Option Investor

Daily Newsletter, Saturday, 03/25/2006

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Table of Contents

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

Market Wrap

Google Bounce, Housing Dip

Friday's opening bounce was due in part from news that Google was finally going to be added to the S&P. The opening bounce on Google sprinted to $370 and a +28 point gain. This powered the Nasdaq and NDX to about a +8 point gain at the opening bell. The news that Alcatel could be in a deal to buy Lucent powered additional buying as talks of consolidation in the telecom and networking sectors added fuel to the Nasdaq bounce. The NDX sprinted +17 points higher and the Nasdaq Compx +15 before the first hour of trading was over. Shorts were forced to cover once again and the downtrend that formed on Thursday was temporarily reversed.

Dow Chart - 15 min

Nasdaq Chart - 240 min

S&P Chart - 240 min

The Google news may have been instrumental in the Nasdaq jump but that is only a temporary blip. Economic news out Friday has the potential to produce longer-term market pressures. We saw on Thursday that existing home sales spiked +5.5% and traders cheered. Market analysts were speculating that the housing bubble was not going to burst after all. Yes, a rebound in the housing market may push the Fed to an additional hike but the economy was ok. Are they right or wrong? On Friday the new home sales numbers were released and new home sales fell -10% in February and -13% year over year. This was the fourth consecutive month of declines and inventory for sale rose to 548,000 units or 6.3 months at the current sales rate. The drop in new home sales was the largest drop since 1997 while the inventory of new homes for sale reached levels not seen since Jan-1996.

Now there are probably a few readers thinking what the heck? Existing home sales are up +5.5% while new home sales are down -10.5%. How can that be? Isn't that a contradiction of facts? The answer is simple. The housing bubble has been a hot topic for months. The average homeowner has been reading the news and thinking it was time to bail to escape from the mountain of debt they have accumulated in their home equity ATM. Consumers have folded their credit card debt, new cars and loan consolidation programs into their tax deductible home mortgage for several years. The 125% loan to value programs even seduced many homeowners to borrow money against their homes to raise investment cash. After all homes were going up at record rates. Many homeowners had borrowed against their equity to buy second homes or homes to fix and flip. You can't turn on cable TV without seeing dozens of shows that are based on the escalation in home prices over the last five years. Design to Sell, Fix and Flip, Sell That House, etc. Fear that this bubble was going to burst and leave homeowners holding the bag sent consumers to their closest realtor. Buyers watching house prices rise for years were waiting to buy the dip.


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The answer to the new home/existing home headline diversion comes from the timing of the transactions. Existing home sales are counted when they close. The +5.5% increase in existing home sales in February were the result of decisions made at least 90-120 days ago or approximately October/November. Homeowners made the decision to sell, slapped on a new coat of paint and cleaned out the garage prior to listing the property. Once the spruce up was over the homes were listed for sale and the process began. The traditional December sales lull due to holiday preparations put home shopping off until January. Competition for available buyers caused a downtick in asking prices as sellers maneuvered into a favorable position in the market. Buyers hoping for a dip saw these "bargains" appear and took the plunge. Contracts were signed in the Jan timeframe and the brain numbing appraisal, inspection, loan, title search, closing process began. Finally in February those Q4 sales decisions began to close and the sales numbers soared.

For new home sales the numbers are counted when contracts are signed. Delivery and closing of those homes can take up to a year depending on options chosen and inventory available. The headline number for new home sales is the very beginning of the sales process and represents a longer-term decision for buyers. New homes are typically more expensive and require many more buying decisions than purchasing a preowned home. It is less impulsive and represents more of a longer-term plan rather than a sudden urge to move. New homes are also seldom bought for speculation. Homeowners looking to speculate in the real estate market will normally buy an additional preowned home to fix and flip or as a rental property and seldom buy a new one for that purpose.

