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Call Updates

Lockheed Martin - LMT - cls: 92.02 change: +0.33 stop: 89.75

Defense stocks were unable to avoid the market-wide profit taking on Friday but LMT did manage to close in the green. Yet the stock continues to trade sideways and the lack of upward momentum is pulling the technical indicators toward bearish signals. The stock should have support near the $90.00 level, which is bolstered by its rising 50-dma. Unfortunately, we are seeing a bearish divergence between price and the MACD indicator and the weekly chart shows a large bearish wedge pattern. We hesitate to suggest new long or call positions at this time. A strong bounce from the $90 level might change our mind. More conservative traders may just want to exit early. Currently we have two targets. Our conservative target is the $94.85-95.00 range. Our aggressive target is the $99.00-100.00 range.

Suggested Options:
We are not suggesting new positions in LMT at this time.

Picked on November 29 at $ 90.62
Change since picked: + 1.40
Earnings Date 01/23/07 (unconfirmed)
Average Daily Volume = 2.1 million

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Altria Group - MO - close: 87.15 change: -0.50 stop: 84.75

We do not see any significant changes from our new play description on Thursday night so we're reposting it here:

Now that it appears the legal troubles for the tobacco industry are finally beginning to diminish many equity analysts are betting that MO will finally spin-off their Kraft business. Spin-off expectations and improving trends for cigarettes overseas is pushing MO to new all-time highs. Volume behind Thursday's rally was significantly above is average, which tends to be a bullish signal. Traders can choose to buy calls now or wait for a potential dip back toward the $86 region. Broken resistance in the $85.00-85.60 region should offer support. We are targeting a rally into the $92.50-95.00 range. Expect some round-number resistance near $90.00. The P&F chart currently points to a $114 target. We do not want to hold over the late January earnings report. FYI: The stock has been getting some positive analysts comments recently and just yesterday LEH raised their price target on the stock.

Suggested Options:
We are suggesting the February calls but do not want to hold over the earnings report.

BUY CALL FEB 85.00 MO-BQ open interest=6382 current ask $4.70
BUY CALL FEB 90.00 MO-BR open interest=6160 current ask $1.75

Picked on January 04 at $ 87.65
Change since picked: - 0.50
Earnings Date 01/31/07 (unconfirmed)
Average Daily Volume = 8.8 million

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Reynolds American - RAI - cls: 64.11 chg: -1.64 stop: 64.90

Friday's session looks pretty negative for RAI. The stock lost 2.49% and under performed its peers and the major market indices. Furthermore Friday's sell-off was fueled by above average volume and RAI broke down under the 50-dma and is flirting with a breakdown under technical support at its 100-dma. The only news we could find that might account for Friday's weakness was an extension of the company's exchange offer for its R.J.Reynolds senior secured notes. Fortunately, we're still just spectators at this point. It's our plan to buy calls on a breakout over resistance in the $66.00-66.50 range. Our suggested trigger to open call plays is at $66.55. If triggered our target is the $69.90-70.00 range. More aggressive traders may want to aim higher. FYI: If RAI doesn't rebound soon we'll drop it as a bullish candidate.

Suggested Options:
We are suggesting the February calls but we do not want to hold over the early February earnings report. Our suggested trigger to open positions is at $66.55.

BUY CALL FEB 65.00 RAI-BM open interest=3549 current ask $1.90
BUY CALL FEB 67.50 RAI-BU open interest= 867 current ask $0.90
BUY CALL FEB 70.00 RAI-BN open interest= 915 current ask $0.35

Picked on January xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 02/07/07 (unconfirmed)
Average Daily Volume = 1.2 million
 

Put Updates

3M Co. - MMM - close: 77.42 change: -0.53 stop: 80.01

This might be a new entry point to buy puts on MMM. The stock's three-week consolidation above its 200-dma has finally been broken. Shares lost 0.6% on Friday and closed at a new two-month low under its 200-dma. The weekly chart's MACD is nearing a new sell signal and short-term daily indicators are turning lower again. While we are suggesting plays here more conservative traders may want to wait for a drop under the exponential 200-dma (near $77.00) or the 100-dma (near $76.35). Our target is the $72.50-70.00 range. The P&F chart points to a $47 target.

