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Call Updates

Lockheed Martin - LMT - close: 92.95 change: +0.60 stop: 88.99

Wednesday was another bullish day in the market and our long play in LMT benefited. We're a little concerned about the light volume push higher and see the possibility for this stock to top out just above $94 but we'll reevaluate if and when LMT reaches that level whether or not we want to take profits a little early. Because it's reaching overbought and showing some bearish divergences at new highs we don't suggest any new plays at this time. A pullback to its uptrend line from June and its 50-dma, both located near $89.10, 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: + 2.33
Earnings Date 01/23/07 (unconfirmed)
Average Daily Volume = 2.1 million
 

Put Updates

Intuitive Surgical- ISRG - close: 96.99 chg: +0.53stop: 104.05

ISRG broke its 10-day (with a minor bump up in the middle of that) losing streak with a small gain on Wednesday. While ISRG is oversold, which says it should be ready for at least a bounce, today's bounce looked more like a bear flag so we expect this to drop a little lower. Our downside target has been the $96.00-95.00 range and we're almost there. 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 $95.70, 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: - 5.06
Earnings Date 02/01/07 (unconfirmed)
Average Daily Volume = 938 thousand

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Mohawk Industries - MHK - close: 75.38 chg: +0.42 stop: 79.01

Volume continues to drop during the bounce from Friday's sell off. Normally that's a bearish sign but during this low-volume week it's hard to say if it's meaningful. Watch for potential support at its uptrend line from July, currently near $73.30. MHK bounced up near its 10-dma at $75.58 and made for another short entry on this stock. A bounce back up to its 20-dma at $76.54 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: - 0.64
Earnings Date 02/22/07 (unconfirmed)
Average Daily Volume = 600 thousand

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3M Co. - MMM - close: 78.47 change: +0.44 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 (where it found support today at $77.55) and is holding above its October gap up (top of the gap is near $77.35). 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: + 0.16
Earnings Date 01/19/07 (unconfirmed)
Average Daily Volume = 2.8 million

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NewMarket - NEU - close: 58.69 change: +0.18 stop: 62.01

NEU dropped sharply first thing this morning but then recovered and closed slightly higher on the day. It is being held down by its downtrend line from the end of November and 10-dma, both near today's high of $58.75. A little higher, at $59.07, it would face resistance at its 100-dma which has acted as support and resistance for the past six months. The bounce off the December 19th low continues to look like a bear flag. NEU has a longer term uptrend line from October 2005 where price bounced on 12/19, currently at $56.79. A break of that support would be another opportunity to enter a short play. Our stop level is above the 20-dma ($60.08) 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: - 0.42
Earnings Date 01/29/07 (unconfirmed)
Average Daily Volume = 275 thousand

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Sears Holding - SHLD - close: 168.41 chg: +1.78 stop: 173.05

A trend line along the consolidation lows since October and the uptrend line from July are both near $169.50 and should continue to be resistance now that they have 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 $169.50 area should offer another opportunity for an entry.

Picked on December 22 at $167.90
Change since picked: + 0.51
Earnings Date 01/16/07 (unconfirmed)
Average Daily Volume = 29.3 million

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Yahoo! Inc. - YHOO - close: 25.75 chg: +0.30 stop: 27.05

YHOO got a bounce with the rest of the market today but wasn't able to get back up to its 10-dma at $26.00. If it can bounce a little higher it should find layered resistance at its 50-dma ($26.22), 20-dma ($26.44) and downtrend line from November ($26.45). This shows an area that could be another entry for a short play. The stop at $27.05 is above the resistance levels identified above. 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: - 0.10
Earnings Date 01/16/07 (unconfirmed)
Average Daily Volume = 29.3 million

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YUM Brands - YUM - close: 59.19 change: +0.45 stop: 60.26

Price continues to consolidate in a bear flag since our play was triggered. It's consolidating on top of what could be a neckline (at $57.80) for a developing H&S pattern since October. YUM climbed slightly above the 10-dma ($59.06) and might continue a little higher to its 20 and 50-dma's near $60. Our stop is at the right place just above the 50-dma. The 20-dma has crossed down through the 50-dma which should help our bearish play. A break below the neckline at $57.80 would offer an additional opportunity for a short play. 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: + 0.70
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: 36.37 chg: +0.12 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. The bounce continued today but again stopped short of its 50% retracement ($36.52) of the decline from October. With it being overbought here we could see the bounce top out here. 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 is only $0.10, and the January $35 put (JWU-MG), which is bid at $0.65. 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: - 2.55
Earnings Date 10/30/06 (confirmed)
Average Daily Volume = 226 thousand
 

Dropped Calls

None
 

Dropped Puts

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Dropped Strangles

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