A Quick Friday Re-Cap

Amazingly, Every Open Position is Moving Your Way

Dear Bottarelli Research Member,

I’ll keep this quick, as it’s getting late on a Friday afternoon.

With approximately 53 minutes left in the trading day, I’m scanning all your open positions. And amazingly, every single one of them is moving the way we want.

Every one of your upside call plays is moving higher:

Eaton Vance stock is up to $30.20. The August 25 Calls (EV HE) you bought for $5.90 trade between $6.00 and $6.40.

Moody’s stock hit a new 52-week high at $67.85. The May 65 Calls (MCO EM) you bought for $4.70 trade between $4.90 and $5.10.

Becton Dickinson stock hit a new 52-week high at $65.77. The June 60 Calls (BDX FL) you bought for $6.90 trade between $7.00 and $7.20.

Chemed stock mounted a very nice recovery today, turning a $0.70 loss in the morning into a $0.70 gain this afternoon. This reversal proves that it’s the stock is ready to break through the double-top chart formation it established on December 14^th and January 9^th. The April 55 Calls (CHE DK) you bought for $4.50 currently trade between $4.00 and $4.30. The slight price lag is simply a carry-over from the early-morning losses.

As far as your downside put positions:

MDC stock is down $0.37 to $63.16. The MDC June 65 Puts (MDC RM) you bought for $7.10 trade between $5.40 and $5.60.

Lear stock set a new 52-week low today at $21.48 and is threatening to go even lower at the close of trading. The April 25 Puts (LEA PE) you bought for $3.60 trade between $4.10 and $4.20.

And your speculative play on Intel has been bouncing around. The company came inches away from hitting another new low today after a rash of downgrades sent the stock down. But as I write, Intel is up $0.03 on the day and the April 22.5 Puts (NQ PX) you bought for $2.25 trade between $2.25 and $2.30.

Finally, I want to close with the most shocking news story of the day, courtesy of H&R Block (HRB – NYSE). I was tempted to enter put options on tax preparer after I read — in disbelief — that the company who files millions of tax returns for Americans announced that they got their own taxes wrong in recent years!

H&R Block plans to restate fiscal years 2004 and 2005, plus previous 2006 quarters, because of errors in calculating its state effective income tax rate. All told, this looks to be a $32 million error — not accounting for the pending public relations nightmare (I can’t wait for Leno and Letterman to get a hold of this one — let alone Cramer!)

The error will knock 7 cents a share off 2005 fiscal-year earnings and 2 cents a share of fiscal 2004 results — news that has pushed shares of H&R Block down 8.8% to a new 52-week low of $22.90.

The only thing stopping me from recommending put options is that the chart now has a massive “downside gap” which could easily get filled if H&R Block comes out next Monday and says “oh never mind, we got our numbers right after all.”

If the news is indeed correct, the stock should not be trading over $20.00 a share. So there could be a potential play in the works, but I’d rather be cautions and right than pre-mature and wrong.

Like my dad always used to say, “measure seven times, cut once.”

With that, have a good weekend.

And as always, Lock and load!

Sincerely,