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Call Updates

Biogen Idec - BIIB - close: 46.21 change: -0.85 stop: 44.45

BIIB continued to correct lower on Friday with an early morning dip to under the $46.00 level. Technical oscillators have turned lower but we suspect the correction may be about over in BIIB. Unfortunately, the stock's direction will probably be set by the markets on Tuesday and the market will most likely be reacting to any earnings news that morning. Readers have a choice here. There is the chance that investors will produce a sell the news reaction once earnings season truly begins next week. If you subscribe to that idea then it might be prudent to exit early in BIIB before it drifts any lower. We're going to remain optimistic for now but would only consider new bullish positions if BIIB traded back above its 10-dma near $47.00. The Point & Figure chart remains bullish and points to a $62 target. Our target for BIIB is the $49.85-50.00 range.

Suggested Options:
We are not suggesting new call positions in BIIB at this time.

Picked on December 27 at $ 46.11
Change since picked: + 0.10
Earnings Date 02/15/06 (confirmed)
Average Daily Volume = 3.2 million

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Caterpillar - CAT - close: 62.33 change: +0.12 stop: 57.95 *new*

Heavy machinery producer and Dow-component CAT continues to show relative strength. The stock inched higher on Friday and closed near an all-time high. The breakout over significant resistance at the $60.00 level is bullish but we hesitate to suggest new positions here. A pull back to the $60.00 level, which should now act as support, or the simple 10-dma could be used as a new entry point. However, traders need to remember that CAT is due to report earnings on January 26th and we do not want to hold over the report. We are going to raise our stop loss to $57.95. Our target is the $64.75-65.00 range. The Point & Figure chart points to a $72 target.

Suggested Options:
We are not suggesting new call positions in CAT at this time.

Picked on January 08 at $ 60.45
Change since picked: + 1.88
Earnings Date 01/26/06 (unconfirmed)
Average Daily Volume = 4.0 million

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Goldman Sachs - GS - close: 133.26 chg: +1.01 stop: 127.45

We are happy to report that GS displayed some relative strength on Friday. The XBD broker-dealer index closed fractionally in the red but shares of GS added 0.7% and look poised to breakout over the $134 level. Our target is the $134.80-135.00 range. We are not suggesting new positions at this time. If GS were to see some profit taking we'd watch for the $130 level to act as support. A bounce near $130 could be used as a new entry for bullish positions.

Suggested Options:
We are not suggesting new call positions in GS at this time.

Picked on January 09 at $130.05
Change since picked: + 3.21
Earnings Date 03/16/06 (unconfirmed)
Average Daily Volume = 3.6 million

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Holly Corp. - HOC - close: 64.12 chg: +1.03 stop: 59.95

The oil stocks continued to rally on Friday even though the price of crude oil has apparently stalled under the $65 a barrel level. Shares of HOC rebounded nicely but remain under resistance at the $65.00 level. If shares of HOC can breakout over $65.00 it will reverse its P&F chart from a sell signal into a new buy signal. It looks like HOC could hit new highs next week, especially if the oil sector continues to be strong. Our trigger to buy calls in HOC is at $65.65. If triggered we'll target a quick rally into the $69.75-70.00 range before the company's early February earnings report. We do not want to hold over the earnings report.

Suggested Options:
We are suggesting the February calls.

BUY CALL FEB 60 HOC-BL open interest= 66 current ask $5.80
BUY CALL FEB 65 HOC-BM open interest=135 current ask $2.85
BUY CALL FEB 70 HOC-BN open interest= 14 current ask $1.10

Picked on January xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 02/06/06 (unconfirmed)
Average Daily Volume = 303 thousand

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Lehman Brothers - LEH - close: 135.65 chg: -0.18 stop: 129.45*new*

LEH may have dipped 18 cents on Friday but we see the lack of more serious profit taking as relative strength. LEH was rebounding higher in the last couple of hours of trading on Friday. Yet this probably isn't a spot to consider new longs. The markets are at a pivotal spot and could go either way. If you're looking for new positions wait for a potential dip into the $130.00-132 region. More conservative traders may actually want to consider taking some money off the table right here. The P&F chart points to a $177 target. We are going to maintain our target in the $138.50-140.00 range. We are raising our stop loss to $129.45.

Suggested Options:
We are not suggesting new call positions in LEH at this time.

Picked on January 09 at $131.05
Change since picked: + 4.60
Earnings Date 03/14/06 (unconfirmed)
Average Daily Volume = 2.3 million

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Ipsco Inc. - IPS - close: 83.93 change: +0.11 stop: 81.95 *new*

Unfortunately, we don't have much new to report on for IPS. Rival steel maker U.S.Steel (X) received an upgrade on Friday but it failed to have any affect on shares of IPS. The overall trend in IPS is bullish but its momentum has stalled. The technicals are offering a mixed picture. Meanwhile the P&F chart, which tends to eliminate some of the noise, is still bullish but looks overbought. We are not suggesting new positions at this time. We might change our mind and consider buying calls if IPS trades over $85.25 again. However, we suspect that if the markets see any sort of sell the news reaction on Monday that IPS will turn lower. Therefore we're going to raise our stop loss to $81.95. If IPS rallies our target is the $89.00-90.00 range. We do not want to hold over its February earnings report.

