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Call Updates

Ashland Inc. - ASH - close: 52.87 change: -0.01 stop: 49.85

It was a quiet day for the market in spite of all the earnings news and shares of ASH illustrated the day closing almost unchanged. Looking intraday traders bought the dip near $52, which is bullish but the stock is testing resistance at the 200-dma. Our target is the $57.00-58.00 range. We do not want to hold over the late April earnings report.

Picked on April 06 at $ 51.25
Change since picked: + 1.62
Earnings Date 04/23/08 (unconfirmed)
Average Daily Volume = 774 thousand

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Baker Hughes - BHI - close: 77.38 chg: +0.49 stop: 71.45

BHI continues to march higher. The stock out performed the S&P 500 today with a 0.6% gain. Shares are getting close to our target in the $78.50-80.00 range. We do not want to hold over the April 22nd earnings report.

Picked on April 10 at $ 72.76
Change since picked: + 4.62
Earnings Date 04/22/08 (confirmed)
Average Daily Volume = 4.7 million

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CH Robinson Worldwide- CHRW - cls: 58.56 chg: -1.27 stop: 56.89

Transports hit some profit taking after yesterday's big rally. CHRW gave back most of its gains but traders did buy the dip near $58.00 just as the transportation average started bouncing late this afternoon. We would use this pull back as a new entry point to buy calls. Our target is the $62.00-62.50 zone. We do not want to hold over the April 22nd earnings so this is a short-term play.

Picked on April 15 at $ 58.25
Change since picked: + 0.31
Earnings Date 04/22/08 (confirmed)
Average Daily Volume = 1.9 million

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CONSOL Energy - CNX - cls: 83.06 chg: -1.22 stop: 76.85

Coal producer CNX also hit some profit taking after yesterday's big move. If we see a dip to $80.00 or its 10-dma readers can use it as a new entry point to buy calls. Our target is the $88.00-90.00 zone. Remember, we do not want to hold over the late April earnings report, which does not give us much time left.

Picked on April 15 at $ 80.55
Change since picked: + 2.51
Earnings Date 04/24/08 (unconfirmed)
Average Daily Volume = 3.7 million

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DryShips Inc. - DRYS - close: 73.69 chg: -0.95 stop: 67.45

It's the same story here. After Wednesday's big rally shares of DRYS pulled back some today. The stock did tag overhead resistance at its 200-dma near $75.75 today. If we see a dip toward $70.00 readers can use it (or a bounce from $70) as a new entry point for calls. Our target is the $79.00-80.00 zone.

Picked on April 15 at $ 70.32
Change since picked: + 3.37
Earnings Date 05/29/08 (unconfirmed)
Average Daily Volume = 4.2 million

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Fluor - FLR - close: 156.40 chg: -2.60 stop: 146.49

After a $9 gain yesterday FLR dips just 1.6% and traders were buying the dip near $154 this afternoon. We're not suggesting new positions at this time. More conservative traders may want to use a higher stop. The stock has already hit our target at the $159.00 level. Our second target is the $168.00-170.00 zone. We do not want to hold over earnings in early May. FYI: The P&F chart is bullish with a $184 target.

Picked on April 01 at $146.50 *triggered /1st target hit $159
Change since picked: + 9.90
Earnings Date 05/07/08 (unconfirmed)
Average Daily Volume = 2.3 million

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CurrencyShares Euro - FXE - cls: 159.11 chg: -0.75 stop: 156.45

The U.S. dollar bounced after yesterday's losses and the Euro slipped in reaction. The FXE dropped just 0.3% and on low volume. The trend is still bullish. We would consider new positions here. Our target is the $164.00-165.00 range. Our time frame is three to five weeks.

Picked on April 13 at $158.57
Change since picked: + 0.54
Earnings Date 00/00/00
Average Daily Volume = 307 thousand

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Essex Prop. - ESS - close: 118.42 chg: +1.07 stop: 109.45

ESS continues to rally and the lack of profit taking after Wednesday's big move is definitely bullish. Shares could hit our target in the $119.50-120.00 zone tomorrow. More aggressive traders could aim much higher, maybe $125 or $130. The P&F chart points to $154. We do not want to hold over the April 30th earnings report.

