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3 Call Contenders: Internet

High volatility in YHOO could mean a big spike ahead


As I was using my Power Stocks scanning program to take a look at the market, internet stocks caught my attention. Several names in this area had all of the qualities I look for in a call option—the potential for a big move up (volatility) based on technicals and past activity in the stock, and good liquidity. All of these are names you’ll recognize, and for good reason—options which do not have liquidity may trap you into a position, or prevent you from taking a large enough position to make the transaction worthwhile.

I’ll leave it up to you to decide which strike price and month are appropriate for your trading style, but be sure to give yourself enough time to be right. I’ve also included the support and volatility levels my scanner has detected for these stocks. An average volatility is considered to be 20.

  • Time Warner (NYSE:TWX) is what I call a “reestablished buy”—a stock that’s resumed its uptrend after a temporary consolidation or downturn. Support for TWX is at $59, and with the stock currently at $60.94 (as of Friday’s close) I’m projecting a slow creep upward, as the stock’s volatility is rated below average, at 18.
  • Google (NASDAQ:GOOG) closed at $880.23 on Friday, well above support at $812, which shows that this uptrend is already underway. The stock has average volatility so I’m not expecting a wild upswing at this point, but a mild one seems likely.
  • Yahoo (NASDAQ:YHOO) is within $2 of its $24 support, at $26.83, and shows above-average volatility at 28. YHOO may make a dramatic move as it also shows the “reestablished buy” pattern.

Want to learn how to rein in your subjective side to capture more profits? My colleague Jon Markman is hosting a free 30-minute webinar this Wednesday at 4:30 PM Eastern: Trade Against Your Gut: When Instinct is Your Worst Enemy.


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