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None ABK None
  IBM  
  MTG  

New Calls

None today.
 

New Puts

Ambac Fincl. - ABK - close: 76.09 change: -0.60 stop: 78.05

Company Description:
Ambac Financial Group, Inc., headquartered in New York City, is a holding company whose affiliates provide financial guarantees and financial services to clients in both the public and private sectors around the world. Ambac's principal operating subsidiary, Ambac Assurance Corporation, a leading guarantor of public finance and structured finance obligations, has earned triple-A ratings, the highest ratings available from Moody's Investors Service, Inc., Standard & Poor's Ratings Services, Fitch, Inc. and Rating and Investment Information, Inc. (source: company press release or website)

Why We Like It:
The action in ABK looks pretty bearish. Short-term and weekly technicals are negative. The oversold bounce from its mid-January breakdown has failed twice under the $78 level. We believe the stock could trade into the $71.00-70.00 range before finding significant support. That's where the longer-term trendline from its weekly chart offers support. There is some short-term technical support at its exponential 200-dma and simple 100-dma near the $74 level so we do expect a bounce there. Our target is $71.00. Our time frame is four to six weeks, probably sooner.

Suggested Options:
We are suggesting the March puts.

BUY PUT MAR 80 ABK-OP open interest= 20 current ask $4.70
BUY PUT MAR 75 ABK-OO open interest=153 current ask $1.80

Picked on February 05 at $ 76.09
Change since picked: + 0.00
Earnings Date 01/25/06 (confirmed)
Average Daily Volume = 463 thousand

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Intl Bus. Mach. - IBM - close: 79.97 change: -1.26 stop: 82.05

Company Description:
IBM is the world's largest information technology company, with 80 years of leadership in helping businesses innovate. Drawing on resources from across IBM and IBM Business Partners, IBM offers a wide range of services, solutions and technologies that enable customers, large and small, to take full advantage of the new era of e-business. (source: company press release or website)

Why We Like It:
The GHA hardware sector index looks a bit overbought after a 25% run up from its late October lows. IBM looks ready to lead the group lower. Investors were not happy with IBM's latest earnings report and now the stock is breaking down under technical support at the 200-dma and round-number support at the $80.00 level. Volume came in more than 50% above its daily average on Friday's breakdown. We would consider put positions here. However, we would really like to see some confirmation. Therefore we are going to use a trigger at $79.49 to open the play. If IBM trades at $79.49 or lower then we'll target a decline into the $75.25-75.00 range. The P&F chart shows a triple bottom breakdown sell signal with a $74 price target.

Suggested Options:
We are suggesting the March puts.

BUY PUT MAR 85 IBM-OQ open interest= 481 current ask $5.40
BUY PUT MAR 80 IBM-OP open interest=2763 current ask $1.75
BUY PUT MAR 75 IBM-OO open interest= 548 current ask $0.40

Picked on February xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 01/17/06 (confirmed)
Average Daily Volume = 6.0 million

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MGIG Invest. - MTG - close: 64.23 change: -0.60 stop: 66.05

Company Description:
MGIC, the principal subsidiary of MGIC Investment Corporation, is the nation's leading provider of private mortgage insurance coverage with $170.0 billion primary insurance in force covering 1.3 million mortgages as of December 31, 2005. MGIC serves 5,000 lenders with locations across the country and in Puerto Rico, helping families achieve homeownership sooner by making affordable low-down-payment mortgages a reality. (source: company press release or website)

Why We Like It:
MTG was soaring higher in January until the company missed the earnings estimates on its January 12th report. The stock has sunk back toward support near $64 and its simple 200-dma. We suspect that MTG is about to breakdown with the potential to trade toward the October lows. We'll suggest a trigger to buy puts under technical support at the 200-dma. Our trigger will be $63.70. If triggered then we'll target a decline into the $58.00-57.50 range.

Suggested Options:
Our time frame is about six weeks so we're going to suggest the March puts but some of our readers might want to consider buying June puts.

BUY PUT MAR 65 MTG-OM open interest=1097 current ask $2.45
BUY PUT MAR 60 MTG-OL open interest=3748 current ask $0.80

Picked on February xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 01/12/06 (confirmed)
Average Daily Volume = 833 thousand
 

New Strangles

None today.
 

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