The Options Trader’s Guide to Technical Analysis
- March Madness is upon us, sports fans!
That means it’s also time for OptionsZone’s Annual March Madness Trading Contest. This year our Sweet 16 is made up of OptionsZone experts and editors, a
few other top traders in the biz, and we even brought back two of last year’s contest winners.They’ve each offered up one trade they think can take home the championship title. We will be tracking their trades from the March 16, the day of
the opening round games, through the close on April 6, the day of the NCAA Championship Game, to see whose trade scores the highest return.So stay tuned to OptionsZone to see who we crown the National Champion, and check out our Sweet 16 to get some great trading ideas.
The Options Trader’s Guide to Technical Analysis
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#1 NNI April 20 Calls
By Nick Atkeson, Big Money Options
Senate Democratic leaders are considering adding an overhaul of student lending to the health care reconciliation bill by revoking the ability of
private banks to sell government-backed student loans. Republicans are against making this move, and pretty much the rest of the health care bill.For Nelnet Inc. (NNI), how this situation plays out is critical,
because making student loans is essentially all the company does.If the student lending legislation is not attached to the bill, NNI is likely to appreciate strongly. The same is likely to happen if the legislation
is attached, but the health care bill fails. On the other hand, if it is included and the bill passes, NNI is likely to depreciate strongly.With so much uncertainty surrounding this legislation, the ideal trade would be a straddle —
buying calls and puts on NNI so you profit no matter what the outcome. But if I had to pick just one side of the trade, it would be the NNI
April 20 Calls (NNI 100417C00020000).
The Options Trader’s Guide to Technical Analysis
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#2 RIMM April 75 Calls
By Sam Collins, Daily Trader’s Alert
BlackBerry-maker Research In Motion (RIMM) is the traditional leader
in the wireless smartphone market, but it has been under pressure while its chief competitor, iPhone-maker Apple (AAPL),
has been a star performer.But it could be the time to load up on RIMM as a renewed emphasis on broadband power by Cisco Systems (CSCO)
focuses on the ability of smartphones to operate at faster speeds with more data.On March 8, RIMM broke from a triple-top at $72 into a gap created on Sept. 25 from $82.72 to $71.42, and did it on very high volume. The target
for the stock is closure of the gap at $83.My pick is the RIMM April 75 Calls (RFY 100417C00075000).
The Options Trader’s Guide to Technical Analysis
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#3 NITE April 17.50 Calls
By Andrew Houghton, Big Money Options
From the first tip through the championship game on April 5, stocks that have the highest probability of moving are those that have some type of
event taking place during March Madness — like Micron Technology (MU),
Schnitzer Steel Industries (SCHN) and Worthington Industries (WOR).
At the same time, the premium that you will dearly pay for will be instantly sucked out like a buzzer-beater three-point swoosh.So, instead of flipping a coin on earnings, and since I haven’t been tipped on the next takeover, nor do I have any insight into the next FDA announcement,
I’m going with one of my favorites, the “Dark NITE.”Knight Capital Group (NITE) is a financial services firm that provides
market access and trade execution services. Over the next couple of months, I expect the news from the jobs market to improve. The stock market has
a strong correlation to employment trends. A further improving stock market will bode well for financial services firms and NITE.Technically, the stock is in great shape and is ready for a tourney run, so my pick is the NITE April 17.50 Calls (QTN 100417C00017500).
The Options Trader’s Guide to Technical Analysis
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#4 AKS April 28 Calls
By Chris Johnson, Winning Edge
AK Steel (AKS), among other steel and basic materials companies,
has been in a holding pattern as the global economic slowdown has affected their output and prices. But we are now headed into a time when many people
are expecting to see an increase in production among industrial companies. AKS is positioned to provide their specialty steels at competitive pricing
as the company has spent the last two years getting “lean and mean.”I think this hometown company (I’m based in Cincinnati) will score big through the NCAA tournament and the rest of 2010.
My pick is the AKS April 28 Calls (AKS 100417C00028000).