Editor's note: We received an email today regarding the option spreads on ESS. When we listed this play the May $120 call had an ask of $2.50. Today the ask is $5.10. That's a potential 100% gain. However, the bid on this option (May $120 call ESS-ED) is only at $2.85 (which would only be a 14% gain). That is a HUGE spread. What should a trader do? Unfortunately, there isn't a lot that we can do. We are at the mercy of the market makers who are trying to protect themselves from losing money. The volatility in the market this year has been huge and probably very painful for some of the market makers. Part of the challenge that exacerbates this problem of huge spreads is that we're playing options that don't have a lot of volume or open interest. On a thinly traded equity like this the market makers might feel that can game the system a little bit more and widen the spreads. Something that we as traders can do is put a limit order in to sell. Normally we prefer to use market orders since orders of 10 or less options are routed electronically. However, in a situation like this you could try putting in a limit order to sell at $5.00 (or whatever you want to try for). I have heard some traders report success when they place their limit order inside the spread. If your limit order is sitting there on a thinly traded option you could get taken out when the next trader places a market order. Fortunately, it looks like the market will have an upward bias on Friday, which should make selling easier for us.

Picked on April 15 at $112.07
Change since picked: + 6.35
Earnings Date 04/30/08 (confirmed)
Average Daily Volume = 411 thousand

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Hovnanian - HOV - close: 11.85 chg: -0.01 stop: 10.45

After Wednesday's big gain in HOV it was bullish to see shares only lose a penny today. The stock maintained a positive trend of higher lows on an intraday basis. We don't see any changes from our previous comments. Our target is the $13.50-14.00 zone. Our second, more aggressive target is the $14.75-15.00 zone.

Picked on April 16 at $ 11.86
Change since picked: - 0.01
Earnings Date 05/29/08 (unconfirmed)
Average Daily Volume = 4.1 million

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Joy Global - JOYG - close: 73.00 chg: -0.65 stop: 68.45

We remain bullish on JOYG. Yesterday the stock broke out over resistance to new all-time highs. Today traders bought the dip near $71.65. We see this as a new entry point to buy calls. Our target is the $79.50-80.00 range. The P&F chart is already bullish with an $88 target.

Picked on April 16 at $ 72.55 *triggered
Change since picked: + 0.45
Earnings Date 05/29/08 (unconfirmed)
Average Daily Volume = 2.3 million

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Lincoln Elec. - LECO - cls: 71.93 chg: -0.47 stop: 68.74

It was a quiet day for LECO. However, we do want to note that there was a virtual floor under the stock at $71.50 almost all day long. Someone was sitting there buying every dip for the better part of Thursday's session. Our first target is the $74.85-75.00 range. Our second target is the $78.00-80.00 zone. The Point & Figure chart is bullish with a $91 target. We do not want to hold over the late April earnings report.

Picked on April 07 at $ 73.73 *triggered/gap higher
Change since picked: - 1.80
Earnings Date 04/24/08 (unconfirmed)
Average Daily Volume = 233 thousand

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Ultra Petrol. - UPL - close: 83.98 chg: -1.46 stop: 79.45

UPL hit a little bit of profit taking with a 1.7% decline. Dips to the 10-dma near $82.00 can probably be used as new entry points for calls. Our target is the $89.50-90.00 zone. The P&F chart has broken through resistance and points to a $95 target.

Picked on April 10 at $ 81.50
Change since picked: + 2.48
Earnings Date 05/01/08 (unconfirmed)
Average Daily Volume = 1.4 million

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United States Oil - USO - close: 92.37 chg: +0.22 stop: 86.49

Target achieved. The USO traded to an intraday high of $92.61 before paring its gains. Our initial target was the $92.50 mark. The USO is looking overbought and due for a correction after a non-stop rally from the $80 level. We are not suggesting new bullish positions. We strongly suggest that readers take money off the table here and only keep a small position open to ride oil's momentum. Our second, more aggressive target is the $97.50-100.00 range.

Picked on April 07 at $ 86.49 *gap higher /1st target hit
Change since picked: + 5.88
Earnings Date 00/00/00 (unconfirmed)
Average Daily Volume = 5.4 million

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ExxonMobil - XOM - cls: 93.38 chg: +0.49 stop: 89.45 *new*

XOM rallied again posting its fourth gain in a row. If you are looking for a new entry point we would wait for a dip near $90.00. Our target is the $94.85-95.00 range. We do not want to hold over the May 1st earnings report. Please note that we're raising the stop loss to $89.45.

