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Call Updates

Burlington NrthSanta Fe - BNI - cls: 80.35 chg: +0.32 stop: 78.99

The major indices managed to close in the green on Friday but the Dow Transportation index only posted a marginal gain. The overall upward pattern in the Transports is still there but recent weakness could be suggesting the sector is due for a stronger consolidation, potentially toward the 4400 level. Meanwhile shares of BNI are still trying to bounce from Thursday's low but shares remain under resistance at the $82.00. We are going to keep the stock active as a candidate with a suggestion to use a trigger at $82.51 to open call positions. If triggered we'll target a rally into the $87.50-90.00 range. We do not want to hold over BNI's late April earnings report.

Suggested Options:
We are suggesting the April and May options but our preference is for May strikes so we can hold the position right up to the April earnings date. Our trigger to buy calls is at $82.51.

BUY CALL MAY 80 BNI-EP open interest= 64 current ask $3.70
BUY CALL MAY 85 BNI-EQ open interest=198 current ask $1.50

Picked on March xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 04/25/06 (unconfirmed)
Average Daily Volume = 2.1 million

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Bear Stearns - BSC - close: 138.14 change: +1.12 stop: 131.99

The rally continues in shares of BSC and the play is now open. The stock has broken out to new highs and traded at our trigger to buy calls at $137.65. The move on Friday also helped the daily chart's MACD indicator produce a new buy signal. Now that the play is open we are targeting a move into the $144.00-145.00 range. However, we would not be surprised to see BSC's first test of potential round-number resistance at $140 to fail and shares would likely dip back toward the $138.00-137.50 level again, which should act as new support. Readers have a choice to initiate new bullish positions here or hope for a pull back.

Suggested Options:
We are suggesting the May calls.

BUY CALL MAY 135 BSC-EG open interest=334 current ask $6.50
BUY CALL MAY 140 BSC-EH open interest=358 current ask $3.70
BUY CALL MAY 145 BSC-EI open interest=455 current ask $1.80

Picked on March 24 at $137.65
Change since picked: + 0.49
Earnings Date 06/15/06 (unconfirmed)
Average Daily Volume = 1.1 million

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Deere Co - DE - close: 78.25 change: +0.25 stop: 74.95

Rival CAT failed to turn in a positive day but the bounce in shares of DE continued on Friday. The overall pattern remains very bullish for DE but this is an aggressive entry point with DE still trading under resistance in the $79.00-79.40 region. We are suggesting new bullish positions here but more conservative traders may want to wait for a move over $79.50 or better yet a move over $80.00, which might act as round-number, psychological resistance. Our target is the $84.00-85.00 range. The P&F chart is bullish and points to a $112 target.

Suggested Options:
We are suggesting the May calls.

BUY CALL MAY 75 DE-EO open interest= 47 current ask $4.80
BUY CALL MAY 80 DE-EP open interest=400 current ask $1.95

Picked on March 22 at $ 77.29
Change since picked: + 0.96
Earnings Date 05/16/06 (unconfirmed)
Average Daily Volume = 1.6 million

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Grainger W.W.Inc. - GWW - close: 75.25 change: -0.00 stop: 73.95

We are still in a wait and see mode with GWW. The stock is flirting with a breakout but shares just can't find any follow through. The last six weeks of 2005 saw GWW trading sideways in a narrow range (about 69.00-72.50). That range grew to $69.00-75.50 in 2006. We thought the stock had broken out through the top of the range a few days ago but there has been no conviction. Volume has dried up too as if traders are waiting to see what direction GWW will move next. Short-term the stock is trading in a new $74.00-76.00 trading range. We are suggesting a trigger to buy calls at $76.51. If triggered we'll target a rally into the $79.90-80.00 range. The P&F chart is bullish with a triple-top breakout buy signal pointing to a $90 target.

Suggested Options:
We do not want to hold over the mid April earnings report so we're suggesting April calls.

BUY CALL APR 75 GWW-DO open interest=805 current ask $2.20
BUY CALL APR 80 GWW-DP open interest=577 current ask $0.60

Picked on March xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 04/15/06 (unconfirmed)
Average Daily Volume = 449 thousand

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Hartford Fin. Srv. - HIG - cls: 80.98 chg: -1.17 stop: 79.95

We have been warning readers for weeks that HIG looks ready to pull back and test support near $80 and its 200-dma. Well now it's finally happening. The bad news is that volume is rising on the pull back, which is bearish. Conservative traders may want to abandon positions now. We are not suggesting new bullish positions until HIG trades over its 50-dma. Nimble traders may want to switch directions and buy puts if HIG breaks down under $80.00 although we'd probably wait for a drop under the February low near $79.50.

