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Call Updates

Apple - AAPL - close: 71.84 change: -0.25 stop: 69.99

Has AAPL reached a new bottom? We've been suggesting that AAPL should find support near the $70.00 level. On Friday the stock dipped twice to the $71 region and buyers stepped in both times to defend the stock. Aggressive traders may want to consider new bullish positions here. Our concern is the NASDAQ, which looks vulnerable. The strongest stock in the world will struggle to climb if the markets are sinking. Just imagine a hot air balloon trying to rise in an elevator moving lower. The balloon is going to go down in spite of its own strength. Now there are always exceptions and some of you will be quick to point out that this is a market of stocks and we're not betting on the stock market in general. Unfortunately, we wouldn't list AAPL as the strongest stock right now. We listed AAPL as a speculative play given the bullish engulfing candlestick and its bounce from $70 a few days ago. There has not been a very strong follow through and the weekly chart looks very bearish! Conservative traders may want to exit early. We will consider bailing out of AAPL bounces and fails to clear the $75 region soon.

Suggested Options:
We are not suggesting new bullish positions in AAPL at the moment.

Picked on January 30 at $ 75.00
Change since picked: - 3.15
Earnings Date 01/18/06 (confirmed)
Average Daily Volume = 27.1 million

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Aetna - AET - close: 98.32 change: +1.30 stop: 93.99 *new*

AET continues to show relative strength. The stock added another 1.3% on Friday despite the widespread pull back. The stock looks poised to hit our target in the $99.00-100.00 range. Honestly, considering the weakness in the major averages we strongly considered just exiting early right here. More conservative traders may want to jump out now for a profit. We are not suggesting new bullish positions. We are raising the stop loss to $93.99. Conservative traders who don't choose to exit early might want to put their stop closer to $96.

Suggested Options:
We are not suggesting new plays in AET.

Picked on January 30 at $ 94.05
Change since picked: + 4.27
Earnings Date 02/09/06 (confirmed)
Average Daily Volume = 1.7 million

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Cummins Inc. - CMI - close: 100.10 change: +2.25 stop: 96.95*new*

We are amazed. The trading in CMI on Thursday looked very bearish. We were expecting to be stopped out on Friday. Instead shares of CMI bounced strongly from the $97.00 level. While our bullish play in CMI has been given new life we are not suggesting new bullish positions right here. The major market averages look vulnerable and more conservative traders may just want to thank their lucky stars and jump out of CMI right here to minimize their losses. Or as an alternative you could raise your stop loss. We are raising our stop loss to $96.95, under Friday's low. We would not consider new positions until CMI hit a new high over $102.00.

Suggested Options:
We are not suggesting new positions in CMI right here.

Picked on February 2 at $101.01
Change since picked: - 0.91
Earnings Date 01/30/06 (confirmed)
Average Daily Volume = 742 thousand

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Express Scripts - ESRX - close: 91.90 chg: +1.06 stop: 87.45

Friday's bounce from the $89.50 region looks like a new bullish entry point to buy calls on ESRX. The stock has been relatively resistant to any profit taking following its bullish breakout over resistance near $90 several days ago. We would consider new call positions here but more conservative traders may want to wait for a new high before initiating positions. Currently our stop loss at $87.45 is under technical support at the rising 50-dma. More conservative traders might want to consider putting their stop under Friday's low instead. Our target is the $99.50-100.00 range but we're running low on time with ESRX due to report earnings in the last week of February.

Suggested Options:
We are suggesting the March calls.

BUY CALL MAR 85 XTQ-CQ open interest= 216 current ask $9.70
BUY CALL MAR 90 XTQ-CR open interest=1019 current ask $6.40
BUY CALL MAR 95 XTQ-CS open interest= 524 current ask $3.90

Picked on January 29 at $ 92.42
Change since picked: - 0.52
Earnings Date 02/22/06 (unconfirmed)
Average Daily Volume = 2.1 million

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Universal Health - UHS - close: 48.67 chg: -0.83 stop: 48.49

The recent failed rally in UHS is starting to look a bit more serious. Shares may need to retrace to the $48.00-47.50 region before attempting another breakout. We remain on the sidelines. Our trigger to buy calls is at $50.51. If triggered then we'll target a rally into the $54.50-55.00 range. The P&F chart is bullish with a $61 target. We do not want to hold over the late February earnings report.

Suggested Options:
If triggered we would suggest the March calls.

Picked on January xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 02/27/06 (confirmed)
Average Daily Volume = 613 thousand
 

Put Updates

Johnson Controls - JCI - cls: 67.91 chg: -0.91 stop: 72.01

Good news! JCI has continued to slide and Friday's 1.3% decline pulled shares under technical support at the 100-dma. The stock looks ready to fall towards our target in the $65.50-65.00 range, above its exponential 200-dma. Currently the Point & Figure chart looks pretty bearish with a $57 target.

Suggested Options:
If you are looking for a new put position in JCI we would consider the March puts although Aprils have more open interest.

Picked on January 25 at $ 69.90
Change since picked: - 1.99
Earnings Date 01/20/06 (confirmed)
Average Daily Volume = 955 thousand

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Meritage Homes - MTH - close: 60.51 chg: +1.75 stop: 62.05

Reversal alert! We are very surprised by the turnaround in MTH on Friday. The stock is still stuck in a bearish longer-term trend dating back to its August peak but short-term MTH is suggesting a turnaround. Friday's session produced a bullish engulfing candlestick pattern on top of a 2.9% gain. More conservative traders, if you entered new positions on Friday, might want to bail out quickly to minimize any losses. We suspect that MTH will make a rally attempt toward short-term resistance at $62.00. Our stop loss is at $62.05 and we're going to keep the play open and see how far MTH will bounce.

