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New Calls

None today.
 

New Puts

Mohawk Industries - MHK - cls: 76.02 chg: -2.27 stop: 79.01

Company Description:
Mohawk is a leading supplier of flooring for both residential and commercial applications. Mohawk offers a complete selection of carpet, ceramic tile, laminate, wood, stone, vinyl, rugs and other home products. (source: company press release or website)

Why We Like It:
The Black & Decker (BDK) earnings warning on Friday appeared to impact shares of MHK. If BDK is struggling due to a drop in orders then MHK is likely to suffer as well since they both supply the housing sector. Shares of MHK lost 2.8% on above average volume to breakdown through the bottom of its two-week trading range. The move helped produce a new MACD sell signal. The P&F chart already has a bearish price target of $60. We are suggesting puts with MHK under $76.65, which is a short-term support/resistance level that shares just broke. We'll try and keep our risk to a minimum with a stop above Thursday's high. We would consider this a relatively higher-risk, aggressive play because MHK might have support at its 200-dma near $75 and at the late November dip near $74.00. Our target is the $70.75-70.00 range.

Suggested Options:
We are suggesting the February puts. It is up to you, the individual trader, to determine which month and strike price best suits your trading style and risk for all the plays in our newsletter.

BUY PUT FEB 80.00 MHK-NP open interest= 156 current ask $5.40
BUY PUT FEB 75.00 MHK-NO open interest= 574 current ask $2.65
BUY PUT FEB 70.00 MHK-NN open interest=2525 current ask $1.05

Picked on December 17 at $ 76.02
Change since picked: + 0.00
Earnings Date 02/22/07 (unconfirmed)
Average Daily Volume = 600 thousand

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3M Co. - MMM - close: 78.31 change: -0.46 stop: 80.01

Company Description:
Every day, 3M people find new ways to make amazing things happen. Wherever they are, whatever they do, the company's customers know they can rely on 3M to help make their lives better. 3M's brands include Scotch, Post-it, Scotchgard, Thinsulate, Scotch-Brite, Filtrete, Command and Vikuiti. Serving customers in more than 200 countries around the world, the people of 3M use their expertise, technologies and global strength to lead in major markets including consumer and office; display and graphics; electronics and telecommunications; safety, security and protection services; health care; industrial and transportation. (source: company press release or website)

Why We Like It:
MMM's rally from its July lows has run out of gas. The stock struggled for two weeks but never made it past resistance near $82.00. Now shares are beginning to breakdown. The recent oversold bounce from the 200-dma earlier in December has failed near $79.70 for the second time this past week. Volume on Friday's failed was above average but we suspect that was due to quadruple-witching expiration of options and futures. Chart readers will also note that Friday's session produced a bearish engulfing candlestick pattern. We are suggesting puts with the stock under $79.00. We would label this an aggressive, higher-risk entry point because MMM does have support at its 200-dma near $77.35, which is also near the top of its October gap higher. If you prefer a less aggressive entry point then wait for a decline under $77.00. The $75.00 level also offers a challenge for the bears since it to will probably be support. Our target is going to be the $72.50-70.00 range. The P&F chart is more bearish with a $47 target.

Suggested Options:
We are suggesting the January puts, which are set to expire in about five weeks.

BUY PUT JAN 80.00 MMM-MP open interest=15284 current ask $2.55
BUY PUT JAN 75.00 MMM-MO open interest=20174 current ask $0.55

Picked on December 17 at $ 78.31
Change since picked: + 0.00
Earnings Date 01/19/07 (unconfirmed)
Average Daily Volume = 2.8 million
 

New Strangles

None today.
 

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