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New Plays
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HRB ELK
OSI SAFM

New Long Plays

HR Block - HRB - close: 24.09 change: +0.74 stop: 22.99

Company Description:
Celebrating its 50th anniversary in 2005, H&R Block is the world's largest tax services provider, having prepared more than 400 million tax returns since 1955. The sixth-largest retailer in the world, H&R Block has more than 12,000 locations serving taxpayers primarily in the United States, Canada and Australia. (source: company press release or website)

Why We Like It:
We like HRB as a bullish candidate because the stock appears to have bottomed. Not only has HRB bottomed it remains very oversold and due for an oversold bounce! We hesitate to add bullish candidates to the play list because so of the major stock averages look bearish. Yet shares of HRB have not shown much weakness over the last few days. Instead the stock has re-tested the $23.00 level as support. The move on Friday over the $24.00 level looks like a buyable breakout. We'll suggest longs with the stock over $24.00 but if you prefer to buy a dip there's a chance HRB could dip to $23.65-23.75 before moving higher. We'll aim for the simple 200-dma currently at $25.80. Our time frame is just less than four weeks. We plan to exit ahead of the company's earnings report.

Picked on October 23 at $24.09
Change since picked: + 0.00
Earnings Date 11/17/05 (confirmed)
Average Daily Volume: 2.1 million


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Outback Stkhse - OSI - close: 37.21 chg: +1.21 stop: 34.75

Company Description:
Outback Steakhouse, Inc. headquartered in Tampa, Florida was founded in 1988 by those who believe in hospitality, sharing, quality, being courageous and having fun! OSI is a company of restaurants that owns and operates Outback Steakhouse units throughout the U.S. as well as Carrabba's Italian Grill, Lee Roy Selmon's, Cheeseburger in Paradise, Bonefish Grill and Paul Lees Chinese Kitchen. The Company also operates through joint venture agreements and existing franchise agreements additional Outback restaurants (including International locations), Carrabba's Italian Grill, Fleming's Prime Steakhouse & Wine Bar. OSI also has a joint venture development relationship with Roy Yamaguchi, the chef and creator of Roy's Restaurants located in Hawaii, the U.S., and Japan. (source: company press release or website)

Why We Like It:
When Wall Street starts buying the bad news we try and take notice. Shares of OSI have been sinking for months and the recent earnings report was a miss. OSI missed estimates by eight cents. Yet the reaction to the earnings news has been positive. The stock is surging higher on very strong volume! Is this new buying interest because investors feel the worst is over? Or is this just short covering. Whatever it is the technical indicators have turned bullish and OSI has broken out from its bearish channel. If the stock does dip we would buy a bounce from the $36.00 level, which should be short-term support. Our target is the $39.90-40.00 range.

Picked on October 23 at $37.21
Change since picked: + 0.00
Earnings Date 10/20/05 (confirmed)
Average Daily Volume: 819 thousand
 

New Short Plays

Elkcorp - ELK - close: 31.14 chg: -1.07 stop: 32.75

Company Description:
ElkCorp, through its subsidiaries, manufactures Elk brand premium roofing and building products (over 90% of consolidated revenue) and provides technologically advanced products and services to other industries. Each of ElkCorp's principal operating subsidiaries is a leader within its particular market. (source: company press release or website)

Why We Like It:
Normally you would think that a company like ELK that makes roofing products would be doing great due to the huge need for roofing supplies after hurricanes Katrina and Rita. The company did say that business was strong due to the storms but there has been no follow through on the pre-hurricane rally in its stock price. Instead shares of ELK have now broken down from its two-week trading range. When the earnings news hit the wires on Friday the stock spiked for a brief time and then plummeted to a new relative low. This looks like a new entry point to short the stock right here but we want to see more confirmation. We'll suggest a trigger at $30.49 to open the play. More conservative traders may want to wait for ELK to trade under the $30.00 mark before considering shorts. Our target will be the $27.00 level.

Picked on October xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/21/05 (confirmed)
Average Daily Volume: 205 thousand


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Sanderson Farms - SAFM - close: 35.17 chg: -0.85 stop: 37.51

Company Description:
Sanderson Farms, Inc. is engaged in the production, processing, marketing and distribution of fresh and frozen chicken and other prepared food items. (source: company press release or website)

Why We Like It:
It's been a rough few months for shares of SAFM. The stock peaked back in July but has managed to stop the bleeding with a sideways consolidation over the last several weeks. That is until now. We suspect that Friday's big volume breakdown to a new relative low (and a new MACD sell signal) could be the beginning of the next leg lower. The company is already facing issues from higher feed costs and damages caused by the two major hurricanes this season. Now investors are starting to worry that SAFM could suffer steep losses if its flocks become infected with the dreaded avian flu that has crept from Asia to Europe. There was a recent Reuters article last week outlining why U.S. flocks are probably safe since most of the chicken and turkey we eat has virtually zero interaction with any migratory birds, which are believed to be the carriers of the virus. However, Wall Street has never been blamed for being logical and thus shares of SAFM look poised to sell-off further as we hear more and more about this Avian flu. We would suggest shorts with the stock under $35.50 (even $36.00). There is potential support near $34.00 but our target is the $32.00-31.00 range.

Picked on October 23 at $35.17
Change since picked: + 0.00
Earnings Date 12/07/05 (unconfirmed)
Average Daily Volume: 257 thousand
 

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