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Call Updates

Apple Inc. - AAPL - close: 124.63 change: -2.83 stop: see details

The oversold bounce in AAPL is struggling and shares never confidently broke through short-term technical resistance at the 10-dma. Lack of conviction on the rebound is worrisome if you're bullish. Should the market show any weakness this week then we would expect AAPL to retest the $120 level as support.

AAPL play #1 - directional calls

This could be a painful week for call holders if AAPL pulls back to $120 but a bounce near $120 would be another tempting entry point to launch new bullish positions. We are suggesting a stop loss at 116.99 under last week's low. More conservative traders may want to use a stop closer to $120. Our target is the $139.00-145.00 range.

AAPL play #2 - Credit put spread

We would use another bounce near $120 as an opportunity to launch new credit put spreads. The options we suggested were buying the March $110 put and selling the March $120 put.

AAPL play #3 - Sell Naked Puts

Again, look for a bounce before launching new naked put positions. We had suggested selling the March $150 put with plans to buy it back when AAPL hits $139.00.

Picked on February 10 at $125.48
Change since picked: - 0.85
Earnings Date 04/24/08 (unconfirmed)
Average Daily Volume = 44.4 million

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Monsanto - MON - cls: 115.35 change: -0.66 stop: 107.85

Friday marked the second time in three days that traders bought the dip in MON near $112. The afternoon bounce on Friday looks like a new bullish entry point to buy calls. More conservative traders may want to consider raising their stop toward $110 or maybe even $112. We have two targets. Our first target is the $127.00 level. Our second target is the $137.00-140.00 range. As we discussed earlier a move over $118 triggered a new P&F chart buy signal, which now forecasts a $157 price target. These have been very volatile stocks so readers should consider them aggressive, higher-risk plays. FYI: MON is presenting at the Morgan Stanley Basic Materials Conference 2008 on February 21st

Suggested Options:
We are suggesting the March or April calls.

Picked on February 12 at $118.09 *gap higher entry
Change since picked: - 2.74
Earnings Date 04/03/08 (unconfirmed)
Average Daily Volume = 7.1 million

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Mosaic - MOS - close: 103.37 change: -0.06 stop: 89.45

Shares of MOS held up pretty well on Friday. Overall the stock tested broken resistance near $100 as new support multiple times this past week. Traders were buying the dip on Friday afternoon and if the market had been open longer MOS would have closed in the green. We remain bullish and would still consider new positions here. However, we have a terrible stop loss. The stock is so volatile that we're trying to give it 10% room to move. Currently our stop is more than 10% away but the $90 level and its 50-dma is the only clear form of support. More conservative traders will want to strongly consider raising their stop loss near $95.00, which might be short-term support if $100 breaks down. We have two targets. The first target is $109.75, just under the January highs. Our second, more aggressive target is the $118.00-120 zone. These are very volatile stocks with a lot of intraday spikes. We would consider this a more aggressive, higher-risk play.

Suggested Options:
We are suggesting the March or April calls.

Picked on February 12 at $101.83 *gap higher entry
Change since picked: 1.54
Earnings Date 04/09/08 (unconfirmed)
Average Daily Volume = 5.8 million

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Petroleo Brasileiro - PBR - cls: 114.45 chg: -0.78 stop: 104.95

Oil stocks performed okay this past week and both the OIX oil index and OSX oil services index look poised to move higher. One item that could impede the energy sector's rally this coming week is crude oil. The rally in crude looks like it's short-term overbought and crude is testing resistance. Honestly, if you look at crude oil you can see what looks like the tip of a right shoulder in a bearish head-and-shoulders pattern. If oil moves down from here traders will need to turn more defensive on oil plays, although oil service stocks could still do okay. Shares of PBR slipped on Friday but investors bought the dip at its 10-dma. We suggested a rebound in the $112.50-110.00 zone was a new entry point and that is what PBR provided. We are leaving our stop loss at $104.95 for now but more conservative traders will want to strongly consider a tighter stop near $110 instead. Speaking of conservative traders, the $120 level is another zone of resistance and you might want to wait for a new high over $120 before initiating new plays. We are considering a second target near $140. Currently, our target is the $128.00-130.00 range. The move over $116 has produced a new Point & Figure chart buy signal. Actually it is a quadruple-top bullish breakout buy signal with a $138 target. FYI: Another risk is PBR's earnings report. We can't find an earnings date and they normally report in mid February. That is a risk because we do not like to hold over an earnings report.

