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Tech and Defense

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LMT    
     
     
     

Play Editor's Note: The expectation this week is that the market will see some sort of profit taking after a 10% bounce in the market. More and more it looks like the lows are behind us at least for the next few weeks. November begins a traditionally bullish time of year for stocks but these seasonal trends may struggle as we face a global recession. Our short-term plan is to buy the dips. Our challenge will be stop loss placement. We want them to be tight but not too tight. I wouldn't be surprised if the market did nothing Monday and Tuesday as the nation waits to see who is elected President but many market pundits are already discounting an Obama win.

FYI: Some of the stocks I'm watching as bullish candidates that look like a buy on a dip are: FO, HES, AMZN, and SPG and VNO. Don't rush out and buy SPG and VNO. They have earnings early this week. Wait until after earnings.

The only bearish candidate that looked tempting was CMI.

NEW DIRECTIONAL CALL PLAYS

Apple Inc. - AAPL - close: 107.59 change: -3.45 stop: 94.45

Why We Like It:
It appears that AAPL has put in a significant bottom. Traders bought the dip at $85.00 in early October. They then started buying the dips in the $92-90 zone. Now that AAPL has produced a bullish breakout from the consolidation phase we think investors will buy the dip around $100. Our suggested entry point to buy calls is the $101.00-95.00 zone although I don't expect AAPL to trade under $100-99.00. We're starting the play with a stop loss at $94.45. More conservative traders could try a tighter stop but these remain volatile markets. If we are triggered at $101.00 Our first target is $111.00. Our second target is $118.50. The $120.00 level looks like it could be significant resistance.

Suggested Options:
We are suggesting the November calls. Our entry point is $101.00.

BUY CALL NOV 100.00 QAA-KT open interest=31939 current ask $11.95
BUY CALL NOV 110.00 QAA-KB open interest=20943 current ask $ 5.95
BUY CALL NOV 120.00 QAA-KD open interest=25099 current ask $ 2.38

Annotated Chart:
AAPL

Picked on November xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/21/08 (confirmed)
Average Daily Volume = 48.3 million

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Lockheed Martin - LMT - close: 85.05 change: +2.87 stop: 77.45

Why We Like It:
Aerospace and defense stock LMT has seen a huge rebound off its lows. The stock has broken its bearish trend of lower highs. We want to buy a dip near what should be support around $80.00. Our suggested entry point is the $81.00-80.00 zone with a stop loss at $77.45. If triggered at $81.00 Our target is the $89.00 mark.

Suggested Options:
We are suggesting the November calls.

BUY CALL NOV 80.00 LMT-KP open interest= 412 current ask $8.00
BUY CALL NOV 85.00 LMT-KQ open interest=1036 current ask $4.80
BUY CALL NOV 90.00 LMT-KR open interest=1321 current ask $2.55

Annotated Chart:
LMT

Picked on November xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/21/08 (confirmed)
Average Daily Volume = 3.8 million

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