support at its rising 10-dma. I don't see any changes from our previous comments. FXI has already hit our first target and we are now aiming for $32.50 just under the 100-dma.

Picked on December 03 at $ 26.27 /gap down entry point
Change since picked:      + 4.21 /originally listed at $27.25
Earnings Date           00/00/00
Average Daily Volume =      51.2 million  


Google Inc. - GOOG - close: 310.28 change: - 4.96 stop: 299.90

GOOG was holding up reasonably well until about 1:30 p.m. That's when shares suddenly moved lower and it was downhill the rest of the day. The action late this afternoon is very short-term bearish and I would expect GOOG to test its 10-dma near $308-307 or a complete drop toward round-number support at $300. Wait for the bounce before considering new bullish positions.

We have two strategies listed on GOOG. One is a directional call play with an exit target at $360.00.

Our second strategy is a naked put play where we sell the naked put and then buy it back for less and our target to exit the naked put play is $350. The suggested put to sell was the January $350 put (GGD-MJ).

Picked on December 13 at $315.76
Change since picked:      - 5.48
Earnings Date           01/29/09 (unconfirmed)
Average Daily Volume =       7.2 million  


Perini Corp. - PCR - close: 21.90 change: -1.31 stop: 19.95

PCR, which had been showing relative strength this week, hit some profit taking today. The stock lost 5.6% but did not break down below its 10-dma or its 100-dma. The dip could be used for a new bullish entry point but I suspect that PCR will test the $21.00 region now. Wait for the dip near $21 or bounce from $21 as your next entry point to buy calls. PCR could be a short squeeze candidate. The most recent data listed short interest at more than 11% of the small 27.7 million-share float. The P&F chart is bullish with a $36 target.

Picked on December 16 at $ 22.36
Change since picked:      - 0.46
Earnings Date           02/26/09 (unconfirmed)
Average Daily Volume =       1.0 million  


Texas Industries - TXI - close: 34.83 change: -1.48 stop: 31.65 *new*

TXI provided us another bullish entry point with today's dip to the rising 10-dma. We are raising our stop loss to $31.65. More conservative traders may want to raise theirs toward $32.20. If you don't want to buy this dip then just wait for the bounce. The stock is a candidate for a short squeeze. The most recent data listed short interest at more than 20% of the very small 21 million-share float. We have two targets. Our first target is $39.50. Our second target is $43.00.

Picked on December 13 at $ 34.43
Change since picked:      + 0.40
Earnings Date           01/08/09 (unconfirmed)
Average Daily Volume =       745 thousand 


PUT Play Updates

*Currently we do not have any put play updates*


Strangle & Spread Play Updates

Ultra S&P500 ProShares - SSO - close: 25.65 change: -0.99 stop: n/a

Time is up. Tomorrow is the last day for December options. The market has been trendless the last few weeks and our strangle failed.

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:      + 0.81
Earnings Date           00/00/00
Average Daily Volume =       126 million  


CLOSED BULLISH PLAYS

Covance Inc. - CVD - close: 41.35 change: -1.43 stop: 38.75

Some unexpected news turned the tables on us in CVD. This morning, before the opening bell, CVD issued an earnings warning for 2008 and expects earnings of $3.02 versus estimates of $3.18. The stock reacted by gapping open lower at $38.70 and plunging to $36.14 before bouncing back to fill the gap. Volume was huge at 5.4 million shares. Our stop loss was $38.75 so the opening trade closed the play.

Chart:
CVD

Picked on December 15 at $ 41.55 *triggered     
Change since picked:      - 0.20
Earnings Date           01/29/09 (unconfirmed)
Average Daily Volume =       1.2 million  


Jacobs Engineering - JEC - close: 46.98 change: -3.12 stop: 44.95

I hope none of our readers were surprised by the action in JEC today. The stock tried one more time to rally past resistance at its 100-dma this morning but the rally failed and JEC produced a bearish engulfing candlestick pattern. The stock has not yet broken its bullish trend of higher lows but it could do that soon. We are dropping JEC as a bullish play for now. Shares hit our first target at $51.00 yesterday. We'll keep JEC on our watch list for another entry point down the road.

Chart:
JEC

Picked on December 12 at $ 44.60 *gap down entry
Change since picked:      + 2.38
Earnings Date           01/21/09 (unconfirmed)
Average Daily Volume =       3.0 million  


NYSE Euronext - NYX - close: 27.01 change: -2.09 stop: 27.25

NYX was under water all day after being downgraded to a "hold" this morning. Shares fell to their rising 10-dma. This would be another bullish entry point but the stock has hit our stop loss at $27.25. The breakdown under prior resistance and what should have been support at $28.00 is short-term bearish.

Chart:
NYX

Picked on December 16 at $ 28.10 *triggered     
Change since picked:      - 1.09
Earnings Date           02/09/09 (unconfirmed)
Average Daily Volume =       5.8 million  


ExxonMobil - XOM - close: 81.06 change: -2.08 stop: 78.45

Oil can't catch a bid. The commodity just continues to fall no matter what and many are speculating that oil will fall below $30 a barrel. The recent weakness in oil has taken a toll on XOM's relative strength. Tuesday saw XOM breakout over resistance and hit our trigger to buy calls. The stock looked poised for a new leg higher. The rally didn't last. Today's 5% drop was enough to hit our stop loss at $78.45 and close the play. If XOM breaks $75.00 or its 50-dma readers may want to switch to bearish strategies on XOM.

Chart:
XOM

Picked on December 16 at $ 82.25 *triggered     
Change since picked:      - 1.19
Earnings Date           02/05/09 (unconfirmed)
Average Daily Volume =        56 million  


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