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Daily Newsletter, Wednesday, 09/07/2005

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Table of Contents

  1. Market Wrap
  2. New Plays
  3. In Play Updates and Reviews

Market Wrap

Market Wrap

New Plays

Most Recent Plays

New Plays
Long Plays
Short Plays
DOW None
RDN  

New Long Plays

Dow Chemical - DOW - close: 44.60 change: +1.41 stop: 42.79

Company Description:
Dow is a leader in science and technology, providing innovative chemical, plastic and agricultural products and services to many essential consumer markets. With annual sales of $40 billion, Dow serves customers in 175 countries and a wide range of markets that are vital to human progress: food, transportation, health and medicine, personal and home care, and building and construction, among others. Committed to the principles of sustainable development, Dow and its 43,000 employees seek to balance economic, environmental and social responsibilities. Union Carbide Corporation is a wholly owned subsidiary of The Dow Chemical Company. (source: company press release or website)

Why We Like It:
Rising crude oil prices have put the squeeze on Dow since the company makes both chemicals and plastics, which require various oil and petroleum ingredients. Plus, the recent hurricane Katrina has disrupted some production capabilities and at least one analyst firm has reduced their earnings estimates on Dow and the rest of the chemical sector. In spite of the bad news the action today in shares of DOW suggest the worst may be behind it at least short-term. Falling crude oil prices certainly help matters and shares of DOW are bouncing from relatively strong support in the $43.00 region. Normally we would not want to chase a 3.2% move in shares of DOW but we may not have an alternative. If you're the patient type then wait for a dip back toward $44.00 or even $43.75 as a new bullish entry point. We're going to suggest plays right here. Our four-week target is the $47.75-48.00 level.

Picked on September 07 at $44.60
Change since picked: + 0.00
Earnings Date 10/27/05 (unconfirmed)
Average Daily Volume: 4.1 million

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Radian Group - RDN - close: 51.10 chg: +0.67 stop: 49.99

Company Description:
Radian Guaranty Inc. is the mortgage insurance subsidiary of Radian Group Inc., a global credit enhancement company headquartered in Philadelphia. Radian Guaranty provides risk management products and services to mortgage lenders nationwide; these services increase opportunities for people to buy homes with little or no down payment, protect lenders from default-related losses on residential first mortgages and facilitate the sale of low-down payment mortgages in the secondary market. (source: company press release or website)

Why We Like It:
Shares of RDN got a bit of a bounce today after Standard & Poors said that RDN was one of four municipal bond insurers that faces less risk from damage done by hurricane Katrina. The rebound in shares of RDN also happens to come just as the stock is testing support near its simple 50-dma, psychological support near $50.00 and its 38.2% Fibonacci retracement level (see chart). This looks like a good spot to enter short-term bullish positions. We'll limit our risk with a stop loss at $49.99 under support. Our target is the $54.00-54.25 range since RDN has significant resistance in the $54.50-55.00 region.

Picked on September 07 at $51.10
Change since picked: + 0.00
Earnings Date 10/19/05 (unconfirmed)
Average Daily Volume: 518 thousand
 

New Short Plays

None today.
 

Play Updates

Updates On Latest Picks

Long Play Updates

Alexander & Baldwin - ALEX - cls: 50.80 chg: -0.50 stop: 49.90*new

ALEX's breakout from late August has completely lost momentum. Shares dipped to its simple 50-dma this morning and managed a very meager bounce. The action on the intraday chart does not look healthy and we're expecting ALEX to test support at the $50.00 level soon. More conservative traders may want to exit early if ALEX trades under the $50.50 mark. We are raising our stop loss to $49.90.

Picked on August 31 at $52.41
Change since picked: - 1.61
Earnings Date 07/27/05 (confirmed)
Average Daily Volume: 310 thousand

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Ryerson Tull - RT - close: 21.19 change: +0.29 stop: 19.49*new*

RT gapped higher this morning but spent the rest of the session in a very tight range. The overall trend remains bullish but any stall in its upward momentum might suggest a retest of support near $20.00 in the intermediate future. We are raising the stop loss to $19.49. Our target is the $23.50-24.00 range.

Picked on August 31 at $20.54
Change since picked: + 0.65
Earnings Date 07/28/05 (confirmed)
Average Daily Volume: 486 thousand

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Smithfield Foods - SFD - close: 28.00 chg: -0.05 stop: 26.85

There is virtually no change in SFD. The stock continues to consolidate under technical resistance at its 100-dma and exponential 200-dma near $28.25.