Picked on April 15 at $ 90.80
Change since picked: + 2.58
Earnings Date 05/01/08 (confirmed)
Average Daily Volume = 26.2 million
 

Put Updates

Ambac Fincl. - ABK - cls: 5.76 change: +0.46 stop: n/a

This week's stock market reaction to earnings out of the financial sector is not playing out as we expected. In spite of losses and more analyst calls for greater write downs, investors are buying these stocks. ABK bounced with an 8.6% gain today. Today's reaction in ABK was probably influenced by earnings from bond insurer MTG. This morning MTG announced an earnings loss of 41 cents a share but Wall Street was expecting a loss of $1.69 per share. This earnings "beat" sent shares of MTG up almost 19%. We are still planning to hold over ABK's earnings report on April 23rd but to be honest we would seriously consider a stop loss around $6.50 (or even $6.00 if you're really concerned). We are not suggesting new bearish positions in ABK. This remains a very speculative play. Previously we had been suggesting the May out-of-the money puts ($5.00 and $2.50 strikes).

Picked on January 27 at $ 11.54
Change since picked: - 5.78
Earnings Date 04/23/08 (confirmed)
Average Daily Volume = 10.9 million

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Capital One - COF - close: 48.74 chg: +2.49 stop: 51.05 *new*

Strength in the financial stocks today launched a 5.3% gain in COF ahead of earnings. We had elected to hold over the announcement this time. Consensus estimates were for a profit of $1.45 a share. COF reported after the closing bell and actually beat estimates by 2 cents. There seems to be mixed reaction to the company's comments about their business environment, one-time charges, and write downs. The stock was trading around $48.35 in after hours trading. We are going to inch down our stop loss to $51.05. More conservative traders might want to move their stop closer to $50.00. Our target is the $41.50-40.00 zone. The Point & Figure chart is bearish with a $38 target.

Picked on April 13 at $ 48.30
Change since picked: + 0.44
Earnings Date 04/17/08 (confirmed)
Average Daily Volume = 9.0 million

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Fannie Mae - FNM - close: 28.25 chg: +0.47 stop: 30.26

FNM continued to bounce thanks to strength in the financials. The stock managed to close over its 50-dma today. Wait for the rebound to fail before considering new put positions. FNM has already exceeded our target at the $25.25 mark. Our second target is the $21.00-20.00 zone.

Picked on April 08 at $ 29.00 /1st target exceeded 25.25
Change since picked: - 0.75
Earnings Date 05/27/08 (unconfirmed)
Average Daily Volume = 26.5 million

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Humana Inc - HUM - cls: 42.27 chg: +0.01 stop: 45.20

HUM continues to under perform. The stock has found some short-term support near $42.00 but the trend of lower highs is suggesting another breakdown lower. We are adjusting our stop loss to $45.20. Our target is the $40.50-40.00 zone. More aggressive traders may want to aim lower. Currently the P&F chart is so bearish it points to a target of zero ($0.00).

Picked on March 30 at $ 45.20
Change since picked: - 2.93
Earnings Date 04/28/08 (confirmed)
Average Daily Volume = 4.4 million

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iShares Financial - IYF - close: 85.01 chg: +1.13 stop: 85.55

We are on the verge of being stopped out in the IYF. Financial stocks rebounded as investors ignore earnings losses in the group on hopes the worst is behind us. The intraday high was $85.48 and our stop loss is at $85.55. We're not suggesting new positions at this time and more conservative traders may want to cut their losses and exit. Our target is the $76.00-75.00. We're adding a second target in the $71.50-70.00 zone.

Picked on April 13 at $ 82.51
Change since picked: + 2.50
Earnings Date 00/00/00
Average Daily Volume = 3.6 million

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iShares Fincl.Servcs. - IYG - cls: 89.90 chg: +1.49 stop: 92.26

The IYG also rebounded with the financials but shares are still trading under potential resistance at $90.00 and its 50-dma. Wait for signs of a failed rally before considering new puts. More conservative traders may want to tighten their stops toward $90.00. We have two targets. Our first target is the $82.00-80.00 zone. Our second, more aggressive target is the $76.00-75.00 zone.

Picked on April 13 at $ 87.26
Change since picked: + 2.64
Earnings Date 00/00/00
Average Daily Volume = 344 thousand

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Juniper Networks - JNPR - cls: 23.36 chg: -0.25 stop: 24.55

Today's relative weakness in JNPR is a good sign but we are more concerned about strength in the tech sector in general. GOOG's earnings after hours tonight are likely to fuel another rally in the NASDAQ. If you study the intraday chart for JNPR it looks like shares were bouncing from the $23.00 level and that JNPR may have set a short-term bottom. We are not suggesting new put plays at this time. We would seriously consider lowering the stop loss toward the $24.00 mark. We do not want to hold over the late April earnings report. Our target is the $20.15-20.00 zone.