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

Picked on February 14 at $ 82.12
Change since picked: - 1.15
Earnings Date 04/27/06 (unconfirmed)
Average Daily Volume = 1.1 million

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Lehman Brothers - LEH - close: 144.91 change: +1.11 stop: 140.79

LEH continues to look like an attractive bullish candidate given its Wednesday bounce from support near the 50-dma and the $141 region. We would suggest new call positions here but more conservative traders may want to wait for a move over $146.00 to confirm that LEH has broken the short-term trendline of lower highs. On the daily chart you can see that the MACD indicator is nearing a new buy signal. We do expect some resistance in the $149-150 region but LEH looks like it has the momentum to breakout higher. Conservative traders may want to exit near $149. We're going to aim for the $153.00-155.00 range.

Suggested Options:
We are suggesting the May calls.

BUY CALL MAY 140 LES-EH open interest=147 current ask $8.10
BUY CALL MAY 145 LES-EI open interest=158 current ask $4.90
BUY CALL MAY 150 LES-EJ open interest=137 current ask $2.60

Picked on March 22 at $144.61
Change since picked: + 0.30
Earnings Date 06/14/06 (unconfirmed)
Average Daily Volume = 2.0 million

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ITT Industries - ITT - close: 56.56 change: +0.11 stop: 53.84*new*

Shares of ITT are still stuck in a short-term trading range. The upper boundary of this range shows clear resistance at the $56.70 level. The good news here is that ITT appears to be showing a bullish trend of higher lows inside this short-term consolidation. Our target is the $57.00-58.00 range. This close to our target we're not suggesting new positions. It might be wise for more conservative traders to just exit early here. We are going to raise our stop loss to breakeven at $53.84.

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

Picked on March 15 at $ 53.84
Change since picked: + 2.72
Earnings Date 04/28/06 (unconfirmed)
Average Daily Volume = 1.4 million

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MedcoHealth - MHS - close: 60.18 change: +1.53 stop: 57.95

Breakout! Friday morning Citigroup started coverage on MHS with a "buy" rating. The news helped push shares of MHS up and out of their trading range and through resistance at the $60.00 level. Volume came in well above the daily average, which is bullish. Our trigger to buy calls was at $60.05 so the play is now open. Our target is the $64.50-65.00 range. The P&F chart already points to a $68 target.

Suggested Options:
We are going to suggest the May options but we plan to exit ahead of MHS' April earnings report. Our trigger is $60.05.

BUY CALL MAY 55 MHS-EK open interest=10 current ask $6.40
BUY CALL MAY 60 MHS-EL open interest=82 current ask $2.85
BUY CALL MAY 65 MHS-EM open interest=96 current ask $0.90

Picked on March 24 at $ 60.05
Change since picked: + 0.13
Earnings Date 04/25/06 (unconfirmed)
Average Daily Volume = 1.6 million

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Altria Group - MO - close: 72.94 chg: +0.19 stop: 71.99*new*

We are surprised at MO's relative strength on Friday. As of Thursday's close the stock looked ready to hit our stop loss at $71.85. It is noteworthy that Friday's bounce failed to breakout over MO's short-term trendline of lower highs so the current trend looks bearish. We are not suggesting new bullish positions and we honestly considered exiting early right here to limit our losses. More conservative traders may want to give an early exit more thought. We are going to inch up our stop loss to $71.99. On Monday the Illinois Supreme Court will decide if they want to hear the appeal of a class action suit against Phillip Morris and its "light" cigarettes.

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

Picked on March 14 at $ 74.11
Change since picked: - 1.17
Earnings Date 04/19/06 (unconfirmed)
Average Daily Volume = 8.1 million

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Silicon Labs - SLAB - close: 52.24 change: +0.19 stop: 46.95

Traders tried to do some profit taking in SLAB on Friday but bulls bought the dip Friday morning and the stock closed in the green again. This helped confirm the new MACD buy signal on its daily chart. Meanwhile bulls will note that the action in the SOX semiconductor index is improving. Short-term technicals on the SOX are starting to turn positive and the MACD is near a new buy signal. The SOX isn't out of the woods yet but it's improvement. Meanwhile SLAB is challenging its highs from January in the $52-53 range. Our target is only the $54.90-55.00 range but more aggressive traders may want to aim higher toward the $58-60 region. We are certainly tempted to aim past the $55 level but the decision on where to exit lies with each individual trader.