The Options Trader’s Guide to Technical Analysis
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#5 EBIX April 17.50 Calls
By John Lansing, Parabolic Options
While Ebix Inc.’s (EBIX) business might not be all that exciting
(it makes software for insurance companies), the potential short squeeze for
the stock could make for some exhilarating profits.With more than 10.5 million shares short on EBIX, there are a lot of sellers who are trying to hold the stock down. In the end, I just don’t think
they’ll be able to, and when EBIX pops, those shorts will be running for cover.My pick is the EBIX April 17.50 Calls (IFQ 100417C00017500).
This play might need some time to take off, but when it does, the profits should be explosive.
The Options Trader’s Guide to Technical Analysis
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#6 RHT April 30 Calls
By Jon Lewis, Winning Edge
If there’s one thing options players love to see, it’s movement. And few events lend themselves more to movement than earnings. That where Red Hat
(RHT) comes into play. The enterprise software developer reports Q4
earnings numbers on March 24.The thing I like about RHT is that it moves after earnings … usually by a lot. In fact, after the last four reports, the stock has gained
an average of 8% in the following week. That kind of move can yield a healthy return on an option.RHT hasn’t missed the Street’s earnings estimate in seven years, so chances are the stock will enjoy another post-earnings bounce. Adding to the
stock’s potential is the constant swirl of takeover rumors, made stronger by the recent offer for software rival Novell (NOVL).
Nothing like some takeover talk to goose the share price.It all adds up to a bullish play, so my pick is the RHT April 30 Calls (RHT 100417C00030000).
The Options Trader’s Guide to Technical Analysis
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#7 KFT June 29 Calls
By Valerie Maczak, OptionsZone Editor
I admit it. I constantly break the cardinal rule of trading and I let my emotions get involved. But I’m a sucker for companies that I know and like,
which is why I got excited when OptionsZone’s
Chief Technical Analyst Sam Collins wrote that his Collins-Bollinger Reversal (CBR) indicator flashed a buy signal for Kraft Foods (KFT).While the technical evidence makes a strong case for a move up, playing the right option is key to capturing profit from it. I like playing slightly
in-the-money options that are a few months out. Open interest is also key for me, as I need an option to be liquid enough to ensure good entry and
exit prices.With KFT currently trading around $29 and Sam’s target of $34, my pick is the KFT June 29 Calls (KFT 100619C00029000).
The Options Trader’s Guide to Technical Analysis
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#8 SQNM April 7 Calls
By Melanie Mociun, 2009 OptionsZone March Madness Contest Winner
Biotechnology company Sequenom Inc. (SQNM) has been moving higher
lately on positive news.The company is scheduled to announce earnings March 15, which could send the stock up or down.
I’m betting on the stock going up with the SQNM April 7 Calls (QJQ 100417C00007000).
The Options Trader’s Guide to Technical Analysis
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#9 NBG April 5 Calls
By Jon Ogg, 24/7 Wall St.
Shares of the National Bank of Greece SA (NBG) have been taken out
to the woodshed. If the market has been strong, it has missed Greece’s largest bank. But lately we’re seeing more friendly comments out of the European
Union on aid to Greece. Despite being one of the PIIGS (Portugal, Italy, Ireland, Greece and Spain), it does not seem that the country is at risk
of default yet (longer-term may be another issue).Also, the Greek bank has major partners all over Europe, and many considered it relatively healthy even as Greece’s woes were mounting. The stock
has also become a virtual proxy for betting on Greece’s recovery or demise.So my pick is a bet on a near-term bounce on a Greek aid and austerity package — the NBG April 5 Calls (NBG 100417C00005000).
I think they offer the best leverage, least risk, and highest chance of the out-of-the-money strike moving in the money.Learn
more about profiting from Greece’s short-term recovery with NBG.
The Options Trader’s Guide to Technical Analysis
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#10 CZZ April 10 Calls
By Bryan Perry, Cash Machine
What’s more “sweet” than sprinkling the “Big Dance” with a commodity play on the biggest sugar producer in the world. Located in, where else, Brazil,
Cosan Ltd. (CZZ) is the power forward in the sugar industry that is
enjoying a healthy rebound in form of demand and price.Citigroup (C) recently upgraded CZZ to “outperform.” The stock is breaking
out of a seven-month trading range at $9 and looks like a layup to $11-$12.My pick is the CZZ April 10 Calls (CZZ 100417C00010000).