I described the process behind the sharp jump in existing home sales for February and that the process likely began in October. If we dig a little deeper we see that October was also the second highest month of new home sales ever at 1.345 million units on an annual basis. July was the highest at 1.371 million. The decline began in August as inventory levels began to climb. The October spike was the result of a quick reaction by builders to step up marketing, price reductions and move in specials to try and flush inventory before winter arrived. Since the 1.345 million headline number in October sales have fallen to only 1.08 million in February. This represents a -20% drop in new home sales in only four months. In some areas of the country such as the west coast sales have declined more than -30%. That is the sharpest decline in nearly a quarter century. The average price of a new home has dropped to $230,400 and a four-month low. Obviously that is not a west coast price. Builders are also reporting a surge in cancellations, which began in the November/December timeframe.

To recap this analysis the key point should be clear. The media has been talking about the bursting housing bubble in some form for about six months. That stretches out a little longer if you take into account the talk about the bubble while it was still rising but little action was taken by consumers during that period. They adopted a wait and see attitude with their finger on the proverbial trigger. Once the signs of weakness began to confirm the talk, consumers sprang into action. That pivot point for consumers appears to have been October in both existing home sales and new home sales. Only the reporting was different due to the different time frames and methods for counting sales. In October consumers began to react to the bubble warnings and the process is continuing as prices fall and interest rates rise.

Is this the end of the world for housing? Definitely not! The rate of sales just prior to the decline was an all time high and simply not sustainable. Interest rates were at decade lows and the consumers were coming out of their 9/11 cocoons. It was simply a buying cycle where all the factors converged for strong gains. Nobody expects a housing disaster, just a return to normal conditions. I was talking about this with an office manager for Countrywide Financial this week. He had just been in a meeting where Countrywide had told them they expected the weakness to firm soon and resume its normal course. According to Countrywide the average age of baby boomer children is now 32. This is also the average age where families purchase the house where they will raise their family. Their 20 something years are behind them and early children are reaching school age. They spend more time actually planning for the future and taking into account things like extra bedrooms, home offices, larger garages, distance from good schools, etc. The home they buy at 32 is one they are likely to be in for many years. According to Countrywide the weakness is only temporary because there has been no reduction in the number of new households created each year. That number is currently 1.2 million and corresponds quite nicely with the recent historical average of new home sales at just over 1.2 million units per year. There will always be peaks and valleys and we are simply shaking off the excess from the 2005 peak.

Chart of Personal Bankruptcy filings. Source = economy.com

The wild card here is the over committed consumer. I discussed last Sunday the expected 2006 economic slowdown due to a rising consumer debt load. This rising debt and slowing economy scenario could keep the pressure on homebuilders and home sales for the rest of 2006. This is not a bad thing just a necessary workout period. All of these factors will be taken into account at next weeks FOMC meeting. They are fully aware of the factors depressing the housing sector and they welcome the pause as a needed cooling off period. However, they also don't want the cooling to become a new ice age in home buying with sales frozen to a standstill. The economy needs the housing sector to prosper in order for the economy to prosper. For the Fed it is all about stable growth rather than a constant boom/bust cycle.

The Fed will have to balance their desire to increase rates with the slowdown in housing. Determining what rate will push housing and the economy into a dive is a prime focus for the Fed. Also pressing their decision next week is the drop in Durable Goods announced on Friday. The headline number was actually a gain of +2.6% but nearly all the growth came from transportation equipment. However, core capital goods ex-aircraft actually fell -2.3%. Boeing said sales of civilian aircraft doubled in February over January levels. A drop in sales of aircraft in January was responsible for the -19.8% drop in the January durable goods number. There has been an underlying weakness in capital goods for the last two months and this could be signaling a lengthening slowdown in the economy that most had thought was already behind us. The durable goods report is always confusing but the Fed will doubtlessly take these numbers into account for their decision next week.

