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Call Updates

Amerada Hess - AHC - close: 131.23 chg: -0.35 stop: 124.49

Friday proved to be a quiet session for oil stocks with crude oil trading closed for the day. Shares of AHC drifted back toward the $130 level. The stock is throwing off some mixed signals. Some of its oscillators are short-term overbought and look poised to turn lower. Meanwhile the stock does still have a steady two-week trend of higher lows (a.k.a. rising trendline of support). When we added this play to the list we labeled a more aggressive, higher risk candidate since crude oil is still stuck in a two-month downtrend. AHC remains a more aggressive play short-term, even though we're long-term bullish on the oil sector. Traders looking for new positions might want to watch for a bounce from the $130.00 level as a new bullish entry point. Our year-end target is the $139.85-140.00 range. We do think the Point & Figure chart is noteworthy with its bullish buy signal pointing to a $160 target (see below).

Suggested Options:
We are going to suggest January calls.

BUY CALL JAN 125.00 AHC-AE open interest=616 current ask $10.80
BUY CALL JAN 130.00 AHC-AZ open interest=942 current ask $ 7.70
BUY CALL JAN 135.00 AHC-AY open interest=585 current ask $ 5.20

Picked on November 16 at $128.49
Change since picked: + 2.74
Earnings Date 01/25/06 (unconfirmed)
Average Daily Volume = 1.9 million

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Apache Corp. - APA - close: 69.50 chg: +0.71 stop: 64.95

APA is another aggressive bullish play in the oil sector although its short-term trend looks slightly more optimistic than AHC's. We like APA as a bullish candidate because of its focus on natural gas production. There is still an expectation that natural gas prices could skyrocket again once winter's chill really hits the northeast, especially since we're still recovering from the setbacks caused by hurricanes this fall. The stock has rebounded smartly from its October lows and in the last month APA has broken through resistance at its 50-dma and 100-dma and at the $69 level. We have been suggesting new bullish positions with APA above $69 but more conservative traders may feel better to wait on a breakout over potential round-number resistance at the $70.00 mark. APA's Point & Figure chart is bullish and points to an $83 target. Our year-end target is the $75-76 range. A breakdown under the 50-dma near $68 would be bad news and could be used as a prompt for more conservative traders to exit early in an effort to minimize losses although currently we have a wide stop to give APA some maneuvering room.

Suggested Options:
We are suggesting January calls.

BUY CALL JAN 65 APA-AM open interest= 8925 current ask $6.40
BUY CALL JAN 70 APA-AN open interest=12758 current ask $3.40
BUY CALL JAN 75 APA-AO open interest= 7622 current ask $1.45

Picked on November 22 at $ 69.05
Change since picked: + 0.45
Earnings Date 01/26/06 (unconfirmed)
Average Daily Volume = 3.7 million

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Goldman Sachs - GS - close: 134.12 chg: +0.04 stop: 126.49

The rally in the broker-dealer sector, and in shares of GS, paused on Friday. Yet shares of the firm remain near all-time highs. We believe that the stock will continue to rise into its mid December earnings report. It's a common pattern for the big investment firms to see their stock's rally into earnings and then sell-off after the report even though they smash the earnings estimates. Right now GS looks a little overbought and we would not be surprised by a pull back toward $132 or even back to the $130 level. A bounce from either level could be used as a new bullish entry point. GS' P&F chart points to a $177 target. We are targeting a move into the $139-140 range.

Suggested Options:
We're not suggesting new positions at this time. Look for a dip back to $132 or $130 and buy a bounce. If that occurs we like the December or January strikes but we plan to exit before the company's earnings report.

