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Call Updates

Lehman Brothers - LEH - cls: 82.74 change: +1.63 stop: 77.99*new*

LEH continues to post strong gains. The XBD broker-dealer index set another record high on Friday. Shares of LEH followed suit with its own new high and a 2% gain on strong volume. Boosting the stock was a price upgrade before the open. An analyst firm raised their price target on LEH to $91. Last week's breakout over resistance at $80.00 is very bullish but don't be surprised if we get some profit taking. Fortunately, broken resistance near $80 should now be new support. We're raising our stop loss to $77.99. More conservative traders may want to use a tighter stop loss. We would not suggest new positions here. Wait for a dip back toward $80-81 before initiating a new play. We have two targets. Our conservative target is the $84.85-85.00 range. Our aggressive target is the $89.00-90.00 range. LEH's Point & Figure chart shows a very bullish pattern called a bullish triangle breakout that points to a $111 target.

Suggested Options:
If LEH provides a new entry point (on a dip towards $80) we'd suggest the February calls.

Picked on January 11 at $ 80.25
Change since picked: + 2.49
Earnings Date 03/15/07 (unconfirmed)
Average Daily Volume = 3.4 million

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Lockheed Martin - LMT - cls: 96.31 change: +0.65 stop: 90.95*new*

Last week was very bullish for LMT. Shares rose more than 4% and broke out past potential resistance at the $95.00 level. Furthermore LMT hit our conservative target in the $94.85-95.00 range. Chart readers will note that Friday's rally in LMT appears to have broken the six-month trendline of resistance (across its highs). We remain bullish on LMT but we're not suggesting new positions at this time. LMT may be due for some profit taking and a dip back toward $94 would not be a surprise. Our aggressive target is the $99.00-100.00 range. We are raising the stop loss to $90.95

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

Picked on November 29 at $ 90.62
Change since picked: + 5.69
Earnings Date 01/23/07 (unconfirmed)
Average Daily Volume = 2.1 million

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Merrill Lynch - MER - close: 97.02 change: +0.74 stop: 93.99*new*

MER is another broker-dealer stock soaring to new record highs. The stock broke out over resistance at the $94.00 level last week and did so on strong volume. We expect that shares will make a run for the $100 level before the earnings report. Our target is the $99.50-100.00 range. We do not want to hold over the January 18th earnings report so we plan to exit on Wednesday the 17th at the closing bell if MER has not hit our target by then. We are not suggesting new positions in MER at this time. Please note that we're raising the stop loss to $93.99.

Suggested Options:
We're not suggesting new plays in MER.

Picked on January 10 at $ 94.44
Change since picked: + 2.58
Earnings Date 01/18/07 (confirmed)
Average Daily Volume = 4.6 million

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Altria Group - MO - close: 88.42 change: -0.98 stop: 84.75

Shares of MO hit some profit taking on Friday. Readers should not be surprised. We warned you on Thursday that the action looked like a short-term bearish reversal. The only good news on Friday was a minor bounce from short-term support at its rising 10-dma. Meanwhile in the news on Friday it was announced that the U.S. Supreme Court will review the "lights" case between the state of Arkansas and Phillip Morris. The Supreme Court is reviewing whether or not MO can successfully keep the case in federal courts or whether it belongs back in state courts. We're not suggesting new positions in MO at this time. More conservative traders might want to consider a tighter stop loss near $86. We are targeting a rally into the $92.50-95.00 range. The P&F chart currently points to a $114 target. We do not want to hold over the late January earnings report.

Suggested Options:
We're not suggesting new positions at this time.

Picked on January 04 at $ 87.65
Change since picked: + 0.77
Earnings Date 01/31/07 (unconfirmed)
Average Daily Volume = 8.8 million
 

Put Updates

Cummins Inc. - CMI - close: 116.75 change: +0.87 stop: 118.15

More conservative traders may want to strongly consider an early exit in CMI. As we expected the stock struggled to make it past short-term resistance at the $118 level. However, our concern now is that if the major averages continue to rally higher next week then CMI will eventually follow and we'll be stopped out. Currently CMI is trading near its four-week trendline of resistance. Yet on the weekly chart the stock has broken a long-term trendline of support. At the same time we notice that on the weekly chart the latest candlestick looks like a potential bullish reversal. We are not suggesting new plays at this time. Currently the Point & Figure chart has a triple-bottom breakdown sell signal with a $96 target but is also testing support in the $114-115 region. We have two targets. Our conservative target is $110.50 and our aggressive target is the $106.00 level.

Suggested Options:
We are not suggesting new plays at this time but watch for a decline under $114.50 or $114.00 as a potential entry point. Don't forget that we want to exit ahead of the January 29th earnings report.

Picked on January 10 at $114.50
Change since picked: + 2.25
Earnings Date 01/29/07 (confirmed)
Average Daily Volume = 1.0 million

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eBay Inc. - EBAY - close: 30.00 change: -0.23 stop: 31.26*new*

Tech stocks, especially Internet stocks, turned in a strong performance last week. Yet EBAY under performed and closed with a loss for the week. The stock continues to trade under a bearish pattern of lower highs and it's struggling with technical resistance at its 200-dma. Even with EBAY's relative weakness we hesitate to suggest new put positions given our time frame and the market's strength. The company is due to report earnings on January 24th and we do not want to hold over the announcement. Please note that we're adjusting our stop loss to $31.26. Our target is the $26.00 level.

Suggested Options:
We are not suggesting new plays at this time.

Picked on January 08 at $ 29.70
Change since picked: + 0.30
Earnings Date 01/24/07 (confirmed)
Average Daily Volume = 14.5 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: 38.91 chg: -0.52 stop: n/a

After two months we're right back where we started. News that NILE would be added to the S&P small cap index (the announcement came out weeks ago) has reversed the stock's direction. Unfortunately, we're down to our last four days before January options expire. We're not suggesting new positions. We're adjusting our target to $1.20, which is half of 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: - 0.01
Earnings Date 10/30/06 (confirmed)
Average Daily Volume = 226 thousand
 

Dropped Calls

Goldman Sachs - GS - close: 213.99 chg: +2.11 stop: 199.75

Target achieved. The broker-dealer stocks continued to run on Friday. The XBD index rose 1% to close at another new all-time high. Meanwhile GS paced the move and closed up 1% for its own record high. The intraday high for GS was $214.22 and our suggested target was the $214.00-215.00 range. More aggressive traders may want to aim higher (maybe the $218-220 region).

Picked on January 10 at $208.11
Change since picked: + 5.88
Earnings Date 03/13/07 (unconfirmed)
Average Daily Volume = 4.7 million

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Reynolds American - RAI - cls: 64.30 chg: -0.71 stop: 64.90

We are giving up on RAI. It was our plan to buy calls on a breakout over resistance near $66.50 but shares of RAI are not cooperating. We're dropping the play unopened.

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

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Sepracor - SEPR - close: 61.30 change: -0.42 stop: 59.99

SEPR is still not moving even though biotechs and drug stocks have turned in a strong rally this past week. We're suggesting an immediate exit to cut our losses and move on.

Picked on January 07 at $ 61.89
Change since picked: - 0.59
Earnings Date 01/31/07 (confirmed)
Average Daily Volume = 2.2 million
 

Dropped Puts

None
 

Dropped Strangles

None
 

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