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Call Updates

Burlington Nor.SantaFe - BNI - cls: 76.22 chg: +0.13 stop: 74.49

The railroad stocks are poised to move but the question is which way? The Monday-Tuesday bullish breakout and buy signal was reversed with a sharp decline on Wednesday thanks to an analyst firm downgrade. Yet the bearish reversal/sell signal failed to see any follow through lower today. The lack of follow through was a surprise in BNI, which had another analyst firm lower their earnings estimates on the company but reiterate their "over weight" on the stock. There was another article from Associated Press that talked about how railroads can't seem to keep up with utility companies demand for coal. Overall the group, and shares of BNI, traded flat to up in what looks like a very short-term oversold bounce. Will the sector continue to bounce or will it drop? The technical picture is mixed with some short-term sell signals and some intermediate term buy signals. Furthermore we're growing concerned about the waning bullish momentum in the broad market averages. Traders may want to tighten their stops and more conservative traders may want to cut their losses now and exit early.

Picked on December 04 at $ 77.26
Change since picked: - 1.06
Earnings Date 01/23/07 (unconfirmed)
Average Daily Volume = 2.5 million

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B.P.Prudhoe Bay - BPT - close: 75.45 chg: +0.35 stop: 73.75

As a whole the oil sectors were unable to escape today's profit taking in spite of a rise in crude oil futures. Shares of BPT managed to out perform its peers with a bounce from the $75 level but that bounce began to fail late this afternoon. We would remain on the defensive even though technically a bounce from support at $75 is a new bullish entry point. Our target is the $79.75-80.00 range. The P&F chart is bullish with an $85 target.

Picked on November 29 at $ 75.25
Change since picked: + 0.20
Earnings Date 00/00/00 (unconfirmed)
Average Daily Volume = 219 thousand

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Biosite - BSTE - close: 49.78 change: -0.11 stop: 47.49

There is still no change from our previous updates on BSTE. The stock continues to consolidate sideways near resistance at the $50.00 level. Shares have a bullish trend of higher lows but the lack of upward follow through is a caution sign, as is the lack of upward momentum in the major averages. Readers can choose to buy a bounce near $49.00 or wait for a rally past $50.50 as a new entry point. Our target is the $54.50-55.00 range.

Picked on December 05 at $ 50.05
Change since picked: - 0.17
Earnings Date 02/07/07 (unconfirmed)
Average Daily Volume = 263 thousand

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Centex - CTX - close: 56.92 change: -0.92 stop: 52.45

The rally in homebuilders ran into a wall today after a Credit Suisse analyst downgraded the entire sector. The analyst stated their opinion that the group had rebounded too high given their perspective on the sector's fundamentals. The homebuilders reversed all of yesterday's gains. Shares of CTX lost 1.59% on above average volume. We would not suggest new bullish positions at this time but keep an eye out for a bounce from support near $55.00 and its 10-dma as a potential entry point. We have two targets. Our conservative target is the $59.50-60.00 range. Our aggressive target is the $63.50-64.00 range. Be aware that the bottom of CTX's April 2006 gap down near $57.25 might be resistance as may the to of its gap near $60.00.

Picked on December 03 at $ 55.89
Change since picked: + 1.03
Earnings Date 01/23/07 (unconfirmed)
Average Daily Volume = 2.0 million

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Diamond Offshore - DO - close: 80.24 change: -0.68 stop: 75.75

Oil stocks were unable to avoid the market wide profit taking today. Shares of DO slipped 0.8% but on below average volume, which would suggest a lack of true selling pressure. We would watch for a dip near its 200-dma (78.50) or the $78.00 level as a new bullish entry point. Our target is the $85.00-86.00 range near its early July high. The P&F chart points to a $92 target.

Picked on December 03 at $ 80.59
Change since picked: + 0.35
Earnings Date 01/26/07 (unconfirmed)
Average Daily Volume = 3.8 million

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Enerplus - ERF - close: 45.70 change: -0.20 stop: 44.45

There is no change from our previous updates on ERF. The stock spent another session trading sideways to down, which continues to weigh on the momentum indicators that are now beginning to turn bearish. More conservative traders may want to tighten their stops toward short-term support at the $45.00 level. Our target is the $50.00-51.00 range.