Suggested Options:
We are not suggesting new call positions in IPS at this time.

Picked on December 30 at $ 83.55
Change since picked: + 0.38
Earnings Date 02/13/06 (unconfirmed)
Average Daily Volume = 396 thousand

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Lennar Corp. - LEN - close: 63.99 chg: -1.24 stop: 61.90 *new*

The Thursday retreat in the homebuilders continued into Friday and shares of LEN fell below the $65.00 level. It looks like the selling stalled near its rising 10-dma and LEN was just beginning to rally late Friday afternoon. We suspect that the weakness was just some profit taking after the sector's earlier strength in the week. LEN had some resistance in the $63.00-64.00 region and it should now act as support. Meanwhile the bonds have been rising (yields falling) and that should help drive mortgage rates lower, which in turn is good for the homebuilders. Watch for a bounce back above the $65.00 level before considering new call positions in LEN. We are raising our stop loss to $61.90. The P&F chart is very positive with a bullish triangle breakout and a $75 target. Our target now is the $69.50-70.00 range before February options expire.

Suggested Options:
We are not suggesting new call positions in LEN at this time.

Picked on January 09 at $ 64.01
Change since picked: - 0.02
Earnings Date 03/16/06 (unconfirmed)
Average Daily Volume = 2.6 million
 

Put Updates

Scotts Miracle grow - SMG - cls: 46.26 che: -0.29 stop: 47.05

The weakness on Friday in shares of SMG has awakened new hope that shares may indeed turn lower. The stock has spent the last two weeks consolidating under resistance at the $47.00 level with a bullish trend of higher lows. That trend was broken on Friday with a drop under its 50-dma. Aggressive traders may want to consider new put positions here. We would prefer to open new put positions on a decline under the $46.00 level. Please remember that we do not want to hold over SMG's January 24th (unconfirmed) earnings report, which would give new positions less than five trading days to perform. Our target is the $41.50-41.25 range.

Suggested Options:
We are suggesting the February puts but only if SMG trades under $46. Remember, that we plan to exit ahead of its earnings report.

BUY PUT FEB 50 SMG-NJ open interest= 49 current ask $4.20
BUY PUT FEB 45 SMG-NI open interest=1051 current ask $1.15

Picked on January 01 at $ 45.24
Change since picked: + 1.02
Earnings Date 01/26/06 (unconfirmed)
Average Daily Volume = 354 thousand
 

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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Amer. Eagle Out. - AEOS - cls: 25.43 chg: +0.21 stop: n/a

Our strangle play in AEOS is pretty much dead. There are four trading days left before January options expire. For this strangle play to have a chance at exiting at breakeven or better then AEOS needs to trade above $29.50 or under $20.00. We are not suggesting new plays. 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 have changed our target to breakeven at $2.35.

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

Picked on November 13 at $ 25.47
Change since picked: - 0.04
Earnings Date 02/23/06 (unconfirmed)
Average Daily Volume = 3.6 million

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Abercrombie&Fitch - ANF - close: 63.76 chg: -2.37 stop: n/a

Murphy's law is alive and well. When ANF was above the $65 level we had a chance that shares might spike higher and give us an opportunity to exit at breakeven ($5.15). Friday's action may have just doomed the strangle play. ANF was downgraded Friday morning and the stock gapped lower to open at $65.00 and close with a 3.58% loss. We have four trading days before January options expire. The options in our strangle are the January $65 calls (ANF-AM) and the January $55 puts (ANF-MK). Our target has been adjusted to breakeven at $5.15.

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

Picked on November 13 at $ 59.67
Change since picked: + 4.09
Earnings Date 02/14/06 (unconfirmed)
Average Daily Volume = 2.7 million

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Blue Coat Sys. - BCSI - cls: 41.80 chg: -0.42 stop: n/a

Short-term technicals look bearish but we're running out of time before January options expire. BCSI needs to trade under $39 or well over $50 if we are going to have a chance at exiting near breakeven. Last week we adjusted our target to breakeven at $3.25. We are not suggesting new plays. Our current play involves the January $50 call and the January $40 put.

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

Picked on December 04 at $ 45.43
Change since picked: - 3.63
Earnings Date 02/23/06 (unconfirmed)
Average Daily Volume = 416 thousand

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Building Materials - BMHC - cls: 77.90 chg: +0.22 stop: n/a

The oversold bounce in BMHC ran right up to its trendline of resistance and stopped. Now the stock is starting to fade lower again. We are not suggesting new strangle positions at this time. The options in our strangle play are the March $90 calls (BGU-CR) and the March $70 puts (BGU-ON). Our estimated cost is $8.20. Our target is $12.50 by March expiration.