The markets seem to be undecided about the Fed direction despite several speeches and much analyst coverage of Fed expectations. The official outlook is still for a quarter point hike in March and again in May. However, the likelihood of another hike in June is slipping. In fact there is an increasing amount of rumors suggesting a potential Fed cut in Q1 of 2007. According to Fed watchers the slowing in housing, slight rise in jobless claims, rising gasoline prices and mixed economic signals suggests the Fed should stop soon and may have already gone too far.

The weak housing numbers gave the market an added boost at Friday's open because it puts that additional pressure on the Fed not to overshoot. The Fed language next week is going to be even more important than normal. I know we say that a lot but it always seems to be true. Over the last two weeks the market has stalled at the current highs and we can't seem to make any headway. We are seeing a lack of conviction by the bulls ahead of the Fed meeting and that should continue until the language is dissected. They will look for any clues that the Fed will quit in May or any clues that they will continue past May. The future of the market in the short term will depend on that language.

You should also note that the FOMC meeting next week has been increased to a two-day meeting from the originally scheduled one-day event. Bernanke must have decided he would need to add the additional time for his first meeting in order to get everyone on the same page and reevaluate all the prior data. I applaud his decision to take this step. Unfortunately it makes our Option Investor mouse pad calendars incorrect since this was scheduled to be only a one-day meeting when they were printed.

Offsetting the market's Fed fears is the approaching end of the quarter. Typically we see the indexes move higher as the quarter ends as retirement contributions begin to appear. We also see tape painting by the funds in order to show the greatest possible spin for those quarterly statements. This may not be readily apparent ahead of the Fed but I believe the dip buying over the last week could have been funds supplying support going into quarter end. Tape painting works best when the markets are near their recent resistance highs. If they were tanking the fund efforts would have less of an impact. With the month/quarter end on Friday and the Fed decision on Wednesday afternoon that leaves two days for a strong tape painting rally on some favorable language. I am not sure how funds will react if the language is not favorable. They still have money to put to work and statements to print. It should be interesting.

Since energy has been holding above support for the last month and many energy stocks are beginning to break out again it would make sense to me that funds will want to show how smart they are by owning energy stocks. Oil prices closed at $64.30 on Friday and moving very close to resistance at $65.50. You may remember that resistance on the expired April contract was just under $64. If you compare apples to apples that equates to the $65.50 level on the May contract. I could easily see that $65.50 level broken before next Friday as funds paint the tape. It is simpler to buy oil futures, which float all boats than buy a couple dozen individual stocks if you want your energy portfolio to shine. You can get in quickly and out quickly compared to stocks. With 7,000 hedge funds and more than 17,000 mutual funds it takes very little imagination to imagine this scenario playing out. If it does then we can also expect some undressing in the futures around April 4th.

Chart of May Crude Oil - Daily

Oil prices continue to be artificially inflated by geopolitical concerns but there is widespread agreement that $60 should remain the bottom on any correction. Italy's Eni SpA declared force majeure last week on a Nigerian oil pipeline that was attacked my militants. The 75,000 bpd pipeline is expected to be back in service sometime next week but it is just one more increment of production taken offline by the group. They claim they will stop the flow of one mbpd and the market is afraid they can do it. Nigeria produces the light sweet crude needed to make low emission gasoline. Nigeria is the 6th largest OPEC producer and the 4th largest supplier of oil to America.

Meanwhile Boliva is expected to nationalize its energy resources the first week of April. This move is being made by the socialist president Evo Morales. Three former presidents have been charged with violating the constitution after privatizing the energy sector more than a decade ago and entering into contracts with foreign oil companies. Those companies invested more than $3 billion into Boliva as a result of the contracts in an effort to modernize its energy production. I guess Bolivia feels there are no further investments coming and it is time to take back those modernized fields. Why is it that companies never learn that dealing with rapidly changing socialists governments tends to be detrimental to their financial health. Companies impacted include Spain's Repsol YPF, Petrobras, Total and Exxon among others. Venezuela just took back half of the exploration blocks foreign companies bid on and paid for in the 1990s. The oil minister said they had plenty of opportunities in the remaining half and basically if they didn't like it they could leave. Is it any wonder that exploration companies are gravitating towards Canada and the Gulf of Mexico where the rule of law applies and the only surprises are whether or not you hit oil or gas.