Suggested Options:
We are suggesting the March or April calls.

Picked on February 12 at $116.00 *triggered
Change since picked: - 1.55
Earnings Date 02/12/08 (unconfirmed)
Average Daily Volume = 7.6 million

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Potash - POT - close: 147.88 change: -0.61 stop: 136.99

POT is still relatively close to its recent all-time high and traders bought the dip on Friday near $145. Shares look poised to breakout into a new leg higher but the bears would argue that POT is struggling to make it past resistance in the $150-153 zone. We would suggest a bounce over $150 or a dip and rebound in the $140-143 region as potential entry points for new call plays. We have two targets for POT. Our first target is the $158.00-160.00 range. Our second, more aggressive target is the $168.00-170.00 zone. More aggressive traders may want to aim significantly higher. The Point & Figure chart is forecasting a $222 target. Again, this is a very volatile stock. Readers should consider it an aggressive, higher-risk trade. Aggressive traders could put their stop under the 50-dma.

Suggested Options:
We are suggesting the March or April calls.

Picked on February 12 at $147.50 *triggered
Change since picked: 0.33
Earnings Date 04/24/08 (unconfirmed)
Average Daily Volume = 5.9 million
 

Put Updates

Ambac Fincl. - ABK - cls: 10.22 change: -0.31 stop: n/a

There is still a lot of fear and uncertainty in the market about how, if any, bailout plan for the bond insurers will work, or how fast it can happen. Investor worries about another round of massive bank write downs are growing again (did they ever go away?). The big news for the bond insurers on Friday was news that FGIC is asking to be split into two companies to separate their municipal bond business from the rest of its bond insurance business. The market immediately wondered if ABK and MBI would do the same. ABK's management said they would look at it but really didn't suggest one way or the other. Shares of ABK lost 3.89% which doesn't illustrate a lot of hope for the company. We remain bearish, although Jim did comment on a glimmer of hope in his wrap tonight. Currently we are suggesting the May puts and a speculative out of the money March call as a hedge to protect us if a bailout deal does get done. Many on Wall Street expect something to occur this week but it could drag out to next week. The options we suggested were the May $5 or $2.50 puts and the March $20 call.

Suggested Options:
see above

Picked on January 27 at $ 11.54
Change since picked: - 1.32
Earnings Date 04/24/08 (unconfirmed)
Average Daily Volume = 10.9 million

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Bear Stearns - BSC - cls: 82.79 chg: 4.32 stop: 85.05*new*

We are not convinced. Shares of BSC surged 5.5% on rumors that it was being acquired by China's CITIC Securities. It appears now that this was some option expiration shenanigan to juice the stock higher before February's equity options expired. BSC has been labeled a takeover candidate for months due to the long-term decline in the share price. More conservative traders may want to go ahead and exit early now to limit their losses. We're actually going to nudge our stop loss higher to $85.05 just to make sure we don't get stopped on a minor intraday spike on Monday. Look for a new decline under $80.00 as a new entry point for puts. Our target is the $71.00-70.00 zone. Our biggest risk is that a bailout plan for the bond insurers does get done (and probably this coming week). If plan is announced and the street thinks it has a good chance of actually coming to pass then shares of BSC are bound to rally sharply due to its exposure to the sub-prime mess.

Suggested Options:
If BSC provides a new entry point we would suggest the March or April puts.

Picked on February 11 at $ 79.49 *triggered
Change since picked: 3.30
Earnings Date 03/13/08 (unconfirmed)
Average Daily Volume = 7.4 million

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FedEx - FDX - close: 87.92 change: -0.09 stop: 92.05

Nothing has changed for FDX. The transports are still facing higher fueled costs. FDX is also facing the possibility of a U.S. recession. The trend continues to look bearish. Technical resistance at the 50-dma held last week so we're adjusting our stop loss to 90.55, which is relatively conservative given FDX's share price. This looks like another bearish entry point to buy puts. There is potential support at $86 but our target is the $81.00-80.00 zone.

