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New Calls

Oil Services HOLDRs - OIH - close: 206.78 chg: +3.29 stop: 199.00

Company Description:
The OIH is the Oil Service HOLDRs, which is an exchange traded fund (ETF) focused on the oil service industry. The OIH currently has 18 companies as part of the ETF.

Why We Like It:
I know for some of our readers it seems crazy to add bullish oil plays when it seems like crude oil could reverse at any moment. And yet the commodity just keeps climbing and leaving a trail of dead bears along its path. While I am personally long-term bullish on oil and the oil sector it does seem like crude is short-term overbought and due for a correction. Yet until the trend changes bullish plays are all we can do in the sector. Investors bought the dip in the oil service stocks and the OIH bounced from the $200 region. We're suggesting readers buy calls on this bounce. We'll try and limit our risk with a stop loss under today's low. Our current target is $219.00-220.00. FYI: The Point & Figure chart is forecasting a staggering $306 price target.

FYI: Another way to play this sector is the DIG ETF but the spreads for options on the DIG are very wide.

Suggested Options:
We are suggesting the June calls.

BUY CALL JUN 200 OIH-FT open interest=2868 current ask $13.50
BUY CALL JUN 210 OIH-FB open interest=1725 current ask $ 7.90
BUY CALL JUN 220 ODL-FD open interest=2165 current ask $ 4.10

Picked on May 13 at $206.78
Change since picked: + 0.00
Earnings Date 00/00/00
Average Daily Volume = 7.1 million


Reliance Steel - RS - close: 65.75 chg: +2.16 stop: 59.99

Company Description:
Reliance Steel & Aluminum Co., headquartered in Los Angeles, California, is one of the largest metals service center companies in the United States. Through a network of more than 180 locations in 37 states and Belgium, Canada, China, South Korea and the United Kingdom, the Company provides value-added metals processing services and distributes a full line of over 100,000 metal products. (source: company press release or website)

Why We Like It:
Shares of steel maker RS are breaking out over resistance to new all-time highs. Traders have a decision to make. Do you buy it now or wait for a pull back. There has been a couple of stocks this year where we waited to buy a dip and the dip never showed up. The stock just kept climbing and we missed the play. That could easily happen here with RS. While that is a risk we are choosing to wait. Our suggested entry point is a pull back into the $64.75-64.00 zone. If triggered we're setting two targets. Our first target is the $69.50-70.00 range. Our secondary, more aggressive target is the $73.00-75.00 range. The P&F chart is bullish with a $73 target.

Suggested Options:
Our suggested trigger is the $64.75 level. If triggered we're suggesting the June calls although September calls could work.

BUY CALL JUN 65.00 RS-FM open interest=1618 current ask $3.50
BUY CALL JUN 70.00 RS-FN open interest= 317 current ask $1.40

Picked on May xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 04/17/08 (confirmed)
Average Daily Volume = 851 thousand

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