Brent Archer
Virginia, US - http://www.investorsobserver.com
Brent Archer is an options analyst and writer at Investors Observer.
Wal-Mart (WMT) on the move after upping forecast
Wal-Mart Stores Inc. (NYSE: WMT) shares are soaring after the company announced a 1.4% September same-store sales increase and upped its Q3 forecast from 62 to 65 cents per share to new estimates of 66 to 69 cents per share, above analysts' predictions of 63 cents. If you think that the company won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on WMT.After hitting a one-year high of $52.15 in October 2006, the stock fell to a 52-week low of $42.09 in September. WMT opened this morning at $47.35. So far today the stock has hit a low of $46.93 and a high of $47.70. As of 10:55, WMT is trading at $47.18, up $1.59 (3.5%). The chart for WMT looks neutral but improving, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
For a bullish hedged play on this stock, I would consider a January bull-put credit spread below the $40 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. This particular trade will make a 5.3% return in just 3 months as long as WMT is above $40 at January expiration. Wal-Mart would have to fall by more than 30% before we would start to lose money.
WMT hasn't been below $40 at all in the past year and has shown support around $43 recently. This trade could be risky if the company's earnings (due out on 11/13) disappoint, but even if that happens, this position could be protected by strong support above $42, where WMT bottomed out in September.
Brent Archer is an options analyst and writer at Investors Observer.
DISCLOSURE: At publication time, Brent neither owns nor controls positions in WMT.
JC Penney (JCP) same store sales weak, outlook lowered
J. C. Penney Company, Inc (NYSE: JCP) stock is plunging this morning as the company cut its Q3 outlook after widely missing September same-store sales estimates. J.C. Penney now expects to report profit of $1 per share to $1.04 per share in the third quarter, compared with a previous outlook for profit of $1.28 per share, while analysts have been expecting earnings of $1.29 per share. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on JCP.After hitting a one-year high of $87.18 in February, the stock fell to a one-year low of $61.54 in August. This morning, JCP opened at $68.48. So far today the stock has hit a low of $64.08 and a high of $68.48. As of 10:45, JCP is trading at $65.05, down $2.95 (-4.3%). The chart for JCP looks neutral and was improving until today, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.
Continue reading JC Penney (JCP) same store sales weak, outlook lowered
Beazer Homes (BZH) will restate 9 years of earnings
Beazer Homes USA Inc. (NYSE: BZH) shares are trading higher today after an audit uncovered several accounting errors. Beazer is going to restate its results going back almost a decade. The changes are expected to boost the company's cumulative bottom line, though it will likely reflect a decrease in net income for 2006. If you think that the company won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on BZH.After hitting a one-year high of $48.60 in December, the stock plunged to hit a low of $8.08 in September. BZH opened this morning at $10.50. So far today the stock has hit a low of $10.13 and a high of $10.75. As of 10:35, BZH is trading at $10.22, up $0.29 (2.9%). The chart for BZH looks neutral but improving, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
For a bullish hedged play on this stock, I would consider a November bull-put credit spread below the $7.50 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 11.1% return in just 5 weeks as long as BZH is above $7.50 at November expiration. Beazer would have to fall by more than 26% before we would start to lose money.
Continue reading Beazer Homes (BZH) will restate 9 years of earnings
Examining Warren Buffett's Portfolio: Nike (NKE)
Nike Inc. (NYSE: NKE) stock has been climbing steadily all year, hitting a new high today, before dropping off slightly as the morning progressed. Warren Buffett, the billionaire investor known for his highly successful buy-and-hold market strategy, owns 8 million shares of NKE, so if you are looking for a stock to own, you could probably do worse than this one. If you think that the company won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on NKE.NKE opened this morning at $61.46. So far today the stock has hit a low of $61.28 and a high of $62.37. As of 1:05, NKE is trading at $61.55, down $0.22 (-0.4%). The chart for NKE looks neutral and improving, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.
For a bullish hedged play on this stock, I would consider an April bull-put credit spread below the $50 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. This particular trade, we will make a 7.5% return in just 6 months as long as NKE is above $50 at April expiration. Nike would have to fall by more than 18% before we would start to lose money.
NKE hasn't been below $50 since February and has shown support around $60 recently. This trade could be risky if the company's earnings (due out in mid-December and mid-March) disappoint, but even if that happens, this position could be protected by strong support between $53 and $54.
Brent Archer is an options analyst and writer at Investors Observer.
DISCLOSURE: At publication time, Brent neither owns nor controls positions in NKE.
