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Call Updates

Carter's Inc. - CRI - close: 68.00 chg: -1.56 stop: 64.75

As expected shares of CRI have stalled under the $70.00 level, which is acting as round-number resistance. The trend in CRI is still very bullish given the breakout over major resistance at the $65.00 level. We can look for the stock to probably dip again early next week and potentially retest the $65 level as support before moving higher. Any bounce above $65 could be used as a new bullish entry point. The P&F chart is bullish and points to an $85 target. Our target is the $72.50-75.00 range. We do not want to hold over the late February earnings report.

Suggested Options:
Watch for a bounce above $65 as an entry point. We are suggesting the March calls so we can hold positions up to but not over the February earnings report.

BUY CALL MAR 65 CRI-CM open interest=172 current ask $5.50
BUY CALL MAR 70 CRI-CN open interest=572 current ask $2.95

Picked on January 25 at $ 66.62
Change since picked: + 1.38
Earnings Date 02/20/06 (unconfirmed)
Average Daily Volume = 313 thousand

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Freeport Mcmoran - FCX - cls: 62.97 chg: +1.17 stop: 56.85*new*

Last week was very strong for almost anything metal related. Miners like PD and FCX rebounded sharply while steel-related stocks rose on merger news. Last week the sector got a boost after an analyst firm upgraded their forecasts on metal demand for 2006. The copper producers are soaring on expectations that demand from the U.S. and China will continue to outweigh supply. Shares of FCX hit a new all-time high of $64.00 on Friday. Our target is the $64.75-65.00 range. At the moment we're not suggesting new bullish positions but we would watch for a dip back toward $60.00 as a new bullish entry point. We are going to raise the stop loss to $56.85. Don't forget that rival Phelps Dodge (PD) is expected to report earnings on January 31st. The stock has been soaring and traders might use the report as an excuse to lock in profits. This is a news event that could influence trading in FCX.

Suggested Options:
We are not suggesting new positions right here but look for a dip back toward the $60 level. We like the March calls.

Picked on January 24 at $ 60.22
Change since picked: + 2.75
Earnings Date 01/17/06 (confirmed)
Average Daily Volume = 2.6 million

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SFBC Intl. - SFCC - close: 21.91 chg: -0.77 stop: 18.95

Our short-term, aggressive rebound play in SFCC is holding up. The stock was downgraded to a "hold" on Friday morning and shares dipped to $21.13 before bouncing. The stock's bullish posture is still intact given the breakout over resistance near $20.00 and its 50-dma. Friday's dip actually looks like a new entry point but patient traders might want to wait before initiating new positions. The broader market indices could be due for a pause and it's almost guaranteed that we'll see some volatility on Tuesday after the FOMC meeting. A pull back into the $20.00-20.75 region would look like an attractive entry point. Remember that the stock has extremely high short interest and any sort of rally in the stock could spark another short squeeze. The latest data shows short interest rising from 74% to 92% of its 18.4 million-share float. If we were short we'd be worried given last week's bullish breakout. Plus, the Point & Figure chart is bullish with a $35 target. Our target is the $24.90-25.00 range. More conservative traders may want to exit in the $24.50-24.65 zone since the 38.2% Fibonacci retracement of its October-December sell-off is about $24.65. Meanwhile it looks like the earnings date has been moved back toward February 22nd. This is still an unconfirmed date but it gives us more time for the play to come to fruition.

Suggested Options:
Previously we suggested the February calls because the only earnings date we had was early February and we did not want to hold over the report. If opening new plays now we'd prefer March calls.

BUY CALL FEB 20.00 JQE-BD open interest=1839 current ask $3.20
BUY CALL FEB 22.50 JQE-BX open interest=1047 current ask $1.85

BUY CALL MAR 20.00 JQE-CD open interest=3072 current ask $4.40
BUY CALL MAR 22.50 JQE-CX open interest=1730 current ask $2.20

Picked on January 25 at $ 20.92
Change since picked: + 0.99
Earnings Date 02/22/06 (unconfirmed)
Average Daily Volume = 2.5 million

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Wynn Resorts - WYNN - close: 62.94 change: +2.86 stop: 58.45*new*

The rally continues in shares of WYNN on Friday. The stock added 4.7% to breakout over its November highs. Shares hit $63.89 on Friday. Our target is the $64.75-65.00 range. More conservative traders may want to think about exiting early right here for a profit. We are not suggesting new bullish positions with WYNN this close to our target. We are raising the stop loss to $58.45. We do not want to hold over the February earnings report.

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

Picked on January 22 at $ 58.78
Change since picked: + 4.16
Earnings Date 02/09/06 (unconfirmed)
Average Daily Volume = 1.1 million
 

Put Updates

Biotech HOLDRs - BBH - close: 194.75 chg: +1.20 stop: 200.11*new*

Weakness in AMGN is weighing on the BBH but strength in the biotech sector in general is stalling any decline in the HOLDR. The P&F chart for the BBH is bearish but short-term technical oscillators are suggesting the BBH will turn higher. Plus, the weekly chart's latest candlestick is suggesting a bullish reversal. Expect a bounce into the $198-199 region before it moves lower again. We're going to lower our stop loss to $200.11. Truly conservative traders may just want to exit early right here. We're not suggesting new put positions at this time but a failed rally under $199 or better yet under $196 could be used as an entry point.

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

Picked on January 20 at $195.78
Change since picked: - 1.03
Earnings Date 00/00/00 (unconfirmed)
Average Daily Volume = 539 thousand

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Johnson Controls - JCI - close: 69.99 chg: -0.62 stop: 72.51

The good news here with JCI was the stock's failure to rally with the broad market indices on Friday. The stock continued to drift lower and has now closed under the $70.00 level. This looks like a new bearish entry point to buy puts. The technical oscillators are also suggesting that JCI will continue lower. Our target is the $65.50-65.00 range but watch for a bounce from the 100-dma near 68.00.

