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Call Updates

Bear Stearns - BSC - close: 154.63 chg: -0.32 stop: 147.95

Most of the market took Friday as a day of rest and experienced mild declines. The broker-dealers were no exception after a strong week of gains. Shares of BSC dipped 0.2% and traded sideways in a relatively narrow range. The stock is arguably short-term overbought so a dip early next week would not be unexpected. We would wait for a dip before considering new positions. Our target is the $159.00-160.00 range. We do not want to hold over the mid December earnings report. FYI: More conservative traders may want to adjust their stop loss closer to the $150 level.

Suggested Options:
We are not suggesting new positions at this time. Wait for a dip.

Picked on November 14 at $151.89
Change since picked: + 2.74
Earnings Date 12/14/06 (unconfirmed)
Average Daily Volume = 1.5 million

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Cerner Corp. - CERN - close: 49.07 chg: -0.13 stop: 47.90

CERN's short-term technicals and now the weekly chart's technicals are starting to falter and roll over into bearish signals. We remain very wary and if we don't see a bounce soon (next couple of days) it may be time to exit. Overall the larger pattern in CERN looks bullish with the breakout over resistance at $48.00. Broken resistance at $48 should now act as support. Unfortunately, the stock has just run out of momentum and has been unable to make any headway even though the major averages were hitting new relative highs. This relative weakness in CERN should put bullish traders on the defensive. We're not suggesting new positions at this time. Our target is the $52.00-52.50 range. FYI: The P&F chart is bullish with an $85 target.

Suggested Options:
We're not suggesting new positions in CERN.

Picked on October 30 at $ 48.05
Change since picked: + 1.02
Earnings Date 10/19/06 (confirmed)
Average Daily Volume = 662 thousand

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Deere & Co. - DE - close: 90.36 change: +0.94 stop: 88.95 *new*

Shares of DE displayed relative strength on Friday. The stock rallied from its lows on Friday morning and barely looked back. DE posted a new five-month closing high and looks poised to continue higher. Unfortunately, we're almost out of time. DE is due to report earnings on Tuesday morning. Naturally we do not want to hold over its earnings report. Therefore we're planning to exit on Monday at the closing bell. Given our time frame we're adjusting the stop loss to $88.95, which is about 15 cents under Friday's low. Our target is the $91.50-92.00 range.

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

Picked on November 08 at $ 87.45
Change since picked: + 2.91
Earnings Date 11/21/06 (confirmed)
Average Daily Volume = 2.7 million

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FedEx - FDX - close: 117.44 chg: -0.70 stop: 113.90

Transports appear to be doing well with the Dow Jones transportation average breaking out over resistance at the 4800 level last week. The MACD on the daily chart for the TRAN has recently produced a new buy signal. Meanwhile FDX has broken out over resistance at the $117 level and its MACD has produced a new buy signal. The significant drop in crude oil futures over the past several days has been a boon for the transports. Given the bullish posture in the transportation sector we would use Friday's dip in FDX as a new bullish entry point to buy calls. We would expect a pull back at the stock's initial test of $120 and shares might bounce around the $117.50-120.00 range for a couple of days. However, our target is the $124.00-125.00 range. The P&F chart is more optimistic with a $153 target. FYI: We do not want to hold over the December earnings report.

Suggested Options:
We are suggesting the December calls although Januarys would also work well.

BUY CALL DEC 110 FDX-LB open interest= 328 current ask $8.50
BUY CALL DEC 115 FDX-LC open interest= 844 current ask $4.60
BUY CALL DEC 120 FDX-LD open interest=1433 current ask $1.85

Picked on November 15 at $117.15
Change since picked: + 0.19
Earnings Date 12/21/06 (unconfirmed)
Average Daily Volume = 1.9 million

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Fomento Econo. - FMX - close: 103.89 chg: -0.23 stop: 99.49

Friday's trading in FMX looks like a new entry point. The stock dipped toward $102 and its rising 10-dma on Friday morning and traders bought the dip sending shares back toward all-time highs before the closing bell. The overall pattern continues to look promising and the path of least resistance appears to be up. Our target is the $107.00-110.00 range.

Suggested Options:
If you're considering new positions in FMX we'd choose the December or January calls.

Picked on November 08 at $102.09
Change since picked: + 1.80
Earnings Date 10/27/06 (confirmed)
Average Daily Volume = 314 thousand

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Goldman Sachs - GS - cls: 195.04 chg: -1.68 stop: 187.45

Last week was a strong one for broker-dealer stocks. Shares of GS helped lead the group to new all-time record highs. It's really not that surprising to see a bit of consolidation/profit taking on Friday after a positive week. We would not suggest new positions at this time. Should the dip continue the nearest support is the 10-dma back near $190 although GS might have some support near $191.50. A bounce from either level could be used as a new entry point. Our target is the $199.00-200.00 range. We do not want to hold over the December earnings report.