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

Picked on December 18 at $ 80.95
Change since picked: - 3.15
Earnings Date 02/07/06 (unconfirmed)
Average Daily Volume = 527 thousand

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Chicago Merc. Exchg. - CME - cls: 382.24 chg: +2.09 stop: n/a

Time is almost up for our strangle in CME. At the moment if we have any hope of exiting near breakeven we need to see CME trade under $340 or above $410 and do it pretty quickly. Odds of that happening don't seem very high at the moment. We are not suggesting new plays. Our current play involves the January $400 calls (CMJ-AK) and the January $350 puts (CMJ-MA).

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

Picked on November 20 at $375.90
Change since picked: + 6.34
Earnings Date 01/31/06 (confirmed)
Average Daily Volume = 879 thousand

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Encana Corp. - ECA - close: 45.61 chg: +0.21 stop: n/a

Shares of oil and natural gas producer ECA continue to consolidate sideways on either side of the $45.00 level. We don't believe this consolidation will last much longer. The energy sector has a lot of catalysts pushing it higher but on the off chance that the industry reverses course we're suggesting a strangle play in ECA. We're suggesting opening strangle positions in the $44.00-46.00 range. We would prefer to open new positions in the $45.25-44.75 region. We are using the April $50 calls and the April $40 puts. Our estimated cost is $3.45. At current prices that means we're betting that ECA will be trading under $36.50 or over $53.50 by April option expiration.

Suggested Options:
We are suggesting the April $50 calls (ECA-DJ) and the April $40 puts (ECA-PH) for our strangle play. A strangle requires that you buy both an out of the money call and an out of the money put. Our estimated cost was $3.45.

Picked on January 10 at $ 45.56
Change since picked: + 0.05
Earnings Date 02/15/06 (confirmed)
Average Daily Volume = 4.4 million

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Four Seasons - FS - close: 54.81 chg: -0.37 stop: n/a

January option expiration is just four trading days away and we see no reason that FS will move much from its current $54-55 trading range. Unfortunately, that means our strangle play will close with a loss. The options in our strangle were the January $60 calls (FS-AL) and the January $50 puts (FS-MJ). We have adjusted our target to breakeven at $2.60.

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

Picked on November 08 at $ 55.37
Change since picked: - 0.56
Earnings Date 02/26/06 (unconfirmed)
Average Daily Volume = 319 thousand

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Questar Corp. - STR - close: 81.12 chg: +0.35 stop: n/a

Oddly enough the natural gas sector continues to creep higher despite a very sharp three-week sell-off in natural gas futures. We are running out of time for our STR strangle. We have adjusted our target to breakeven at $5.10. Our strangle involves the January $80 calls (STR-AP) and the January $70 puts (STR-MN).

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

Picked on November 20 at $ 76.25
Change since picked: + 4.87
Earnings Date 02/09/06 (unconfirmed)
Average Daily Volume = 716 thousand

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Texas Ind. - TXI - close: 52.98 chg: +0.17 stop: n/a

TXI is still stuck in its trading range and that's bad news for our strangle play. The options in our strangle are the January $55 calls (TXI-AK) and the January $45 puts (TXI-MI). Our target has been reduced to breakeven at $2.70. A move into the $57-58 range might be enough to get our strangle there.

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

Picked on November 27 at $ 49.57
Change since picked: + 3.41
Earnings Date 01/05/06 (confirmed)
Average Daily Volume = 354 thousand
 

Dropped Calls

Gilead Sciences - GILD - close: 59.40 chg: +0.96 stop: 54.51

Target achieved. GILD continued to rally on Friday and hit our target in the $59.00-60.00 range. It looks like GILD has changed its earnings date to January 30th.

Picked on December 22 at $ 54.51
Change since picked: + 4.89
Earnings Date 01/30/06 (confirmed)
Average Daily Volume = 4.3 million
 

Dropped Puts

Progressive Corp - PGR - cls: 116.67 chg: +1.22 stop: 119.15

It is arguable if we have been stopped out or not. The high for the day says $120.37. Yet if you look at any of the intraday charts you won't find PGR trading above $118.15 on Friday. Thus, the high-for-the-day reading appears to be a bad tick right near the opening bell on Friday morning. If it had been a real rally higher we would have been stopped out at $119.15. We're choosing to close the play anyway because PGR is due to report earnings on January 18th before the market open and we don't want to hold over the report.

Picked on December 30 at $117.45
Change since picked: - 0.78
Earnings Date 01/18/06 (confirmed)
Average Daily Volume = 836 thousand
 

Dropped Strangles

Lear Corp - LEA - close: 24.24 chg: -0.34 stop: n/a

We are choosing an early exit in the LEA strangle play. The stock continued to sink on Friday but shares now look oversold enough to produce an oversold bounce. The options in our strangle were the January $35 calls and the January $25 puts (LEA-ME). On Friday the LEA-ME puts hit a high of $1.55 and are currently trading at $1.20bid/$1.30ask. Our estimated cost was $1.60. We'd rather exit now and minimize our loss than bet on a continued decline in LEA next week. More aggressive traders may want to reconsider and keep the play open just remember that it won't take much of a bounce to make the option premium disappear.

Picked on November 06 at $ 30.24
Change since picked: - 6.00
Earnings Date 01/25/06 (confirmed)
Average Daily Volume = 1.8 million
 

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