The market is trending lower but there are a few pockets of strength. Here's a list of bullish and bearish candidates that caught my eye.
FFIV - The stock is bouncing and looks ready to rally to new multi-week highs. Shares are still building a trend of higher lows.
SODA - This stock displayed relative strength with a surge to new highs. I probably wouldn't chase it here but you can put it on your watch list and look for an entry point.
VRUS - Shares look poised to breakout past resistance at the top of its trading range near $110. My biggest concern is that the options on VRUS have wide spreads.
ILMN - This stock has not yet broken its bullish trend of higher lows. A rally past $73.00 might be a new bullish entry point.
WPI - This drug stock has been pretty resistant to profit taking. The stock has been consolidating sideways but the long-term trend is still up.
TDC - I've mentioned TDC before. Shares have a very consistent up trend and traders just bought the dip at support near its 40 and 50-dma again.
ANF - This teen retailer looks bearish. The stock has closed under its 50-dma but I wouldn't chase it here. Look for an oversold bounce into the $72-73 zone and then look for a potential entry point to buy puts.
AAPL - This tech titan is falling fast in spite of all the positive headlines. I do think there is opportunity to buy it on a dip near its rising 200-dma. We will probably add AAPL as a call trade very soon with a buy-the-dip trigger near $325.00 and a stop loss just under $320.00.
NEW DIRECTIONAL PUT PLAYS
Diamond Offshore Drilling, Inc. - DO - close: 68.88 change: -0.36
Stop Loss: 72.65
Target(s): 64.50, 62.50
Current Option Gain/Loss: + 0.0%
Time Frame: 4 to 6 weeks
New Positions: Yes, see below
Why We Like It:
The OSX oil service index managed a bounce today but the sector looks poised to break down from its recent consolidation near the 260 area. Meanwhile DO has been under performing its peers. Shares broke down under technical support at its 200-dma and the $70.00 level yesterday. Today the oversold bounce failed at the $70.00 level and DO closed on its lows for the session. DO has found support in the $69.00-68.60 area in the past so more conservative traders may want to use a trigger to buy puts at $68.50. I am suggesting we go ahead and buy puts now. We'll use a stop loss at $72.65. Our targets are $64.50 and $62.50. The Point & Figure chart for DO is currently still bullish but the stock is on the verge of forming a new sell signal.
FYI: Traders should note that the most recent data listed short interest at more than 14% of the float. That does raise the risk of a short squeeze should the stock suddenly find strength.
- Suggested Positions -
buy the July $67.50 PUT (DO1116S67.5) current ask $1.97
Entry on June 8th at $ xx.xx
Earnings Date 07/21/11 (unconfirmed)
Average Daily Volume = 1.8 million
Listed on June 7th, 2011