Picked on November 20 at $131.58
Change since picked: + 2.54
Earnings Date 12/15/05 (unconfirmed)
Average Daily Volume = 3.6 million

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Hovnanian - HOV - close: 51.35 change: +0.28 stop: 47.45 *new*

The housing stocks have seen new strength this past month with many of them breaking out through multi-month trendlines of resistance. Boosting the group has been a pull back in mortgage rates. HOV is one such stock that has broken out from its three-month bearish trend and shares appear to have produced a new bottom in the $44-48 region. We liked the breakout over its 50-dma and its push past round-number, psychological resistance at the $50.00 mark. Right now we'd probably look for a dip back toward the $50 level as a new entry point. HOV's P&F chart has reversed into a buy signal that points to a $66 target. Our target is the $54.50-55.00 range and we plan to exit ahead of HOV's early December earnings report (12/6 or 12/7). That doesn't give us a lot of time so more conservative traders may want to pass or look towards other housing stocks as candidates. We are raising our stop loss on HOV to $47.45.

Suggested Options:
We're not suggesting new positions at this time. Look for a bounce from the $50 level. We like the December or January strikes but remember we're exiting in a couple of weeks.

Picked on November 21 at $ 49.25
Change since picked: + 2.10
Earnings Date 12/07/05 (unconfirmed)
Average Daily Volume = 1.5 million

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Intl. Bus. Mach. - IBM - cls: 88.80 chg: +0.00 stop: 84.85

Shares of IBM (and AAPL) helped lead the GHA hardware index higher this month with IBM's breakout over resistance at the $85 level two weeks ago. The stock remains bullish but short-term it's looking a little overbought as is the GHA hardware index (and while we're at it AAPL looks overbought too). The P&F chart for IBM looks pretty optimistic with a triple-top breakout buy signal and a $104 price target. We're only targeting a move into the $89.90-90.00 range and with IBM just a $1.00 away we're not suggesting new plays. More conservative traders may want to think about exiting early right here for a profit just in case the market sees a post-Thanksgiving pull back. We are prepared to hold IBM through the end of the year.

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

Picked on November 15 at $ 85.25
Change since picked: + 3.55
Earnings Date 01/16/06 (unconfirmed)
Average Daily Volume = 5.6 million

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Novastar Fincl. - NFI - cls: 32.13 chg: +0.48 stop: 29.24

NFI is a new bullish play from the Wednesday night newsletter. We see no changes from our original play description so we're reposting it here:

If Wall Street believes that we could be nearing the end of the FOMC's rate hike cycle it could be good news for mortgage lenders like NFI. It appears that this train of thought, following the release of the latest FOMC minutes on Tuesday, is what pushed NFI to breakout from its consolidation pattern. The high-volume breakout on Tuesday also pushed the stock above its simple 50-dma and above its 3 1/2 month trendline of lower highs. We are going to suggest new plays here at $31.65 but there is a good chance that NFI will pull back and retest the $30.50 region as support. Patient traders might do well to wait for a dip and then evaluate a bullish entry. NFI's next earnings report is not until February so we're going to target the 200-dma near $35 over the next eight weeks.

Suggested Options:
We are suggesting the January calls.

BUY CALL JAN 30 NFI-AF open interest=4837 current ask $3.10
BUY CALL JAN 35 NFI-AG open interest=2708 current ask $0.70

Picked on November 23 at $ 31.65
Change since picked: + 0.48
Earnings Date 02/06/06 (unconfirmed)
Average Daily Volume = 621 thousand

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NovAtel Inc. - NGPS - close: 31.35 chg: +0.44 stop: 27.75

We expected a pull back toward the $30.00 level, which as broken resistance should become new support. However, the dip was bought pretty quick on Friday near $30.50. Unfortunately, volume was so low on Friday we hesitate to put much weight with Friday's trading. NGPS remains a bullish candidate with the breakout from its three-week trading range and its breakout above its long-term trendline (see the weekly chart). We would still consider new positions here but odds are with the market so overbought we'll get another chance to buy a dip near $30.00, which would be the more advantageous entry point. The P&F chart for NGPS points to a $50 target. Our target is the $35.00-36.00 range by year-end.

Suggested Options:
We are suggesting the January strikes although Decembers and March options have more open interest.