Picked on April 09 at $ 22.95 triggered
Change since picked: + 0.41
Earnings Date 04/24/08 (unconfirmed)
Average Daily Volume = 11.5 million

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MBIA Inc. - MBI - close: 12.71 change: +1.06 stop: n/a

Ouch! MBI bounced with the financials today and added 9% to its share price. The reaction to financial earnings this week has not played out as expected. This morning bond insurer MTG reported earnings that were a loss but they were not as bad as Wall Street expected. Shares of MTG soared 19%, which probably influenced some short covering in MBI. Per our previous comments, we will probably drop MBI this weekend if we don't see some sort of significant reversal tomorrow. The general trend in MBI is still one of a narrowing, neutral pennant pattern of higher lows and lower highs but we don't want to stick around as May option premiums will begin to evaporate in earnest starting next week. We are not suggesting new bearish positions at this time. We had been suggesting the out-of-the-money May puts (7.50, 5.00 and 2.50 strikes).

Picked on January 27 at $ 14.20
Change since picked: - 1.49
Earnings Date 05/13/08 (confirmed)
Average Daily Volume = 15.2 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 Inc. - GOOG - cls: 449.54 chg: -5.49 stop: n/a

Perfection. GOOG's dip to $450 provided a perfect entry point for us to open strangle positions ahead of earnings. CNBC was billing tonight's earnings report as the most significant quarterly report since the company's IPO. While we know they are inclined to sensationalism it did give some idea to the pent up expectations for GOOG's report. If you haven't heard yet GOOG announced earnings after the closing bell today and blew away the estimates. Wall Street was looking for $4.52 a share. GOOG delivered $4.84 a share. This better than expected earnings news has launched GOOG back into the stratosphere. The stock is up about $80 in after hours. The after hours high thus far is $533.50 and at the time of this update GOOG is near $526.00. We are suggesting that readers exit at the open tomorrow. More aggressive traders, who can watch the stock all day, might want to try and time an exit and see how far GOOG might run. We had suggested the May $500 call (GOP-EO) and the May $400 put (GOP-QT) with an estimated cost of $14.10. Our suggested exit was to sell if either option hit $25.00. However, now that it looks like GOOG will gap open at $525.00 we are changing our exit price. Instead of selling at $25.00 we want to sell if either option hits $34.50 or more. We wouldn't be surprised to see the May $500 call trade higher but we can't estimate what the intraday high might be. The call option is going to gap open tomorrow the question is how high.

Picked on April 16 at $455.03
Change since picked: - 5.49
Earnings Date 04/17/08 (confirmed)
Average Daily Volume = 2.9 million

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Goldman Sachs - GS - cls: 172.10 chg: +3.05 stop: n/a

GS also enjoyed a decent bounce thanks to strength in the financials and a positive reaction to the Merrill Lynch earnings news. We are not suggesting new strangles at this time. The options we suggested for this strangle were the May $190 calls (GPY-ER) and the May $160 puts (GPY-QL). Our estimated cost was $8.70. We want to sell if either option trades at $14.50 or higher. FYI: The May $160 puts hit a high of $7.70 today.

Picked on April 06 at $175.40
Change since picked: - 3.30
Earnings Date 06/12/08 (unconfirmed)
Average Daily Volume = 14.5 million

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Merrill Lynch - MER - cls: 46.71 chg: +1.82 stop: n/a

MER reported earnings this morning. Wall Street expected a loss of $1.99 a share. MER delivered a loss of $2.19. Investors saw this as a relief that the numbers were not worse and the stock bounced 4%. We were expecting a bigger post-earnings reaction. More conservative traders will want to seriously consider just cutting your losses right now and bailing out. We're going to stick with MER for another day, maybe two, just to see if it can develop a trend. We're not suggesting new positions. The lack of a bigger move in MER has pretty much doomed the April options. We have a very aggressive, high-risk April strangle and a May strangle. The options we suggested in the April strangle were April 47.50 calls (MER-DW) and the April 37.50 puts (MER-PB). Our estimated cost was $0.90. We want to sell if either option hits $1.80 or more. However, we have to exit before Friday's close because of April option expiration. The options we listed in the May strangle were the May $50 calls (MER-EJ) and the May $32.50 puts (MER-QA). Our estimated cost was $1.76 and we want to sell if either option hits $3.00 or more.

Picked on April 15 at $ 43.34
Change since picked: + 3.37
Earnings Date 04/17/08 (confirmed)
Average Daily Volume = 30.6 million
 

Dropped Calls

None
 

Dropped Puts

None
 

Dropped Strangles

None
 

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