Suggested Options:
We are suggesting the February puts but remember that we plan to exit ahead of MMM's late January earnings report.

BUY PUT FEB 80.00 MMM-NP open interest=1058 current ask $3.40
BUY PUT FEB 75.00 MMM-NO open interest= 703 current ask $1.05

Picked on December 17 at $ 78.31
Change since picked: - 0.89
Earnings Date 01/30/07 (confirmed)
Average Daily Volume = 2.8 million

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NewMarket - NEU - close: 56.21 change: -1.42 stop: 60.35 *new*

NEU continues to sink and the stock lost another 2.4% on Friday. We're not suggesting new positions since shares are quickly approaching our target in the $55.00-54.75 range. We're concerned that NEU might find support at its rising 200-dma, which is nearing $55.00. Please note that we're adjusting our stop loss to $60.35, which is just above the recent highs. FYI: More aggressive traders may want to aim lower.

Suggested Options:
We're not suggesting new plays in NEU at this time.

Picked on December 14 at $ 59.11
Change since picked: - 2.90
Earnings Date 01/29/07 (unconfirmed)
Average Daily Volume = 275 thousand

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Sears Holding - SHLD - cls: 166.04 chg: -0.96 stop: 171.55*new*

Retail stocks continued to see more selling pressure. The RLX index lost 1.1% while SHLD slipped 0.5%. The stock stalled right at its rising 100-dma. The trend for SHLD still looks bearish but be prepared for a potential oversold bounce from here. The $170 level should act as short-term overhead resistance. Readers can use another failed rally under $170 or a new decline under $165.00 as a new entry point. The Point & Figure chart points to a $152 target. Our target is the $162.00-160.00 range. We're going to adjust our stop loss to $171.55.

Suggested Options:
If SHLD produces a new entry point we'd suggest the February puts.

Picked on December 22 at $167.90
Change since picked: - 1.86
Earnings Date 02/15/07 (unconfirmed)
Average Daily Volume = 1.9 million

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YUM Brands - YUM - close: 58.19 change: -0.51 stop: 60.26

YUM is inching lower toward the bottom of its trading range and looks poised to breakdown next week. More aggressive traders may want to consider new put positions now. We would wait for a decline under $58.00 or its December low near $57.82 before opening new put positions. Our target is the $55.75-55.00 range but keep an eye on the rising 100-dma as potential support. FYI: A decline under $57.00 would reverse the P&F chart into a new sell signal.

Suggested Options:
If YUM breaks under $58.00 we'd suggest the February puts.

BUY PUT FEB 60.00 YUM-NL open interest=168 current ask $3.10
BUY PUT FEB 55.00 YUM-NK open interest=190 current ask $0.90

Picked on December 12 at $ 58.49
Change since picked: - 0.30
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 - cls: 38.53 chg: +0.52 stop: n/a

We are down to our last two weeks for this January strangle play on NILE. January options expire soon. The bad news is that NILE has rebounded almost back to where we picked it. Odds are that the slow and steady buying in NILE is due to funds picking up shares before NILE is added to the S&P smallcap index, which was announced a few weeks ago. We're not suggesting new positions. We are adjusting our target to breakeven at $2.40, which was our estimated cost. The options in our suggested strangle are the January $45 call (JWU-AI) and the January $35 put (JWU-MG).

Suggested Options:
We are not suggesting new plays in NILE.

Picked on October 29 at $ 38.92
Change since picked: - 0.39
Earnings Date 10/30/06 (confirmed)
Average Daily Volume = 226 thousand
 

Dropped Calls

Biosite Inc. - BSTE - close: 55.06 change: +3.86 stop: 48.65

Wow! We thought BSTE was going to run but we didn't think it was going do it all in one day. We added BSTE as a bullish call candidate on Thursday night following the breakout over resistance. The stock shot to our target on Friday with a big rally on huge volume. Our target was the $54.85-55.00 range and BSTE hit an intraday high of $55.50.

Picked on January 04 at $ 51.20
Change since picked: + 3.86
Earnings Date 02/07/07 (unconfirmed)
Average Daily Volume = 238 thousand
 

Dropped Puts

None
 

Dropped Strangles

None
 

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