Schaeffer's Midday Options Update Features J.C. Penney, Johnson & Johnson, Research in Motion Limited, Tasty Baking, and Phelps Dodge.CINCINNATI -- Today's Schaeffer's Midday Options Update features J.C. Penney (NYSE NYSE See: New York Stock Exchange :JCP See Java Community Process. JCP - Java Community Process ), Johnson & Johnson (NYSE:JNJ JNJ Johnson and Johnson (stock symbol) JNJ Journal of Nursing Jocularity ), Research in Motion Limited (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :RIMM (Rambus Inline Memory Module) See RDRAM. See also RIM. ), Tasty Baking (NASDAQ:TSTY), and Phelps Dodge Phelps Dodge Corporation is a former United States company founded in 1834 by Anson Greene Phelps and William E. Dodge. On March 19, 2007, it was acquired by Freeport-McMoRan and now operates under the name Freeport-McMoRan Copper & Gold Inc. (NYSE:PD). The Midday Options Update contains a brief commentary on the day's most notable activity and a table listing the most-active calls and puts for the day. The Midday Options Update is published every day at www.SchaeffersResearch.com - the home of Bernie Schaeffer and Schaeffer's Investment Research. For additional information about this report or to have it delivered to you free via email every day click on the following link. http://www.schaeffersresearch.com/redirect.aspx?CODE=PRMOU12M&PAGE=1 . Options Update: Calls Extremely Active on Phelps Dodge Stock losses are widening this afternoon, thanks to a rise in oil prices and further jumps in other commodities, which fanned the flames of inflation fears. These fears have reinforced the view that the Fed may raise rates again in June. The Dow Jones Industrial Average Dow Jones Industrial Average The best known U.S. index of stocks. A price-weighted average of 30 actively traded blue-chip stocks, primarily industrials including stocks that trade on the New York Stock Exchange. (DJIA DJIA See Dow Jones Industrial Averager (DJIA). ) is staring down the barrel of a triple-digit loss, which would be the first since February, as we head into the final hours of trading, as 24 of its components have logged a loss. Crude futures are close to $74 per barrel this afternoon, more than a one-week high, thanks to the Middle East situation, a refinery closure for Valero (VLO VLO Valero Energy (stock symbol) VLO Very Low Observable VLO Landing Gear Operation Speed (aviation) VLO Ventro-lateral orbital (area of the brain) ), and violence in Nigeria. These three concerns have investors re-evaluating the supply situation as we head into the summer driving season. April retail sales were released this morning. Sales increased 0.5 percent thanks to increased spending at the gas pump. Excluding gas sales, seasonally adjusted Seasonally adjusted Mathematically adjusted by moderating a macroeconomic indicator (e.g., oil prices/imports) so that relative comparisons can be drawn from month to month all year. sales increased 0.1 percent. Excluding automobile sales, sales increased 0.7 percent. On the whole, economists were looking for Looking for In the context of general equities, this describing a buy interest in which a dealer is asked to offer stock, often involving a capital commitment. Antithesis of in touch with. larger increases: 0.7 percent overall and 0.8 percent excluding autos. The Commerce Department revealed news that renews concerns about inflation. The Department announced that U.S. business sales and inventories increased 0.7 percent in March. This news indicates that stockpiles of unsold goods are at "lean" levels. Finally, the number of initial jobless claims Initial Jobless Claims is a report issued by the U.S. Department of Labor on a weekly basis. This report tracks how many people have filed for unemployment benefits in the previous week. It is a good gauge of the U.S. job market. dropped by 1,000 to 324,000. A Penney for Your Thoughts J.C. Penney (NYSE:JCP) announced first-quarter earnings of 90 cents per share Cents per share The amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned. this morning on sales of $4.22 billion. The consensus estimate for the retailer's quarterly earnings stood at 88 cents per share on sales of $4.22 billion. The company then forecast second-quarter earnings of roughly 60 cents per share (expectations are for 58 cents per share), and yearly earnings of $4.24 to $4.34 per share (expectations are for $4.35). JCP also increased its earnings per share growth target to 16 percent per year during the upcoming four years. No More Tears More Tears was a Canadian television series, which aired on CBC Television in 1998. The series was a short run dramedy, produced and written by Ken Finkleman following the success of his 1996 series The Newsroom, and was in part a remake of Federico Fellini's ? Dow component Johnson & Johnson (NYSE:JNJ) is in positive territory this afternoon, thanks to an analyst upgrade. Bank of America
