LEA Hits New Low – Take Profits

Take a 25% Gain as Market Drops

By Bryan Bottarelli
Tuesday, February 28, 2006 1:32 PM EST
Tue, 28 Feb 2006 18:32:00 GMT

Dear Bottarelli Research Member,

As I mentioned this morning, the downside pressure on the markets are dropping our call plays underneath our entry prices. This could prove to be an opportunity to add to the positions, but let’s not jump the gun.

The reason we’re weighted more to the upside than to the downside is that the major market averages have been hitting new 52-week highs. The small caps, the S&P 500, and even the NASDAQ have all recently broken out to new multi-year highs — which supports being slightly over-weighted to the upside. But on the same hand, it certainly does not mean you should be without downside protection. That’s why we’re holding puts on LEA, MDC, and INTC.

In terms of MDC, I expected a larger drop today than what we’re witnessing. The combination of a 90-point down day on the Dow and weak housing statistics from yesterday should signal the setting of a new 52-week low. MDC stock is indeed down $0.75 as I write, but I expected a more violent sell off. I guess we’ll have to be patient with this one. Hold.

Intel (INTC – NASDAQ) is bucking the downside trend and is actually up $0.19 as I write. Granted, it’s a weak attempt at an upside move, but you have to give the stock credit for being in the green today. I think the Intel bulls are thinking of this as a buying opportunity, but I’m not sure that’s the right move. Maintain your speculative April 22.5 puts (NQ PX) on Intel.

Finally, let’s close off the alert with some gains. Lear Corp (LEA – NYSE) hit a new 52-week low toady at $20.78. This move has pushed your April 25 Puts (LEA PE) up to a high of $4.50, and it looks like they have the ability to move even higher.

LEA

Based off a $3.60 entry price, that’s good for a 25% gainer. Let’s use today’s downside weakness to take the money off the table on this one.

PLAY: Sell the Lear April 25 Puts (LEA PE) at or above $4.50, good for the day.

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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