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AAPL XMSR NONE

New Calls

Apple - AAPL - close: 75.00 change: +2.97 stop: 69.99

Company Description:
Apple ignited the personal computer revolution in the 1970s with the Apple II and reinvented the personal computer in the 1980s with the Macintosh. Today, Apple continues to lead the industry in innovation with its award-winning desktop and notebook computers, OS X operating system, and iLife and professional applications. Apple is also spearheading the digital music revolution with its iPod portable music players and iTunes online music store. (source: company press release or website)

Why We Like It:
We have been watching AAPL ever since its earnings report. The company pre-announced strong earnings in early January and the news sent shares soaring higher. The actual earnings report was a bit anticlimactic especially with a lackluster earnings guidance for the second quarter. We've been watching to see if and where investors would step in to buy the dip. It looks like bulls are defending support near the $70.00 level. Today's rebound produced a bullish engulfing candlestick pattern (interpreted as a bullish reversal) on volume way above the daily average. We see this as a short-term, very aggressive and speculative entry point, especially given the bearish P&F chart and bearish technicals on the weekly chart. We're suggesting bullish positions here with a target in the $84.00-85.00 range. More conservative traders might want to wait for more confirmation and look for a move over today's high (76.60) or the 10-dma (76.95) before buying calls. We'll put our stop loss under support near $70.00. Our time frame is six-to-eight weeks.

Suggested Options:
We are suggesting the March calls. As with all of our new call or put plays the options listed are for reference. You the individual trader should decide which month and which strike best suits your trading style and risk.

BUY CALL MAR 70 QAA-CN open interest=1628 current ask $7.90
BUY CALL MAR 75 QAA-CO open interest=4051 current ask $5.00
BUY CALL MAR 80 QAA-CP open interest=12900 current ask $2.90

Picked on January 30 at $ 75.00
Change since picked: + 0.00
Earnings Date 01/18/06 (confirmed)
Average Daily Volume = 27.1 million

New Puts

XM Sat.Radio - XMSR - close: 26.43 chg: -1.04 stop: 28.51

Company Description:
XM is America's number one satellite radio service with more than 6 million subscribers. Broadcasting live daily from studios in Washington, DC, New York City, the Country Music Hall of Fame in Nashville, Toronto and Montreal, XM's 2006 lineup includes 160 digital channels of choice from coast to coast: the most commercial-free music channels, plus premier sports, talk, comedy, children's and entertainment programming; and 21 channels of the most advanced traffic and weather information. (source: company press release or website)

Why We Like It:
After months of consolidating sideways with a bearish trend of lower highs it looks like XMSR is finally breaking down. The stock has seen a sharp rise in volume lately and today's 3.7% decline was fueled by extremely strong volume, which is of course very bearish. The stock gapped down this morning and then rallied just enough to fill the morning gap before heading lower again. More conservative traders may want to wait for XMSR to breakdown below its April 2005 lows near $26.00 before initiating positions. We're going to target a decline into the $21.00-20.00 range and we'll start with a stop loss at $28.51. We do not want to hold over the (unconfirmed) February 9th earnings report making this a short-term play. FYI: the P&F chart points to a $19.00 target.

Suggested Options:
We only have a few days so we're suggesting the February puts.

BUY PUT FEB 30.00 QSY-NF open interest=1310 current ask $3.80
BUY PUT FEB 27.50 QSY-NY open interest=3645 current ask $1.70
BUY PUT FEB 25.00 QSY-NE open interest=5841 current ask $0.60
BUY PUT FEB 22.50 QSY-NX open interest= 687 current ask $0.25

Picked on January 30 at $ 26.43
Change since picked: + 0.00
Earnings Date 02/09/06 (unconfirmed)
Average Daily Volume = 5.0 million

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