Suggested Options:
Our time frame is short so we're suggesting the April calls.

BUY CALL APR 50 QFJ-DJ open interest=2259 current ask $3.70
BUY CALL APR 55 QFJ-DK open interest=1578 current ask $1.15

Picked on March 23 at $ 51.05
Change since picked: + 1.19
Earnings Date 04/26/06 (unconfirmed)
Average Daily Volume = 1.2 million

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Schlumberger - SLB - close: 122.18 chg: -0.84 stop: 118.99

The oil sectors are on the rebound and the OSX oil services index looks ready to breakout above resistance near its 50-dma and the 205 level. Such a move in the OSX would herald a new leg higher and probably launch a run at the January highs. We think SLB will be leading the charge. Friday the stock paused a bit but we don't see any change from our Thursday night play description so we're reposting it here:

We are going to increase our exposure to the oil sector. The OSX oil services sector looks ready to breakout over resistance after forming what looks like an inverse or bullish head-and-shoulders pattern over the last few weeks. SLB looks to be part of the vanguard leading the services industry higher. We like the bounce from $119 and its 50-dma as a new bullish entry point. However, more conservative traders may want to wait for a move over $125.00 or $125.50 before initiating positions. We are targeting a rally into the $129.75-130.00 range. The P&F chart is bullish and points to a $144 target. Please note that SLB is due to split 2-for-1 on April 10th. Our post-split target will be the $64.87-65.00 range. We do not want to hold over the April 21st earnings report.

Suggested Options:
We are suggesting the May calls although more aggressive traders might want to try April strikes.

BUY CALL MAY 120 SLB-ED open interest=5533 current ask $7.60
BUY CALL MAY 125 SLB-EU open interest=5462 current ask $5.00
BUY CALL MAY 130 SLB-EZ open interest=5826 current ask $3.10

Picked on March 23 at $123.02
Change since picked: - 0.84
Earnings Date 04/21/06 (unconfirmed)
Average Daily Volume = 6.2 million

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Toyota Motor Corp. - TM - close: 108.18 chg: +0.98 stop: 104.99

If you were looking for a new bullish entry point in TM this is probably it. However, we remain somewhat cautious given the bearish MACD on the daily chart and the short-term four-day trend of lower highs. Plus, the lack of volume continues to be a weakness in TM's up trend. More conservative types may want to think about tightening their stop loss. The $110 level remains short-term resistance. Our target is the $112.50-115.00 range. Traders with a longer-term horizon may want to aim higher.

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

Picked on March 12 at $106.68
Change since picked: + 1.50
Earnings Date 02/07/06 (confirmed)
Average Daily Volume = 438 thousand

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Valero Energy - VLO - close: 59.19 change: +0.39 stop: 54.49*new*

Another positive day for oil stocks helped lift VLO toward round-number resistance at the $60.00 level. The stock failed to breakout but shares did hit a new one-month high. We would expect a dip back toward the 10-dma near 57.50 and use a pull back as a new bullish entry point. Our target is the $62.50-63.00 range. Please note that we're raising our stop loss to $54.49.

Suggested Options:
We are not suggesting new bullish positions in VLO at this time. Wait for a pull back toward the 10-dma. We would choose the April or May calls.

Picked on March 15 at $ 57.55
Change since picked: + 1.64
Earnings Date 05/02/06 (unconfirmed)
Average Daily Volume = 10.7 million
 

Put Updates

Biosite Inc. - BSTE - close: 51.33 chg: +0.08 stop: 52.55

We are starting to wonder if BSTE is going to cooperate with us or not. The stock has bounced twice from the $50.00 level in the last week and tried to breakout over the $52.00 level three times. Short-term technical oscillators are actually starting to look bullish. We are going to keep BSTE as a bearish candidate for now but we're definitely sticking to our plan to use a trigger at $49.75 and more conservative traders may want to wait for a breakdown under $49.00 before initiating positions. Our target will be the $45.25-45.00 range. If BSTE closes over $52.50 we'll drop the stock as a bearish candidate.