Suggested Options:
We are suggesting the March or April puts.

Picked on February 10 at $ 88.00
Change since picked: - 0.08
Earnings Date 03/20/08 (unconfirmed)
Average Daily Volume = 3.2 million

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W.W.Grainger - GWW - close: 75.12 chg: -0.34 stop: 80.05

GWW continues to drift lower but the stock settled on the $75.00 strike price as February options expired. We remain bearish and if you are looking for a new entry point watch for a failed rally under $78.00 or a new relative low under $74.60. Our target is the $70.75-70.00 zone.

Suggested Options:
We are suggesting the March or April puts.

Picked on February 10 at $ 76.65
Change since picked: - 1.53
Earnings Date 04/16/08 (unconfirmed)
Average Daily Volume = 1.0 million

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iShares DJ Financial - IYF - cls: 87.31 chg: 0.40 stop: 91.85*new*

Hmm... the trend in the financials is still bearish. Yet the sector managed a bounce on Friday in the face of growing write down fears. This could be a warning sign for the bears. Wait for another failed rally in the $88-90 zone or a new low under $85.50 before considering new put positions. We're adjusting our stop loss to $91.85, which is just above the 50-dma. More conservative traders will want to strongly consider adjusting their stop closer to $90.00. We're aiming for a test of the $80.00 region. Our official target is the $81.00-80.00 zone. FYI: Read tonight's wrap. Jim discusses the bond insurers again. A solution in that industry could light a fire under the financials. The banks are already setting up for a strong third and fourth quarter. The question is how bad will the first two quarters of 2008 be?

Suggested Options:
We would consider the March or April puts.

Picked on February 06 at $ 88.62
Change since picked: - 1.31
Earnings Date 00/00/00
Average Daily Volume = 1.1 million

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MBIA Inc. - MBI - close: 12.24 change: -0.38 stop: n/a

For comments on the bond insurers see ABK's update and tonight's market wrap. MBI's 3% decline on Friday is not encouraging if you're bullish. We remain bearish. Currently we are suggesting the May puts and a speculative out of the money March call as a hedge to protect us if a bailout deal does get done. Many on Wall Street expect something to occur this week but it could drag out to next week. The options we suggested were the May $7.50, $5.00 or $2.50 puts. We recently added a deep out of the money call, the March $22.50 call, as a hedge in case a rescue plan does get announced and the stocks react to it.

Suggested Options:
See play details.

Picked on January 27 at $ 14.20
Change since picked: - 1.96
Earnings Date 01/31/08 (confirmed)
Average Daily Volume = 15.2 million

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Mohawk Ind. - MHK - cls: 72.07 chg: -1.63 stop: 78.05

We do not see any changes from our Thursday night comments so we're reposting them here:

MHK reported earnings Wednesday night and beat estimates but then warned for the future. The company continues to struggle due to the housing slow down. The trading action Thursday was bearish. We're suggesting puts now with MHK under $75.00. We'll try and get buy with a stop loss above Thursday's high at $78.05. There is potential support at $70.00 but we're aiming for the $66.50-65.00 zone near its January 2008 bottom. A failed rally near $75.00 would be a very attractive entry point.

Suggested Options:
We are suggesting the March puts.

BUY PUT MAR 75.00 MHK-OO open interest=202 current ask $5.30
BUY PUT MAR 70.00 MHK-ON open interest=347 current ask $2.70

Picked on February 14 at $ 73.70
Change since picked: - 1.63
Earnings Date 02/13/08 (confirmed)
Average Daily Volume = 907 thousand

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Myriad Genetics - MYGN - cls: 37.64 chg: -0.89 stop: 40.51*new*

Shares of MYGN continued to slip lower and the stock broke down under short-term support near $38.00 on Friday. Volume has been just a little above average all week, which is probably negative since the trend is down. MYGN under performed the DRG drug index and BTK biotech index. We would keep an eye on the BTK, which looks ready to bounce higher next week. Please note that we're adjusting the stop loss to $40.51. Our MYGN target is the $36.00-35.00 range. More aggressive traders may want to aim lower. The Point & Figure chart is bearish with a $34 target. FYI: We always consider a biotech stocks to be a more aggressive, higher risk play because you never know when an FDA decision will be released or some clinical trial info will come out that could send the stock moving sharply either direction.