Traders should see a 2-3 point spike in the stock getting this option trade to the Final Four and quite likely climbing the ladder to cut the net
down.
The Options Trader’s Guide to Technical Analysis
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#11 RIMM April 80 Calls
By Akiva Shmidman, 2009 OptionsZone March Madness Contest Winner
Research In Motion (RIMM) is beginning to trend upward and having
a bit of a breakout from the last couple of months. It should have a nice run-up into earnings (March 31) as well.RIMM lost market share to the Apple (AAPL) iPhone, and many BlackBerry
users were on the fence about whether to keep their BlackBerry or enjoy the iPhone experience. However, with the introduction of the iPad, BlackBerry
users can keep their RIMM device, get an iPad and live happily ever after.My pick is RIMM April 80 Calls (RFY 100417C00080000).
The Options Trader’s Guide to Technical Analysis
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#12 MU April 10 Calls
By Michael Shulman, ChangeWave Shorts
The NCAA tournament is about the underdogs — the 15th seed beating the 2nd seed or the game-winning jump shot from a real student who will never
wear a professional uniform.One underdog stock to watch is Micron Technology (MU), which manufactures
specialty memory chips, and niche parts of the memory business are humming in 2010. Micron is not a great company, but it is a stock with declining
short interest that is sitting on a rising tide — semiconductors are hot and money is flowing even to lesser names.The company sells at just 10-12 times earnings, and it is scheduled to report earnings April 1. I think they will surprise people, so my pick is
the MU April 10 Calls (MU 100417C00010000).
The Options Trader’s Guide to Technical Analysis
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#13 CGX April 45 Puts
By Ron Jackson, Maximum Options
Consolidated Graphics (CGX) offers printing and related services
for the direct mail business. I see the end of the direct marketing season approaching, so its best business months are behind it.Until recently, too many people liked the CGX. Plus, the stock just cracked its seven-day moving average and its 40, 5, 10 stochastics.
My pick is the CGX April 45 Puts (CGX 100417P00045000).
The Options Trader’s Guide to Technical Analysis
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#14 CIEN April 15 Calls
By Adam Warner, Daily Options Report
If Cisco Systems (CSCO) is going to change the Internet forever,
maybe that will throw some business Ciena’s (CIEN) way. Or, better
yet, Cisco may just take them over — it’s been the spot for rumors lately.My pick is the CIEN April 15 Calls (EUQ 100417C00015000).
C’mon, John Chambers, show some spring cheer. And quickly.
The Options Trader’s Guide to Technical Analysis
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#15 USO April 43 Calls
By Jared Woodard, Condor Options
Rather than shooting for the moon on lottery-ticket calls on some microcap stock no one’s ever heard of, I’m going for a genuine trade here: United
States Oil Fund (USO) calls.I think seasonal tendencies favor a move higher in oil, and a decisive move above $42 would represent a break above the highs from late October 2009.
My pick is the USO April 43 Calls (USO 100417C00043000). Implied
volatility isn’t as low here as it is in equities, but then we actually see some genuine movement in oil prices on a daily basis.
The Options Trader’s Guide to Technical Analysis
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#16 AMZN April 125 Puts
By Jim Woods, OtionsZone Editor
I’ll admit that online retailer Amazon.com (AMZN) is one of my favorite
companies, but it’s not my favorite company. That distinction goes to Apple (AAPL),
and the release of its new iPad — slated for April 3 — looks like it’s going to rock Amazon’s world.According to the latest ChangeWave Alliance research, huge pre-launch iPad demand is going to have a major impact on the e-reader market. So, for
a great way to sink a winning shot from what I suspect will be a double dribble in Amazon shares in the week before and after the iPad’s release,
my pick is the AMZN April 125 Puts (QZN 100417P00125000).This out-of-the-money put option could be a huge winner if Amazon shares begin to sell off, so I’m taking this outside shot.
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