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Electronic Arts - ERTS - close: 56.41 change: -1.88 stop: 60.01

Company Description:
Electronic Arts (EA), headquartered in Redwood City, California, is the world's leading interactive entertainment software company. Founded in 1982, the company develops, publishes, and distributes interactive software worldwide for videogame systems, personal computers and the Internet. Electronic Arts markets its products under four brand names: EA SPORTS(TM), EA(TM), EA SPORTS BIG(TM) and POGO(TM). In fiscal 2005, EA posted revenues of $3.1 billion and had 31 titles that sold more than one million copies. EA's homepage and online game site is www.ea.com. (source: company press release or website)

Why We Like It:
We would normally be bullish on ERTS due to its 800-pound gorilla status in the growing business of video games. Yet the technical picture is drastically deteriorating for the stock. Maybe it's another reaction to investors worried about the impact of rising fuel costs on consumers' discretionary income. What we do know is that the technical picture is bearish and its P&F chart has a perfect failed rally at resistance and a new sell signal now pointing toward the $52 level but this target will probably be adjusted lower. Today's high-volume breakdown under technical support at its simple 200-dma looks like an entry point to buy puts. Our target is the $51.00-50.00 range. More conservative traders might want to wait for confirmation with a decline under the 100-dma near 55.85. Others might prefer to see a failed rally under the $57.50 region as a new entry point.

Suggested Options:
We are suggesting the October puts.

BUY PUT OCT 60.00 EZQ-VL OI=1106 current ask $4.80
BUY PUT OCT 55.00 EZQ-VK OI= 102 current ask $2.05
BUY PUT OCT 50.00 EZQ-VJ OI= 143 current ask $0.65

Picked on August 30 at $ 56.41
Change since picked: + 0.00
Earnings Date 10/25/05 (unconfirmed)
Average Daily Volume = 3.7 million


Urban Outfitters - URBN - cls: 55.05 chg: -1.16 stop: 57.01

Company Description:
Urban Outfitters, Inc. is an innovative specialty retailer and wholesaler which offers a variety of lifestyle merchandise to highly defined customer niches through 82 Urban Outfitters stores in the United States, Canada, and Europe; an Urban Outfitters web site and catalog; 69 Anthropologie stores in the United States; an Anthropologie web site and catalog; and Free People, the Company's wholesale division, which sells its product to approximately 1,100 specialty stores, department stores and catalogs, as well as through 4 Free People stores and a web site. (source: company press release or website)

Why We Like It:
Another way to play the weakness in retailers is URBN. Analysts have not been too keen on the apparel industry this season and readers can see on URBN's chart that the short-term up trend has been broken. Longer-term the stock looks incredibly strong but we suspect that the current atmosphere of rising oil and fuel costs will continue to weigh on the retailers as a group. That could pull shares of URBN back toward stronger support at its 200-dma. Plus, the Point & Figure chart for URBN has already reversed into a sell signal now pointing to a $49 target. Our strategy is to use a trigger at $54.25. Currently URBN has found support near $54.50 twice this month and has additional support at the 100-dma (now at 54.50). If URBN breaks down we want to catch it and target the $50.25-50.00 range. The 50.00 level should be round-number, psychological support and the 200-dma (now at 49.23) will rise to bolster this area. Readers should know that URBN is due to split 2-for-1 on September 26th. While normally this might lend the stock some strength we believe the overall market weakness (with September traditionally being the worst month of the year) will prevail.

Suggested Options:
We are suggesting the October puts.

BUY PUT OCT 60.00 URQ-VL OI= 11 current ask $6.00
BUY PUT OCT 55.00 URQ-VK OI=119 current ask $2.80
BUY PUT OCT 50.00 URQ-VJ OI= 12 current ask $1.05

Picked on August xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 08/11/05 (confirmed)
Average Daily Volume = 1.1 million


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