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Call Updates

CNOOC - CEO - cls: 165.77 chg: -5.53 stop: 159.49

As traders we have a decision to make with CEO. The U.S. markets pulled back sharply on Friday. Normally overseas markets react negatively to any bid decline here in the states. So do we buy the dip in CEO near $165? Or do you try and exit early or tighten your stop closer to $165 to reduce your risk? We also need to take into account that shares of CEO are likely to gap open on Monday (for us) as they adjust to trading on the Chinese exchanges. Will it gap higher or lower? We still believe that the oil stocks present some bullish opportunities. Although Jim might discuss his views in the wrap this weekend on how crude oil is temporarily too high (we are still very bullish on oil long-term). At this point in the game we are going to suggest that readers look for a bounce in the $165-160 zone as a new entry point to buy calls. We are listing two targets. Our first target is the $188.00-190.00 zone. Our second target is the $208-210 zone. We would expect some resistance and a pull back on CEO's initial test of the $185 region and the $200 region. Our $208 price target is pretty aggressive given our three to four week time frame. We do not want to hold over earnings. Plan on exiting the majority of the position at the first target.

Suggested Options:
If CEO provides a new entry point we would suggest the March or April calls. March calls only have three weeks left.

Picked on February 26 at $170.73
Change since picked: - 4.96
Earnings Date 03/19/08 (unconfirmed)
Average Daily Volume = 509 thousand

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CF Industries - CF - close: 122.08 change: -4.14 stop: 117.45

As the market's losses began to mount on Friday afternoon so did the declines for CF. The stock lost 3.2% and produced a bearish engulfing candlestick pattern. This is typically seen as a bearish reversal pattern and the ominous roll over in some of the technical oscillators doesn't bode well for the bulls either. If the market sees any sort of sharp sell-off lower on Monday then CF could break support at $120 and stop us out. If we do get stopped out we'll be looking for a new bullish entry point on a dip near $115 and its rising 50-dma (or very worst-case near the 100-dma). If you're feeling conservative then consider a tighter stop near $120. Our target is the $138.00-140.00 zone. The Point & Figure chart is bullish with an updated $143 target. FYI: The most recent data puts short interest at 6.8% of the 53.4 million-share float.

Suggested Options:
If CF provides a new entry point we would suggest the March or April calls. March calls only have three weeks left.

Picked on February 19 at $121.03 *triggered/gap higher
Change since picked: + 1.05
Earnings Date 04/24/08 (unconfirmed)
Average Daily Volume = 2.8 million

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iShares China 25 - FXI - cls: 145.23 chg: -5.26 stop: 149.45

The Chinese FXI never confirmed its bullish breakout from Wednesday. The index has lost about ten points since then. It looks like traders were buying the dip near $145.00 late this afternoon. Aggressive traders may be tempted to follow their lead and jump in here. However, we will repeat our comments from the CEO update. Normally overseas markets react negatively to big down days here in the states. That should put more pressure on the FXI come Monday - at least Monday morning. Patient investors might get a shot to buy a dip or a bounce around $143 or even $140-137 in the FXI. If we see a clear bounce around the $140 area we might adjust our suggested entry point. Currently we're waiting for a move over $160. Our official plan suggests that readers buy calls at $161.01. If we are triggered our target is the $178.00-180.00 zone although we'll have to keep a wary eye on potential resistance at the 100-dma.

Suggested Options:
If the FXI provides an entry point we would suggest the March or April calls. Our preference would be April strikes.

Picked on February xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 00/00/00
Average Daily Volume = 7.8 million

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Humana Inc. - HUM - close: 68.33 change: -2.92 stop: 67.75

Thursday HUM provided us what looked like the perfect entry point with a dip to $70.50. We had been suggesting that readers buy calls in the $71.00-70.00 zone. Sadly, Friday's market weakness pushed HUM right through technical support near $70.00 and its 200-dma. The intraday low was $68.12. Honestly, we're surprised that we were not stopped out. If the market sees any follow through lower on Monday we do expect to be stopped out at $67.75. However, readers may want to keep an eye on the $67-66 zone and look for a rebound there as a new entry point to consider buying calls. We have two targets. Our first target is the $74.75-75.00 range. Our second target is the $78.00-80.00 zone but HUM will have to power through technical resistance near $75.00, its 100-dma and 50-dma to reach our second target. The P&F chart is bullish. It recently produced a new triple-top breakout buy signal with an $83 target.

Editor's note: HUM and healthcare may be a great long-term investment considering the future of the U.S. and the aging baby-boomer population. Unfortunately, this short-term reversal in HUM is pretty ugly. If it breaks down under the February low (65.89) we would strongly consider shorts/puts and aim for the $60 level.

Suggested Options:
Should HUM surprise us and provide a new entry point we would suggest the March or April calls. Our preference would be for the April strikes.