Akamai Technologies (AKAM) soars on Buy rating, new director
Akamai Technologies Inc. (Nasdaq: AKAM) shares are trading higher today after AmTech Research initiated coverage on AKAM with a buy rating. Also today, AKAM named Jill A. Greenthal, an adviser at Blackstone Group (NYSE: BX) to its board of directors. If you think that the company won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on AKAM.After hitting a one-year high of $59.69 in February, the stock dropped to a 52-week low of $27.75 in September. AKAM opened this morning at $36.11. So far today the stock has hit a low of $36.09 and a high of $37.94. As of 12:52, AKAM is trading at $37.30, up $1.68 (4.7%). The chart for AKAM looks bullish but improving, while S&P gives the stock a negative 2 STARS (out of 5) sell rating.
For a bullish hedged play on this stock, I would consider a January bull-put credit spread below the $25 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. This particular trade, will make a 4.2% return in just 3 months as long as AKAM is above $25 at January expiration. Akamai would have to fall by more than 33% before we would start to lose money.
AKAM hasn't been below $25 at all in the past year and has shown support around $31 recently. This trade could be risky if the company's earnings (due out on 10/24) disappoint, but even if that happens, this position could be protected by strong support between $29 and $31, where AKAM has held firm for the past two months.
Brent Archer is an options analyst and writer at Investors Observer.
DISCLOSURE: At publication time, Brent neither owns nor controls positions in AKAM.
Morgan Stanley (MS) and financials continue to struggle
Morgan Stanley (NYSE: MS) stock is falling again today as some negative momentum continues after a string of leading banks have taken billions in mortgage write-downs over the past several trading days. Competitor Merrill Lynch (NYSE: MER) was also downgraded by two separate brokers yesterday, which did not help matters among the major financial stocks. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on MS.After hitting a one-year high of $76.04 in June, the stock fell to a one-year low of $54.90 in August. This morning, MS opened at $68.54. So far today the stock has hit a low of $66.80 and a high of $68.54. As of 11:00, MS is trading at $67.28, down 66 cents (-1.0%). The chart for MS looks bullish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
For a bearish hedged play on this stock, I would consider a November bear-call credit spread above the $75 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 5.3% return in 6 weeks as long as MS is below $75 at November expiration. Morgan Stanley would have to rise by more than 11% before we would start to lose money.
MS has not been above $75 by more than a few cents in the past year, and has shown some resistance around $70 recently. This trade could be risky if the Fed actions turn the credit markets around, but even if that happens, this position could be protected by the resistance the stock formed around $74 where the stock formed a top in June and August.
Brent Archer is an options analyst and writer at Investors Observer.
FedEx (FDX) higher as some economic optimism returns
FedEx Corporation (NYSE: FDX) shares are trading higher today as the stock appears to have found some support around $105 recently. Investors are buying back into FDX for a variety of reasons: possibly because the stock looks cheap compared to historical prices, possibly because oil prices took a big drop yesterday, and possibly due to economic optimism spurred by the start of earnings season and some M&A activity that could signal a reprieve from the credit crunch. If you think that the company won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on FDX.After hitting a one-year high of $121.42 in February, the stock slipped to a one-year low of $99.30 in August. FDX opened this morning at $106.27. So far today the stock has hit a low of $106.27 and a high of $107.70. As of 10:50, FDX is trading at $107.10, up $1.00 (0.9%). The chart for FDX looks bearish and steady, while S&P gives the stock its highest 5 STARS (out of 5) strong buy rating.
For a bullish hedged play on this stock, I would consider a January bull-put credit spread below the $90 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 5.3% return in just 4 months as long as FDX is above $90 at January expiration. FedEx would have to fall by more than 16% before we would start to lose money.
FDX hasn't been below $99 at all in the past year and has shown support around $104 recently. This trade could be risky if oil prices soar again, but even if that happens, this position could be protected by strong support between $104 and $106, where the stock bottomed out a few times in the past year.
Brent Archer is an options analyst and writer at Investors Observer.
Aluminum Corp. of China (ACH) on the move
Aluminum Corp. of China Ltd. (NYSE: ACH) stock is slumping today as aluminum futures are off by more than 2% as are other industrial metals like copper. Investors may also be locking in their gains after Friday's big positive move. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on ACH
The stock has been climbing steadily all year, hitting a one-year high of $76.99 on Friday. This morning, ACH opened at $74.00. So far today the stock has hit a low of $72.78 and a high of $75.33. As of 11:00, ACH is trading at $74.92, down $1.93 (-2.5%). The chart for ACH looks bullish but slightly deteriorating, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
For a bearish hedged play on this stock, I would consider an October bear-call credit spread above the $85 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverages nice returns. For this particular trade, we will make a 6.4% return in 2 weeks as long as ACH is below $85 at October expiration. Chalco would have to rise by more than 33% before we would start to lose money. The stock has never been above $77 and would have to jump by over 14% in less than two weeks to cause a problem.