Suggested Options:
We're not suggesting new positions at this time but a failed rally under its 10-dma could be a new entry point.

Picked on February 07 at $ 39.75 *triggered
Change since picked: - 2.11
Earnings Date 02/05/08 (confirmed)
Average Daily Volume = 801 thousand

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Sears Holding - SHLD - cls: 98.75 chg: 1.30 stop: 100.25

SHLD managed a minor bounce in the $96-97 zone but the stock continues to have a short-term and long-term bearish trend of lower highs. We remain bearish but we're waiting for a more convincing breakdown. Currently our official entry point to buy puts is at $94.75. If triggered at $94.75 our target is the $86.00-85.00 range. We do not want to hold over the end of February (now confirmed) earnings report.

Suggested Options:
If SHLD hits our trigger at $94.75 we are suggesting the March or April puts.

BUY PUT MAR 95.00 KTQ-OS open interest=3008 current ask $5.60
BUY PUT MAR 90.00 KTQ-OR open interest=8432 current ask $3.60
BUY PUT MAR 85.00 KTQ-OQ open interest=12336 current ask $2.20

Picked on February xx at $ xx.xx <-- see TRIGGER
Change since picked: 0.00
Earnings Date 02/28/08 (confirmed)
Average Daily Volume = 3.0 million

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Simon Properties - SPG - cls: 84.51 chg: -0.07 stop: 90.15*new*

Like most of the market the REIT stocks spent the week churning sideways. However, the overall trend continues to look bearish. We are adjusting our stop loss to $90.15. More conservative traders may want to consider a stop loss near the 50-dma around 87.60. A failed rally under 86 or a new decline under $82.40 could be used as a entry point for puts. Our target is the $76.00-75.00 range.

Suggested Options:
If SPG provides a new entry point we would suggest the March or April puts.

Picked on February 07 at $ 84.39 *triggered
Change since picked: 0.12
Earnings Date 02/01/08 (confirmed)
Average Daily Volume = 2.7 million
 

Strangle Updates

None
 

Dropped Calls

CONSOL Energy - CNX - cls: 75.08 change: -4.80 stop: 73.85

A Goldman Sachs analyst downgraded the coal sector on Friday and the stocks got crushed. Shares of CNX deflated to close with a 6% loss. Unfortunately, the intraday low was $72.96, which was enough to hit our stop loss at $73.85. This could have been a one-day fluke but we'll have to see.

Picked on February 10 at $ 77.54
Change since picked: - 2.46
Earnings Date 04/24/08 (unconfirmed)
Average Daily Volume = 3.3 million
 

Dropped Puts

Hansen Natural - HANS - close: 37.92 chg: -0.61 stop: 40.05

We can blame Goldman Sachs again! Positive comments from a Goldman Sachs analyst about HANS' quarter drove the stock to a 5.7% gain (can you say short covering?). The stock soared Friday morning and quickly breached resistance at the $40.00 mark hitting our stop loss at $40.05. Hopefully when the stock gapped open higher and sprinted to $40 no one chose to open new put plays.

Picked on February 14 at $ 37.92 *stopped 40.05
Change since picked: 2.17
Earnings Date 02/28/08 (unconfirmed)
Average Daily Volume = 1.9 million
 

Dropped Strangles

DJIA 1/100 Index - $DJX - cls: 123.48 chg: -0.29 stop: n/a

Back on January 31st the DJIA looked poised for a big move - either a breakout from its bearish trend or a plunge back to its January lows. Instead the DJX merely tagged both the top and bottom edge of our strangle essentially going nowhere.

Picked on January 29 at $124.80
Change since picked: - 1.32
Earnings Date 00/00/00
Average Daily Volume = million

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Google - GOOG - close: 529.64 chg: - 2.61 stop: n/a

In the past we have had success playing strangles on GOOG's always volatile post-earnings move. Yet the last couple of times this type of play has not worked as expected. We could have exited for a profit on the dip under $500 but the option values did not rise to where we thought it would (our target) price so we didn't.

Picked on January 30 at $548.27
Change since picked: -18.63
Earnings Date 01/31/08 (confirmed)
Average Daily Volume = 5.6 million

 

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