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Call Plays

Goldman Sachs - GS

Another day of big mergers and acquisitions helped fuel a strong 2.38 percent rally in the XBD broker-dealer index. GS, already in breakout mode, only added 1.6 percent. The stock looks strong here but if you're patient look for a pull back toward the $106.00-106.50 level and buy a bounce. We are going to raise our stop loss to $103.99.

KB Home - KBH

Homebuilders dipped sharply this morning on some lagging economic news but traders quickly bought the dip. The DJUSHB index bounced from support at the 800 level and KBH bounced from support near $105 and its 21-dma. This looks like a new bullish entry point in KBH.

Pulte Homes - PHM

Remember that we are planning to exit on Tuesday or Wednesday afternoon to avoid PHM's Wednesday evening earnings report.

Pixar - PIXR

Be careful here. Merrill Lynch raised its earnings estimates for PIXR this morning but the stock failed to participate in today's market bounce and that could spell bad news for the bulls.

Put Play

Apollo Group - APOL

Education stocks bounced with the major stock indices on Monday despite a negative story on the "60 Minutes" TV show over the weekend, which critiqued the industry and CECO specifically. Fortunately, technical traders will note that APOL produced a failed rally at the $80.00 mark, which could satisfy the oversold bounce we were predicting for the stock. Look for a down day tomorrow to confirm the failed rally as a new entry point.

Dropped Call

Alliance Resource - ARLP - close: 70.14 chg: +0.48 stop: 69.00

After months of support at the 50-dma ARLP broke down this morning. Early morning weakness sent ARLP to $68.05, which was more than enough to stop us out at $69.00. While traders bought the dip and pushed shares back over round-number support at $70.00 and its 50-dma the short-term trend of lower highs remains an issue.

Picked on January 10 at $ 69.80
Change since picked: + 0.34
Earnings Date 01/27/05 (confirmed)
Average Daily Volume = 115 thousand


Dropped Put

Black & Decker - BDK - close: 82.40 chg: +1.49 stop: 82.61

It would appear that last week's high-volume breakdown under major support at the 100-dma and the $80.00 mark was nothing more than a bear trap. Friday and Monday produced a two-day bounce and shares pushed through what should have been new resistance at $80.00 and $81.50. We have been stopped out at $82.61. We remain skeptical that this bounce has any legs until BDK trades back over $85.

Picked on January 26 at $ 79.47
Change since picked: + 2.93
Earnings Date 01/26/05 (confirmed)
Average Daily Volume = 659 thousand


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