Market Outlook
Our indicators are bullish, including the 40-day Moving Averages Index. Our three main internal indicators, the 200-day Moving Averages Index, Advance Decline Index and Cumulative Volume Index, remain bullish. And volatility readings continue to trend lower.
Option trading investors should continue to favor bullish positions such as call buying and put credit spreads.
Recommended Options Trade: Corinthian Colleges (NASDAQ: COCO)
COCO has been a troubled stock which has resulted in a heavy short position against it. But it looks like it has made a nice extended base and a move higher could result in a rapid short-covering rally.
Buy the COCO May 7 Call around 60 cents ($60 per contract).
After taking the position, enter a good-til-cancelled contingent order to sell this option if the stock hits its target price of $6.80. That should give you an option price of about $1.10, for an 83% profit.
Close this position and cut losses if the stock closes below $5.40, when the option price should be about 40 cents. The stock is currently trading at $5.78.
Recommended Options Trade: Coventry Health Care (NYSE: CVH)
CVH has been in a long uptrend and broke above resistance at about $26.50. It has since formed a bullish “flag formation” and should move higher from that if stocks continue to rally.
Buy the CVH Apr 32 Call in the range of $1.00 ($100 per contract).
After taking the position, enter a good-til-cancelled contingent order to sell this option if the stock hits its target price of $32.70. That should give you an option price of about $2.10, for a 110% profit.
Close this position and cut losses if the stock closes below $29.40, when the option price should be about 70 cents. The stock is currently trading at $30.52.
* All of our short-term recommendations can be taken for up to three days after they are recommended. Make sure the stock and option prices are close to where they were when we made the recommendation. If after three days you still have not gotten the position filled, cancel the order and wait for our new recommendations, as the profit probabilities may no longer be valid.
