Altria Group (NYSE: MO) Trade Set-Up

Business Money
#1

Mother Teresa was asking for opinions in an earlier thread about Altria Group (NYSE:MO) so I’ve been periodically checking in on this stock. A few interesting developments have occurred on the MO chart which I believe to be bullish and a good time for an entry.

Looking at the chart below, the price is right at the $85 support set up at the end of Aug 06 (blue horizontal line). It also just bounced off the upward trendline (red). Furthermore, if you look at the small green circle at the bottom right of the chart, the Slow Stochastic indicator has just crossed upwards, indicating a potential buying opportunity. The bigger green circle above shows an interesting area of the MACD indicator. When the blue line crosses the red line, it’s a bullish signal. This hasn’t happened yet but there appears to be divergence of price and indicator. What this means is that MO has been trending downwards recently with lower lows but the MACD indicator (black part) shows higher lows in the same time frame. This implies a reversal to the upside will happen soon. Thus, I feel that it is likely the MACD will produce a bullish signal soon.

The last time MO was at $85 and trending upwards, it took a month to get to $90. I think it’ll do the same this time around – perhaps up to 6 weeks long.

The stock is too pricey for me but I am interested in buying a call option. They are availabe at a strike price of $85 (just in the money) or at $90 (rather far from the money). The next question is what month should I buy. March is obviously out of the question and given that I am giving this stock 6 weeks to hit its peak, that’s around the expiry date for the April options. Do I buy $85 April (@$2.40) or $85 June (@3.60). A more aggressive trade would be $2.40 and since I’m just opening up a small position, I think I’m leaning towards the April options.

Your opinions are welcome.

#2

Don’t forget that MO will split off Kraft very soon. How that will effect the stock price is beyond me.

I’ve owned MO for 5 years and am loving it. :smiley:

Good luck on your trade.

#3

D’oh! It wasn’t Mother Teresa, it was you jdsmith! My apologies. Anyway, it’s been a while since I’ve pulled the trigger on a options trade (covered calls aside) so this should be fun :slight_smile:

EDIT: Double D’oh! The Kraft distribution is on March 30, which will really screw up the April options. Hmm…I guess I’ll be sitting on the sidelines for this one until the dust settles.

#4

I used to own MO, but sold it after the thought of supporting smokers kill themselves made sleep less comfortable for me. In all conscience I couldn’t own this stock, even if it went to $1000 (and it could!) per share. Sorry to add a moral dimension to this, but I just couldn’t see how this company was helping people with cigarettes as a major part of their income. Now Kraft on the other hand, I would certainly look at that! It’s a great brand already.

Kenneth

#5

[quote=“KenTaiwan98”]I used to own MO, but sold it after the thought of supporting smokers kill themselves made sleep less comfortable for me. In all conscience I couldn’t own this stock, even if it went to $1000 (and it could!) per share. Sorry to add a moral dimension to this, but I just couldn’t see how this company was helping people with cigarettes as a major part of their income. Now Kraft on the other hand, I would certainly look at that! It’s a great brand already.

Kenneth[/quote]

No problemo, the moral dilemna is often herad in MO circles. For me, there is no better protected company out there. With State debt tied to tobacco bonds, MO has pretty much free reign to keep on smokin.

Kraft though, can’t be far from the sinstock tree. All the fat and salt and shit in their food. blech. Heart attack central there, and fattening up America to boot.

#6

Yep. Agreed. There is a liability issue there, too. But did anyone get withdrawal symptoms from not eating Philadelphia or Ritz? I’m not sure that the courts will buy that one.

Kenneth