The next OPEC meeting is June 1st in Venezuela and the VZ oil minister has already said they will be pressing for a cut in production again. Heck, I would be afraid Chavez would take them all hostage and nominate himself as the new OPEC president.

Outside of Google and housing there was little news moving the markets on Friday. The next most popular topic was a potential takeover of Lucent by Alcatel to create a $33 billion telecom firm. The rumors of a Lucent takeover have been making the rounds for a couple years and many times Alcatel was the suggested suitor. Friday's news that it was nearly a done deal was so anticlimactic that both companies only gained about 25 cents each. Of course that was a +8.5% gain for Lucent. If the deal goes through the NYSE will have to find another stock to take the spot as the daily volume leader that Lucent normally fills. For instance, Lucent traded 531 million shares on Friday or 22.5% of the total volume on the NYSE. I am sure the market makers in Lucent will be sorry to see that cash cow leave for greener pastures.

Chart of Russell 2000 - Weekly

As the quarter draws to a close we have a chance for a record quarter on some indexes. The S&P close today represents a +4.3% gain for the quarter with several strong days likely ahead. The S&P has not posted a quarterly gain of more than 4.3% since late 2004. If Friday's close was the quarter end the Dow would have posted a +5.2% gain, Nasdaq +4.89% and NYSE Composite +6.4%. Those were blown away by the Russell-2000 small caps posting a +12% gain for the year and the Dow transports adding +9.5%. The last index on the list is the NDX, which posted a gain of only +2% mostly due to the addition of Google to the index in late December. Google was trading around $440 when it was added and it closed at $365 on Friday. This was +$24 more than Thursday's close due to the S&P addition. Without that S&P news the NDX would have barely edged over a +1.5% gain for the year. The NDX closed at 1688 the day before Google was added in December and closed at 1679 on Friday. The lackluster performance was not entirely Google's fault with INTC, EBAY, AMZN, YHOO and SNDK leading the miserable NDX performance.

Chart of Google - Weekly

Other than the NDX the remainder of the indexes are still pegged at or near their highs. The Russell closed at a new historic high on Friday at 753 while the Dow, SPX, Nasdaq and NYSE Composite are still struggling just a few points below their respective highs. I have to admit I thought this week would turn out a lot worse when I wrote about it on Tuesday night. Whatever produced that monster dip on Tuesday was forgotten after several Dow components announced positive news before the bell on Wednesday. Microsoft's announcement about the delay of the new Windows software knocked the Nasdaq for a loop but it was quickly forgotten and Friday's close brought us right back to Tuesday's levels before that event. Yes, the bulls are alive and buying every dip.

This suggests to me that the Fed decision language will be viewed through rose-colored glasses as long as the shock of a very negative report does not break the glass. Anything even remotely market friendly will be met with a strong finish for March. You only need to look at the homebuilder stocks on Friday for a sign. New home sales were down -10.5% and Centex gained +1.16, Lennar +.47, NVR +2.98. Only Beazer and Hovnanian could not quite make it back to positive territory and finished with fractional losses. The bad news bulls are alive and leading the charge. There are some high profile economic reports next Thursday and Friday but after the Fed meeting they may just be additional stepping-stones for the end of quarter buying.

The qualification for all of this is the same gains that I listed above. While I would not expect the funds to take profits before quarter end it is always possible. It also sets up the potential for some relatively strong undressing the following week. Funds may not want to hold over what could be seen as questionable earnings. If the end of quarter scenario does play out as expected I would plan on either exiting at month end or tightening stops on April 3rd. Yes, it is time to sell too soon!