Picked on February 28 at $ 71.00 *triggered
Change since picked: - 2.67
Earnings Date 04/28/08 (unconfirmed)
Average Daily Volume = 1.9 million

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Monsanto - MON - cls: 115.68 change: -2.84 stop: 113.99

Traders are facing another tough decision with MON. The stock has pulled back to what should be support near its short-term trend of higher lows, support near $115, and its rising 50-dma. All three should combine to be a tough spot for the bears to break through and thus a buying opportunity for the bulls. However, the recent weakness is casting a bearish tint across the short-term oscillators. I remain bullish on the fertilizer stocks. However, if we get stopped out on market volatility this coming week I suggest we watch the $110 level or the 100-dma as potential entry points to jump back in. We have two targets. Our first target is the $127.00 level. Our second target is the $137.00-140.00 range. We are adjusting our stop loss to $113.99. The fertilizer and agriculture stocks have been very volatile so readers should consider them aggressive, higher-risk plays.

Suggested Options:
The March and April calls look good. My preference would be April calls since March strikes expire in three weeks. You may want to wait until after Monday morning to see if there is any market follow through to the downside before considering new positions.

Picked on February 12 at $118.09 *gap higher entry
Change since picked: - 2.41
Earnings Date 04/03/08 (unconfirmed)
Average Daily Volume = 7.1 million

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Potash - POT - close: 158.90 change: -3.39 stop: 147.75

It is always painful to see gains get stripped away like today's 2% drop in POT. However, the stock has actually been showing relative strength and remains above its 10-dma. The question is can it hold above this level next week? POT has already surpassed our early target in the $158-160 zone so readers should have already booked some profits. At this point a correction back to the $155.00-152.50-150.00 zone would still be normal and a dip near its 50-dma would definitely look like a new bullish entry point to jump in again. We're not suggesting new positions today but we'll be looking for new entries next week if POT provides one. 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.

Suggested Options:
We're not suggesting new positions at this time but if an entry point presents itself we'd use the April calls.

Picked on February 12 at $147.50 *triggered
Change since picked: +11.40
Earnings Date 04/24/08 (unconfirmed)
Average Daily Volume = 5.9 million

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Shaw Group - SGR - close: 64.38 change: -3.91 stop: 59.85

Ouch! The market-wide profit taking on Friday hit shares of SGR pretty hard. The stock, which had been up two weeks in a row and most of last week, plunged 5.7% to its rising 10-dma on Friday. This wiped out all of our unrealized gains in one session. We are still bullish on SGR but we need to see some sort of bounce first before considering new call positions. A rebound anywhere in the $60-62.50 region should work. We have two targets. Our first target is the $69.50-70.00 zone. Our second, more aggressive target is the $74.00-75.00 zone. The Point & Figure chart is very bullish with an $81 target.

Suggested Options:
If SGR provides a new entry point we would suggest the April calls.

Picked on February 24 at $ 64.53
Change since picked: - 0.15
Earnings Date 04/08/08 (unconfirmed)
Average Daily Volume = 1.8 million

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Smith Intl - SII - close: 63.03 change: -2.72 stop: 59.90

Oil service stocks had been leaders most of the week but traders sold them hard on Friday in a rush to lock in a gain. Shares of SII spiked lower and ended the session with a 4.1% loss. The stock is now trading back under its 50 and 200-dma. While it looks like SII was starting to rebound on Friday afternoon we would be cautious here. There may be another surge lower on Monday. A bounce anywhere above $60 could be used as a new bullish entry point. The stock has already hit our first target in the $64 zone. Our second target is the $68.00-70.00 zone. The P&F chart for SII is very bullish with an $80 target (it was a $77 target last week).

Suggested Options:
If SII provides a new entry point we would suggest the April calls.

Picked on February 17 at $ 60.52
Change since picked: + 2.51
Earnings Date 04/24/08 (unconfirmed)
Average Daily Volume = 3.5 million

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Yahoo! Inc. - YHOO - close: 27.78 change: -0.37 stop: n/a

YHOO continues to drift down as investors wait on the next development in the MSFT-YHOO drama. Last week the biggest news was a rumor that YHOO was finally in "talks" with MSFT about the takeover bid. We have three weeks before March options expire. Right now we're speculating that MSFT will raise its bid before expiration. This remains a very risky, aggressive bet. Our suggested calls were the March $30 or March $32.50 strikes.

Suggested Options:
We're not very enthusiastic about opening new call positions here especially with just three weeks to expiration.

Picked on February 17 at $ 29.66
Change since picked: - 1.88
Earnings Date 04/17/08 (unconfirmed)
Average Daily Volume = 54 million
 

Put Updates

Ambac Fincl. - ABK - cls: 11.14 change: -0.66 stop: n/a

Here we are. It's the end of February and still no bailout deal and no ratings agency downgrade in spite of all the dire warnings a few weeks ago. That doesn't mean the agencies won't still downgrade ABK and MBI. A couple of the rating agencies did reaffirm their triple-A rating on ABK and MBI while keeping them on negative creditwatch. Seems like a contradiction and a worthless action at this point. There was some news floating around on Friday that the ABK rescue plan had run into some hurdles with how much money the company needs to raise in order to get the deal approved. Meanwhile in the news ABK cut its dividend from 7 cents to 1 cent and have suspended all structured finance deals for the next six months. Anything and everything could happen in the next week or two but we're still betting with the bears. This remains a very speculative play. We will definitely hold over the April earnings if we get the chance. If you are considering new positions here then think about an out of the money April call as a potential hedge against a deal getting done. Previously we had been suggesting the May out-of-the money puts and a speculative out-of-the money March ($20) call as a hedge should a bailout plan come to pass.

