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Call Updates

Lockheed Martin - LMT - close: 91.70 change: -0.24 stop: 88.99

LMT struggled a little on Friday but still managed to use its 10-dma ($91.23) for support and it suffered less than the broader market's sell off. Because it's reaching overbought we don't suggest any new plays at this time. A pullback to its uptrend line from June and its 50-dma, both located just under $89, would provide a good opportunity for a new entry. If that support doesn't hold then we have our stop in the correct place. We have two upside 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: + 1.08
Earnings Date 01/23/07 (unconfirmed)
Average Daily Volume = 2.1 million
 

Put Updates

Intuitive Surgical- ISRG - close: 97.02 chg: -1.94 stop: 104.05

With ISRG down 9 days (with a minor bump up in the middle of that) it would appear this stock is ready for at least a bounce but so far our short play is looking good. Today tacked on another 2% decline. We'd like to keep the stop far enough away so as not to get hit on a whipsaw but today is a good day to ratchet it down some. We're lowered the stop to $102.60 which keeps it above its 20, 50 and 100-dma's. It also gets it closer to our entry price. Our target is the $96.00-95.00 range. WE do not want to hold over the early February earnings report. With the stock oversold and price nearing an uptrend line from August, currently at $95.60, we're suggesting taking profits and exiting the play if $95.80 is tagged. There is a gap up on November 20, 2006 that would be closed at $95.79. We can always look for another entry on a bounce.

Picked on December 18 at $102.05
Change since picked: - 5.03
Earnings Date 02/01/07 (unconfirmed)
Average Daily Volume = 938 thousand

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Mohawk Industries - MHK - close: 74.27 chg: -0.49 stop: 79.01

MHK looks like it's ready to break support in the $75 area. Friday's close was below its 200-dma at $74.51. But Friday's sell off was on low volume and may not mean much. Watch for potential support at its uptrend line from July, currently near $73.25. A bounce back up to its 10-dma at $75.73 or 20-dma at $76.55 would not be out of the ordinary and could make for another entry point for a short play. A break below its uptrend line would also be a good entry. In the meantime we'll keep our stop above the December highs in case we see a bounce to relieve its oversold conditions. Our downside target is the $70.75-70.00 range, near November's low.

Picked on December 17 at $ 76.02
Change since picked: - 1.75
Earnings Date 02/22/07 (unconfirmed)
Average Daily Volume = 600 thousand

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3M Co. - MMM - close: 78.35 change: -0.46 stop: 80.01

After dropping from its November highs MMM has been consolidating during December in what appears to be a sideways coil. This should be a continuation pattern for another leg down so our short play continues to look good here. We are suggesting puts for the more aggressive traders with the stock under $79.00 while more conservative traders can look for a decline under $78.00 or the 200-dma near $77.53. We consider this to be an aggressive, higher-risk play because MMM does have support at its 200-dma, its uptrend line from July, currently at $78.15, and is holding above its October gap up. It takes a break below $76.40 to enable bears to breathe a little easier. Our target is going to be the $72.50-70.00 range. The P&F chart is more bearish with a $47 target.

Picked on December 17 at $ 78.31
Change since picked: + 0.04
Earnings Date 01/19/07 (unconfirmed)
Average Daily Volume = 2.8 million

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NewMarket - NEU - close: 57.78 change: -0.08 stop: 62.01

It's the battle of the trend lines here. NEU has a longer term uptrend line from October 2005 where price bounced on Tuesday 12/19/06. That uptrend line is currently at $56.70. The downtrend line from the end of November coincides with the 10-dma at $58.80 and this line/dma held price down on Friday. The test of that resistance on Friday offered another opportunity to buy some puts. Our stop level is above the 20-dma ($60.89) which makes it a good place to keep it for now although more aggressive traders can consider lowering it to $61.01. Our downside target is the $54.00-53.50 range. FYI: The P&F chart points to a $51 target. Plus, short-interest is about 7% of the 14.8 million-share float, which is probably enough to raise the risk of a short squeeze if NEU abruptly turns higher.