New Plays

Most Recent Plays

New Plays
Long Plays
Short Plays

New Long Plays

Anglo-American - AAUK - close: 18.73 chg: +0.51 stop: 17.65

Company Description:
Anglo American is a global leader in mining and natural resources focused on adding value for shareholders, customers, employees and the communities in which the Group operates. The Group owns a well diversified range of high quality assets covering gold, platinum, diamonds, coal, ferrous and base metals, industrial minerals and paper and packaging, underpinned by considerable financial strength and technical expertise. Anglo's businesses are involved in an array of value adding products and services along a pipeline that extends from the initial mining or production of raw materials to, in some products, the ultimate consumer. (source: company press release or website)

Why We Like It:
A rally in gold on Friday and a strong bounce in the metal and mining stocks helped push shares of AAUK through resistance. The stock's 2.7% gain is a bullish breakout through resistance at $18.50, its 50-dma and its two-month trendline of lower highs. We are going to suggest bullish positions here although some traders may want to wait and look for a dip back toward $18.50. Our target will be the $19.85-20.00 range. If you look at the chart AAUK appears to have produced a big bull flag pattern and more aggressive traders may want to aim higher than $20.

Picked on March 26 at $18.73
Change since picked: + 0.00
Earnings Date 02/06/06 (confirmed)
Average Daily Volume: 1.6 million


Denbury Res. - DNR - close: 30.47 change: +1.48 stop: 27.95

Company Description:
Denbury Resources Inc. (www.denbury.com) is the largest oil and natural gas operator in Mississippi, owns the largest reserves of CO2 used for tertiary oil recovery east of the Mississippi River, and holds key operating acreage in the onshore Louisiana, Alabama, and Texas Barnett Shale areas. The Company increases the value of acquired properties in its core areas through a combination of exploitation drilling and proven engineering extraction practices. (source: company press release or website)

Why We Like It:
We are bullish on oil and the oil sectors. The price of crude is likely to stay high given the violence in Nigeria and the geopolitical concerns with Iran and Iraq. Meanwhile the OIX and OSX oil indices look ready to breakout higher. Leading the charge is DNR. The stock has broken out above resistance at $29.00 and the $30.00 levels on Friday. Volume was very strong on Friday's rally, which is also a bullish development. We would suggest long positions above $30.00. The P&F chart points to a $46 target. We are only targeting a move into the $33.50-34.00 range.

Picked on March 26 at $30.47
Change since picked: + 0.00
Earnings Date 05/02/06 (unconfirmed)
Average Daily Volume: 783 thousand


Glamis Gold - GLG - close: 29.36 chg: +1.44 stop: 26.74

Company Description:
Glamis Gold Ltd. is a premier intermediate gold producer with low-cost gold mines and development projects in Nevada, Mexico and Central America. Plans call for growth from 434,000 ounces of gold production in 2005 to over 700,000 ounces in 2007. The Company remains 100 percent unhedged. (source: company press release or website)

Why We Like It:
GLG is another bullish candidate in the metals, gold and mining sector. The price of gold has bounce strongly in the last couple of days and Friday saw gold price breakout over its 50-dma. GLG has produced a similar move with a bounce from its 100-dma and now Friday's breakout over its 50-dma and its trend of lower highs. The MACD indicator has turned positive as have more short-term technical oscillators. We are going to suggest bullish positions with GLG above the 50-dma (28.85) but more conservative traders may want to wait for a move over $30.00 before initiating new positions. Our target is the $32.00-32.50 range.