Suggested Options:
We're not suggesting new positions in GS at this time.

Picked on November 14 at $190.36
Change since picked: + 4.68
Earnings Date 12/12/06 (unconfirmed)
Average Daily Volume = 4.8 million

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KLA-Tencor - KLAC - close: 51.69 chg: +0.64 stop: 47.65

The SOX semiconductor sector index has struggled to build on Tuesday's big bullish breakout. Yet at the same time the sector has resistance any attempt at profit taking thus far. Depending on your perspective the semis are still showing some relative strength. One stock in the industry that is out performing its peers is KLAC. Traders bought the dip near $50 on Thursday morning and the rebound continued into Friday with a 1.25% gain on above average volume, which tends to be a bullish sign. Technical indicators are pointing higher and the P&F chart points to a $70 target. Our target is the $54.50-55.00 range. The stock appears to have solid resistance at $55.00.

Suggested Options:
We probably wouldn't suggest new positions right here in KLAC. Keep an eye out for a dip back towards $50.50-50.00 range as a potential entry point. We'd use the December or January calls.

Picked on November 14 at $ 50.81
Change since picked: + 0.88
Earnings Date 01/00/07 (unconfirmed)
Average Daily Volume = 3.9 million

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Morgan Stanley - MS - close: 79.12 chg: +0.44 stop: 74.49

MS displayed some relative strength on Friday. The stock managed a 0.55% gain while the rest of the broker-dealer sector slipped on Friday. Shares appear to have found some (very) short-term support near $78.00. As long as the market is positive on Monday we might see MS rally into our target zone of $79.90-80.00. More aggressive traders may want to aim higher since the P&F chart points to an $83 target. We're not suggesting new positions at this time.

Suggested Options:
We're not suggesting new positions in MS at this time.

Picked on November 12 at $ 76.68
Change since picked: + 2.44
Earnings Date 12/20/06 (unconfirmed)
Average Daily Volume = 4.1 million

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Thomas & Betts - TNB - close: 53.68 chg: -0.10 stop: 49.90

So far so good with TNB. The stock produced a strong week rising 4.5% and the technical picture has definitely improved. While we remain optimistic we would not suggest new positions at this time. The stock is challenging resistance near the $54 level. Odds are good that TNB might see some consolidation soon. A dip back toward $52 might be a new entry point to buy calls. Our target is the $56.00-57.00 range. Currently the P&F chart points to a $77 target.

Suggested Options:
We're not suggesting new plays in TNB at this time. Watch for a dip and then consider using the December calls.

Picked on November 12 at $ 51.36
Change since picked: + 2.32
Earnings Date 01/23/07 (unconfirmed)
Average Daily Volume = 471 thousand
 

Put Updates

Cardinal Health - CAH - cls: 62.67 chg: -0.72 stop: 64.05*new*

The trend in CAH still appears to be down but the stock is struggling to make any headway (lower) given a bullish market environment and new relative highs for the major averages. The recent failed rally under $64 looks like a potential entry point for put plays but we would rather wait for a new relative low or at least another decline under $62.00. We are somewhat concerned at how the P&F chart's trendline of support has risen to the $59 level. Taking everything into consideration (lack of movement, bullish market, potential support), we would hesitate to open new put plays in CAH. Our target is the $58.00-57.50 range. Please note that we're adjusting our stop loss to $64.05.

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

Picked on November 10 at $ 61.99
Change since picked: + 0.68
Earnings Date 10/27/06 (confirmed)
Average Daily Volume = 1.3 million

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Freeport McMoran - FCX - cls: 57.40 chg: +1.24 stop: 60.26

Target achieved. Shares of FCX gapped down to open at $55.50 and then dipped to $54.95 before bouncing back. We have two targets on FCX. Our conservative target was the $55.25-55.00 range, which was hit on Friday. Our aggressive target is the $51.00-50.00 range. We would be extra careful if you're still holding positions. The sharp rebound was fueled by strong volume this Friday and it looks like a short-term bullish reversal. At the least we would expect a bounce to the 10-dma overhead near $58.70 and it wouldn't surprise us to see a bounce towards $60. FCX's direction next week will depend on strength in the metal and mining stocks, gold and copper futures and to a lesser extent oil. As oil falls it makes gold less of an attractive inflationary hedge. We do note that the XAU gold & silver index produced a bearish signal in its MACD just two days ago. We're not suggesting new positions at this time.

Suggested Options:
We're not suggesting new positions in FCX at this time.

Picked on November 08 at $ 59.05
Change since picked: - 1.65
Earnings Date 10/17/06 (confirmed)
Average Daily Volume = 3.7 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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Caterpillar - CAT - close: 60.94 chg: -0.43 stop: n/a

We only have four weeks left for our strangle on CAT to pan out. That is certainly enough time for CAT to produce a big move but right now the stock is not suggesting it will move. Thus we would suggest against opening new strangle plays. The options in our strangle are the December $65 call (CAT-LM) and the December $55 put (CAT-XK). Our estimated cost was about $0.75. We want to exit if either options rises to $1.50.

