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CYT PGR None
GILD    
X    

New Calls

Cytec Ind. - CYT - close: 46.47 chg: +0.87 stop: 44.99

Company Description:
Cytec Industries is a specialty chemicals and materials technology company with pro forma sales in 2004, including the Surface Specialties acquisition, of approximately $3.0 billion. Its growth strategies are based on developing technologically advanced customer solutions for global markets including: aerospace, coatings, mining, plastics and water treatment. (source: company press release or website)

Why We Like It:
CYT's business and profits were impacted by the hurricanes earlier this past fall since the company has operations in Louisiana and Texas. The company eventually had to lower earnings expectations. After the September sell-off shares of CYT appears to have put in a bottom in the $39-41 range. More recently the stock has been consolidating sideways above its 200-dma but under resistance near $46.60. It's probably not a coincidence that this resistance also lines up with its five-month trendline of lower highs. We want to try and catch a breakout over that trendline. Therefore we're suggesting a trigger at $47.01. If triggered we'll target a run toward the $50.00 level by its early February earnings report. The P&F chart for CYT points to a $65 target.

Suggested Options:
We are suggesting the February calls but we do not want to hold over the February earnings report.

BUY CALL FEB 40 CYT-BH open interest= 81 current ask $7.00
BUY CALL FEB 45 CYT-BI open interest= 89 current ask $2.85
BUY CALL FEB 50 CYT-BJ open interest=164 current ask $0.75

Picked on December xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 02/02/06 (unconfirmed)
Average Daily Volume = 333 thousand

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Gilead Sciences - GILD - close: 54.07 chg: +2.45 stop: 49.99

Company Description:
Gilead Sciences is a biopharmaceutical company that discovers, develops and commercializes innovative therapeutics in areas of unmet medical need. The company's mission is to advance the care of patients suffering from life-threatening diseases worldwide. Headquartered in Foster City, California, Gilead has operations in North America, Europe and Australia. (source: company press release or website)

Why We Like It:
If you like fundamentals then consider this a bird-flu play. If you're a technical trader than this looks close to a bull-flag breakout pattern. GILD actually invented Tamiflu and sold it to Roche. GILD still gets royalties on the drug so today's news that the U.S. has okayed Tamiflu as a potential treatment of birdflu in children is certainly bullish. The move in GILD (+4.7%) is a breakout above its four-week trendline of lower highs. Short-term technical oscillators are already starting to turn bullish and its MACD is nearing a new buy signal. We want to see more confirmation so we're suggesting a trigger to buy calls at $54.51. More conservative traders may want to wait for a move over $55.00 instead. Our four-week target is the $59.00-60.00 range. We do not want to hold over the January earnings report.

Suggested Options:
We are suggesting the February calls even though we plan to exit in January ahead of GILD's earnings report.

BUY CALL FEB 50 GDQ-BJ open interest=1696 current ask $5.80
BUY CALL FEB 55 GDQ-BK open interest=4061 current ask $2.75
BUY CALL FEB 60 GDQ-BL open interest=2406 current ask $1.10

Picked on December xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 01/17/06 (unconfirmed)
Average Daily Volume = 4.3 million

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United States Steel - X - close: 46.49 chg: +1.55 stop: 44.65

Company Description:
United States Steel Corporation headquartered in Pittsburgh, Pa., manufactures a wide variety of steel sheet, tubular and tin products; coke, and taconite pellets; and has a worldwide annual raw steel capability of 26.8 million net tons. (source: company press release or website)

Why We Like It:
The steel industry was mostly positive on Wednesday and shares of X are bouncing after testing support near the $45.00 level. It's probably not a coincidence that Tuesday's low was also a test of the 38.2% Fibonacci retracement level. Today's bounce was fueled by better than average volume and looks like a new bullish entry point. However, we want to see more follow through before opening new plays. A breakout over the 10-dma should work. We're suggesting a trigger at $47.05. If triggered we'll target a rise into the $52.00-52.50 range. We do not want to hold over the January earnings report.

Suggested Options:
We are suggesting the February calls even though we plan to exit in January ahead of X's earnings report.

BUY CALL FEB 40 X-BH open interest= 51 current ask $7.70
BUY CALL FEB 45 X-BI open interest=238 current ask $4.40
BUY CALL FEB 50 X-BJ open interest=489 current ask $2.25

Picked on December xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 01/24/06 (unconfirmed)
Average Daily Volume = 3.8 million
 

New Puts

Progressive Corp - PGR - cls: 118.90 chg: -0.72 stop: 121.25

Company Description:
The Progressive Group of Insurance Companies, in business since 1937, ranks third in the nation for auto insurance based on premiums written and provides drivers with competitive rates and 24/7, in-person and online service. (source: company press release or website)

Why We Like It:
It looks like the upward momentum in PGR has topped. Of course bears have probably been saying that for almost five years straight. The stock is a huge momentum candidate and the biggest risk for bears here is probably some end-of-quarter window dressing in the last two weeks of December. The recent pull back toward the 50-dma did not produce much of a bounce and we suspect that PGR may dip back toward its 100-dma under $110 before it continues much higher. This should be considered an aggressive play. We're going to suggest a trigger at 117.45 to open the play. If triggered we'll target a decline into the $110.50-110.00 range. We do not want to hold over the January earnings report.

Suggested Options:
We are suggesting the February puts so we can hold them right up to PGR's earnings report.

BUY PUT FEB 120 PGR-ND open interest=751 current ask $4.90
BUY PUT FEB 115 PGR-NC open interest=235 current ask $2.90

Picked on December xx at $ xx.xx <-- see Trigger
Change since picked: + 0.00
Earnings Date 01/19/06 (unconfirmed)
Average Daily Volume = 836 thousand
 

New Strangles

None today.
 

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