NEW DIRECTIONAL CALL PLAYS
L-3 Communications - LLL - close: 94.01 change: +1.06 stop: 91.25
L-3 Communications is a prime contractor in Command, Control and Communications, Intelligence, Surveillance and Reconnaissance (CÂ³ISR), Government Services, Aircraft Modernization and Maintenance (AM&M) and has the broadest base of Electronic Systems in the industry. L-3 is also a major provider of homeland defense products and services for a variety of emerging markets. (source: company press release or website)
Why We Like It:
Readers know that while I am bullish on the market I'm also cautious about opening new positions at current levels. All of the major indices are extremely overbought but that doesn't mean they can't get more overbought before eventually correcting. With that in mind the best trade right now is to probably sit on your hands and just wait for the pull back, which could last a few days. If you just have to trade then LLL might work. The defense sector has been performing well with both the defense sector indices at new 52-week highs. I like LLL because shares are not quite so overbought and extended following the recent consolidation in the $91.50-93.50 zone.
Aggressive traders willing to take the risk of buying calls in this environment can buy calls on LLL at current levels. We'll use a stop loss at $91.25. Our first target is $97.00. Our final target is $99.75.
Normally I would probably choose the $95 calls but this is a very aggressive entry point given the market's condition. I'd rather have the least amount of capital invested so I'm suggesting the $100 strike. Keep your position size limited.
Suggested Position: BUY CALL APRIL 100.00 (LLL 10D100.00) @ $0.30
Entry on March xxth at $ xx.xx
Earnings Date 04/22/10
Average Daily Volume = 908 thousand
Listed on March 17th, 2010