BUY CALL JAN 30 QAZ-AF open interest= 12 current ask $3.50
BUY CALL JAN 35 QAZ-AG open interest= 63 current ask $1.50

Picked on November 21 at $ 30.45
Change since picked: + 0.90
Earnings Date 01/26/06 (unconfirmed)
Average Daily Volume = 292 thousand

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Phelps Dodge - PD - cls: 134.70 chg: +5.59 stop: 124.99 *new*

Copper-related mining stocks turned in a strong session on Friday and PD helped lead the way with a 4.3% gain and a new monthly high. Friday's rally, while fueled by low volume, is still a positive step in reaffirming its five-week trend of higher lows. Our year-end target is the $139.90-140.00 range. More conservative traders may want to target the October high near $138.50. We are adjusting the stop loss to $124.99.

Suggested Options:
We are not suggesting new bullish positions at this time but a dip back toward $130-132 could be used as a new entry point. We like the January calls.

Picked on November 18 at $131.25
Change since picked: + 3.45
Earnings Date 01/26/06 (unconfirmed)
Average Daily Volume = 2.7 million

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Polaris Ind. - PII - close: 49.44 change: -0.12 stop: 45.95

PII is a somewhat aggressive play since shares are in an eight-month bearish trend. Yet short-term it looks like PII may have finally found a bottom with its sideways consolidation in the $44-48 range over the past seven weeks. PII isn't so much a retailer as it is a maker of recreational motorized toys but now that retailers are moving higher into the holiday shopping season PII might be able to ride their coattails. Currently the stock has stalled under round-number, psychological resistance at the $50 mark. We would look for a dip back toward the $48.50-48.00 range and buy a bounce there as a new entry point. Our year-end target is the $54-55 range under its simple 200-dma.

Suggested Options:
We're not suggesting new positions right here. Wait for a dip back toward 48.50-48.00. We like the January calls although March options have more open interest.

Picked on November 21 at $ 48.47
Change since picked: + 0.97
Earnings Date 01/12/06 (unconfirmed)
Average Daily Volume = 467 thousand

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Rockwell Autom. - ROK - cls: 56.85 chg: -0.05 stop: 54.80

We have been growing more worried over ROK's relative weakness over the past week but viewing the larger picture shares of ROK still look bullish. Granted short-term technical signals have turned bearish and more conservative traders may want to exit here or near the $56 level to protect their capital. We're going to wait it out since broken resistance near $55.00 should act as new support. We do expect the stock to dip back toward the $55 level in the next several days if not early next week so be prepared. A bounce from the $55 level could be used as a new bullish entry point. The Point & Figure chart for ROK shows a triple-top breakout buy signal with a $69 target. We're targeting a move $61-62 range by year end. More conservative traders might want to exit early at $60.

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

Picked on November 03 at $ 55.90
Change since picked: + 0.95
Earnings Date 11/03/05 (confirmed)
Average Daily Volume = 804 thousand

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Walter Inds. - WLT - close: 51.66 change: +0.27 stop: 45.95

WLT is a construction services stock that has seen its shares breakout over major resistance at the $50.00 level to score new all-time highs. The P&F chart looks very bullish with a $67 target. We believe shares can run into the $57-58 range before year's end. We would consider new positions right here but traders might do well to wait for a dip back to the $50 level and buy a bounce, especially with the major averages looking so overbought. The options have already risen significantly even though shares of WLT have not.

Suggested Options:
We are suggesting the January calls.

BUY CALL JAN 50 WLT-AJ open interest=3403 current ask $6.40
BUY CALL JAN 55 WLT-AK open interest=3834 current ask $2.40

Picked on November 20 at $ 51.50
Change since picked: + 0.16
Earnings Date 10/26/05 (confirmed)
Average Daily Volume = 927 thousand
 

Put Updates

None
 

Strangle Updates

(What is a strangle? It's when a trader buys an out-of-the-money (OTM) call and an OTM put on the same stock. The strategy is neutral. You do not care what direction the stock moves as long as the move is big enough to make your investment profitable.)