Suggested Options:
We would hesitate to open new positions at this time.

Picked on January 27 at $ 11.54
Change since picked: - 0.40
Earnings Date 04/24/08 (unconfirmed)
Average Daily Volume = 10.9 million

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MBIA Inc. - MBI - close: 12.97 change: -1.09 stop: n/a

Shares of MBI lost 7.7% on Friday. The stock under performed its peer ABK most likely due to its 10-K filing. An AP article on the company's regulatory filing was interesting. MBI claims that "demand for our product is the lowest it has been and we are writing very little new business." They stated that they (MBI) expect more write downs due to a very bad January. The picture still looks very murky for MBI and ABK. While a rescue plan might get done the bond insurers could get downgraded by the ratings agencies at any time. If you're thinking about opening new plays then consider an out of the money April call as a hedge against a bailout coming to pass. We had been suggesting the out-of-the-money May puts and a March $22.50 (or $20.00) call as a hedge in case a bailout plan for the bond insurers does get done. We will definitely hold over the April earnings if we get the chance.

Suggested Options:
We would hesitate to open new positions at this time.

Picked on January 27 at $ 14.20
Change since picked: - 1.23
Earnings Date 01/31/08 (confirmed)
Average Daily Volume = 15.2 million

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Everest Re Group - RE - close: 96.88 change: -1.05 stop: 102.01

Weakness in insurance giant AIG and the market weighed on shares of RE. Yet honestly we were expecting a bigger decline. Shares of RE only lost 1%. The pattern still looks very bearish but the lack of real movement makes us cautious. We are setting two quick targets. Our first, conservative target is $93.50. Our second, more aggressive target is the $91.00-90.00 zone. We're suggesting a stop loss at $102.01 but more conservative traders might be able to get away with a stop around $100.51. FYI: The P&F chart is bearish with a $74 target.

Suggested Options:
We would suggest the March or April puts. Aprils would be our preference.

Picked on February 28 at $ 97.93
Change since picked: - 1.05
Earnings Date 04/23/08 (unconfirmed)
Average Daily Volume = 487 thousand
 

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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CROCS Inc. - CROX - close: 24.32 chg: -0.81 stop: n/a

CROX slipped 3.2% on Friday, under performing the S&P 500 (-2.7%) but the stock bounced near $24.00 for the second time this week. The trend is obviously bearish but CROX is very oversold and due for a bounce. We only have three weeks left until March expiration. Any bounce in CROX would wipe out any premium still left in the March $25 puts. More conservative traders need to strongly consider an early exit now to cut your losses. On the positive side the market could see another big drop on Monday and further push the puts into the money. We are not suggesting new strangles at this time and we are adjusting our exit target. The options we had suggested were the March $40 calls (CQJ-CH) and the March $25 puts (CQJ-OE). Our estimated cost was $2.50. We were previously suggesting an exit if either option hit $4.25. We're adjusting our target to $3.75.

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

Picked on February 17 at $ 33.43
Change since picked: - 9.11
Earnings Date 02/19/08 (confirmed)
Average Daily Volume = 5.2 million

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Genentech - DNA - close: 75.75 change: -0.11 stop: n/a

DNA did post a gain for the week but the stock gave back a big chunk of it with profit taking Tuesday through Friday. Shares did start to bounce when they tagged the $75 level and its rising 10-dma on Friday. We are not suggesting new positions at this time. The options we had suggested were the March $75 calls (DWN-CO) and the March $70 puts (DWN-ON). Our estimated cost was $2.80. We want to sell if either option hits $5.00 or higher.

Suggested Options:
We are not suggesting new strangle positions in DNA.

Picked on February 20 at $ 72.37
Change since picked: + 3.38
Earnings Date 04/10/08 (unconfirmed)
Average Daily Volume = 3.5 million
 

Dropped Calls

MEMC Electr. - WFR - cls: 76.28 chg: -2.40 stop: 77.45

It's been a rough three days for solar-energy bulls. WFR hit our trigger to buy calls on an intraday spike Tuesday and has been sliding lower ever since. Friday's market weakness helped send WFR through the $78.00 level and quickly hit our stop loss at $77.45.

Picked on February 26 at $ 82.55 *triggered
Change since picked: - 6.27
Earnings Date 04/24/08 (unconfirmed)
Average Daily Volume = 5.9 million
 

Dropped Puts

None
 

Dropped Strangles

None
 

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