Picked on November 29 at $ 46.01
Change since picked: - 0.31
Earnings Date 11/10/06 (confirmed)
Average Daily Volume = 973 thousand

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General Dynamics - GD - cls: 74.73 chg: -0.67 stop: 71.90

Defense stocks were also hit with profit taking on Thursday. Shares of GD lost 0.88% and dropped back under the $75.00 level, which as broken resistance should have been short-term support. The two-day decline has put a bearish curve into some of the short-term technical indicators and traders will want to turn defensive. Truly conservative traders may want to raise their stops toward the $74 level. We're not suggesting new positions at this time. Our target is the $78.00-80.00 range. The Point & Figure chart points to an $82 target.

Picked on November 29 at $ 74.35
Change since picked: + 0.38
Earnings Date 01/24/07 (unconfirmed)
Average Daily Volume = 1.4 million

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KB Home - KBH - close: 52.11 change: -1.38 stop: 49.45 *new*

KBH gave back all of yesterday's gains. Fueling the sell-off in homebuilders was an analyst downgrade of the sector. Shares of KBH lost 2.5% and on above average volume. We would expect a dip back toward support near $50.00 and its 200-dma and 10-dma. We are going to try and reduce our risk by raising the stop loss to $49.45. Our target is the $57.50-60.00 range. The P&F chart looks pretty bullish with a spread triple-top breakout buy signal with a $73 target.

Picked on December 03 at $ 52.04
Change since picked: + 0.07
Earnings Date 03/00/07 (unconfirmed)
Average Daily Volume = 2.7 million

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KLA-Tencor - KLAC - close: 51.50 chg: -0.42 stop: 49.90 *new*

We need to warn traders about the semiconductor group. The SOX was one of the worst performing sector indices today with a 1.69% decline that weighed on the NASDAQ. The trading in the SOX is beginning to look like a bearish double-top pattern with a peak just before Thanksgiving and a second peak this week. Shares of KLAC will likely follow the SOX lower. Right now we're expecting a dip toward the $50 level, which should be support. We're going to try and reduce our risk by tightening the stop loss to $49.90. We're not suggesting new positions at this time. Currently our target is the $54.50-55.00 range.

Picked on November 14 at $ 50.81
Change since picked: + 0.69
Earnings Date 01/00/07 (unconfirmed)
Average Daily Volume = 3.9 million

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L-3 Comm. - LLL - close: 83.35 change: -0.10 stop: 79.99

Defense stocks and software stocks suffered some profit taking on Thursday. The GSO software sector is beginning to look pretty bearish with a new lower high this past week and today's drop under its 50-dma. LLL managed to out perform its peers in both sectors but a market sell-off would still weigh on the stock. Readers can watch for a bounce from support near $82 as a new entry point but we would hesitate to open new call positions if the major averages are negative. Our target is the $88.00-90.00 range. The Point & Figure chart forecasts a $104 target.

Picked on December 04 at $ 83.81
Change since picked: - 0.61
Earnings Date 01/25/07 (unconfirmed)
Average Daily Volume = 840 thousand

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Lockheed Martin - LMT - cls: 91.64 change: -0.64 stop: 87.65

LMT is another defense-related stock that suffered some profit taking. Today's session actually produced a minor bearish engulfing candlestick, which is typically seen as a one-day bearish reversal pattern, especially at the top of an up trend. We would expect a dip back toward the $90 level, which should act as short-term support. We have two targets. Our conservative target is the $94.85-95.00 range. Our more aggressive target is in the $99-100 range.

Picked on November 29 at $ 90.62
Change since picked: + 1.02
Earnings Date 01/23/07 (unconfirmed)
Average Daily Volume = 2.1 million

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Sepracor - SEPR - close: 57.07 chg: -0.44 stop: 53.61

The profit taking in SEPR failed to break the $56-58 trading range or its 10-dma. We would stay cautious. More conservative traders may want to tighten their stops. Our target for SEPR is the $59.50-60.00 range.

Picked on November 19 at $ 54.69
Change since picked: + 2.38
Earnings Date 01/25/07 (unconfirmed)
Average Daily Volume = 2.3 million

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Thomas & Betts - TNB - close: 52.59 chg: -0.28 stop: 49.90

The rebound in TNB suffered a setback today. Shares lost 0.5%. The technical picture is mixed but we note a bearish trend of lower highs in the RSI indicator. More conservative traders may want to tighten their stops toward the 50-dma near $51.19. Our target is the $56.00-57.00.