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AmerisourceBergen - ABC - cls: 79.39 chg: +0.11 stop: n/a

Hmm... we're moving into crunch time for shares of ABC. We only have three more weeks before December options expire. While December is historically one of the most bullish months of the year there's no guarantee, furthermore there's no guarantee that ABC will participate in any holiday rally. Currently shares of ABC still look bullish but the stock is trading under round-number resistance at the $80.00 mark. To have any hope of profitability with our December strangle ABC needs to breakout over the $80 level and soon. We are not suggesting new strangle positions at this time. Our current strangle involves the December $80 calls (ABC-LP) and the December $70 puts (ABC-XN). Our estimated cost was $2.80. Our current target is for a rise to $5.00 in the strangle.

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

Picked on October 16 at $ 74.81
Change since picked: + 4.63
Earnings Date 11/03/05 (confirmed)
Average Daily Volume = 900 thousand

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Amer. Eagle Out. - AEOS - cls: 24.11 chg: -0.77 stop: n/a

Some of the retailers were stumbling lower on "Black Friday", which traditionally signals the beginning of the holiday shopping season. AEOS was one such retailer, which lost more than three percent following Wednesday's failed rally at its exponential 200-dma. We are not suggesting new strangle positions at this time. The current strangle has an estimated cost of $2.35 with the January $27.50 calls (AQU-AY) and the January $22.50 puts (AQU-MX). We are targeting a rise to $4.70.

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

Picked on November 13 at $ 25.47
Change since picked: - 1.33
Earnings Date 11/15/05 (confirmed)
Average Daily Volume = 3.6 million

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Abercrombie&Fitch - ANF - close: 62.87 chg: -0.26 stop: n/a

Apparel retailer ANF also experienced some profit taking on Friday but shares rebounded off their worst levels of the session. We wouldn't be surprised to see a dip back toward support at broken resistance near $60.00. We are not suggesting new strangle positions at this time. The options in our strangle are the January $65 calls (ANF-AM) and the January $55 puts (ANF-MK). Our estimated cost was $5.15. We're looking for a rise to $8.50.

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

Picked on November 13 at $ 59.67
Change since picked: + 4.07
Earnings Date 11/15/05 (confirmed)
Average Daily Volume = 2.7 million

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Chicago Merc. Exchg. - CME - cls: 396.90 chg: +10.23 stop: n/a

Wow! Shares of CME displayed lots of strength on Friday. The stock broke out and closed at a new all-time high just under the $400 level. We are not suggesting new strangle positions at this time. Our current play involves the January $400 calls (CMJ-AK) and the January $350 puts (CMJ-MA). Our estimated cost was $26.70. We're aiming for a rise to $40.00 in the strangle before January options expire.

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

Picked on November 20 at $375.90
Change since picked: +21.00
Earnings Date 01/24/06 (unconfirmed)
Average Daily Volume = 879 thousand

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D.R.Horton - DHI - close: 36.62 chg: -0.05 stop: n/a

DHI is another homebuilder who saw its November rally take a post-Thanksgiving nap. Shares traded in a very narrow range. The overall pattern remains bullish but DHI could dip back toward the $35 level before moving higher again. We are not suggesting new strangles at this time. Our current play involves the January $35 calls (DHI-AG) and the January $30 puts (DHI-MF). Our estimated cost was $3.15. We're aiming for a rise to $6.00.

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

Picked on November 13 at $ 32.56
Change since picked: + 4.06
Earnings Date 11/16/05 (confirmed)
Average Daily Volume = 3.2 million

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Four Seasons - FS - close: 50.31 chg: -0.09 stop: n/a

FS' sideways consolidation continues. The good news is that FS has not participated in the market's rally. The bad news is that this sideways consolidation only makes our option time premium erode more quickly! We need volatility. Now the overall trend remains bearish and we expect shares to turn lower. We are not suggesting new strangles at this time. The options in our strangle were the January $60 calls (FS-AL) and the January $50 puts (FS-MJ). Our estimated cost was about $2.60. We're aiming for a rise to $5.00 or more.

