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Long Play Updates

Advance Auto Parts - AAP - cls: 34.00 chg: +0.69 stop: 31.89

AAP continues to show relative strength. The stock rallied for a 2% gain and broke out over technical resistance at the 100-dma to close at a new three-month high. Our target remains the $35.80-36.00 range. We do not want to hold over the early November earnings report for AAP.

Picked on September 12 at $32.93
Change since picked: + 1.07
Earnings Date 11/02/06 (unconfirmed)
Average Daily Volume: 1.4 million

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Hovnanian - HOV - close: 30.20 change: +0.92 stop: 27.74

Our bullish play in HOV is now open. Homebuilders shrugged off more bad news (again) and the DJUSHB home construction index was the best performing sector index up 3.4%. The news today was actually on existing home sales. Inventories rose to a 7-month supply and existing home prices fell in August (y/o/y) for the first time in 11 years. That didn't stop investors from buying the group and volume on HOV's rally came in pretty strong. We were waiting for a breakout over resistance at $30.00 with a trigger to go long at $30.11. The play is open and our target is the $34.00-35.00 range. Our time frame is about six to eight weeks.

Picked on September 25 at $30.11
Change since picked: + 0.09
Earnings Date 09/06/06 (confirmed)
Average Daily Volume: 1.6 million

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Intl. Game Tech. - IGT - close: 39.92 chg: +0.68 stop: 38.95

It might be window dressing or it could just be IGT riding the market strength but shares added 1.7%. Unfortunately the rally failed to close over round-number resistance at the $40.00 level. We're suggesting that readers wait for a new move over $40.32 before opening positions. Our target is the $44.00-45.00 range. We do not want to hold over the early November earnings report. FYI: The P&F chart points to a $57 target.

Picked on September 17 at $40.26
Change since picked: - 0.34
Earnings Date 11/02/06 (unconfirmed)
Average Daily Volume: 2.2 million

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United Tech. - UTX - close: 63.23 chg: +0.93 stop: 61.99

The bounce in UTX (+1.49%) after testing support near $62 on Friday would normally look like a bullish entry point to go long. If your bias is bullish then consider opening plays here. We are somewhat skeptical of the bounce today and remain unconvinced. Our target is $66.00.

Picked on September 10 at $63.34
Change since picked: - 0.11
Earnings Date 10/17/06 (unconfirmed)
Average Daily Volume: 3.5 million

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WebEx Comm. - WEBX - close: 40.09 chg: +1.68 stop: 37.45*new*

Internet stocks performed pretty well on Monday with the INX Internet index adding 2%. Shares of WEBX out performed its peers and the NASDAQ with an impressive 4.3% gain on strong volume. Odds are good this is funds window dressing their portfolios with WEBX ahead of the quarter end this Friday. The move today is a bullish breakout over $40.00 and its recent trading range. By all accounts this strength and breakout looks like a new entry point to go long. WEBX is hitting new multi-year highs. However, we would be careful about opening new bullish positions at this time. Please note that we're raising our stop loss to $37.45. Our target remains the $42.50-44.00 range. The P&F chart is very positive with a bullish triangle breakout buy signal.

Picked on September 12 at $38.49
Change since picked: + 1.60
Earnings Date 10/25/06 (unconfirmed)
Average Daily Volume: 625 thousand
 

Short Play Updates

Charlotte Russe - CHIC - close: 26.32 chg: +0.55 stop: 27.05

Retail stocks performed well as funds loaded up with the end of quarter window dressing. Shares of CHIC managed a 2.1% bounce on strong volume. It is the volume that concerns us and the stock could see more window dressing buying pressure before the end of the week. Conservative traders may want to tighten their stops significantly or exit early to cut their losses now. We're not suggesting new positions. We do not want to hold over the mid October earnings report. FYI: The latest (August) data puts short interest at 6.9% of CHIC's 22.2 million-share float.

Picked on September 22 at $25.75
Change since picked: + 0.57
Earnings Date 10/19/06 (unconfirmed)
Average Daily Volume: 497 thousand

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Commercial Metals - CMC - close: 19.09 chg: -0.05 stop: 21.55

Bearish analyst comments and a couple of downgrades in the steel sector helped pull CMC lower this morning. The stock dipped to $18.40 before bouncing back. Volume was above average on the session. The move looks like a short-term bullish reversal and we would expect the bounce to continue toward the $20 level. Broken support at $20.00 should now act as new resistance. A failed rally under $20 could be used as a new entry point for shorts. Our target is the $17.50-17.00 range. We do not want to hold over the late October earnings report.

Picked on September 21 at $19.90
Change since picked: - 0.81
Earnings Date 10/24/06 (unconfirmed)
Average Daily Volume: 1.5 million

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CSX Corp. - CSX - close: 30.64 change: +0.07 stop: 31.26

Transport stocks under performed the market on Monday but the pattern in most of them was wide spread. The group saw a dip this morning only to rebound higher into the afternoon. CSX broke support at $30.00 and its 200-dma on an intraday basis but reversed higher at $29.81. Thankfully that was not low enough to hit our trigger at $29.75 so we're still sitting on the sidelines. Today's move looks like a short-term bullish reversal and we'd expect a bounce - probably into the $31.00-31.50 region. If triggered at 29.75 our target is the $27.00-26.00 range. We do not want to hold over the mid October earnings report so that gives us about four weeks.

