Option Investor>
QCOM $374 +9.88 (-10.75)) Up almost $10 today on only half the
ADV - talk about a great consolidation! Yesterday we got a $355
buying opportunity, and today another one at $363. Support
continues to move up, while resistance continues at $390. As we
noted, QCOM is forming a nice ascending triangle, which usually
portends a breakout. That it's happening on unusually low volume
tells us that buyers are hesitant to jump in, but sellers are
even more reluctant to sell. QCOM has fallen off the active
traders' radar screens keeping the price "reasonable" for us to
make an entry. What will put it back on traders' radar, drive
the volume and increase the price? How about that shareholders
meeting on Dec 20th to vote an authorized share increase (the
catalyst that makes the 4:1 split possible), or an announcement
that QCOM has found a buyer for their handset business? Those
would do nicely, thank you. Get ready. Assuming the market
doesn't roll over on us in the next 2 weeks, this is shaping up
to be a great play. Some words of caution though: DEC strike
time premiums will eat us alive because they are still huge and
they expire in 2 weeks. Don't buy these and sit on em. If you
can stomach the price, look at and consider the JAN strikes so
you don't get the stuffing knocked out of your account from the
rapid time decay. For the intestinally fortified, selling ATM
puts could produce a turbo-charged return, but also carries
nitroglycerin-like risk.
JDSU $239.94 +10.38 (-26.06) What great entry points we saw
yesterday - $225 at the open with a $15 spike, all in the first
hour of trade, followed by four re-tests of the $222-$225 range
throughout the day. Today, $233 provided support, as JDSU (like
QCOM) consolidated in low end of the channel, exhibiting higher
lows. Though 40% of today's gain was a result of a gap up, Dain
Rauscher Wessels issued a Strong Buy rating with a price target
of $300, which helped a bunch. That follows yesterday's
reiteration by SoundView of their Buy rating. JDSU too is a
splitter (2:1) on Dec 30th, but it's a bit early for a serious
split run to begin. Even so, as the primary producer of passive
and active optical components used in NT, CSCO, LU, and TLAB's
optical components, it won't stay down for long. Nonetheless,
with any market correction, JDSU will likely move with it. There
is strong historical support at $225 (yesterday's 10 mln shares
plus confirms that), whereas channeling support is more like
$227-$230. Target shoot to your own level of risk tolerance.
With an almost $18 recovery since Tuesday, remember to protect
your profits with stop loss orders, or at least be disciplined
enough to get out and buy it back later if the trade heads south
on you. While a potentially great play, it still carries above
average risk. P.s. - don't be alarmed to read the Furukawa
Electric of Japan sold 1.8 mln shares of JDSU (a big chunk of
yesterday's volume); they did it to pare down some debt and still
have 36.2 mln shares left. |
