Dear Bottarelli Research Member,
The Federal Reserve will release their latest decision on interest rates this Wednesday. Leading up to this announcement (around 1:15 Chicago time) I don’t expect to see any major directional moves in the market. But that doesn’t mean that we can’t get positioned in advanced of this meeting, right?
If the market rallies off Wednesday’s news, one stock that’ll really move is Goldman Sachs Group (GS – NYSE). After all, Goldman’s ex-CEO Henry Paulson is our current Treasury Secretary, and you better believe he has a good idea of how Wednesday’s action will affect his former company. Don’t forget, the Secretary of the Treasury is fifth in the United States presidential line of succession — meaning he has a lot of power and influence that’s most likely funneled directly to GS for trading decisions. Despite the overall struggles in the brokerage group, GS is the one company bucking the trend. A quick look at the chart below shows you that the stock is about to break out to a new 52-week high — and the Fed meeting on Wednesday could be all that’s needed to spark new high levels.
If you’re a speculative trader and would like to make a quick trade on the anticipation of a Fed-induced market rally, then this November upside play on GS is just for you:
PLAY: Buy the GS November 250 Calls (GPY KA) at or under $4.30, good for the day. Current bid/ask spread is $3.70 to $3.90. Place a protective stop limit at $2.00.
Now, if a play like this is too quick for you, then we have another rather interesting situation happening in Orient-Express Hotels (OEH).If you recall, I highlighted OEH back on October 6th as a stock that we need to keep an eye on. Considered the most opulent of all the hotel chains, OEH operates 49 properties that include 39 deluxe hotels, 2 restaurants, 6 tourist trains, and 2 river cruise ships — and right now, the company could be in the middle of an old-fashioned bidding war.
You see, Indian Hotels Co. wants to acquire a significant stake in OEH. And at the same time, Dubai Holding (which is a part of the United Arab Emirates’ business empire) said it also wants to acquire the hotel outright. Indian Hotels has already acquired a 10% stake in Orient-Express, and Dubai Holding currently owns 3.9 million shares (or 9.2%) in Orient-Express — and you better believe that both companies are rolling in cash. In fact, Dubai Holding has already said that if any third-party makes an offer for Orient-Express, they would consider making a counteroffer.
When you have two rich companies fighting over control, it’s certainly a good thing for that particular stock. Therefore, I’d like to establish a longer-dated December position in OEH and give this bidding war time to play itself out. Here’s the play:
PLAY: Buy the OEH December 65 Calls (OEH LM) at or under $4.00, good for the day. Current bid/ask spread is $2.85 to $3.70. Place a protective stop limit at $1.40.
Looking at our current positions, let’s continue to hold our BID November 55 Calls (BID KK), BHP November 85 Calls (BHP KQ), and NILE November 80 Puts (JWU WP).BID is trading lower by $1.30 this morning, so feel free to use this dip to enter this position if you missed it last week.
Also, BHP set a new 52-week high today, so our calls continue to look strong. And NILE is looking weak despite an upward market, so maintain puts on that one as well.
*Personal Note: It was almost surreal. Not three minutes after the market closed on Friday, my wife came into my office and said, “I think my water just broke.” Paige Marie Bottarelli was born nine hours later, healthy and vibrant as ever! I’ll continue to monitor the markets and trade this week, as we have a key Fed announcement on Wednesday. But I’ll keep our positions a little on the lighter side. In other words, I don’t expect any super-fast intra-day trades, but I do expect to issue alerts throughout the week. I thank you in advance for your understanding as the Bottarelli family continues to grow!
And as always…
Lock and load!