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New Plays

New Option Plays

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BNI None None

Play Editor's note: The markets reacted favorably to the GDP news and the FOMC commentary on interest rates, inflation, the housing sector, and the economy. Unfortunately, the markets have a habit of reversing their first reaction to an FOMC decision. We are cautiously adding new positions to the newsletter but traders should keep one eye on the exit door in case stocks reverse course.

New Calls

Burlington Nor.SantaFe - BNI - cls: 80.36 chg: +2.26 stop: 77.99

Company Description:
A subsidiary of Burlington Northern Santa Fe Corporation, BNSF Railway Company operates one of the largest North American rail networks, with about 32,000 route miles in 28 states and two Canadian provinces. BNSF is among the world's top transporters of intermodal traffic, moves more grain than any other American railroad, carries the components of many of the products we depend on daily, and hauls enough low-sulphur coal to generate about ten percent of the electricity produced in the United States. (source: company press release or website)

Why We Like It:
Railroad stocks were a bright spot in the market today. The Dow Jones railroad index soared 3.7% and contributed plenty of strength to the transportation index's 2.6% gain. Leading the charge was BNI, which rose 2.8% on above average volume. Aggressive traders might want to buy calls now with today's strength and breakout over $80.00. We see resistance in the $81.75 region with the October and January peaks. Therefore we'd prefer to use a trigger at $82.01 to open positions. Waiting for a move past $82.00 would force BNI to breakout past resistance at the neckline to a bullish or inverse head-and-shoulders pattern. If we are triggered at $82.01 our target will be the all-time highs in the $87.00-87.50 range. FYI: The Point & Figure chart points to $100 and the inverse H&S pattern also suggests a $100 target.

Suggested Options:
We are suggesting the March calls on BNI. Our trigger is at $82.01

BUY CALL MAR 80.00 BNI-CP open interest=2616 current ask $3.10
BUY CALL MAR 85.00 BNI-CQ open interest= 96 current ask $1.05

Picked on January xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 01/23/07 (confirmed)
Average Daily Volume = 2.4 million


RTI Int. - RTI - close: 81.75 change: +2.56 stop: 76.75

Company Description:
RTI International Metals is one of the worlds largest producers of titanium. Through its various subsidiaries, RTI manufactures and distributes titanium and specialty metal mill products, extruded shapes, formed parts and engineered systems for aerospace, industrial, defense, energy, chemical and consumer applications for customers around the world. The Company has two business groups, the Titanium Group and the Fabrication & Distribution Group, made up of 1,400 people at 18 locations in the United States, Canada, Europe, and Asia. (source: company press release or website)

Why We Like It:
It looks like the consolidation in shares of RTI is over. The stock rocketed higher from early October to early December and has spent the last several weeks consolidating those gains. Now shares are breaking out to new eight-month highs over resistance at the $80.00 level and on strong volume. There is potential resistance at its all-time high from May 2006 at $83.33 but we suspect RTI will push past it. Today's bullish breakout has produced a new Point & Figure chart buy signal with a $105 target. We are suggesting call positions with RTI in the $80-83 range. Our target is the $88.00-90.00 range.

Suggested Options:
We are suggesting the March calls.

BUY CALL MAR 80.00 RTI-CP open interest=869 current ask $6.40
BUY CALL MAR 85.00 RTI-CQ open interest=814 current ask $4.00

Picked on January 31 at $ 81.75
Change since picked: + 0.00
Earnings Date 03/12/07 (unconfirmed)
Average Daily Volume = 737 thousand

New Puts

None today.

New Strangles

None today.

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