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Call Updates

Amerada Hess - AHC - close: 90.06 chg: -1.25 stop: 86.25

Energy stocks experienced some profit taking on Friday after most equities in the group turned in a three or four day bounce this past week. At the moment AHC is offering technical traders a mixed picture. The Point & Figure chart is showing sell signal. Meanwhile its daily candlestick chart is displaying a bounce from the bottom of its ten-week descending channel. AHC is also bouncing from its 200-dma's. Yet the bounce has been somewhat volatile as traders witness crude oil prices slowly breakdown under technical support at its own 200-dma. Technical traders using the daily chart might consider bullish positions but watch for a possible dip back toward the $88 level near its 200-dma before it continues higher. We are not suggesting new bullish plays at this time. The major market indices are short-term overbought and due for a dip and that could lead AHC lower to retest the lower boundary of its channel. 

Suggested Options:
We are not suggesting new plays at this time.

Picked on May 17 at $ 89.41
Change since picked: + 0.65
Earnings Date 07/27/05 (unconfirmed)
Average Daily Volume = 1.6 million 

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Caterpillar - CAT - close: 93.63 chg: +0.13 stop: 89.00

So far so good. CAT turned in a strong week following the DJIA index higher. CAT managed to breakout above its six-week trend of lower highs, technical resistance at its 50 and 100-dma's, and the neckline of its inverse/bullish head-and-shoulders pattern. We remain bullish on the stock but expect a probably dip back toward the $92.00 level (maybe 91.50) before CAT continues higher. Readers can watch for the dip and use a bounce as a new bullish entry point. Our target is the $99.25-100.00 range. The P&F chart's bullish signal points to a $109 target.

Suggested Options:
We are suggesting the June calls although August strikes would also work well.

BUY CALL JUN 90.00 CAT-FR OI=3397 current ask $4.90
BUY CALL JUN 95.00 CAT-FS OI=3179 current ask $1.75
BUY CALL JUN100.00 CAT-FT OI=1349 current ask $0.40

Picked on May 18 at $ 92.35
Change since picked: + 1.28
Earnings Date 04/20/05 (confirmed)
Average Daily Volume = 2.8 million 

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Federated Dept Stores - FD - cls: 68.86 chg: -0.08 stop: 64.45 

Retail stocks turned in a pretty strong week fed by a broad market rally and several strong earnings reports in the sector. Shares of FD broke out over resistance at the $65.00 level to hit new all-time highs. Volume has been relatively strong in FD's breakout suggesting more gains ahead. A downgrade for a handful of apparel retailers hit the sector on Friday morning but shares of FD rebounded to close nearly unchanged. This display of relative strength bodes well for next week, especially since the major averages look tired and due for a dip. We are not suggesting new bullish positions because FD is nearing our target in the $69.95-70.00 range. More conservative traders may want to consider an earlier exit in the 69.50-70.00 range. 

Suggested Options:
We are not suggesting new plays at this time. Traders can prepare to exit. 

Picked on May 17 at $ 66.60
Change since picked: + 2.26
Earnings Date 05/11/05 (confirmed)
Average Daily Volume = 2.9 million 

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Hovnanian - HOV - close: 56.82 chg: -0.27 stop: 52.49 

The housing stocks did pretty well this past week with the DJUSHB sector index breaking out over its nine-week trend of lower highs. Shares of HOV helped lead the way. We're encouraged that the sector held up as well as it did on Friday after Fed chairman Alan Greenspan's comments. Alan said the Federal Reserve does not see a national housing bubble but they do see several smaller, regional bubbles. We expect a market pull back next week as stocks digest their gains. Readers can watch for HOV to pull back toward the $55.00 level and use a dip there as a new bullish entry point. Our short-term target is the $59-60 range compared to the bullish P&F chart's target of $72.

Suggested Options:
We are suggesting the June calls although August strikes would also work well.

BUY CALL JUN 55.00 HOV-FK OI=2106 current ask $3.80
BUY CALL JUN 60.00 HOV-FL OI=1028 current ask $1.30

Picked on May 06 at $ 54.26
Change since picked: + 2.56
Earnings Date 05/31/05 (confirmed)
Average Daily Volume = 1.2 million 

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Eli Lilly - LLY - close: 58.90 change: -1.04 stop: 57.99 

Hmmm... we cannot explain it but LLY took a disappointing tumble on Friday with a 1.7 percent decline. Volume was slightly above average. Most of the move all occurred right at the open and then LLY traded sideways in a narrow range. We've been suggesting that readers wait for LLY to trade over the $60.00 level before considering new bullish positions. Conservative types might wait for a move over $61.00 instead. Those suggestions still apply today but traders should also re-evaluate their stop losses. LLY's relative weakness on Friday could suggest more weakness next week. Some traders might want to exit LLY early if the DRG drug index breaks down under the 330 level. Longer-term we like the April breakout but LLY may need to consolidate more. The P&F chart shows a quadruple top breakout buy signal with a $79 target.

Suggested Options:
We are not suggesting new plays at this time. Watch for a move over $60.00. If LLY does turn higher we like the July calls.

