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New Option Plays

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Call Options Plays
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Strangle Options Plays
OMCBNINone
 ESRX 
 FLR 

New Calls

Omnicom - OMC - close: 90.97 chg: +1.72 stop: 87.84

Company Description:
Omnicom Group Inc. is a leading global marketing and corporate communications company. Omnicom's branded networks and numerous specialty firms provide advertising, strategic media planning, direct and promotional marketing, public relations and other specialty communications services to over 5,000 clients in more than 100 countries. (source: company press release or website)

Why We Like It:
OMC displayed some relative strength on Friday. The stock surged higher with a 1.9% gain on above average volume to breakout over resistance at its 100-dma and the $90.00 level (actually resistance in the $9.30-9.40 region). If you look at the daily chart you can see that OMC has just broken through the neckline of an inverse (bullish) head-and-shoulders pattern it just happens to have two right shoulders, which is not uncommon. The H&S pattern would suggest a $96 target, which almost coincides with the June highs near $96.60. We are suggesting that traders open call option positions with OMC above $90.00. Our target is the $96.00-96.50 range. The Point & Figure chart for OMC is very optimistic with a $131 target.

Suggested Options:
We are suggesting the October calls.

BUY CALL OCT 90.00 OMC-JR open interest=1433 current ask $2.85
BUY CALL OCT 95.00 OMC-JS open interest=1385 current ask $0.75

Picked on September 10 at $ 90.97
Change since picked: + 0.00
Earnings Date 10/24/06 (unconfirmed)
Average Daily Volume = 1.1 million
 

New Puts

Burlington NorSantaFe - BNI - cls: 65.93 chg: +0.09 stop: 66.75

Company Description:
A subsidiary of Burlington Northern Santa Fe Corporation, BNSF Railway operates one of the largest railroad networks in North America, with about 32,000 route miles in 28 states and two Canadian provinces. (source: company press release or website)

Why We Like It:
We are going to try again with BNI. We had the stock on the newsletter recently as a put candidate but then chose to exit early when shares broke out higher above the top edge of its bearish channel on August 31st. Since then shares of BNI have not made any headway. The stock has been consolidating sideways. Meanwhile the Dow Jones Transportation average is breaking down from its own sideways consolidation. This weakness in the transports is bad news for the market and will likely pull BNI with it. Our plan is to catch a breakdown under support near $64.00. We're suggesting that traders use a trigger at $63.74 to open positions. We are going to have two targets. We suggest readers sell part of their position at $60.25 then sell the rest at our second target of $57.00. The P&F chart is bearish with a $50 target.

Suggested Options:
We are suggesting the October puts.

BUY PUT OCT 65.00 BNI-VM open interest=4287 current ask $2.10
BUY PUT OCT 60.00 BNI-VL open interest=2204 current ask $0.75

Picked on September xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/24/06 (unconfirmed)
Average Daily Volume = 2.8 million

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Express Scripts - ESRX - close: 81.29 chg: +0.35 stop: 82.51

Company Description:
Express Scripts provides integrated PBM services, including network-pharmacy claims processing, home delivery services, benefit-design consultation, drug-utilization review, formulary management, disease management, and medical- and drug-data analysis services. (source: company press release or website)

Why We Like It:
The upward momentum in shares of ESRX is running out of steam. Shares broke out over resistance at $80.00 and its 200-dma in early August but have not been able to build on that feat. The sideways consolidation over the past five-weeks also appears to have a bearish double-top pattern. If the market does see a September swoon then we expect ESRX will breakdown under support at $80.00. It's our plan to capture the breakdown with a suggested trigger to buy puts at $79.85. If triggered our short-term target is the $75.50-75.00 range. It's worth noting that a move under $80 would reverse the P&F chart into a new sell signal.

Suggested Options:
We are suggesting the October or November puts. Our trigger to open positions is at $79.85.

BUY PUT OCT 85.00 XTQ-VQ open interest=233 current ask $5.20
BUY PUT OCT 80.00 XTQ-VP open interest=446 current ask $2.50
BUY PUT OCT 75.00 XTQ-VO open interest=241 current ask $1.10

BUY PUT NOV 80.00 XTQ-WP open interest=559 current ask $3.80
BUY PUT NOV 75.00 XTQ-WO open interest=667 current ask $2.10

Picked on September xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/25/06 (unconfirmed)
Average Daily Volume = 1.6 million

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Fluor - FLR - close: 81.74 change: -1.17 stop: 86.01

Company Description:
Fluor Corporation provides services on a global basis in the fields of engineering, procurement, construction, operations, maintenance and project management. (source: company press release or website)

Why We Like It:
Normally we would be watching the $80.00 level for round-number, psychological support but it looks like the key level on FLR was the $82.00 mark. The stock has been bouncing along support near $82 for months but the bearish trend of lower highs has finally bloomed into a bearish breakdown and sell signal. The recent weakness has also produced a breakdown under technical support at its simple and exponential 200-dma(s). Friday's decline has also produced a bearish triangle breakdown sell signal on its P&F chart with a $75 target. We are suggesting that readers open put plays with FLR under $82.00. Our target is the $75.50-75.00 range. Don't be surprised to see a little bit of an oversold bounce near $80.00.

Suggested Options:
We are suggesting the October puts.

BUY PUT OCT 85.00 FLR-VQ open interest=620 current ask $5.20
BUY PUT OCT 80.00 FLR-VP open interest=634 current ask $2.70
BUY PUT OCT 75.00 FLR-VO open interest=883 current ask $1.20

Picked on September 10 at $ 81.74
Change since picked: + 0.00
Earnings Date 11/06/06 (unconfirmed)
Average Daily Volume = 863 thousand
 

New Strangles

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