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Call Updates

Burlington Nor.SantaFe - BNI - cls: 81.47 chg: +1.11 stop: 77.99

We did not have to wait very long for BNI to hit our trigger and open the play. Transport stocks continued to rally and the Dow Jones railroad index gained another 1.47%. Boosting the railroads was a positive story about how railroads will benefit from the rising ethanol industry. Shares of BNI surged to a new multi-month high of $82.54 before paring its gains. Volume on today's 1.38% rally was relatively strong. Now that the play is open our target is the $87.00-87.50 range. If you are the patient type then consider waiting for a dip back towards $80.00 as a new entry point to buy calls. FYI: The Point & Figure chart points to $100 and the inverse H&S pattern also suggests a $100 target.

Picked on February 1 at $ 82.01
Change since picked: - 0.54
Earnings Date 01/23/07 (confirmed)
Average Daily Volume = 2.4 million

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Macerich - MAC - close: 96.28 change: +0.75 stop: 91.95*new*

Shares of MAC, a REIT, continue to set new all-time highs. We're not suggesting new positions as the stock has entered an extremely overbought condition. If you are looking for a new entry point consider watching for a bounce near its simple 10-dma. We are adjusting our stop loss to $91.95. This remains an aggressive, higher-risk play. Our target is the $98.00-100.00 range. We do not want to hold over the February 13th earnings report.

Picked on January 28 at $ 93.46
Change since picked: + 2.82
Earnings Date 02/13/07 (confirmed)
Average Daily Volume = 436 thousand

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OM Group - OMG - close: 50.14 change: +1.28 stop: 45.75 *new*

Another bullish day in the markets helped OMG post a strong 2.6% gain and produce a technical breakout over round-number resistance at the $50.00 mark. Volume continues to come in very low and that should put bulls on alert. We are adjusting our stop loss to $45.75. OMG should find short-term support in the $47.50-48.00 region. Our target is the $54.00-55.00 range. We do not want to hold over the early March earnings. FYI: The P&F chart points to a $57 target.

Picked on January 25 at $ 48.05
Change since picked: + 2.09
Earnings Date 03/02/07 (unconfirmed)
Average Daily Volume = 770 thousand

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RTI Int. - RTI - close: 83.79 change: +2.04 stop: 76.75

Our new play in RTI is off to a strong start. Traders bought the morning dip near $81.30 and the stock rebounded to hit new all-time highs (above $83.33). We do not see any changes from our previous comments on the stock. Our target is the $88.00-90.00 range. The P&F chart points to a $105 target. In other news the company announced that its current president and CEO will step down on April 27th but will continue to work with management through his official retirement date in July.

Picked on January 31 at $ 81.75
Change since picked: + 2.04
Earnings Date 03/12/07 (unconfirmed)
Average Daily Volume = 737 thousand

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Teleflex - TFX - close: 67.60 chg: +0.82 stop: 64.75

What a difference a couple of days can make. TFX has bounced strongly from support near $65 and its rising 50-dma. Today's rally saw the stock breakout to multi-month highs and past the mini-(bearish) double top in mid January. Our biggest concern today was the lack of volume on the move. Our target is the $71.00-72.00 range. FYI: The P&F chart points to an $81 target. We plan to exit ahead of the mid February earnings report.

Picked on January 14 at $ 67.11
Change since picked: + 0.49
Earnings Date 02/14/07 (unconfirmed)
Average Daily Volume = 202 thousand
 

Put Updates

F5 Networks - FFIV - close: 71.81 change: +0.40 stop: 76.25

We do not see any changes from our previous comments on FFIV. The stock produced a minor bounce following yesterday's decline. FFIV appears to be trading inside a narrow, bearish channel over the last two and a half weeks. The simple 10-dma should be short-term overhead resistance. More conservative traders may want to wait for more confirmation and only buy puts on a break down under $70.00. A 38.2% Fibonacci retracement would be very close to $65.00 and FFIV's rising 100-dma so we are aiming for the $66.00-65.00 range. FYI: The Point & Figure chart has produced a triple-bottom breakdown sell signal with a $63 target. Plus, the company announced an analyst meeting for February 7th in New York.

Picked on January 28 at $ 72.70
Change since picked: - 0.89
Earnings Date 01/24/07 (confirmed)
Average Daily Volume = 1.0 million

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Whole Foods - WFMI - close: 43.97 chg: +0.78 stop: 45.51

A bullish day for the markets helped WFMI produce another oversold bounce (+1.8%) but shares continue to struggle under their trendline of resistance (lower highs). A failed rally under $44.00-44.50 can be used as a new entry point. Our target is the $40.25-40.00 range. We do not want to hold over the February earnings report. FYI: The P&F chart points to a $26 target.