Picked on May 04 at $ 60.15
Change since picked: - 1.25
Earnings Date 04/18/05 (confirmed)
Average Daily Volume = 4.7 million 

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Reynolds American - RAI - cls: 82.67 chg: -0.03 stop: 77.95

RAI, like most of the market, saw its rally stall on Friday. We were triggered in this bullish play a few days ago when RAI broke out above resistance in the $81.00 region and hit ours entry point at $81.31. The move also helped produce a new P&F buy signal that now points to a $90.00 target. Thus far we're encouraged that RAI has been able to maintain its gains with the stock consolidating sideways in a $1.00 range the last 2 1/2 sessions. Yet if the major market indices dip lower next week we'd expect RAI to follow. Readers can watch for a dip back toward the $81.00-81.50 region and use a bounce there as a new bullish entry point. Our target remains the $85-86 range.

Suggested Options:
We are suggesting the June calls.

BUY CALL JUN 80.00 RAI-FP OI=3740 current ask $3.70
BUY CALL JUN 85.00 RAI-FQ OI= 615 current ask $0.90

Picked on May 16 at $ 81.31
Change since picked: + 1.36
Earnings Date 04/27/05 (confirmed)
Average Daily Volume = 866 thousand 

Put Updates

MGIC Invest. - MTG - close: 60.05 change: +0.22 stop: 61.11

Shares of MTG continue to consolidate sideways right at pivotal overhead resistance near the $60 level. Looking at the daily candlestick chart readers can see that MTG is trading right near the top of its descending channel. Normally this would be a tempting spot to open bearish plays. Our concern is that with the major market averages turning higher MTG might breakout from its own declining channel. We would not suggest new bearish put plays until MTG trades under the $59.00 level again. 

Suggested Options:
We are not suggesting new plays at this time. Watch for a move under $59.00. 

Picked on May 15 at $ 58.91
Change since picked: + 1.14
Earnings Date 04/14/05 (confirmed)
Average Daily Volume = 742 thousand 

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Precision Castparts - PCP - cls: 74.65 chg: -0.38 stop: 75.05

We initially added PCP to the play list as a bearish candidate several days ago when the stock look poised to breakdown under major technical support. Since then the major market averages have all broken out to the upside. Normally a bullish market turnaround like this would have us dropping an untriggered bearish play like PCP. However, PCP has not participated very much in the market's rally. Furthermore it is still trading under a two-month trend of lower highs. If the stock does break technical support at its 100-dma it could signal a significant change in direction for PCP. If the stock declines under the $72 level it will produce a new sell signal on its P&F chart. We're going to stand by our strategy to use a trigger at $71.95. Our target will be the 200-dma near $67.50.

Suggested Options:
We are not suggesting new plays at this time. Wait for PCP to breakdown under the $72.00 level.

Picked on May xx at $ xx.xx <-- see TRIGGER
Change since picked: - 0.00
Earnings Date 05/03/05 (confirmed)
Average Daily Volume = 492 thousand 

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Parker Hannifin - PH - close: 60.67 change: +0.29 stop: 62.01

PH appears to be stuck in a trading range between $57 and $62. Nimble traders might want to try and time their entries and exits to take the maximum advantage of this range. However, we suspect that the sideways consolidation may be over soon. If the market continues to rally then PH is likely to breakout over its trendline of resistance (see chart). However, currently the major averages are overbought and due for a pull back. That can set PH up for another decline. We would suggest new short-term bearish positions on another decline below 59.50. More aggressive traders might look for a failed rally under the 50-dma near 61.50 instead. We're going to stick with our $55-54 target for now but some investors might want to consider an early exit near $57.

Suggested Options:
We are not suggesting new plays at this time. Look for a drop below $59.50 first. 

Picked on April 28 at $ 59.08
Change since picked: + 1.59
Earnings Date 04/18/05 (confirmed)
Average Daily Volume = 1.2 million 

Dropped Calls

Invitrogen - IVGN - close: 79.70 change: +0.02 stop: 74.85 

Close enough! As we discussed in Thursday's update we're choosing to exit early in IVGN. The stock continues to trade with a bullish pattern of higher lows and looks poised to climb higher next week. We felt it was more prudent to exit now as IVGN toys with overhead resistance (and our target) at the $80.00 level. IVGN looks a little extended up five weeks in a row and we'll be sure to keep an eye on it for a pull back toward support near $75.00 where it might offer another bullish entry point.

Picked on May 03 at $ 75.51
Change since picked: + 4.19
Earnings Date 04/28/05 (confirmed)
Average Daily Volume = 888 thousand 

Dropped Puts

L-3 Comm. - LLL - close: 69.97 chg: +1.84 stop: 69.55 

We have been very cautious on LLL's rebound the last few days but until Friday the stock had remained under resistance. LLL got a boost on Friday morning after Smith Barney upgraded the stock to a "buy". This sent LLL through resistance in the $69.00-69.50 levels and its simple and exponential 200-dma's. Our stop loss was 69.55, which was triggered early in the day. 

Picked on May 10 at $ 68.01
Change since picked: + 1.96
Earnings Date 04/26/05 (confirmed)
Average Daily Volume = 855 thousand 

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