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New Option Plays

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Call Options Plays
Put Options Plays
Strangle Options Plays
ABK None None
AMGN    
DE    
EMR    
GBX    
VMC    

Play Editor's note: The market's strength during the last few weeks has been unusual. We're not going to discuss why the market has been strong right here. That's what the market commentary is for. We will say that historically stocks tend to be weak the second half of September and the first half of October. Today may have been a turning point. The broad-based rally today was pretty strong. Internals looked good although we could have done with a little more volume. We are cautiously bullish here. You will note a large number of new call plays today but do not interpret that as our bias as being very bullish. At this point the contrarian in us expects every rally to fail but we can't trade on our market bias alone - only what the market gives us. Right now the trend is up so we're going to play it. Watch those stop losses!


New Calls

Ambac Fincl. - ABK - close: 84.40 chg: +0.84 stop: 81.99

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. (source: company press release or website)

Why We Like It:
ABK found support near $82 a couple of weeks ago. Shares formed a short-term bottom there bolstered by technical support at its rising 100-dma. Now the short-term technicals are looking bullish and its MACD on the daily chart has produced a new buy signal. Today's gain is a bullish breakout over resistance near $84.00 and its 50-dma. Volume came in light, which is a warning sign, but we're going to play it anyway. We're suggesting calls with ABK above $84.00. Our target is the $88.00-90.00 range. We do not want to hold over the October 25th earnings report. FYI: The P&F chart points to a $102 target.

Suggested Options:
We are suggesting the November calls but we do not want to hold over the October earnings.

BUY CALL NOV 80.00 ABK-KP open interest=158 current ask $5.60
BUY CALL NOV 85.00 ABK-KQ open interest=698 current ask $2.00

Picked on October 04 at $ 84.40
Change since picked: + 0.00
Earnings Date 10/25/06 (confirmed)
Average Daily Volume = 819 thousand

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Amgen Inc. - AMGN - close: 72.97 change: +1.64 stop: 69.99

Company Description:
Amgen discovers, develops and delivers innovative human therapeutics. A biotechnology pioneer since 1980, Amgen was one of the first companies to realize the new science's promise by bringing safe and effective medicines from lab, to manufacturing plant, to patient. Amgen therapeutics have changed the practice of medicine, helping millions of people around the world in the fight against cancer, kidney disease, rheumatoid arthritis, and other serious illnesses. (source: company press release or website)

Why We Like It:
The biotech sector is breaking out and AMGN is helping lead the charge. We like AMGN as a bullish candidate given today's breakout from its two-week trading range. Volume on today's breakout was pretty strong and that's definitely a bullish sign. The stock should continue to see strength as investors have been favoring the big caps. We'll stick a stop loss under the recent support and target a rally into the $79-80.00 range. However, we will exit ahead of the October 23rd earnings report. FYI: The P&F chart is also showing a bullish breakout and an $86 target.

Suggested Options:
We are suggesting the November calls but we do not want to hold over the October earnings.

BUY CALL NOV 70.00 YAA-KN open interest= 794 current ask $4.40
BUY CALL NOV 72.50 YAA-KV open interest=1802 current ask $2.70
BUY CALL NOV 75.00 YAA-KO open interest=3950 current ask $1.40

Picked on October 04 at $ 72.97
Change since picked: + 0.00
Earnings Date 10/23/06 (confirmed)
Average Daily Volume = 7.8 million

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Deere & Co. - DE - close: 85.39 change: +1.80 stop: 82.99

Company Description:
Deere & Company, founded in 1837, grew from a one-man blacksmith shop into a worldwide corporation that today does business in more than 160 countries and employs over 46,000 people worldwide. Deere & Company consists of three equipment operations, credit operations, and four support operations. (source: company press release or website)

Why We Like It:
Shares of DE look poised to move higher. The stock's breakout in the last week of September produced a new triple-top breakout buy signal on its P&F chart, which now points to a $102 target. The last few days has seen DE churn sideways under the $85 level as it digested those September gains but now the stock is breaking out again. Readers might want to consider this a hedge against our bearish play on CAT right now. We are suggesting calls with DE above $85.00. We'd suggest a stop loss under the recent trading range. Our target is the $89.50-90.00 range. We do not want to hold over the November earnings report.

Suggested Options:
We are suggesting the November calls.