Picked on September xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/17/06 (confirmed)
Average Daily Volume: 4.5 million

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Hormel Foods - HRL - close: 36.40 chg: +0.38 stop: 36.51

If you exit now you might be able to pay for the commissions. The market's rally helped fuel a 1% gain in HRL on Monday. The move actually looks like a bullish engulfing candlestick pattern, which is typically interpreted as a bullish reversal. Honestly we're a little surprised that the rebound in HRL stalled out at $36.50 and failed to hit our stop loss at $36.51. We suggest that readers strongly consider exiting early right here.

Picked on August 31 at $36.65
Change since picked: - 0.25
Earnings Date 11/23/06 (unconfirmed)
Average Daily Volume: 331 thousand

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Ladish - LDSH - close: 29.68 change: -0.25 stop: 31.01

Correction! Over the weekend we added LDSH as a new short candidate with a trigger to open plays at $29.65. That was a typo. It was supposed to be a trigger at $28.65. If you go back and read Sunday's newsletter you'll see that we said, "We're suggesting a trigger to short the stock at $29.65, which is under last week's lows." Last week's low was $28.70. We're going to open the play anyway but we are NOT suggesting new positions until LDSH trades at or below $28.65. Our target is the $25.50-25.00 range. We do not want to hold over the late October earnings report. FYI: The latest (August) data puts short interest at 6.5% of LDSH's 14 million-share float. That's not a very big float and might be a reason for concern.

Picked on September 25 at $29.65
Change since picked: + 0.00
Earnings Date 10/24/06 (unconfirmed)
Average Daily Volume: 270 thousand

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Linear Tech. - LLTC - close: 32.02 chg: +0.05 stop: 32.66

Warning! The action in LLTC today looks like a short-term bullish reversal. The stock dipped to an intraday low of $31.05. Our trigger to short the stock was at $31.79. The market rebound led by strength in the semiconductors helped pull LLTC back into the green. We are not suggesting new plays at this time and more conservative traders, if you opened positions this morning, may want to exit immediately to cut your losses. We do not want to hold over the mid October earnings report. FYI: The latest (August) data puts short interest at 4% of LLTC's 300 million-share float.

Picked on September 25 at $31.79
Change since picked: + 0.23
Earnings Date 10/17/06 (unconfirmed)
Average Daily Volume: 4.0 million

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NTL Inc. - NTLI - close: 25.15 chg: +0.17 stop: 26.05

NTLI traded in a 60-cent range all day and the afternoon bounce had actually begun to fade lower into the close. This relative weakness is a good sign but we'd probably wait for a move under $24.80 or $24.75 before opening new short positions. Our target is the $21.00-20.00 range. More conservative traders may want to exit near $23.00. We do not want to hold over the early November earnings report.

Picked on September 21 at $25.01
Change since picked: + 0.14
Earnings Date 11/03/06 (unconfirmed)
Average Daily Volume: 2.5 million

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Reliance Steel - RS - close: 29.22 change: -0.13 stop: 31.01

This morning before the opening bell an analyst firm downgraded NUE and X and issued concerns over rising inventories in the steel industry. Shares of RS gapped open lower in sympathy but the stock bounced back like much of the market today. Watch for a failed rally near $30.00 as a potential entry point to open shorts. Our short-term target is the $26.50-26.00 range.

Picked on September 24 at $29.35
Change since picked: - 0.13
Earnings Date 10/19/06 (unconfirmed)
Average Daily Volume: 1.1 million

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Washington Group Intl. - WGII - cls: 57.27 chg: +0.76 stop: 57.25

There is no change from our weekend update. We are still waiting on the sidelines for WGII to breakdown under the 200-dma. We might drop WGII as a bearish candidate if shares close over $58.00. We're suggesting a trigger to short the stock at $55.45. You may want to wait for a decline under $55.00. Our target is the $51.00-50.00 range. We do not want to hold over the November earnings report.

Picked on September xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 11/06/06 (unconfirmed)
Average Daily Volume: 242 thousand
 

Closed Long Plays

None
 

Closed Short Plays

Tessera Tech. - TSRA - close: 33.60 chg: +1.70 stop: 32.81

We have been stopped out of TSRA at $32.81. Shares were strong from the start this morning with a gap higher to open at $32.61. The rally lifted TSRA 5.3% to breakout above its bearish pattern of lower highs. Today's strength probably had a lot of short covering behind it. The breakout from the bearish pattern is very positive but TSRA still has significant long-term resistance in the $35.00-36.00 range.

Picked on September 19 at $30.95
Change since picked: + 2.65
Earnings Date 10/31/06 (unconfirmed)
Average Daily Volume: 634 thousand
 

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