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Begin part 3 of 3

THE PLAYS:

Upside:

Play Date: 10/21/2008
ALXN (Alexion Pharmaceuticals--$41.00; -0.90; optionable): Drugs
http://biz.yahoo.com/p/a/alxn.html
EARNINGS: 10-23-08 before the open
STATUS: Double bottom w/handle. A very interesting pattern here as ALXN holds support at the 200 day SMA (36.31) in its 10 week base. This is an actual base as opposed to just a stock that has sold off and is trying to rebound. ALXN broke higher in late July on earnings, gapping out of a 9 month base. Rallied to 48 on the move and then sold back in the market selling, testing its new 8 year high. It used the selling to form the current base, surging off the 200 day last Friday on very strong, above average volume. Nice test back to the 50 day EMA (40.30) Monday and Tuesday, and it may test a couple of more sessions along this support. All the better as it polishes the base. Just waiting for that next break higher on solid trade.
Volume: 802.359K Avg Volume: 1.709M
BUY POINT: $42.11 Volume=2.2M Target=$48.95 Stop=$40.08
POSITION: XQN AH - Jan. $40c (61 delta) &/or Stock or XQN WH - Nov. $40p (-40 delta, $3 to sell)
http://www.investmenthouse.com/ci/alxn.html

Play Date: 10/21/2008
AMED (Amedisys--$55.03; +1.17; optionable): Home health care
http://biz.yahoo.com/p/a/amed.html
EARNINGS: 10-28-08 before the open
STATUS: Double bottom. After a steady rise for a few years AMED peaked out in late July and early August, falling hard in August. It caught itself and started forming a new base at the 200 day SMA (49.07) the past 10 weeks. Undercut the 200 day in the October selling but recovered, continuing the work on its base. Rallied up the past week, pausing at some resistance at 55. Still working on its pattern and may take a few more sessions to complete it so we will just be patient and let it show us the breakout if it will. This is one of the few 'hot' sectors in the market in the sense it has stocks forming good bases and starting to move up.
Volume: 790.49K Avg Volume: 1.2M
BUY POINT: $56.35 Volume=1.5M Target=$64.95 Stop=$53.44
POSITION: CQW AK - Jan. $55c (52 delta) &/or Stock
http://www.investmenthouse.com/ci/amed.html

Play Date: 10/21/2008
RS (Reliance Steel--$26.38; -0.47; optionable): Steel and aluminum fabrication
http://biz.yahoo.com/p/r/rs.html
EARNINGS: Announced 10-16-08
STATUS: Trend reversal. No big surge or selloff on earnings, just continued work on its lateral range the past three weeks, showing some good price/volume action, i.e. up on the upside sessions, lower on the downside sessions. The pattern has tightened along the 10 day EMA (26.76) the past week, and volume spiked Tuesday as RS showed a tight doji just below that near resistance level. Looking for that volume spike to take RS higher. We can move in with traditional upside plays with stock and call options or we can sell some puts on it; if it runs higher the puts fall in value and we can repurchase them for less than we paid. With the November options listed if they expire worthless or we buy them after a good surge where their value is near zero our return is in the 20% range (based on the margin requirement for selling the puts). Either way RS looks good.
Volume: 3.624M Avg Volume: 1.855M
BUY POINT: $27.76 Volume=2.5M Target=$34.88 Stop=$25.82
POSITION: RS CE - Mar. $25c (79 delta) &/or Stock or RS WE - Nov. $25p ($1.70 to sell)
http://www.investmenthouse.com/ci/rs.html

Play Date: 10/21/2008
T (AT&T--$25.73; -1.26; optionable): Telecom services
http://biz.yahoo.com/p/t/t.html
EARNINGS: 10-22-08 before the open
STATUS: Trend reversal. This is not our usual play, but some folks want to play dividends so we are looking at T, a healthy dividend payer (current yield about 6.5%) that also has earnings potential thanks to its alliance with AAPL and its much better than expected iPhone sales. Indeed, T was moving after hours on the AAPL earnings, but the real story is tomorrow when T announces its results. If T gets a pop we are looking at selling some puts on it as it tests that surge, holds, and starts to rebound. This way we take in the premium for the put sale, using collateral in our account to cover the margin requirements (cash &/or Stock). If T rallies the puts drop in value and we buy them back at a much lower price. If it hangs around we can just let them expire and keep the money. If it comes back a bit we have until 24ish before we would be flat on the play given the option premium we take in on the put sale. Thus we would pick up T at a decent price if it hangs in this general area. We can also just buy the stock outright but as the ex-dividend date has passed on this one (and on most dividend paying stocks) for this quarter we like selling the puts as a way to take in some money now versus waiting for the next dividend payment in February.
Volume: 32.946M Avg Volume: 33.448M
BUY POINT: $26.55 Volume=50M Target=$30.75 Stop=$24.69
POSITION: T LZ - Jan. $26c (61 delta) &/or Stock or T XE - Dec. $25p (sells for $2.60)
http://www.investmenthouse.com/ci/t.html

Downside:

Play Date: 10/21/2008
BCR (C.R. Bard--$79.41; -2.21; optionable): Medical instruments
http://biz.yahoo.com/p/b/bcr.html
EARNINGS: 10-22-08 after the close
STATUS: Put. BCR rallied back the past week after an incredibly nasty drop through early last week. It tapped the 10 day EMA (82.09) Tuesday and then slid back down on rising though still below average volume (Monday was low trade after a week of big trade before). Money flow is heading lower even as BCR rebounded, an indication of its weakness. Looking for BCR to turn lower from here and continue the selling. A move to the target lands a 38%ish gain.
Volume: 721.875K Avg Volume: 880.706K
BUY POINT: $78.88 Volume=1M Target=$73.75 Stop=$82.21
POSITION: BCR XP - Dec. $80p (-41 delta)
http://www.investmenthouse.com/ci/bcr.html

Play Date: 10/21/2008
GWR (Genesee & Wyoming--$28.73; -0.16; optionable): Railroads
http://biz.yahoo.com/p/g/gwr.html
EARNINGS: 11-3-08
STATUS: Put. Rails were one of the groups that hung on longer than most, but they cracked big time in late September and early October. After that plunge GWR found some support at the January 2008 low and bounced, but it only made it back to the 10 day EMA (29.08) on mostly lower and lower volume. Showed a doji Tuesday at the 10 day on the lowest volume yet. It is either going to try a modest bounce higher or make another major break lower. Anticipating the latter, so if it rolls over we move in for the ride lower. A move to the target lands a 41%ish gain.
Volume: 276.485K Avg Volume: 510.068K
BUY POINT: $28.38 Volume=635K Target=$24.85 Stop=$29.94
POSITION: GWR XF - Dec. $30p (-49 delta)
http://www.investmenthouse.com/ci/gwr.html

Good Investing!
Jon L. Johnson and your IH Alerts Team

All of the foregoing is commentary for informational purposes only. All statements and expressions are the opinion of Online Investment Services, LP. or its paid consultants and are not meant to be a solicitation or recommendation to buy, sell, or hold securities. We are not licensed or registered in the securities industry. The information presented herein and on our related web site has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. The security portfolio of Partners in Online Investment Services, LP. or its paid consultants may, in some instances, include securities mentioned herein and on our web site. Estimates, assumptions and other forward-looking information are subject to the limits of forecasting. Actual future developments may differ materially due to many factors. Good Investing!

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