Suggested Options:
We are not suggesting new plays at this time. Watch for a move to $49.75. If triggered we'd choose the May puts.

Picked on March xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 03/25/06 (unconfirmed)
Average Daily Volume = 261 thousand

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Gannett Co Inc. - GCI - close: 58.91 chg: -0.49 stop: 61.76

Good news. GCI may be weaker than we expected. We have been warnings readers to watch for a bounce and a failed rally near $60.00 as the next entry point to consider buying puts. Now it looks like the 59.50 level is acting as new resistance. Shares of GCI displayed relative weakness on Friday following some disappointing revenue numbers from fellow newspaper company Knight Ridder (KRI) on Thursday night. Friday's decline might be a new entry point. Our target is the $55.25-55.00 range. Don't forget that we plan to exit ahead of the April 12th earnings report.

Suggested Options:
We are suggesting the April puts.

BUY PUT APR 60 GCI-PL open interest=1263 current ask $1.90
BUY PUT APR 55 GCI-PK open interest= 628 current ask $0.25

Picked on March 19 at $ 59.04
Change since picked: - 0.13
Earnings Date 04/12/06 (confirmed)
Average Daily Volume = 1.1 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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Encana Corp. - ECA - close: 47.91 chg: +1.13 stop: n/a

We have four weeks left before April options expire. If this play is going to be successful we need to see ECA trade over $53.50 or under $36.50. We are not suggesting new strangle positions. 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 positions at this time.

Picked on January 10 at $ 45.56
Change since picked: + 2.35
Earnings Date 02/15/06 (confirmed)
Average Daily Volume = 4.4 million

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Ryland Group - RYL - close: 70.86 change: +0.30 stop: n/a

The worse than expected new home sales figures on Friday morning temporarily sucked the wind out of the homebuilders rebound but shares of RYL managed to bounce back into the green by the closing bell. This play is not in good shape. We only have four weeks left before April options expire. Right now RYL appears to have reversed course and is rebounding higher. In order for this play to be successful we would need to see RYL trade over $87 or under $63. At this point in the game traders might want to be thinking about an early exit right now to salvage some capital. We are adjusting our target to breakeven at $7.00. We are not suggesting new strangle positions at this time. Our play involves the April $80 calls (RYL-DP) and the April $70 puts (RYL-PN).

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

Picked on January 22 at $ 75.19
Change since picked: - 4.33
Earnings Date 01/24/06 (confirmed)
Average Daily Volume = 1.1 million
 

Dropped Calls

Cummins Inc. - CMI - cls: 105.13 change: +0.36 stop: 103.85

More aggressive traders may want to keep CMI on their watch list as a potential candidate should the stock bounce higher from here. Unfortunately, we have been stopped out. The market makers must have seen a bunch of stops under the $104 level and tried to take them out because CMI traded under $103.90 for about 60 seconds on Friday morning before rebounding. The stock probably spent about two minutes trading under $104.00. Our stop loss was $103.85. The low was $103.82.

Picked on March 13 at $105.25*gap higher*
Change since picked: - 0.12
Earnings Date 04/20/06 (unconfirmed)
Average Daily Volume = 867 thousand

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Hydril - HYDL - close: 76.22 change: -0.77 stop: 71.95

Target achieved. HYDL turned in a strong morning on Friday and rose to $77.91 before succumbing to some profit taking after a decent bounce from $72. Our target was the $77.50-80.00 range.

chart:

Picked on March 12 at $ 70.23
Change since picked: + 5.99
Earnings Date 04/26/06 (unconfirmed)
Average Daily Volume = 289 thousand

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Macerich Co. - MAC - close: 72.44 change: -0.70 stop: 69.95

REIT stock MAC is not cooperating. The stock's bullish break out has failed to see any follow through. Short-term technicals are turning bearish. We would rather exit early right here and then watch from a distance to see if MAC turns around again. More aggressive traders may want to consider keeping bullish positions open but expect a consolidation to the 50-dma under $72.00 if not the $70 level. The P&F chart remains bullish and points to an $87 target.

Picked on March 16 at $ 74.05
Change since picked: - 1.61
Earnings Date 05/16/06 (unconfirmed)
Average Daily Volume = 371 thousand
 

Dropped Puts

None
 

Dropped Strangles

None
 

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