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Call Updates

Express Scripts - ESRX - close: 91.91 chg: -0.22 stop: 88.24*new*

ESRX is still hovering near all-time highs but it just can't seem to power its way through resistance in the $93.00 area. If the short-term technical oscillators are any clue then ESRX stands a good chance of breaking out next week. Our biggest concern here would be a substantial pull back in the major indices, which would probably drag ESRX back toward technical support at the 50-dma (near 88.40). We would consider new call positions here near $92 but more conservative traders might be better off waiting for a breakout over $93 before initiating positions. We are going to raise our stop loss toward the 50-dma and set the new stop at $88.24. Our target is the $99.50-100.00 range. We do not want to hold over the late February earnings report so that only gives us about a week and a half but so far the 22nd earnings date is unconfirmed.

Suggested Options:
We are suggesting the March calls since we plan to exit in late February. The March $100 calls are definitely more risky here. Some of the spreads between bid and ask on these March calls seem a bit wide. More nimble traders might be able to get a better price.

BUY CALL MAR 90 XTQ-CR open interest=1184 current ask $6.40
BUY CALL MAR 95 XTQ-CS open interest= 836 current ask $3.80
BUY CALL MAR100 XTQ-CT open interest= 474 current ask $1.95

Picked on January 29 at $ 92.42
Change since picked: - 0.51
Earnings Date 02/22/06 (unconfirmed)
Average Daily Volume = 2.1 million

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Universal Health - UHS - close: 49.54 chg: -0.13 stop: 48.49

Shares of UHS traded lower on Friday morning but investors bought the dip and the stock rebounded back above its simple 10-dma and exponential 200-dma. So far we remain on the sidelines. Our strategy is to try and capture a breakout over resistance near $50.00. We are using a trigger at $50.51 to open the play. If UHS trades at or above $50.51 then the play is open and we're targeting a run into the $54.50-55.00 range. This zone coincides with resistance from its August 2005 peak and P&F chart resistance near $56. Currently the P&F chart is bullish and points to a $61.00 target. We do not want to hold over the February 27th earnings report so we only have about two weeks for the play to be triggered and then for shares to run higher.

Suggested Options:
We are suggesting the March calls since we plan to exit in late February.

BUY CALL MAR 45 UHS-CI open interest= 57 current ask $5.00
BUY CALL MAR 50 UHS-CJ open interest=185 current ask $1.35

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

Put Updates

Ambac Fincl. - ABK - close: 75.57 change: +0.64 stop: 78.05

Traders need to be a little cautious here with ABK. The stock bounced from its lows on Friday but failed to breakout over the $76.00 level and its short-term trend of lower highs (resistance). Pushing the insurance sector higher was a positive earnings report from AOC. AOC beat estimates by 11-cents and the stock responded with a 9.2% gain to hit new three-year highs. Looking back to ABK the overall pattern on its weekly chart remains bearish but short-term oscillators hooked higher due to Friday's rebound. Plus, we're fighting against a bullish P&F chart. More conservative traders may want to consider an early exit if ABK trades above 76.50. We have been warning readers to watch for potential support and a bounce at its 100-dma (now at 74.57) and the exponential 200-dma (now at $74.15). Our target is $71.00. Our time frame is four to five weeks, probably sooner.

Suggested Options:
Enter new positions carefully. We would not open new put positions if ABK trades over $76.00.

BUY PUT MAR 80 ABK-OP open interest= 43 current ask $4.80
BUY PUT MAR 75 ABK-OO open interest=407 current ask $1.70

Picked on February 05 at $ 76.09
Change since picked: - 0.52
Earnings Date 01/25/06 (confirmed)
Average Daily Volume = 463 thousand

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Administaff - ASF - close: 38.49 change: -0.63 stop: 41.75*new*

So far so good. ASF has continued to show relative weakness and hit a low of $37.55 intraday on Friday. Volume on Friday's 1.6% decline came in above average, which is positive for the bears. The P&F chart is looking bearish too with a sell signal that points to a $35.00 target. Our target is the simple 200-dma but since the moving average is rising (currently at 34.11) we are using an exit target in the $35.25-34.50 range. The intraday bounce on Friday may not be over. We'd expect another move to the $40.00 level on Monday before shares roll over again. There is stronger resistance near $41.00, which is now bolstered by its simple 10-dma. We are lowering our stop loss to $41.75. Don't forget that we need to exit on Wednesday afternoon, February 15th, to avoid holding over the Thursday morning earnings report.