BUY CALL NOV 80.00 DE-KP open interest=289 current ask $7.30
BUY CALL NOV 85.00 DE-KQ open interest=395 current ask $3.90
BUY CALL NOV 90.00 DE-KR open interest=379 current ask $1.70

Picked on October 04 at $ 85.39
Change since picked: + 0.00
Earnings Date 11/14/06 (unconfirmed)
Average Daily Volume = 2.7 million

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Emerson Electric - EMR - close: 84.77 chg: +0.74 stop: 82.99

Company Description:
Emerson, based in St. Louis, is a global leader in bringing technology and engineering together to provide innovative solutions to customers through its network power, process management, industrial automation, climate technologies, and appliance and tools businesses. Sales in fiscal 2005 were $17.3 billion. (source: company press release or website)

Why We Like It:
The rally in EMR has brought the stock right to resistance near $85.00. Volume has dried up the last few days as EMR digested its recent gains. Now shares look poised to breakout over the $85 mark and make a run toward its highs. We're suggesting a trigger to buy calls at $85.15. If triggered our target is the $89.00-90.00 range. The P&F chart is bullish and points to a $92 target. We do not want to hold over the late October earnings report.

Suggested Options:
We are suggesting the November calls but we do not want to hold over the October earnings.

BUY CALL NOV 80.00 EMR-KP open interest=588 current ask $5.80
BUY CALL NOV 85.00 EMR-KQ open interest=848 current ask $2.20
BUY CALL NOV 90.00 EMR-KR open interest=118 current ask $0.50

Picked on October xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/31/06 (unconfirmed)
Average Daily Volume = 1.5 million

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Greenbrier - GBX - close: 29.70 change: +1.19 stop: 27.99

Company Description:
The Greenbrier Companies, headquartered in Lake Oswego, OR, is a leading supplier of transportation equipment and services to the railroad industry. The Company builds new railroad freight cars in its manufacturing facilities in the U.S., Canada, and Mexico and marine barges at its U.S. facility. It also repairs and refurbishes freight cars and provides wheels and railcar parts at 23 locations across North America. Greenbrier builds new railroad freight cars and refurbishes freight cars for the European market through both its operations in Poland and various subcontractor facilities throughout Europe. Greenbrier owns approximately 9,000 railcars, and performs management services for approximately 135,000 railcars. (source: company press release or website)

Why We Like It:
The Dow Jones railroad index broke out over resistance at the 380 level and its 200-dma with Wednesday's 2.3% gain. The group has broken out past its five-month trendline of resistance. We suspect that GBX is poised to breakout from its trading range and join its peers in the railroad sector. Today's rally in GBX was a technical breakout over the 100-dma but the stock has resistance at the $30.00 mark. We're suggesting a trigger to buy calls at $30.05. If triggered our target is the $33.00-34.00 range. We do not want to hold over the early November earnings report. FYI: The P&F chart is still bearish but it's seeing a strong bounce near support.

Suggested Options:
We are suggesting the November calls.

BUY CALL NOV 25.00 GBX-KE open interest= 0 current ask $5.70
BUY CALL NOV 30.00 GBX-KF open interest=96 current ask $2.15

Picked on October xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 11/01/06 (unconfirmed)
Average Daily Volume = 310 thousand

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Vulcan Materials - VMC - close: 79.22 chg: +1.67 stop: 76.95

Company Description:
Vulcan Materials Company, a member of the S&P 500 Index, is the nation's foremost producer of construction aggregates: primarily crushed stone, sand and gravel, and a major producer of other construction materials required by the U.S. economy. (source: company press release or website)

Why We Like It:
VMC has been consolidating sideways under resistance at the $80.00 level for just over a month. Today's rally has put the stock back in position to breakout over resistance and the short-term technicals are beginning to turn bullish again. The P&F chart is already bullish with a $93 target. We are suggesting a trigger to buy calls at $80.26, which is above the late September high. If triggered our target is the $84.50-85.00 range. We do not want to hold over the late October earnings report.

Suggested Options:
We are suggesting the November calls but we do not want to hold over the October earnings.

BUY CALL NOV 75.00 VMC-KO open interest= 257 current ask $6.40
BUY CALL NOV 80.00 VMC-KP open interest= 543 current ask $3.40
BUY CALL NOV 85.00 VMC-KQ open interest=1158 current ask $1.55

Picked on October xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/31/06 (unconfirmed)
Average Daily Volume = 843 thousand
 

New Puts

None today.
 

New Strangles

None today.
 

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