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

Picked on February 02 at $ 58.76
Change since picked: + 1.75
Earnings Date 01/26/06 (confirmed)
Average Daily Volume = 560 thousand

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Phelps Dodge - PD - close: 158.49 chg: +0.39 stop: 167.15

We do not see much change from our original play description from Thursday night. The one thing we would say is that Friday's session was not a very convincing follow through on Thursday's technical bearish reversal. Traders might want to consider waiting for PD to trade under Friday's low (157.21) before initiating new positions. Our original play description is reposted here:

We are fundamentally bullish on PD. The company is a major player in the copper-mining industry and the commodity has been hitting new highs for a while now. Demand seems to be outstripping supply for the malleable metal. PD's recent earnings report came in above expectations and management issued a big buy back program. Both events are positives. Yet shares of PD appear to have gotten ahead of themselves. Today's trading hit a new all-time high and then crashed. The move produced a big bearish engulfing candlestick, which is typically a bearish reversal pattern. This is an aggressive, higher-risk bearish play since we are trying to time a pull back toward its trendline of support. We're going to suggest put positions here (under $160) with a stop above today's high. More conservative traders may want to wait for PD to move under $158 or $156 before initiating positions. We are aiming for the simple 50-dma, currently at 144.50, but since the moving average is naturally a moving target we'll use an exit/target range of $147.50-145.00 for now.

Suggested Options:
We are suggesting the March puts.

BUY PUT MAR 160 PD-OL open interest=702 current ask $11.90
BUY PUT MAR 155 PD-OK open interest=316 current ask $ 9.00
BUY PUT MAR 150 PD-OJ open interest=232 current ask $ 6.70

Picked on February 02 at $158.10
Change since picked: + 0.39
Earnings Date 01/31/06 (confirmed)
Average Daily Volume = 2.6 million

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XM Sat.Radio - XMSR - close: 24.34 chg: -0.70 stop: 27.01 *new*

XMSR continues to sink, hitting new one-year lows. Shares do look very oversold and way overdue for a bounce. We would not suggest new put positions here. XMSR could easily rebound back to the 10-dma (now at 26.45) before sliding lower again. We are lowering our stop loss to $27.01. We plan to exit ahead of its earnings report. Currently we have an unconfirmed report date of February 9th. Our target is the $21.00 level.

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

Picked on January 30 at $ 26.43
Change since picked: - 2.09
Earnings Date 02/09/06 (unconfirmed)
Average Daily Volume = 5.0 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: 78.27 chg: +1.51 stop: n/a

Earnings from BMHC are just around the corner. When the company announces on Tuesday, February 7th this week we'll expect some volatility and probably see shares move in a new direction instead of this choppy, sideways action. 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 in BMHC at this time.

Picked on December 18 at $ 80.95
Change since picked: - 2.68
Earnings Date 02/07/06 (confirmed)
Average Daily Volume = 527 thousand

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Encana Corp. - ECA - close: 46.78 chg: -0.65 stop: n/a

ECA has pulled back along with the rest of the oil sector and crude oil futures. The stock might continue to churn sideways between $45 and $50 until its earnings report on February 15th. We're not suggesting new positions in ECA right now. 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 in ECA at this time.

Picked on January 10 at $ 45.56
Change since picked: + 1.22
Earnings Date 02/15/06 (confirmed)
Average Daily Volume = 4.4 million

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Google Inc. - GOOG - close: 381.55 chg: -14.48 stop: n/a

Shares of GOOG are on the move and the stock lost 3.6% on Friday although GOOG closed off its worst levels of the session. Currently the stock is flirting with the simple 100-dma ($383), which was support back in October. We are not suggesting new positions. The put side of our high-risk, speculative strangle is the February $420s (GOP-ND). These puts hit a high of $46.40 on Friday and are currently trading at $39.30bid/$40.00ask. Our estimated cost was $40.10 and we're aiming for a rise to $60.00. You may want to adjust your own target to whatever you deem is appropriate (whether that's an exit at $50 or $70 or something else). It might be wise to exit early since GOOG is fast approaching what looks like support at the bottom of its rising channel (see chart). Just remember that the February options are running out of time with just two weeks left of life.

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

Picked on January 29 at $433.49
Change since picked: -51.94
Earnings Date 01/31/06 (confirmed)
Average Daily Volume = 11.1 million

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Ryland Group - RYL - close: 71.00 change: +2.22 stop: n/a

Homebuilding stocks bounced on Friday and RYL did so with volume coming in above average. The afternoon rebound did stall under its 200-dma but the bounce may not be over yet. We're 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 in RYL at this time.

Picked on January 22 at $ 75.19
Change since picked: - 4.19
Earnings Date 01/24/06 (confirmed)
Average Daily Volume = 1.1 million
 

Dropped Calls

SFBC Intl. - SFCC - close: 25.35 chg: +2.37 stop: 19.90

Target achieved. Positive broker comments, a reiterated buy rating, and a new higher price target did the trick for us on SFCC. The stock gapped open at $25.69, fell back to $24 and then rebounded again. Our target was the $24.50-25.00 range but due to the gap higher we're adjusting our exit.

Picked on January 25 at $ 20.92
Change since picked: + 4.43
Earnings Date 02/22/06 (unconfirmed)
Average Daily Volume = 2.5 million
 

Dropped Puts

None
 

Dropped Strangles

None
 

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