Suggested Options:
We only have three days left so we're not suggesting new positions.

Picked on February 08 at $ 39.90
Change since picked: - 1.41
Earnings Date 02/16/06 (confirmed)
Average Daily Volume = 367 thousand

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Cameco Corp. - CCJ - close: 70.02 change: -0.97 stop: 73.76

Hmm... Prudential downgraded mining and copper stocks on Friday. Equities like FCX and PD were hit hard by the downgrade. Yet CCJ, which is better known for its uranium mining, is stubbornly holding on to the $70.00 level. The intraday chart on Friday for CCJ shows the sideways trading coiling into a narrow point. That sort of pattern usually precedes a breakout. Let's hope the breakout is downward. The simple 10-dma, now at 72.37, should be short-term overhead resistance. We would not open new put positions until CCJ trades under Friday's low (68.75). More conservative traders might do well to wait for CCJ to trade under the simple 50-dma (67.25) before initiating positions. Our target is the $61.50-60.00 range. The P&F chart is bearish and points to a $57 target. CCJ is set to split 2-for-1 on February 23rd.

Suggested Options:
We are not suggesting new put positions in CCJ at the moment. See play details for potential entry points.

Picked on February 07 at $ 68.57
Change since picked: + 1.45
Earnings Date 01/31/06 (confirmed)
Average Daily Volume = 1.1 million

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Intl Bus. Mach. - IBM - close: 81.33 change: +0.93 stop: 82.05

This was a tough decision. Friday's bounce in IBM back above the simple 200-dma and the $81.00 level looks like a clear signal to bail out of any bearish put positions. We are going to suggest that more conservative traders consider exiting early right here. However, we're going to keep the play open. IBM is still trading under resistance (see chart). We are not suggesting new plays at this time. Our target is the $75.25-75.00 range.

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

Picked on February 06 at $ 79.49
Change since picked: + 1.84
Earnings Date 01/17/06 (confirmed)
Average Daily Volume = 6.0 million

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Ipsco Inc. - IPS - close: 87.25 chg: +0.80 stop: 90.01

Friday proved to be a volatile day for IPS. The stock traded in a wide $4.00 range. Our trigger to buy puts was at $85.90 so the play is now open. However, we would be a little cautious here. It looks like IPS bounced from its 50-dma near Friday's low. The overall pattern still looks like IPS has reversed course after the February 6 & 7th failed rally. Watch for the current bounce to fail at $89 or at $90 and then consider new bearish positions if IPS rolls over again. Our target is the $80.25-80.00 range. The P&F chart displays a triple-bottom sell signal and a $77 target.

Suggested Options:
We are suggesting the March puts.

BUY PUT MAR 90 IPS-OR open interest=1643 current ask $6.50
BUY PUT MAR 85 IPS-OQ open interest= 59 current ask $3.70
BUY PUT MAR 80 IPS-OP open interest=1383 current ask $1.85

Picked on February 10 at $ 85.90
Change since picked: + 1.35
Earnings Date 02/06/06 (confirmed)
Average Daily Volume = 343 thousand

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Johnson Controls - JCI - cls: 68.01 chg: +0.76 stop: 69.05

Prepare to exit JCI. The stock's bounce over the last three days is starting to look like a short-term bottom. The move has certainly turned many of its short-term technical oscillators higher. Friday's gain was fueled by a late day rally on rising volume. It also looks like JCI has broken out through its four-week trendline of resistance. More conservative traders might just want to exit early right here. We certainly considered it. We are going to keep the play open because JCI still has technical resistance at the 10-dma (68.33) and the 100-dma (68.75). We are not suggesting new plays. Our target has been the $65.50-65.00 range.