Brent Archer is an options analyst and writer at Investors Observer. DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in ACH.
Valero Energy (VLO) upgrade trumps lower crude prices
Despite plunging crude oil futures, Valero Energy Corp. (NYSE: VLO) shares are trading higher today after Citigroup upgraded VLO from hold to buy. If you think that the company won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on VLO.After hitting a one-year high of $78.68 in July, the stock dropped sharply and has been trading mostly in the upper $60's over the past three months. VLO opened this morning at $68.85. So far today the stock has hit a low of $68.81 and a high of $71.90. As of 11:30, VLO is trading at $70.44, up $2.09 (3.1%). The chart for VLO looks bearish and steady, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.
For a bullish hedged play on this stock, I would consider a November bull-put credit spread below the $60 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 8.7% return in just 6 weeks as long as VLO is above $60 at November expiration. Valero would have to fall by more than 14% before we would start to lose money. Learn more about this type of trade here.
VLO hasn't been below $60 since March and has shown support around $68 recently. This trade could be risky if oil prices relax over the next few months, but even if that happens, this position could be protected by strong support between $60 and $65, where the stock bottomed out in August.
Brent Archer is an options analyst and writer at Investors Observer.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in VLO.
Bear Stearns (BSC) reeling from more bad financial news
Bear Stearns Companies Inc. (NYSE: BSC) stock is struggling as many of its competitors have announced large write-downs on holdings of mortgage securities and leveraged loans over the past week in the wake of the credit crunch. Merrill Lynch (NYSE: MER) and Washington Mutual (NYSE: WM) both took large write-downs last week, and JP Morgan (NYSE: JPM) and Bank of America (NYSE: BAC) are expected to write down a total of around $3 billion combined when they report earnings later this week. Merrill also got downgraded by two firms over the weekend after Friday's write-down. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on BSC.
After hitting a one-year high of $172.61 in January, the stock fell to a one-year low of $99.75 in August. This morning, BSC opened at $129.30. So far today the stock has hit a low of $126.95 and a high of $129.40. As of 11:15, BSC is trading at $127.39, down $4.19 (-3.2%). The chart for BSC looks neutral but improving, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
For a bearish hedged play on this stock, I would consider a January bear-call credit spread above the $165 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 6.4% return in 4 months as long as BSC is below $165 at January expiration. Bear would have to rise by more than 33% before we would start to lose money. Learn more about this type of trade here.
Continue reading Bear Stearns (BSC) reeling from more bad financial news
Is there a Yahoo! (YHOO) break-up play?
Yahoo! Inc. (NASDAQ: YHOO) shares are trading higher today after a new Sanford C. Bernstein & Co. report suggested this morning that Yahoo would be worth more if it broke up its Internet businesses. The analyst said Yahoo's operations could be valued as high as $39 per share, compared with a current share price closer to $27. If you think that the company won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on YHOO.After hitting a one year high of $33.61 in May, the stock slipped through the spring and early summer to set its 52 week low of 22.27 in August. Yahoo! opened this morning at $27.78. So far today the stock has hit a low of $27.75 and a high of $28.16. As of 11:30, YHOO is trading at $27.78, up $0.63 (2.2%). The chart for YHOO looks bullish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
For a bullish hedged play on this stock, I would consider a January bull-put credit spread below the $22.50 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. This particular trade will make a 9.2% return in just 4 months as long as YHOO is above $22.50 at January expiration. Yahoo! would have to fall by more than 19% before we would start to lose money.
YHOO hasn't been below $22.50 by more than a few cents in the past year and has shown support around $25 recently. This trade could be risky if the company's earnings (due out on 10/16) disappoint, but even if that happens, this position could be protected by strong support between $22.50 and $24, where the stock bottomed out in August and September.
Brent Archer is an options analyst and writer at Investors Observer.
DISCLOSURE: At publication time, Brent neither owns nor controls positions in YHOO.
Caterpillar (CAT) lifted by employment report
Caterpillar Inc. (NYSE: CAT) shares are trading higher today along with many other major industrial stocks after the monthly employment report was released today. September's report showed job growth and August's report was revised to switch a previously reported decline in jobs to a significant gain. If you think that the company won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on CAT.The stock hit its 52 week high of 87.00 in July and set its 52 week low of 57.98 in January. Caterpillar has been generally gaining ground for the past year, with slight hiccups in October of 2006 and July of this year. CAT opened this morning at $79.01. So far today the stock has hit a low of $79.01 and a high of $80.63. As of 11:10, CAT is trading at $80.25, up $1.61 (2.0%). The chart for CAT looks neutral but improving, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
For a bullish hedged play on this stock, I would consider a November bull-put credit spread below the $70 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 4.8% return in just 6 weeks as long as CAT is above $70 at November expiration. Caterpillar would have to fall by more than 12% before we would start to lose money.