Suggested Options:
We are suggesting the April puts because the March puts don't have much open interest.

BUY PUT APR 75 JCI-PO open interest=156 current ask $6.70
BUY PUT APR 70 JCI-PN open interest=210 current ask $3.70
BUY PUT APR 65 JCI-PM open interest=432 current ask $1.75

Picked on January 25 at $ 69.90
Change since picked: + 0.09
Earnings Date 01/20/06 (confirmed)
Average Daily Volume = 955 thousand

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Omnicare - OCR - close: 55.05 change: +0.97 stop: 56.25

Bears need to be on yellow alert here! Seeing OCR rebound on Friday is not a surprise given the strength in the major indices. What really concerns us is the last candlestick on the weekly chart, which looks like a "hammer" pattern or a bullish reversal signal. We strongly considered exiting early right here but upon closer inspection of OCR's trading on Friday we're going to let the play run for now. OCR did rebound higher on Friday but the stock only bounced high enough to fill the gap from Wednesday morning. Shares actually tried to breakout over the $55.50 level twice on Friday and failed both times. Plus, OCR still has what looks like significant resistance near $56.00-56.20. More aggressive traders may want to widen their stop a little bit. We'll leave our stop loss at $56.25 for now. A new decline under $54.00 could be used as a new entry point but keep in mind we're only targeting a slide into the $51.00-50.00 range. We do not want to hold over the late February earnings report.

Suggested Options:
Watch for a failed rally under $56 as a new entry point. We like the March puts.

Picked on January 20 at $ 54.99
Change since picked: + 0.06
Earnings Date 02/23/06 (unconfirmed)
Average Daily Volume = 1.3 million
 

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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Building Materials - BMHC - cls: 80.00 chg: +1.69 stop: n/a

BMHC has seen strong volume on its bounce over the last two days and shares have managed to breakout over its four-month trendline of resistance. Earnings are coming up around February 7th and will probably produce more volatility. 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 strangle positions at this time.

Picked on December 18 at $ 80.95
Change since picked: - 0.95
Earnings Date 02/07/06 (unconfirmed)
Average Daily Volume = 527 thousand

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Encana Corp. - ECA - close: 47.11 chg: +0.63 stop: n/a

ECA is still consolidating sideways and the stock may not be able to breakout of this pattern until its earnings report on February 15th or unless oil makes some drastic moves. We're not suggesting new positions. Our strategy involves the April $50 calls (ECA-DJ) and the April $40 puts (ECA-PH). Our estimated cost is $3.45. We are aiming for a rise to $5.95.

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

Picked on January 10 at $ 45.56
Change since picked: + 1.55
Earnings Date 02/15/06 (confirmed)
Average Daily Volume = 4.4 million

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Ryland Group - RYL - close: 73.30 change: +1.49 stop: n/a

Homebuilders rebounded on Friday after the new home sales figures that came out on Friday morning were better than expected. RYL rallied just enough to fill the gap and test the $75 region and its 50-dma as overhead resistance. The move looks like a failed rally sort of bearish entry point to buy puts but we'd look for some confirmation first if you are bearish on the stock. With regards to our strangle play we are not suggesting new positions. Our play involves the April $80 calls (RYL-DP) and the April $70 puts (RYL-PN). Our estimated cost is $7.00. Our target is $12.00.

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

Picked on January 22 at $ 75.19
Change since picked: - 1.89
Earnings Date 01/24/06 (confirmed)
Average Daily Volume = 1.1 million
 

Dropped Calls

AmerUS Group - AMH - close: 61.04 change: +0.18 stop: 59.88

To be perfectly honest we're disappointed in AMH's performance. The markets have rallied strongly for the last two sessions and shares of AMH have been barely positive both days. Volume has also been very low. AMH is expected to report earnings on February 1st and while this is an unconfirmed date we are not going to hold over the announcement. Instead we're choosing to exit early right here. The action on Friday looks like a short-term failed rally pattern. More aggressive traders might want to think about holding a position for the next couple of days but exiting before Wednesday's potential earnings announcement.

Picked on January 25 at $ 60.85
Change since picked: + 0.19
Earnings Date 02/01/06 (unconfirmed)
Average Daily Volume = 325 thousand

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Selective Ins. - SIGI - close: 57.10 chg: -0.90 stop: 54.65

We are choosing to exit early with SIGI. The stock under performed the market and its peers on Friday. Given the stock's relative weakness during Friday's session we don't want to hold it going into next week. We had planned on exiting on Tuesday afternoon ahead of its earnings report due out later on Tuesday following the closing bell. By the way, we would not be surprised to see SIGI announce a stock split with its earnings report.

Picked on January 19 at $ 56.05
Change since picked: + 1.05
Earnings Date 01/31/06 (confirmed)
Average Daily Volume = 163 thousand
 

Dropped Puts

Express Scripts - ESRX - close: 92.42 chg: +3.20 stop: 90.01

The sell-off in ESRX never materialized. Our plan was to buy puts on a breakdown below its 50-dma and the low last week. The stock never neared our trigger at $84.95. Thus we're dropping ESRX as a bearish candidate. Last Thursday we suggested that if ESRX broke out to a new high we'd consider bullish positions. Please see today's new plays for a bullish strategy on ESRX.

Picked on January xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 02/22/06 (confirmed)
Average Daily Volume = 2.1 million
 

Dropped Strangles

None
 

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