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Joined: 28 Dec 2005 Posts: 12643
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Posted: Sun Jan 22, 2006 11:33 am Post subject: Mon: Buys DOW Sells OIH SLB BHI IWM |
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Mon: Buys DOW Sells OIH SLB BHI IWM
Primary Trades:
OIH has the potential to pullback over 10 points quickly and over 20 points intermediate-term. OIH Feb 145 or Apr 140 puts are currently fairly priced and optimal (e.g. a large general expectation that they will fall into the money before expiration).
IWM has the potential to fall much further with the market, i.e. over two points short or intermediate term, to below 68. IWM Feb or May slightly in-the-money puts may generally be best (i.e. given cost and potential return).
Secondary Trades:
DOW reports earnings Thu, it's fundamentally undervalued, and may rise into or after earnings. Feb or Mar 40 calls are best for a short-term trade.
SLB is the largest oil services stock (with a market cap about twice the size of HAL, which is the second largest). SLB beat earnings expectations by $0.09, declared a 2:1 split (effective Mar 1st), and boosted its dividend $0.04 to $0.25. SLB rose six points before earnings Thursday and rose another seven points on earnings Friday. SLB has risen 45 points in three months to close at 122 1/4, and the Feb 120 puts are 3.50. SLB's RSI is severely overbought at 81. The strong rise Thursday and Friday on top of big gains with very high volume indicate a "blow-off top."
BHI closed at about 74, created a spinning top, with a severely overbought RSI above 81. The Feb 75 puts are 3.30.
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Primary Trade: An intermediate or long term trade. Timing can be off substantially. Volatility not a factor. Risk is low to moderate. Potential return is often moderate.
Secondary Trade: A short term trade. Timing must be accurate or volatility must be high. Risk is high. Potential return is high.
Secondary Trades should be generally avoided, although considered. Note: If Secondary Trades are taken, they may affect Primary Trades. |
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