Picked on March 26 at $29.36
Change since picked: + 0.00
Earnings Date 05/15/06 (unconfirmed)
Average Daily Volume: 1.4 million


Oil States Intl. - OIS - close: 35.35 chg: +1.04 stop: 32.24

Company Description:
Oil States International, Inc. is a diversified oilfield services company. With locations around the world, Oil States is a leading manufacturer of products for deepwater production facilities and subsea pipelines, and a leading supplier of a broad range of services to the oil and gas industry, including production-related rental tools, work force accommodations and logistics, oil country tubular goods distribution and land drilling services. (source: company press release or website)

Why We Like It:
The OSX oil services index looks ready to breakout from its current consolidation. If that occurs then shares of OIS will probably build on its current rebound and potentially start a new leg higher that will challenge the January highs. OIS already appears to have broken out from its two-month consolidation lower. The stock has bounced twice near its 200-dma and technical indicators are turning bullish. The P&F chart may be bearish but it shows OIS currently rebounding from a test of support. Aggressive traders may want to open long positions now or look for a dip and bounce near $34. We are going to wait. We're suggesting a trigger to go long at $36.05. If triggered then we will target a rally into the $41-42 range. Please note that we do not want to hold over the late April earnings report.

Picked on March xx at $xx.xx
Change since picked: + 0.00
Earnings Date 04/20/06 (unconfirmed)
Average Daily Volume: 777 thousand


Trident Micro. - TRID - 30.50 chg: +1.55 stop: 27.49

Company Description:
Trident Microsystems, Inc., with headquarters in Sunnyvale, California, designs, develops and markets digital media integrated circuits for HDTV, LCD TV, PDP TV, DLP TV, and DCRT. Trident's products are sold to a network of OEMs, original design manufacturers and system integrators worldwide. (source: company press release or website)

Why We Like It:
The SOX semiconductor index, while still stuck in a four-week bearish trend, is showing signs of a potential bottom and a possible bullish reversal. If the SOX does rebound then TRID will have stronger sector support for its already bullish momentum. Shares of TRID have been channeling higher for months and the stock recently bounced near the bottom of its rising channel. Friday's big gain was fueled by very strong (bullish) volume and the stock broke out over resistance in the $29.50-30.00 range. The MACD has produced a new buy signal. We are going to suggest long positions with TRID over $29.00. Our target will be the $33.00-33.50 range. We do not want to hold over the mid April earnings report.

Picked on March 26 at $30.50
Change since picked: + 0.00
Earnings Date 04/19/06 (unconfirmed)
Average Daily Volume: 1.6 million

New Short Plays

None today.

Play Updates

Updates On Latest Picks

Long Play Updates

Amer. Campus Com. - ACC - cls: 26.57 chg: -0.28 stop: 25.99 *new*

This is not a good sign. ACC's bounce from the $26.00 level is already failing. The MACD's sell signal has become more pronounced and other technical indicators are looking bearish. We are not suggesting new plays and more conservative traders may want to seriously consider exiting early right here. We're raising our stop loss to $25.99. Should ACC surprise us and move higher we'll keep our target at $29.75.

Picked on March 15 at $27.11
Change since picked: - 0.54
Earnings Date 03/01/06 (confirmed)
Average Daily Volume: 70 thousand


IAC/InterActive - IACI - close: 30.31 chg: +0.10 stop: 29.95

After three weeks into IACI we are right back were we started at $30.31. That's not a good sign and more conservative traders should strongly consider exiting early right here, especially considering the bearish technical indicators. We are keeping the play open only because the stock has managed to bounce from the $30.00 mark two days in a row. We're not suggesting new longs at this time. If IACI manages to turn higher our target is the $32.90 mark.

Picked on March 03 at $30.31
Change since picked: - 0.00
Earnings Date 02/08/06 (confirmed)
Average Daily Volume: 2.1 million


Smurfit-Stone - SSCC - close: 13.38 chg: +0.22 stop: 12.99

We are encouraged by the action in SSCC. The stock has bounced twice this past week in the $13.05-13.10 range. Plus, volume on Friday's rebound made improvement. The volume was still below average but it was better than what we've seen lately for SSCC. More aggressive traders might want to consider new positions here. We would wait for a new move over $13.50 or $13.60 before initiating new longs. We are still targeting the $14.95 mark versus the P&F chart, which points to a $23.50 target.

