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New Option Plays

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BTU None None
BZH    
CRS    

New Calls

Peabody Energy - BTU - close: 39.89 chg: +2.12 stop: 37.24

Company Description:
Peabody Energy is the world's largest private-sector coal company, with 2005 sales of 240 million tons of coal and $4.6 billion in revenues. Its coal products fuel approximately 10 percent of all U.S. electricity generation and 3 percent of worldwide electricity. (source: company press release or website)

Why We Like It:
Coal stocks are on the move. The group has suffered a lot over the last six months with many stocks in the industry losing half their value. Yet now, after a month of consolidating sideways, we're seeing signs of life again. Volume is picking up on the rallies and we're seeing some bullish breakouts over resistance. BTU broke out over its multi-month trendline of resistance and is now on the verge of breaking out past round-number, psychological resistance at the $40.00 level. A move over $40 would reverse the P&F chart into a new buy signal. We are suggesting a trigger to buy calls at $40.05. If triggered our target is the $43.25-45.00 range. We have a low target for two reasons. We're short on time and the $43.30 level was support in the past so it will likely offer some resistance moving ahead. The time frame issue is also a challenge. We only have six trading days. BTU is due to report earnings on the morning of Oct. 19th and we do not want to hold over the report. So we must exit on the 18th. If you don't like the time frame issue check out these stocks in the sector: ACI, FDG, JRCC, FCL.

Suggested Options:
We are suggesting the October or November calls. Our trigger is at $40.05. We want to exit ahead of the Oct. 19th earnings.

BUY CALL OCT 35.00 BTU-JG open interest= 7765 current ask $5.20
BUY CALL OCT 40.00 BTU-JH open interest=15588 current ask $1.65

BUY CALL NOV 35.00 BTU-KG open interest= 2838 current ask $5.90
BUY CALL NOV 40.00 BTU-KH open interest= 3609 current ask $2.75

Picked on October xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/19/06 (confirmed)
Average Daily Volume = 5.8 million

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Beazer Homes - BZH - close: 42.30 change: +1.68 stop: 39.85

Company Description:
Beazer Homes USA, Inc., headquartered in Atlanta, is one of the country's ten largest single-family homebuilders. (source: company press release or website)

Why We Like It:
Homebuilders were the best performing sector today. The DJUSHB home construction index rose 2.8% thanks to a J.P.Morgan analyst who upgraded three builders this morning. There actually seems to be a growing camp of supporters who believe the bottom is in for the homebuilders. Shares of BZH certainly appear to have produced a bottom with the lows in July and September. Aggressive traders might want to consider positions in BZH now given the breakout over $40 and its 50-dma. We still see potential resistance at its 100-dma directly overhead and BZH has struggled with the $42.50 level in the past. We're suggesting a trigger to buy calls at $42.75. If triggered our target is the $49.00-50.00 range. We do not want to hold over the early November earnings report. FYI: If BZH trades over $43.00 it will produce a new Point & Figure chart buy signal.

Suggested Options:
We are suggesting the November calls. Our trigger is at $42.75.

BUY CALL NOV 40.00 BZH-KH open interest=1341 current ask $4.00
BUY CALL NOV 45.00 BZH-KI open interest=2346 current ask $1.40

Picked on October xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 11/02/06 (unconfirmed)
Average Daily Volume = 1.3 million

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Carpenter Tech. - CRS - cls: 109.31 chg: +1.69 stop: 104.95

Company Description:
Carpenter produces and distributes specialty alloys, including stainless steels, titanium alloys, and superalloys, and various engineered products. (source: company press release or website)

Why We Like It:
The metal and steel producers are on the rebound. The group has turned higher this past week and the sector could be poised to catch up with the broader market. Volume is rising on CRS' rally, which is normally a bullish sign. Most of the technical indicators are positive. The P&F chart points to a $120 target. We are suggesting a trigger to buy calls at $110.51, which is above Monday's high. More conservative traders may want to wait for a move past $112.00 near the September high. Our target is the $118.00-120.00 range. Unfortunately, we don't have a lot of time. CRS is due to report earnings in just a couple of weeks. We do not want to hold over the report. FYI: We want to remind readers that CRS can be volatile so consider this an aggressive play.

Suggested Options:
We are suggesting the November calls.

BUY CALL NOV 105.00 CRS-KA open interest=228 current ask $9.20
BUY CALL NOV 110.00 CRS-KB open interest=416 current ask $6.50
BUY CALL NOV 115.00 CRS-KC open interest=243 current ask $4.30

Picked on October xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/23/06 (unconfirmed)
Average Daily Volume = 754 thousand
 

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