Option Investor
Play Updates

Turning More Defensive

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Play Editor's Note: I would encourage all of our readers to rethink their risk and exposure to the market right here. Stocks have continued to drift lower and I am starting to think the bear-market rally from the bottom has finally run out of gas and we face more downside risk. Seasonal trends like the Christmas rally and the January effect, which had moved into December, do not appear to be working this year.


CALL Play Updates

Alcon Inc - ACL - close: 85.82 change: -0.62 stop: 83.75 *new*

ACL is holding up reasonably well. Shares lost 0.7% on Tuesday. I've grown a lot more cautious about the market in general and traders should remain cautious with ACL as well. We are inching up our stop loss to $83.75. If you want to take an optimistic view of what is happening in ACL the stock may be building a bull-flag pattern. If that is the case then wait for a bullish breakout of that pattern. If you drill down to an intraday chart ACL is minor resistance at $87.00 and then again at $88.50.

There is potential resistance at the 50-dma and at the $100.00 level. The Point & Figure chart is bullish with a $110 target. Our target is $99.00.

Picked on December 22 at $ 85.25 *triggered     
Change since picked:      + 0.57
Earnings Date           02/04/09 (unconfirmed)
Average Daily Volume =       840 thousand 


Caterpillar - CAT - close: 41.13 change: -0.65 stop: 39.95

I am about ready to give up on CAT. Last Thursday's bearish engulfing candlestick looks more and more like the bearish reversal it should be. CAT still has round-number support at $40.00 but confidence is waning. More conservative traders will want to seriously consider exiting right here. Even if CAT bounces we might want to use it as an exit to minimize our losses. I am not suggesting new positions at this time although that could change if CAT does produce a strong bounce from $40.00.

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:      - 2.67
Earnings Date           01/29/09 (unconfirmed)
Average Daily Volume =      13.4 million  


Research In Motion - RIMM - close: 41.81 change: +0.22 stop: 37.99

RIMM managed to out perform the S&P 500 with a 0.5% gain but shares spent most of the day churning sideways. We remain bullish given the breakout over $40.00 but traders should stay defensive. We have two targets. Our first target is $44.95. Our second target is $48.00. FYI: The P&F chart is bullish with a $56 target.

Picked on December 22 at $ 41.50
Change since picked:      + 0.31
Earnings Date           12/18/08 (confirmed)
Average Daily Volume =        25 million  


Sunoco Inc - SUN - close: 41.16 change: -0.78 stop: 39.45

Traders may want to rethink bullish positions on any oil refiners like SUN. While the stock has been out performing the S&P 500, I heard some bearish news today. The crack spread to refine oil into gasoline has actually been negative the last couple of weeks. So why have shares of the refiners been so strong? Falling oil prices certainly reduce their input costs but gasoline prices have also plunged and usage is down. We are going to keep SUN on the play list for now. Broken resistance at $40.00 should remain as support but you may want to think twice about opening new bullish positions. Speaking of bullish positions, if you were looking for one, wait for a dip to and then a bounce from the $40.00 level before even considering a call position. The P&F chart is very bullish with a $54 target. Our target is $47.00.

Picked on December 20 at $ 42.30
Change since picked:      - 1.14
Earnings Date           02/04/09 (unconfirmed)
Average Daily Volume =       4.2 million  


PUT Play Updates

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Strangle & Spread Play Updates

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CLOSED BULLISH PLAYS

Express Scripts - ESRX - close: 59.07 change: -0.82 stop: 57.95

Shares of ESRX produced yet another failed rally under the $62.00 level today. Today's session also produced another bearish engulfing candlestick. I am suggesting readers exit early. I'd rather cut losses now and wait for a new relative high. The P&F chart is still bullish for now.

Chart:
ESRX

Picked on December 06 at $ 59.36 /gap higher entry 
Change since picked:      - 0.29 /originally listed at $58.58
Earnings Date           02/19/09 (unconfirmed)
Average Daily Volume =       3.1 million  


Goldman Sachs - GS - close: 75.20 change: -1.80 stop: 77.95

GS has taken a turn for the worse. We had been waiting for a bullish breakout over its 50-dma. Now the stock has sunk toward round-number support at $75.00. The stock looks ready to drop toward the $70-68 zone. Nimble traders may actually want to short/buy puts on GS under $75.00 with a short-term target near $70. We are dropping GS as a bullish candidate with the play unopened. Our suggested entry point to buy calls was $83.00.

Chart:
GS

Picked on December xx at $ xx.xx <-- see TRIGGER
Change since picked:      + 0.00
Earnings Date           03/18/09 (unconfirmed)
Average Daily Volume =      25.7 million  


Perini Corp. - PCR - close: 21.45 change: +0.47 stop: 19.95

My outlook on the market has changed so we want to cut our losses with PCR. The stock out performed the market with a 2.2% bounce today but the bounce failed twice in the $21.80 region. Odds look better for another dip and probable break under the $20.00 level than another rebound. I'd rather exit now and cut our losses. We can always jump back in if PCR continues higher.

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.

Chart:
PCR

Picked on December 16 at $ 22.36
Change since picked:      - 0.91
Earnings Date           02/26/09 (unconfirmed)
Average Daily Volume =       1.0 million  


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