Picked on March 19 at $13.58
Change since picked: - 0.20
Earnings Date 04/26/06 (unconfirmed)
Average Daily Volume: 3.1 million

Short Play Updates

Baidu.com - BIDU - close: 50.20 change: -0.40 stop: 52.11

Friday may have been a turning point for BIDU. The stock tried to breakout again over the $52.00 level and failed for the third try in a row. It's might also be noteworthy that the simple 50-dma is quickly descending and should act as overhead technical resistance, currently at 52.25. It also seems that BIDU produced a bearish engulfing candlestick pattern on Friday, which is normally interpreted as a bearish reversal. We would still not consider new positions just yet. Wait for a move under $49.00 or if you're more conservative, then under $48.00 before considering new shorts. Remember, that BIDU has relatively high short interest and the big risk here is a short squeeze! Our target is the $41.00-40.00 range.

Picked on March 09 at $ 48.32
Change since picked: + 1.88
Earnings Date 05/23/06 (unconfirmed)
Average Daily Volume = 788 thousand


Crown Castle Intl. - CCI - cls: 29.50 chg: +0.70 stop: 30.31

We mentioned that traders should be ready for an oversold bounce and CCI delivered on Friday with a rebound from the simple 100-dma. Volume came in above average on the bounce but the rally stalled under the $30.00 level and its simple 10-dma. This may prove to be a new bearish entry point for shorts. We're going to keep our stop loss at $30.31 for now but more conservative traders may want to place their stop closer to the $30.00 mark. Our target is the $26.25-26.00 range.

Picked on March 15 at $29.36
Change since picked: + 0.14
Earnings Date 05/02/06 (unconfirmed)
Average Daily Volume: 1.1 million


N.Y.Times - NYT - close: 25.39 change: -0.11 stop: 26.51*new*

NYT displayed more relative weakness on Friday. The stock spiked higher on Friday morning but just enough to fill the gap from Wednesday. The rally quickly faded and NYT closed with a 0.4% loss. It didn't help the bulls that rival newspaper company Knight Ridder (KRI) reported worse than expected revenue numbers on Thursday night. We remain bearish. Our target is the $24.00 level. We do not want to hold over the April 13th earnings report. Please note that we're adjusting our stop loss to 26.51.

Picked on March 22 at $25.55
Change since picked: - 0.16
Earnings Date 04/13/06 (confirmed)
Average Daily Volume: 1.1 million


Tribune Co. - TRB - close: 27.88 change: -0.19 stop: 30.26*new*

TRB extended its losses to six days in a row. Volume on the sell-off continues to come in above its daily average, which is bearish. News that fellow newspaper company Knight Ridder (KRI) reported weaker than expected revenue numbers undermined confidence in the sector. We think that it's time traders prepared for an oversold bounce, potentially up to the 10-dma (29.38) or maybe even the $30.00 level. We're going to adjust our stop loss to $30.26. We are not suggesting new shorts at this time. Our target is the $26.50-26.00 range. We do not want to hold over the April earnings report.

Picked on March 19 at $29.36
Change since picked: - 1.48
Earnings Date 04/13/06 (confirmed)
Average Daily Volume: 1.6 million

Closed Long Plays


Closed Short Plays


Today's Newsletter Notes: Market Wrap by Jim Brown and all other plays and content by the Option Investor staff.


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.

Readers are urged to consult with their own independent financial advisors with respect to any investment. All information contained in this report and website should be independently verified.

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Copyright Option Investor Inc, 2005
All rights reserved

Today's Newsletter Notes: Market Wrap by Jim Brown and all other plays and content by the Option Investor staff.


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.

Readers are urged to consult with their own independent financial advisors with respect to any investment. All information contained in this report and website should be independently verified.

To ensure you continue to receive email from Option Investor please add "support@optioninvestor.com"

Option Investor Inc
PO Box 630350
Littleton, CO 80163

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