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Call Updates

Lockheed Martin - LMT - close: 92.07 change: -0.24 stop: 88.99

Friday was a doji day for LMT. The stock had rallied into the afternoon but then suffered a quick sell off in the last hour that wiped out the day's gains. What that means for next week can't be known but bullishly we see the stock hanging above its 10-dma at $91.86. 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 $89.26, 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: + 1.45
Earnings Date 01/23/07 (unconfirmed)
Average Daily Volume = 2.1 million
 

Put Updates

Mohawk Industries - MHK - close: 74.86 chg: -0.72 stop: 79.01

The low volume bounce this week was followed by a stronger sell off today. The 10-dma had been holding MHK down, on a closing basis, and today's drop found support at its 100-dma but is slightly below its 50-dma. Next moving average support is its 200-dma at $74.28 and then its uptrend line from July, currently near $73.60. Once it can get through this layered support it could be a quick drop to our downside target is the $70.75-70.00 range, near November's low. We'll keep our stop above the December highs in case we see a bounce to relieve its oversold conditions. Our

Picked on December 17 at $ 76.02
Change since picked: - 1.16
Earnings Date 02/22/07 (unconfirmed)
Average Daily Volume = 600 thousand

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3M Co. - MMM - close: 77.93 change: -0.23 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, especially with the weekly stochastics pointing down. 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 last Tuesday, now at $77.62) 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: - 0.38
Earnings Date 01/19/07 (unconfirmed)
Average Daily Volume = 2.8 million

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NewMarket - NEU - close: 59.05 change: -0.47 stop: 62.01

NEU is battling its 20 and 100-dma's at $59.73 and $59.09, resp. 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 $57.23. A break of that support would be another opportunity to enter a short play. Our stop level is now just above the downtrend line from October 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: - 0.06
Earnings Date 01/29/07 (unconfirmed)
Average Daily Volume = 275 thousand

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Sears Holding - SHLD - close: 167.93 chg: -0.07 stop: 173.05

A trend line along the consolidation lows since October and the uptrend line from July intersect at $169.68 today and that's where SHLD stopped in this morning's early spike up. So support has turned to resistance now and made for another good short entry today. 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 further retests of the $169.70 area should offer another opportunity for an entry.

Picked on December 22 at $167.90
Change since picked: + 0.03
Earnings Date 01/16/07 (unconfirmed)
Average Daily Volume = 29.3 million

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Yahoo! Inc. - YHOO - close: 25.54 chg: +0.18 stop: 27.05

YHOO got a big bounce with the rest of the this morning but gave most of it back by the end of the day. But price continued to hold above support at the bottom of the gap from October 30th. The 10-dma at $25.80 held down the bounce again. If it can bounce a little higher it should find layered resistance at its downtrend line from November ($26.26), its 50-dma ($26.29), 20-dma ($26.33). A bounce to this area would be another entry for a short play. The stop at $27.05 is now above the downtrend line from July and 100-dma which makes it a good location for additional short entries. A break below $25.13 could see some acceleration lower. 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: - 0.31
Earnings Date 01/16/07 (unconfirmed)
Average Daily Volume = 29.3 million

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YUM Brands - YUM - close: 58.80 change: -0.30 stop: 60.26

YUM 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 found resistance at its 20-dma ($59.63) and the top of its bear flag on Thursday and dropped back below its 10-dma ($59.06) today. Our stop is at the right place just above the 50-dma at $60.19. 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: + 0.31
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: 36.89 chg: -0.03 stop: n/a

NILE has been struggling to bounce off its December low but got a stronger bounce this week and has unfortunately worsened our strangle position by dropping the value of our puts while barely adding to the value of the call side. The daily chart has moved into overbought and we could see this turn back down any day now. This unfortunately continues to just chew up time. 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 $0.40. 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 after the new year starts 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: - 2.03
Earnings Date 10/30/06 (confirmed)
Average Daily Volume = 226 thousand
 

Dropped Calls

None
 

Dropped Puts

Intuitive Surgical- ISRG - close: 95.90 chg: -0.83 stop: 104.05

ISRG dropped today and closed its November 20th gap at $95.79 (today's low was the late afternoon spike down to $95.64). Our profit target had been changed to $95.80 since a close of that gap and an uptrend line from August could provide support here, especially with oversold oscillators. Slightly lower is the trend line along the lows since March, currently at $94.07. If you're still in this play then that would be the next downside target to consider taking profits (and consider a long play).

Picked on December 18 at $102.05
Change since picked: - 6.25 * hit profit target at $95.80
Earnings Date 02/01/07 (unconfirmed)
Average Daily Volume = 938 thousand
 

Dropped Strangles

None
 

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