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

Picked on January 25 at $ 69.90
Change since picked: - 1.89
Earnings Date 01/20/06 (confirmed)
Average Daily Volume = 955 thousand

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Loews - LTR - close: 95.85 change: +1.12 stop: 97.01

Now you see why we suggested using a trigger with LTR. We were concerned that Thursday's decline under support near $95 and the 100-dma looked a bit too much like a bear trap. That doesn't mean that LTR won't continue moving lower from here but short-term technical oscillators, which have been oversold, certainly look a bit more bullish today. More aggressive traders might consider a failed rally under the 50-dma (near $97.50) as a potential entry point for puts. We're going to stick to our original plan and use a trigger at $94.45 to open our play. If triggered we'll target a decline into the $90.25-90.00 range, which is still above technical support at its rising 200-dma. Please note that if LTR does not hit our trigger on Monday we're going to drop it as a candidate. We do not want to hold over the Thursday, February 16th earnings report.

Suggested Options:
We are suggesting the March puts.

BUY PUT MAR 95 LTR-OS open interest=493 current ask $2.15
BUY PUT MAR 90 LTR-OR open interest=681 current ask $0.85

Picked on February xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 02/16/06 (confirmed)
Average Daily Volume = 508 thousand

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MGIG Invest. - MTG - close: 63.37 change: +0.36 stop: 66.05

MTG is still bouncing but we expect the bounce to fail near resistance at $64.00 and its simple 200-dma. This also happens to be the neckline for its bearish head-and-shoulders pattern (see chart). Wait for the failed rally to appear near $64.00 before initiating new positions. Our target is the $58.00-57.50 range. The P&F chart points to a $53 target.

Suggested Options:
We are suggesting the March puts.

BUY PUT MAR 65 MTG-OM open interest=1213 current ask $2.75
BUY PUT MAR 60 MTG-OL open interest=4065 current ask $0.90

Picked on February 06 at $ 63.70
Change since picked: - 0.33
Earnings Date 01/12/06 (confirmed)
Average Daily Volume = 833 thousand

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Meritage Homes - MTH - close: 58.56 chg: -0.82 stop: 61.11*new*

We feel like we have picked the wrong horse for the race in the housing sector. The DJUSHB home construction index has continued to sink but shares of MTH have been showing too much relative strength against its peers. We are not going to abandon the play but neither are we suggesting new put positions in MTH. Our concern is that if the homebuilders produce an oversold bounce next week then MTH will bounce with them and breakout higher. We are going to tighten our stop loss further to $61.11. Our target is the $52.00 level and this coincides with the P&F chart's target at $52. A move under $57.35 might change our mind about opening new positions.

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

Picked on February 02 at $ 58.76
Change since picked: + 0.62
Earnings Date 01/26/06 (confirmed)
Average Daily Volume = 560 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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Building Materials - BMHC - cls: 71.24 chg: -1.53 stop: n/a

Reaction to last week's earnings announcement helped push BMHC lower and under support at the simple and exponential 200-dma's. Yet so far the stock has found support near the $70.00 level. 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 plays in BMHC.

Picked on December 18 at $ 80.95
Change since picked: - 9.71
Earnings Date 02/07/06 (confirmed)
Average Daily Volume = 527 thousand

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Encana Corp. - ECA - close: 41.85 chg: -0.84 stop: n/a

Profit taking in the oil and gas stocks continued on Friday. Shares of ECA dipped toward the $40.00 level but traders bought the dip. The stock has broken down through multiple levels of support in the last few days. The P&F chart now points to a $31 target. However, it's worth noting that the P&F chart also shows ECA testing support and that means we can probably expect an oversold bounce from here. We are not suggesting new strangle positions but nimble, more aggressive traders might want to consider buying some short-term calls here and exiting on a bounce near $44.50-45.00. The $45 level, bolstered by the simple 200-dma looks like short-term resistance. Our strangle 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 plays in ECA.

Picked on January 10 at $ 45.56
Change since picked: - 3.71
Earnings Date 02/15/06 (confirmed)
Average Daily Volume = 4.4 million

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Ryland Group - RYL - close: 67.17 change: -0.65 stop: n/a

Shares of RYL and the housing sector have been sinking steadily for about a month now. We have no reason to expect a trend change but the group, and RYL, look oversold and due for a bounce. We're not suggesting new strangle 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 plays in RYL.

Picked on January 22 at $ 75.19
Change since picked: - 8.02
Earnings Date 01/24/06 (confirmed)
Average Daily Volume = 1.1 million
 

Dropped Calls

None
 

Dropped Puts

None
 

Dropped Strangles

None
 

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