Picked on November 12 at $ 51.36
Change since picked: + 1.23
Earnings Date 01/23/07 (unconfirmed)
Average Daily Volume = 471 thousand

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Valero Energy - VLO - close: 55.58 change: -0.70 stop: 53.45*new*

VLO is another oil stock that suffered some profit taking in spite of new strength in the crude oil futures. We would expect a dip toward short-term support near $55 and/or its 10-dma (around 54.65). We're going to raise our stop loss to $53.45. More conservative traders may want to use a tighter stop loss. Our target is the $59.50-60.00 range.

Picked on December 03 at $ 55.85
Change since picked: - 0.27
Earnings Date 01/30/07 (unconfirmed)
Average Daily Volume = 14.3 million
 

Put Updates

Genzymme - GENZ - close: 61.64 change: -1.32 stop: 66.05

It was a good day for bears in GENZ. The stock touched overhead resistance at its descending 10-dma and then plunged. Shares broke down under short-term support at $62 and closed with a 2.09% loss. Traders may want to tighten their stops. Our target is the $58.00-56.00 range.

Picked on December 03 at $ 62.77
Change since picked: - 1.13
Earnings Date 02/15/07 (unconfirmed)
Average Daily Volume = 1.9 million

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NewMarket - NEU - close: 61.27 change: -0.79 stop: 62.25

The oversold bounce in NEU is beginning to struggle. Aggressive traders might want to consider new positions with NEU under $63.00. We are waiting for a breakdown under support with a trigger to buy puts at $58.25. Our target would be the $52.50-52.00 range.

Picked on December xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 01/29/07 (unconfirmed)
Average Daily Volume = 275 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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Caterpillar - CAT - close: 63.00 chg: -0.05 stop: n/a

Shares of CAT temporarily traded over technical resistance at its 50-dma but eventually gave back all of its intraday gains. We are not suggesting new positions at this time. Our estimated cost was about $0.75. We want to exit if either options rises to $1.50. The options in our strangle are the December $65 call (CAT-LM) and the December $55 put (CAT-XK).

Picked on November 08 at $ 60.10
Change since picked: + 2.90
Earnings Date 01/19/06 (unconfirmed)
Average Daily Volume = 7.7 million

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Blue Nile - NILE - cls: 33.84 chg: -0.85 stop: n/a

NILE turned in a weak session with a 2.45% loss and a bearish engulfing candlestick. Shares also closed back under their 100-dma. We're 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).

Picked on October 29 at $ 38.92
Change since picked: - 5.08
Earnings Date 10/30/06 (confirmed)
Average Daily Volume = 226 thousand
 

Dropped Calls

EOG Resources - EOG - close: 68.94 change: -0.41 stop: 67.99

We are going to cut our losses in EOG here. The stock continues to look weak and a breakdown under the $68 level appears imminent.

Picked on November 29 at $ 72.06
Change since picked: - 3.12
Earnings Date 10/25/06 (unconfirmed)
Average Daily Volume = 3.6 million

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Merck Co. - MRK - close: 43.95 change: -0.72 stop: 43.29

We are suggesting an early exit in MRK. Drug-giant Eli Lilly (LLY) issued an earnings warning today and that weighed on shares of MRK. MRK dropped 1.6% and broke down under support at $44 and its 50-dma. The decline helped the daily and weekly MACD indicators produce a new sell signal.

Picked on December 03 at $ 45.06
Change since picked: - 1.11
Earnings Date 01/25/07 (unconfirmed)
Average Daily Volume = 10.3 million

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Research In Motion - RIMM - cls: 128.75 chg: -6.69 stop: 129.99

Our aggressive play in RIMM didn't pan out. We have been stopped out of RIMM at $129.99. We warned readers that a breakout from its consolidation pattern was imminent. Unfortunately, the direction was determined by a couple of analyst firms. Two separate analyst firms downgraded the stock based on valuation concerns. This prompted RIMM to gap down to open at $132.65 and then plunge 4.9% on above average volume and breakdown support. Aggressive, nimble traders may actually want to consider put positions now. The next level of support appears to be the 50-dma near $120.

Picked on November 28 at $134.29
Change since picked: - 5.54
Earnings Date 12/21/06 (unconfirmed)
Average Daily Volume = 7.2 million
 

Dropped Puts

None
 

Dropped Strangles

None
 

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