Picked on December 14 at $ 59.11
Change since picked: - 1.33
Earnings Date 01/29/07 (unconfirmed)
Average Daily Volume = 275 thousand

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Sears Holding - SHLD - close: 167.74 chg: -0.19 stop: 173.05

SHLD tagged our trigger at $167.90 so the play is now open. A trend line along the lows since October, currently near $169.40, should continue to be resistance (Friday's high poked above it briefly) now that it has been broken. Our downside target is the $162.00-160.00 range. Aggressive traders can look for a further pullback to near $157 which is the October low and will be near the uptrend line from March 2006 by the time it gets there. Keep an eye on the simple 100-dma near $162.69 which might offer some support. If you missed the entry, any retest of the $169-170 area should offer another opportunity for an entry.

Picked on December 22 at $167.90
Change since picked: - 0.16
Earnings Date 01/16/07 (unconfirmed)
Average Daily Volume = 29.3 million

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Yahoo! Inc. - YHOO - close: 25.55 chg: +0.07 stop: 27.05

Internet stocks (INX.X) continued their decline today and with YHOO being the weak sister in this sector our put play in this stock looks good. This week's break below its 50-dma, currently at $26.15, places it back in a bearish mode. With the 10-dma also at $26.15 any bounce back up to that level offers another opportunity to play the short side. The stop at $27.05 is above the 20-dma at $26.72. Our downside target is the $22.65 level near the October low. More aggressive traders may want to aim lower. FYI: It might be worth noting that short interest is about 6.9% of YHOO's 1.2 billion share float.

Picked on December 20 at $ 25.85
Change since picked: - 0.35
Earnings Date 01/16/07 (unconfirmed)
Average Daily Volume = 29.3 million

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YUM Brands - YUM - close: 58.77 change: +0.22 stop: 60.26

Price has essentially consolidated in what looks like a bear flag since our play was triggered. This is a good sign for our short play in YUM. The chart looks very yummy (sorry) to a bear as the 10-dma continues to hold price down. It's possible we could see a bounce up to its 50-dma at $60.10 so our stop is at the right place. The 20-dma, at $60.29, should cross down through the 50-dma any day now. The 10-dma is currently at $59.20 and continues to offer additional opportunities for entries. Our downside target is the $55.75-55.00 range, which is near the top of the gap up on October 12, 2006. Closing the gap at $54.57 makes for another downside target.

Picked on December 12 at $ 58.49
Change since picked: + 0.28
Earnings Date 02/07/07 (unconfirmed)
Average Daily Volume = 1.6 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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Blue Nile - NILE - close: 35.77 chg: -0.16 stop: n/a

NILE has been struggling to bounce off its December low and while the bounce is not making much progress it is unfortunately just chewing up time. We see the possibility that it's getting ready to drop considering the fact that the bounce attempt looks ready to fail. Friday's close was held below its 50-dma at $35.89 and stochastics is back into overbought. Our problem is time and we don't know if we'll see enough of a move before January expiration. 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), which closed at $0.15, and the January $35 put (JWU-MG), which last traded at $1.10. Our best guess is that this stock is ready for a drop which would obviously help the put side of this trade. There's not much value left in the call side. A drop through $34.25 could see some acceleration lower but it will still need to get through its 200-dma at $33.71. For January expiration we'll need a closing price of $32.60 or less in order to cover our cost. There is still a reasonable chance that will happen if the broader market starts to sell off so use that as your guide as to whether or not you want to limit your loss and exit earlier. We'll continue to monitor this play into January expiration or an exit at $3.90 for either side, whichever comes first.

Picked on October 29 at $ 38.92
Change since picked: - 3.15
Earnings Date 10/30/06 (confirmed)
Average Daily Volume = 226 thousand
 

Dropped Calls

MEMC Electronic - WFR - close: 39.71 change: -1.12 stop: 39.95

As we feared, the semiconductor index continued its decline and dragged WFR below our stop at $39.95. The stock gapped down on Friday and never attempted to close the gap. This made it impossible to attempt an exit on a bounce. While this play has been stopped out you may want to keep an eye on its uptrend line from July and its 50-dma, both near $38.40, for potential support to try another long play. Our target was the $47.50-50.00 range and the P&F chart is still bullish with a $48 target.


Picked on December 10 at $ 42.40
Change since picked: - 2.45 *stopped out at $39.95
Earnings Date 01/25/07 (unconfirmed)
Average Daily Volume = 4.4 million
 

Dropped Puts

None
 

Dropped Strangles

None
 

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