Option Investor
Play Updates

Stocks Pull Back to Short-term Support

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CALL Play Updates

Amazon.com - AMZN - close: 51.56 change: -0.52 stop: 49.45 *new*

Shares of AMZN were downgraded to a "market perform" on Friday but it failed to have much of an affect on the stock. AMZN drifted lower but held on to short-term, rising support at its 10-dma. I see this dip as another entry point to buy calls however, more patient traders may want to wait and see if AMZN dips closer to the $50.00 region. The $50.00 level should be round-number, psychological support so we're raising our stop loss to $49.45.

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.

Suggested Options:
We are suggesting the January calls. Given a choice I'd use the $50 or $55 strikes.

Annotated Chart:
AMZN

Picked on December 13 at $ 51.25
Change since picked:      + 0.31
Earnings Date           01/28/09 (unconfirmed)
Average Daily Volume =      12.9 million  


Caterpillar - CAT - close: 42.69 change: +0.53 stop: 39.95

Friday's session provided yet another bullish entry point to buy calls on CAT as shares bounced from the $42.00 level. The stock out performed the broad market indices with a 1.2% gain. More importantly there was no follow through on Thursday's bearish engulfing candlestick pattern. We're not necessarily "out of the woods" yet but CAT is maintaining the bullish pattern of higher lows. More conservative traders may want to raise their stops. I am going to keep our stop loss under the $40.00 mark, which should be another level of support. If the market sees any weakness this week expect CAT to retest the $40 level.

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

Suggested Options:
I would use the January $40 or $45 calls.

Annotated Chart:
CAT

Picked on December 16 at $ 43.80
Change since picked:      - 1.11
Earnings Date           01/29/09 (unconfirmed)
Average Daily Volume =      13.4 million  


Express Scripts - ESRX - close: 61.35 change: +2.00 stop: 57.95 *new*

ESRX showed some holiday cheer with a nice 3.3% bounce from rising support at its 10-dma. Friday's move definitely relieves some of our concern that the rally was stalling. The stock is still struggling with resistance near $62.00 but the bullish pattern of higher lows would suggest the next real move is higher. We are raising our stop loss to $57.95. Our target is $64.00.

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

Annotated Chart:
ESRX

Picked on December 06 at $ 59.36 /gap higher entry 
Change since picked:      + 1.99 /originally listed at $58.58
Earnings Date           02/19/09 (unconfirmed)
Average Daily Volume =       3.1 million  


FTSE/Xinhau China Index - FXI - close: 30.55 chg: +0.07 stop: 29.45 *new*

Chinese stocks were a mixed bag on Friday. The Shanghai index traded quietly higher but the Hang Seng index plunged 2.4%. The FXI managed another bounce from the $30.00 level and closed in positive territory, barely. The trend is still higher but momentum is waning. We are raising our stop loss to $29.45. Almost any downturn this week will stop us out. Only nimble traders should consider opening new bullish positions now. FXI has already hit our first target and we are now aiming for $32.50 just under the 100-dma.

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

Annotated Chart:
FXI

Picked on December 03 at $ 26.27 /gap down entry point
Change since picked:      + 4.28 /originally listed at $27.25
Earnings Date           00/00/00
Average Daily Volume =      51.2 million  


Google Inc. - GOOG - close: 310.17 change: - 0.11 stop: 299.90

Bulls need to turn defensive on GOOG. This past week was a struggle for the stock, which was unable breakout past its descending 50-dma. On a very short-term basis GOOG has developed a trend of lower highs that will very quickly come into conflict with the three-week trend of higher lows. My comments last week suggested that any weakness would likely push GOOG toward round-number support at $300. That hasn't happened yet but the stock looks poised to test that level soon.

Currently, my expectations are for the market to drift higher over the next five to seven trading days. If I did not have this slightly bullish bias I would exit GOOG right here and cut losses early. Right now I would wait for a bounce from the $300 level or wait for a breakout above the 50-dma near $320.

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).

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

Annotated Chart:
GOOG

Picked on December 13 at $315.76
Change since picked:      - 5.59
Earnings Date           01/29/09 (unconfirmed)
Average Daily Volume =       7.2 million  


Perini Corp. - PCR - close: 21.94 change: +0.04 stop: 19.95

PCR is a bet on the Obama-infrastructure build out. The stock has been stair-stepping higher inside a narrow bullish channel. The stock just spent the last couple of days digesting some gains and pulling back to short-term support at the 10-dma. This should be a new bullish entry point to buy calls. More conservative traders may want to raise their stop loss toward the $21.00 level.

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. We have two targets. Our first target is $24.90. Our second target is $27.00.

Suggested Options:
We are suggesting the January calls.

Annotated Chart:
PCR

Picked on December 16 at $ 22.36
Change since picked:      - 0.42
Earnings Date           02/26/09 (unconfirmed)
Average Daily Volume =       1.0 million  


Texas Industries - TXI - close: 34.87 change: +0.04 stop: 32.45 *new*

Cement maker TXI is another infrastructure play. The stock's rally seemed to stall this past week but shares have maintained a bullish trend of higher lows. We are going to try and reduce our risk by raising the stop loss to $32.45. If we do get stopped out keep TXI on your watch list. The $30.00 level should be support and the TXI might also find support at the 38.2% Fibonacci retracement of its November-December bounce near $30. A bounce from $30 would look like a new bullish entry point. Currently we have two targets. Our first target is $39.50. Our second target is $43.00. 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.

Suggested Options:
We are suggesting the January calls but plan to exit ahead of the early January earnings report!

Annotated Chart:
TXI

Picked on December 13 at $ 34.43
Change since picked:      + 0.44
Earnings Date           01/08/09 (unconfirmed)
Average Daily Volume =       745 thousand 


PUT Play Updates

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Strangle & Spread Play Updates

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CLOSED BULLISH PLAYS

China Mobile Ltd. - CHL - close: 52.51 change: -0.15 stop: 51.90

Some of the technical indicators in CHL are suggesting that the rally is running out of steam. On a positive note volume has been light for the dip last week and CHL still has a bullish pattern of higher lows. Unfortunately, the intraday low on Friday just happened to be $51.90, our recently adjusted stop loss. I would keep an eye on CHL for a dip and a bounce from the $50.00 level as a possible entry point for new positions. CHL had hit our first target at $51.75 days ago. We were aiming for a second target at $57.00.

Chart:
CHL

Picked on December 03 at $ 47.11 /gap down entry
Change since picked:      + 5.40 /originally listed at $47.85
Earnings Date           00/00/08 (unconfirmed)
Average Daily Volume =       3.9 million  


CLOSED STRANGLE & SPREAD PLAYS

Ultra S&P500 ProShares - SSO - close: 25.47 change: -0.18 stop: n/a

November 12th the S&P 500 has broken down under the 900 level again and fallen straight toward what was support near 850. The index was setting up for a big move either direction. We launched our strangle but instead of using the S&P 500 we played the 2x double-long SSO ETF. The next several days after launching our play the market plunged to new lows but the rebound was equally sharp. Then volatility began to fade away as stocks churned in a tighter and tighter range. This left our strangle position to evaporate and eventually expire.

The narrowing wedge or triangle pattern on the S&P and SSO is actually another set up for a straddle or strangle play. We might reconsider another position after Christmas.

Chart:
SSO

Picked on November 12 at $ 24.84
Change since picked:      + 0.63
Earnings Date           00/00/00
Average Daily Volume =       126 million  


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