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

Picked on November 08 at $ 60.10
Change since picked: + 0.84
Earnings Date 01/19/06 (unconfirmed)
Average Daily Volume = 7.7 million

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Blue Nile - NILE - cls: 35.98 chg: -0.51 stop: n/a

It looks like NILE's second attempt at an oversold bounce has stalled under the $37.00 level. We are not suggesting new positions at this time. Our estimated cost was $2.40 and we're planning to sell if either side of our strangle rises to $3.90. The options in our suggested strangle are the January $45 call (JWU-AI) and the January $35 put (JWU-MG).

Suggested Options:
We're not suggesting new plays on NILE.

Picked on October 29 at $ 38.92
Change since picked: - 2.94
Earnings Date 10/30/06 (confirmed)
Average Daily Volume = 226 thousand
 

Dropped Calls

FreightCar Amer. - RAIL - close: 55.72 change: -1.29 stop: 53.49

Closing RAIL as a bullish candidate might seem a bit abrupt. After all the transportation sector turned in a relatively strong week thanks to a big drop in oil futures. Yet the railroad-related stocks didn't truly participate in the transportation rally. Most of the transports strength was in airlines (remember the merger news). Studying the railroad sector index and the relative weakness in RAIL on Friday we decided that it's better off to exit early. There is a chance that RAIl might bounce from its 10-dma near Friday's lows or bounce from the $55 level or even the $54 level. Yet at this time we just don't feel like risking it. We're suggesting an early exit to cut our losses.

Picked on November 08 at $ 56.08
Change since picked: - 0.36
Earnings Date 10/26/06 (confirmed)
Average Daily Volume = 334 thousand

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Whirlpool - WHR - close: 86.50 change: -1.83 stop: 86.99

We have been stopped out of WHR at $86.99. Readers will note that we have been very wary of the stock over the last couple of days given the recent failed rallies near $90. Unfortunately, instead of exiting early it looked like WHR might bounce from short-term support near $88 and its 10-dma. Instead the stock plunged lower on Friday morning and quickly hit our stop loss closing the play.

Picked on November 13 at $ 90.15
Change since picked: - 3.65
Earnings Date 01/23/06 (unconfirmed)
Average Daily Volume = 1.0 million
 

Dropped Puts

Capital One Finc. - COF - cls: 75.50 chg: -0.10 stop: 79.33

Target achieved. The relative weakness in COF this past week blossomed into a spike down to the $74.00 level thanks to an analyst downgrade on Friday morning. COF was downgraded from an "out perform" to a "market perform" and shares dipped to $74.00 before bouncing back. Our target was the $75.10-75.00 range.

Picked on October 31 at $ 79.33
Change since picked: - 3.83
Earnings Date 10/18/06 (confirmed)
Average Daily Volume = 2.4 million
 

Dropped Strangles

Bear Stearns - BSC - cls: 154.63 chg: -0.32 stop: n/a

Our strangle on BSC using November options has expired. The stock tried but it never moved further than $5.91 from the $150.00 mark. We needed a bigger move to put one of the options in our strangle into a profitable position. Our estimated cost was $4.00. The options in our play were the November 155 call (BSC-KK) and the November 145 put (BSC-WI).

Picked on October 22 at $150.19
Change since picked: + 4.44
Earnings Date 12/14/06 (unconfirmed)
Average Daily Volume = 1.6 million

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Cephalon - CEPH - close: 78.15 change: +0.95 stop: n/a

Target achieved. Biotech stocks displayed relative strength on Friday and CEPH continued to out perform the market and its peers. Friday's session saw CEPH add another 1.2% to close at a new eight-month high. The call side of our strangle hit $5.00 and our target was to sell at $4.90. Our estimated cost was $3.45. More aggressive traders may want to consider aiming higher and exiting as CEPH nears potential resistance at the $80 level. However, keep in mind that CEPH looks extremely overbought and due for a consolidation but until the bulls run out of steam they remain in control. The options in our strangle are the December $75 call (CQE-LO) and the December $65 put (CQE-XM).

Picked on October 29 at $ 69.35
Change since picked: + 8.80
Earnings Date 11/02/06 (confirmed)
Average Daily Volume = 2.0 million

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ConocoPhillips - COP - close: 62.70 chg: +0.43 stop: n/a

The strangle on COP using November options has expired. Our estimated cost was $1.15 and we're going to need a strong move past $65 to see a chance at an exit. Our suggested options were the November $65 call (COP-KM) and the November $55 put (COP-WK).

Picked on October 15 at $ 60.03
Change since picked: + 2.67
Earnings Date 10/25/06 (confirmed)
Average Daily Volume = 9.8 million
 

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