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

Picked on November 08 at $ 55.37
Change since picked: - 4.34
Earnings Date 11/10/05 (confirmed)
Average Daily Volume = 319 thousand

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Hutchinson Tech. - HTCH - cls: 26.85 chg: -0.17 stop: n/a

Last week's rally in HTCH has turned many of its technical indicators bullish. Unfortunately, turning its indicators positive was not much of a challenge since HTCH has been essentially churning sideways with a slight bearish tilt for the past three months. We were just about prepared to exit early prior to last week's rally. If HTCH fails to build on these gains an early exit may still be our best option to salvage any capital from our play. Short-term we do expect HTCH to dip but the $26 level should act as short-term support. If we don't see the bullish trend continue to develop this next week we'll re-evaluate an early exit next weekend. We are not suggesting new strangles at this time. The options in our strangle were the January $30 calls (UTQ-AF) and the January $20 puts (UTQ-MD). Our estimated cost was $1.65. We have adjusted our initial target from $3.00 to breakeven at $1.65 since the post-earnings reaction was not as big as expected.

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

Picked on October 26 at $ 24.89
Change since picked: + 1.96
Earnings Date 11/01/05 (confirmed)
Average Daily Volume = 666 thousand

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Lear Corp - LEA - close: 27.88 chg: -0.56 stop: n/a

Automotive stocks like GM and LEA continue to sink and Friday saw shares of LEA drop almost two percent. The long-term bearish trend is still very much intact with technical indicators pointing lower. Last week LEA produced a new failed rally under the $30.00 level and odds are growing that we'll see a new relative low soon. The Point & Figure chart for LEA points to an $11 target. We are no longer suggesting new strangle positions. The options in our strangle are the January $35 calls (LEA-AG) and the January $25 puts (LEA-ME). We are targeting a rise to $3.20 or more.

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

Picked on November 06 at $ 30.24
Change since picked: - 2.36
Earnings Date 10/26/05 (confirmed)
Average Daily Volume = 1.8 million

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Loews - LTR - close: 97.80 change: +0.00 close: n/a

The consolidation in LTR is narrowing. The stock peaked under $99 on November 18th and has traded sideways since. The sideways action has narrowed significantly and we can expect a breakout either direction soon. Obviously we'd like to see LTR break higher but with the major averages looking overbought and due for a dip the next move may be lower. LTR's technical indicators are suggesting the next move will be lower. We only have three weeks left before December options expire. More conservative traders have a decision to make. The December $95 calls (LTR-LS) are trading around $3.50 right now. If you could exit now it would technically be a small profit. You have to decide. Do you exit now or hold on for a possible rally to the $100 level. We wouldn't be surprised to see LTR dip back toward $95 and then bounce back toward $100 but it would make for a volatile three weeks with the December calls. We're not suggesting new plays. The options in our strategy are the December $95 calls (LTR-LS) and the December $85 puts (LTR-XQ). Our estimated cost is about $3.05. We plan to exit if our strangle rises to $5.00 or if shares of LTR hit 99.90.

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

Picked on October 23 at $ 89.94
Change since picked: + 7.86
Earnings Date 10/27/05 (confirmed)
Average Daily Volume = 602 thousand

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Verifone Holdings - PAY - cls: 23.16 chg: +0.31 stop: n/a

This coming week could be an exciting one for PAY. The stock has spent the last three weeks consolidating its gains from October and early November. Now after testing support near $22 and its 200-dma we expect shares to rebound higher again. That could all change on Thursday. PAY is expected to report earnings on December 1st. Wall Street's estimates are for profits of 19-cents a share. Our current strangle involves the January $22.50 calls (PAY-AX) and the January $17.50 puts (PAY-MW). Our estimated cost was $2.60 and we're aiming for a rise to $4.50 or more. Right now those calls (PAY-AX) are trading in the $2.00-2.25 range. If PAY misses earnings or issues some negative guidance the calls could evaporate into thin air. If PAY rebounds higher before its earnings report more conservative traders may want to exit early instead of holding over its earnings announcement. We do have January strikes and are planning on holding over the report.

