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EOG Resources - EOG - close: 69.38 chg: +2.01 stop: 67.49

Company Description:
EOG Resources, Inc. is one of the largest independent (non-integrated) oil and natural gas companies in the United States with proved reserves in the United States, Canada, offshore Trinidad and the United Kingdom North Sea. (source: company press release or website)

Why We Like It:
We are going to try and play EOG again. We recently had EOG on the play list as a call candidate but the stock never hit our trigger to open positions. In the last two days the stock has produced a bullish reversal and Tuesday's 3% gain is a bullish breakout from its two-week consolidation pattern, which now looks like a bull-flag pattern. While short-term technical indicators are bullish but the stock has additional overhead resistance at its 200-dma near $70.75. We want to see more confirmation so we're using a trigger to buy calls at $71.01, which would be a significant breakout above its six-month trendline of resistance (lower highs, see chart). The biggest challenge with this play is the time frame. EOG is due to report earnings on August 1st before the market opens. That means we need to exit on Monday, July 31st at the closing bell to avoid holding over the company's report. That's not a lot of time and we're still using a trigger to open the play - although aggressive traders may want to consider positions now with today's breakout. Our short-term target will be the $77.50 level.

Suggested Options:
We are suggesting the August calls. You choose which strike (and month) best suits your trading style and risk profile.

BUY CALL AUG 65.00 EOG-HM open interest=1326 current ask $6.10
BUY CALL AUG 70.00 EOG-HN open interest=3245 current ask $3.10
BUY CALL AUG 75.00 EOG-HO open interest=1148 current ask $1.20

Picked on July xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 08/01/06 (confirmed)
Average Daily Volume = 3.6 million

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General Dynamics - GD - cls: 69.38 chg: +1.37 stop: 67.45

Company Description:
General Dynamics, headquartered in Falls Church, Virginia, employs approximately 81,900 people worldwide and had 2005 revenue of $21.2 billion. The company is a market leader in mission-critical information systems and technologies; land and expeditionary combat systems, armaments and munitions; shipbuilding and marine systems; and business aviation. (source: company press release or website)

Why We Like It:
The defense-related stocks are on the move. Tuesday saw the DFI index breakout above the 1100 level and its simple 50-dma. The sector index has just a little bit farther to go to completely breakout past the top of its two-month trading range. Leading the sector higher was a big move in GD, which turned in a 2% gain today. The stock is already a relative strength winner with today's close putting it near all-time highs. Shares look poised to breakout past resistance at the $70.00 mark. We're suggesting a trigger at $70.05 to catch that breakout. If triggered our target is the $74.50-75.00 range. The P&F chart for GD already points to a $75 target.

Suggested Options:
We are suggesting the August and September calls. You choose which strike and month best suits your needs.

BUY CALL AUG 67.50 GD-HU open interest=3575 current ask $2.95
BUY CALL AUG 70.00 GD-HN open interest=3842 current ask $1.40
BUY CALL AUG 75.00 GD-HO open interest=1223 current ask $0.25

BUY CALL SEP 65.00 GD-IM open interest= 20 current ask $5.60
BUY CALL SEP 70.00 GD-IN open interest= 25 current ask $2.25
BUY CALL SEP 75.00 GD-IO open interest= 14 current ask $0.65

Picked on July xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 07/19/06 (confirmed)
Average Daily Volume = 1.5 million
 

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