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New Calls

Foster Wheeler - FWLT - close: 36.78 chg: +0.80 stop: 35.49

Company Description:
Foster Wheeler Ltd. is a global company offering, through its subsidiaries, a broad range of engineering, procurement, construction, manufacturing, project development and management, research and plant operation services. Foster Wheeler serves the refining, upstream oil and gas, LNG and gas-to-liquids, petrochemical, chemicals, power, pharmaceuticals, biotechnology and healthcare industries. The corporation is based in Hamilton, Bermuda, and its operational headquarters are in Clinton, New Jersey, USA. (source: company press release or website)

Why We Like It:
Our bias for January may be growing more bearish but FWLT has shown enough relative strength over the last year that it warrants a closer look as a bullish candidate. The stock has been a consistent winners for the bulls over the last several months. The consolidation in October promptly rebounded higher after hitting the 38.2% Fibonacci retracement level. Currently the stock is stuck in a trading range between $35.50 and $38.00. If FWLT breaks out higher we want to catch it. We're suggesting a trigger to go long calls on the stock at $38.05. If triggered we'll target a run into the $42.00-42.50 range. Currently the P&F chart is very bullish with a $73 target.

Suggested Options:
We are going to suggest the February calls.

BUY CALL FEB 35 UFB-BG open interest=1594 current ask $3.40
BUY CALL FEB 40 UFB-BH open interest=2184 current ask $0.95

Picked on January xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 03/15/06 (unconfirmed)
Average Daily Volume = 598 thousand

New Puts

Netease.com - NTES - close: 56.16 chg: -0.64 stop: 58.01

Company Description:
NetEase.com, Inc. is a leading China-based Internet technology company that pioneered the development of applications, services and other technologies for the Internet in China. Our online communities and personalized premium services have established a large and stable user base for the NetEase websites which are operated by our affiliate. As of September 2005, the NetEase websites had more than 614 million average daily page views, making us one of the most popular destinations in China and on the World Wide Web. In particular, NetEase provides online game services to Internet users through the licensing or in-house development of massively multi-player online role-playing games, including Westward Journey Online II, Fantasy Westward Journey and Fly for Fun. (source: company press release or website)

Why We Like It:
If investor sentiment does sour on stocks in early 2006 one of the losers could be NTES. The stock was hammered in November after missing earnings estimates. More recently there have been analyst comments suggesting the stock is fairly valued here. What we see is a sideways consolidation with a bearish trend of lower highs. The P&F chart is bearish with a $34 target. We're going to suggest a trigger to buy puts on NTES at $54.95. If triggered we'll target a decline into the $50.25-50.00 range. We do not want to hold positions over the February earnings report.

Suggested Options:
We are suggesting the February puts.

BUY PUT FEB 60 NQG-NL open interest=1034 current ask $6.40
BUY PUT FEB 55 NQG-NK open interest=1982 current ask $3.50
BUY PUT FEB 50 NQG-NJ open interest= 355 current ask $1.55

Picked on January xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 02/21/06 (unconfirmed)
Average Daily Volume = 4.2 million


Scotts Miracle grow - SMG - cls: 45.24 change: -0.46 stop: 47.55

Company Description:
With more than $2.3 billion in worldwide sales and more than 6,000 associates, The Scotts Miracle-Gro Company, through its wholly-owned subsidiary, The Scotts Company LLC, is the world's largest marketer of branded consumer products for lawn and garden care, with products for professional horticulture as well. The Company's brands are the most recognized in the industry. In the U.S., the Company's Scotts, Miracle-Gro and Ortho brands are market-leading in their categories, as is the consumer Roundup brand, which is marketed in North America and most of Europe exclusively by Scotts and owned by Monsanto. The Company also owns Smith & Hawken, a leading brand of garden-inspired products that includes pottery, watering equipment, gardening tools, outdoor furniture and live goods. In Europe, the Company's brands include Weedol, Pathclear, Evergreen, Levington, Miracle- Gro, KB, Fertiligene and Substral. (source: company press release or website)

Why We Like It:
It looks like the bloom on shares SMG is about to fall off. The stock has been a momentum winner since the current run began back in late June. Yet this last Thursday the company guided lower for the first quarter. Investors reacted by sending the stock lower and SMG broke down below technical support at the 50-dma. The attempted bounce on Friday failed near the 50-dma and the $46 level. Now that the quarter is over and the need for window dressing fulfilled shares of SMG could see a new wave of selling in January. Technically the stock has produced new bearish sell signals on its weekly chart. We are going to suggest puts here at $45.24. More conservative traders may want to wait for a decline under $45.00 before opening positions. A failed rally under $47.00 could also work as a new bearish entry point. There is some support near $44.00 and the rising 100-dma (43.63) but we're going to target a decline toward support in the $41.50-41.25 range. We do not want to hold over the late January earnings report.

Suggested Options:
We are suggesting the February puts.

BUY PUT FEB 47.50 SMG-MW open interest= 42 current ask $2.65
BUY PUT FEB 45.00 SMG-MI open interest=309 current ask $1.00
BUY PUT FEB 42.50 SMG-MV open interest=630 current ask $0.35

Picked on January 01 at $ 45.24
Change since picked: + 0.00
Earnings Date 01/26/06 (unconfirmed)
Average Daily Volume = 354 thousand

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