Picked on January 19 at $ 44.85
Change since picked: - 0.88
Earnings Date 02/21/07 (unconfirmed)
Average Daily Volume = 3.3 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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Google - GOOG - cls: 481.75 change: -19.75 stop: n/a

It seems that investors were not satisfied with GOOG's earnings results last night. The company beat estimates and gave a positive conference call but that wasn't enough to stave off the profit taking. Analysts' reaction to the earnings news was almost universally positive with plenty of firms reiterating their buy ratings or raising estimates or raising price target on GOOG. Yet this "news" was not enough to stave off the profit taking. The stock produced a bearish engulfing candlestick pattern on very big volume. Typically these patterns are seen as one-day bearish reversals. Today's decline was extra bearish as GOOG broke down past its trend of higher lows. GOOG closed almost on its low for the day and that is typically a bearish signal for the following session. We are not suggesting new strangle positions at this time. In the Sunday newsletter we suggested two different potential strangle strategies. One involved the February $530 call (GOP-BW) and the February $470 put (GOP-NG). This strategy had an estimated cost of $17.40 and we want to exit if either option rises to $29.00 or more. The second strangle strategy involved the February $550 call (GOP-BY) and the February $450 put (GOP-NJ). This second strategy had an estimated cost of $8.70 and we want to sell if either option rises to $16.00 or more. Editor's note: Many times the biggest move in GOOG is on the first day after earnings but it might pay off to hold the strangle position for two or three days to capture the largest chunk of any post earnings news. If after three days following the earnings report and the options have not hit our target we'll probably exit.

Picked on January 28 at $495.84
Change since picked: -14.09
Earnings Date 01/31/07 (confirmed)
Average Daily Volume = 5.2 million

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Intuitive Surgical - ISRG - cls: 99.32 chg: +0.91 stop: n/a

Bulls continued to control the direction for shares of ISRG as investors placed their bets ahead of the company's earnings report due out tonight. The stock rose 0.9% on strong volume and challenged the $100 level twice. We are no longer suggesting new strangle positions. After the closing bell ISRG reported earnings that were 11 cents better than consensus estimates of 51 cents a share. While management said that the first quarter of 2007 might be light the company guided higher for all of 2007. Trader reaction to the news was positive. After hours markets saw ISRG trade to a high near $117.00 and as of this commentary the stock was trading near $114.20. We can probably expect the stock to gap open higher tomorrow. Given the sharp after-market move traders might want to raise their target to exit. We're going to keep our target on the options at $14.80. Our suggested strangle involves the February $100 call (AXQ-BT) and the February $90 put (AXQ-NR). Our estimated cost was $7.20 and we want to sell if either option rises to $14.80 or more.

Picked on January 28 at $ 94.98
Change since picked: + 4.34
Earnings Date 02/01/07 (confirmed)
Average Daily Volume = 882 thousand

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United Parcel Srv. - UPS - cls: 73.64 chg: +1.36 stop: n/a

UPS continued to bounce thanks to a rally in transports and a pull back in crude oil. The stock's 1.8% gain today pushed the stock high enough to "fill the gap" from January 30th. The question now is whether or not shares will continue to rally and breakout over its trendline of resistance or will it turn over and renew the bearish trend. We are not suggesting new strangle positions in UPS. We are going to need to see a much bigger move in UPS if our strangle play is going to be profitable. We suggested the February $75 call (UPS-BO) and the February $70 put (UPS-NN). Our estimated cost was $1.65. We want to exit if either option rises to $3.75 or more.

Picked on January 28 at $ 72.49
Change since picked: + 1.15
Earnings Date 01/30/07 (confirmed)
Average Daily Volume = 2.9 million
 

Dropped Calls

Alexandria RealEst. - ARE - cls: 109.57 chg: +1.21 stop: 103.99

Target achieved. Shares of ARE continued to show impressive relative strength and posted another gain, making this the eight gain in a row. Volume has been coming in above average during the entire weeklong rally. The stock hit an intraday high of $109.94, which was enough for our target in the $109.90-110.00 range. We would keep an eye on ARE for a dip back toward $105-106 as a potential entry point for new plays but bear in mind the company's upcoming earnings report so you don't hold over the announcement.

Picked on January 29 at $105.51
Change since picked: + 4.06
Earnings Date 02/08/07 (unconfirmed)
Average Daily Volume = 213 thousand

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KB Home - KBH - close: 54.55 change: +0.33 stop: 49.99

Target achieved. Homebuilders continued to rally following yesterday's positive comments from the Fed on a stabilizing housing market. Shares of KBH traded to an intraday high of $55.27. Our target was the $54.90-55.00 range. We're closing the play but given the improved outlook on the homebuilders we would continue to watch KBH and the group for potential plays. Another dip and bounce near $52.00 or a breakout past $55.00 might be alternative entry points. FYI: The Point & Figure chart points to a $76 target.

Picked on January 21 at $ 51.74
Change since picked: + 2.81
Earnings Date 03/19/07 (unconfirmed)
Average Daily Volume = 2.2 million

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Mohawk Ind. - MHK - close: 85.79 chg: +3.37 stop: 77.45

Target achieved and exceeded. We still cannot find any specific news to account for MHK's super strong rally over the last couple of days. Yesterday's positive comments on an improving real estate market certainly didn't hurt but MHK's reaction has been abnormally strong. We suspect this has been a short squeeze with bears racing to cover positions following the breakout over resistance at $80.00. The most recent (January) data put short interest at just over 10% of MHK's 53.3 million-share float. Our target was the $84.00-85.00 range.

Picked on January 21 at $ 78.38
Change since picked: + 7.41
Earnings Date 02/15/07 (confirmed)
Average Daily Volume = 557 thousand
 

Dropped Puts

None
 

Dropped Strangles

None
 

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