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

Picked on October 12 at $ 19.98
Change since picked: + 3.18
Earnings Date 12/01/05 (confirmed)
Average Daily Volume = 259 thousand

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Protein Design Labs - PDLI - cls: 28.69 chg: +0.02 stop: n/a

Reaction to PDLI's earnings report on November 1st was not as sharp as we expected. The stock began to slip lower following earnings but then in the last seven trading sessions the stock has surprisingly rallied higher. This back and forth action has been bad news for our December strangle. Here's more bad news. The rally in the biotech sector (see the BTK index), like the major indices, is looking tired. If the BTK consolidates lower we would expect PDLI to follow. That's the wrong direction. We need PDLI to pick a direction and go, especially with just three weeks left before December options expire. At the moment we're expecting PDLI to pull back, probably towards $27.50 or $27.00, which effectively puts us back at the starting line with no catalyst to move the stock and very little time. More conservative traders may want to look for an early exit and cut their losses. At this point we plan on riding the December options into expiration since the month of December tends to be bullish. We are not suggesting new strangle positions. The options in our strangle are the December $30 calls (PQI-LF) and the December $25 puts (PQI-XE). Our estimated cost was at $1.80. We'll plan to sell if either side rises to $3.25.

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

Picked on October 30 at $ 27.70
Change since picked: + 0.99
Earnings Date 11/01/05 (confirmed)
Average Daily Volume = 1.8 million

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Spectrum Brands - SPC - close: 18.42 change: -0.48 stop: n/a

Is the oversold bounce in SPC finally over? It looks like it might be. The stock failed to breakout over the bottom of its gap down and its 21-dma. Friday's weakness appears to correspond with its trend of lower highs. We are not suggesting new strangle positions at this time. Our estimated cost for this strangle was $1.25. The options in our suggested strangle are the December $22.50 calls (SPC-LX) and the December $17.50 puts (SPC-XW). We are aiming for a rise to $2.50 or more.

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

Picked on November 08 at $ 20.63
Change since picked: - 2.02
Earnings Date 11/10/05 (confirmed)
Average Daily Volume = 576 thousand

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Questar Corp. - STR - close: 78.09 chg: +1.38 stop: n/a

STR rallied strongly from May through the end of September fueled by a huge move in natural gas prices. Currently there is a lot of uncertainty about where natural gas will head next? Will it continue to sell off? Or will natural gas spike to new highs as the cold of winter pushes demand higher while the U.S. is still trying to recover from this fall's hurricanes. This uncertainty has lead to STR's sideways trading over the last few weeks and provided our entry point to launch strangles in the $75-77 window (although we prefer to enter as close to $75 as possible). Right now STR is outside this window and we're not suggesting new plays. If STR dips again we might use a $76-75 entry window. Our strangle involves the January $80 calls (STR-AP) and the January $70 puts (STR-MN). Our estimated cost was $5.10 and we're aiming for a rise to $9.50 or more. FYI: while we're not suggesting new plays investors looking for a new strangle here in STR might want to consider using the April strikes to give you more time to catch any winter-inspired run in natural gas.

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

Picked on November 20 at $ 76.25
Change since picked: + 1.84
Earnings Date 01/26/05 (unconfirmed)
Average Daily Volume = 716 thousand

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Valero Energy - VLO - close: 101.28 chg: +0.70 stop: n/a

Many stocks in the oil sector have begun to rebound from their October or November lows. VLO did see a rebound but has fallen again and the stock's overall pattern is a sideways consolidation with higher lows and lower highs. This sort of squeeze tends to produce a breakout sooner or later and that's what we're counting on with a strangle play. We're fortunate that VLO is consolidating near a significant strike price at the $100 mark. We opened the play with a $99.00-101.00 entry window to launch a strangle play. We suspect that VLO will dip again into this entry window so if you're looking for a new play be ready. We're suggesting the January $110 calls (VLO-AB) and the January $90 puts (VLO-MR). Our estimated cost is $5.85. We are aiming for a rise to $9.50. Post split that target will change to $4.75 as our cost will adjust to $2.825. VLO will split 2-for-1 on December 16th.

Suggested Options:
Watch for a dip back into our $99.00-101.00 entry window. At current prices this strangle is about $5.40.

Picked on November 21 at $101.00
Change since picked: + 0.28
Earnings Date 01/30/06 (unconfirmed)
Average Daily Volume = 10.7 million
 

Dropped Calls

None
 

Dropped Puts

None
 

Dropped Strangles

None
 

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