CAT hasn't been below $70 since April and has shown support around $77 recently. This trade could be risky if the company's earnings (due out on 10/19) disappoint, but even if that happens, this position could be protected by strong support between $70 and $75, where the stock bottomed out in August and September.
Brent Archer is an options analyst and writer at Investors Observer.
DISCLOSURE: At publication time, Brent neither owns nor controls positions in CAT.
Monster Worldwide (MNST) options strategy after downgrade
Monster Worldwide Inc. (NASDAQ: MNST) shares have been slipping today after a Wachovia Capital Markets analyst downgraded the stock to Market Perform from Outperform. The broker cited a sluggish domestic economy and fewer recruitment advertising. If you think this stock won't be rising too far in the coming months as a result of this downgrade, then it could be a good time to look at a bearish hedged play on MNST.This stock has been sharply falling since the beginning of the year and hit its 52-week low of 32.37 in mid-September. This morning, MNST opened at $35.15. So far today the stock has hit a low of $35.00 and a high of $38.85. As of 11:20, MNST is trading at $35.53, down $0.28 (-0.8%). The chart for MNST looks neutral but improving, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
For a bearish hedged play on this stock, I would consider a December bear-call credit spread above the $45 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. This particular trade will make a 5.3% return in 11 weeks as long as MNST is below $45 at December expiration. Monster would have to rise by more than 26% before we would start to lose money.
MNST has not been above $45 since June, and has shown some resistance around $37 recently. This trade could be risky if the company's earnings (due out in late October) disappoint, but even if that happens, this position could be protected by the resistance the stock formed between $40 and $45 in July.
Brent Archer is an options analyst and writer at Investors Observer.
DISCLOSURE: At publication time, Brent neither owns nor controls positions in MNST.
US Steel (X) lower on underweight rating
United States Steel Corp. (NYSE: X) stock is lower this morning after Morgan Stanley initiated coverage on X today with an underweight rating, causing the stock to slump in early trading. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on X.After hitting a one-year high of $127.26 in June, the stock dipped in late summer, but has been climbing over the past two months. This morning, X opened at $105.18. So far today the stock has hit a low of $104.15 and a high of $106.11. As of 10:45, X is trading at $105.10, down $2.26 (-2.1%). The chart for X looks bullish and steady, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.
For a bearish hedged play on this stock, I would consider a November bear-call credit spread above the $120 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. This particular trade will make a 14.9% return in 7 weeks as long as X is below $120 at November expiration. US Steel would have to rise by more than 13% before we would start to lose money.
X has not been above $120 since June, and has shown some resistance around $108.50 recently. This trade could be risky if economic data turns more positive in the wake of the Fed's rate cuts, but even if that happens, this position could be protected by the resistance the stock formed around $115 where it has topped out in July.
Brent Archer is an options analyst and writer at Investors Observer.
DISCLOSURE: At publication time, Brent neither owns nor controls positions in X.
CVS Caremark (CVS) same-store-sales impress
CVS Caremark Corp. (NYSE: CVS) shares have hit a new one-year high today after announcing this morning that September same-store sales rose by 5%. If you think that the company won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on CVS.After hitting a one year lowof $27.09 back in November, the stock has risen steadily, settling in between $35 and $40 over the past 6 months. CVS opened this morning at $38.83. So far today the stock has hit a low of $38.39 and a high of $39.99. As of 11:00, CVS is trading at $38.63, up $0.34 (0.9%). The chart for CVS looks bullish and steady, while S&P gives the stock its highest 5 STARS (out of 5) strong buy rating.
For a bullish hedged play on this stock, I would consider a November bull-put credit spread below the $35 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 8.7% return in just 7 weeks as long as CVS is above $35 at November expiration. CVS would have to fall by more than 9% before we would start to lose money.
CVS hasn't been below $35 by more than a few cents since April and has shown support around $36.50 recently. This trade could be risky if the company's earnings (due out on 11/1) disappoint like Walgreen's (NYSE: WAG) did, but even if that happens, this position could be protected by strong support around $35, where the stock bounced back in August.
Brent Archer is an options analyst and writer at Investors Observer.
DISCLOSURE: At publication time, Brent neither owns nor controls positions in CVS. He does control a bullish hedged trade on WAG.
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