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New Calls

Ipsco Inc. - IPS - close: 82.64 change: +1.84 stop: 79.99

Company Description:
IPS operates steel mills at three locations and pipe mills at six locations in the United States and Canada. As a low cost North American steel producer, IPSCO has a combined annual steel making capacity of 3,500,000 tons. The Company's tubular facilities produce a wide range of tubular products including line pipe, oil and gas well casing and tubing, standard pipe and hollow structurals. Steel can also be further processed at IPSCO's five temper leveling and coil processing facilities. (source: company press release or website)

Why We Like It:
We're going to add another steel stock to the play list as a bullish candidate. Shares of IPS have been winners for the bulls this past year and the stock is trading near its highs. The sector has been ticking higher as investors speculate on further consolidation in the industry. Recent M&A activity certainly seems to confirm the idea. On the other hand IPS does look a bit extended and overbought. We certainly would not make any long-term investments here. This is purely a short-term (four-week) trade. We think that IPS could try and rally toward $90.00 by its earnings report in late January. The recent consolidation appears to be nearing an end and today's bounce from the $80 region looks like a new bullish entry point. However, instead of launching new positions here we want to use a trigger. The recent high was $83.50. We'll suggest a trigger to buy calls at $83.55. If triggered we'll target a run into the $89.00-90.00 range. We do not want to hold over the earnings report.

Suggested Options:
We are suggesting the February calls because we suggest holding any bullish position up to the company's late January earnings report.

BUY CALL FEB 80 IPS-BP open interest= 16 current ask $6.70
BUY CALL FEB 85 IPS-BQ open interest= 88 current ask $4.20

Picked on December xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 01/24/06 (unconfirmed)
Average Daily Volume = 396 thousand

New Puts

Stryker Corp. - SYK - close: 45.29 chg: +0.07 stop: 46.51

Company Description:
Stryker Corporation is one of the world's leading medical device companies with the most broadly-based range of products in orthopaedics and a significant presence in other medical specialties. The Company's products include implants that are used in joint replacement, trauma, craniomaxillofacial and spine surgeries; orthobiologics; operating room and interventional pain products; surgical navigation, endoscopic, communications and digital imaging systems; as well as patient handling and emergency medical equipment. In addition, Stryker provides outpatient physical therapy services in the United States. (source: company press release or website)

Why We Like It:
Medical device stocks, for the most part, have produced a pretty good bounce from their lows in October and November this past year. The bad news for bulls in SYK is that it looks like the rally is ending. Shares of SYK failed to breakout over its 200-dma in mid December. Now the stock is barely holding on to support near the bottom of its rising channel. A breakdown under round-number support near $45.00 would be a technical sell signal. The P&F chart already points to a $23.00 target. Plus, the MACD indicator on its daily chart in addition to some of its other technical oscillators are flashing sell signals. Aggressive traders may want to buy puts on a move under $44.90. We're going to suggest a trigger to buy puts at $44.29 under its simple 50-dma. If triggered we'll target a decline into the $40.25-40.00 range, near its October lows. We do not want to hold over the January earnings report. That gives us about three weeks, maybe less.

Suggested Options:
We are suggesting the February puts.

BUY PUT FEB 45 SYK-NI open interest=385 current ask $1.75
BUY PUT FEB 40 SYK-NH open interest=126 current ask $0.40

Picked on December xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 01/17/06 (unconfirmed)
Average Daily Volume = 2.1 million

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