Picked on August 25 at $27.61
Change since picked: + 0.39
Earnings Date 08/25/05 (confirmed)
Average Daily Volume: 825 thousand
 

Short Play Updates

Anheuser Busch - BUD - cls: 45.09 chg: -0.18 stop: 46.25

BUD hit some profit taking this morning but there were bulls there to buy this dip. We suspect that BUD is going to make a run towards resistance near $46.00 and its simple 100-dma. We're not suggesting new positions at this time.

Picked on July 28 at $44.77
Change since picked: + 0.32
Earnings Date 07/27/05 (confirmed)
Average Daily Volume: 2.3 million

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Intl Game Tech. - IGT - cls: 27.33 chg: +0.13 stop: 28.01

Shares of Shuffle Master (SHFL) were up noticeably (+17%) following some positive earnings guidance and that gave the casino-related stocks a very positive bias. Shares of IGT only managed a 13-cent gain and remains under resistance but the overall environment has us feeling cautious.

Picked on July 21 at $27.21
Change since picked: + 0.12
Earnings Date 07/21/05 (confirmed)
Average Daily Volume: 2.3 million

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Juniper Networks - JNPR - cls: 23.80 chg: +0.45 stop: 24.01

Shares of CSCO continued to rally following yesterday's upgrade and the whole networking sector turned in a very strong gain with the NWX index up 2.4%. JNPR paced the move with a 1.9% rally but stalled under resistance at the $24.00 level. We are not suggesting new plays at this time although more aggressive traders might consider shorting JNPR with a failed rally under $24.00.

Picked on July 21 at $23.90
Change since picked: - 0.10
Earnings Date 07/19/05 (confirmed)
Average Daily Volume: 7.5 million

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Royal Caribbean - RCL - cls: 42.45 chg: +0.15 stop: 45.01

RCL continues to under perform the market and its rival CCL. It is interesting to note that volume is rising. The action in RCL is a very tight tug-of-war between the bulls and bears as RCL oscillates between $42 and $43. We are lowering our stop loss to $44.11. Our target is the $41.25-41.00.

Picked on July 27 at $45.50
Change since picked: - 3.05
Earnings Date 07/27/05 (confirmed)
Average Daily Volume: 1.3 million

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Wal-Mart - WMT - close: 45.86 change: +0.17 stop: 47.01

There is no change from our previous update on WMT. We continue to look for the stock to bounce into the $46.00-46.50 range. We would not suggest new plays until we see a failed rally under $47.00. Right now WMT's technicals are starting to turn positive because the stock is so oversold. In the news WMT's CEO told Wall Street that the company plans to be very competitive with steep discounts to lure in customers during the holiday shopping season this year.

Picked on August 24 at $45.95
Change since picked: - 0.09
Earnings Date 08/16/05 (confirmed)
Average Daily Volume: 10.2 million

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Yellow Roadway - YELL - close: 46.56 chg: -0.05 stop: 50.01

There is no change from our previous update on YELL. The stock continues to look weak. YELL actually looks oversold but there has not been much success with the recent oversold bounce. We remain bearish with the stock under $48.00.

Picked on September 04 at $46.88
Change since picked: - 0.32
Earnings Date 10/27/05 (unconfirmed)
Average Daily Volume: 1.2 million

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Yahoo! Inc. - YHOO - close: 34.06 change: +0.38 stop: 34.81

This is an important test for shares of YHOO. The stock rallied higher following a surge in the Internet sector today. YHOO hit an intraday high of $34.25 before turning lower this afternoon. This looks like a failed rally under its simple 50-dma and its exponential 200-dma. However, before readers consider new bearish positions we want to see some confirmation that YHOO will indeed turn lower. Wait for a decline back under $33.30 (today's low) or even $33.00 before initiating new shorts.

Picked on August 30 at $33.18
Change since picked: + 0.88
Earnings Date 10/18/05 (unconfirmed)
Average Daily Volume: 17.1 million
 

Closed Long Plays

None
 

Closed Short Plays

Today's Newsletter Notes: All plays and content by the Option Investor staff.

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Option Investor Inc is neither a registered Investment Advisor nor a Broker/Dealer. Readers are advised that all information is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor is it to be construed as a recommendation to buy, hold or sell (short or otherwise) any security. All opinions, analyses and information included herein are based on sources believed to be reliable and written in good faith, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. In addition, we do not necessarily update such opinions, analysis or information. Owners, employees and writers may have long or short positions in the securities that are discussed.

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