Options That Shoot and Score

The NCAA basketball tournament, referred to as March Madness, is a hugely popular annual event for players, students, fans and the millions who buy a square or two in a pool at the office. Teams from all over the country play, the favorites do well — except for the cocky guys who think they’ve got it made — and there’s always a smaller group that surprises them all. Wait a second … that sounds like stocks.

We’ve asked our experts to pair some of their favored tourney teams with stocks and suggest some options trades that will draw cheers from investors. They’ve put together an eclectic mix, ranging from the railroad Norfolk Southern Corporation (NYSE: NSC) to oil firm Occidental Petroleum (NYSE: OXY) to wireless giant Qualcomm (NASDAQ: QCOM), and three more. Please read on and find a winning trade.

Norfolk Southern Corporation (NYSE: NSC)

By Sam Collins, Chief Technical Analyst, InvestorPlace

Two teams from the vicinity of Richmond, Va. are in the run for the NCAA title. Both the University of Richmond and Virginia Commonwealth have fans talking after making the Sweet 16. This is VCU’s first Sweet 16 appearance and Richmond’s first since 1988.

Norfolk, Va.-based rail transportation company Norfolk Southern (NYSE: NSC) and its subsidiaries engage in the movement of raw materials, intermediate products, and finished goods that represent a broad cross-section of the economy with an emphasis on energy (coal).  S&P rates NSC as a Four Star Buy with a 12-month objective of $75.  Technically the stock broke from a cup and handle in October with a price objective of $74 but consolidated between December and late February before breaking out again March 11 at $66.  Buy the NSC May 21 Calls at Strike Price 70 under $1.75 with a target of $4.00

Smithfield Foods (NYSE: SFD)

By Sam Collins, Chief Technical Analyst, InvestorPlace

The men of both Richmond and VCU are well acquainted with the great meat products on their training tables from Smithfield Foods (NYSE: SFD) that give them the energy to take the title.  SFD stock rose from under $19 in January and last week bounced from its 50-day moving average at $21.50 to close at $22.49 on Friday.  Feed prices are important to SFD’s profits and lately corn prices, after a big run early in the year, have dropped sharply.  This could have a direct impact on SFD’s earnings and drive the stock through its recent high at $23.64 to our objective at $25.  Buy the SFD May 21 Calls at Strike Price 23 under $1.00 with a target of $3.00.

Johnson Controls (NYSE: JCI)

By Chris Johnson and Jon Lewis, Editors, The Winning Edge

With the Sweet 16 teams left in the tournament, four states have two teams remaining. And two of those are probably a major surprise. Wisconsin can brag on #4 Wisconsin and #11 Marquette remaining. Let’s look at Wisconsin’s largest company in terms of revenue — Johnson Controls (NYSE: JCI), a manufacturer of interior products and systems for the automotive industry and for buildings.

Car sales numbers are getting better, which helps parts makers such as JCI. And JCI is considered a top corporate citizen by a number of ratings services due to its ethics and sustainable business practices.

The stock is up by more than 50% in the past seven months. Currently, shares are rebounding off their 100-day moving average after pulling back by around 9% in the wake of the Japanese earthquake disaster. Next up is the February high above 42, then the all-time high of around 44.50 reached in 2007.

JCI’s recent retreat offers an excellent entry point as the stock builds strength for a renewed uptrend. Jump on board now with the JCI May 40 Call for around $2.50.

Dominion Resources (NYSE: D)

By Chris Johnson and Jon Lewis, Editors, The Winning Edge

Another intriguing state with two teams in the Sweet 16 is Virginia. Both teams are huge surprises – #11 Virginia Commonwealth and #12 Richmond. One of 20 Fortune 500 companies based in Virginia is Richmond’s own Dominion Resources (NYSE: D), a utility that provides the electric and natural gas needs of customers in Virginia and northeastern North Carolina (another state with two NCAA entries).

Many utilities were thrown under the bus from the backlash against power companies after the Japan quake. D saw its stock plunge 8% in just six days. The shares found support at their 200-day moving average, however, and have since rebounded to take out their 100-day and 50-day trend lines.

Analysts are skeptical toward D, with just three of 17 considering the stock a “buy.” That leaves ample room for upgrades to push the shares higher.

Don’t expect D to suddenly take off, but look for it to rally back after being pummeled by an overreaching market. Give the stock plenty of time to rebound by playing the D July 45 Call for around $1.50.

Occidental Petroleum (NYSE: OXY)

By Jim Woods, Stocks and Markets Writer

As a UCLA alumnus, just about every year I know my Bruins are likely to take to the courts during March Madness. This year the boys from Los Angeles made it through to the second round, but unfortunately, they were ousted by the hard-nosed play of the Florida Gators. Well, UCLA may be out of the tournament, but one company located just blocks away from the UCLA campus is always in the game. It’s Occidental Petroleum (NYSE: OXY).

Given all of the craziness taking place right now with the price of oil, look for this stellar oil company to keep on winning in the tournament that matters most to investors — the tournament of big future earnings and big shareholder returns. Traders should post-up on the OXY May 2011 110 Call for a great shot at big gains.

Qualcomm (NASDAQ: QCOM)

By Jim Woods, Stocks and Markets Writer

About 135 miles south of the UCLA campus you’ll find San Diego State University. Not traditionally known as a basketball powerhouse, the Aztecs did come into the tournament highly ranked. The team fought its way past a tough Temple squad in the second round to take a double-overtime victory and move on to the Sweet 16. This kind of determined play reminds me of San Diego-based wireless technology giant Qualcomm (NASDAQ: QCOM).

The company has earned its position atop the wireless space, and it’s done so over the years with a constant eye on advancing and improving the rapidly changing technology in the industry. As the corporate IT spending picture continues to improve, aggressive traders may want to take a three-point shot with the QCOM May 2011 57.50 Call.

 

At the time of publication, Jim Woods held no positions in any of the stocks mentioned in this article.