Bank of America (NYSE: BAC TYO: 8648 ) is the largest commercial bank in the United States in terms of deposits, and the largest company of its kind in the world. upgraded JNJ to "buy" from "neutral." The brokerage attributed the move to JNJ's valuation, its relatively minimal exposure to generics during the next two years, and an improving pharmaceuticals pipeline. Bank of America's analyst noted that he expects three new products in 2006, which will lead to improved sales and earnings growth through 2007. RIMM Shot Research in Motion Limited (NASDAQ:RIMM) is lower this afternoon after announcing that it will launch its BlackBerry service in China through China Mobile Communications Co. The baron of the BlackBerry announced that its service will soon be offered "nationwide" in China. The Canadian company will announce availability dates for BlackBerry Wireless Handhelds and its BlackBerry Enterprise Server BlackBerry Enterprise Server (BES) is the name of the middleware software package that is part of the BlackBerry wireless platform from Research In Motion. BES connects to messaging and collaboration software (Microsoft Exchange, Lotus Domino, Novell GroupWise) on enterprise at a later date. Tasty News This morning, Tasty Baking (NASDAQ:TSTY) announced that it is considering relocating to a new facility outside of Philadelphia. The maker of Tastykake-brand snack cakes noted that it would prefer to remain in the city of brotherly love, and is looking at upgrading its original bakery, and enhancing the use of its Oxford-based bakery. The company is also considering a "combination" of upgrades and relocation. Most-Active Options Update At 2:10 p.m. Eastern time, the Dow Jones Industrial Average (DJIA - 11,514.5) has lost 1.10 percent. The S&P 500 Index (SPX (Sequenced Packet EXchange) The transport layer protocol in the NetWare operating system. Similar to the TCP layer in TCP/IP, it ensures that the entire message arrives intact. SPX uses NetWare's IPX as its delivery mechanism. - 1,308.22) is 1.11 percent lower, while the Nasdaq Composite (COMP - 2,280.4) is 1.74 percent lower. At 2:10 p.m. Eastern time, 4,102,343 calls have changed hands compared to 3,060,210 calls, equaling a single-day put/call volume ratio of 0.74. The CBOE's equity put/call volume ratio weighed in at 0.93. Okay, assignment time boys and girls boys and girls mercurialisannua. . Scroll down to the most-active calls chart and see if you can see who I will be writing about today. My guess is that more than half of you guessed: Phelps Dodge Good work gang! According to Hoover's, Phelps Dodge (NYSE:PD) is the world's second-largest copper producer. That said, PD also produces gold, silver, molybdenum molybdenum (məlĭb`dənəm) [Gr.,=leadlike], metallic chemical element; symbol Mo; at. no. 42; at. wt. 95.94; m.p. about 2,617°C;; b.p. about 4,612°C;; sp. gr. 10.22 at 20°C;; valence +2, +3, +4, +5, or +6. , and other mineral and chemical by-products of its copper operations. In my quest for news on PD, I made my way to MarketWatch and saw this headline: Metals Rally Rolls On. Underneath this headline I saw, "Gold futures soar to latest multi-decade high, and copper and platinum achieve new records." No wonder PD takes up five slots on our most-active calls chart. These new positions are deep in the money, suggesting that options players feel the run higher could continue. Technically, I don't blame the options players for jumping into these positions. Check out PD's weekly chart. The shares have been ushered higher by their 10-week and 20-week moving averages. Since the end of last May, PD has closed just one week below this double-barreled support. Spanning out to a longer-term look, the stock also enjoys staunch support from its 10-month and 20-month moving averages. The last time PD finished below these trendlines was April 2003. During that time period, the equity finished below its 10-month moving average just four times. That's the good news, but there is some bad news. Notice that all of the trendlines that I mentioned are well below PD's current position. The firm would need to lose roughly 16 percent before running into its 10-week moving average, and roughly 30 percent before hitting its 10-month moving average. Is that a drop you are willing to face? That is why the in-the-money, intermediate-term call is not a bad option to play here. Let's take a look at PD's sentiment backdrop, shall we? --Percent of analysts tracked by Zacks who rate the stock with a "hold" or worse: 50% --Number of analysts tracked by Zacks: 12 --Short-interest ratio: 1.62 --Schaeffer's put/call open interest ratio (SOIR SOIR Schaeffer's Put/Call Open Interest Ratio SOIR Simultaneous Operations on Intersecting Runways ): 0.76 --SOIR percent rank: 62 --Overall Schaeffer's Equity Scorecard rating: 6.5 PD's sentiment backdrop isn't overwhelming. In fact, the only real positive I see is the potential for a move higher fueled by upgrades. This fact doesn't mean that I am not bullish on PD. Of course, we have to ask if the strength in the metals market temporary, or can gold run to $1,000? A good strategy may be to wait for the stock to pull back a bit, and then capitalize on intermediate- to long-term, in-the-money options. That appears to be what fueled today's action. Click here to see a Monthly Chart of PD Since December 2002 With 10-Month and 20-Month Moving Averages: http://www.schaeffersresearch.com/wire?ID=15897 . The best way to take advantage of the timely Schaeffer commentaries is to sign up to receive their free e-newsletters -- Opening View, Market Recap and Monday Morning Outlook. Click here to have the Schaeffer's commentaries delivered to you free via email every day. http://www.schaeffersresearch.com/redirect.aspx?CODE=PRMOU12M&PAGE=1 . About Schaeffer's Investment Research (www.SchaeffersResearch.com) Schaeffer's Investment Research, founded by Bernie Schaeffer in 1981, is a financial information and trading resources company. It publishes Bernie Schaeffer's Option Advisor, the nation's leading options subscription newsletter. The firm's contrarian approach focuses on stocks with technical and fundamental trends that run counter to investor expectations. The firm's website, http://www.SchaeffersResearch.com , is recognized as one of the leading information sources for stock and options traders and was cited as the top options website by both Forbes and Barron's. Click here for more details about Schaeffer's trading methodology: http://www.SchaeffersResearch.com/method . |
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